core.
2008 Annual Report Alliance Resource Partners, L.P. Alliance Holdings GP, L.P.
1
Alliance Resource Partners, L.P. (ARLP) and
Alliance Holdings GP, L.P. (AHGP) are master
limited partnerships. Both are publicly traded
on the NASDAQ Global Select Market.
ARLP
Delivered over 27 million tons of coal to
customers in 2008
Has grown to be the fifth largest coal
producer in the eastern U.S.
Operates in the Illinois Basin, Central
Appalachia and Northern Appalachia
regions
Eight underground mining complexes
currently in operation and two new
complexes under construction
Grows through organic development
projects and strategic acquisitions
Markets coal to major U.S. utilities and
industrial users
Has significant percent of sales tonnage
dedicated to long-term contracts
Exceeds $1 billion in total assets and total
revenues
Employs over 3,000
AHGP
Owns and controls the managing general
partner of ARLP
Holds a 1.98 percent general partner
interest and 100 percent of the incentive
distribution rights in ARLP
Owns 42 percent of ARLP's common units
2008 was another record year for ARLP. For
the eighth consecutive year, new records
were set for coal sales, production volumes,
revenues and EBITDA*.
Cash distributions to ARLP unitholders
increased 22.2 percent during 2008 to an
annualized rate of $2.86 per unit, while
AHGP’s increased 40 percent to an annualized
rate of $1.61 per unit.
* After normalizing EBITDA for the non-recurring synfuel
benefits realized in 2007. EBITDA is defined as net
income before income taxes, minority interest, net
interest expense and depreciation, depletion and
amortization. See GAAP and non-GAAP reconciliation
information on the inside back cover.
2
c o r e
coal.
Coal generates half of the electricity used daily in the U.S., and it is
the nation’s most abundant low-cost fuel source. Worldwide desire
for coal is also strong: the International Energy Agency projects that
by 2030 global demand will increase more than 70 percent.
With eight consecutive years of record-breaking results just completed, Alliance Resource Partners (ARLP) is focused
on tomorrow. Coal remains America’s most cost-effective and reliable fuel source: it comprises 95 percent of the United
States’ energy reserves and an estimated 200-plus year supply of this critical natural resource is available.
As economic recovery efforts continue, there is renewed focus on energy development and innovation. While much of
this focus is directed toward renewable, alternative sources of energy, we believe the reality is that America will need
to fully utilize all available energy resources if our economy is to be competitive and prosperous in the future – and coal
must continue to play a key role.
The importance of coal to worldwide economic growth is clearly evident. There are 28 new U.S. coal-fired power
plants currently under construction capable of generating a combined 26 gigawatts of electricity. Countries around
the globe are building coal plants to generate an additional 150 gigawatts of electric power. Coal continues to be the
fastest growing fuel source to meet the world’s electricity needs. Increased funding and resources to support clean-coal
initiatives and emerging BTU conversion programs will only serve to enhance the importance of coal in the future.
Coal resources are tightly woven throughout the fabric of our nation's great history. America's energy future is filled with
potential, and coal is at its very core.
1
c o r e
operations.
Operations in all major U.S. eastern coalfields provide Alliance
Resource Partners the flexibility to produce and supply by rail, truck
and barge various qualities of coal that meet our customers’ diverse
requirements.
We control more than 686 million tons of marketable reserves, including low-, medium- and high-sulfur coal, and
currently operate eight underground mining complexes with two more under construction.
During 2008, our mines produced a record 26.4 million tons of coal, up 8.9 percent over the previous 2007 record.
ARLP’s total 2008 sales, primarily to utilities and industrial customers, also hit a new high: volumes totaled 27.2 million
tons, up 9.9 percent when compared with 2007.
Strength in the coal markets throughout much of 2008 enabled ARLP to secure substantial commitments for coal
sales to our customers for delivery terms of up to 10 years at prices significantly above historical levels. We believe
these long-term commitments position us to continue delivering solid results in the future by providing stability to our
revenues and reducing volatility through market cycles. Our contract portfolio also gives us means to maximize the
productivity and efficiency of our operations, as well as a strong foundation for future production, earnings and cash
flow growth.
Two years ago, demand for scrubber-quality coal began to dramatically increase. In response, ARLP expanded its
western Kentucky operations which continued into 2008 with the addition of a fifth continuous mining unit and new coal
preparation plant at our Warrior Complex. Both became operational in early 2009.
During 2008 we also committed to construct two new mining complexes, River View and Tunnel Ridge, to further
enhance ARLP’s strategic presence in the expanding high-sulfur coal market. Consistent with our disciplined approach,
both of these projects are supported by coal sales agreements with customers that have indicated a need for the
production from these two mines to meet their long-term requirements. In addition, development activities are ongoing
for the Gibson South and Penn Ridge mine projects; however, timing for the construction of these two facilities has
been delayed by the downturn in the economy.
2
CoAL MininG CoMPLexes
Illinois
Indiana
Ohio
Pennsylvania
Maryland
8
11
10
st
W
WW
West
rgViVirVV
gg
Virginia
5
12
1
13
9
2
3
4
KKKKeennt
Kentucky
6
7
Virginia
Current Mining Operations
Mine Development Projects
Central Appalachia
Illinois Basin
Mines Under Construction
Transfer Terminal
Northern Appalachia
Current Mining operations
Mines under Construction
transfer terminal
1 Pattiki Complex
2 Dotiki Complex
3 Warrior Complex
4 Hopkins Complex
5 Gibson Complex
6 Pontiki Complex
7 MC Mining Complex
8 Mettiki Complex
9 River View Complex
10 Tunnel Ridge Complex
Mine development Projects
11 Penn Ridge Complex
12 Gibson South Complex
13 Mount Vernon Transfer Terminal
Mines undeR ConstR uCtion
Mine deveLoPMent PRojeCts
River View – estimated 105 million
tons of high-sulfur coal reserves.
This underground mining complex is
scheduled to come online during the
second half of 2009. We plan to develop
this mine for up to eight continuous
mining units with an annual production
capacity of approximately 6.4 million
tons. At full capacity, River View will
employ more than 600 people.
Tunnel Ridge – estimated 71 million
tons of high-sulfur coal reserves. ARLP
has secured sales commitments for 30
million tons over 10 years to support the
opening of this underground longwall
mining complex in late 2010. Tunnel
Ridge will be capable of annually
producing up to 6 million tons of coal
at full capacity and employ more than
230 people.
Gibson South – estimated 83 million tons
of medium-sulfur coal reserves.
Penn Ridge – estimated 57 million tons of
high-sulfur coal reserves.
Visit our Web site for details and updates about
ARLP’s operations:
www.arlp.com/operations/mines.htm
3
COAL TONS SOLD
2004-2008
REVENUES
2004-2008
EBITDA*
2004-2008
S
N
O
T
N
O
L
L
M
I
I
28
26
24
22
20
18
16
I
S
N
O
L
L
M
N
I
I
S
R
A
L
L
O
D
1100
1000
900
800
700
600
500
I
S
N
O
L
L
M
N
I
I
S
R
A
L
L
O
D
300
250
200
150
100
50
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
ARLP DISTRIBUTION GROWTH
2006-20008
AHGP DISTRIBUTION GROWTH
2006-2008
$3.00
$2.75
$2.50
$2.25
$2.00
$1.75
$1.50
$1.25
I
I
N
O
I
T
U
B
R
T
S
D
Y
L
R
E
T
R
A
U
Q
D
E
Z
I
L
A
U
N
N
A
$1.75
$1.50
$1.25
$1.00
$0.75
$0.50
$0.25
I
I
N
O
I
T
U
B
R
T
S
D
Y
L
R
E
T
R
A
U
Q
D
E
Z
I
L
A
U
N
N
A
J
U
N
-
0
6
S
E
P
-
0
6
D
E
C
-
0
6
M
A
R
-
0
7
J
U
N
-
0
7
S
P
E
-
0
7
D
E
C
-
0
7
M
A
R
-
0
8
J
U
N
-
0
8
S
E
P
-
0
8
D
E
C
-
0
8
J
U
N
-
0
6
S
E
P
-
0
6
D
E
C
-
0
6
M
A
R
-
0
7
J
U
N
-
0
7
S
P
E
-
0
7
D
E
C
-
0
7
M
A
R
-
0
8
J
U
N
-
0
8
S
E
P
-
0
8
D
E
C
-
0
8
FutuRe sustAinAbiLity
It is ARLP’s goal to increase production
by 10 percent annually over the long
term. This benchmark is important
because it establishes the groundwork
for strong financial results in the future
for our partnership.
Is this production growth attainable?
We believe many of the components
are in place to make this goal a reality:
4
With access to significant coal
reserves and resources and clear
visibility to future growth, we are
focused on realizing our goals of
increasing production and creating
sustainable, capital-efficient growth
in cash flow which, in turn, will
maximize distributions for ARLP
and AHGP unitholders.
ARLP currently has over 686 million
tons of reportable coal reserves, and
an additional 150 million tons of coal
deposits that are under control near
our existing reserve bases;
Our new mines under construction at
Tunnel Ridge and River View will, at
full capacity, add over 12 million tons
of annual coal production to meet
existing customer demand; and
Expansion projects at Gibson South
and Penn Ridge have been identified
to meet anticipated customer
requirements for the future.
c or e
results.
Record results during 2008 reflect our employees’ focus and
dedication to improve operational efficiency and fulfill our
customers’ needs. That core commitment to excellence continues
and translates into strong performance for our unitholders.
Alliance Resource Partners' operating results during 2008 set the foundation once again for recording-setting
EBITDA* – up 9.4 percent after being normalized for non-recurring synfuel benefits that expired in 2007. Additionally,
our coal sales in 2008 exceeded $1 billion for the first time in our history. Record-breaking coal sales volumes and
coal prices pushed revenues up 11.9 percent when compared with the previous year.
ARLP’s long-stated goal is to provide unitholders one of the highest distribution growth rates in the master limited
partnership investment sector. We were able to achieve that goal in 2008 while continuing to maintain one of the
strongest distribution coverage ratios in the MLP sector. Distribution increases are intended to be sustainable for the
long term and are the product of significant review, stress testing and diligence by ARLP’s management and Board
of Directors. ARLP has increased quarterly distributions per limited partnership unit by 43 percent since June 2006,
and Alliance Holdings (AHGP) has increased quarterly distributions 87 percent during the same time frame. We are
optimistic that future coal prices and increased coal production will allow us to continue meeting this goal.
During 2008, we also enhanced our liquidity by completing a $350 million private placement of seven-year and
ten-year Senior Notes while maintaining our existing $150 million revolving credit facility that expires in 2012. As
we enter 2009, our strong balance sheet, solid internal cash flow and ample liquidity provide ARLP an excellent
platform for continuing success.
* EBITDA is defined as net income before income taxes, minority interest, net interest expense and depreciation, depletion and amortization.
See GAAP and non-GAAP reconciliation information on the inside back cover.
5
c o re
employees.
Employees are the backbone of Alliance Resource Partners’
success. ARLP’s employees – 3,000 strong and growing – take
great pride in the role they play in fueling America.
ARLP strives to be the “Employer of Choice” at each of our operational locations, all union free, by stressing three
core values for employees: safety, quality of life and job security. Our typical employee is a team player who has
invested at least a dozen years of service with ARLP. And as we grow our business and look to the future, we are
recruiting and training the next generation of miners. More than 350 employees were added to our ranks in 2008 and,
as development of our new River View and Tunnel Ridge complexes continues, ARLP expects to create another 650
jobs by the end of 2010.
ARLP promotes a culture of safety, and zero accidents is our goal. While we have not yet achieved that target, our
programs are reaping positive results and recognition. During 2008, the Holmes Safety Association recognized seven
of our operations with Excellence in Safety awards. Our West Virginia operations won the Mountaineer Guardian
Award and the Sentinels of Safety Award. The ARLP mine rescue program has distinguished itself as one of the elite
programs across the United States by taking top honors in multiple state mine rescue competitions. ARLP currently
maintains nine highly trained mine rescue teams, and each team member exceeds the annual Mine Safety & Health
Administration (MSHA) minimum training requirements by more than 50 percent. Collectively, our teams participated in
43 MSHA sanctioned mine rescue, bench and first aid competitions during 2008 and were evaluated against stringent
National Rules.
Our employees are encouraged to embrace a daily attitude of “being the best that we can be.” ARLP supports this
culture by providing employees highly competitive and specialized compensation and benefits plans, as well as the
leading-edge tools needed to work efficiently and effectively while on the job. We also support life-enhancement
opportunities through educational initiatives, employee education reimbursement, matching gift programs and a
generous profit sharing and savings plan. During 2008, ARLP’s benefit plan was named a top 10 percent active
employee benefit plan by Cammock’s Inc., an independent coal industry benefit survey organization. We also were
honored as 2008 Business of the Year in Hopkins County, Kentucky, based on Alliance's growth and contributions to
the community.
ARLP is proud of our employee-wellness focus and the life changes resulting from it. In 2008, the program won the
South West Benefits Association’s Best Health Care Solution award. The program’s components include, among
other items, free on-site visits at our seven staffed health clinics, access to clinic physicians and nurses, tele-medicine
consultations, free over-the-counter medications, and programs designed to reduce cardiovascular disease.
Our employees understand the importance of ongoing process improvements, compliance assurance, safety,
accountability and pollution prevention. Results oriented, they enable ARLP to create value for our customers.
And they do so everyday.
6
CoRe LeAdeRs
Our officers represent more than 150
years of coal industry experience.
ARLP officers
Joseph W. Craft III †
President, Chief Executive Officer
Robert G. Sachse
Executive Vice President – Marketing
Charles R. Wesley
Executive Vice President
Brian L. Cantrell †
Senior Vice President
and Chief Financial Officer
R. Eberley Davis †
Senior Vice President,
General Counsel and Secretary
Thomas M. Wynne
Senior Vice President and
Chief Operating Officer
ARLP directors
Joseph W. Craft III
Charles R. Wesley
Michael J. Hall
John P. Neafsey ‡
John H. Robinson
Wilson M. (Mack) Torrence
AHGP directors
Joseph W. Craft III ‡
Thomas M. Davidson Sr.
Robert J. Druten
Michael J. Hall
† Also AHGP officer
‡ Chairman of the Board
7
8
Core strategies in place since Alliance Resource Partners’ inception
have stimulated growth, fostered industry respect and resulted in the
partnership’s position as the fifth largest coal producer in the eastern
United States.
We believe our successes and marketing strategies during 2008 positioned our partnership to continue on its record-
breaking path in 2009-2010. Strong coal markets throughout much of 2008 allowed ARLP to commit substantial future
production under long-term contracts at attractive price levels. As the economy continues to recover, these contracts
should allow us to achieve considerable growth over the next several years. Moreover, existing coal supply contracts
and ongoing discussions with our customers validate that ARLP’s River View and Tunnel Ridge expansion projects are
needed to meet market demand over the long term.
In 2009 and beyond, we will stay true to our long-term growth agenda by:
Continuing to be a disciplined producer, with project development tied to sales commitments;
Maintaining continuous focus on safety and operational optimization; and
Pursuing opportunistic acquisitions that bring meaningful value to our unitholders.
Looking ahead, our faith remains strong that America’s courage and innovation will again drive the engines of economic
growth – economic growth that is ultimately fueled by abundant, reliable, low-cost energy. ARLP is confident that coal
will continue to play a major role in future economic growth and prosperity, both domestically and worldwide.
As coal continues to play a key role in America’s quest for energy independence, we are undeterred in our efforts to
strengthen ARLP’s industry position and remain committed to our customers, to our partners and to our industry.
The dedication of our employees, our relationships with customers and the confidence of our unitholders provide
Alliance Resource Partners and Alliance Holdings GP momentum and purpose. Thanks to each of you.
Joseph W. Craft III
ARLP President, Chief Executive Officer
and Director
AHGP President, Chief Executive Officer
and Chairman of the Board
March 16, 2009
9
Reconciliation of GAAP "Cash Flows Provided by operating Activities" to non-GAAP "ebitdA"
Reconciliation of non-GAAP "ebitdA" to GAAP "net income"
Year Ended December 31
(in thousands)
2008
2007
2006
2005
2004
$
Cash flows provided by operating activities
Non-cash compensation expense
Asset retirement obligations
Coal inventory adjustment to market
Net gain (loss) on sale of property, plant and equipment
Gain on sale of coal reserves
Gain from insurance recoveries for property damage
Gain from insurance settlement proceeds received in a prior period
Loss on retirement of damaged vertical belt equipment
Other
Net effect of working capital changes
Interest expense, net
Income tax expense (benefit)
261,041
(3,931)
(2,827)
(452)
911
5,159
-
-
-
(366)
(19,661)
18,418
(480)
EBITDA
Depreciation, depletion and amortization
Interest expense, net
Income tax (expense) benefit
Cumulative effect of accounting change
Minority interest (expense)
257,812
(105,278)
(18,418)
480
-
(420)
$
244,012
(3,925)
(2,419)
(21)
3,189
-
2,357
5,088
-
(811)
7,898
9,952
1,669
266,989
(85,310)
(9,952)
(1,669)
-
332
$
250,923
(4,112)
(2,101)
(319)
1,188
-
-
-
-
(1,119)
(5,317)
9,175
2,443
250,761
(66,489)
(9,175)
(2,443)
112
161
$
193,618
(8,193)
(1,918)
(573)
(179)
-
-
-
(1,298)
(580)
34,770
11,816
2,682
230,145
(55,637)
(11,816)
(2,682)
-
-
$
145,055
(20,320)
(1,622)
(488)
332
-
-
-
-
(587)
7,915
14,963
2,641
147,889
(53,664)
(14,963)
(2,641)
-
-
Net income
$
134,176
$
170,390
$
172,927
$
160,010
$
76,621
EBITDA is defined as net income before net interest expense, income taxes, depreciation, depletion and amortization and minority interest. EBITDA is used as a
supplemental financial measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and
others to assess: the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; the ability of our assets to
generate cash sufficient to pay interest costs and support our indebtedness; our operating performance and return on investment as compared to those of other
companies in the coal energy sector, without regard to financing or capital structures; and the viability of acquisitions and capital expenditure projects and the overall
rates of return on alternative investment opportunities.
EBITDA should not be considered as an alternative to net income, income from operations, cash flows from operating activities or any other measure of financial
performance presented in accordance with generally accepted accounting principles. EBITDA is not intended to represent cash flow and does not represent the
measure of cash available for distribution. Our method of computing EBITDA may not be the same method used to compute similar measures reported by other
companies, or EBITDA may be computed differently by us in different contexts (i.e. public reporting versus computation under financing agreements).
EBITDA in 2008 was a record after normalizing 2007 EBITDA for $31.325 million of nonrecurring synfuel benefits that expired in 2007.
Forward Looking statements
This Annual Report contains forward-looking statements and information that are based on the beliefs of Alliance Resource Partners, L.P. and Alliance Holdings GP,
L.P. (the “Partnerships”) and those of their respective general partners (the “General Partners”), as well as assumptions made by and information currently available
to them. When used in this Annual Report, words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “intend,” “could,” “believe,” “may,” and similar
expressions and statements regarding the plans and objectives of the Partnerships for future operations, are intended to identify forward-looking statements.
Although the Partnerships and their General Partners believe that such expectations reflected in such forward-looking statements are reasonable at the time such
statements are made, neither the Partnerships nor the General Partners can give assurances that such expectations will prove to be correct. Such statements are
subject to a variety of risks, uncertainties and assumptions. For a description of such risks and uncertainties, please see the forward-looking statements included
in the Annual Reports on Form 10-K for Alliance Resource Partners, L.P. and Alliance Holdings GP, L.P. which are available by request or can be viewed on the
partnerships’ respective Web sites. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary
materially from those the Partnerships anticipated, estimated, projected or expected.
The Partnerships have no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
unitholder information
The following information applies to Alliance Resource
Partners, L.P. and Alliance Holdings GP, L.P. unless
specified otherwise.
business structure
Publicly traded master limited partnership.
Common unit trading
Common units are traded on the NASDAQ Global Select
Market.
NASDAQ Ticker Symbols
Alliance Resource Partners, L.P. ARLP
Alliance Holdings GP, L.P.
AHGP
Common Units Outstanding (12/31/2008)
ARLP 36,613,458 common units
AHGP 59,863,000 common units
Cash distributions
The partnerships expect to make quarterly distributions
to unitholders of record on the applicable record dates
according to the following schedules:
Alliance Resource Partners, L.P.
Within 45 days after the end of each March, June,
September and December.
Alliance Holdings GP, L.P.
Within 50 days after the end of each March, June,
September and December.
Partnership tax details
Unitholders are partners in the partnership and receive
quarterly cash distributions. Cash distributions generally
are not taxable as long as the individual unitholder’s tax
basis remains above zero.
A partnership generally is not subject to federal or
state income tax. The annual income, gains, losses,
deductions or credits of the partnership flow through to
the unitholders, who are required to report their allocated
share of these amounts on their individual tax returns, as
though the unitholder had incurred these items directly.
schedule K-1
Unitholders of record receive Schedule K-1 packages
that summarize their allocated share of the partnership’s
reportable tax items for the fiscal year. It is important
to note that cash distributions received should not be
reported as taxable income. Only the amounts provided on
the Schedule K-1 should be entered on each unitholder’s
tax return.
Schedule K-1 information is also available on our Web
sites. Please visit www.arlp.com and www.ahgp.com.
Unitholder’s should refer questions regarding their
Schedule K-1 as follows:
By Mail
K-1 Support
P.O. Box 799060
Dallas, TX 75379-9060
By Phone / Fax
Alliance Resource Partners, L.P.
phone (800) 485-6875 fax (866) 554-3842
Alliance Holdings GP, L.P.
phone (866) 867-4060 fax (866) 554-3842
tRAnsFeR AGent And ReGistRAR
Direct requests regarding transfer of units, lost certificates,
lost distribution checks or address changes to:
American Stock Transfer and Trust Company
Attn: Shareholder Services
59 Maiden Lane – Plaza Level
New York, NY 10038
(800) 937-5449
independent Auditors
Deloitte & Touche LLP
Two Warren Place
6120 South Yale Avenue, Suite 1700
Tulsa, OK 74136
Partnership offices
1717 South Boulder Avenue, Suite 400
Tulsa, OK 74119
(918) 295-7600
Partnership Mailing Address
P.O. Box 22027
Tulsa, OK 74121-2027
Contact
Brian L. Cantrell
Senior Vice President and Chief Financial Officer
(918) 295-7674
brian.cantrell@arlp.com
investor information and Form 10-K
For additional information or to receive a free copy of the
2008 Form 10-K, please contact the appropriate e-mail
address or phone number listed below. Form 10-K also
may be downloaded from the partnerships’ Web sites.
Alliance Resource Partners, L.P.
E-mail: investorrelations@arlp.com
Phone: (918) 295-7674
Web site www.arlp.com
Alliance Holdings GP, L.P.
E-mail: investorrelations@ahgp.com
Phone: (918) 295-1415
Web site www.ahgp.com
11
www.arlp.com | www.ahgp.com
P.O. Box 22027, Tulsa, Oklahoma 74121-2027
12