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Alliance Resource Partners, L.P. Reports Increased Quarterly Coal Sales Volumes, Revenues, Net Income and EBITDA and Record First Half Financial and Operating Results; Declares Quarterly Distribution of $0.56 Per Unit
TULSA, Okla.--(BUSINESS WIRE)--Alliance Resource Partners, L.P. (NASDAQ: ARLP - ) today reported increases to coal sales volumes, revenues, net income and EBITDA for the second quarter ended June 30, 2007 (the "2007 Quarter"). Results for the 2007 Quarter benefited from a final settlement with ARLP's insurance underwriters for claims relating to the December 2004 Excel No. 3 mine fire. This benefit was partially offset by increased compliance costs and reduced productivity associated with the interpretation and enforcement of recently enacted federal and state mine safety regulations.

ARLP also announced that the Board of Directors of its managing general partner (the "Board") declared a quarterly cash distribution of $0.56 per unit for the 2007 Quarter. The 2007 Quarter distribution equates to an annualized rate of $2.24 per unit and will be paid on August 14, 2007, to all unitholders of record as of August 7, 2007. The announced distribution represents a 3.7% increase over the $0.54 per unit cash distribution for the first quarter of this year and a 12.0% increase over the quarter ended June 30, 2006 (the "2006 Quarter") cash distribution of $0.50 per unit. Increases to ARLP's quarterly cash distribution to unitholders are generally considered by the Board at its January and July meetings.

"Alliance Resource Partners achieved several significant milestones during the first six months of 2007," said Joseph W. Craft III, President and Chief Executive Officer. "While we delivered record operating and financial performance, our mines continued to be among the safest in the industry as we again posted the best safety results in the history of ARLP. In addition, the Providence reserve acquisition further strengthened our position in the growing Illinois Basin market. Our sustained high level of performance and growth led to Alliance climbing to number fourteen on BusinessWeek's annual list of '100 Hot Growth Companies,' our fifth consecutive year in the rankings."

"These results were accomplished despite reduced production capacity utilization in the 2007 Quarter," said Craft. "ARLP's coal production was lower than anticipated as we exercised discipline in an oversupplied market and experienced production interruptions due to compliance efforts in response to extensive changes in federal regulatory safety standards. Looking ahead, improved market conditions have recently resulted in additional sales commitments of approximately 500,000 tons for 2007 and we do not anticipate our safety compliance efforts to result in continuing production interruptions. As a result, we expect to return to full production capacity for the remainder of 2007."

Consolidated Financial Results

Net income for the 2007 Quarter increased 14.0% to $46.2 million, or $1.03 of adjusted net income per diluted limited partner unit, compared to net income for the 2006 Quarter of $40.6 million, or $0.94 of adjusted net income per diluted limited partner unit. A final settlement with insurance underwriters for claims relating to the Excel No. 3 mine fire resulted in a $12.3 million increase to net income in the 2007 Quarter, as ARLP recorded a net gain from insurance settlement of approximately $11.5 million and a reduction in operating expenses of approximately $0.8 million. (See ARLP Press Releases dated December 27, 2004, January 7, January 14, February 21, and March 3, 2005.) EBITDA rose 17.8% in the 2007 Quarter to $70.5 million, compared to 2006 Quarter EBITDA of $59.9 million. (ARLP's use of adjusted net income per limited partner unit is consistent with the methodology generally used by securities analysts and consensus estimates. For definitions of adjusted net income per limited partner unit and EBITDA and related reconciliations to GAAP, please see the end of this release.)

Driven by higher average coal sales prices and coal sales volumes, revenues for the 2007 Quarter increased 19.0% to $263.3 million, compared to $221.3 million for the 2006 Quarter. Average coal sales prices per ton rose approximately 4.6% to $38.60 per ton sold, while coal sales volumes increased 12.7% to 6.3 million tons, compared to the 2006 Quarter. Primarily reflecting production interruptions related to compliance efforts in response to emergency federal safety standards, coal production volumes declined to 5.6 million tons in the 2007 Quarter.

Operating expenses in the 2007 Quarter increased to $178.0 million, compared to $140.9 million in the 2006 Quarter. As anticipated, operating expenses at the Mettiki mining complex increased $17.1 million, primarily due to the higher cost structure of mining in West Virginia compared to Maryland. ARLP completed the transition of longwall operations to the Mountain View mine from the depleted Mettiki mine in the fourth quarter of 2006. Operating expenses also rose by $10.1 million at the Elk Creek mine, primarily as a result of the mine operating at increased production capacity in the 2007 Quarter compared to development activity during the 2006 Quarter. Compliance efforts associated with recently enacted mine safety regulations, increased labor related expenses, materials and supply costs and sales related expenses also contributed to higher operating expenses in the 2007 Quarter.

General and administrative expenses increased during the 2007 Quarter to $8.3 million from $7.1 million during the 2006 Quarter, primarily as a result of higher salaries, wages and unit-based compensation expenses. Increased capital spending related to ARLP's growth initiatives resulted in higher depreciation, depletion and amortization expense, which rose $5.1 million during the 2007 Quarter to $21.4 million.

For the six months ended June 30, 2007 (the "2007 Period"), ARLP reported records for tons produced and sold, revenues, net income and EBITDA. Net income for the 2007 Period increased 3.4% to $91.8 million, compared to net income of $88.8 million for the six months ended June 30, 2006 (the "2006 Period"). Revenues for the 2007 Period rose 13.2% to $520.4 million and coal sales volumes increased 6.7% to 12.5 million tons, as compared to $459.6 million and 11.7 million tons for the 2006 Period, respectively. 2007 Period revenues also benefited from higher average coal sales prices per ton, which increased 6.4% to $38.63 per ton compared to the 2006 Period. EBITDA for the 2007 Period climbed 10.3% to $138.6 million, compared to EBITDA of $125.7 million for the 2006 Period. Total coal production increased during the 2007 Period to 12.2 million tons, compared to 12.1 million tons of coal produced during the 2006 Period. (For a definition of EBITDA and reconciliation to GAAP, please see the end of this release.)

Financial results for the 2007 Period benefited from the net gain and reduced operating expenses attributable to the final settlement on insurance claims associated with the Excel No. 3 mine fire discussed above. ARLP's year-to-date financial results were negatively impacted by higher operating expenses and outside purchases and increased depreciation, depletion and amortization, as discussed above.

Regional Results and Analysis

                 Illinois      Central       Northern
                   Basin       Appalachia    Appalachia    Total (4)
               ------------- ------------- ------------- -------------
               2007   2006   2007   2006   2007   2006   2007   2006
                 Qtr    Qtr    Qtr    Qtr    Qtr    Qtr    Qtr    Qtr
               ------ ------ ------ ------ ------ ------ ------ ------

Tons sold
 (millions)     4.503  3.923  0.919  0.906  0.857  0.741  6.279  5.570
Coal sales
 price per ton
 (1)           $34.02 $34.01 $57.00 $52.32 $41.84 $29.51 $38.60 $36.90
Segment
 Adjusted
 EBITDA Expense
 per ton (2)   $25.41 $23.25 $40.69 $39.35 $36.49 $20.92 $29.53 $26.10
Segment
 Adjusted
 EBITDA
 (millions) (3) $46.4  $47.4  $26.5  $11.7   $5.7   $6.9  $78.8  $67.0

(1) Sales price per ton is defined as total coal sales divided by total tons sold.

(2) Segment Adjusted EBITDA Expense per ton represents the sum of operating expenses, outside purchases and other income divided by total tons sold.

(3) For a definition of Segment Adjusted EBITDA and reconciliation to GAAP, please see the end of this release.

(4) Total includes other and corporate.

Increased Illinois Basin and Northern Appalachian sales tons drove ARLP's coal sales volumes higher in the 2007 Quarter to 6.3 million tons, compared to 5.6 million tons of coal sold in the 2006 Quarter. During the 2007 Quarter, Illinois Basin coal sales volumes increased 14.8% to 4.5 million tons, compared to the 2006 Quarter. Higher Illinois Basin sales volumes were primarily attributable to increased production capacity at the Elk Creek mine, increased productivity at the Warrior mine, and higher sales from inventory during the 2007 Quarter. Partially offsetting these increases, Illinois Basin coal sales volumes were negatively impacted by additional processing required at the Gibson and Elk Creek mines as a result of adverse geologic conditions encountered at these operations during the 2007 Quarter. Coal sales volumes in the Northern Appalachian region increased 15.7%, primarily as a result of higher sales from inventory during the 2007 Quarter compared to the 2006 Quarter.

Average coal sales price per ton increased 4.6% in the 2007 Quarter to $38.60, compared to an average coal sales price per ton of $36.90 realized during the 2006 Quarter. Average coal sales prices in the Northern Appalachian region increased 41.8% per ton as a result of new coal sales contracts, which reflect the impact of anticipated higher operating costs at the Mountain View mining operation. Primarily as a result of improved contract pricing, sales prices per ton in the Central Appalachian region increased 8.9% during the 2007 Quarter, compared to the 2006 Quarter.

Total Segment Adjusted EBITDA Expense per ton increased 13.1% during the 2007 Quarter to $29.53 per ton sold, as compared to the 2006 Quarter. Reduced production and higher operating expenses associated with the new mine safety standards negatively impacted Segment Adjusted EBITDA Expense per ton in all regions. Higher Segment Adjusted EBITDA Expense per ton in the Northern Appalachian region reflects the previously discussed increased operating costs at the Mountain View mine, primarily due to higher transportation cost, West Virginia severance taxes and the loss of certain Maryland state tax benefits. Segment Adjusted EBITDA Expense per ton in the Northern Appalachian region was also impacted by a longwall move in the 2007 Quarter. (For a definition of Segment Adjusted EBITDA and reconciliation to GAAP, please see the end of this release.)

Outlook

"Long-term supply/demand fundamentals for scrubber quality coal remain favorable and ARLP continues to see significant growth opportunities for high-sulfur coal in the Illinois Basin and Northern Appalachian regions," said Mr. Craft. "The installation of scrubbers in the markets ARLP serves appears to be moving forward as expected and we continue to receive positive indications of demand from potential customers for production from our organic growth projects. We recently executed a contract to begin construction of the slope and shaft at our River View project and we remain focused on securing the coal sales commitments necessary to allow development of River View and our other growth projects ahead of the anticipated increase in demand for Illinois Basin and Northern Appalachian coal."

Capital expenditures in the 2007 Quarter totaled $91.8 million, including capital associated with the Providence reserve acquisition. (See ARLP Press Release dated June 20, 2007.) Total capital expenditures for the 2007 full year are currently estimated in a range of $175.0 to $185.0 million.

Reflecting results for the 2007 Period and based on its current outlook for the remainder of the year, ARLP is anticipating 2007 guidance ranges for revenues, excluding transportation revenues, $985.0 to $1,015.0 million; EBITDA, $255.0 to $285.0 million; and net income, $155.0 to $185.0 million. As the interpretation and enforcement of new federal and state mine safety regulations continue to evolve, the cost of implementing these regulations over the remainder of 2007 could push ARLP's financial and operating results toward the lower end of current guidance ranges.

As a result of lower production capacity utilization in the 2007 Quarter, ARLP is currently anticipating coal production for 2007 in a range of 24.3 to 24.8 million tons. For 2007, ARLP has secured sales and price commitments for approximately 24.0 million tons. Sales commitments for approximately 19.1 million tons and 15.4 million tons have been secured for 2008 and 2009, respectively, of which approximately 4.3 million tons and 9.7 million tons are currently open to market pricing in 2008 and 2009, respectively.

Guidance ranges for 2007 net income include an estimated benefit of approximately $25.0 to $27.0 million from ARLP's various coal synfuel-related agreements. Net income from ARLP's various coal synfuel-related agreements was approximately $8.8 million and $16.9 million in the 2007 Quarter and 2007 Period, respectively. Realization of future synfuel related benefits could be reduced if non-conventional synfuel tax credits become unavailable to the owners of the coal synfuel facilities due to a rise in the price of crude oil or otherwise. The non-conventional synfuel tax credit is scheduled to expire on December 31, 2007.

A conference call regarding ARLP's 2007 Quarter financial results is scheduled for today at 11am Eastern. To participate, dial (866) 203-3206 and provide passcode 73565583. International callers should dial (617) 213-8848. Investors may also listen to the call via the "investor information" section of ARLP's website at http://www.alrp.com."

About Alliance Resource Partners, L.P.

ARLP is a diversified producer and marketer of steam coal to major United States utilities and industrial users. ARLP, the nation's only publicly traded master limited partnership involved in the production and marketing of coal, is currently the fourth largest coal producer in the eastern United States with operations in all major eastern coalfields. ARLP currently operates eight underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia.

News, unit prices and additional information about ARLP, including filings with the Securities and Exchange Commission, are available at http://www.arlp.com. For more information, contact the investor relations department of ARLP at 918-295-7674 or via e-mail at investorrelations@arlp.com

The statements and projections used throughout this release are based on current expectations. These statements and projections are forward-looking, and actual results may differ materially. These projections do not include the potential impact of any mergers, acquisitions or other business combinations that may occur after the date of this release. At the end of this release, we have included more information regarding business risks that could affect our results.

FORWARD-LOOKING STATEMENTS: With the exception of historical matters, any matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projected results. These risks, uncertainties and contingencies include, but are not limited to, the following: increased competition in coal markets and our ability to respond to the competition; fluctuation in coal prices, which could adversely affect our operating results and cash flows; risks associated with the expansion of our operations and properties; deregulation of the electric utility industry or the effects of any adverse change in the domestic coal industry, electric utility industry, or general economic conditions; dependence on significant customer contracts, including renewing customer contracts upon expiration of existing contracts; customer bankruptcies and/or cancellations or breaches of existing contracts; customer delays or defaults in making payments; fluctuations in coal demand, prices and availability due to labor and transportation costs and disruptions, equipment availability, governmental regulations and other factors; our productivity levels and margins that we earn on our coal sales; greater than expected increases in raw material costs; greater than expected shortage of skilled labor; any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments associated with asset retirement obligations and workers' compensation claims; any unanticipated increases in transportation costs and risk of transportation delays or interruptions; greater than expected environmental regulation, costs and liabilities; a variety of operational, geologic, permitting, labor and weather-related factors; risk associated with major mine-related accidents, such as mine fires or other interruptions; results of litigation, including claims not yet asserted; difficulty maintaining our surety bonds for asset retirement obligations as well as workers' compensation and black lung benefits; coal market's share of electricity generation; prices of fuel that compete with or impact coal usage, such as oil or natural gas; legislation, regulatory and court decisions; the impact from provisions of The Energy Policy Act of 2005; replacement of coal reserves; a loss or reduction of the direct or indirect benefit from certain state and federal tax credits, including non-conventional source fuel tax credits; difficulty obtaining commercial property insurance, and risks associated with our increased participation (excluding any applicable deductible) in the commercial insurance property program.

Additional information concerning these and other factors can be found in ARLP's public periodic filings with the Securities and Exchange Commission ("SEC"), including ARLP's Annual Report on Form 10-K for the year ended December 31, 2006, filed on March 1, 2007 with the SEC. Except as required by applicable securities laws, ARLP does not intend to update its forward-looking statements.

          ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING DATA
            (In thousands, except unit and per unit data)
                             (Unaudited)

                      Three Months Ended         Six Months Ended
                           June 30,                  June 30,
                   ------------------------- -------------------------
                       2007         2006         2007         2006
                   ------------ ------------ ------------ ------------

Tons sold                6,279        5,570       12,457       11,672
Tons produced            5,638        5,802       12,195       12,050

SALES AND OPERATING
 REVENUES:
  Coal sales       $   242,364  $   205,513  $   481,234  $   423,725
  Transportation
   revenues             10,606        8,956       19,285       18,990
  Other sales and
   operating
   revenues             10,339        6,835       19,861       16,909
                   ------------ ------------ ------------ ------------
       Total
        revenues       263,309      221,304      520,380      459,624
                   ------------ ------------ ------------ ------------

EXPENSES:
  Operating
   expenses            177,968      140,877      344,957      292,887
  Transportation
   expenses             10,606        8,956       19,285       18,990
  Outside purchases      7,607        4,705       13,873        8,231
  General and
   administrative        8,266        7,091       16,195       14,249
  Depreciation,
   depletion and
   amortization         21,425       16,288       41,218       31,010
  Net gain from
   insurance
   settlement          (11,491)           -      (11,491)           -
                   ------------ ------------ ------------ ------------
       Total
        operating
        expenses       214,381      177,917      424,037      365,367
                   ------------ ------------ ------------ ------------

INCOME FROM
 OPERATIONS             48,928       43,387       96,343       94,257

  Interest expense      (2,842)      (3,439)      (5,660)      (6,588)
  Interest income          569          909        1,103        1,813
  Other income             167          197        1,068          468
                   ------------ ------------ ------------ ------------
INCOME BEFORE
 INCOME TAXES,
 CUMULATIVE EFFECT
 OF ACCOUNTING
 CHANGE AND
 MINORITY INTEREST      46,822       41,054       92,854       89,950
INCOME TAX EXPENSE         670          547        1,244        1,306
                   ------------ ------------ ------------ ------------
INCOME BEFORE
 CUMULATIVE EFFECT
 OF ACCOUNTING
 CHANGE AND
 MINORITY INTEREST      46,152       40,507       91,610       88,644
CUMULATIVE EFFECT
 OF ACCOUNTING
 CHANGE                      -            -            -          112
MINORITY INTEREST           85           43          167           43
                   ------------ ------------ ------------ ------------
NET INCOME         $    46,237  $    40,550  $    91,777  $    88,799
                   ============ ============ ============ ============

GENERAL PARTNERS'
 INTEREST IN NET
 INCOME            $     8,326  $     6,090  $    15,937  $    10,934
                   ============ ============ ============ ============

LIMITED PARTNERS'
 INTEREST IN NET
 INCOME            $    37,911  $    34,460  $    75,840  $    77,865
                   ============ ============ ============ ============

BASIC NET INCOME
 PER LIMITED
 PARTNER UNIT      $      0.80  $      0.73  $      1.60  $      1.56
                   ============ ============ ============ ============

DILUTED NET INCOME
 PER LIMITED
 PARTNER UNIT      $      0.80  $      0.72  $      1.59  $      1.55
                   ============ ============ ============ ============

DISTRIBUTIONS PAID
 PER COMMON UNIT   $      0.54  $      0.46  $      1.08  $      0.92
                   ============ ============ ============ ============

WEIGHTED AVERAGE
 NUMBER OF UNITS
OUTSTANDING-BASIC   36,550,659   36,426,306   36,545,600   36,426,306
                   ============ ============ ============ ============

WEIGHTED AVERAGE
 NUMBER OF UNITS
OUTSTANDING-DILUTED 36,794,912   36,797,407   36,782,509   36,780,300
                   ============ ============ ============ ============
          ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED BALANCE SHEETS
                   (In thousands, except unit data)
                             (Unaudited)

                                              June 30,   December 31,
ASSETS                                          2007         2006
                                             ---------- --------------
CURRENT ASSETS:
  Cash and cash equivalents                  $  17,652      $  36,789
  Trade receivables, net                        86,511         96,558
  Other receivables                              3,236          3,378
  Due from affiliates                              117             25
  Marketable securities                              -            260
  Inventories                                   27,105         20,224
  Advance royalties                              3,316          4,629
  Prepaid expenses and other assets              3,963          8,225
                                             ---------- --------------
       Total current assets                    141,900        170,088

PROPERTY, PLANT AND EQUIPMENT:
  Property, plant and equipment, at cost       899,008        819,991
  Less accumulated depreciation, depletion
   and amortization                           (387,923)      (383,284)
                                             ---------- --------------
       Total property, plant and equipment,
        net                                    511,085        436,707

OTHER ASSETS:
  Advance royalties                             28,169         22,135
  Other long-term assets                        14,740          6,032
                                             ---------- --------------
       Total other assets                       42,909         28,167
                                             ---------- --------------
TOTAL ASSETS                                 $ 695,894      $ 634,962
                                             ========== ==============

LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
  Accounts payable                           $  53,559      $  57,879
  Due to affiliates                                614          1,414
  Accrued taxes other than income taxes         14,880         14,618
  Accrued payroll and related expenses          13,585         14,698
  Accrued interest                               4,362          4,264
  Workers' compensation and pneumoconiosis
   benefits                                      7,723          7,704
  Current capital lease obligation                 373            339
  Other current liabilities                      7,494         13,786
  Current maturities, long-term debt            18,585         18,000
                                             ---------- --------------
       Total current liabilities               121,175        132,702

LONG-TERM LIABILITIES:
  Long-term debt, excluding current
   maturities                                  149,000        126,000
  Pneumoconiosis benefits                       27,884         26,315
  Accrued pension benefit                        7,699          6,191
  Workers' compensation                         46,021         38,488
  Asset retirement obligations                  48,682         47,825
  Due to affiliates                              1,354            994
  Long-term capital lease obligation             1,327          1,512
  Minority interest                                672            839
  Other liabilities                              6,615          5,616
                                             ---------- --------------
       Total long-term liabilities             289,254        253,780
                                             ---------- --------------
       Total liabilities                       410,429        386,482
                                             ---------- --------------

COMMITMENTS AND CONTINGENCIES

PARTNERS' CAPITAL:
  Limited Partners - Common Unitholders
   36,550,659 and 36,419,847 units
   outstanding, respectively                   584,311        549,005
  General Partners' deficit                   (292,019)      (293,569)
  Accumulated other comprehensive income        (6,827)        (6,956)
                                             ---------- --------------
       Total Partners' Capital                 285,465        248,480
                                             ---------- --------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL      $ 695,894      $ 634,962
                                             ========== ==============
          ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In thousands)
                             (Unaudited)

                                                   Six Months Ended
                                                        June 30,
                                                  --------------------
                                                     2007      2006
                                                  ---------- ---------

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES       $ 141,372  $128,820
                                                  ---------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Property, plant and equipment:
    Capital expenditures                            (69,170)  (92,017)
    Changes in accounts payable and accrued
     liabilities                                     (7,315)   (1,786)
    Proceeds from sale of property, plant and
     equipment                                        3,048       510
  Proceeds from insurance settlement for
   replacement assets                                 2,511         -
  Purchase of marketable securities                       -   (19,187)
  Proceeds from marketable securities                   260    44,018
  Payment for acquisition of coal reserves and
   other assets                                     (53,309)        -
  Payment for acquisition of business                     -    (1,648)
  Advances on Gibson rail project                    (5,888)        -
                                                  ---------- ---------
      Net cash used in investing activities        (129,863)  (70,110)
                                                  ---------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under revolving credit facilities       23,585         -
  Payments on capital lease obligation                 (151)        -
  Payment of debt issuance cost                           -      (690)
  Equity contribution received by Mid-America
   Carbonates, LLC                                        -     1,000
  Cash contribution by General Partners                  91         -
  Distributions paid to Partners                    (54,171)  (42,474)
                                                  ---------- ---------
      Net cash used in financing activities         (30,646)  (42,164)
                                                  ---------- ---------

NET CHANGE IN CASH AND CASH EQUIVALENTS             (19,137)   16,546

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     36,789    32,054

                                                  ---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD        $  17,652  $ 48,600
                                                  ========== =========

SUPPLEMENTAL CASH FLOW INFORMATION:
  CASH PAID FOR:
    Interest                                      $   6,074  $  6,934
                                                  ========== =========
    Income taxes                                  $   2,175  $  1,900
                                                  ========== =========

  NON-CASH INVESTING ACTIVITY:
    Purchase of property, plant and equipment     $   4,824  $  7,577
                                                  ========== =========

Reconciliation of GAAP "Cash Flows Provided by Operating Activities" to Non-GAAP "EBITDA", Reconciliation of non-GAAP "EBITDA" to GAAP "Net Income" and Reconciliation of non-GAAP "EBITDA" to "Segment Adjusted EBITDA" (in thousands).

EBITDA is defined as net income before net interest expense, income taxes, depreciation, depletion and amortization, cumulative effect of accounting change and minority interest. EBITDA is used as a supplemental financial measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to assess:

  • the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
  • the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness;
  • our operating performance and return on investment as compared to those of other companies in the coal energy sector, without regard to financing or capital structures; and
  • the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

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. Our 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 us in different contexts (i.e. public reporting versus computation under financing agreements).

Segment Adjusted EBITDA is defined as income before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses, and cumulative effect of accounting change and minority interest.

                 Three Months Ended   Six Months Ended    Year Ended
                      June 30,            June 30,        December 31,
                 ------------------- ------------------- -------------
                                                             2007E
                   2007      2006      2007      2006      Midpoint
                 --------- --------- --------- --------- -------------

Cash flows
 provided by
 operating
 activities      $ 72,367  $ 61,180  $141,372  $128,820   $   251,000
Long-term
 incentive plan      (780)     (865)   (1,386)   (1,922)       (3,100)
Asset retirement
 obligations         (613)     (524)   (1,218)   (1,025)       (2,200)
Coal inventory
 adjustment to
 market              (524)     (986)     (939)   (2,122)            -
Net gain (loss)
 on sale of
 property, plant
 and equipment        842       (34)      846       384             -
Gain from
 insurance
 recoveries for
 property damage    2,357         -     2,357         -         2,400
Gain from
 insurance
 settlement
 proceeds
 received in a
 prior period       5,088         -     5,088         -         5,100
Other                 (46)     (270)      (93)     (412)         (300)
Net effect of
 working capital
 changes          (11,114)   (1,706)  (13,199)   (4,069)        4,100
Interest
 expense, net       2,273     2,530     4,557     4,775        10,200
Income taxes          670       547     1,244     1,306         2,800
                 --------- --------- --------- --------- -------------
EBITDA             70,520    59,872   138,629   125,735       270,000
Depreciation,
 depletion and
 amortization     (21,425)  (16,288)  (41,218)  (31,010)      (86,800)
Interest
 expense, net      (2,273)   (2,530)   (4,557)   (4,775)      (10,200)
Income taxes         (670)     (547)   (1,244)   (1,306)       (2,800)
Cumulative
 effect of
 accounting
 change                 -         -         -       112             -
Minority
 interest              85        43       167        43          (200)
                 --------- --------- --------- --------- -------------
Net income       $ 46,237  $ 40,550  $ 91,777  $ 88,799   $   170,000
                 ========= ========= ========= ========= =============
                                    Three Months Ended
                                         June 30,
                                 ------------------------
                                    2007         2006
                                 ----------- ------------

EBITDA                            $   70,520  $    59,872
General and administrative             8,266        7,091
                                 ----------- ------------
Segment Adjusted EBITDA           $   78,786  $    66,963
                                 =========== ============

Reconciliation of GAAP "Net Income per Limited Partner Unit" reflecting the impact of EITF 03-6 to non-GAAP "Adjusted Net Income per Limited Partner Unit"

Net income per limited partner unit as dictated by EITF 03-6 is theoretical and pro forma in nature and does not reflect the economic probabilities of whether earnings for an accounting period would or could be distributed to unitholders. The Partnership Agreement does not provide for the distribution of net income, rather, it provides for the distribution of available cash, which is a contractually defined term that generally means all cash on hand at the end of each quarter after establishment of sufficient cash reserves required to operate the ARLP in a prudent manner. Accordingly, the distributions we have paid historically and will pay in future periods are not impacted by net income per limited partner unit as dictated by EITF 03-6.

In addition to net income per limited partner unit as calculated in accordance with EITF 03-6, we also present "adjusted net income per limited partner unit," as reflected in the table below. "Adjusted net income per limited partner unit," is defined as net income after deducting the amount allocated to the general partners' interests, including the managing general partner's incentive distribution rights, divided by the weighted average number of outstanding limited partner units during the period. As part of this calculation, in accordance with the cash distribution requirements contained in the Partnership Agreement, net income is first allocated to the managing general partner based on the amount of incentive distributions attributable to the period. The remainder is then allocated between the limited partners and the general partners based on their respective percentage ownership in ARLP. Adjusted net income per limited partner unit is used as a supplemental financial measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to assess:

  • the actual operation of our Partnership Agreement with respect to the rights of the general and limited partners participation in distributions, and
  • the financial performance of our assets without regard to financing methods or capital structure; and our operating performance and return on investment as compared to those of other companies in the coal energy sector, without regard to financing or capital structures.

Our method of computing adjusted net income per limited partner unit may not be the same method used to compute similar measures reported by other companies and may be computed differently by us in different contexts.

                                 Three Months Ended  Six Months Ended
                                      June 30,           June 30,
                                 ------------------- -----------------
                                    2007      2006     2007     2006
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Net Income per Limited Partner
 Unit:
  Basic                             $  0.80  $  0.73  $  1.60  $  1.56
  Diluted                           $  0.80  $  0.72  $  1.59  $  1.55
Dilutive impact of theoretical
 distribution of earnings
 pursuant to EITF 03-6:
  Basic                             $  0.24  $  0.22  $  0.48  $  0.58
  Diluted                           $  0.23  $  0.22  $  0.47  $  0.57
Adjusted Net Income per Limited
 Partner Unit:
  Basic                             $  1.04  $  0.95  $  2.08  $  2.14
  Diluted                           $  1.03  $  0.94  $  2.06  $  2.12


Contact:

Alliance Resource Partners, L.P.
Brian L. Cantrell, 918-295-7673