Alliance Resource Partners (NASDAQ:ARLP) has done it again.

While other coal companies collapse under the weight of shrinking margins and falling production, Alliance Resource thrives. Coal miners like Alpha Natural Resources (NASDAQOTH:ANRZQ) are resorting to harsh cost cuts to keep profits afloat, which will come at a severe cost to future growth. No such sacrifice is necessary for Alliance Resource Partners, a coal company that is reporting record results quarter after quarter.

Source: Alliance Resource web site, Central Appalachia

Strong results across the board
In all, Alliance Resource Partners posted quarterly profits of $2.20 per unit, representing 13% growth year over year. The main contributor for this was record coal production, particularly in its Appalachian region. In turn, Alliance Resource had more than enough financial flexibility to increase its distribution, which MLP investors crave. The company bumped up its distribution to $4.89 per unit on an annualized basis. This represented a 2% distribution from the previous quarter and an 8% increase year over year. Alliance Resource has now come through with 24 consecutive quarterly distribution hikes.

Alliance Resource's performance looks fantastic on its own, but even more so when you compare it to other coal companies. Alpha Natural posted earnings that beat expectations, which sent its stock jumping 5% on the day of the earnings report. But there's very little for investors to cheer. The company only produced better-than-expected earnings as a result of a severe cost-cutting effort, which is not sustainable over the long run. From a fundamental basis, its operations are still struggling mightily. Coal revenues fell 16% year over year, and the company's margins are deteriorating. Alpha Natural's weighted average margin per ton collapsed by 47% in the most recent quarter.

There was simply nowhere for Alpha Natural Resources to hide last quarter. It posted declining revenue and average realized prices in all of its geographic operating segments, which include Powder River Basin coal, Eastern steam coal, and Eastern metallurgical coal. As a result, it's clear that Alliance Resource is by far the best house in a bad neighborhood.

Alliance Resource also kept a lid on costs in the first quarter, reducing its expense per ton by nearly 6% in the quarter. The combination of record quarterly coal production and declining costs is what drove such impressive profit growth. You may be asking yourself how this is possible, in light of the fact that so many other coal companies are struggling just to stay in business.

What separates Alliance Resource Partners from the pack
The first major difference between Alliance Resource Partners and its rivals is its positioning geographically. Its mines are located near its utility customers, which results in much lower transportation costs that allow it to keep wide margins. In addition, its customer base provides a much more reliable, consistent flow of business. Around 90% of Alliance Resource's coal production is shipped to utilities, which are still using coal despite what you may have heard. Coal still accounts for around half of electricity generation in the United States.

Two key developments for Alliance Resource Partners are its Gibson South and Tunnel Ridge mines, which are helping drive production forecasts. The Gibson South mine began initial production in the last month, which was ahead of schedule. Earlier this year, the Tunnel Ridge mine underwent a major revision plan, and performed above management's expectations during the quarter. Tunnel Ridge was a key contributor in the company's Appalachian region growing production by 25%.

Solid performance in Appalachia more than offset relatively weak performance in the Illinois Basin, which is Alliance Resource's other major operating region. In that area, tons sold fell by 3%. As a whole, however, Alliance Resource knocked it out of the park once again. Not only did the company increase production, but its cost-cutting program paid dividends as well.

Bank on continued growth
Alliance Resource is executing extremely well and proved it by increasing its guidance for both revenue and profits for the remainder of the year. This means the company should have no trouble extending its streak of record production. And, Alliance Resource should also have no trouble increasing its distribution for the 25th consecutive quarter when it reports again three months from now.

Bob Ciura owns shares of Alliance Resource Partners, L.P.. The Motley Fool recommends Alliance Resource Partners, L.P.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.