Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Significant relationships referenced in this management’s discussion and analysis of financial condition and results of operations include the following:
● References to “we,” “us,” “our” or “ARLP Partnership” mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.
● References to “ARLP” mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.
● References to “MGP” mean Alliance Resource Management GP, LLC, ARLP’s general partner.
● References to “Mr. Craft” mean Joseph W. Craft III, the Chairman, President and Chief Executive Officer of MGP.
● References to “Intermediate Partnership” mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.
● References to “Alliance Coal” mean Alliance Coal, LLC, an indirect wholly owned subsidiary of ARLP.
● References to “Alliance Minerals” mean Alliance Minerals, LLC, an indirect wholly owned subsidiary of ARLP.
● References to “Alliance Resource Properties” mean Alliance Resource Properties, LLC, an indirect wholly owned subsidiary of ARLP.
Summary
We are a diversified natural resource company that generates operating and royalty income from the production and marketing of coal to major domestic utilities, industrial users and international customers, as well as royalty income from oil & gas mineral interests located in strategic producing regions across the United States. Our strategy is to provide our customers with reliable, baseload fuel for electricity generation to meet load expectations. The primary focus of our business is to maximize the value of our existing mineral assets, both in the production of coal from our mining assets and the leasing and development of our coal and oil & gas mineral ownership. In addition, we continue to position ourselves as a reliable energy provider for the future as we pursue opportunities that support the growth and development of energy and related infrastructure. We intend to pursue strategic investments that leverage our core competencies and relationships with electric utilities, industrial customers, and federal and state governments. We believe that our diverse and rich resource base and strategic investments will allow us to continue to create long-term value for unitholders.
We are the second largest coal producer in the eastern United States with seven operating underground mining complexes near many of the major eastern utility generating plants and on major coal hauling railroads in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia, as well as a coal-loading terminal in Indiana. Two of our mines also have loading facilities located on the Ohio River.
In addition to our mining operations, Alliance Resource Properties owns or leases substantially all of our coal mineral resources and the majority of our coal mineral reserves in the Illinois and Appalachia Basins that are (a) leased to our internal mining complexes or (b) near our coal mining operations but not yet leased.
We currently own mineral interests in approximately 70,000 net royalty acres in premier oil & gas producing regions of the United States, primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK), and Williston (Bakken) basins, providing us with diversified exposure to industry-leading operators consistent with our general strategy to grow our oil & gas mineral interest business.
We have invested in energy and infrastructure opportunities including our investments in Infinitum Electric, Inc. (“Infinitum”), NGP Energy Transition, L.P. (“NGP ET IV”), and Ascend Elements, Inc. (“Ascend”) which are in the businesses of, respectively, electric motor manufacturing, private equity investments in renewable energy, the electrification of our economy or the efficient use of energy, and the manufacturing and recycling of sustainable, engineered battery materials for electric vehicles.
29
Table of Contents
In February 2025, we committed to invest up to $25.0 million of limited partner interests in Gavin Generation Holdings A, LP (“Gavin Generation”), which is sponsored by a private equity firm. This commitment represents an interest of approximately 5.0% in Gavin Generation (based on total commitments). As of September 30, 2025, we have funded $22.1 million of our $25.0 million capital commitment. For more information about the Gavin Generation investment, please read “Item 1. Financial Statements (Unaudited)—Note 3 – Variable Interest Entities” of this Quarterly Report on Form 10-Q.
We have four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties. We also have an “all other” category referred to as Other, Corporate and Elimination. Our two coal operations reportable segments correspond to major coal producing regions in the eastern United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues. Our Oil & Gas Royalties reportable segment includes our oil & gas mineral interests. Our Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties.
● Illinois Basin Coal Operations reportable segment includes (a) the Gibson County Coal, LLC (“Gibson”) mining complex, (b) the Warrior Coal, LLC mining complex, (c) the River View Coal, LLC (“River View”) mining complex, which includes the River View and Henderson County mines and (d) the Hamilton County Coal, LLC (“Hamilton”) mining complex. The segment also includes our Mt. Vernon coal-loading terminal in Indiana which operates on the Ohio River, Mid-America Carbonates, LLC and other support services, and certain of our idled or closed mining complexes.
● Appalachia Coal Operations reportable segment includes (a) the Mettiki Coal, LLC and Mettiki Coal (WV), LLC (collectively, “Mettiki”) mining complex, (b) the Tunnel Ridge, LLC (“Tunnel Ridge”) mining complex and (c) the MC Mining, LLC (“MC Mining”) mining complex.
● Oil & Gas Royalties reportable segment includes oil & gas mineral interests held by Alliance Minerals as well as our equity method investment in AllDale Minerals III, LP (“AllDale III”). Please read “Item 1. Financial Statements (Unaudited) — Note 3 – Variable Interest Entities” of this Quarterly Report on Form 10-Q for more information on AllDale III.
● Coal Royalties reportable segment includes substantially all of our coal mineral resources and the majority of our coal mineral reserves owned or leased by Alliance Resource Properties that are (a) leased to certain of our mining complexes in the Illinois Basin and Appalachia Basin or (b) located near our operations and external mining operations.
● Other, Corporate and Elimination includes marketing and administrative activities, certain of our subsidiaries, primarily consisting of Matrix Design Group, LLC, its subsidiaries, and Alliance Design Group, LLC, Bitiki KY, LLC, which holds our crypto-mining activities, our non oil & gas equity and debt investments, Wildcat Insurance, LLC, which assists the ARLP Partnership with its insurance requirements, AROP Funding, LLC (“AROP Funding”) and Alliance Resource Finance Corporation (“Alliance Finance”), and other miscellaneous activities. The eliminations included in Other, Corporate and Elimination primarily represent the intercompany coal royalty transactions described above between our Coal Royalties reportable segment and our coal operations’ mines. Please read “Item 1. Financial Statements (Unaudited)—Note 3 – Variable Interest Entities, Note 7 – Investments, and Note 8 – Long-Term Debt” of this Quarterly Report on Form 10-Q for more information on our investments in Infinitum, Ascend, and NGP ET IV as well as AROP Funding and Alliance Finance.
30
Table of Contents
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
Consolidated Information
Three Months Ended
September 30,
2025
2024
Increase (Decrease)
(in thousands)
Consolidated Total
Tons sold
8,703
8,379
324
3.9
%
Tons produced
8,416
7,754
662
8.5
%
Volume - BOE (1)
899
864
35
4.1
%
Coal sales
$
511,593
$
532,647
$
(21,054)
(4.0)
%
Oil & gas royalties
$
32,055
$
34,448
$
(2,393)
(6.9)
%
Total revenues
$
571,367
$
613,569
$
(42,202)
(6.9)
%
Segment Adjusted EBITDA Expense (2)
$
359,253
$
393,717
$
(34,464)
(8.8)
%
Net income of ARLP
$
95,104
$
86,281
$
8,823
10.2
%
Segment Adjusted EBITDA (2)
$
207,186
$
192,273
$
14,913
7.8
%
(1) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
(2) For definitions of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to their respective comparable GAAP financial measures, please see below under “— Reconciliation of Non-GAAP Financial Measures.”
Total Revenues
Total revenues for the three months ended September 30, 2025 (“2025 Quarter”) decreased 6.9% to $571.4 million compared to $613.6 million for the three months ended September 30, 2024 (“2024 Quarter”) primarily due to lower coal sales price per ton and reduced transportation revenues, partially offset by increased coal sales volumes.
● Coal sales decreased to $511.6 million for the 2025 Quarter compared to $532.6 million for the 2024 Quarter. The decrease was attributable to lower average coal sales prices, which reduced coal sales by $41.6 million, partially offset by higher tons sold, which increased coal sales by $20.6 million. Coal sales prices decreased by 7.5% as a result of lower domestic price realizations at several mines resulting from the continued roll-off of higher-priced legacy contracts. Higher coal sales volumes was primarily driven by increased tons sold from our Hamilton and River View mines, partially offset by reduced coal sales volumes at Tunnel Ridge due to timing of shipments.
● Transportation revenues and expenses were $7.7 million and $24.6 million for 2025 and 2024 Quarters, respectively. The decrease of $16.9 million was primarily attributable to lower third-party transportation rates in the 2025 Quarter and decreased coal shipments for which we arrange third-party transportation. Transportation revenues are recognized when title to the coal passes to the customer and recognized in an amount equal to the corresponding transportation expenses.
Segment Adjusted EBITDA Expense
Segment Adjusted EBITDA Expense decreased 8.8% to $359.3 million primarily related to our coal operations which decreased 7.7% to $356.7 million, as a result of lower per ton costs, partially offset by higher coal sales volumes. Segment Adjusted EBITDA Expense per ton sold for our coal operations decreased 11.1% to $40.99 per ton sold in the 2025 Quarter compared to $46.11 per ton in the 2024 Quarter, primarily due to increased production and recoveries at several mines, including our Tunnel Ridge mine, and reduced longwall move days at our Hamilton operation as well as the following per ton cost decreases:
● Labor and benefit expenses, excluding workers’ compensation, per ton produced decreased 11.3% to $12.90 per ton in the 2025 Quarter from $14.54 per ton in the 2024 Quarter. The decrease of $1.64 per ton was primarily due to lower direct labor costs at several mines.
31
Table of Contents
● Material and supplies expenses per ton produced decreased 12.1% to $14.01 per ton in the 2025 Quarter from $15.94 per ton in the 2024 Quarter. The decrease of $1.93 per ton produced primarily reflects decreases of $0.82 per ton for roof support, $0.36 per ton in longwall subsidence expense, $0.24 per ton for various preparation plant expenses, and $0.22 per ton for safety related materials and supplies .
● Maintenance expenses per ton produced decreased 16.3% to $4.73 per ton in the 2025 Quarter from $5.65 per ton in the 2024 Quarter. The decrease of $0.92 per ton produced was primarily a result of lower maintenance costs at several mines.
Segment Adjusted EBITDA Expense per ton decreases were partially offset by the following increase:
● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $0.48 per produced ton sold in the 2025 Quarter compared to 2024 Quarter primarily as a result of an unfavorable mix of tons sold that were mined in states with severance taxes.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense increased to $78.2 million for the 2025 Quarter compared to $73.0 million for the 2024 Quarter primarily as a result of new mine infrastructure and longwall equipment placed in service during the 2025 Quarter at our Hamilton and Tunnel Ridge operations.
Equity method investment income (loss)
Equity method investment income was $4.5 million in the 2025 Quarter compared to a loss of $2.3 million in the 2024 Quarter. The increase was primarily due to an increase in the value of our share of the net assets of the companies in which we hold interests.
Net income attributable to ARLP
Net income attributable to ARLP for the 2025 Quarter increased 10.2% to $95.1 million, or $0.73 per basic and diluted limited partner unit, compared to $86.3 million, or $0.66 per basic and diluted limited partner unit for the 2024 Quarter as a result of reduced operating expenses and higher investment income, partially offset by lower coal sales.
Segment Adjusted EBITDA
Our 2025 Quarter Segment Adjusted EBITDA increased 7.8% to $207.2 million from the 2024 Quarter Segment Adjusted EBITDA of $192.3 million.
32
Table of Contents
Segment Information
Three Months Ended
September 30,
2025
2024
Increase (Decrease)
(in thousands)
Illinois Basin Coal Operations
Tons sold
6,611
5,967
644
10.8
%
Coal sales
$
337,377
$
337,816
$
(439)
(0.1)
%
Other revenues
$
1,790
$
2,331
$
(541)
(23.2)
%
Segment Adjusted EBITDA Expense
$
233,806
$
225,498
$
8,308
3.7
%
Segment Adjusted EBITDA
$
105,361
$
114,649
$
(9,288)
(8.1)
%
Appalachia Coal Operations
Tons sold
2,092
2,412
(320)
(13.3)
%
Coal sales
$
174,216
$
194,831
$
(20,615)
(10.6)
%
Other revenues
$
675
$
479
$
196
40.9
%
Segment Adjusted EBITDA Expense
$
120,802
$
157,792
$
(36,990)
(23.4)
%
Segment Adjusted EBITDA
$
54,089
$
37,518
$
16,571
44.2
%
Oil & Gas Royalties
Volume - BOE (1)
899
864
35
4.1
%
Oil & gas royalties
$
32,055
$
34,448
$
(2,393)
(6.9)
%
Other revenues
$
703
$
240
$
463
192.9
%
Segment Adjusted EBITDA Expense
$
4,052
$
5,844
$
(1,792)
(30.7)
%
Segment Adjusted EBITDA
$
27,720
$
28,706
$
(986)
(3.4)
%
Coal Royalties
Volume - Tons sold (2)
7,055
5,109
1,946
38.1
%
Intercompany coal royalties
$
24,662
$
16,647
$
8,015
48.1
%
Segment Adjusted EBITDA Expense
$
7,572
$
5,589
$
1,983
35.5
%
Segment Adjusted EBITDA
$
17,090
$
11,058
$
6,032
54.5
%
(1) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
(2) Represents tons sold by our Coal Operations segments associated with coal reserves leased from our Coal Royalties segment.
Illinois Basin Coal Operations – Segment Adjusted EBITDA decreased 8.1% to $105.4 million in the 2025 Quarter from $114.6 million in the 2024 Quarter. The decrease of $9.2 million was primarily attributable to lower average coal sales prices and higher operating expenses, partially offset by increased sales volumes. Coal sales price per ton decreased by 9.9% compared to the 2024 Quarter as a result of lower domestic price realizations across the region. Tons sold increased by 10.8% compared to the 2024 Quarter due primarily to increased volumes from our Hamilton and River View mines. Segment Adjusted EBITDA Expense increased 3.7% to $233.8 million in the 2025 Quarter from $225.5 million in the 2024 Quarter, primarily as a result of increased sales volumes, partially offset by lower operating expenses per ton. Segment Adjusted EBITDA Expense per ton decreased by 6.4% compared to the 2024 Quarter due primarily to increased production in the region, improved recoveries at our River View and Hamilton mines and reduced longwall move days at Hamilton.
Appalachia Coal Operations – Segment Adjusted EBITDA increased 44.2% to $54.1 million for the 2025 Quarter from $37.5 million in the 2024 Quarter. The increase of $16.6 million was primarily attributable to reduced operating expenses, partially offset by lower coal sales. The decrease in coal sales primarily reflects lower coal sales volumes, which decreased by 13.3% in the 2025 Quarter due to the timing of shipments from our Tunnel Ridge operation. Partially offsetting lower coal sales volumes, coal sales price per ton increased by 3.1% compared to the 2024 Quarter primarily due to higher domestic pricing from each operation and an increased sales mix of higher priced tons from our MC Mining and Mettiki operations in the 2025 Quarter. Segment Adjusted EBITDA Expense decreased 23.4% to $120.8 million in the 2025 Quarter from $157.8 million in the 2024 Quarter due primarily to reduced sales volumes and per ton expenses. Segment Adjusted EBITDA Expense per ton for the 2025 Quarter decreased by 11.7% compared to the 2024 Quarter due
33
Table of Contents
to lower labor costs, higher recoveries and improved mining conditions across the region and increased productivity at Tunnel Ridge.
Oil & Gas Royalties – Segment Adjusted EBITDA decreased to $27.7 million in the 2025 Quarter compared to $28.7 million in the 2024 Quarter due to lower average sales price per MBOE, which decreased 10.5%, partially offset by higher volumes. Oil & Gas Royalty volumes increased to 899 MBOE in the 2025 Quarter compared to 864 MBOE in the 2024 Quarter.
Coal Royalties – Segment Adjusted EBITDA increased to $17.1 million in the 2025 Quarter compared to $11.1 million in the 2024 Quarter due to higher royalty tons sold and average royalty rates per ton received from the Partnership's mining subsidiaries.
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
Consolidated Information
Nine Months Ended
September 30,
2025
2024
Increase (Decrease)
(in thousands)
Consolidated Total
Tons sold
24,856
24,904
(48)
(0.2)
%
Tons produced
24,978
25,305
(327)
(1.3)
%
Volume - BOE (1)
2,659
2,579
80
3.1
%
Coal sales
$
1,465,573
$
1,607,185
$
(141,612)
(8.8)
%
Oil & gas royalties
$
103,612
$
107,907
$
(4,295)
(4.0)
%
Total revenues
$
1,659,298
$
1,858,616
$
(199,318)
(10.7)
%
Segment Adjusted EBITDA Expense (2)
$
1,058,873
$
1,115,215
$
(56,342)
(5.1)
%
Net income of ARLP
$
228,497
$
344,525
$
(116,028)
(33.7)
%
Segment Adjusted EBITDA (2)
$
570,005
$
654,831
$
(84,826)
(13.0)
%
(1) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
(2) For definitions of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to their respective comparable GAAP financial measures, please see below under “— Reconciliation of Non-GAAP Financial Measures.”
Total Revenues
Total revenues for the nine months ended September 30, 2025 (“2025 Period”) decreased 10.7% to $1.66 billion compared to $1.86 billion for the nine months ended September 30, 2024 (“2024 Period”) primarily due to lower coal sales and transportation revenues.
● Coal sales decreased to $1.47 billion for the 2025 Period compared to $1.61 billion for the 2024 Period. The decrease was attributable to lower average coal sales prices, which reduced coal sales by $138.5 million and lower tons sold, which reduced coal sales by $3.1 million. Coal sales prices decreased by 8.6% as a result of lower domestic price realizations at several mines due to the continued roll-off of higher-priced legacy contracts and reduced export price realizations from our MC Mining and Mettiki mines.
● Transportation revenues and expenses were $26.5 million and $82.1 million for 2025 and 2024 Periods, respectively. The decrease of $55.6 million was primarily attributable to lower third-party transportation rates in the 2025 Period and decreased coal shipments for which we arrange third-party transportation. Transportation revenues are recognized when title to the coal passes to the customer and recognized in an amount equal to the corresponding transportation expenses.
34
Table of Contents
Segment Adjusted EBITDA Expense
Segment Adjusted EBITDA Expense decreased 5.1% to $1.06 billion primarily related to our coal operations which decreased 5.6% to $1.03 billion, as a result of lower per ton costs. Segment Adjusted EBITDA Expense per ton sold for our coal operations decreased 5.5% to $41.63 per ton sold in the 2025 Period compared to $44.04 per ton in the 2024 Period, primarily due to an increased sales mix of tons from lower cost operations, higher recoveries from several mines and fewer longwall move days at our Hamilton operation as well as the following per ton cost decreases:
● Labor and benefit expenses, excluding workers’ compensation, per ton produced decreased 3.0% to $13.12 per ton in the 2025 Period from $13.52 per ton in the 2024 Period. The decrease of $0.40 per ton was primarily due to lower direct labor costs at several mines.
● Material and supplies expenses per ton produced decreased 11.5% to $13.80 per ton in the 2025 Period from $15.59 per ton in the 2024 Period . The decrease of $1.79 per ton produced primarily reflects decreases of $0.76 per ton for roof support, $0.36 per ton in longwall subsidence expense, and $0.35 per ton for contract labor used in the mining process .
● Maintenance expenses per ton produced decreased 11.7% to $4.74 per ton in the 2025 Period from $5.37 per ton in the 2024 Period . The decrease of $0.63 per ton produced was primarily a result of lower maintenance costs at several mines.
● Outside coal purchases decreased to $19.0 million in the 2025 Period compared to $27.9 million in the 2024 Period. The decrease in outside coal purchases benefited costs per ton in the 2025 Period since the cost of outside coal purchases is generally higher on a per ton basis than our produced coal.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense increased to $223.2 million for the 2025 Period compared to $205.0 million for the 2024 Period primarily as a result of increased coal sales volumes at our River View mine and new mine infrastructure and longwall equipment placed in service at our Hamilton and Tunnel Ridge operations during the 2025 Period.
Impairment loss on investments
During the 2025 Period, we recorded a $25.0 million impairment on our equity investment in Ascend as a result of Ascend’s recent recapitalization through a convertible note financing completed during the 2025 Period. Please read “Item 1. Financial Statements (Unaudited)—Note 7 – Investments” of this Quarterly Report on Form 10-Q for more information.
Net income attributable to ARLP
Net income attributable to ARLP for the 2025 Period was $228.5 million, or $1.76 per basic and diluted limited partner unit, compared to $344.5 million, or $2.64 per basic and diluted limited partner unit, for the 2024 Period as a result of lower coal sales, higher depreciation, and the impairment loss on investments in the 2025 Period, partially offset by reduced operating expenses and higher investment income.
Segment Adjusted EBITDA
Our 2025 Period Segment Adjusted EBITDA decreased $84.8 million to $570.0 million from the 2024 Period Segment Adjusted EBITDA of $654.8 million.
35
Table of Contents
Segment Information
Nine Months Ended
September 30,
2025
2024
Increase (Decrease)
(in thousands)
Illinois Basin Coal Operations
Tons sold
19,318
18,191
1,127
6.2
%
Coal sales
$
1,014,452
$
1,040,419
$
(25,967)
(2.5)
%
Other revenues
$
6,265
$
7,284
$
(1,019)
(14.0)
%
Segment Adjusted EBITDA Expense
$
674,954
$
674,753
$
201
0.0
%
Segment Adjusted EBITDA
$
345,763
$
372,950
$
(27,187)
(7.3)
%
Appalachia Coal Operations
Tons sold
5,538
6,713
(1,175)
(17.5)
%
Coal sales
$
451,121
$
566,766
$
(115,645)
(20.4)
%
Other revenues
$
2,183
$
2,362
$
(179)
(7.6)
%
Segment Adjusted EBITDA Expense
$
354,199
$
412,056
$
(57,857)
(14.0)
%
Segment Adjusted EBITDA
$
99,105
$
157,072
$
(57,967)
(36.9)
%
Oil & Gas Royalties
Volume - BOE (1)
2,659
2,579
80
3.1
%
Oil & gas royalties
$
103,612
$
107,907
$
(4,295)
(4.0)
%
Other revenues
$
1,560
$
563
$
997
177.1
%
Segment Adjusted EBITDA Expense
$
14,331
$
15,419
$
(1,088)
(7.1)
%
Segment Adjusted EBITDA
$
87,487
$
91,366
$
(3,879)
(4.2)
%
Coal Royalties
Volume - Tons sold (2)
17,619
15,594
2,025
13.0
%
Intercompany coal royalties
$
58,069
$
51,933
$
6,136
11.8
%
Other revenues
$
—
$
9
$
(9)
(100.0)
%
Segment Adjusted EBITDA Expense
$
19,767
$
18,485
$
1,282
6.9
%
Segment Adjusted EBITDA
$
38,302
$
33,457
$
4,845
14.5
%
(1) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).
(2) Represents tons sold by our Coal Operations segments associated with coal reserves leased from our Coal Royalties segment.
Illinois Basin Coal Operations – Segment Adjusted EBITDA decreased 7.3% to $345.8 million in the 2025 Period from $373.0 million in the 2024 Period. The decrease of $27.2 million was primarily attributable to lower coal sales prices, partially offset by higher sales volumes. Coal sales price per ton decreased by 8.2% compared to the 2024 Period as a result of lower domestic price realizations at several mines in the region. Sales volumes increased by 6.2% compared to the 2024 Period due primarily to increased tons sold from our Hamilton and River View mines. Segment Adjusted EBITDA Expense remained consistent with the 2024 Period as higher sales volumes were offset by lower operating expenses per ton. Segment Adjusted EBITDA Expense per ton for the 2025 Period decreased by 5.8% compared to the 2024 Period due primarily to increased production and improved recoveries at our River View and Hamilton mines and reduced longwall move days at Hamilton.
Appalachia Coal Operations – Segment Adjusted EBITDA decreased 36.9% to $99.1 million for the 2025 Period from $157.1 million in the 2024 Period. The decrease of $58.0 million was primarily attributable to lower coal sales, which decreased 20.4% to $451.1 million in the 2025 Period from $566.8 million in the 2024 Period, partially offset by lower operating expenses. The decrease in coal sales reflects lower coal sales volumes and price realizations. Tons sold decreased by 17.5% in the 2025 Period compared to the 2024 Period primarily as a result of lower production levels at Tunnel Ridge due to challenging mining conditions experienced prior to the recent transition to a new longwall district. Average coal sales price per ton decreased by 3.5% compared to the 2024 Period primarily due to reduced domestic pricing from our Tunnel Ridge and MC Mining operations and lower export price realizations from MC Mining and Mettiki, partially offset by a greater mix of higher priced sales tons from the MC Mining and Mettiki operations during the 2025 Period. Segment
36
Table of Contents
Adjusted EBITDA Expense decreased 14.0% to $354.2 million in the 2025 Period from $412.1 million in the 2024 Period due to reduced volumes partially offset by increased per ton operating expenses. Segment Adjusted EBITDA Expense per ton for the 2025 Period increased by 4.2% compared to the 2024 Period due to challenging mining conditions at the Tunnel Ridge mine.
Oil & Gas Royalties – Segment Adjusted EBITDA decreased to $87.5 million in the 2025 Period compared to $91.4 million in the 2024 Period due to lower average sales price per BOE, which decreased 6.9%, partially offset by higher volumes, which increased 3.1%.
Coal Royalties – Segment Adjusted EBITDA increased 14.5% to $38.3 million in the 2025 Period compared to $33.5 million in the 2024 Period due to higher royalty tons, which increased 13.0%.
Reconciliation of Non-GAAP Financial Measures
Segment Adjusted EBITDA
We define Segment Adjusted EBITDA (a non-GAAP financial measure) as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization and general and administrative expenses adjusted for certain items that we characterize as unrepresentative of our ongoing operations. Segment Adjusted EBITDA is a key component of consolidated Adjusted EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others. We believe that the presentation of consolidated Adjusted EBITDA provides useful information to investors regarding our performance and results of operations because Adjusted EBITDA, when used in conjunction with related GAAP financial measures, (i) provides additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provides investors with the financial analytical framework upon which we base financial, operational, compensation and planning decisions and (iii) presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.
Segment Adjusted EBITDA is also used as a supplemental measure by our management for reasons similar to those stated in the previous explanation of Adjusted EBITDA. In addition, the exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA allows management to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments.
The following is a reconciliation of net income, the most comparable GAAP financial measure, to consolidated Segment Adjusted EBITDA:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
(in thousands)
Net income
$
96,818
$
86,916
$
233,403
$
347,992
Noncontrolling interest
(1,714)
(635)
(4,906)
(3,467)
Net income attributable to ARLP
$
95,104
$
86,281
$
228,497
$
344,525
General and administrative
21,373
21,878
62,333
64,569
Depreciation, depletion and amortization
78,211
72,971
223,180
204,974
Interest expense, net
10,351
7,352
26,600
21,018
Change in fair value of digital assets
(3,739)
(332)
(11,021)
(8,437)
Impairment loss on investments
—
—
25,000
—
Litigation expense accrual
—
—
—
15,250
Income tax expense
5,886
4,123
15,416
12,932
Consolidated Segment Adjusted EBITDA
$
207,186
$
192,273
$
570,005
$
654,831
Segment Adjusted EBITDA Expense
We define Segment Adjusted EBITDA Expense (a non-GAAP financial measure) as the sum of operating expenses, coal purchases and other expenses as adjusted to remove certain items from operating expenses that we characterize as unrepresentative of our ongoing operations. Transportation expenses are excluded as these expenses are
37
Table of Contents
passed through to our customers and, consequently, we do not realize any gain or loss on transportation revenues. Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments. Segment Adjusted EBITDA Expense is a key component of Segment Adjusted EBITDA in addition to coal sales, royalty revenues and other revenues. The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses. We also review Segment Adjusted EBITDA Expense on a per ton basis for cost trends at our coal operations by dividing Segment Adjusted EBITDA expense by coal sales volumes.
The following is a reconciliation of operating expenses, the most comparable GAAP financial measure, to consolidated Segment Adjusted EBITDA Expense:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2025
2024
2025
2024
(in thousands)
Operating expenses (excluding depreciation, depletion and amortization)
$
354,604
$
384,844
$
1,040,328
$
1,100,308
Litigation expense accrual
—
—
—
(15,250)
Outside coal purchases
4,514
8,192
19,038
27,912
Other expense (income)
135
681
(493)
2,245
Consolidated Segment Adjusted EBITDA Expense
$
359,253
$
393,717
$
1,058,873
$
1,115,215
38
Table of Contents
Liquidity and Capital Resources
Liquidity
We have historically satisfied our working capital requirements and funded our capital expenditures, investments, contractual obligations and debt service obligations with cash generated from operations, cash provided by the issuance of debt or equity, borrowings under credit and securitization facilities and other financing transactions. We believe that existing cash balances, future cash flows from operations and investments, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet our working capital requirements, capital expenditures and additional investments, debt payments, contractual obligations, commitments and distribution payments. Nevertheless, our ability to satisfy our working capital requirements and additional investments, to satisfy our contractual obligations, to fund planned capital expenditures, to service our debt obligations or to pay distributions will depend upon our future operating performance and access to and cost of financing sources, which will be affected by prevailing economic conditions generally, and in both the coal and oil & gas industries specifically, as well as other financial and business factors, some of which are beyond our control. Based on our recent operating cash flow results, current cash position, anticipated future cash flows and sources of financing that we expect to have available, we anticipate being in compliance with the covenants of the Credit Agreement and expect to have sufficient liquidity to fund our operations and growth strategies. However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future covenant compliance or liquidity may be adversely affected. Please read “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.
Unit Repurchase Program
We have $80.6 million remaining authorized under our unit repurchase program as of September 30, 2025. No units were repurchased during the nine months ended September 30, 2025. The program has no time limit and we may repurchase units from time to time in the open market or in other privately negotiated transactions. The unit repurchase program authorization does not obligate us to repurchase any dollar amount or number of units. The timing of any future unit repurchases and the ultimate number of units to be purchased will depend on several factors, including business and market conditions, our future financial performance, and other capital priorities. Please read “Part II - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” of this Quarterly Report on Form 10-Q for more information on the unit repurchase program.
Accounts Receivable Securitization
In January 2025, we extended the term of the accounts receivable securitization facility (the “Securitization Facility”) to January 2026. The borrowing availability under the facility is a maximum of $75.0 million. For additional information on the Securitization Facility, please see “Item 1. Financial Statements (Unaudited) – Note 8 – Long-Term Debt.”
Cash Flows
Cash provided by operating activities was $507.3 million for the 2025 Period compared to $634.7 million for the 2024 Period. The decrease in cash provided by operating activities was primarily due to the decrease in net income adjusted for non-cash items and unfavorable working capital changes primarily related to trade receivables and other miscellaneous changes. These decreases were partially offset by favorable working capital changes primarily related to inventories and accounts payable compared to the 2024 Period.
Net cash used in investing activities was $251.0 million for the 2025 Period compared to $337.4 million for the 2024 Period. The decrease in cash used in investing activities was primarily due to the decrease in capital expenditures and oil & gas reserves acquisitions in the 2025 Period as compared to the 2024 Period. This decrease was partially offset by increased equity method investments and change in accounts payable and accrued liabilities during the 2025 Period.
Net cash used in financing activities was $298.8 million for the 2025 Period compared to $161.7 million for the 2024 Period. The increase in cash used in financing activities was primarily attributable to proceeds from the issuance of our 2029 Senior Notes and from an equipment financing in the 2024 Period. These increases were partially offset by reduced payments on long-term debt and reduced distributions paid to partners in the 2025 Period and the payment of debt issuance costs in the 2024 Period.
39
Table of Contents
Cash Requirements
Management anticipates having sufficient cash flow to meet 2025 cash requirements, including capital expenditures, acquisitions of oil & gas mineral interests, scheduled payments on long-term debt, lease obligations, asset retirement obligation costs and workers’ compensation and pneumoconiosis costs, with our September 30, 2025 cash and cash equivalents of $94.5 million, cash flows from operations, or borrowings under our revolving credit facility and securitization facility, if necessary. We currently project average estimated annual maintenance capital expenditures over the next five years of approximately $7.28 per ton produced. Our anticipated total capital expenditures, including maintenance capital expenditures, for 2025 are estimated in a range of $285.0 million to $320.0 million. We will continue to have significant cash requirements over the long term, which may require us to incur debt or seek additional equity capital. The availability and cost of additional capital will depend upon prevailing market conditions, the market price of our common units and several other factors over which we have limited control, as well as our financial condition and results of operations.
Debt Obligations
See “Item 1. Financial Statements (Unaudited)—Note 8 – Long-Term Debt” of this Quarterly Report on Form 10-Q for a discussion of our long-term debt obligations.
We also have an agreement with a bank to provide additional letters of credit in the amount of $5.0 million to maintain surety bonds to secure certain asset retirement obligations and our obligations for workers’ compensation benefits. On September 30, 2025, we had $5.0 million in letters of credit outstanding under this agreement.
Related-Party Transactions
We have related-party transactions and activities with Mr. Craft, MGP and their respective affiliates as well as other related parties. These related-party transactions and activities relate principally to (1) coal mineral leases with The Joseph W. Craft III Foundation and The Kathleen S. Craft Foundation, (2) the use of aircraft and (3) a master supply and services agreement for the purchase and servicing of electronic components and other parts used in mining equipment. We also have related-party transactions with (a) WKY CoalPlay LLC, a company owned by entities related to Mr. Craft, regarding three mineral leases, and (b) entities in which we hold equity investments. For more information regarding our investments, please read “Item 1. Financial Statements (Unaudited) — Note 7 – Equity Investments” of this Quarterly Report on Form 10-Q. Please read our Annual Report on Form 10-K for the year ended December 31, 2024, “Item 8. Financial Statements and Supplementary Data — Note 21 – Related-Party Transactions” for additional information concerning related-party transactions.
New Accounting Standards
See “Item 1. Financial Statements (Unaudited) – Note 2. New Accounting Standards” of this Quarterly Report on Form 10-Q for a discussion of new accounting standards.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.