Alliance Holdings GP, L.P. (NASDAQ: AHGP) today announced that the Board of Directors of AHGP’s general partner (the "Board") declared a quarterly cash distribution for the quarter ended June 30, 2008 (the "2008 Quarter") of $0.3525 per unit (an annualized rate of $1.41 per unit), payable on August 19, 2008, to AHGP’s unitholders of record as of the close of trading on August 12, 2008.
The announced distribution represents a 33.0% increase over the $0.265 per unit distribution (an annualized rate of $1.06 per unit) for the quarter ended June 30, 2007 (the “2007 Quarter”) and an increase of 22.6% over the first quarter 2008 distribution of $0.2875 per unit (an annualized rate of $1.15 per unit) In addition, the Board will begin considering increases to unitholder cash distributions on a quarterly basis, instead of its historical practice of considering distribution increases at its January and July meetings.
The declared distribution is based on the distribution AHGP will receive from its ownership interests in Alliance Resource Partners, L.P. (NASDAQ: ARLP). On July 28, 2008, ARLP announced a quarterly distribution for the 2008 Quarter of $0.66 per unit, or $2.64 per unit on an annualized basis, which will be paid on August 14, 2008 to all ARLP unitholders of record as of the close of trading on August 7, 2008. (See ARLP Press Release dated July 28, 2008.)
"Robust coal market fundamentals coupled with ARLP’s strong performance and positive growth outlook have again allowed us to provide our unitholders with an attractive increase to quarterly cash distributions,” said Joseph W. Craft, III, President and Chief Executive Officer. "Assuming ARLP can meet its goal of increasing cash distributions by 6.0% to 8.0% each quarter through 2010, AHGP unitholders could see quarterly distributions more than double during the same period as a result of the accelerated cash flow growth achievable through our ownership interests in ARLP.”
AHGP also reported net income for the 2008 Quarter of $21.7 million, compared to net income of $23.8 million for the 2007 Quarter. Basic and diluted net income per limited partner unit for the 2008 Quarter decreased to $0.36 per unit, compared to $0.40 per basic and diluted limited partner unit for the 2007 Quarter.
For the six months ended June 30, 2008 (the “2008 Period”), AHGP's net income decreased to $44.7 million compared to $46.9 million for the six months ended June 30, 2007 (the “2007 Period”). Basic and diluted net income per limited partner unit for the 2008 Period decreased to $0.75 per unit, compared to $0.78 per basic and diluted limited partner unit for the 2007 Period.
AHGP currently has no other operating activities apart from those conducted by the operating subsidiaries of ARLP and reports its financial results on a consolidated basis with the financial results of ARLP. AHGP’s principal sources of cash flow are its ownership of general partner interests, limited partner interests and incentive distribution rights in ARLP. Based on ARLP’s current declared distribution, AHGP expects to receive quarterly cash distributions from ARLP of $21.9 million, or $87.6 million on an annualized basis. AHGP’s primary cash requirements are for general and administrative expenses, including for 2008 an estimated $2.2 million in incremental general and administrative expenses associated with being a publicly traded limited partnership, working capital requirements and distributions to its unitholders. At June 30, 2008, AHGP had no borrowings outstanding under its revolving credit facility.
AHGP and ARLP will discuss their 2008 Quarter financial results during a joint conference call scheduled for today at 10:00 a.m. Eastern. To participate in the conference call, dial (866) 356-4281 and provide pass code 38911440. International callers should dial (617) 597-5395. Investors may also listen to the call via the "investor information" section of AHGP's website at http://www.ahgp.com.
An audio replay of the conference call will be available for approximately one week. To access the audio replay, dial (888) 286-8010 and provide pass code 86251739. International callers should dial (617) 801-6888.
This announcement is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b), with 100% of the partnership’s distributions to foreign investors attributable to income that is effectively connected with a United States trade or business. Accordingly, AHGP’s distributions to foreign investors are subject to federal income tax withholding at the highest applicable tax rate.
About Alliance Holdings GP, L.P.
AHGP is a limited partnership formed to own and control Alliance Resource Management GP, LLC, the managing general partner of ARLP, through which it holds a 1.98% general partner interest and the incentive distribution rights in ARLP. In addition, AHGP owns 15,544,169 common units of ARLP.
News, unit prices and additional information about AHGP including filings with the Securities and Exchange Commission, are available at http://www.ahgp.com. For more information, contact the investor relations department of AHGP at 918-295-1415 or via e-mail at investorrelations@ahgp.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, other business combinations, or dispositions 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: initially, our operating cash flow will be derived exclusively from cash distributions from ARLP; the risks to the business of ARLP include: increased competition in coal markets and ARLP’s ability to respond to the competition; fluctuation in coal prices, which could adversely affect ARLP’s operating results and cash flows; risks associated with the expansion of ARLP’s operations and properties; deregulation of the electric utility industry or the effects of any adverse change in the 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 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; ARLP’s productivity levels and margins that it earns on its 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 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; risk associated with major mine-related accidents, such as mine fires or interruptions; results of litigation, including claims not yet asserted; difficulty maintaining ARLP’s surety bonds for mine reclamation 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 and interpretations thereof, including but not limited to issues related to climate change; the impact from provisions of The Energy Policy Act of 2005; the impact from provisions of or changes in enforcement activities associated with the Mine Improvement and New Emergency Response Act of 2006 as well as subsequent federal and state legislation or regulations; replacement of coal reserves; a loss or reduction of direct or indirect benefits from certain state and federal tax credits; difficulty obtaining commercial property insurance, and risks associated with ARLP’s participation (excluding any applicable deductible) in the commercial insurance property program.
Additional information concerning these and other factors can be found in AHGP’s public periodic filings with the Securities and Exchange Commission ("SEC"), including AHGP's Annual Report on Form 10-K for the year ended December 31, 2007, filed on March 7, 2008 with the SEC. Except as required by applicable securities laws, AHGP does not intend to update its forward-looking statements.
ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING DATA (In thousands, except unit and per unit data) (Unaudited) | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| SALES AND OPERATING REVENUES: | ||||||||||||||||
| Coal sales | $ | 261,567 | $ | 242,364 | $ | 530,725 | $ | 481,234 | ||||||||
| Transportation revenues | 11,007 | 10,606 | 21,627 | 19,285 | ||||||||||||
| Other sales and operating revenues | 3,546 | 10,238 | 7,259 | 19,716 | ||||||||||||
| Total revenues | 276,120 | 263,208 | 559,611 | 520,235 | ||||||||||||
| EXPENSES: | ||||||||||||||||
| Operating expenses | 191,363 | 177,968 | 383,981 | 344,957 | ||||||||||||
| Transportation expenses | 11,007 | 10,606 | 21,627 | 19,285 | ||||||||||||
| Outside purchases | 4,552 | 7,607 | 7,455 | 13,873 | ||||||||||||
| General and administrative | 12,612 | 8,794 | 21,928 | 17,347 | ||||||||||||
| Depreciation, depletion and amortization | 25,600 | 21,425 | 48,894 | 41,218 | ||||||||||||
| Gain on sale of coal reserves | (5,159 | ) | - | (5,159 | ) | - | ||||||||||
| Net gain from insurance settlement and other | (2,790 | ) | (11,491 | ) | (2,790 | ) | (11,491 | ) | ||||||||
| Total operating expenses | 237,185 | 214,909 | 475,936 | 425,189 | ||||||||||||
| INCOME FROM OPERATIONS | 38,935 | 48,299 | 83,675 | 95,046 | ||||||||||||
| Interest expense | (3,250 | ) | (2,842 | ) | (6,238 | ) | (5,663 | ) | ||||||||
| Interest income | 209 | 576 | 315 | 1,115 | ||||||||||||
| Other income | 250 | 167 | 467 | 1,068 | ||||||||||||
| INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND NON-CONTROLLING INTEREST | 36,144 | 46,200 | 78,219 | 91,566 | ||||||||||||
| INCOME TAX EXPENSE (BENEFIT) | (70 | ) | 669 | (725 | ) | 1,244 | ||||||||||
| INCOME BEFORE MINORITY INTEREST AND NON-CONTROLLING INTEREST | 36,214 | 45,531 | 78,944 | 90,322 | ||||||||||||
MINORITY INTEREST (EXPENSE) | (102 | ) | 85 | (243 | ) | 167 | ||||||||||
| INCOME BEFORE NON-CONTROLLING INTEREST | 36,112 | 45,616 | 78,701 | 90,489 | ||||||||||||
| Affiliate non-controlling interest in consolidated partnership’s net income | (5 | ) | (7 | ) | (12 | ) | (15 | ) | ||||||||
| Non-affiliate non-controlling interest in consolidated partnership’s net income | (14,406 | ) | (21,788 | ) | (33,963 | ) | (43,582 | ) | ||||||||
| NET INCOME | $ | 21,701 | $ | 23,821 | $ | 44,726 | $ | 46,892 | ||||||||
| BASIC AND DILUTED NET INCOME PER LIMITED PARTNER UNIT | $ | 0.36 | $ | 0.40 | $ | 0.75 | $ | 0.78 | ||||||||
| DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT | $ | 0.2875 | $ | 0.25 | $ | 0.575 | $ | 0.50 | ||||||||
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING-BASIC AND DILUTED | 59,863,000 | 59,863,000 | 59,863,000 | 59,863,000 | ||||||||||||
ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except unit data) (Unaudited) | ||||||||
| ASSETS | June 30, | December 31, | ||||||
| 2008 | 2007 | |||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 362,354 | $ | 1,783 | ||||
| Trade receivables | 81,028 | 92,667 | ||||||
| Other receivables | 5,180 | 3,399 | ||||||
| Due from affiliates | 158 | - | ||||||
| Inventories | 28,483 | 26,100 | ||||||
| Advance royalties | 4,452 | 4,452 | ||||||
| Prepaid expenses and other assets | 3,968 | 9,281 | ||||||
| Total current assets | 485,623 | 137,682 | ||||||
| PROPERTY, PLANT AND EQUIPMENT: | ||||||||
| Property, plant and equipment, at cost | 1,004,012 | 948,210 | ||||||
| Less accumulated depreciation, depletion and amortization | (453,337 | ) | (427,572 | ) | ||||
| Total property, plant and equipment, net | 550,675 | 520,638 | ||||||
| OTHER ASSETS: | ||||||||
| Advance royalties | 21,700 | 25,974 | ||||||
| Other long-term assets | 16,702 | 18,194 | ||||||
| Total other assets | 38,402 | 44,168 | ||||||
| TOTAL ASSETS | $ | 1,074,700 | $ | 702,488 | ||||
| LIABILITIES AND PARTNERS’ CAPITAL | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 54,797 | $ | 47,034 | ||||
| Due to affiliates | - | 1,343 | ||||||
| Accrued taxes other than income taxes | 12,421 | 11,091 | ||||||
| Accrued payroll and related expenses | 17,376 | 15,180 | ||||||
| Accrued interest | 4,017 | 3,826 | ||||||
| Workers’ compensation and pneumoconiosis benefits | 8,038 | 8,124 | ||||||
| Current capital lease obligation | 365 | 377 | ||||||
| Other current liabilities | 9,110 | 6,754 | ||||||
| Current maturities, long-term debt | 18,000 | 18,000 | ||||||
| Total current liabilities | 124,124 | 111,729 | ||||||
| LONG-TERM LIABILITIES: | ||||||||
| Long-term debt, excluding current maturities | 479,500 | 136,000 | ||||||
| Pneumoconiosis benefits | 30,403 | 29,392 | ||||||
| Workers’ compensation | 46,860 | 44,150 | ||||||
| Asset retirement obligations | 55,124 | 54,903 | ||||||
| Due to affiliates | 105 | - | ||||||
| Long-term capital lease obligation | 962 | 1,135 | ||||||
| Minority interest | 750 | 507 | ||||||
| Other liabilities | 9,740 | 7,333 | ||||||
| Total long-term liabilities | 623,444 | 273,420 | ||||||
| Total liabilities | 747,568 | 385,149 | ||||||
| NON-CONTROLLING INTEREST IN CONSOLIDATED PARTNERSHIP: | ||||||||
| Affiliate | (303,815 | ) | (303,816 | ) | ||||
| Non-Affiliates | 367,897 | 358,601 | ||||||
| Total non-controlling interest | 64,082 | 54,785 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| PARTNERS’ CAPITAL: | ||||||||
| Limited Partners – Common Unitholders 59,863,000 units outstanding, respectively | 262,941 | 262,445 | ||||||
| Accumulated other comprehensive income | 109 | 109 | ||||||
| Total Partners’ Capital | 263,050 | 262,554 | ||||||
| TOTAL LIABILITIES AND PARTNERS’ CAPITAL | $ | 1,074,700 | $ | 702,488 | ||||
ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | ||||||||
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2008 | 2007 | |||||||
| CASH FLOWS PROVIDED BY OPERATING ACTIVITIES | $ | 149,627 | $ | 139,877 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Property, plant and equipment: | ||||||||
| Capital expenditures | (70,950 | ) | (69,170 | ) | ||||
| Changes in accounts payable and accrued liabilities | 3,356 | (7,315 | ) | |||||
| Proceeds from sale of property, plant and equipment | 567 | 3,048 | ||||||
| Proceeds from the sale of coal reserves | 7,159 | - | ||||||
| Proceeds from insurance settlement for replacement assets | - | 2,511 | ||||||
| Proceeds from marketable securities | - | 260 | ||||||
| Payment for acquisition of coal reserves and other assets | (13,300 | ) | (53,309 | ) | ||||
| Advances on Gibson rail project | - | (5,888 | ) | |||||
| Receipts of prior advances on Gibson rail project | 1,023 | - | ||||||
| Net cash used in investing activities | (72,145 | ) | (129,863 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from long-term debt | 350,000 | - | ||||||
| Borrowings under revolving credit facilities | 88,850 | 23,585 | ||||||
| Payments under revolving credit facilities | (95,350 | ) | - | |||||
| Payments on capital lease obligation | (185 | ) | (151 | ) | ||||
| Payment of debt issuance costs | (830 | ) | - | |||||
| Contributions to consolidated partnership from affiliate non-controlling interest | 1 | 1 | ||||||
Distributions paid by consolidated partnership to affiliate non-controlling interest | (12 | ) | (11 | ) | ||||
Distributions paid by consolidated partnership to non-affiliate non-controlling interest | (24,964 | ) | (22,905 | ) | ||||
Distributions paid to Partners | (34,421 | ) | (29,931 | ) | ||||
| Net cash provided by (used in) financing activities | 283,089 | (29,412 | ) | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 360,571 | (19,398 | ) | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,783 | 37,069 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 362,354 | $ | 17,671 | ||||
Contacts:
Brian L. Cantrell, 918-295-7673
