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Alliance Resource Partners Posts Annual Operating and Financial Results

January 31, 2014

Alliance Resource Partners, L.P. on January 28 reported record operating and financial results, as it set new annual benchmarks for coal sales and production volumes, revenues, net income and EBITDA for the year ended December 31, 2013 (the "2013 Year"). In a release on January 28 , the Company noted that on the strength of record coal sales volumes, revenues climbed to a record $2.2 billion for the 2013 Year, an increase of 8.4 percent compared to the year ended December 31, 2012 (the "2012 Year"). Higher revenues contributed to record EBITDA of $685.9 million for the 2013 Year, an increase of 18.0 percent compared to the 2012 Year. Net income was also higher in the 2013 Year, increasing 17.3 percent to a record $393.5 million , or $7.26 per basic and diluted unit. (For a discussion of EBITDA and related reconciliations to comparable GAAP financial measures, please see the end of this release.) For the quarter ended December 31, 2013 (the "2013 Quarter"), revenues increased 3.1 percent to a record $566.7 million , compared to the quarter ended December 31, 2012 (the "2012 Quarter"). Net income and EBITDA were also higher in the 2013 Quarter, as net income increased 2.7 percent to $99.3 million , or $1.85 per basic and diluted limited partner unit, and EBITDA increased 5.6 percent to $175.9 million . ARLP also announced that the Board of Directors of its managing general partner increased the cash distribution to unitholders for the 2013 Quarter to $1.1975 per unit (an annualized rate of $4.79 per unit), payable on February 14 , to all unitholders of record as of the close of trading on February 7 . The announced distribution represents an 8.1 percent increase over the cash distribution of $1.1075 per unit for the 2012 Quarter and a 1.9 percent increase over the cash distribution of $1.175 per unit for the 2013 third quarter (the " Sequential Quarter "). "For the thirteenth consecutive year, ARLP posted record results and set new annual benchmarks in 2013 for our major operating and financial measures," said Joseph W. Craft III , President and Chief Executive Officer. "These superior results reflect the exceptional capabilities and execution of our employees and I want to thank the entire Alliance team for their individual contributions to our success. Looking ahead, market dynamics continue to favor the Illinois Basin and Northern Appalachia coal markets and we remain encouraged that our strategy of expanding ARLP's presence as a low- cost operator in these regions will create growth opportunities in the future. Based on this outlook and our record setting results, ARLP's Board of Directors elected to increase quarterly unitholder distributions for the twenty-third consecutive quarter." Consolidated Financial Results Twelve Months Ended December 31, 2013 Compared to Twelve Months Ended December 31, 2012 Strong performance from ARLP's Illinois Basin operations and increased volumes from the Tunnel Ridge longwall operation during the 2013 Year drove coal sales volumes up 10.4 percent to a record 38.8 million tons and production volumes higher by 11.4 percent to a record 38.8 million tons, both as compared to the 2012 Year. As anticipated, total average coal sales prices declined 2.2 percent in the 2013 Year to $55.04 per ton sold due to ARLP's reduced participation in the weak metallurgical coal markets. Volume growth more than offset lower average coal sales prices, however, leading to record revenues, EBITDA and net income in the 2013 Year. ARLP's increased coal sales and production volumes in the 2013 Year also contributed to higher sales-related expenses, materials and supplies expenses, labor-related expenses and maintenance costs, which combined to push operating expenses up 7.3 percent to $1.4 billion . These increases were partially offset by lower workers' compensation expense due to favorable reserve adjustments. On a per ton basis, Segment Adjusted EBITDA Expense declined by 5.4 percent in the 2013 Year compared to the 2012 Year primarily as a result of increased coal volumes, reduced outside coal purchases and lower workers' compensation expense. (For a definition of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense per ton and related reconciliations to comparable GAAP financial measures, please see the end of this release). Depreciation, depletion and amortization increased $46.8 million to $264.9 million in the 2013 Year, compared to the 2012 Year, primarily as a result of the increased production volumes mentioned above, as well as capital expenditures related to production expansion and infrastructure improvements at various other operations. As anticipated, ARLP's financial results for both the 2013 and 2012 Years were negatively impacted by losses related to White Oak's development of its Mine No. 1. Since our equity investment in White Oak entitles ARLP to receive substantially all distributions from White Oak until we achieve our contractual preferred return, ARLP currently reflects substantially all of White Oak's income and losses in its financial results. Reported net equity in loss of affiliates of $24.4 million for the 2013 Year and $14.7 million for the 2012 Year was primarily due to the allocation of losses related to White Oak's mine development activities. Comparative results between the 2012 and 2013 Years were also impacted by a non-cash asset impairment charge of $19.0 million at the Pontiki mining complex in 2012. The Pontiki mine ceased production at the end of November 2013 after more than 36 years of operation. Three Months Ended December 31, 2013 Compared to Three Months Ended December 31, 2012 For the 2013 Quarter, record revenues reflect record coal sales of $542.9 million and higher other sales and operating revenues, due to increased product sales at Matrix and greater throughput service revenues received from White Oak . Reflecting the factors discussed above, Segment Adjusted EBITDA Expense per ton declined to $36.25 per ton in the 2013 Quarter, an improvement over both the 2012 and Sequential Quarter . General and administrative expenses increased $2.2 million to $17.0 million , primarily as a result of higher compensation-related expenses and other professional services. Depreciation, depletion and amortization increased $3.0 million to $66.2 million in the 2013 Quarter compared to the 2012 Quarter, primarily as a result of our production growth and investments in infrastructure and equipment at various operations. Reflecting slightly higher Central Appalachian and Northern Appalachian sales volumes, ARLP sold 9.8 million tons of coal in the 2013 Quarter, which was comparable to the 2012 Quarter. Coal sales volumes from the Illinois Basin in the 2013 Quarter decreased slightly compared to the 2012 Quarter, primarily due to the River View mine substantially depleting its coal inventory prior to the end of the Sequential Quarter . Coal sales volumes in the Illinois Basin increased compared to the Sequential Quarter , primarily as a result of strong sales performance from the Dotiki, Gibson North and Onton mines. In Central Appalachia, increased coal sales volumes compared to the 2012 Quarter reflect the temporary idling of the Pontiki mining complex during the 2012 Quarter and improved mining conditions at our MC Mining operation in the 2013 Quarter. Compared to the Sequential Quarter , improved coal recoveries and additional unit shifts at MC Mining contributed to higher coal sales volumes. Coal sales volumes in Northern Appalachia increased from the 2012 and Sequential Quarters reflecting improved recoveries at the Mettiki mine offset in part by a longwall move at Tunnel Ridge in the 2013 Quarter. As anticipated, total coal inventory fell significantly during the 2013 Quarter, decreasing by approximately 655,000 tons to approximately 343,000 tons at the end of 2013. Segment Adjusted EBITDA Expense per ton in Central Appalachia improved compared to the 2012 Quarter primarily as a result of lower repair costs. Compared to the Sequential Quarter , Segment Adjusted EBITDA Expense per ton in Central Appalachia benefited from increased lower cost production at MC Mining following the shutdown of production operations at the Pontiki mine in late November 2013 . Compared to the 2012 Quarter, Segment Adjusted EBITDA Expense per ton in Northern Appalachia benefitted from improved recoveries and lower contract mining expense and outside coal purchases at the Mettiki mine, partially offset by higher employee benefits costs, particularly medical expenses. Northern Appalachia was also negatively impacted in the 2013 Quarter due to a longwall move at Tunnel Ridge . Outlook Commenting on ARLP's outlook, Craft said, "ARLP enters 2014 with an expectation of posting another year of record results. Coal sales and production volumes are expected to increase year-over-year, despite closing the Pontiki mine which produced approximately 700,000 tons in 2013. We remain confident Tunnel Ridge will increase coal volumes in 2014 by approximately 1.8 million tons and Gibson South is anticipated to begin initial production in the third quarter, adding approximately 400,000 tons this year. From a marketing perspective, ARLP's sales portfolio remains strong, with approximately 87.0 percent of our anticipated 2014 coal sales volumes priced and committed. As discussed below, we anticipate our 2014 EBITDA margins to be comparable to 2013." For 2014, ARLP is providing the following full year guidance for its operating and investment activities: Capital Expenditures and Investments - Total 2014 capital expenditures for ARLP's operating activities are currently estimated in a range of $320.0 to $350.0 million , including maintenance capital expenditures. Maintenance capital expenditures anticipated during 2014 reflect equipment rebuilds and replacements, mine extension projects at various mines and infrastructure projects at several operations. Based on anticipated maintenance capital requirements in 2014 and considering its current five-year planning horizon, ARLP is currently estimating total average maintenance capital expenditures of approximately $5.90 per ton produced for long-term distribution planning purposes. Total capital also includes approximately $65.0 to $75.0 million for production expansion projects related to completion of development at the Gibson South mine and reserve acquisitions related to ARLP's participation in the development of the White Oak Mine No. 1. During 2014, ARLP also currently expects to fund approximately $80.0 to $95.0 million of its preferred equity investment commitment to White Oak . ARLP continues to anticipate its investments in White Oak will become meaningfully accretive to its financial results in the 2015 time frame following the commencement of longwall production from the White Oak Mine No. 1 in the second half of 2014. As a result of ARLP's capital investment projects and anticipated production increases in 2014, depreciation, depletion and amortization expense is currently expected to increase to approximately $287.0 million , compared to $264.9 million in 2013. Coal Production and Sales Volumes - Coal volumes are currently expected to increase in 2014 to a range of 39.25 to 40.75 million tons produced and sold. ARLP has approximately 34.9 million tons contractually committed and priced for 2014 and has also secured coal sales and price commitments for approximately 27.0 million tons, 21.2 million tons and 9.4 million tons in 2015, 2016 and 2017, respectively. Revenue, EBITDA and Net Income Estimates - Driven primarily by anticipated increases in coal sales volumes, ARLP is currently expecting 2014 revenues to increase slightly over 2013 revenues to a range of $2.2 to $2.3 billion , excluding transportation revenues. ARLP's operating activities are currently expected to generate EBITDA in a range of $660.0 to $760.0 million and net income in a range of $340.0 to $440.0 million . The 2014 ranges for both consolidated EBITDA and net income reflect the pass through of approximately $27.5 to $35.5 million of losses related to ARLP's investments in White Oak . Per Ton Estimates - Based on existing coal sales commitments and expectations for filling its current open position, ARLP anticipates its average coal sales price per ton at the midpoint of its 2014 guidance ranges will be comparable to 2013 realizations. In addition, based on current cost and production estimates, ARLP anticipates total Segment Adjusted EBITDA Expense per ton and total realized margins per ton at the midpoint of its 2014 guidance ranges will also be comparable to 2013. ARLP is a diversified producer and marketer of coal. More Information: www.arlp.com ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


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