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Pulling Back the Curtain on ALRP’s 3Q16 Operating Performance

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Nov. 2 2016, Updated 10:05 a.m. ET

Operating expenses

Alliance Resource Partners’s (ARLP) 3Q16 operational performance was driven by lower overall operating expenses on a year-over-year basis.

ARLP measures the operating expenses of its segments through adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] expense per metric ton. It includes operating expenses, outside coal (KOL) purchases, and other income divided by tons sold.

For 3Q16, ARLP’s overall segment-adjusted EBITDA expense per ton came in at $32.44 compared to $32.65 in 3Q15.

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Alliance Resource Partners’s adjusted EBITDA

Higher-than-anticipated coal shipments and lower operating expenses helped Alliance Resource Partners (ARLP) to beat analysts’ 3Q16 EBITDA estimates. Alliance Resource Partners’s 3Q16 adjusted EBITDA came in at $178.4 million against analysts’ expectations of $165.2 million. A higher EBITDA implies higher income from the company’s operations.

EBITDA outlook

Following Alliance Resource Partners’s 3Q16 results, analysts issued higher revisions for their future EBITDA estimates for ARLP. For the coming quarter, analysts expect ARLP’s EBITDA to be ~$158 million, compared to the pre-3Q16 estimates of $148 million.

For the nine months ended September 30, 2016, ARLP reported adjusted EBITDA of ~$484 million. The company has its fiscal 2016 EBITDA guidance in the range of $650 million–$660 million.

However, future operating margins of ARLP and its peers Cloud Peak Energy (CLD), Arch Coal (ARCH), Alpha Natural Resources (ANRZQ), and Peabody Energy (BTUUQ) largely depend on a sustainable recovery in coal (KOL) prices.

In the next part of this series, we’ll look at Alliance Resource Partners’s leverage and liquidity position.

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