Alliance Holdings GP, L.P. (AHGP)
Q2 2008 Earnings Call Transcript
July 28, 2008 10:00 am ET
Brian Cantrell – SVP and CFO
Joe Craft – President and CEO
Jim Rollyson – Raymond James
Paul Forward – Stifel Nicholas
Ron Londe – Wachovia
Luther Lu – FBR Capital Markets
Rob Mullin – Duquesne Capital
Mike Tang [ph] – Morningstar
Franklin Ross [ph] – Link Foundation [ph]
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Thank you, Katie, and welcome everyone. We appreciate your interest in Alliance Resource Partners, which today we refer to as ARLP, and Alliance Holdings GP, which we refer to as AHGP. We released our 2008 second quarter earnings earlier this morning and will now discuss these results and our outlook for the remainder of 2008.
Following our prepared remarks, we will open the call to your questions. Before we begin, I’ll run through a few reminders. As is our practice, since AHGP’s only assets are its ownership interests and ARLP, our comments today will be directed to ARLP’s results and outlook unless otherwise noted. In addition, some of our remarks this morning may include statements, which are not historical in nature and may concern future expectations, plans and objectives of the partnerships regarding our future operations.
Any such comments constitute forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and are based on to believe so the partnerships and those of their respective general partners and management, as well as assumptions made by and information currently available to them. Although the Alliance partnerships, their general partners and management believe the forward-looking statements are reasonable at the time made, no assurances can be given that such statements will prove to be correct. These forward-looking statements are subject to a variety of risks, uncertainties and assumptions, which are contained in our filings from time to time with the Securities and Exchange Commission and are also reflected in today’s press releases on the partnerships.
If one or more of these risks or uncertainties materialize or if the underlying assumptions proven correct, our actual results may vary materially from those we anticipated, estimated, projected or expected. In providing these remarks, neither ARLP not AHGP has any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Finally, we will also be discussing certain non-GAAP financial measures. Definitions and reconciliations of the differences between these non-GAAP measures and the most directly comparable GAAP financial measure are contained at the end of the ARLP press release, which has been posted on the partnership’s [ph] Web site and furnished to the SEC on Form 8-K.
Now that we are through the preliminaries, I’ll turn the call over to Joe Craft, our President and Chief Executive Officer. Joe?
Good morning, everyone, and thanks for joining our second quarter 2008 earnings review. The US co-markets remained stronger in the first half of 2008 and are expected to continue to benefit from favorable global and domestic coal supply and demand fundamentals for the foreseeable future. The coal continuing to be the fuel of choice to meet the growing electric power generation needs around the global, demand for coal continues to outpace supply and has resulted in significant price increases in every coal market in the world.
Domestically, coal consumption is rising, exports are growing year-over-year and utility stock piles are declines. Combining this rising demand with various constraints that continue to limit increases in coal supply supports our optimistic outlook for coal prices for the foreseeable future. These markets are helping ARLP stay on track to meet its production and distribution growth targets.
During the quarter, we continued to experience increased demand for our coal in all the markets ARLP serves and successfully added to our coal sales commitments beyond 2008 at attractive prices. We also made significant progress on the construction of our new River View mine and continue to have positive discussion with potential customers for our growth projects at Tunnel Ridge, Gibson South and Penn Ridge.
Overall, we remain encouraged about ARLP’s future growth opportunities and are committed to sharing the gains from these opportunities with unitholders. Toward that end, management has set a goal of increasing ARLP unitholder distributions by 6% to 8% per quarter through 2010.
For the 2008 quarter, the Board of Directors of each partnership announced significant increases to their respective unitholder distributions for the second quarter just ended. The ARLP Board declared a quarterly cash distribution, a $0.66 per unit for the 2008 quarter, a 12.8% increase over the distribution for the first quarter of this year and a 17.9% increase over the distribution for the 2007 second quarter.
The AHGP Board declared a quarterly cash distribution for the 2008 second quarter of $0.3525 per unit. As a result of the accelerate cash flow growth available to AHGP from its ownership interest in ARLP, the declared distribution represents a 22.6% increase over the cash distribution paid for the first quarter of this year and a 33% increase over the distribution for the second quarter of 2007.