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ALLIANCE HOLDINGS GP, L.P. Increases Quarterly Distribution by 2.9% to $0.44 Per Unit and Reports Increased Third Quarter 2009 Financial Results

TULSA, Okla.--(BUSINESS WIRE)--Oct. 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 September 30, 2009 (the "2009 Quarter") of $0.44 per unit, or an annualized rate of $1.76 per unit, which will be paid on November 19, 2009, to AHGP’s unitholders of record as of the close of trading on November 12, 2009.

The announced distribution represents a 12.8% increase over the $0.39 per unit distribution (an annualized rate of $1.56 per unit) for the quarter ended September 30, 2008 (the "2008 Quarter") and an increase of 2.9% over the second quarter 2009 distribution of $0.4275 per unit (an annualized rate of $1.71 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 $0.76 per unit, or $3.04 per unit on an annualized basis, payable on November 13, 2009 to all unitholders of record as of the close of trading on November 6, 2009. (See ARLP Press Release dated October 28, 2009.)

AHGP also reported net income for the 2009 Quarter of $23.7 million, or $0.40 per basic and diluted limited partner unit, an increase of 27.9% compared to net income for the 2008 Quarter of $18.5 million, or $0.31 per basic and diluted limited partner unit. For the nine months ended September 30, 2009, AHGP’s net income increased 39.5% to a record $88.2 million, or $1.47 per basic and diluted limited partner unit, compared to net income for the nine months ended September 30, 2008 of $63.2 million, or $1.06 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 $27.1 million, or $108.5 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 September 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) 713-8310 and provide pass code 52016000. International callers should dial (617) 597-5308 and provide the same pass code. 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 44482289. 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 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 issues related to climate change and miner health and safety; the ARLP Partnership's productivity levels and 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 benefits from certain 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

September 30

  Nine Months Ended

September 30

2009   2008 2009   2008
 
SALES AND OPERATING REVENUES:
Coal sales $ 281,628 $ 269,318 $ 881,508 $ 800,043
Transportation revenues 11,663 11,721 35,347 33,348
Other sales and operating revenues   6,246     4,647     15,671     11,906  
Total revenues   299,537     285,686     932,526     845,297  
 
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization) 204,840 199,321 605,693 583,302
Transportation expenses 11,663 11,721 35,347 33,348
Outside coal purchases 517 6,995 5,709 14,450
General and administrative 10,370 7,565 30,060 29,493
Depreciation, depletion and amortization 28,145 25,403 83,767 74,297
Gain from sale of coal reserves - - - (5,159 )
Net gain from insurance settlement and other   -     -     -     (2,790 )
Total operating expenses 255,535 251,005 760,576 726,941
 
INCOME FROM OPERATIONS 44,002 34,681 171,950 118,356
Interest expense (7,675 ) (8,134 ) (23,464 ) (14,372 )
Interest income 121 2,133 1,065 2,448
Other income   126     231     554     698  
INCOME BEFORE INCOME TAXES 36,574 28,911 150,105 107,130
INCOME TAX EXPENSE (BENEFIT)   585     92     811     (633 )
NET INCOME 35,989 28,819 149,294 107,763
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (12,300 )   (10,299 )   (61,070 )   (44,517 )
NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, L.P. ("NET INCOME OF AHGP") $ 23,689   $ 18,520   $ 88,224   $ 63,246  
 

BASIC AND DILUTED NET INCOME OF AHGP PER LIMITED PARTNER UNIT

$ 0.40   $ 0.31   $ 1.47   $ 1.06  
 
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT $ 0.4275   $ 0.3525   $ 1.245   $ 0.9275  
 

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   September 30,   December 31,
2009 2008
 
CURRENT ASSETS:
Cash and cash equivalents $ 94,118 $ 246,708
Trade receivables 93,532 87,922
Other receivables 3,675 6,021
Marketable securities 4,952 -
Inventories 49,239 26,510
Advance royalties 3,200 3,200
Prepaid expenses and other assets   955     10,162  
Total current assets 249,671 380,523
 
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 1,317,098 1,085,214
Less accumulated depreciation, depletion and amortization   (532,741 )   (468,784 )
Total property, plant and equipment, net 784,357 616,430
 
OTHER ASSETS:
Advance royalties 26,628 23,828
Other long-term assets   12,404     11,845  
Total other assets   39,032     35,673  
TOTAL ASSETS $ 1,073,060   $ 1,032,626  
 
LIABILITIES AND PARTNERS’ CAPITAL
 
CURRENT LIABILITIES:
Accounts payable $ 66,094 $ 63,991
Due to affiliates 488 54
Accrued taxes other than income taxes 11,837 11,235
Accrued payroll and related expenses 23,709 20,555
Accrued interest 6,703 3,454
Workers’ compensation and pneumoconiosis benefits 9,254 9,377
Current capital lease obligation 331 351
Other current liabilities 12,524 12,671
Current maturities, long-term debt   18,000     18,000  
Total current liabilities 148,940 139,688
 
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities 422,000 440,000
Pneumoconiosis benefits 33,559 31,436
Accrued pension benefit 20,881 19,952
Workers’ compensation 59,663 47,828
Asset retirement obligations 57,949 56,204
Due to affiliates 215 103
Long-term capital lease obligation 543 784
Other liabilities   7,007     5,459  
Total long-term liabilities   601,817     601,766  
Total liabilities   750,757     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 270,090 256,395
Accumulated other comprehensive income (loss)   (8,013 )   (8,673 )
Total AHGP Partners’ Capital 262,077 247,722
Noncontrolling interests   60,226     43,450  
Total Partners' Capital   322,303     291,172  
TOTAL LIABILITIES AND PARTNERS’ CAPITAL $ 1,073,060   $ 1,032,626  
 
 
 

ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
  Nine Months Ended
September 30,
2009   2008
 
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 236,881   $ 191,339  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures (251,453 ) (122,887 )
Changes in accounts payable and accrued liabilities 5,084 11,339
Proceeds from sale of property, plant and equipment 1 2,487
Proceeds from sale of coal reserves - 7,159
Purchase of marketable securities (4,527 ) -
Payment for acquisition of coal reserves and other assets - (29,800 )
Receipts of prior advances on Gibson rail project   1,828     1,645  
Net cash used in investing activities   (249,067 )   (130,057 )
 
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 - (116,850 )
Payments on capital lease obligation (261 ) (281 )
Payment on long-term debt (18,000 ) (18,000 )
Payment of debt issuance costs - (1,721 )
Purchase of options on limited partner common units - (22 )
Net settlement of employee withholding taxes on vesting of ARLP Long-Term Incentive Plan (791 ) -
Contributions to consolidated partnership from affiliate noncontrolling interest - 1
Contribution by limited partner-affiliate - 816
Distributions paid by consolidated partnership to noncontrolling interests (47,010 ) (39,057 )
Distributions paid to Partners   (74,529 )   (55,523 )
Net cash (used in) provided by financing activities   (140,591 )   208,213  
 
EFFECT OF CURRENCY TRANSLATION ON CASH   187     -  
 
NET CHANGE IN CASH AND CASH EQUIVALENTS (152,590 ) 269,495
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 246,708 1,783
   
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 94,118   $ 271,278  
 
 

Presentation of Net Income

On January 1, 2009, we adopted the provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810-10-65 and FASB ASC 810-10-45-16 (Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements), which establishes accounting and reporting standards for noncontrolling ownership interest in subsidiaries. Prior to adoption of FASB ASC 810-10-65 and FASB ASC 810-10-45-16, 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