Press Release

Alliance Holdings GP, L.P. Reports Quarterly Financial Results and Increases Quarterly Distribution by 32.7% to $0.73 Per Unit

Company Release - July 31, 2017 7:00 AM ET

TULSA, Okla.--(BUSINESS WIRE)-- Alliance Holdings GP, L.P. (NASDAQ: AHGP) today reported financial results for the quarter ended June 30, 2017 (the "2017 Quarter") and, as previously announced, the Board of Directors of its general partner (the "Board") approved a distribution to unitholders of $0.73 per unit (an annualized rate of $2.92 per unit) for the 2017 Quarter. The announced distribution is payable on August 18, 2017 to AHGP's unitholders of record as of the close of trading on August 11, 2017 and is an increase of 32.7% compared to the distribution of $0.55 declared for the quarters ended June 30, 2016 (the "2016 Quarter") and March 31, 2017.

The declared distribution reflects the previously announced agreement between AHGP and Alliance Resource Partners, L.P. (NASDAQ: ARLP) pursuant to which AHGP’s incentive distribution rights in ARLP have been eliminated and its approximate one percent general partner interest in ARLP has been converted into a non-economic interest in exchange for the issuance to AHGP of 56.1 million ARLP common units. (See ARLP and AHGP Press Release dated July 28, 2017.)

AHGP's principal sources of cash flow are its ownership interests in ARLP. The declared distribution is based on the distribution AHGP will receive from its ownership interests in ARLP, which previously announced a quarterly distribution for the 2017 Quarter of $0.50 per unit, or $2.00 per unit on an annualized basis, payable on August 14, 2017 to all unitholders of record as of the close of trading on August 7, 2017. (See ARLP Press Release dated July 28, 2017.) Based on ARLP's current declared distribution, AHGP expects to receive quarterly cash distributions from ARLP of $44.3 million, or $177.2 million on an annualized basis. AHGP's primary cash requirements are for working capital, distributions to its unitholders and, for the 2017 full year, an estimated $2.0 million in general and administrative expenses.

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. The consolidated net income of AHGP includes earnings and losses attributable to both AHGP and noncontrolling interests.

A joint conference call regarding AHGP and ARLP’s 2017 Quarter financial results is scheduled for today at 10:00 a.m. Eastern. To participate in the conference call, dial (888) 317-6016 and request to be connected to the Alliance Resource Partners, L.P. and Alliance Holdings GP, L.P. earnings conference call. International callers should dial (412) 317-6016; Canada callers should dial (855) 669-9657 and request to be connected to the same call. 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 US Toll Free (877) 344-7529; International Toll (412) 317-0088; Canada Toll Free (855) 669-9658 and request to be connected to replay access code 10110611.

About Alliance Holdings GP, L.P.

AHGP is a limited partnership formed to own and control ARLP’s managing general partner through which it holds a non-economic general partner interest and an approximate one percent general partner interest in ARLP’s operating subsidiary, Alliance Resource Operating Partners L.P. In addition, AHGP owns 87,188,338 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 expansion of the ARLP Partnership's operations and properties; legislation, regulations, and court decisions and interpretations thereof, including those relating to the environment and the release of greenhouse gases, 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 existing contracts upon expiration; 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; continuation or worsening of depressed oil and gas prices adversely affecting the ARLP Partnership’s investments in oil and gas mineral interests; 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, including costs of health insurance and taxes resulting from the Affordable Care Act, 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 post-mine reclamation as well as 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 the ARLP Partnership does 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, 2016, filed on February 24, 2017 and AHGP's Quarterly Report in Form 10-Q for the quarter ended March 31, 2017, filed on May 8, 2017 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 Six Months Ended
June 30, June 30,
2017 2016 2017 2016
SALES AND OPERATING REVENUES:
Coal sales $ 382,262 $ 422,469 $ 821,006 $ 823,761
Transportation revenues 7,328 5,482 16,924 12,040
Other sales and operating revenues   9,029   11,090   21,694   15,965
Total revenues   398,619   439,041   859,624   851,766
 
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization) 238,668 251,947 501,460 515,526
Transportation expenses 7,328 5,482 16,924 12,040
General and administrative 15,324 18,635 31,771 36,188
Depreciation, depletion and amortization   59,020   73,697   124,147   144,304
Total operating expenses   320,340   349,761   674,302   708,058
 
INCOME FROM OPERATIONS 78,279 89,280 185,322 143,708
Interest expense, net (10,615) (7,770) (18,131) (15,385)
Interest income 56 4 81 8
Equity in income (loss) of affiliates 2,916 (37) 6,616 (64)
Debt extinguishment loss (8,148) (8,148)
Other income   389   161   1,687   252
 
INCOME BEFORE INCOME TAXES 62,877 81,638 167,427 128,519
 
INCOME TAX EXPENSE (BENEFIT)   5   6   (7)   (2)
 
NET INCOME 62,872 81,632 167,434 128,521
 
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (20,289)   (36,259)   (69,840)   (52,306)
 
NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, L.P. ("NET INCOME OF AHGP") $ 42,583 $ 45,373 $ 97,594 $ 76,215
 
BASIC AND DILUTED NET INCOME OF AHGP PER LIMITED PARTNER UNIT $ 0.71 $ 0.76 $ 1.63 $ 1.27
 
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT $ 0.55 $ 0.55 $ 1.10 $ 1.51
 
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)

 
June 30, December 31,
2017 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 43,987 $ 44,525
Trade receivables 118,801 152,032
Other receivables 241 279
Due from affiliates 33 37
Inventories, net 115,017 61,051
Advance royalties, net 1,207 1,207
Prepaid expenses and other assets   15,644   22,128
Total current assets 294,930 281,259
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 2,926,175 2,920,988
Less accumulated depreciation, depletion and amortization   (1,400,169)   (1,335,145)
Total property, plant and equipment, net 1,526,006 1,585,843
OTHER ASSETS:
Advance royalties, net 40,737 29,372
Equity investments in affiliates 149,592 138,817
Goodwill 136,399 136,399
Other long-term assets   34,135   25,997
Total other assets   360,863   330,585
TOTAL ASSETS $ 2,181,799 $ 2,197,687
 
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 69,039 $ 64,460
Due to affiliates 728 906
Accrued taxes other than income taxes 20,160 18,288
Accrued payroll and related expenses 37,405 41,576
Accrued interest 5,583 316
Workers' compensation and pneumoconiosis benefits 9,731 9,897
Current capital lease obligations 27,855 27,196
Other current liabilities 15,543 14,778
Current maturities, long-term debt, net   75,700   149,874
Total current liabilities 261,744 327,291
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities, net 385,886 399,446
Pneumoconiosis benefits 63,662 62,822
Accrued pension benefit 40,607 42,070
Workers' compensation 52,416 40,400
Asset retirement obligations 124,970 125,266
Long-term capital lease obligations 71,510 85,540
Other liabilities   17,353   17,203
Total long-term liabilities   756,404   772,747
Total liabilities   1,018,148   1,100,038
 
PARTNERS CAPITAL:
Alliance Holdings GP, L.P. ("AHGP") Partners' Capital:
Limited Partners – Common Unitholders 59,863,000 units outstanding 630,516 598,077
Accumulated other comprehensive loss   (16,287)   (16,550)
Total AHGP Partners' Capital 614,229 581,527
Noncontrolling interests   549,422   516,122
Total Partners’ Capital   1,163,651   1,097,649
TOTAL LIABILITIES AND PARTNERS CAPITAL $ 2,181,799 $ 2,197,687
 
       

ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
Six Months Ended
June 30,
2017 2016
 
CASH FLOWS FROM OPERATING ACTIVITIES: $ 293,332 $ 210,798
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures (67,517) (48,602)
Increase (decrease) in accounts payable and accrued liabilities 2,411 (10,894)
Proceeds from sale of property, plant and equipment 540 749
Contributions to equity investments in affiliates (12,587) (33,185)
Other   1,829   960
Net cash used in investing activities   (75,324)   (90,972)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under securitization facility 75,700 32,100
Payments under securitization facility (100,000) (27,700)
Payments on term loan (50,000) (56,250)
Borrowings under revolving credit facilities 40,000 140,000
Payments under revolving credit facilities (295,000) (75,000)
Borrowings under long-term debt 400,000
Payment on long-term debt (145,000)
Proceeds on capital lease transactions 33,881
Payments on capital lease obligations (13,389) (9,660)
Payment of debt issuance costs (15,033)
Payment for debt extinguishment (8,148)
Contributions to consolidated company from affiliate noncontrolling interest 251 1,300
Net settlement of employee withholding taxes on vesting of ARLP Long-Term Incentive Plan (2,988) (1,336)
Contribution by limited partner - affiliate 800
Distributions paid by consolidated partnership to noncontrolling interests (39,553) (50,036)
Distributions paid to Partners (65,849) (90,393)
Other   (337)  
Net cash used in financing activities   (218,546)   (103,094)
 
NET CHANGE IN CASH AND CASH EQUIVALENTS (538) 16,732
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 44,525 38,678
       
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 43,987 $ 55,410
 

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

Source: Alliance Holdings GP, L.P.