Alliance Resource Partners LP (ARLP) 2017 Q2 法說會逐字稿

Good morning, and welcome to the Alliance Resource Partners, L.P. and Alliance Holdings GP, L.P. second quarter earnings conference call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Brian Cantrell, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you, Brian, and welcome, everyone. Earlier this morning, we released 2017 second quarter earnings for both Alliance Resource Partners, or ARLP; and Alliance Holdings GP, or AHGP, and we'll now discuss these results as well as our outlook for the balance of the year. Following our prepared remarks, we'll open the call to your questions.

Before we begin, however, a reminder that some of our remarks today may include forward-looking statements that are subject to a variety of risks, uncertainties and assumptions that are contained in our filings from time to time with the Securities and Exchange Commission and are also reflected in this morning's press releases. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected. In providing these remarks, neither partnership has any obligation to publicly update or revise any forward-looking statement whether as a result of new information, future events or otherwise, unless required by law to do so.

Finally, we will 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 our website and furnished to the SEC on Form 8-K.

With the required preliminaries completed now, we have a lot of ground to cover this morning. So at this point, I'll turn the call over to Joe Craft, our President and Chief Executive Officer. Joe?

Thank you, Brian. Good morning, everyone.

ARLP and AHGP made tremendous progress during the first 6 months of 2017, delivering strong operating and financial results while achieving significant milestones that have the Alliance partnerships well positioned to continue to deliver on our goal of creating long-term value for our unitholders.

Turning first to our results. ARLP's performance for the 2017 quarter was in line with our expectations despite the unforeseen impact of customer force majeure events and shipment deferrals impacting sales by approximately 1 million tons. Operationally, ARLP continued to benefit from our strategy of shifting production to our lowest-cost mines as expenses per ton fell 11% compared to the 2016 quarter.

Our continued focus on controlling costs and minimizing capital has allowed ARLP to achieve attractive industry-leading margins and strong distributable cash flow in the face of lower coal sales prices. Our marketing team also continued to strengthen ARLP's contract portfolio since our last report, booking an additional 8.2 million tons of coal deliveries through 2020.

In keeping with our previously stated objective of opportunistically deploying capital to generate sustainable cash flows as a complement to ARLP's core coal business, we made a new oil and gas midstream investment a couple of weeks ago. This $100 million investment is structured to provide ARLP with a quarterly cash or payment-in-kind return and is expected to be immediately accretive to our results.

Our view of the second half of 2017 remains positive. We anticipate that our customers will make up the force majeure tons and deferred shipments I mentioned earlier over the next 6 to 9 months. And with nearly all of our planned production for the year now under contract, we believe coal volumes and revenue should be within our previous guidance ranges for 2017. We expect our strong operating performance to continue, giving us the confidence to confirm ARLP's full year guidance for net income, adjusted EBITDA and distributable cash flow.

We are also pleased that ARLP was able to resume increasing distributions to our unitholders. As previously discussed, we felt ARLP would be in a position to again consider growing unitholder distributions once the previous uncertainty in the debt capital markets was addressed. Completion of our 2025 bond offering and extending our revolving credit facility to 2021 successfully alleviated these debt market concerns, providing ARLP with a stable, long-term capital structure and ample liquidity.

With our conservative balance sheet intact for the foreseeable future and in consideration of our strong performance and positive outlook, the Alliance board selected to meaningfully increase distributions by 14.3% at ARLP and 32.7% at AHGP compared to the 2017 and the sequential quarter. I think that should be 2016 and sequential quarters. I'm optimistic that ARLP's low-cost operations and strong market position will support additional quarterly distribution increases in the future.

Finally, I want to address the exchange transaction we announced last Friday. This all-equity tax-free exchange transaction is a first step towards simplifying our partnership structure. While both ARLP and AHGP will remain publicly traded following the exchange transaction, the Alliance partnerships are positioned for a second step transaction at a later date, whereby ARLP would become the sole reporting and trading entity with a substantially larger public float. The management will be evaluating the timing and structure of any such second step transaction, and any recommendation in this regard is subject to market, strategy considerations and regulatory conditions, including the ultimate outcome of any tax reform currently under consideration by the U.S. Congress.

The streamlined economic structure of the Alliance partnerships is intended to enhance value for unitholders of both ARLP and AHGP. The elimination of the IDRs should lower ARLP's cost of capital and create flexibility for equity capital market transactions by ARLP, whether in the form of additional common unit issuances if needed to pursue future growth opportunities or common unit repurchases to return long-term value to all unitholders.

I'll now turn the call over to Brian for a more detailed look at our results for the 2017 quarter. Brian?

Thank you, Joe. As announced this morning, the Alliance partnerships reported results in line with our expectations for the 2017 quarter. Coal sales and production volumes increased 6.3% and 13.3%, respectively, led by strong performance at our Hamilton, Gibson South and River View mines during the 2017 quarter compared to the 2016 quarter. Offsetting these increased sales volumes, however, was the anticipated reduction in coal sales prices due to the expiration of higher-priced legacy contracts, which pushed total revenues down 9.7% in the 2017 quarter compared to the 2016 quarter.

ARLP continued to benefit during the 2017 quarter from ongoing efforts to shift production to our lowest-cost operations as total operating expense fell 5.3% and segment-adjusted EBITDA expense per ton improved 11%, both as compared to the 2016 quarter. The 2017 quarter also benefited from the receipt of better-than-anticipated performance from our investments in oil and gas minerals, which increased $3 million compared to the 2016 quarter.

Reflecting lower coal price realizations and the negative impact of the deferred coal shipments Joe mentioned earlier as well as the $8.1 million make-whole payment incurred upon early repayment of our private placement notes, net income fell to $63.2 million for the 2017 quarter compared to $82.7 million for the 2016 quarter. Excluding the make-whole payment, adjusted EBITDA was also lower in the 2017 quarter, decreasing to $141.1 million from $164.2 million for the 2016 quarter.

Comparative results for the sequential quarter were similarly impacted by the factors just reviewed as well as ARLP's exceptionally strong start to the year as coal volumes, revenues, adjusted EBITDA and net income were all lower compared to the first quarter of 2017. Year-to-date, ARLP posted increases to all of our major financial and operating metrics with coal sales and production volumes, revenues, net income and adjusted EBITDA all higher compared to the 2016 period.

In comparing ARLP's results for the 2017 quarter-end period, I also want to briefly address earnings per unit. Logically, you would expect ARLP's lower net income for the 2017 quarter to result in a lower EPU compared to the 2016 quarter. As an MLP, ARLP first allocates its net income to the general and limited partners' interests based on amounts distributed and expected to be distributed, and then allocates the difference between net income and such amounts based on the respective ownership interest.

However, because of the units issued in the exchange transaction were not outstanding as of June 30, 2017, weighted average units outstanding are not impacted. Since the elimination of the IDRs and the exchange transaction occurred before the upcoming record date for distributions, the allocation of ARLP's net income to the general partners is significantly reduced and is reflected in ARLP's results for the 2017 quarter. Because of how EPU is calculated creates a lack of comparability between periods, we will be providing investors in our quarterly 10-Q filing with the SEC a detailed pro forma presentation of the above-described impacts for ARLP as if the exchange transaction had occurred on January 1, 2016.

As Joe mentioned, ARLP is confirming its previous guidance estimates for 2017. Based on results to date and expectations for the remainder of the year, we continue to expect full year results within the following ranges: coal production of 38.1 million to 39.1 million tons; coal sales volumes of 38.5 million to 39.5 million tons; revenues, excluding transportation revenues, of $1.78 billion to $1.82 billion; net income of $290 million to $330 million; and adjusted EBITDA of $605 million to $645 million.

In addition, ARLP is maintaining its previous 2017 guidance for capital expenditures in a range of $145 million to $165 million.

Total investments are now estimated in a range of $120 million to $130 million, including the $100 million investment in Kodiak and $20 million to $30 million related to the acquisition of oil and gas mineral interests.

Turning now to the balance sheet. As indicated during our last call in May, we paid off the $50 million balance remaining on our term loan A and repaid in full the $145 million series B private placement notes due June of 2018. As a result, we reduced total debt by $63.6 million, further lowered our leverage to 0.78x total debt to trailing 12 months adjusted EBITDA and ended the 2017 quarter with strong liquidity of $625.6 million.

Our 2025 unsecured bonds have performed well, recently trading approximately 116 to 123 basis points tighter than our 7.5% coupon. With this strong market benchmark, our newly simplified structure and our conservative balance sheet, ARLP has ample capital market access and capacity to execute our plans and pursue future opportunities.

This concludes our prepared comments. And now with Brian's assistance, we will open the call to your questions. Brian?

(Operator Instructions) The first question comes from Mark Levin of Seaport Global Securities.

Congratulations, gentlemen, on another good quarter, particularly in the Illinois Basin where the costs keep coming down. It feels like you guys are getting yourselves all the way down to the low end of the cost curve. But with regard to the transaction that you announced on Friday night after the close, can you talk about the timing of it, doing it now versus maybe waiting until tax reform and some of the issues in Washington were more settled? Is there a reason why there is this intermediate step rather than just doing it all at once, once everything had been settled?

I think once we completed our financing, we felt it was timely to go ahead and make the exchange on the IDR, that we did not need to wait for that particular issue. It allowed us to increase our distribution to the level we did. So we felt delaying that step really was not necessary as we waited to see when we should focus on the next steps. So we wanted to go ahead and bring that value to the table since we got the debt issue -- reacted, if you will, to the debt market situation and we're successful with our bond offering and our financing on the revolver. We felt the time was right to go ahead and do the transaction with the IDR. And we'll wait and evaluate the second step, as we stated in our press release.

Got it. No, that makes sense. And then with regard to the distribution increase and the coverage ratio, I think in the press release, it references at the midpoint of the ranges and assuming that the current distribution increase, you'd be roughly 1.8x covered. Is there -- I assume this is not a one-fell-swoop sort of move that there will be -- I guess, is it fair to assume that there will be consistent quarterly distribution increases from here on out? And what is the coverage ratio or the target coverage ratio that you think -- or what the board would be comfortable with?

The -- yes. The expectation is that we will continue to be on a path of growing our distributions on a quarterly basis. As far as the amount and the timing -- excuse me, the amount -- the coverage ratio question, that will be determined on a quarterly basis. I think we've never really looked at a coverage ratio...

Target.

Target. I think as Brian mentioned, we have paid down our debt, and we've got a very attractive debt coverage ratio as well. So we really also -- I mean, we really have no capital needs. Now we're fully invested in our capacity. So I don't know that we have to maintain a high coverage ratio in anticipation of reinvesting in new coal mines, for example. So the decision will be made on a quarterly basis. And I think the answer is, yes, we would expect to gradually increase our distribution on a quarterly basis going forward.

Got it. My last question has to do with the M&A environment. I know it's something that's been discussed on previous calls. Is there still an appetite for M&A in the coal space? I know you made this rather large oil and gas investment that you announced today. But is this move in any way a precursor, getting a lower cost of capital, perhaps, to finding opportunities or to consolidate whether it's in the Illinois Basin or Northern App? And are those opportunities still out there in your view?

My answer is the same as it has been. We will continue to evaluate opportunities to grow in the coal business within the Illinois Basin and Northern App. Whether there will be actionable items in the near term, it's possible. But it's always difficult to make an acquisition in coal business for whatever reason, so I can't comment beyond that.

The next question comes from Paul Forward with Stifel, Nicolaus.

Just want to ask about the Kodiak investment. Are there any -- is there any further detail that you can give us in terms of either multiples paid or the growth trajectory you expect or maybe some greater quantification of the assets that you've made an investment in, anything you can give us?

Probably not a whole lot more detail, Paul. I mean, this team at Kodiak is very experienced in this area. They have a track record of showing meaningful growth and value creation. They do have a significant pipeline of future activities that our investments will help them undertake. Look, it's an accretive, attractive return. And it's not anything other than we saw an opportunity, we have the capacity and we elected to deploy the cash so that we can grow cash flows in the future, and as we have done with the oil and gas mineral investments, generate cash flow that will support our coal business.

On the customer deferrals, these were -- I guess, I would ask, these were just individual power plant service issues? Or was it kind of demand driven, the need to defer those deliveries? And then was there any -- we've heard other coal miners talk about difficulties on the rails. Any problems with any rail service issues related to any of that? Or are those entirely separate issues?

The majority of the deferrals was force majeure, which did reflect issues at a couple of power plants. Those tons will be made up. So the (inaudible) forgiven. So we will -- and those issues have been resolved. So we do expect that those tons will be delivered in the second half of the year, and it may spill over into the first quarter depending on rail service, to be exact. So that will -- again, those tons will be made up at the price. I want to make sure we're clear on that. As far as the other deferrals, the weather was -- we did have a slow start to the summer. So some shipments did, in fact, flow into the third quarter. They're not significant deferrals. They're just sort of month-to-month-type deferrals that more likely was weather related. As far as the railroads, we had some delay, but I wouldn't characterize it any more differently than what we've had in the past. So it really wasn't transportation related, but there was some tonnage that was impacted that will be -- again, I would characterize that more a month-to-month-type transaction timing than a systemic issue for us.

And Joe, you're not -- are you concerned that there might be -- that as you think about deferrals going into the second half of the year or first quarter of next year, are you worried about rail service possibly deteriorating over time? Or is that just not something you're seeing yet?

No, I'm not worried about it. I think that when you see some of your competitors complain about rail service, they are in different markets than we are in. I believe their complaints really don't tie to the areas where we're operating. But having said that, Mr. Harrison of CSX made it clear that there needs to be change. He, I think, is striving like all of us to try to focus on increasing their efficiency. We are trying to do the same. I think that's prudent for all companies to focus on how they can reduce their costs and increase their resource utilization. So exactly how that develops, I would characterize the communication that he is signaling is that the old model in the coal business of the way the utilities and the rail and the producers conducted business, it needs to change. If our customers are going to continue to deploy a short-term buying strategy, then the 3 of us need to come together, the producer, the rails and the customers, we've got to come together and find a win-win-win solution because we can't continue to do business in the old model and deliver the low-cost efficiencies that he's acknowledged, he's striving for and I support. So it's in our customers' best interest -- the utility customers to sit down with the rails and producers to come up with a way that we can achieve their objective of wanting to adopt a short-term buying philosophy, but at the same time make sure that when they need the tonnage, that the capacity of the equipment and the production is there to meet their needs. So I'm hopeful that, that will happen. I know we've had conversations with both railroads that service us as well as our customers to seek opportunities to be responsive to our customer, but at the same time make sure that we're there for them and that the rails are there for them. So yes -- so I don't -- I'm not worried about it, but at the same time, there's opportunity for some disruption if we don't come together and clarify exactly the timing for deliveries so that the equipment's there, the production's there when the customers need it. As we looked at second half, there is the potential. If you look at July temperatures, they've been running slightly above normal. Our forecast that we follow suggests that August is going to be above normal for our market area. So when you combine those 2 with some additional export opportunities we see, it is possible that the second half shipments can come in above where we've been running. And we need to make sure our transportation providers are there to allow us take advantage of those opportunities. We'll have to do that with communication.

And well, just along those same lines, last question. As you look at 2018, you've probably only got about half of your coal committed to customers. And I guess that goes along the same lines of is the -- your customers are looking for new shorter-term model, but at the same time, you've got a lot of uncommitted coal for next year. Do you see the risk rising that you'll have to scale back again? Is the risk that you won't be able to place all of the uncommitted 18 million or 19 million tons and you'll have to cut back? Or do you anticipate that your customers will be more active in locking up 2018 tons over the next few months?

It's more the latter. No, I don't think we will have to cut back. I believe that the customers will be out in force in the next quarter and in the fourth quarter to fill substantially a lot of their open position. I believe the low-cost producer's going to be able to secure tonnage. I would hope that we could actually increase volume next year. But we will see how the market responds. As we've mentioned in the past, we think there are some higher-cost producers that have supply in the market today on the basis of higher price legacy contracts. Those contracts expire at the end of this year. So we're confident at this moment in time that we will be able to place our tonnage for next year at comparable levels that we have in 2017, if not improve or increase those volumes.

Next question comes from Lucas Pipes with FBR Capital Markets.

So I wanted to ask you, Brian, on the pricing side, and I'm sure you can appreciate this question because of some of the pricing points that we see on our screens. They seem awfully, awfully low kind of in comparison to where you're selling your coal in the second quarter or expected to sell at June 2017. Brian, where would you put kind of the pricing range for 2018 when you put tons to bed? I'm not looking for an exact number, but just I think this is something that's on investors' minds and would appreciate kind of a ZIP code in terms of what they should be penciling in.

Sure, Lucas. I think on our previous call, we indicated that we, at that time, expected price realizations in '18 to be comparable to our -- what we're seeing in 2017. Joe just indicated, depending on how higher-cost supply reacts and what natural gas pricing looks like, et cetera, it could vary a little bit. If we are looking at it, we may have a bit of a bias to it being a little bit better in '17 compared to '18, but it's -- I'm sorry, '18 compared to '17, but it does remain fluid. And there's a lot of factors, as you know, that go into where prices ultimately settle. But we're comfortable with our prior comments around 2017. And in 2018, they -- we expect them to be comparable, if not a little bit better.

I just had a comment. When you're looking at your screen, the physical markets are trading appreciably higher than that. Again, you have to think in terms of the high-cost producer. If you were trying to model the prices you see on your screen, that's just going to accelerate the shutdowns, as I talked about earlier. So we don't anticipate -- the markets are appreciably higher than that. At the same time, they're not high enough to keep that tonnage on the market, in our view. So that sort of is consistent with what I was trying to say a few minutes ago.

Yes. And Lucas, as we've talked in the past, the things you see on the screen are maybe directional indicators. But you have to consider the qualities that are reflected on those screens, BTU content, chlorine, et cetera, where it's delivered. And you have to factor all of that in compared to the various qualities, transportation advantages, that we can bring to the market. So it's tough to generalize, and we have opportunities to do better than what the screens may otherwise indicate.

The biggest issue is volume. So many of the exits that you're looking at are train by train or vessel by vessel type [price]. They're not (inaudible) transactions.

That's very helpful. And maybe to switch over to the cost side, again with an eye towards 2018. Joe, I think you just mentioned that you're looking to maybe sell more coal in '18 versus '17. What would you say is going to be the impact on the cost side? And directionally, for 2018, what else do you think are opportunities in terms of cost cutting? And when you put that all together, what do you think is kind of a good cost number to use going forward?

On the cost side, we do believe the costs that you're seeing are sustainable. We believe that there's opportunity to continue to make some efficiency improvements. I believe with the Trump administration being able to fill out certain positions across the government, it might help our efficiency as well. As far as how that ties to the cost, I mean, I think that we should see them comparable to 2017 numbers would be my guess. If we brought on additional production, it's not going to be a lot. So that could help incrementally, but I don't foresee it being a substantial enough number that's going to move the needle significantly.

To that point on efficiencies going forward, we do have excess capacity within our existing installed infrastructure. So regardless of additional tons that we bring on, the cost of those incremental tons is very attractive. And if we're able to do that, it should help us from an overall perspective.

The next question comes from Eric Pallone with Goldman Sachs Asset Management.

I just wanted to follow up on the Kodiak investment. You guys -- or can you guys disclose some of the economics around that deal, like what the coupon payment would be on that preferred investment and then maybe the triggers for PIK versus cash pay and how, I guess, Kodiak would make that determination?

We are not able to disclose the specifics around the economics under our agreement with them. And there are -- they do have some optionality over the next 18, 24 months or so, I believe, in terms of whether they pay us through PIK or through cash or a combination thereof. Once that initial period lapses, then it all does turn to cash. So they have some optionality in how they perform, and it's difficult to get precise there. But I will tell you that the structured return is very attractive for us. And as we said in the releases and in our comments, it will be accretive to our results.

Okay. And then would economics realized from that transaction be included in your EBITDA guidance for this year? Or that all show up as a cash flow statement item?

It is included in our EBITDA guide for this year, yes.

Next question comes from Nick Jarmoszuk with Stifel.

Regarding potential acquisitions you guys are looking at, how do you balance the use of your equity versus debt? And how should we think about maximum leverage you guys are willing to incur?

Historically, we have not used equity in financing for acquisitions. We haven't done a whole lot of acquisitions. We have grown organically, but we've mostly financed those with internally generated cash flow. With our high coverage ratio that we have on our existing operations, I would expect that any acquisition or asset transaction would probably be financed similar to the way we've done it in the past. You can never rule out using equity, depending upon the opportunity. But historically, we have not done so. As far as the debt that we would take on, I think we've mentioned in the past that we like being in the 1x range. That's debt to EBITDA. We've also mentioned in the past that if we did an acquisition, we could take it up to 2x for a temporary basis if we expect -- if we could see the opportunity to get it back into the 1x range within a reasonable time period. So hopefully, that answers your question.

In terms of the reasonable time period, is that over -- what sort of...

3 to 5 years.

It'll be transaction specific but within a reasonably determinable time.

(Operator Instructions) The next question comes from [Joseph Pizano], a private investor.

I'm just curious with all these changes, as far as stock prices, could we see any -- hopefully, an increase in stock price? I know it's hard to say and everything, but I'm just curious.

It's hard to predict how the markets will react. But if you look at the yields that we were trading at prior to the distribution increase, if yields just stay constant with an increase in distribution, you would expect a nice uptick in equity prices as well. Markets are not always efficient. So I -- obviously, we can't give you a precise answer, but we're hopeful that by increasing returns to our unitholders, that our equity price will react favorably as well.

Next question comes from Lin Shen with Hite.

This is James Jampel and Lin Shen for Hite. I just got a couple questions. I think you mentioned that coverage will decline over time. Could you foresee going to something like a 1:1 coverage ratio and then varying distribution quarter-to-quarter based on cash flow?

No, that was debt that we were talking about.

Yes, that was debt leverage, not distribution coverage.

So there's no change in your coverage ratio for equity going forward?

The coverage ratio is based on our distributable cash flow and the level of our distribution. The midpoint of our guidance for this year, we're just south of 1.8x. And assuming that the $0.50 distribution we declared for this quarter is -- remains intact for the balance of the year with -- if we continue to increase distributions as we're hopeful and optimistic that we will be able to, you may see distribution coverage trend down a little bit. But in terms of going to a 1:1, no, that's not something we're striving toward, and then particularly we're not striving toward going to a variable distribution model. If you look back over time, we've generally gotten down under the 1.5x level plus or minus, depending on the particular period. And we like knowing that we have a solid coverage so that any distribution we declare, we have comfort that it is sustainable over the long term.

Okay, fair enough. In your view, should the G&A burden at AHGP cause it to trade at a discount? And what run rate should we use for the G&A at AHGP?

No, I don't think it should cause it to trade at a discount at all. The total G&A at AHGP, I believe, is about $2 million a year, plus or minus. There will be opportunities if we do ultimately fully simplify the partnership structure to reduce that. But it's not meaningful enough at the GP level that it should have any impact on how it trades.

There are still (inaudible) 1% interest, GP interest at AHGP also. So there will be additional cash flows other than the distribution rolling in that can help recover that $2 million cost, which should be pretty transparent to what the distribution is. Whatever we get from ARLP for the units owned more likely will be distributed out.

Yes. The GP has generally been -- because there's no operating activity at that level, we distributed right around 1.1x levels and...

1.01.

Our coverage has been in the 1.0 -- 1.0 to 1.1x level, and we don't see any reason for that to change. So essentially, all the cash flows that come into the GP will be paid out to its unitholders.

Great. And last one from me. How would different outcomes on tax reform change the desire to consolidate the 2 entities? What are you looking for to come out of Washington?

Well, again, there are several things we're looking at, not only taxes that have resulted in the decision to do this transaction in a 2-step transaction. So tax is one, to try to just understand what the new rules are. So it's not that we're looking for anything. It's just wanting to know what the rules are before we do something. And then if the law changes, we say, well, we thought this was going to be the result. But if they change the law and we didn't anticipate that, it could get you a different result. So that is a factor. But there are other factors that will also go into the decision for the second step.

Yes. Tax considerations are important. But as Joe said, they're not the only thing. You guys know us well. We are very deliberate. We want to thoroughly evaluate all of our options and alternatives before we take the next step in most situations, and this circumstance is no different.

(Operator Instructions) The next question comes from Brad Seagraves with Davenport.

I just was wondering, just given the lack of yield compression we've seen so far today, would it make sense to lay out some sort of minimum long-term distribution increase guidance, just at a minimum level, something that won't get you over your skis but might give the market confidence in future increases?

No, we haven't done that in the past. Our board is more comfortable making a decision on a biannual basis. We've made our decision for this quarter. As we look in October, we're going to have more clarity back to the question that was raised earlier about how the tonnage volumes will -- what we expect the volumes to be, expressed what I believe they will be. But we will have more certainty in the October time period with what those will be based off of what we anticipate to be a significant amount of proposals coming out from our customers. So our board is not comfortable at this moment to give that guidance. But I believe when we roll into the October earnings call or the next earnings call, that we will have more clarity on that by having a better feel for what our volume in 2018 and pricing will be that can give you the guidance you're seeking.

This concludes our question-and-answer session. I would like to turn the conference back over to Brian Cantrell for any closing remarks.

Thank you, Brian, and thanks to everyone for your time this morning as well as your continued support and interest in both ARLP and AHGP. As Joe mentioned, our next quarterly earnings call and release are scheduled for late October, and we look forward to discussing our results for the 2017 third quarter with you at that time. This concludes our call, and thanks to everyone again for your participation.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.