Good day, ladies and gentlemen, and welcome to the Q2 2013 Alliance Resource Partners, L.P. and Alliance Holdings GLP and LP Earnings Conference Call. My name is Stephanie, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. And now, I would like to turn the call over to Mr. Brian Cantrell, Senior Vice President and Chief Financial Officer. Please proceed, sir.

Thank you, Stephanie, and welcome, everyone. Earlier this morning, we released 2013 second quarter earnings for both Alliance Resource Partners, or ARLP, and Alliance Holdings GP, or AHGP, and we'll now discuss those results, as well as our outlook for 2013. Following our prepared remarks, we'll open the call to your questions. We'll begin this morning with a few customary reminders. First, since AHGP's only assets are its ownership interest in ARLP, our comments today will be directed to ARLP's results and outlook unless otherwise noted. In addition, please be aware that some of our remarks may include forward-looking statements that 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 from the partnerships. While these forward-looking statements are based on information currently available to the partnerships and those of their general partners and management, if one of more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results for the partnerships may vary materially from those we projected or expected. In providing these remarks, neither ARLP nor 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'll also be discussing certain non-GAAP financial measures. Definitions and reconciliations of the differences between these non-GAAP financial measures and the most directly comparable GAAP financial measures are contained at the end of the ARLP press release, which has been posted on ARLP's website and furnished to the SEC on Form 8-K. Now that we're through the required preliminaries, I'll start this morning with a review of the partnerships' operating and financial results for the most recent quarter and the first…

Thank you, Brian, and good morning, everyone. As Brian just reviewed, ARLP added to its history of delivering exceptional results by posting new operating and financial benchmarks for the 2013 quarter and first half of the year. I'd like to touch briefly on a few highlights. Once again, ARLP's teams have demonstrated their ability to effectively execute our strategy and deliver long-term value in a challenging market for the coal industry. Operationally, performance at Tunnel Ridge continues to improve as previously discussed revisions to the mine plan are implemented. Sequential production increased approximately 54%, and Tunnel Ridge remains on track to reach an annual run rate of approximately 6 million tons by year end. Our Illinois Basin mines continue to deliver strong performance, most notably at the River View, Gibson North and Onton operations. Construction of our new Gibson South mine also continues to move forward with initial production targeted for the third quarter of 2014. Initial production from continuous miner development activity has now begun at White Oak. The longwall should begin operations toward the middle of next year, and we anticipate that our investments in White Oak will begin to generate positive cash flow to ARLP in 2014 and grow to approximately $90 million to $95 million in 2016. Despite difficult market conditions, our marketing team continued to build on ARLP's solid contract position. During the 2013 quarter, they successfully reached agreement for the sale of approximately 2.6 million tons, bringing total new coal sales commitments to approximately 4.5 million tons since the beginning of this year. Assuming coal production and customer deliveries occur as planned, ARLP is now essentially sold-out in 2013 and has commitments for approximately 80% of anticipated sales volumes in 2014. While our results speak for themselves, they could only be accomplished through the…

[Operator Instructions] First question comes from David Feaster from Raymond James.

Could you talk about the Northern Appalachian market real quick? The market remained pretty tight right now with a couple mine outages. Have you seen a pickup in spot demand? And if there is been a pickup in demand, do you have any spare capacity at your mine in Northern Appalachia?

Yes, we do see the supply disruptions have made the market tight, stockpiles are declining. We do not have any spare capacity. So we are not able to participate, but the prices have firmed since the last quarter.

Okay On the met market, you talked a little bit, your continued weakness there. Do you see met production coming back online in 2014? I remember before when we've talked, it's been -- you're looking for prices closer to the 200 threshold, is that kind of still where you're looking?

It all depends on transportation. But we -- it's hard to know what's going to happen in 2014, but I think that price range is something will definitely be attractive. It may not need to be at that level depending on what the transportation might be. So we're disappointed where met prices are. We think that there will be some supply reductions for the balance of the year. So hopefully in 2014, we will see improved pricing. So we can participate.

Okay. Now in Central Appalachia, fortunately, your mines remain profitable primarily due to large -- much higher contract pricing. With spot prices are in the mid-$50s right now, it implies your mine would be underwater. When you look at 2014, 2015 contracting for these mines, what's your outlook for the region's production? Are you considering whittling down production as your higher price contracts roll off?

Yes, we're -- specifically at our MC mining operation, that's a higher quality coal. So we're trying to position that mine to sell some in the PCI market. It would supplement the markets there. As far as the steam market, we're going to have to look for niche opportunities to be able to continue to produce into that marketplace. And we're working on those now to see if we can't make that happen.

The next question comes from Paul Forward from Stifel Nicolaus. Paul S. Forward - Stifel, Nicolaus & Co., Inc., Research Division: Wanted to ask on the -- well I guess, first of all, the $43 a ton number in Northern Appalachia in the quarter there, really sounds like Tunnel Ridge is getting close to what you'd expected from the mines. Can you talk about -- are the issues that you had with a little disappointment in the mining conditions you found earlier, are you past that? And can you see a low- to mid-$40s type cost going forward out of that region?

I think that as we mentioned in the last quarter, we've implemented a change in our mine plan. However, that will still require -- and we did have a longwall move in July. So we're in the second panel. We expect the second panel to be similar to the first panel. Recoveries did improve this past quarter and therefore, led to the higher production and the lower cost. So we would be expecting cost to be in the same range in the third quarter. As we look to fourth quarter and beyond, with the change in the mine plan, we're hoping that we can see improved cost and improved production, therefore, getting to that 6 million ton annual run rate that I mentioned in our opening comments. Paul S. Forward - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. And I wanted to ask a little kind of what your thoughts might be on the coal markets. You've got about 80% of your coal committed for 2014, and you had touched a little bit on the Northern App markets being pretty favorable right now. Overall, this year, you're talking about average realized lower pricing being down 1% to 3%. With that 80% commitment level for 2014, can you characterize what your average price outlook directionally might be on '14 versus '13? And then, also considering the -- we've had some overall good news relative to last year on coal demand levels, but we did have a fairly mild first half of the summer. And we've seen overall U.S. shipment volumes have been creeping up. Can you talk about it on -- as you're putting to bed the remaining 20% of your expected production and committing that to customers for next year, is that -- how do you think that's going to look relative to the 80% that you've already got committed?

Okay. I'm not exactly sure I understand your last part. But let me go ahead and start answering 2 or 3 questions, and then you can follow up with what I've missed. Specifically to the average sales price per ton, this year was impacted primarily because of not selling the met tons. So when we look at the average sales price per ton in 2013 compared to 2014, the mix between Northern App and the balance of our reserves is going to allow for an improved average sales price year-over-year because the Northern App prices are higher than the Illinois Basin prices and based on what we're looking at. So we'd expect that we will see improved pricing. Now as you look at the balance of the 20%, we anticipate there's numerous solicitations that have already been announced. And there's going to be more coming down the pike in the third quarter of this year. And that will help us determine exactly what that will be to where we can possibly give you more guidance, probably in the fourth quarter. It probably won't be concluded by the end of the third quarter. But we do anticipate that the prices will be up. I mean can't give you a precise percentage yet because of the not knowing what the balance of that 20% will be. But based on our expectation, it's going to be a higher revenue on an average sales price per ton basis next year versus this year. Paul S. Forward - Stifel, Nicolaus & Co., Inc., Research Division: No, that's what I needed. That's good. And I think you had talked a little bit about the White Oak contributing $90 million to $95 million in 2016. Is that -- putting the 2016 number on that, is that being a little conservative, I guess, considering that if you're going to startup, maybe, third quarter 2014, 2015 ought to be a pretty good year too, right? I was just wondering why you would have put a '16 number on when you would hit that full kind of run rate.

Yes, I mean, we will have positive -- and we're expecting that positive cash flow in 2014 and 2015. We just think that based on timing, 2016 gives us more of the normal run rate. That's where we'll start getting returns on our Series A. But so 2015, we will get cash flow out of the royalties in the prep plant and load out facilities. So we'll get some meaningful dollars there. But it's all going to be dependent on timing, and not knowing exactly when the longwall is going to start will affect that number. So we didn't feel comfortable giving guidance at this time on that.

The next question comes from Sam Dubinsky from Wells Fargo.

I just have a couple of quick housekeeping ones. I know you don't want to give an exact number. But perhaps, can you give an idea of how you're contract pricing for 2014 and '15 compare to the current spot market pricing? And how does this compare to historical trends?

I would say that it is higher than what you would see in the spot market pricing. It's what the trend has been and that's consistent with what we've seen in the past. So from a trend-line basis, you could expect, looking back in time, a similar premium for long-term contracts compared to spot pricing.

And what is that? Can you give an idea of the percent premium on average?

I'm not at liberty to tell you about that right now because of all the negotiations we've got. So I'm sorry, I can't disclose that.

And then just do you think you're shipping close to your customers' consumption, or do you think there's still inventory in the channel?

We are pretty much right on track for customer shipments for our contracts. So we haven't seen any -- basically, we haven't seen any deferrals. So we're right on track for shipments based off our contracts.

Okay. And then lastly, can you just talk about capacity for next year and your ability to flex capacity if the market continues to remain strong? What is it today and what could it be if you had to increase it?

Well, I'd say that what we've indicated is Gibson South will come on in the third, fourth quarter of 2014. So we're projecting that'll be about 300,000 tons. And then we're looking at Tunnel Ridge to be at a run rate of 6 million. And we really don't have any excess flex capacity, using your terminology, with the existing capital that we have invested. And our Illinois Basin operations have produced more than we anticipated this year with the embedded capacity we have. So we're running full-out at the moment. And so the only opportunity for increased tons that we're anticipating right now is at Gibson South and Tunnel Ridge. We also mentioned White Oak's coming online. We expect the longwall to be in 2014. That tonnage won't be reflected in our numbers. But again, we will get some benefit out of their production there based on the structure of that joint venture.

The next question comes from Alex Turnbull from Goldman Sachs.

[Audio Gap] Take-or-pay tons. Did that cash flow get recorded as revenue towards average tons? And my second question is about the market. I understand that your largest competitor, Foresight, sold about 35% to 40% of their product into the export market last year. But this year, they're not going to be able to compete. So I'm just wondering how pricing is looking in 2014 and '15, given that the effective supply in Illinois is going to increase 20%, there's no particular increase in demand and there's no particularly good reason why people would pay a premium for long-term uptakes?

Okay. We missed your first question. I'll go ahead and try to answer your second question and --go ahead.

I'm sorry. The first question was if you guys – so you all had [ph] a take-or-pay contract and your customer said "I can't take this toll. I'm going to pay to the break." Do you then record that under revenues and divide it by the reduced number of tons sold, or do you just record that as something else?

I think the question, Brian, is if we had a negotiation with a customer and they wanted to buy out a contract, how do you record that?

I believe that gets recorded through Other Revenue. It's not a sale of a coal ton. It's a revenue associated with a contract termination.

Okay. Because on the broader questions of market, I think it's interesting because I know that [indiscernible] Asian [ph] coal. And the market, the U.S. stuff was shut down. And your largest competitor was selling a lot of Asian coal which has got to go somewhere now.

Yes, I think back -- your -- what I thought -- what I heard your second question was for Illinois Basin coal since there was an increased demand, why do we expect to get a premium for long-term contracts, spot…

Your nearest competitor is selling -- has now got a lot of their supply, 40% of their supply, which can't got into Asia anymore and has to go somewhere.

Yes. I think that the response that is: One, we do have a domestic market that's growing for Illinois Basin coal, primarily at the expense of Central Appalachian coal. We're switching in the 2014, 2015 time frame. And I think that our coals, you also got to look at the various qualities of coal. And so certain of our coals compete in the markets that the longwall coals do not compete in. And I think that, plus the relationships we have, allow us to sell coal at a market -- we got a higher BTU. We got lower transportation. And there's numerous factors that give a different price point relative to what you might see in the spot market pricing.

Okay. And then this is – so there's one -- sorry, one more follow-up question. So I noticed that under the EIA-923 filings that you guys have some very profitable contracts selling like $4 an MMBtu or close to it into say VEPCO, Georgia Power and so forth. Those contracts have since rolled off. Have those been renewed at similar prices, or can we assume they've been renewed at quite different prices?

They're all different. And a couple of those, we're actually in the middle of negotiating right now. So I can comment on specific the contract-by-contract price differentials.

[Operator Instructions] The next question comes from the line of Joseph Stadler [ph], no company name provided.

This is Joseph Stadler [ph] of Stadler and Company [ph]. Do you anticipate any need to go to the equity markets? I know you have not done so in secondaries in the past, or to the debt markets to achieve your ongoing goals. And what additional steps are you taking to reduce costs, your cost structures, particularly in those areas where prices continue to soften?

Joseph, I'll take on the first part of that question with regard need or desire to access the equity markets. We talked about what our liquidity levels are and what our leverage ratios look like. Our balance sheet is very conservative. We have significant capacity available to us in the debt markets, if need be. And our cash flow remains very strong. So I don't see any need at this point in time to execute our existing plans to go into the equitable capital markets.

And on the cost side, we're hitting on all cylinders right now, and we're doing very well. So we believe we can compete with our cost structure. We're continuously looking for ways to be efficient and cost-effective. Our team has done a great job with that. And they need to get congratulated for a tremendous effort. So we feel like we are a low-cost producer in the markets we serve. And we respect that and we stay on top of it, and I think our record speaks for itself. Our guys have done a fantastic job of controlling our cost.

There are no more questions at this time. I would now like to turn the call back over to Mr. Brian Cantrell.

Thank you, Stephanie. We appreciate everyone's time this morning, as well as your continued support and interest in both ARLP and AHGP. Our next call is currently scheduled for late October, and we look forward to discussing our third quarter results with you at that time. Thanks again.

Thank you for your participation in today's conference. This concludes your presentation. You may now this connect, and have a good day.