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Alliance Holdings GP, L.P. Reports Quarterly Financial Results; Declares Quarterly Distribution of $0.55 Per Unit

TULSA, Okla.--(BUSINESS WIRE)--Apr. 26, 2016-- Alliance Holdings GP, L.P. (NASDAQ: AHGP) today announced that the Board of Directors of its general partner (the "Board") approved a distribution to unitholders for the quarter ended March 31, 2016 (the "2016 Quarter") of $0.55 per unit, or an annualized rate of $2.20 per unit compared to a quarterly cash distribution of $0.9375 per unit for the quarter ended March 31, 2015 (the "2015 Quarter") and $0.96 per unit for the quarter ended December 31, 2015. The current declared distribution is payable on May 20, 2016 to AHGP’s unitholders of record as of the close of trading on May 13, 2016.

AHGP’s principal sources of cash flow are its ownership of general partner interests, limited partner interests and incentive distribution rights in Alliance Resource Partners, L.P. (NASDAQ: 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 2016 Quarter of $0.4375 per unit, or $1.75 per unit on an annualized basis, payable on May 13, 2016 to all unitholders of record as of the close of trading on May 6, 2016. (See ARLP Press Release dated April 26, 2016.)

"The decision by our Board to decrease AHGP’s unitholder distribution reflects the distribution reduction announced today by ARLP," said Joseph W. Craft III, President and Chief Executive Officer. "In light of the current capital market environment, we support ARLP’s difficult decision to decrease its unitholder distribution to improve its coverage ratio, reduce its indebtedness and further strengthen its balance sheet."

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. Consolidated net income includes earnings and losses attributable to both AHGP and non-controlling interests. Unless otherwise noted, any reference to net income in this release represents Net Income Attributable to AHGP.

AHGP also reported net income for the 2016 Quarter of $30.8 million, or net income per basic and diluted limited partner interest of $0.52 per unit, compared to net income for the 2015 Quarter of $65.5 million, or $1.09 per basic and diluted limited partner unit.

Based on ARLP’s current declared distribution, AHGP expects to receive quarterly cash distributions from ARLP of $33.4 million, or $133.6 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 2016 full year an estimated $2.0 million in general and administrative expenses.

AHGP and ARLP will discuss their 2016 Quarter financial results during a joint conference call scheduled for today at 10:00 a.m. Eastern. To participate in the conference call, dial (855) 793-3259 and provide conference number 74677339. International callers should dial (631) 485-4928 and provide the same conference number. 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 (855) 859-2056 and provide conference number 74677339. International callers should dial (404) 537-3406 and provide the same conference number.

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 31,088,338 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 statements 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, 2015, filed on February 26, 2016 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,
2016     2015
 
SALES AND OPERATING REVENUES:
Coal sales $ 401,292 $ 517,739
Transportation revenues 6,558 7,148
Other sales and operating revenues   4,875     35,413  
Total revenues   412,725     560,300  
 
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization) 253,303 334,362
Transportation expenses 6,558 7,148
Outside coal purchases - 322
General and administrative 17,553 17,263
Depreciation, depletion and amortization   80,883     78,268  
Total operating expenses 358,297 437,363
 
INCOME FROM OPERATIONS 54,428 122,937
Interest expense, net (7,615 ) (7,968 )
Interest income 4 531
Equity in loss of affiliates, net (27 ) (9,686 )
Other income   91     118  
INCOME BEFORE INCOME TAXES 46,881 105,932
INCOME TAX BENEFIT   (8 )   (2 )
NET INCOME 46,889 105,934
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (16,047 )   (40,404 )
NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, L.P. ("NET INCOME OF AHGP") $ 30,842   $ 65,530  
 
BASIC AND DILUTED NET INCOME OF AHGP PER LIMITED PARTNER UNIT $ 0.52   $ 1.09  
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT $ 0.96   $ 0.915  

 

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,
2016 2015
 
CURRENT ASSETS:
Cash and cash equivalents $ 35,765 $ 38,678
Trade receivables 119,662 122,875
Other receivables 848 696
Due from affiliates 34 38
Inventories, net 155,344 121,081
Advance royalties, net 6,770 6,820
Prepaid expenses and other assets   23,774     29,890  
Total current assets 342,197 320,078
 
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 3,065,155 3,044,260
Less accumulated depreciation, depletion and amortization   (1,309,334 )   (1,243,985 )
Total property, plant and equipment, net 1,755,821 1,800,275
 
OTHER ASSETS:
Advance royalties, net 32,666 21,295
Equity investments in affiliates 84,234 64,509
Goodwill 136,399 136,399
Other long-term assets   22,751     23,960  
Total other assets   276,050     246,163  
TOTAL ASSETS $ 2,374,068   $ 2,366,516  
 
LIABILITIES AND PARTNERS' CAPITAL
 
CURRENT LIABILITIES:
Accounts payable $ 63,527 $ 84,058
Due to affiliates 41 129
Accrued taxes other than income taxes 16,609 15,621
Accrued payroll and related expenses 33,459 37,031
Accrued interest 2,801 306
Workers’ compensation and pneumoconiosis benefits 8,843 8,688
Current capital lease obligations 20,148 19,764
Other current liabilities 19,534 18,929
Current maturities, long-term debt, net   240,436     238,086  
Total current liabilities 405,398 422,612
 
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities, net 644,736 579,420
Pneumoconiosis benefits 61,079 60,077
Accrued pension benefit 38,781 39,031
Workers’ compensation 48,337 47,486
Asset retirement obligations 123,302 122,434
Long-term capital lease obligations 74,895 80,150
Other liabilities   21,684     21,174  
Total long-term liabilities   1,012,814     949,772  
Total liabilities   1,418,212     1,372,384  
 
COMMITMENTS AND CONTINGENCIES
 
PARTNERS' CAPITAL:
Alliance Holdings GP, L.P. ("AHGP") Partners' Capital:
Limited Partners – Common Unitholders 59,863,000 units outstanding 540,601 567,259
Accumulated other comprehensive loss   (14,785 )   (14,875 )
Total AHGP Partners' Capital 525,816 552,384
Noncontrolling interests   430,040     441,748  
Total Partners' Capital   955,856     994,132  
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 2,374,068   $ 2,366,516  
   
 
ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
2016     2015
 
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 80,278   $ 161,059  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures (31,733 ) (50,330 )
Changes in accounts payable and accrued liabilities (6,247 ) 659
Proceeds from sale of property, plant and equipment 458 299
Purchases of equity investments in affiliates (20,168 ) (18,804 )
Payments for acquisitions of businesses, net of cash acquired - (28,078 )
Other   416     1,807  
Net cash used in investing activities   (57,274 )   (94,447 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under securitization facility 22,500 -
Payments under securitization facility (13,900 ) -
Payments on term loan (6,250 ) (6,250 )
Borrowings under revolving credit facilities 105,000 95,000
Payments under revolving credit facilities (40,000 ) (65,000 )
Payments on capital lease obligations (4,871 ) (343 )
Contribution to consolidated company from affiliate noncontrolling interest 796 333
Net settlement of employee withholding taxes on vesting of ARLP Long-Term Incentive Plan (1,336 ) (2,719 )
Distributions paid by consolidated partnership to noncontrolling interests (30,388 ) (28,688 )
Distributions paid to Partners (57,468 ) (54,775 )
Other   -     (2,141 )
Net cash used in financing activities   (25,917 )   (64,583 )
 
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,913 ) 2,029
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 38,678 28,274
   
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 35,765   $ 30,303  

Source: Alliance Holdings GP, L.P.

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