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Alliance Resource Partners, L.P. Announces Record Quarterly Net Income; Raises Quarterly Cash Distribution by 11% to $0.625 Per Unit; and Increases Guidance

TULSA, Okla., Apr 23, 2004 (BUSINESS WIRE) -- Alliance Resource Partners, L.P. (ARLP) today reported record net income for the first quarter ended March 31, 2004 of $18.2 million, or $1.00 per basic limited partner unit, an increase of approximately 39% over 2003 first quarter net income of $13.1 million, or $0.81 per basic limited partner unit. Net income per basic limited partner unit is calculated using the weighted average number of basic units outstanding of 17,903,793 and 16,593,609 for the quarters ended March 31, 2004 and 2003, respectively, both of which reflect our common unit offerings completed in the first quarter of 2003. Income before income taxes for the quarter improved 35% to a record $19.0 million, compared to $14.1 million for the same quarter of 2003.

The Partnership also announced that its Board of Directors declared a quarterly cash distribution of $0.625 per unit for the first quarter ended March 31, 2004 (an annualized rate of $2.50 per unit), payable on May 14, 2004, to all unitholders of record as of May 3, 2004. This represents an increase of 11% over the cash distribution for the fourth quarter of 2003 of $0.5625 per unit (an annualized rate of $2.25 per unit) and a 25% increase since 2002.

"We achieved record revenues, tons produced and net income for the quarter due to favorable market conditions which allowed us to benefit from higher prices, increase production and secure additional sales," said Joseph W. Craft III, President and Chief Executive Officer. "These results and market conditions have allowed us to increase our distribution to unitholders for the second consecutive quarter in advance of our normal mid-year review. Going forward, we expect to consider future distribution increases at the January and July Board of Directors' meetings."

Revenues for the 2004 first quarter were $157.8 million, an increase of approximately 26% over revenues of $124.9 million for the comparable period last year. Revenues for the first quarter of 2004 were positively impacted by the increase in tons of coal sold and higher contract prices on long-term coal sales agreements. In addition, our revenues in the 2004 first quarter benefited significantly from higher sales prices realized on incremental production sold into the export and Central Appalachia coal markets.

Production increased to 5.1 million tons for the first quarter of 2004 as compared to 5.0 million for the comparable period in 2003, primarily due to higher productivity at our Warrior Coal, Gibson County Coal and East Kentucky operations. These increases were partially offset by reduced production at our idled Hopkins County Coal operation (See ARLP Press Releases, dated April 3 and June 2, 2003) and the impact of the Dotiki mine fire earlier this year.

Results for the first quarter of this year were achieved despite lost production, continuing fixed expenses and other expenses incurred as a result of the mine fire that occurred at the Dotiki mine, operated by our Webster County Coal, LLC subsidiary. (See ARLP Press Releases, dated February 12, March 1, March 8, and March 25, 2004.) We maintain commercial property insurance policies which we believe will substantially cover the expenses and losses relating to the fire. For the first quarter of 2004, we have recognized a $2.9 million receivable under the insurance policies reflecting a partial recovery of certain fire-related expenses, net of a $3.5 million self-retention and deductible and 10% coinsurance. We continue to analyze the full extent of expenses and losses (including business interruption) pertaining to the fire. Until our analysis is complete, however, it is premature to quantify the total impact of the Dotiki mine fire incident on the financial results of Alliance.

Total operating expenses increased to $104.3 million for this quarter as compared to $82.8 million for the first quarter of last year. The increase was primarily due to higher costs due to increased production, increased sales related expenses, and net expenses related to the Dotiki mine fire. Operating expenses for the 2004 quarter were $0.38 per ton sold below expectation for all operations, excluding Dotiki. General and administrative expenses also increased in the first quarter of this year by $4.6 million to $10.3 million as compared to $5.7 million during the same period of 2003, primarily as a result of increased incentive compensation expense. This expense increase was principally attributable to the Long-Term Incentive Plan and was caused by the increased market value of our common units, which closed at $40.00 per unit on March 31, 2004.

In response to robust market conditions as well as a supply shortage in the markets served by our Mettiki mine, we have signed two separate agreements with contract mining companies to produce coal on reserves we control near the Mettiki complex. We expect both of these operations to begin production in June 2004 and will add annual production of approximately 625,000 tons. To further increase production during the second half of 2004, we will also add equipment at our Gibson County Coal and Pattiki mines. We are estimating additional 2004 capital expenditures of approximately $5.1 million for these contract mining and equipment projects. As a result of these projects and accelerated production schedules at certain other operations, we are now estimating 2004 production at 20.6 million tons. Approximately 200,000 tons remain unsold in 2004.

Looking ahead, Mr. Craft said, "Based on our current projections, we are increasing estimated net income for the year ending December 31, 2004 to a range of $65.0 to $75.0 million, excluding any additional insurance recoveries for expenses and losses attributable to the Dotiki mine fire. For 2005, we are currently estimating coal production of approximately 21.3 million tons of which approximately 82% is committed under existing coal sales agreements. Approximately 49% of our estimated 2005 production is subject to market price negotiations for existing contracts as well as anticipated new coal supply agreements. We will continue to assess market demand and, should attractive opportunities become available, we will consider increasing production to meet the needs of our customers."

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.

Alliance Resource Partners is the nation's only publicly traded master limited partnership involved in the production and marketing of coal. Alliance Resource Partners currently operates eight mining complexes in Illinois, Indiana, Kentucky and Maryland.

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: 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; 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 of, or breaches to 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; any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments associated with post-mine reclamation 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; risks of major mine-related accidents or interruptions; results of litigation; difficulty maintaining our surety bonds for mine reclamation as well as workers' compensation and black lung benefits; difficulty obtaining commercial property insurance; and risks associated with our 10.0% participation (excluding any applicable deductible) in the commercial insurance property program.

Additional information concerning these and other factors can be found in the Partnership's public periodic filings with the Securities and Exchange Commission ("SEC"), including the Partnership's Annual Report on Form 10-K for the year ended December 31, 2003 filed on March 12, 2004 with the SEC. Except as required by applicable securities laws, the Partnership does not intend to update its forward-looking statements.
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