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Alliance Holdings GP, L.P. Reports Record Quarterly Financial Results and Increases Quarterly Distribution by 2.4% to $0.8475 Per Unit

TULSA, Okla.--(BUSINESS WIRE)--Apr. 28, 2014-- Alliance Holdings GP, L.P. (NASDAQ: AHGP) today reported record quarterly financial results for the quarter ended March 31, 2014 (the "2014 Quarter"). On the strength of record results by its operating subsidiary, Alliance Resource Partners, L.P. (NASDAQ: ARLP), AHGP’s net income rose 12.4% to a record $67.4 million, or net income per basic and diluted limited partner interest of $1.13 per unit, an increase of 13.0% compared to quarter ended March 31, 2013 (the "2013 Quarter"). (Operating results for AHGP reflect those of the operating subsidiaries of ARLP and, as a result, AHGP reports its financial results on a consolidated basis with the financial results of ARLP. For a discussion of net income presentation, please see the end of this release.)

AHGP also announced that the Board of Directors of its general partner (the "Board") increased the cash distribution to unitholders for the 2014 Quarter to $0.8475 per unit, or an annualized rate of $3.39 per unit, payable on May 20, 2014 to AHGP’s unitholders of record as of the close of trading on May 13, 2014. The declared quarterly cash distribution represents an 11.1% increase over the cash distribution of $0.7625 per unit for the 2013 Quarter and an increase of 2.4% over the fourth quarter 2013 distribution of $0.8275 per unit.

"AHGP continues to benefit from the strong operating and financial performance of ARLP," said Joseph W. Craft III, President and Chief Executive Officer. "With ARLP poised to deliver another year of record results, our leverage to growth at ARLP is expected to benefit AHGP as well. Reflecting this expectation, the Board elected to increase quarterly unitholder distributions for the twenty-fourth consecutive quarter."

AHGP’s principal sources of cash flow are its ownership of general partner interests, limited partner interests and incentive distribution rights in ARLP. The declared distribution is based on the distribution AHGP will receive from its ownership interests in ARLP, which today announced a quarterly distribution for the 2014 Quarter of $1.2225 per unit, or $4.89 per unit on an annualized basis, payable on May 15, 2014 to all unitholders of record as of the close of trading on May 8, 2014. (See ARLP Press Release dated April 28, 2014.)

Based on ARLP’s current declared distribution, AHGP expects to receive quarterly cash distributions from ARLP of $51.6 million, or $206.4 million on an annualized basis. AHGP’s primary cash requirements are for working capital, distributions to its unitholders and general and administrative expenses, including for 2014 an estimated $4.6 million in general and administrative expenses.

AHGP and ARLP will discuss their 2014 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) 515-2908 and provide pass code 49236626. International callers should dial (617) 399-5122 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 47869959. International callers should dial (617) 801-6888 and provide the same pass code.

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 Alliance Resource Partners, L.P. (NASDAQ: 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. The Board of Directors of ARLP announced today that it approved a two-for-one split of ARLP’s common units. The unit split will take place in the form of a one unit distribution on each ARLP unit outstanding, with units to be distributed on June 16, 2014 to unitholders of record as of May 30, 2014. Following the unit split, AHGP will continue to own a 1.98% general partner interest and the incentive distribution rights in ARLP. In addition, AHGP will receive an additional 15,544,169 ARLP common units, which will bring its total ownership to 31,088,338 ARLP common units. The quarterly cash distribution per ARLP unit will be reduced by half and as a result, ARLP’s total distribution to AHGP will remain unchanged after the ARLP unit split is consummated.

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: changes in competition in coal markets and the ARLP Partnership's ability to respond to such changes; changes in coal prices, which could affect the ARLP Partnership's operating results and cash flows; risks associated with the ARLP Partnership's expansion of its operations and properties; legislation, regulations, and court decisions and interpretations thereof, including those relating to the environment, mining, miner health and safety and health care; 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; changing global economic conditions or in industries in which the ARLP Partnership’s customers operate; liquidity constraints, including those resulting from any future unavailability of financing; customer bankruptcies, cancellations or breaches to existing contracts, or other failures to perform; customer delays, failure to take coal under contracts or defaults in making payments; adjustments made in price, volume or terms to existing coal supply agreements; fluctuations in coal demand, prices and availability; the ARLP Partnership's productivity levels and margins earned on its coal sales; changes in raw material costs; changes in the availability of skilled labor; the ARLP Partnership's ability to maintain satisfactory relations with its employees; increases in labor costs, adverse changes in work rules, or cash payments or projections associated with post-mine reclamation and workers' compensation claims; increases in transportation costs and risk of transportation delays or interruptions; operational interruptions due to geologic, permitting, labor, weather-related or other 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; difficulty in making accurate assumptions and projections regarding pension, black lung benefits and other post-retirement benefit liabilities; the coal industry's share of electricity generation, including as a result of environmental concerns related to coal mining and combustion and the cost and perceived benefits of other sources of electricity, such as natural gas, nuclear energy and renewable fuels; uncertainties in estimating and replacing the ARLP Partnership’s coal reserves; a loss or reduction of benefits from certain tax deductions and credits; difficulty obtaining commercial property insurance, and risks associated with the ARLP Partnership's participation (excluding any applicable deductible) in the commercial insurance property program; and difficulty in making accurate assumptions and projections regarding future revenues and costs associated with equity investments in companies we do not control.

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, 2013, filed on February 28, 2014 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

March 31,

2014     2013
 
SALES AND OPERATING REVENUES:
Coal sales $ 525,545 $ 534,509
Transportation revenues 6,005 6,934
Other sales and operating revenues   10,384     6,527  
Total revenues   541,934     547,970  
 
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization) 322,242 348,575
Transportation expenses 6,005 6,934
Outside coal purchases 2 602
General and administrative 17,899 15,713
Depreciation, depletion and amortization   66,841     64,382  
Total operating expenses 412,989 436,206
 
INCOME FROM OPERATIONS 128,945 111,764
Interest expense, net (8,063 ) (6,618 )
Interest income 389 134
Equity in loss of affiliates, net (6,241 ) (3,867 )
Other income   306     274  
INCOME BEFORE INCOME TAXES 115,336 101,687
INCOME TAX BENEFIT   -     (697 )
NET INCOME 115,336 102,384
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (47,889 )   (42,382 )
NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, L.P. ("NET INCOME OF AHGP") $ 67,447   $ 60,002  
 
BASIC AND DILUTED NET INCOME OF AHGP PER LIMITED PARTNER UNIT $ 1.13   $ 1.00  
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT $ 0.8275   $ 0.74  
 

WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING - BASIC AND DILUTED

  59,863,000     59,863,000  
 

 

       

ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 
ASSETS March 31, December 31,
2014 2013
 
CURRENT ASSETS:
Cash and cash equivalents $ 19,124 $ 98,375
Trade receivables 199,554 153,662
Other receivables 294 776
Due from affiliates 2,300 1,889
Inventories 68,751 44,214
Advance royalties 11,454 11,454
Prepaid expenses and other assets   9,974     16,264  
Total current assets 311,451 326,634
 
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 2,681,406 2,645,872
Less accumulated depreciation, depletion and amortization   (1,062,256 )   (1,031,493 )
Total property, plant and equipment, net 1,619,150 1,614,379
 
OTHER ASSETS:
Advance royalties 20,741 18,813
Equity investments in affiliates 154,029 130,410
Due from affiliate 11,458 11,560
Other long-term assets   23,738     24,883  
Total other assets   209,966     185,666  
TOTAL ASSETS $ 2,140,567   $ 2,126,679  
 
LIABILITIES AND PARTNERS' CAPITAL
 
CURRENT LIABILITIES:
Accounts payable $ 84,213 $ 79,772
Due to affiliates 202 290
Accrued taxes other than income taxes 25,091 19,086
Accrued payroll and related expenses 43,116 47,105
Accrued interest 6,302 996
Workers’ compensation and pneumoconiosis benefits 9,237 9,065
Current capital lease obligations 1,307 1,288
Other current liabilities 17,130 18,625
Current maturities, long-term debt   43,000     36,750  
Total current liabilities 229,598 212,977
 
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities 790,000 831,250
Pneumoconiosis benefits 49,698 48,455
Accrued pension benefit 17,544 18,182
Workers’ compensation 54,857 54,949
Asset retirement obligations 81,324 80,807
Long-term capital lease obligations 16,758 17,135
Other liabilities   6,407     7,331  
Total long-term liabilities   1,016,588     1,058,109  
Total liabilities   1,246,186     1,271,086  
 
COMMITMENTS AND CONTINGENCIES
 
PARTNERS' CAPITAL:
Alliance Holdings GP, L.P. ("AHGP") Partners' Capital:
Limited Partners – Common Unitholders 59,863,000 units outstanding 517,841 500,070
Accumulated other comprehensive loss   (4,207 )   (4,198 )
Total AHGP Partners' Capital 513,634 495,872
Noncontrolling interests   380,747     359,721  
Total Partners' Capital   894,381     855,593  
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 2,140,567   $ 2,126,679  
 
   

ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
Three Months Ended
March 31,
2014     2013
 
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 139,530   $ 199,184  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures (69,463 ) (70,306 )
Changes in accounts payable and accrued liabilities (3,745 ) (7,608 )
Proceeds from sale of property, plant and equipment - 9
Purchases of equity investments in affiliate (30,000 ) (29,700 )
Payments to affiliate for acquisition and development of coal reserves (1,401 ) (12,064 )
Advances/loans to affiliate   -     (1,643 )
Net cash used in investing activities   (104,609 )   (121,312 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities 82,800 45,000
Payments under revolving credit facilities (117,800 ) (50,000 )
Payments on capital lease obligations (358 ) (284 )
Net settlement of employee withholding taxes on vesting of ARLP Long-Term Incentive Plan (2,991 ) (3,015 )
Distributions paid by consolidated partnership to noncontrolling interests (26,286 ) (24,154 )
Distributions paid to Partners   (49,537 )   (44,299 )
Net cash used in financing activities   (114,172 )   (76,752 )
 
NET CHANGE IN CASH AND CASH EQUIVALENTS (79,251 ) 1,120
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 98,375 31,111
   
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 19,124   $ 32,231  
 

Presentation of Net Income

Consolidated net income 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