Alliance Resource Partners, L.P. (ARLP 0.59%) reported its second-quarter results before the market opened on Tuesday. The coal MLP shipped a record amount of coal during the quarter, which thanks to its strong coal sales contracts resulted in relatively stable distributable cash flow. In fact, while the rest of the coal industry is "under extreme duress," according to CEO Joseph Craft, Alliance Resources delivered another strong performance enabling it to once again increase its distribution even as other coal-fueled investor income streams disappear.

A look at the numbers
For the quarter, Alliance Resource Partners reported record revenue of $604.7 million, which was up from $598.6 million in the second quarter of last year. That said, the company's underlying cash flow did slip a bit as a result of higher expenses and an equity loss from its ownership interest in White Oak. Overall, EBITDA was $182.4 million, or $30.7 million lower than the year-ago quarter. However, excluding the White Oak equity loss, which the company is now in the process of acquiring, the company's results came in as expected.

Further, distributable cash flow, which is much more important for MLP investors, only slipped roughly $5 million year-over-year to $149 million in the quarter. Given that the company only paid out $86.2 million in distributions, it had a robust distribution coverage ratio of 1.73 times, with anything over 1.0 times being considered reasonably safe. In fact, it's this robust coverage ratio, along with the company's solid coal contracts, that is giving it the confidence to boost its distribution by 1.9% to $0.675 per unit. That increase marks the 29th consecutive quarter that Alliance has increased its distribution.

A look at outlook
Alliance Resources is different from other coal producers as its coal sales are backed by long-term contracts, which help to lock in its cash flow. Further, the company maintains a fairly solid balance sheet so it's not being weighed down by debt, which is a problem plaguing its highly leveraged peers. So, while the weak coal market is having an impact on the company, that impact isn't as steep.

As a result, the company remains on track to meet its full-year targets for EBITDA and net income. Helping to supplement its confidence in its ability to meet those targets is the aforementioned acquisition of the entirety of White Oak, which should close later this week. It's a deal that the company expects will provide long-term advantages for the company as it will assume operational and marketing control of the asset, enabling it to lock up future sales and drive down costs.

Investor takeaway
Alliance Resources delivered another solid quarter. While it's not immune to the downturn in the coal market, the company's focus on locking up its coal volumes under long-term sales contracts as well as its relatively low leverage, has it well positioned to weather the downturn. Further, the company's distribution remains a relatively safe bet for the near-to-mid term as the company has a very strong distribution coverage ratio and the aforementioned contracts, which will provide a lot of stability for the payout.