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Alliance Resource Partners L.P. Reports Operating Results (10-K)

February 28, 2012 | About:
Guy Bennett

10qk

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Alliance Resource Partners L.P. (ARLP) filed Annual Report for the period ended 2011-12-31.

Alliance Res has a market cap of $2.61 billion; its shares were traded at around $71.4175 with a P/E ratio of 8.7 and P/S ratio of 1.4. The dividend yield of Alliance Res stocks is 5.6%. Alliance Res had an annual average earning growth of 16.3% over the past 10 years. GuruFocus rated Alliance Res the business predictability rank of 5-star.

Highlight of Business Operations:

Illinois BasinSegment Adjusted EBITDA increased 9.7% to $505.1 million in 2011 from $460.6 million in 2010. The increase of $44.5 million was primarily attributable to improved contract pricing resulting in a higher average coal sales price of $50.45 per ton during 2011 compared to $47.50 per ton in 2010, as well as increased tons sold, which increased 3.2% to 25.6 million tons sold in 2011. Coal sales increased 9.6% to $1.3 billion in 2011 compared to $1.2 billion in 2010. The increase of $0.1 billion reflects the increase in average coal sales price discussed above and increased tons produced and sold from expansion of production capacity at our River View mine and resumption of full production at our Pattiki mine in the first quarter of 2011, offset partially by difficult mining conditions at our Dotiki and Warrior mines. Total Segment Adjusted EBITDA Expense in 2011 increased 9.6% to $786.1 million from $717.0 million in 2010, an increase of $1.79 per ton sold to $30.75 from $28.96 per ton sold, primarily as a result of certain cost increases described above under consolidated operating expenses, as well as lower production at the Dotiki and Warrior mines due to difficult mining conditions and weather related disruptions at the Gibson North mine. The per ton increases were partially offset by higher production at our River View and Pattiki mines in 2011 and the impact on 2010 of a $1.2 million loss on the retirement of certain assets related to the failed vertical hoist conveyor system at our Pattiki mine. For more information on Pattiki, please read Item 8. Financial Statements and Supplementary DataNote 3. Pattiki Vertical Hoist Conveyor System Failure in 2010 of this Annual Report on Form 10-K.

Central AppalachiaSegment Adjusted EBITDA increased 46.3% to $53.7 million in 2011, compared to $36.7 million in 2010. The increase of $17.0 million was primarily attributable to increased tons sold, which increased 14.7% to 2.5 million tons sold in 2011, as well as improved contract pricing resulting in a higher average coal sales price of $80.34 per ton sold during 2011 compared to $74.19 per ton sold in 2010. Total Segment Adjusted EBITDA Expense during 2011 increased 17.8% to $151.1 million from $128.3 million during 2010, an increase of $1.55 per ton sold to $59.31 from $57.76 per ton sold, primarily as a result of certain cost increases described above under consolidated operating expenses, particularly the impact of increasingly stringent regulatory compliance which caused the idling of our Pontiki mine for approximately 24 consecutive days in the fourth quarter of 2011.

Illinois BasinSegment Adjusted EBITDA increased 46.0% to $460.6 million in 2010 from $315.5 million in 2009. The increase of $145.1 million was primarily attributable to increased tons sold, which increased 26.0% to 24.8 million tons sold in 2010, as well as improved contract pricing resulting in a higher average coal sales price of $47.50 per ton during 2010 compared to $43.08 per ton in 2009. Coal sales increased 38.9% to $1.2 billion in 2010 compared to $846.9 million in 2009. The increase of $329.3 million primarily reflects increased sales from our River View mine (which commenced operations in August of 2009 and continued to expand production during 2010), increased sales from coal inventories in the region and the negative impact of weather disruptions in 2009 at our Dotiki, Warrior and Elk Creek mines, partially offset by production disruptions at our Dotiki, Gibson and Pattiki mines during 2010. Total Segment Adjusted EBITDA Expense in 2010 increased 34.6% to $717.0 million from $532.5 million in 2009, an increase of $1.87 per ton sold to $28.96 from $27.09 per ton sold, primarily as a result of certain cost increases described above under consolidated operating expenses as well as a $1.2 million loss on the retirement of certain assets related to the failure of the vertical hoist conveyor system at our Pattiki mine, the aforementioned production disruptions at our Dotiki, Gibson and Pattiki mines and increased sales from coal inventories in the region. For more information on our Pattiki mine, please read Part II. Item 8. Financial Statements Note 3. Pattiki Vertical Hoist Conveyor System Failure in 2010 of this Annual Report on Form 10-K.

Central AppalachiaSegment Adjusted EBITDA decreased $4.4 million, or 10.8%, to $36.7 million in 2010, compared to $41.1 million in 2009. The decrease was primarily the result of lower sales volumes due to the impact of heightened regulatory oversight, reduced coal demand in the spot market during 2010, lower clean coal recovery due to mining conditions and the continued impact of idling one mining unit at Pontiki beginning in July 2009, partially offset by improved contract pricing in 2010 that resulted in an increase in the average coal sales price of $6.28 per ton to $74.19 per ton in 2010, as compared to $67.91 per ton in 2009. Segment Adjusted EBITDA Expense per ton sold during 2010 increased to $57.76 compared to $52.41 per ton sold, an increase of $5.35 per ton sold, reflecting certain cost increases described above under consolidated operating expenses, as well as the impact of lower coal sales volumes and decreased coal production in response to lower spot market demand and lower productivity due to Pontikis transition from the depleted Pond Creek coal seam into the thinner Van Lear coal seam beginning in 2009. Although Segment Adjusted EBITDA Expense per ton sold increased, Segment Adjusted EBITDA Expense for 2010 decreased 7.3% to $128.3 million from $138.4 million in 2009 primarily as a result of lower coal sales offset in part by higher expenses per ton as described above.

Northern AppalachiaSegment Adjusted EBITDA increased to $46.7 million in 2010, compared to $15.6 million in 2009. The increase of $31.1 million was primarily attributable to a higher average sales price of $63.60 per ton sold in 2010 compared to $51.28 per ton sold in 2009, and a 22.4% increase in tons sold to 3.3 million tons in 2010, both resulting from improved demand in the export coal markets, as well as the benefit of increased production days and additional contract miner production. Segment Adjusted EBITDA Expense for 2010 increased 32.0% to $163.9 million from $124.2 million in 2009, an increase of $3.66 on a per ton sold basis to $50.34 from $46.68 per ton sold, primarily as a result of higher coal sales volumes, higher costs associated with producing metallurgical quality coal, lower coal recoveries due to adverse geologic conditions, as well as other cost increases described above under consolidated operating expenses, including non-capitalized costs incurred related to our Tunnel Ridge mine.

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