Alliance Holdings GP, L.P. Increases Quarterly Distribution by 3.2% to $0.72 Per Unit and Reports Quarterly Financial Results Business Wire TULSA, Okla. -- October 26, 2012 Alliance Holdings GP, L.P. (NASDAQ: AHGP) today announced that the Board of Directors of its general partner declared a quarterly cash distribution for the quarter ended September 30, 2012 (the "2012 Quarter") of $0.72 per unit, or an annualized rate of $2.88 per unit. The declared distribution will be paid on November 19, 2012 to AHGP’s unitholders of record as of the close of trading on November 12, 2012. The announced quarterly cash distribution represents an 18.0% increase over the $0.61 per unit distribution (an annualized rate of $2.44 per unit) for the quarter ended September 30, 2011 (the "2011 Quarter") and an increase of 3.2% over the second quarter 2012 distribution of $0.6975 per unit (an annualized rate of $2.79 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 2012 Quarter of $1.085 per unit, or $4.34 per unit on an annualized basis, payable on November 14, 2012 to all unitholders of record as of the close of trading on November 7, 2012. (See ARLP Press Release dated October 26, 2012.) AHGP reported net income for the 2012 Quarter of $39.5 million, or $0.66 per basic and diluted limited partner unit, compared to $57.1 million, or $0.95 per basic and diluted limited partner unit, in the 2011 Quarter. The decrease in net income during the 2012 Quarter primarily reflects approximately $24.1 million of losses and charges related to ARLP's idling of the Pontiki mine, including a non-cash asset impairment of $19.0 million, and reduced coal shipments into the metallurgical export markets. (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 $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 general and administrative expenses, including for 2012 an estimated $4.5 million to $4.75 million in general and administrative expenses. AHGP and ARLP will discuss their 2012 Quarter financial results during a joint conference call scheduled for today at 10:00 a.m. Eastern. To participate in the conference call, dial (800) 299-9086 and provide pass code 23801657. International callers should dial (617) 786-2903 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 72201009. 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. 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 email@example.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; the impact of health care legislation; 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 due to labor and transportation costs and disruptions, equipment availability, governmental regulations, including those related to carbon dioxide emissions, and other factors; legislation, regulatory and court decisions and interpretations thereof, including issues related to air and water quality and miner health and safety; the ARLP Partnership's productivity levels and margins earned on its coal sales; unexpected changes in raw material costs; unexpected changes in availability of skilled labor; the ARLP Partnership's ability to maintain satisfactory relations with its employees; any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments or projections 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; difficulty in making accurate assumptions and projections regarding pension, black lung benefits and other post-retirement benefit liabilities; coal market'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 alternative sources of energy, 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 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, 2011, filed on February 28, 2012 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 Nine Months Ended September 30, September 30, 2012 2011 2012 2011 SALES AND OPERATING REVENUES: Coal sales $ 499,003 $ 473,683 $ 1,441,107 $ 1,323,851 Transportation 5,625 7,446 17,651 25,452 revenues Other sales and operating 6,720 6,528 25,854 19,381 revenues Total revenues 511,348 487,657 1,484,612 1,368,684 EXPENSES: Operating expenses (excluding 338,644 294,771 946,806 835,006 depreciation, depletion and amortization) Transportation 5,625 7,446 17,651 25,452 expenses Outside coal 4,424 19,864 34,759 29,495 purchases General and 15,282 13,613 47,494 40,692 administrative Depreciation, depletion and 59,781 40,275 154,923 117,237 amortization Asset impairment 19,031 - 19,031 - charge Total operating 442,787 375,969 1,220,664 1,047,882 expenses INCOME FROM 68,561 111,688 263,948 320,802 OPERATIONS Interest (7,446 ) (8,782 ) (21,626 ) (27,248 ) expense, net Interest 94 84 239 279 income Equity in loss of affiliates, (2,832 ) - (11,040 ) - net Other income 254 360 2,853 1,340 INCOME BEFORE 58,631 103,350 234,374 295,173 INCOME TAXES INCOME TAX (102 ) (317 ) (726 ) (221 ) BENEFIT NET INCOME 58,733 103,667 235,100 295,394 LESS: NET INCOME ATTRIBUTABLE (19,238 ) (46,559 ) (91,927 ) (133,367 ) TO NONCONTROLLING INTERESTS NET INCOME ATTRIBUTABLE TO ALLIANCE HOLDINGS GP, $ 39,495 $ 57,108 $ 143,173 $ 162,027 L.P. ("NET INCOME OF AHGP") BASIC AND DILUTED NET INCOME OF AHGP $ 0.66 $ 0.95 $ 2.39 $ 2.71 PER LIMITED PARTNER UNIT DISTRIBUTIONS PAID PER $ 0.6975 $ 0.5825 $ 2.0025 $ 1.665 LIMITED PARTNER UNIT WEIGHTED AVERAGE NUMBER OF UNITS 59,863,000 59,863,000 59,863,000 59,863,000 OUTSTANDING - BASIC AND DILUTED ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except unit data) (Unaudited) ASSETS September 30, December 31, 2012 2011 CURRENT ASSETS: Cash and cash equivalents $ 4,110 $ 281,469 Trade receivables 152,826 128,643 Other receivables 1,432 3,525 Due from affiliates 79 - Inventories 63,923 33,837 Advance royalties 9,038 7,560 Prepaid expenses and other assets 10,321 12,022 Total current assets 241,729 467,056 PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment, at cost 2,278,297 1,974,520 Less accumulated depreciation, depletion and (784,123 ) (793,200 ) amortization Total property, plant and equipment, net 1,494,174 1,181,320 OTHER ASSETS: Advance royalties 26,972 27,916 Equity investments in affiliates 74,329 40,118 Other long-term assets 31,196 18,067 Total other assets 132,497 86,101 TOTAL ASSETS $ 1,868,400 $ 1,734,477 LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Accounts payable $ 113,776 $ 97,369 Due to affiliates 395 494 Accrued taxes other than income taxes 19,150 15,897 Accrued payroll and related expenses 42,233 35,876 Accrued interest 6,320 2,195 Workers’ compensation and pneumoconiosis 9,488 9,511 benefits Current capital lease obligations 1,019 676 Other current liabilities 22,900 15,326 Current maturities, long-term debt 18,000 18,000 Total current liabilities 233,281 195,344 LONG-TERM LIABILITIES: Long-term debt, excluding current maturities 693,000 686,000 Pneumoconiosis benefits 60,987 54,775 Accrued pension benefit 24,273 27,538 Workers’ compensation 74,862 64,520 Asset retirement obligations 76,695 70,836 Long-term capital lease obligations 18,865 2,497 Other liabilities 8,536 6,774 Total long-term liabilities 957,218 912,940 Total liabilities 1,190,499 1,108,284 COMMITMENTS AND CONTINGENCIES PARTNERS' CAPITAL: Alliance Holdings GP, L.P. ("AHGP") Partners' Capital: Limited Partners – Common Unitholders 437,140 414,165 59,863,000 units outstanding Accumulated other comprehensive loss (16,669 ) (17,560 ) Total AHGP Partners' Capital 420,471 396,605 Noncontrolling interests 257,430 229,588 Total Partners' Capital 677,901 626,193 TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,868,400 $ 1,734,477 ALLIANCE HOLDINGS GP, L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, 2012 2011 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 422,369 $ 429,975 CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment: Capital expenditures (332,353 ) (216,308 ) Changes in accounts payable and accrued (4,024 ) 511 liabilities Proceeds from sale of property, plant and 114 465 equipment Purchase of equity investments in affiliate (43,100 ) (35,700 ) Payment for acquisition of business (100,000 ) - Payments to affiliate for development of coal (34,601 ) (33,841 ) reserves Advances/loans to affiliate (2,229 ) - Payments from affiliate 4,229 - Other 546 810 Net cash used in investing activities (511,418 ) (284,063 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under term loan 250,000 - Borrowings under revolving credit facility 150,000 - Payments under revolving credit facility (75,000 ) - Payment on term loan (300,000 ) - Payment on long-term debt (18,000 ) (18,000 ) Payments on capital lease obligations (673 ) (595 ) Payment of debt issuance costs (4,272 ) - Net settlement of employee withholding taxes on (3,734 ) (2,324 ) vesting of ARLP Long-Term Incentive Plan Distributions paid by consolidated partnership (66,755 ) (57,787 ) to noncontrolling interests Distributions paid to Partners (119,876 ) (99,672 ) Net cash used in financing activities (188,310 ) (178,378 ) NET CHANGE IN CASH AND CASH EQUIVALENTS (277,359 ) (32,466 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 281,469 342,237 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,110 $ 309,771 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. Contact: Alliance Holdings GP, L.P. Brian L. Cantrell, 918-295-7673
Alliance Holdings GP, L.P. Increases Quarterly Distribution by 3.2% to $0.72 Per Unit and Reports Quarterly Financial Results
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