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Alliance Resource Partners Misses Analysts Earnings Estimates

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Apr. 29 2016, Updated 7:37 a.m. ET

Alliance Resource Partners’ earnings

Alliance Resource Partners (ARLP) reported a strong operational performance during 1Q16. However, the company missed analysts’ adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) estimates due to lower revenues. ARLP reported adjusted EBITDA of $136 million against analysts’ estimates of $147 million. Moreover, reported EBITDA fell by nearly 27% from the $209 million in EBITDA reported for 1Q15. Lower EBITDA implies lower income from operations.

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Segment-adjusted EBITDA

Segment-adjusted EBITDA excludes the impact of general and administrative expenses from adjusted EBITDA. ARLP uses segment-adjusted EBITDA to evaluate the operating performance of individual segments.

As discussed earlier in this series, ARLP’s operational performance is driven by lower operating expenses across the company’s major revenue generating segments. For 1Q16, the Illinois Basin’s segment-adjusted EBITDA came in at $112 million, compared with $148 million in 1Q15 and $171 million in 4Q15. The Appalachian segment reported adjusted EBITDA of $39 million, compared with $56 million in 1Q15 and $29 million in 4Q15. When compared on a per-ton-sold basis, the operational performance of both segments remains nearly the same.

Net adjusted income

ARLP’s net adjusted income came in at $27.6 million for 1Q16, against analysts’ expectations of $36.8 million. The decrease in adjusted income is mainly due to lower-than-anticipated revenues due to lower coal (KOL) shipments.

The continued downturn in the commodity market could have a significant impact on the future margins of ARLP and peers Cloud Peak Energy (CLD), Arch Coal (ACIIQ), Alpha Natural Resources (ANRZQ), and Peabody Energy (BTUUQ). In the next part of this series, we’ll look at Alliance Resource Partners’ leverage and liquidity position.

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