Alliance Resource Partners, L.P. Announces Record Quarterly Results; Increases Quarterly Cash Distribution to $0.65 Per Unit; and Raises Guidance

Business Wire, July 22, 2004

TULSA, Okla. -- Alliance Resource Partners, L.P. (Nasdaq:ARLP) today reported net income of $22.9 million, or $1.25 per basic limited partner unit, for the second quarter ended June 30, 2004, compared to $8.5 million, or $0.47 per basic limited partner unit, for the 2003 second quarter. The second quarter 2004 results represent record quarterly net income for the Partnership and reflect a 168% increase in net income as compared to the same period last year. Income before income taxes for the 2004 second quarter improved to a record $23.6 million, an increase of 155% over the $9.2 million reported for the same quarter of 2003.

The Partnership also announced that its Board of Directors declared a quarterly cash distribution of $0.65 per unit for the second quarter ended June 30, 2004 (an annualized rate of $2.60), payable on August 13, 2004, to all unitholders of record as of August 2, 2004. This represents an increase of 4% over the $0.625 distribution per unit for the first quarter of this year (an annualized rate of $2.50) and a 24% increase since the distribution for the second quarter of 2003.

Revenues for the 2004 second quarter rose 22% to a record $162.5 million compared to $133.5 million in the same period last year. Revenues increased in the current quarter due to record tons of coal sold, 5.2 million tons in the 2004 second quarter compared to 4.7 million tons sold in the 2003 second quarter, and continued strength in spot prices in the export and Central Appalachian coal markets.

Record quarterly production of 5.2 million tons represents an increase of 12% over the 4.6 million tons produced during the comparable period last year. The Partnership continued to realize the benefits of previous capital and infrastructure investments through higher productivity at its Illinois Basin and East Kentucky operations. These increases were partially offset by the production loss associated with the idling of the Hopkins County Coal operation (See ARLP Press Releases, dated April 3 and June 2, 2003).

Operating expenses increased to $102.9 million for the second quarter of 2004 as compared to $94.9 million in the 2003 quarter. Increased operating expenses were primarily due to higher sales volumes and sales related expenses, increased maintenance expenses, and higher materials and supplies costs. Although total operating expenses increased in the current quarter, operating expenses per produced ton sold decreased by $0.17 per ton as compared to the same period last year. General and administrative expenses rose by $4.6 million during the second quarter of this year to $11.3 million as compared to $6.7 million during the same period of 2003. This expense increase was primarily a result of increased incentive compensation expense and was principally attributable to the increased market value of the Partnership's common units, which closed at $46.66 per unit on June 30, 2004.

For the six months ended June 30, 2004, the Partnership had net income of $41.1 million, or $2.25 per basic limited partner unit, compared to net income of $21.7 million, or $1.27 per basic limited partner unit, for the same period of 2003. Revenues were $320.4 million and coal sales were 10.3 million tons for the first six months of 2004, compared to $258.4 million and 9.2 million tons, respectively, for the same period of 2003.

The continuing strength in the U.S. coal markets has favorably impacted Alliance's financial results for the first half of this year. As a result of increased production, particularly at the Pattiki, Warrior, Gibson County and East Kentucky mines, the Partnership was able to benefit from robust market conditions by selling additional tons at higher prices. Revenues were further benefited by tons sold into the export market at substantially higher prices. For the six months ended June 30, 2004, higher total operating expenses were primarily due to increased sales volumes, maintenance expense, material and supplies costs, and sales related expenses. These increased costs were more than offset by higher prices during the first half of 2004, as average coal sales prices improved by $2.76 per ton compared to the six month period ended June 30, 2003.

Commenting on the Partnership's performance, Joseph W. Craft III, President and Chief Executive Officer said, "We have enjoyed a sustained period of high level performance as evidenced by Alliance recently being named to Business Week's annual list of '100 Best Growth Companies' for the second year in a row. I am extremely pleased that our strong performance has continued this year as we have reacted quickly to the opportunities presented by favorable market conditions. So far this year, we have achieved record results for revenues, net income, production tons, and tons sold. It is gratifying to share this success by increasing our distribution to unitholders for the third consecutive quarter."

Reflecting on the future, Mr. Craft added, "We remain well positioned for the rest of this year. Planned production increases are on schedule with deliveries from two third-party mining activities at Mettiki beginning earlier this month. Equipment additions have been completed at our Gibson County mine and are scheduled at our Pattiki mine later this quarter. We have committed essentially all of our estimated 2004 production of 20.6 million tons under existing coal sales agreements and continue to evaluate the market for additional opportunities. Based on our performance to date and current projections, we are increasing our estimate for 2004 net income to a range of $70.0 to $80.0 million."