UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to_____________
ALLIANCE RESOURCE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 73-1564280
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
|
1717 South Boulder Avenue, Suite 600, Tulsa, Oklahoma 74119
(Address of principal executive offices and zip code)
(918) 295-7600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of November 14, 2002, 8,982,780 Common Units and 6,422,531 Subordinated Units are outstanding.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS(UNAUDITED) PAGE
----
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets as of September 30, 2002
and December 31, 2001 ........................................... 1
Consolidated Statements of Income for the three-months
and nine-months ended September 30, 2002 and 2001 ............... 2
Condensed Consolidated Statements of Cash Flows for
the nine-months ended September 30, 2002 and 2001 ............... 3
Notes to Consolidated Financial Statements ...................... 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ............................. 5
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK ..................................................... 11
ITEM 4 CONTROLS AND PROCEDURES ......................................... 11
FORWARD-LOOKING STATEMENTS ...................................... 13
|
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ................................... 14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ........... 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ..................... 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS .................................... 14
ITEM 5. OTHER INFORMATION ................................... 14
|
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .................... 14
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
ASSETS
SEPTEMBER 30, DECEMBER 31,
2002 2001
--------- ---------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents ................................................. $ 3,433 $ 9,176
Trade receivables, net .................................................... 44,697 31,124
Marketable securities (at cost, which approximates fair value) ............ -- 10,085
Inventories ............................................................... 15,937 11,600
Advance royalties ......................................................... 5,353 5,353
Prepaid expenses and other assets ......................................... 3,475 2,020
--------- ---------
Total current assets ............................................... 72,895 69,358
PROPERTY, PLANT AND EQUIPMENT AT COST .......................................... 398,556 367,050
LESS ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION ...................... (195,765) (169,960)
--------- ---------
202,791 197,090
OTHER ASSETS:
Advance royalties ......................................................... 10,109 9,756
Coal supply agreements, net ............................................... 9,133 12,031
Other long-term assets .................................................... 2,190 2,670
--------- ---------
$ 297,118 $ 290,905
========= =========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .......................................................... $ 26,287 $ 25,237
Due to affiliates ......................................................... 619 2,595
Accrued taxes other than income taxes ..................................... 6,749 5,660
Accrued payroll and related expenses ...................................... 9,790 8,284
Accrued interest .......................................................... 1,650 5,402
Workers' compensation and pneumoconiosis benefits ......................... 3,757 4,194
Other current liabilities ................................................. 3,616 5,324
Current maturities, long-term debt ....................................... 15,000 15,000
--------- ---------
Total current liabilities .......................................... 67,468 71,696
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities .............................. 210,000 211,250
Accrued pneumoconiosis benefits ........................................... 15,708 14,615
Workers' compensation ..................................................... 20,639 18,409
Reclamation and mine closing .............................................. 15,659 15,387
Due to affiliates ......................................................... 5,333 3,624
Other liabilities ......................................................... 2,591 2,865
--------- ---------
Total liabilities .................................................. 337,398 337,846
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL (DEFICIT):
Common Unitholders 8,982,780 units outstanding ............................ 145,252 141,448
Subordinated Unitholder 6,422,531 units outstanding ....................... 113,658 110,935
General Partners .......................................................... (298,376) (298,510)
Minimum pension liability ................................................. (814) (814)
--------- ---------
Total Partners' capital (deficit) .................................. (40,280) (46,941)
--------- ---------
$ 297,118 $ 290,905
========= =========
|
See notes to consolidated financial statements.
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ---------------------------
2002 2001 2002 2001
------------ ----------- ----------- -----------
SALES AND OPERATING REVENUES:
Coal sales ........................................... $ 121,620 $ 111,733 $ 354,736 $ 316,561
Transportation revenues .............................. 5,045 4,782 14,492 13,995
Other sales and operating revenues ................... 5,506 1,379 14,823 4,812
------------ ----------- ----------- -----------
Total revenues ............................. 132,171 117,894 384,051 335,368
------------ ----------- ----------- -----------
EXPENSES:
Operating expenses ................................... 90,756 77,049 244,759 228,315
Transportation expenses .............................. 5,045 4,782 14,492 13,995
Outside purchases .................................... 11,371 8,825 34,259 22,050
General and administrative ........................... 4,088 4,279 13,761 13,225
Depreciation, depletion and amortization ............ 11,643 11,016 34,755 33,371
Interest expense (net of interest income and interest
capitalized for the three months and nine months
ended September 30, 2002 and 2001 of $406, $324,
$992 and $1,492, respectively) ................. 4,055 4,261 12,201 12,744
------------ ----------- ----------- -----------
Total operating expenses .................. 126,958 110,212 354,227 323,700
----------- ----------- -----------
INCOME FROM OPERATIONS .................................... 5,213 7,682 29,824 11,668
OTHER INCOME (EXPENSE) .................................... (412) 134 417 538
------------ ----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE .................................... 4,801 7,816 30,241 12,206
CUMULATIVE EFFECT OF ACCOUNTING CHANGE .................... -- -- -- 7,939
------------ ----------- ----------- -----------
NET INCOME ................................................ $ 4,801 $ 7,816 $ 30,241 $ 20,145
============ =========== =========== ===========
GENERAL PARTNERS' INTEREST IN
NET INCOME ........................................... $ 96 $ 156 $ 605 $ 403
============ =========== =========== ===========
LIMITED PARTNERS' INTEREST IN
NET INCOME ........................................... $ 4,705 $ 7,660 $ 29,636 $ 19,742
============ =========== =========== ===========
BASIC NET INCOME PER LIMITED
PARTNER UNIT ......................................... $ 0.31 $ 0.50 $ 1.92 $ 1.28
============ =========== =========== ===========
BASIC NET INCOME PER LIMITED PARTNER
UNIT BEFORE ACCOUNTING CHANGE ........................ $ 0.31 $ 0.50 $ 1.92 $ 0.78
============ =========== =========== ===========
DILUTED NET INCOME PER LIMITED
PARTNER UNIT ......................................... $ 0.30 $ 0.49 $ 1.87 $ 1.26
============ =========== =========== ===========
DILUTED NET INCOME PER LIMITED PARTNER
UNIT BEFORE ACCOUNTING CHANGE ........................ $ 0.30 $ 0.49 $ 1.87 $ 0.76
============ =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-BASIC .................................... 15,405,311 15,405,311 15,405,311 15,405,311
============ =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-DILUTED .................................. 15,844,316 15,678,013 15,842,689 15,676,639
============ =========== =========== ===========
|
See notes to consolidated financial statements.
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2002 2001
---------- ----------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES ......................... $ 46,520 $ 45,489
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ...................... (37,838) (40,499)
Proceeds from sale of property, plant and equipment ............ 320 100
Purchase of marketable securities .............................. -- (33,539)
Proceeds from the maturity of marketable securities ........... 10,085 60,924
---------- ----------
Net cash used in investing activities ............... (27,433) (13,014)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit and working capital facilities 61,700 --
Payments under revolving credit and working capital facilities . (51,700) --
Payments on long-term debt ..................................... (11,250) --
Distribution to Partners ....................................... (23,580) (23,580)
---------- ----------
Net cash used in financing activities ............... (24,830) (23,580)
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS ............................. (5,743) 8,895
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................... 9,176 6,933
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................... $ 3,433 $ 15,828
========== ==========
CASH PAID FOR:
Interest ....................................................... $ 16,600 $ 17,519
========== ==========
|
See notes to consolidated financial statements.
ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND PRESENTATION
Alliance Resource Partners, L.P., a Delaware limited partnership (the "Partnership"), was formed on May 17, 1999, to acquire, own and operate certain coal production and marketing assets of Alliance Resource Holdings, Inc., a Delaware corporation ("ARH") (formerly known as Alliance Coal Corporation), consisting of substantially all of ARH's operating subsidiaries, but excluding ARH.
The accompanying consolidated financial statements include the accounts and operations of the Partnership and present the financial position as of September 30, 2002 and December 31, 2001, and the results of its operations for the three-month and nine-month periods ended September 30, 2002 and 2001 and its cash flows for the nine month periods ended September 30, 2002 and 2001. All material intercompany transactions and accounts have been eliminated.
These consolidated financial statements and notes thereto for interim periods are unaudited. However, in the opinion of management, these financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the results of the periods presented. Results for interim periods are not necessarily indicative of results for a full year.
These consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and should be read in conjunction with the consolidated and combined financial statements and notes included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2001.
2. CONTINGENCIES
The Partnership is involved in various lawsuits, claims and regulatory proceedings incidental to its business. The Partnership provides for costs related to litigation and regulatory proceedings, including civil fines issued as part of the outcome of these proceedings, when a loss is probable and the amount is reasonably determinable. In the opinion of management, the outcome of these matters to the extent not previously provided for or covered under insurance will not have a material adverse effect on the Partnership's business, financial position or results of operations, although management cannot give any assurance to that effect.
The Partnership is involved in a dispute with PSI Energy Inc. ("PSI") concerning the procedures for and testing of a certain coal quality specification relating to the minimum Hardgrove Grindability Index (i.e. physical hardness of coal) of coal supplied by its Gibson County mining complex. Gibson County Coal and PSI have had on-going discussions since March 2001 concerning the procedures for and testing of coal supplied by the Gibson County mining complex, and have been unable to resolve their differences to-date. During March and April 2002, PSI withheld approximately $234,000 in payments due to Gibson County Coal; PSI has not withheld any additional payments and has verbally advised that it does not intend to withhold any future payments until this dispute is resolved. PSI has previously claimed damages of $1,568,023 at June 30, 2002. PSI has not provided specific information concerning the alleged penalties for shipments after June 30, 2002. Based on Gibson County Coal's understanding of PSI's position, the current penalties alleged by PSI are estimated to be approximately $2,000,000 through September 30, 2002.
During April 2002, Gibson County Coal and PSI agreed to proceed with mediation in an effort to resolve this contractual dispute. The mediation of the dispute occurred in August 2002 during which the parties concluded an outline of a tentative settlement, subject to the negotiation of a definitive settlement agreement. The parties are in the process of negotiating such settlement agreement, but no assurance can be provided that a final settlement can be reached. In the event the final settlement agreement and certain other agreements cannot be concluded, the parties will proceed with either additional mediation efforts or resort to arbitration. Gibson County Coal continues to strongly disagree with PSI's position.
3. SUBSEQUENT EVENT
On October 23, 2002, the Partnership declared a minimum quarterly distribution for the period from July 1, 2002 to September 30, 2002, of $0.50 per unit, totaling approximately $7,703,000, on all of its Common and Subordinated Units outstanding, payable on November 14, 2002, to all unitholders of record on November 1, 2002.
4. ACQUISITION
On November 14, 2002, the Partnership announced that ARH Warrior Holdings, Inc. ("ARH Warrior Holdings"), a company indirectly owned by management of the Partnership, had delivered notice to the Partnership of its intention to require the Partnership to purchase Warrior Coal, LLC ("Warrior Coal"), from ARH Warrior Holdings, pursuant to the terms of the Amended and Restated Put and Call Option Agreement (the "Put/Call Agreement") between the Partnership and ARH Warrior Holdings. The Partnership expects to consummate the purchase of Warrior Coal in the first quarter of 2003.
At closing, the Partnership will pay ARH Warrior Holdings, Inc. approximately $12,500,000 in cash representing the put option price in accordance with the Put/Call Agreement. In addition, the Partnership will repay Warrior Coal's borrowings under the revolving credit agreement between an affiliate of ARH Warrior Holdings, Inc. and Warrior Coal, which obligations currently are estimated to be approximately $16,900,000. The primary borrowings under the revolving credit agreement financed new infrastructure capital projects that are expected to improve productivity and significantly increase capacity. Warrior Coal currently plans to add one continuous miner unit early in the second quarter 2003, to supplant other operations of the Partnership that will be depleting.
Under the terms of the Put/Call Agreement, the Partnership, through Warrior Coal, will assume certain other obligations, including a mineral lease and sublease with SGP Land, LLC, an affiliate of ARH Warrior Holdings, Inc., covering coal reserves that have been and will continue to be mined by Warrior Coal. The terms and conditions of the mineral lease and sub-lease will remain unchanged following the closing of the acquisition.
The Partnership plans to fund the Warrior Coal transaction through the issuance of additional debt and/or equity, depending on market conditions, or through borrowings under its credit facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SELECTED OPERATING DATA
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------- ---------- ---------- ----------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Tons sold(000s) 4,676 4,335 13,577 12,915
Tons produced(000s) 3,710 3,905 12,350 11,973
Revenues per ton sold(1) $ 27.19 $ 26.09 $ 27.22 $ 24.88
Cost per ton sold(2) $ 22.71 $ 20.80 $ 21.56 $ 20.41
|
(1) Revenues per ton sold is based on the total of coal sales and other sales and operating revenues divided by tons sold.
(2) Cost per ton is based on the total of operating expenses, outside purchases and general and administrative expenses divided by tons sold.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001
Coal sales. Coal sales for the three months ended September 30, 2002 (the "2002 Quarter") increased 8.8% to $121.6 million from $111.7 million for the three months ended September 30, 2001 (the "2001 Quarter"). The increase of $9.9 million was primarily attributable to higher price sales contracts secured during the second half of last year and increased tons associated with coal feedstock for coal synfuel production. These increases were partially offset by a decrease in activity in the domestic coal brokerage market. Tons sold increased 7.9% to 4.7 million for the 2002 Quarter from 4.3 million for the 2001 Quarter. Tons produced decreased 5.0% to 3.7 million tons for the 2002 Quarter from 3.9 million for the 2001 Quarter.
Transportation revenues. Transportation revenues were comparable for the 2002 and 2001 Quarters at $5.0 million and $4.8 million, respectively. The Partnership reflects reimbursement of the cost of transporting coal to customers through third-party carriers as transportation revenues and the corresponding expense as transportation expense in the consolidated statements of income. No profit margin is realized on transportation revenues.
Other sales and operating revenues. Other sales and operating revenues increased to $5.5 million for the 2002 Quarter from $1.4 million for the 2001 Quarter. The increase of $4.1 million is primarily attributable to additional service fees associated with increased volumes at a third-party coal synfuel facility at our Hopkins County Coal, LLC mining complex.
Operating expenses. Operating expenses increased 17.8% to $90.8 million for the 2002 Quarter from $77.0 million for the 2001 Quarter. The increase of $13.8 million is primarily the result of lower production at the Mettiki Coal, LLC mining complex and East Kentucky operations. Production costs were negatively impacted by adverse geology encountered as Mettiki moved its longwall mining equipment to a new longwall panel in August 2002. Mettiki's production decreased approximately 300,000 tons compared to the 2001 Quarter. Mining conditions are expected to improve when the longwall moves to its next panel, which is scheduled for early November 2002. Mettiki's reduced production levels along with reduced production at the eastern Kentucky operations caused by the need to relieve its coal inventory build up that occurred earlier this year resulted in higher per ton costs compared to the 2001 Quarter. In addition the Partnership's Dotiki mine experienced higher than normal expenses attributed mostly to increased volume of fully washed coal sales at that mining complex.
Transportation expenses. See "Transportation revenues" above concerning transportation expenses.
Outside purchases. Outside purchases increased to $11.4 million for the 2002 Quarter compared to $8.8 million for the 2001 Quarter. The increase of $2.6 million is primarily the result of outside purchases necessary to fulfill coal feedstock contract commitments at our Hopkins County Coal mine, offset by a decrease in the activity in the domestic coal brokerage market. The Partnership entered into coal supply agreements with Warrior Coal, LLC, an affiliate of the Partnership, for the purchase of up to 1.8 million tons during the year ending December 31, 2002. By mutual agreement, the parties currently
expect purchases under this agreement to be approximately 1.6 million tons during the year ending December 31, 2002.
General and administrative. General and administrative expenses were comparable for the 2002 and 2001 Quarters at $4.1 million and $4.3 million, respectively.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expenses were comparable for the 2002 and 2001 Quarters at $11.6 million and $11.0 million, respectively.
Interest expense. Interest expense was comparable for the 2002 and 2001 Quarters at $4.1 million and $4.3 million, respectively.
EBITDA (income before net interest expense, depreciation, depletion and amortization) decreased to $20.5 million for the 2002 Quarter compared with $23.1 million for the 2001 Quarter. The $2.6 million decrease is primarily attributable to high production costs at Mettiki due to adverse geology encountered as Mettiki moved its longwall mining equipment to a new longwall panel in August 2002, reduced production at the eastern Kentucky operations and increased operating expenses at the Dotiki mine due to the increased volume of fully washed coal sales. These higher production costs are partially offset by higher price realizations and increased volumes associated with coal synfuel related agreements.
EBITDA should not be considered as an alternative to net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with generally accepted accounting principles. EBITDA is not intended to represent cash flow and does not represent the measure of cash available for distribution, but provides additional information for evaluating the Partnership's ability to make minimum quarterly distributions. The Partnership's method of computing EBITDA may not be the same method used to compute similar measures reported by other companies, or EBITDA may be computed differently by the Partnership in different contexts (i.e., public reporting versus computation under financing agreements).
Nine Months Ended September 30, 2002 compared to Nine Months Ended September 30, 2001
Coal sales. Coal sales for the nine months ended September 30, 2002 (the "2002 Period") increased 12.1% to $354.7 million from $316.6 million for the nine months ended September 30, 2001 (the "2001 Period"). The increase of $38.1 million was primarily attributable to higher price sales contracts secured during the second half of last year, increased tons associated with coal feedstock for coal synfuel production, and higher production from the Gibson County Coal mining complex. These increases were partially offset by a decrease in activity in the domestic coal brokerage market. Tons sold increased 5.1% to 13.6 million for the 2002 Period from 12.9 million for the 2001 Period. Tons produced increased 3.1% to 12.4 million tons for the 2002 Period from 12.0 million for the 2001 Period.
Transportation revenues. Transportation revenues were comparable for the 2002 and 2001 Periods at $14.5 million and $14.0 million, respectively. The Partnership reflects reimbursement of the cost of transporting coal to customers through third-party carriers as transportation revenues and the corresponding expense as transportation expense in the consolidated statements of income. No profit margin is realized on transportation revenues.
Other sales and operating revenues. Other sales and operating revenues increased to $14.8 million for the 2002 Period from $4.8 million for the 2001 Period. The increase of $10.0 million is primarily attributable to additional service fees associated with increased volumes at a third-party coal synfuel facility at our Hopkins County Coal mining complex.
Operating expenses. Operating expenses increased 7.2% to $244.8 million for the 2002 Period from $228.3 million for the 2001 Period. The increase of $16.5 million is primarily the result of increased operating costs associated with increased sales volumes of coal synfuel production. In addition, the Dotiki mine experienced higher than normal expenses attributed mostly to increased volume of fully washed coal sales at that mining complex and production costs were negatively impacted by adverse geology encountered as Mettiki moved its longwall mining equipment to a new longwall panel in August 2002 resulting in higher per ton costs compared to the 2001 Period.
Transportation expenses. See "Transportation revenues" above concerning transportation expenses.
Outside purchases. Outside purchases increased to $34.3 million for the 2002 Period compared to $22.1 million for the 2001 Period. The increase of $12.2 million is primarily the result of outside purchases necessary to fulfill coal feedstock contract commitments at our Hopkins County Coal mine, offset by a decrease in the activity in the domestic coal brokerage market. The Partnership has entered into coal supply agreements with Warrior Coal, LLC, an affiliate of the Partnership, for the purchase of up to 1.8 million tons during the year ending December 31, 2002. By mutual agreement, the parties currently expect purchases under this agreement to be approximately 1.6 million tons during the year ending December 31, 2002.
General and administrative. General and administrative expenses were comparable for the 2002 and 2001 Periods at $13.8 million and $13.2 million, respectively.
Depreciation, depletion and amortization. Depreciation, depletion and amortization expenses increased 4.1% to $34.8 million for the 2002 Period compared to $33.4 million for the 2001 Period. The increase of $1.4 million primarily resulted from additional depreciation expense associated with the new Gibson County Coal mining complex.
Interest expense. Interest expense was comparable for the 2002 and 2001 Periods at $12.2 million and $12.7 million, respectively.
EBITDA (income before net interest expense, depreciation, depletion and amortization) increased 16.5% to $77.2 million for the 2002 Period compared with $66.3 million for the 2001 Period. The 2001 Period results include the benefit of a cumulative effect of accounting change totaling $7.9 million related to a change in the method of estimating the black lung benefits liability. Excluding the benefit of the accounting change on the 2001 Period, EBITDA for the 2002 Period increased $18.8 million or 32.4%. The $18.8 million increase in EBITDA, after excluding the effect of the accounting change, is primarily attributable to higher price realizations, increased volumes associated with coal synfuel related agreements and higher sales volume from the Gibson County Coal mining complex.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash provided by operating activities was $46.5 million for the 2002 Period compared to $45.5 million for the 2001 Period. The increase in cash provided by operating activities was principally attributable to operating income and working capital changes during the 2002 Period compared to the 2001 Period.
Net cash used in investing activities was $27.4 million for the 2002 Period compared to $13.0 million for the 2001 Period. The increase in the use of cash is principally attributable to reduced
liquidation of marketable securities, net of purchases, during the 2002 Period compared to the 2001 Period.
Net cash used in financing activities was $24.8 million for the 2002 Period compared to $23.6 million for the 2001 Period. The increase is attributable to $11.3 million of scheduled payments on long-term debt partially offset by $10.0 million in net borrowings under the revolving credit facility.
Capital Expenditures
Capital expenditures decreased to $37.8 million in the 2002 Period compared to $40.5 million in the 2001 Period. The decrease is principally attributable to capital expenditures related to the Gibson County Coal mining complex during the 2001 Period. The Partnership estimates that its capital expenditures will be approximately $52.4 million for 2002, including $15.9 million and $8.0 million related to the extension into the Pattiki II Coal reserve area and a new service shaft at the Dotiki mine, respectively. The Partnership currently expects to fund capital expenditures, other than acquisitions, with cash generated from operations and borrowings under its working capital and revolving credit facilities described below.
ARH Warrior Holdings, Inc. ("ARH Warrior Holdings"), a company indirectly owned by management of the Partnership, had delivered notice to the Partnership of its intention to require the Partnership to purchase Warrior Coal, LLC ("Warrior Coal"), from ARH Warrior Holdings pursuant to the terms of the Amended and Restated Put and Call Option Agreement (the "Put/Call Agreement") between the Partnership and ARH Warrior Holdings. The Partnership expects to consummate the purchase of Warrior Coal in the first quarter of 2003.
Warrior Coal is an underground mining complex that utilizes continuous mining units employing room-and-pillar mining techniques and is located adjacent to the Partnership's Western Kentucky operations. Warrior Coal is expected to produce approximately 1.6 million tons during 2002, essentially all of which is or will be sold to the Partnership as feedstock for synfuel production. Assuming the Partnership consummates the acquisition, the Partnership plans to add a third continuous mining unit at Warrior Coal, early in the second quarter 2003, to supplant other operations of the Partnership that will be depleting.
At closing, the Partnership will pay ARH Warrior Holdings, Inc. approximately $12.5 million in cash representing the put option price in accordance with the Put/Call Agreement. In addition, the Partnership will repay Warrior Coal's borrowings under the revolving credit agreement between an affiliate of ARH Warrior Holdings, Inc. and Warrior Coal, which obligations currently are estimated to be approximately $16.9 million. The primary borrowings under the revolving credit agreement financed new infrastructure capital projects that are expected to improve productivity and significantly increase capacity. Warrior Coal currently plans to add one continuous miner unit early in the second quarter 2003, to supplant other operations of the Partnership that will be depleting.
Under the terms of the Put/Call Agreement, the Partnership, through Warrior Coal, will assume certain other obligations, including a mineral lease and sublease with SGP Land, LLC, an affiliate of ARH Warrior Holdings, Inc., covering coal reserves that have been and will continue to be mined by Warrior Coal. The terms and conditions of the mineral lease and sub-lease will remain unchanged following the closing of the acquisition.
The Partnership plans to fund the Warrior Coal transaction through the issuance of additional debt and/or equity, depending on market conditions, or through borrowings under its credit facility. The Partnership anticipates that the acquisition will be immediately accretive on a basic earnings per unit basis.
Reclamation Bonds and Insurance
Federal and state laws require surety bonds or other acceptable form of surety support to secure the Partnership's obligations related to (a) the statutory requirement that we return mined property to its approximate original condition at the completion of the mining and reclamation process and (b) self-insured workers compensation. During the 2002 Quarter, the Partnership secured renewal and/or replacement of various surety bonds. As of September 30, 2002, the Partnership has put in place a surety bond program with several third-party bonding entities, which program is subject to certain financial and other conditions. The Partnership believes the program is sufficient to support our projected surety bond requirements for self-insured workers compensation programs and reclamation activities through 2004.
During September 2002, the Partnership completed its annual property and casualty insurance renewal. In general, recent insurance carrier losses worldwide have created a tightening market reducing available capacity for underwriting property insurance. As a result, the Partnership and its affiliates increased the deductible for property insurance from $1.0 million to $3.5 million and, in addition, retained a participating interest along with its insurance carriers in the commercial property program at various levels up to 15.48%. The aggregate maximum limit in the commercial property program is $50 million per occurrence of which the Partnership would be responsible for a maximum limit of $7.7 million for each occurrence. While the Partnership does not have a significant history of material insurance claims, the ultimate amount of occurrences incurred and claims made, if any, are dependent on future developments. The Partnership cannot assure you that it will not experience significant insurance claims in the future, which as a result of the Partnership's participation in the commercial property program, could have a material adverse effect on its business, financial condition and results of operations.
Combining the increase in insurance premiums with the increased cost for surety capacity, the Partnership is expecting an increase in insurance and surety related costs for the quarterly period ending December 31, 2002 and year ending December 31, 2003 of approximately $0.5 million and $2.5 million, respectively.
Permitting
In January 2002, the West Virginia Department of Environmental Protection (the "WV DEP") denied a permit application relating to 3.1 million tons of coal reserves located in West Virginia that are contiguous to Mettiki Coal, LLC's Maryland coal reserves. In May 2002, the West Virginia Surface Mine Review Board (the "Surface Board") heard the Partnership's appeal of the WV DEP's permit denial. The Surface Board unanimously reversed WV DEP's permit denial. The Surface Board's action allows full seam extraction in a significant part of the permit area, while the remaining portion can be partially extracted through the room-and-pillar method of mining by continuous miners. Subject to the WV DEP's approval of a mitigation plan that addresses any potential dewatering of a small tributary to the North Branch of the Potomac River, the remaining area of the permit boundary should also be approved for full seam extraction. In October 2002, the Maryland Department of the Environment approved a permit application allowing Mettiki access to such West Virginia reserves by tunneling under the North Branch of the Potomac River from Mettiki's existing Maryland operations.
Notes Offering, Credit Facility and Letters of Credit Facilities
Concurrently with the closing of the Partnership's initial public offering, the Partnership's Special GP issued and Alliance Resource Operating Partners, L.P. (the "Intermediate Partnership") assumed the obligations with respect to $180 million principal amount of 8.31% senior notes due August 20, 2014. The Special GP also entered into, and the Intermediate Partnership assumed the obligations under, a $100 million credit facility. The credit facility consists of three tranches, including a $50 million term loan facility, a $25 million working capital facility and a $25 million revolving credit facility. The Partnership
has borrowings outstanding of $35 million under the term loan facility and $5 million outstanding under each of the revolving credit facility and working capital facility at September 30, 2002, respectively. The interest rate on the term loan facility at September 30, 2002 was 4.56%. The interest rate on the revolving credit facility and working capital facility was 4.75% and 3.31% at September 30, 2002, respectively. The credit facility expires August 2004. The senior notes and credit facility are guaranteed by all of the subsidiaries of the Intermediate Partnership. The senior notes and credit facility contain various restrictive and affirmative covenants, including the amount of distributions by the Intermediate Partnership and the incurrence of other debt. The Partnership was in compliance with the covenants of both the credit facility and senior notes at September 30, 2002.
In 2001, the Partnership entered into agreements with three banks to provide letters of credit in an aggregate amount of $25.0 million. On September 30, 2002, one of these letter of credit facility agreements was extended for an additional one-year term. At September 30, 2002, the Partnership had $15.5 million in letters of credit outstanding supporting reclamation and workers' compensation surety bond requirements. The Special GP guarantees the letters of credit.
Recent Accounting Pronouncements
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred. When the liability is initially recorded, a cost is capitalized by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. To settle the liability, the obligation for its recorded amount is paid or a gain or loss upon settlement is incurred. Since the Partnership has historically adhered to accounting principles similar to SFAS No. 143 in accounting for its reclamation and mine closing costs, the Partnership does not believe that adoption of SFAS No. 143, effective January 1, 2003, will have a material impact on its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
All of the Partnership's transactions are denominated in U.S. dollars, and as a result, the Partnership does not have material exposure to currency exchange-rate risks.
The Partnership did not engage in any interest rate, foreign currency exchange rate or commodity price-hedging transactions as of September 30, 2002.
The Intermediate Partnership assumed obligations under a $100 million credit facility. Borrowings under the credit facility are at variable rates and, as a result, the Partnership has interest rate exposure. The Partnership's earnings are not materially affected by changes in interest rates, if interest rates increased by 100 basis points, interest expense for the nine months ended September 30, 2002 would have increased by approximately $300,000.
As of September 30, 2002, there were no significant changes in the Partnership's quantitative and qualitative disclosures about market risk as set forth in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2001.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90-day period prior to filing of this report, an evaluation was carried out by management, including our chief executive officer and principal accounting officer, of the effectiveness
of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon this evaluation, the chief executive officer and the principal accounting officer concluded that the design and operation of these disclosure controls and procedures were effective.
Subsequent to this evaluation on October 25, 2002 through the date of this filing on Form 10-Q for the quarterly period ended September 30, 2002, there have been no significant changes in the Partnership's internal controls or in other factors that could significantly affect these controls, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. These statements are based on our beliefs as well as assumptions made by, and information currently available to, us. When used in this document, the words "anticipate," "believe," "continue," "estimate," "expect," "forecast", "may," "project", "will," and similar expressions identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to various risks, uncertainties and assumptions. Specific factors which could cause actual results to differ from those in the forward-looking statements include:
o competition in coal markets and our ability to respond to the competition;
o fluctuation in coal prices, which could adversely affect our operating results and cash flows;
o deregulation of the electric utility industry and/or the effects of any adverse changes in the domestic coal industry, electric utility industry, or general economic conditions;
o dependence on significant customer contracts, including renewing customer contracts upon expiration;
o customer cancellations of, or breaches to, existing contracts;
o customer delays or defaults in making payments;
o fluctuations in coal demand, price and availability due to labor and transportation costs and disruptions, equipment availability, governmental regulations and other factors;
o our productivity levels and margins that we earn on our coal sales;
o any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments associated with post-mine reclamation and workers' compensation claims;
o greater than expected environmental regulations, costs and liabilities;
o a variety of operational, geologic, permitting, labor and weather-related factors;
o risks of major mine-related accidents or interruptions;
o results of litigation;
o difficulty maintaining our surety bonds for mine reclamation as well as workers' compensation and black lung benefits;
o difficulty obtaining commercial property insurance; and
o and risks associated with our 15.48% participation (excluding any applicable deductible) in the commercial property program.
If one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may differ materially from those described in any forward-looking statement. When considering forward-looking statements, you should also keep in mind the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2001. Those risk factors could also cause our actual results to differ materially from those contained in any forward-looking statement. We disclaim any obligation to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.
You should consider the above information when reading any forward-looking statements contained in:
o this Quarterly Report on Form 10-Q;
o other reports filed by us with the SEC;
o our press releases; and
o oral statements made by us or any of our officers or other persons acting on our behalf.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information under "Contingencies" in Note 2 of the Notes to Unaudited Consolidated Financial Statements herein is hereby incorporated by reference. See also "Item 3. Legal Proceedings" in the Annual Report on Form 10-K for the year ended December 31, 2001.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Description
10.32 -- First Amendment to the Letter of Credit Facility
Agreement between Alliance Resource Partners, L.P. and
Bank of the Lakes, National Association.
10.33 -- Amendment One to Letter of Credit Facility Agreement
between Alliance Resource Partners, L.P. and Bank of
Oklahoma, National Association.
|
(b) Reports on Form 8-K:
A Form 8-K was filed on August 9, 2002 to submit to the Securities and Exchange Commission the certifications of the Partnership's chief executive officer and principal accounting officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in Tulsa, Oklahoma, on November 14, 2002.
ALLIANCE RESOURCE PARTNERS, L. P.
By: Alliance Resource Management GP, LLC
its managing general partner
/s/ Joseph W. Craft III ----------------------------- Joseph W. Craft III President, Chief Executive Officer and Director /s/ Dale G. Wilkerson ----------------------------- Dale G. Wilkerson Vice President and Controller (Principal Accounting Officer) |
CERTIFICATION
I, Joseph W. Craft III certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alliance Resource Partners, L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Joseph W. Craft III -------------------------- Joseph W. Craft III President, Chief Executive Officer and Director |
CERTIFICATION
I, Dale G. Wilkerson certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alliance Resource Partners, L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
d. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
e. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Dale G. Wilkerson ----------------------------- Dale G. Wilkerson Vice President and Controller (Principal Accounting Officer) |
EXHIBIT INDEX
Exhibit
No. Description
------- ------------
10.32 -- First Amendment to the Letter of Credit Facility Agreement
between Alliance Resource Partners, L.P. and Bank of the
Lakes, National Association.
10.33 -- Amendment One to Letter of Credit Facility Agreement between
Alliance Resource Partners, L.P. and Bank of Oklahoma,
National Association.
|
EXHIBIT 10.32
September 25, 2002
ALLIANCE RESOURCE PARTNERS, L.P. c/o
Alliance Resource Management GP, LLC 1717
South Boulder Avenue, Suite 600
Tulsa, Oklahoma 74119
ATTN: Cary Marshall
RE: Letter of Credit for the benefit of the Kentucky Dept. of Workers' Claims
Dear Mr. Marshall:
This letter constitutes a first amendment to the Letter of Credit Facility Agreement, executed between Alliance Resource Partners, L.P. and Bank of the Lakes as of October 2, 2001 (the "Facility Agreement"), to allow for the issuance of the attached non-standard letter of credit.
As we discussed with Randy Pierce, the Facility Agreement did not contemplate this type of state-agency mandated, clean letter of credit in at least the following respects:
(i) By requiring that the letter of credit not mention the LC applicant or the account party, KY is trying to short-circuit any possibility of a rightful dishonoring;
(ii) The invoking of only the Uniform Customs and practice for Documentary Credits could bring into doubt the applicability of Article 5 of the Uniform Commercial Code;
(iii) Both the absence of any required documents accompanying the sight draft or required certification of nonperformance and the requirement that the LC not mention the applicant could increase the likelihood of fraud under this LC;
(iv) All of the above could make it more difficult for Bank of the Lakes to dishonor based on fraud that would otherwise be permitted under UCC Article 5.
For these and other reasons, Bank of the Lakes must treat this LC as making a loan to Alliance. However, based on our strong customer relationship and the creditworthiness of Alliance, Bank of the Lakes will issue the LC (substantially in the form attached) under the Facility Agreement.
The Facility Agreement is hereby amended to the extent necessary to permit on a one-time basis the issurance of the attached LC.
Sincerely,
/s/ Scott Yandell ----------------- Scott Yandell, President Bank of the Lakes, N.A. |
ACCEPTED AND AGREED this 25th day of September, 2002 on behalf of Alliance Resource Partners, L.P ., a limited partnership
By: Alliance Resource Management GP, LLC, the managing general partner
By: /s/ Cary P. Marshall ----------------------------------- Name: Cary P. Marshall Title: VP of Finance and Treasurer |
EXHIBIT 10.33
AMENDMENT ONE TO
LETTER OF CREDIT FACILITY AGREEMENT
This Amendment One to Letter of Credit Facility Agreement ("Amendment"), is dated effective as of September 30, 2002, by and between ALLIANCE RESOURCE PARTNERS, L.P., a Delaware limited partnership ("Borrower") and BANK OF OKLAHOMA, N.A. ("Bank").
RECITALS
A. Reference is made to the Letter of Credit Facility Agreement dated as of June 29, 2001, between Borrower and Bank (the "Credit Agreement"), pursuant to which currently exists a $10,000,000 Letter of Credit Commitment as further evidenced by the $10,000,000 Promissory Note dated July 31, 2001 ("Note"). Terms used herein shall have the meanings given in the Credit Agreement, unless otherwise defined herein.
B. Borrower has requested Bank with respect to the Letter of Credit Commitment to extend the Termination Date to September 30, 2003; and Bank has agreed to accommodate Borrower's request, subject to the terms and conditions set forth below.
AGREEMENT
For valuable consideration received, the parties hereto agree to the following:
1. Amendments to Credit Agreement. The Credit Agreement is amended as follows.
1.1 Letter of Credit Fee. Section 1.29 is hereby amended to evidence that the rate ".95%" shall now mean and read "1.25%."
1.2 Termination Date. Section 1.40 is hereby amended to evidence that it shall mean September 30, 2003.
1.3 Leverage Ratio. Section 6.7 is hereby amended to evidence that the ratio "4 to 1" shall now mean and read "3.5 to 1."
1.4 Negative Pledge. A new section 6.12 is hereby added: "6.12 Negative Pledge. If Guarantor assigns, transfers, conveys, pledges or encumbers, in part or in whole, any Common Units of Alliance Resource Partners, L.P."
2. Ratification of Documents. Borrower hereby ratifies and confirms the Credit Agreement, and all instruments, documents and/or agreements executed and/or delivered by Borrower to Lender in connection therewith, and Borrower represents to Lender that (i) they remain in full force and effect, and Borrower is in full and complete compliance therewith; (ii) all representations and warranties made
thereunder are true and correct as of the date hereof; and (iii) no Event of Default exists. Additionally, current calculations with respect to Section 6.7 (Leverage Ratio) are set forth on Schedule "2" hereto.
3. Ratification of Guaranties.
3.1. Alliance Resource GP, LLC, hereby ratifies and confirms its Guaranty Agreement, and represents and warrants to Lender that it is in full and complete compliance with the terms and conditions of the Guaranty Agreement, and any representations and warranties made therein remain true and correct in all material respects. Additionally, (i) the Guaranty is hereby amended to evidence that the "Obligations" defined therein shall include the renewed $10,000,000 Promissory Note, and (ii) current calculations with respect to Section 6.8 (Guarantor Liquidity) and Section 6.9 (Guarantor Net Asset Position) are set forth on Schedule "3" hereto.
4. Conditions Precedent. The effectiveness of this Amendment, and the obligations of Lender's commitments hereunder, are conditioned upon satisfaction of the following at or before closing:
4.1. Borrower shall execute and deliver to Lender this Amendment, and all schedules hereto.
4.2. Borrower shall execute and deliver to Lender the $10,000,000 Line Note ("Renewal Note") in form and content as set forth on Schedule "4.2" hereto.
4.3. Certified Resolutions as to Borrower in form and content as set forth on Schedule "4.3" hereto.
4.4. Certified Resolutions as to Guarantor in form and content as set forth on Schedule "4.4" hereto.
4.5. Borrower shall execute and/or deliver any other instruments, documents, legal opinions or agreements required by Lender in connection herewith.
5. Governing Law and Binding Effect. This Amendment shall be governed by and construed in accordance with the laws of the State of Oklahoma, and shall be binding upon and inure to the benefit of the parties hereto, their respective successors and assigns.
6. Expenses. Borrower shall pay the costs, expenses and fees incurred by Lender in connection herewith.
7. Counterparts. This Amendment may be executed in multiple counterparts, with all counterparts constituting one agreement.
"Lender"
BANK OF OKLAHOMA, N.A.
By /s/ Robert D. Mattax ---------------------------------- Robert D. Mattax, Senior Vice President |
"Borrower"
ALLIANCE RESOURCE PARTNERS, L.P.,
an Delaware limited partnership
By: ALLIANCE RESOURCE MANAGEMENT GP, LLC,
the managing general partner
By /s/ Cary P. Marshall --------------------------------------------- Cary P. Marshall, Vice President of Corporate Finance and Treasurer |
"Guarantor"
ALLIANCE RESOURCE GP, LLC
By /s/ Cary P. Marshall --------------------------------------------- Cary P. Marshall, Vice President of Corporate Finance and Treasurer |
Schedule "2"
(Leverage Ratio Calculations)
Schedule "3"
(Guarantor Net Asset Position)
Schedule "4.2"
($10,000,000 Note)
Schedule "4.3"
(Certified Resolutions of Borrower)
Schedule "4.4"
(Certified Resolutions of Guarantor)