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Alliance Holdings GP, L.P. Increases Quarterly Distribution by 3.0% to $0.4275 Per Unit and Reports Increased Second Quarter 2009 Financial Results

TULSA, Okla.--(BUSINESS WIRE)--Jul. 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 June 30, 2009 (the "2009 Quarter") of $0.4275 per unit, or an annualized rate of $1.71 per unit, which will be paid on August 19, 2009, to AHGP’s unitholders of record as of the close of trading on August 12, 2009.

The announced distribution represents a 21.3% increase over the $0.3525 per unit distribution (an annualized rate of $1.41 per unit) for the quarter ended June 30, 2008 (the "2008 Quarter") and an increase of 3.0% over the first quarter 2009 distribution of $0.415 per unit (an annualized rate of $1.66 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 2009 Quarter of $0.745 per unit, or $2.98 per unit on an annualized basis, payable on August 14, 2009 to all unitholders of record as of the close of trading on August 7, 2009. (See ARLP Press Release dated July 28, 2009.)

AHGP also reported net income for the 2009 Quarter which increased 18.5% to $25.7 million, or $0.43 per basic and diluted limited partner unit, compared to net income for the 2008 Quarter of $21.7 million, or $0.36 per basic and diluted limited partner unit. For the six months ended June 30, 2009, AHGP’s net income increased 44.3% to a record $64.5 million, or $1.08 per basic and diluted limited partner unit, compared to net income for the six months ended June 30, 2008 of $44.7 million, or $0.75 per basic and diluted limited partner unit. (For a discussion of net income presentation, please see the end of this release.)

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 $26.3 million, or $105.4 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 June 30, 2009, AHGP had no borrowings outstanding under its revolving credit facility.

AHGP and ARLP will discuss their 2009 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) 831-6272 and provide pass code 97717775. International callers should dial (617) 213-8859. Investors may also listen to the call via the "investor information" section of ARLP’s website at www.arlp.com or AHGP’s website at 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 89249803. 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 www.ahgp.com. For more information, contact the investor relations department of AHGP at (918) 295-1415 or via e-mail at www.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 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.

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: increased competition in coal markets and the ARLP Partnership's ability to respond to the competition; sustained decreases in coal prices, which could adversely affect the ARLP Partnership's operating results and cash flows; decreases in spot market prices for coal; risks associated with the ARLP Partnership's expansion of its 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; the impact and duration of the current worldwide economic downturn; liquidity constraints, including those resulting from the cost or unavailability of financing due to current credit market conditions; customer bankruptcies 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; legislation, regulatory and court decisions and interpretations thereof, including but not limited to issues related to climate change and miner health and safety; the ARLP Partnership's productivity levels and its margins earned on 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; risks associated with major mine-related accidents, such as mine fires, or interruptions; results of litigation, including claims not yet asserted; difficulty maintaining the ARLP Partnership'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; replacement of coal reserves; a loss or reduction of direct or indirect benefits from certain state and federal tax credits; and difficulty obtaining commercial property insurance, and risks associated with the ARLP Partnership's participation (excluding any applicable deductible) in its 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, 2008, filed on March 6, 2009 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,

2009     2008 2009     2008
 
SALES AND OPERATING REVENUES:
Coal sales $ 287,620 $ 261,567 $ 599,880 $ 530,725
Transportation revenues 12,794 11,007 23,684 21,627
Other sales and operating revenues   3,384     3,546     9,425     7,259  
Total revenues   303,798     276,120     632,989     559,611  
 
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization) 204,477 191,363 400,853 383,981
Transportation expenses 12,794 11,007 23,684 21,627
Outside coal purchases 432 4,552 5,192 7,455
General and administrative 9,573 12,612 19,690 21,928
Depreciation, depletion and amortization 28,272 25,600 55,622 48,894
Gain from sale of coal reserves - (5,159 ) - (5,159 )
Net gain from insurance settlement and other   -     (2,790 )   -     (2,790 )
Total operating expenses 255,548 237,185 505,041 475,936
 
INCOME FROM OPERATIONS 48,250 38,935 127,948 83,675
Interest expense (7,808 ) (3,250 ) (15,789 ) (6,238 )
Interest income 296 209 944 315
Other income   202     250     428     467  
INCOME BEFORE INCOME TAXES 40,940 36,144 113,531 78,219
INCOME TAX EXPENSE (BENEFIT)   (201 )   (70 )   226     (725 )
NET INCOME 41,141 36,214 113,305 78,944
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (15,432 )   (14,513 )   (48,770 )   (34,218 )
NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, L.P. (“NET INCOME OF AHGP”) $ 25,709   $ 21,701   $ 64,535   $ 44,726  
 
BASIC AND DILUTED NET INCOME OF AHGP PER LIMITED PARTNER UNIT $ 0.43   $ 0.36   $ 1.08   $ 0.75  
 

DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT

$ 0.415   $ 0.2875   $ 0.8175   $ 0.575  
 

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,
2009 2008
 
CURRENT ASSETS:
Cash and cash equivalents $ 159,465 $ 246,708
Trade receivables 88,439 87,922
Other receivables 4,485 6,021
Marketable securities 5,094 -
Inventories 49,837 26,510
Advance royalties 3,200 3,200
Prepaid expenses and other assets   4,034     10,162  
Total current assets 314,554 380,523
 
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 1,241,812 1,085,214
Less accumulated depreciation, depletion and amortization   (506,125 )   (468,784 )
Total property, plant and equipment, net 735,687 616,430
 
OTHER ASSETS:
Advance royalties 26,680 23,828
Other long-term assets   10,575     11,845  
Total other assets   37,255     35,673  
TOTAL ASSETS $ 1,087,496   $ 1,032,626  
 
LIABILITIES AND PARTNERS’ CAPITAL
 
CURRENT LIABILITIES:
Accounts payable $ 72,353 $ 63,991
Due to affiliates 44 54
Accrued taxes other than income taxes 12,029 11,235
Accrued payroll and related expenses 19,517 20,555
Accrued interest 3,451 3,454
Workers’ compensation and pneumoconiosis benefits 9,429 9,377
Current capital lease obligation 338 351
Other current liabilities 14,033 12,671
Current maturities, long-term debt   18,000     18,000  
Total current liabilities 149,194 139,688
 
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities 440,000 440,000
Pneumoconiosis benefits 32,819 31,436
Accrued pension benefit 20,823 19,952
Workers’ compensation 54,187 47,828
Asset retirement obligations 57,376 56,204
Due to affiliates 181 103
Long-term capital lease obligation 624 784
Other liabilities   5,538     5,459  
Total long-term liabilities   611,548     601,766  
Total liabilities   760,742     741,454  
 
COMMITMENTS AND CONTINGENCIES
 
PARTNERS’ CAPITAL:
Alliance Holdings GP, L.P. (“AHGP”) Partners' Capital:
Limited Partners – Common Unitholders 59,863,000 units outstanding, respectively 271,992 256,395
Accumulated other comprehensive income (loss)   (8,106 )   (8,673 )
Total AHGP Partners’ Capital 263,886 247,722
Noncontrolling interests   62,868     43,450  
Total Partners' Capital   326,754     291,172  
TOTAL LIABILITIES AND PARTNERS’ CAPITAL $ 1,087,496   $ 1,032,626  
 
 
ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
 
    Six Months Ended
June 30,
2009     2008
 
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 163,118   $ 149,627  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures (174,685 ) (70,950 )
Changes in accounts payable and accrued liabilities 8,364 3,356
Proceeds from sale of property, plant and equipment 1 567
Proceeds from sale of coal reserves - 7,159
Purchase of marketable securities (4,527 ) -
Payment for acquisition of coal reserves and other assets - (13,300 )
Receipts of prior advances on Gibson rail project   1,223     1,023  
Net cash used in investing activities   (169,624 )   (72,145 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 350,000
Borrowings under revolving credit facilities - 88,850
Payments under revolving credit facilities - (95,350 )
Payments on capital lease obligation (173 ) (185 )
Payment of debt issuance costs - (830 )
Net settlement of employee withholding taxes on vesting of ARLP Long-Term Incentive Plan (791 ) -
Contributions to consolidated partnership from affiliate noncontrolling interest - 1
Distributions paid by consolidated partnership to noncontrolling interests (31,022 ) (24,976 )
Distributions paid to Partners   (48,938 )   (34,421 )
Net cash provided by (used in) financing activities   (80,924 )   283,089  
 
EFFECT OF CURRENCY TRANSLATION ON CASH   187     -  
 
NET CHANGE IN CASH AND CASH EQUIVALENTS (87,243 ) 360,571
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   246,708     1,783  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 159,465   $ 362,354  
 

Presentation of Net Income

On January 1, 2009, we adopted the provisions of statement of financial accounting standards ("SFAS") No. 160, Noncontrolling Interests in Consolidated Financial Statements, which establishes accounting and reporting standards for noncontrolling ownership interest in subsidiaries. Prior to adoption of SFAS No. 160, consolidated net income included earnings attributable to AHGP but excluded earnings attributable to noncontrolling interests. Consolidated net income now includes earnings attributable to both AHGP and noncontrolling interests. Unless otherwise noted, any reference to net income in this release represents net income attributable to AHGP.

Source: Alliance Holdings GP, L.P.

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