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Alliance Holdings GP, L.P. Increases Quarterly Distribution to $0.4025 Per Unit and Reports Strong 2008 Financial Results

TULSA, Okla.--(BUSINESS WIRE)--Jan. 28, 2009--Alliance Holdings GP, L.P. (NASDAQ: AHGP) today announced that the Board of Directors of its general partner (the "Board") declared a quarterly cash distribution for the quarter ended December 31, 2008 (the "2008 Quarter") of $0.4025 per unit, or an annualized rate of $1.61 per unit, which will be paid on February 19, 2009, to AHGP's unitholders of record as of the close of trading on February 12, 2009.

The announced distribution represents a 40.0% increase over the $0.2875 per unit distribution (an annualized rate of $1.15 per unit) for the quarter ended December 31, 2007 (the "2007 Quarter") and an increase of 3.2% over the third quarter 2008 distribution of $0.39 per unit (an annualized rate of $1.56 per unit).

The declared distribution is based on the distribution AHGP will receive from its ownership interests in Alliance Resource Partners, L.P. (NASDAQ: ARLP). ARLP today announced a quarterly distribution for the 2008 Quarter of $0.715 per unit, or $2.86 per unit on an annualized basis, payable on February 13, 2009 to all unitholders of record as of the close of trading on February 6, 2009. (See ARLP Press Release dated January 28, 2009.)

"On the strength of ARLP's solid operating and financial performance, AHGP again provided our unitholders with attractive distribution growth in 2008," said Joseph W. Craft, III, President and Chief Executive Officer. "As we look forward, ARLP is well positioned to manage through the current economic turmoil and, as a result, our outlook for AHGP distribution growth remains positive."

AHGP also reported net income for the 2008 Quarter of $18.0 million, or $0.30 per basic and diluted limited partner unit, compared to net income of $20.5 million, or $0.34 per basic and diluted limited partner unit, for the 2007 Quarter. For the year ended December 31, 2008, AHGP reported net income of $81.2 million, or $1.36 per basic and diluted net income per limited partner unit, compared to $87.9 million, or $1.47 per basic and diluted net income per limited partner unit, for the year ended December 31, 2007.

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 $24.8 million, or $99.1 million on an annualized basis. AHGP's primary cash requirements are for working capital requirements, distributions to its unitholders and general and administrative expenses, including for 2009 an estimated $2.2 million in general and administrative expenses associated with being a publicly traded limited partnership. At December 31, 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 (800) 597-1926 and provide pass code 67031060. International callers should dial (617) 597-5525. Investors may also listen to the call via the "investor information" section of ARLP's website at http://www.arlp.com or 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 94750546. 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, including those related to carbon emissions, 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 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 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              Year Ended

                   December 31,                    December 31,

                     2008            2007            2008            2007

SALES AND
OPERATING
REVENUES:

Coal sales         $ 293,016       $ 236,708       $ 1,093,059     $ 960,354

Transportation       11,407          9,265           44,755          37,688
revenues

Other sales and
operating            6,421           6,354           18,327          34,945
revenues

Total revenues       310,844         252,327         1,156,141       1,032,987

EXPENSES:

Operating
expenses
(excluding           218,552         163,271         801,854         685,085
depreciation,
depletion and
amortization)

Transportation       11,407          9,265           44,755          37,688
expenses

Outside coal         9,326           4,359           23,776          21,969
purchases

General and          9,364           11,661          38,857          36,724
administrative

Depreciation,
depletion and        30,981          22,288          105,278         85,310
amortization

Gain on sale of      -               -               (5,159     )    -
coal reserves

Net gain from
insurance            -               -               (2,790     )    (11,491    )
settlement and
other

Total operating      279,630         210,844         1,006,571       855,285
expenses

INCOME FROM          31,214          41,483          149,570         177,702
OPERATIONS

Interest expense     (7,773     )    (2,958     )    (22,145    )    (11,660    )

Interest income      1,328           337             3,776           1,732

Other income         177             196             875             1,385

INCOME BEFORE
INCOME TAXES,
MINORITY INTEREST    24,946          39,058          132,076         169,159
AND
NON-CONTROLLING
INTEREST

INCOME TAX           153             (124       )    (480       )    1,670
EXPENSE (BENEFIT)

INCOME BEFORE
MINORITY INTEREST
AND                  24,793          39,182          132,556         167,489
NON-CONTROLLING
INTEREST

MINORITY INTEREST    (24        )    102             (420       )    332
(EXPENSE)

INCOME BEFORE
NON-CONTROLLING      24,769          39,284          132,136         167,821
INTEREST

Affiliate
non-controlling
interest in          (2         )    (7         )    (18        )    (29        )
consolidated
partnership's net
income

Non-affiliate
non-controlling
interest in          (6,799     )    (18,811    )    (50,904    )    (79,927    )
consolidated
partnership's net
income

NET INCOME         $ 17,968        $ 20,466        $ 81,214        $ 87,865

BASIC AND DILUTED
NET INCOME PER     $ 0.30          $ 0.34          $ 1.36          $ 1.47
LIMITED PARTNER
UNIT

DISTRIBUTIONS
PAID PER LIMITED   $ 0.39          $ 0.265         $ 1.3175        $ 1.03
PARTNER UNIT

WEIGHTED AVERAGE
NUMBER OF UNITS
                     59,863,000      59,863,000      59,863,000      59,863,000
OUTSTANDING-BASIC
AND DILUTED




ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

                                                   December 31,
ASSETS
                                                     2008           2007

CURRENT ASSETS:

Cash and cash equivalents                          $ 246,708      $ 1,783

Trade receivables                                    87,922         92,667

Other receivables                                    6,021          3,399

Inventories                                          26,510         26,100

Advance royalties                                    3,200          4,452

Prepaid expenses and other assets                    10,162         9,281

Total current assets                                 380,523        137,682

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment, at cost               1,085,214      948,210

Less accumulated depreciation, depletion and         (468,784  )    (427,572 )
amortization

Total property, plant and equipment, net             616,430        520,638

OTHER ASSETS:

Advance royalties                                    23,828         25,974

Other long-term assets                               11,845         18,194

Total other assets                                   35,673         44,168

TOTAL ASSETS                                       $ 1,032,626    $ 702,488

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:

Accounts payable                                   $ 63,991       $ 47,034

Due to affiliates                                    54             1,343

Accrued taxes other than income taxes                11,235         11,091

Accrued payroll and related expenses                 20,555         15,180

Accrued interest                                     3,454          3,826

Workers' compensation and pneumoconiosis benefits    9,377          8,124

Current capital lease obligation                     351            377

Other current liabilities                            12,671         6,754

Current maturities, long-term debt                   18,000         18,000

Total current liabilities                            139,688        111,729

LONG-TERM LIABILITIES:

Long-term debt, excluding current maturities         440,000        136,000

Pneumoconiosis benefits                              31,436         29,392

Accrued pension benefit                              19,952         -

Workers' compensation                                47,828         44,150

Asset retirement obligations                         56,204         54,903

Due to affiliates                                    103            -

Long-term capital lease obligation                   784            1,135

Minority interest                                    927            507

Other liabilities                                    5,459          7,333

Total long-term liabilities                          602,693        273,420

Total liabilities                                    742,381        385,149

NON-CONTROLLING INTEREST IN CONSOLIDATED
PARTNERSHIP:

Affiliate                                            (303,824  )    (303,816 )

Non-Affiliates                                       357,573        358,601

Total non-controlling interest                       53,749         54,785

COMMITMENTS AND CONTINGENCIES

PARTNERS' CAPITAL:

Limited Partners - Common Unitholders 59,863,000     256,395        262,445
units outstanding, respectively

Accumulated other comprehensive income (loss)        (19,899   )    109

Total Partners' Capital                              236,496        262,554

TOTAL LIABILITIES AND PARTNERS' CAPITAL            $ 1,032,626    $ 702,488




ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

                                                     Year Ended

                                                     December 31,

                                                       2008          2007

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES          $ 259,311     $ 241,552

CASH FLOWS FROM INVESTING ACTIVITIES:

Property, plant and equipment:

Capital expenditures                                   (176,482 )    (119,590 )

Changes in accounts payable and accrued liabilities    10,046        (7,094   )

Proceeds from sale of property, plant and equipment    2,708         6,770

Proceeds from sale of coal reserves                    7,159         -

Proceeds from insurance settlement for replacement     -             2,511
assets

Proceeds from marketable securities                    -             260

Payment for acquisition of coal reserves and other     (29,800  )    (53,309  )
assets

Advances on Gibson rail project                        -             (8,212   )

Receipts of prior advances on Gibson rail project      2,244         -

Net cash used in investing activities                  (184,125 )    (178,664 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt               350,000       -

Borrowings under revolving credit facilities           88,850        195,925

Payments under revolving credit facilities             (116,850 )    (167,925 )

Payments on capital lease obligation                   (377     )    (339     )

Payment of long-term debt                              (18,000  )    (18,000  )

Payment of debt issuance costs                         (1,721   )    (264     )

Purchase of options on limited partner common units    (22      )    -

Contribution to consolidated partnership from          1             1
affiliate non-controlling interest

Contribution by limited partner - affiliate            816           813

Distributions paid by consolidated partnership to      (27      )    (23      )
affiliate non-controlling interest

Distributions paid by consolidated partnership to      (54,062  )    (46,703  )
non-affiliate non-controlling interest

Distributions paid to Partners                         (78,869  )    (61,659  )

Net cash provided by (used in) financing activities    169,739       (98,174  )

NET CHANGE IN CASH AND CASH EQUIVALENTS                244,925       (35,286  )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD       1,783         37,069

CASH AND CASH EQUIVALENTS AT END OF PERIOD           $ 246,708     $ 1,783



CONTACT: Alliance Holdings GP, L.P.
Brian L. Cantrell,918-295-7673

Source: Alliance Holdings GP, L.P.