What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-09 compared with 2021-11-04 · 155 added, 225 removed, 444 unchanged (46% of the section changed)

4 unchanged sentences

(In thousands, except unit data)

September 30,

CURRENT ASSETS:

38 unchanged sentences

Long-term operating lease obligations

Deferred income tax liabilities

Other liabilities

13 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except unit and per unit data)

Three Months Ended

Nine Months Ended

September 30,

SALES AND OPERATING REVENUES:

5 unchanged sentences

Transportation expenses

Outside coal purchases

General and administrative

Depreciation, depletion and amortization

Asset impairments

Goodwill impairment

Total operating expenses

INCOME (LOSS) FROM OPERATIONS

Interest expense (net of interest capitalized for the three and nine months ended September 30, 2021 and 2020 of $ 123 , $ 199 , $ 314 and $ 1,265 , respectively)

INCOME FROM OPERATIONS

Interest expense (net of interest capitalized for the three months ended March 31, 2022 and 2021 of $ 70 and $ 86 , respectively)

Interest income

Equity method investment income

Other expense

INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAX EXPENSE

NET INCOME (LOSS)

Other income (expense)

INCOME BEFORE INCOME TAXES

INCOME TAX EXPENSE (BENEFIT)

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

NET INCOME (LOSS) ATTRIBUTABLE TO ARLP

NET INCOME ATTRIBUTABLE TO ARLP

EARNINGS PER LIMITED PARTNER UNIT - BASIC AND DILUTED

3 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

NET INCOME (LOSS)

OTHER COMPREHENSIVE INCOME (LOSS):

OTHER COMPREHENSIVE INCOME:

Defined benefit pension plan

3 unchanged sentences

Pneumoconiosis benefits

Amortization of net actuarial loss (gain) (1)

Amortization of net actuarial loss (1)

Total pneumoconiosis benefits adjustments

OTHER COMPREHENSIVE INCOME

COMPREHENSIVE INCOME (LOSS)

COMPREHENSIVE INCOME

Comprehensive income attributable to noncontrolling interest

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO ARLP

COMPREHENSIVE INCOME ATTRIBUTABLE TO ARLP

(1) Amortization of prior service cost and net actuarial gain or loss is included in the computation of net periodic benefit cost (see Notes 13 and 15 for additional details).

4 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

Capital expenditures

Change in accounts payable and accrued liabilities

Increase in accounts payable and accrued liabilities

Proceeds from sale of property, plant and equipment

Distributions received from investments in excess of cumulative earnings

Escrow deposit for oil & gas reserve acquisition

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under securitization facility

Payments under securitization facility

Proceeds from equipment financings

Payments on equipment financings

4 unchanged sentences

Payment of debt issuance costs

Payments for purchase of units and tax withholdings related to settlements under deferred compensation plans

Distributions paid to Partners

5 unchanged sentences

Cash paid for interest

Cash paid for income taxes

SUPPLEMENTAL NON-CASH ACTIVITY:

1 unchanged sentence

Right-of-use assets acquired by operating lease

Market value of common units issued under deferred compensation plans before tax withholding requirements

See notes to condensed consolidated financial statements.

21 unchanged sentences

● References to "Alliance Minerals"

mean Alliance Minerals, LLC, the holding company for our oil and gas minerals interests.

mean Alliance Minerals, LLC, the holding company for our oil and gas mineral interests.

● References to "Alliance Resource Properties"

3 unchanged sentences

We are managed by our general partner, MGP, a Delaware limited liability company which holds a non-economic general partner interest in ARLP.

Change in Tax Status

On March 15, 2022, Alliance Minerals changed its federal income tax status from a pass-through entity to a taxable entity via a "check the box"

election (the "Tax Election"), which became effective January 1, 2022.

This election for Alliance Minerals is anticipated to reduce the total income tax burden on our oil & gas royalties, as Alliance Minerals will pay entity-level taxes at corporate tax rates that are well below individual tax rates that would otherwise be paid by our unitholders.

For more information on the Tax Election please see Note 7 – Income Taxes.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts and operations of the ARLP Partnership and present our financial position as of September 30, 2021 and December 31, 2020, the results of our operations and comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020.

The accompanying condensed consolidated financial statements include the accounts and operations of the ARLP Partnership and present our financial position as of March 31, 2022 and December 31, 2021 and the results of our operations, comprehensive income and cash flows for the three months ended March 31, 2022 and 2021.

All intercompany transactions and accounts have been eliminated.

7 unchanged sentences

Actual results could differ from those estimates.

LONG-LIVED ASSET IMPAIRMENTS

During the first quarter of 2020, we recorded $ 23.5 million of non-cash asset impairment charges in our Illinois Basin Coal Operations segment due to sealing our idled Gibson North mine, resulting in its permanent closure, and a decrease in the fair value of certain mining equipment at our idled operations and greenfield coal reserves as a result of weakened coal market conditions.

During the same period, we also recorded an asset impairment charge of $ 1.5 million in our Coal Royalties segment due to a decrease in the fair value of greenfield coal reserves held by Alliance Resource Properties near our coal mining operations in the Illinois Basin.

See Note 16 – Segment Information for more information about our segments.

The fair values of the impaired assets were determined using a market approach, which represents Level 3 fair value measurements under the fair value hierarchy.

The fair value analysis used assumptions regarding the marketability of certain mining and reserve assets near our Illinois Basin coal mining operations.

GOODWILL IMPAIRMENT

During the first quarter of 2020, we considered whether an interim test of our consolidated goodwill of $ 136.4 million was necessary.

Our consolidated goodwill included $ 132.0 million recorded in our Illinois Basin Coal Operations segment in conjunction with our acquisition of the Hamilton County Coal, LLC ("Hamilton") mine on July 31, 2015.

We assessed certain events and changes in circumstances, including a) adverse industry and market developments, including the impact of the COVID-19 pandemic, b) our response to these developments, including temporarily ceasing production at several mines, including our Hamilton mine and c) our actual performance during the quarter.

After consideration of these events and changes in circumstances, we performed an interim test of the goodwill associated with Hamilton comparing Hamilton's carrying amount to its fair value.

We estimated the fair value of Hamilton using an income approach utilizing a discounted cash flow model.

The assumptions used in the discounted cash flow model included estimated production, forward coal prices, operating expenses, capital expenditures and a weighted average cost of capital.

Our forecasts of future cash flows considered market conditions at the time of the assessment and our estimate of the mine's performance in future years based on the information available to us.

Key assumptions used in our valuation were not observable in active markets;

therefore, the fair value measurements represent Level 3 fair value measurements.

The fair value of Hamilton was determined to be below its carrying amount (including goodwill) by more than the recorded balance of goodwill associated with the mine.

Accordingly, we recognized an impairment charge of $ 132.0 million consisting of the total carrying amount of goodwill associated with Hamilton.

This impairment charge reduced our consolidated goodwill balance to $ 4.4 million.

During the first quarter of 2020, we also performed an interim test on ARLP's remaining goodwill balances not associated with Hamilton and concluded no impairment was necessary for our other reporting units.

We are not a taxable entity for federal or state income tax purposes;

the tax effect of our activities accrues to our unitholders.

Although publicly traded partnerships as a general rule are taxed as corporations, we qualify for an exemption because at least 90% of our income consists of qualifying income, as defined in Section 7704(c) of the Internal Revenue Code.

Net income for financial statement purposes may differ significantly from taxable income reportable to unitholders as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under our partnership agreement.

Individual unitholders have different investment bases depending upon the timing and price of acquisition of their partnership units.

Furthermore, each unitholder's tax accounting, which is partially dependent upon the unitholder's tax position, differs from the accounting followed in our consolidated financial statements.

Accordingly, the aggregate difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined because information regarding each unitholder's tax attributes in our partnership is not available to us.

Our subsidiary Alliance Minerals within our Oil & Gas Royalties segment and certain other subsidiaries within our Other, Corporate and Elimination category are subject to federal and state income taxes.

We use the liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences of (i) temporary differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities and (ii) operating losses and tax credit carryforwards.

Deferred income tax assets and liabilities are based on enacted rates applicable to the future period when those temporary differences are expected to be recovered or settled.

The effect of a change in tax status or a change in tax rates on deferred tax assets and liabilities is recognized in the period the change in status is elected or rate change is enacted.

A valuation allowance is provided for deferred tax assets when it is more likely than not the deferred tax assets will not be realized.

NEW ACCOUNTING STANDARDS

New Accounting Standards Issued and Adopted

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance ("ASU 2021-10").

ASU 2021-10 increases the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.

We adopted ASU 2021-10 on January 1, 2022.

The adoption of ASU 2021-10 did not have a material impact on our condensed consolidated financial statements.

CONTINGENCIES

7 unchanged sentences

We also have various other lawsuits, claims and regulatory proceedings incidental to our business that are pending against the ARLP Partnership.

We record an accrual for a potential loss related to these matters when, in management's

opinion, such loss is probable and reasonably estimable.

We record an accrual for a potential loss related to these matters when, in management's opinion, such loss is probable and reasonably estimable.

Based on known facts and circumstances, we believe the ultimate outcome of these outstanding lawsuits, claims and regulatory proceedings will not have a material adverse effect on our financial condition, results of operations or liquidity.

1 unchanged sentence

Inventories consist of the following:

September 30,

(in thousands)

3 unchanged sentences

The following table summarizes our fair value measurements within the hierarchy not included elsewhere in these notes:

September 30, 2021

March 31, 2022

December 31, 2021

8 unchanged sentences

Debt Issuance Costs

September 30,

(in thousands)

4 unchanged sentences

June 2020 equipment financing

Line of credit

Less current maturities

4 unchanged sentences

The Credit Agreement is guaranteed by certain of our Intermediate Partnership's material direct and indirect subsidiaries (the "Restricted Subsidiaries") and is secured by substantially all the assets of the Restricted Subsidiaries.

The Credit Agreement is also guaranteed by Alliance Minerals but the oil and gas minerals assets of Alliance Minerals and its direct and indirect subsidiaries (collectively with Alliance Minerals, the "Unrestricted Subsidiaries") are not collateral under the Credit Agreement.

The Credit Agreement is also guaranteed by Alliance Minerals but the oil and gas mineral assets of Alliance Minerals and its direct and indirect subsidiaries (collectively with Alliance Minerals, the "Unrestricted Subsidiaries") are not collateral under the Credit Agreement.

Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) the Base Rate at the greater of three benchmarks or (ii) a Eurodollar Rate, plus margins for (i) or (ii), as applicable, that fluctuate depending upon the ratio of Consolidated Debt to Consolidated Cash Flow (each as defined in the Credit Agreement).

The Eurodollar Rate, with applicable margin, under the Revolving Credit Facility was 2.68 % as of September 30, 2021.

On September 30, 2021, we had $ 23.3 million of letters of credit outstanding with $ 436.2 million available for borrowing under the Revolving Credit Facility.

The Eurodollar Rate, with applicable margin, under the Revolving Credit Facility was 2.80 % as of March 31, 2022.

On March 31, 2022, we had $ 44.1 million of letters of credit outstanding with $ 415.4 million available for borrowing under the Revolving Credit Facility.

We incur an annual commitment fee of 0.35 % on the undrawn portion of the Revolving Credit Facility.

4 unchanged sentences

The Credit Agreement requires the Intermediate Partnership to maintain (a) a debt to cash flow ratio of not more than 2.5 to 1.0, (b) a cash flow to interest expense ratio of not less than 3.0 to 1.0 and (c) a first lien debt to cash flow ratio of not more than 1.5 to 1.0, in each case, during the four most recently ended fiscal quarters.

The debt to cash flow ratio, cash flow to interest expense ratio and first lien debt to cash flow ratio were 0.95 to 1.0, 11.60 to 1.0 and 0.10 to 1.0, respectively, for the trailing twelve months ended September 30, 2021.

We remained in compliance with the covenants of the Credit Agreement as of September 30, 2021 and anticipate remaining in compliance with the covenants.

The debt to cash flow ratio, cash flow to interest expense ratio and first lien debt to cash flow ratio were 0.88 to 1.0, 12.91 to 1.0 and 0.09 to 1.0, respectively, for the trailing twelve months ended March 31, 2022.

We remained in compliance with the covenants of the Credit Agreement as of March 31, 2022 and anticipate remaining in compliance with the covenants.

Senior Notes.

2 unchanged sentences

Interest is payable semi-annually in arrears on each May 1 and November 1.

indenture governing the Senior Notes contains customary terms, events of default and covenants relating to, among other things, the incurrence of debt, the payment of distributions or similar restricted payments, undertaking transactions with affiliates and limitations on asset sales.

The indenture governing the Senior Notes contains customary terms, events of default and covenants relating to, among other

things, the incurrence of debt, the payment of distributions or similar restricted payments, undertaking transactions with affiliates and limitations on asset sales.

The issuers of the Senior Notes may redeem all or a part of the notes at any time at redemption prices set forth in the indenture governing the Senior Notes.

1 unchanged sentence

On December 5, 2014, certain direct and indirect wholly owned subsidiaries of our Intermediate Partnership entered into a $ 100.0 million accounts receivable securitization facility ("Securitization Facility").

In January 2021, we reduced the borrowing availability under the facility to $ 60.0 million.

Under the Securitization Facility, certain subsidiaries sell certain trade receivables on an ongoing basis to our Intermediate Partnership, which then sells the trade receivables to AROP Funding, LLC ("AROP Funding"), a wholly owned bankruptcy-remote special purpose subsidiary of our Intermediate Partnership, which in turn borrows on a revolving basis up to $ 60.0 million secured by the trade receivables.

2 unchanged sentences

The agreement governing the Securitization Facility contains customary terms and conditions, including limitations with regards to certain customer credit ratings.

In January 2021, we extended the term of the Securitization Facility to January 2022 and reduced the borrowing availability under the facility to $ 60.0 million.

In January 2022, we extended the term of the Securitization Facility to January 2023.

The Securitization Facility was previously scheduled to mature in January 2022.

On September 30, 2021, we had no outstanding balance under the Securitization Facility.

On March 31, 2022, we had no outstanding balance under the Securitization Facility.

May 2019 Equipment Financing .

On May 17, 2019, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $ 10.0 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "May 2019 Equipment Financing").

The May 2019 Equipment Financing contains customary terms and events of default and provides for thirty-six monthly payments with an implicit interest rate of 6.25 % , maturing on May 1, 2022.

Upon maturity, the equipment will revert to the Intermediate Partnership.

The May 2019 Equipment Financing contains customary terms and events of default and provides for thirty-six monthly payments with an implicit interest rate of 6.25 % .

The May 2019 Equipment Financing matured on May 1, 2022 and the equipment reverted to the Intermediate Partnership.

November 2019 Equipment Financing.

6 unchanged sentences

Upon maturity, the equipment will revert to the Intermediate Partnership.

Line of Credit.

On February 19, 2021, we entered into a line of credit arrangement with a related party for $ 5.0 million.

The line of credit has a maturity date of February 28, 2023, with an option to extend it for an additional six months and accrue interest at an annual rate of 3.50 % .

Interest is payable quarterly commencing March 31, 2021, and continuing each March 31, June 30, September 30 and December 31 thereafter through and including February 28, 2023.

The agreement contains customary terms and events of default and is guaranteed by ARLP.

We utilize the line of credit, as appropriate, for capital expenditures and investments.

As of September 30, 2021, we had drawn $ 3.2 million under this agreement.

Components of income tax expense (benefit) are as follows:

Three Months Ended March 31,

(in thousands)

Income tax expense (benefit)

Alliance Minerals' Tax Election resulted in the recognition of an initial deferred tax liability of $ 37.3 million and a corresponding increase to income tax expense for the three months ended March 31, 2022.

This increase in income tax expense reduced net income by $ 37.3 million, or approximately $ 0.29 per basic and diluted limited partner unit, for the three months ended March 31, 2022.

Recognition of the initial deferred tax liability and expense is primarily the result of the $ 177.0 million non-cash acquisition gain recognized in 2019 related to the acquisition of the remaining interests in AllDale Minerals LP ("AllDale I") and AllDale Minerals II, LP ("AllDale II", and collectively with AllDale I, "AllDale I & II") (the “Acquisition Gain”).

The Acquisition Gain was recognized to step up to fair value the financial reporting basis of the interests we already owned at the time of acquisition.

The tax basis of the underlying properties of AllDale I & II did not include the Acquisition Gain.

Reconciliations of income taxes at the U.S.

federal statutory tax rate to income taxes at our effective tax rate are as follows:

Three Months Ended March 31,

(in thousands)

Income taxes at statutory rate

Income taxes at statutory rate on Partnership income not subject to income taxes

Increase (decrease) resulting from:

State taxes, net of federal income tax

Change in valuation allowance of deferred tax assets

Deferred taxes related to tax election

Income tax expense (benefit)

The effective income tax rate for our income tax expense for the three months ended March 31, 2022 is greater than the federal statutory rate, primarily due to the effect of the Tax Election previously discussed, partially offset by the portion of income not subject to income taxes.

The effective income tax rate for our income tax benefit for the three months ended March 31, 2021 is less than the federal statutory rate, primarily due to the portion of income not subject to income taxes.

Significant components of deferred tax liabilities and deferred tax assets are as follows:

(in thousands)

Deferred tax liabilities:

Property, plant and equipment

Total deferred tax liabilities

Deferred tax assets:

Federal loss carryovers and credits

Total deferred tax assets

Less valuation allowance

Net deferred tax assets

Overall net deferred tax liabilities

The change in deferred tax liabilities for property, plant and equipment is primarily as a result of the Acquisition Gain discussed above.

Federal loss carryovers and credits are primarily due to net operating losses and research and development credits associated with the operations of other subsidiaries that are taxable for federal income tax purposes.

The valuation allowance as of March 31, 2022 and 2021 serves to reduce the available deferred tax assets to amounts that will, more likely than not, be realized.

We considered all available positive and negative evidence, which incorporates available tax planning strategies and our estimate of future reversals of existing temporary differences, and have determined that a portion of our deferred tax assets relating to state losses and credits may not be realized.

Our 2018 through 2021 tax years remain open to examination by tax authorities.

VARIABLE INTEREST ENTITIES

Cavalier Minerals

On November 10, 2014, our subsidiary, Alliance Minerals, and Bluegrass Minerals Management, LLC ("Bluegrass Minerals") entered into a limited liability company agreement (the "Cavalier Agreement") to create Cavalier Minerals JV, LLC ("Cavalier Minerals"), which was formed to indirectly acquire oil & gas mineral interests through its ownership in AllDale Minerals LP ("AllDale I") and AllDale Minerals II, LP ("AllDale II", and collectively with AllDale I, "AllDale I & II").

Alliance Minerals owns a 96 % member interest in Cavalier Minerals, and Bluegrass Minerals owns a 4 % member interest in Cavalier Minerals and a profits interest which entitles it to receive distributions equal to 25 % of all distributions (including in liquidation) after all members have recovered their investment.

8 unchanged sentences

Bluegrass Minerals' equity ownership of Cavalier Minerals is accounted for as noncontrolling ownership interest in our condensed consolidated balance sheets.

In addition, earnings attributable to Bluegrass Minerals are recognized as noncontrolling interest in our condensed consolidated statements of operations.

In addition, earnings attributable to Bluegrass Minerals are recognized as noncontrolling interest in our condensed consolidated statements of income.

In February 2017, Alliance Minerals committed to directly invest $ 30.0 million in AllDale Minerals III, LP ("AllDale III") which was created for similar investment purposes as AllDale I & II.

12 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

9 unchanged sentences

(in thousands)

February 14, 2020

August 13, 2021

November 12, 2021

(1) On October 25, 2021, we declared this quarterly distribution payable on November 12, 2021 to all unitholders of record as of November 5, 2021 .

February 14, 2022

May 13, 2022 (1)

(1) On April 26, 2022, we declared this quarterly distribution payable on May 13, 2022 to all unitholders of record as of May 6, 2022.

Unit Repurchase Program

2 unchanged sentences

The unit repurchase program authorization does not obligate us to repurchase any dollar amount or number of units.

No unit repurchases were made during the nine months ended September 30, 2021.

No unit repurchases were made during the three months ended March 31, 2022.

Since inception of the unit repurchase program, we have repurchased and retired 5,460,639 units at an average unit price of $ 17.12 for an aggregate purchase price of $ 93.5 million.

1 unchanged sentence

Change in Partners' Capital

The following tables present the quarterly change in Partners' Capital for the nine months ended September 30, 2021 and 2020:

The following tables present the quarterly change in Partners' Capital for the three months ended March 31, 2022 and 2021:

Limited Partner

9 unchanged sentences

Common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Balance at March 31, 2021

Comprehensive income:

Actuarially determined long-term liability adjustments

Total comprehensive income

Common unit-based compensation

Distributions on deferred common unit-based compensation

1 unchanged sentence

Distributions to Partners

Balance at June 30, 2021

Comprehensive income:

Actuarially determined long-term liability adjustments

Total comprehensive income

Settlement of deferred compensation plans

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Distributions to Partners

Balance at September 30, 2021

Balance at March 31, 2022

Limited Partner

5 unchanged sentences

Balance at January 1, 2021

Comprehensive income (loss):

Net income (loss)

Actuarially determined long-term liability adjustments

Total comprehensive loss

Settlement of deferred compensation plans

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Distributions to Partners

Balance at March 31, 2020

Comprehensive income (loss):

Actuarially determined long-term liability adjustments

Total comprehensive loss

Common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Balance at June 30, 2020

Comprehensive income:

3 unchanged sentences

Distributions from consolidated company to noncontrolling interest

Balance at September 30, 2020

Balance at March 31, 2021

REVENUE FROM CONTRACTS WITH CUSTOMERS

3 unchanged sentences

(in thousands)

Three Months Ended September 30, 2021

Oil & gas royalties

Coal royalties

Transportation revenues

Other revenues

Total revenues

Three Months Ended September 30, 2020

Oil & gas royalties

Coal royalties

Transportation revenues

Other revenues

Total revenues

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Oil & gas royalties

3 unchanged sentences

Total revenues

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Oil & gas royalties

3 unchanged sentences

Total revenues

The following table illustrates the amount of our transaction price for all current coal supply contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2021 and disaggregated by segment and contract duration.

The following table illustrates the amount of our transaction price for all current coal supply contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2022 and disaggregated by segment and contract duration.

(in thousands)

8 unchanged sentences

Our participating securities are outstanding restricted unit awards under our Long-Term Incentive Plan ("LTIP") and phantom units in notional accounts under our Supplemental Executive Retirement Plan ("SERP") and the MGP Amended and Restated Deferred Compensation Plan for Directors ("Directors' Deferred Compensation Plan").

The following is a reconciliation of net income (loss) attributable to ARLP used for calculating basic and diluted earnings per unit and the weighted-average units used in computing EPU for the three and nine months ended September 30, 2021 and 2020:

The following is a reconciliation of net income attributable to ARLP used for calculating basic and diluted earnings per unit and the weighted-average units used in computing EPU for the three months ended March 31, 2022 and 2021:

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per unit data)

Net income (loss) attributable to ARLP

Net income attributable to ARLP

Distributions to participating securities

Undistributed earnings attributable to participating securities

Net income (loss) attributable to ARLP available to limited partners

Net income attributable to ARLP available to limited partners

Weighted-average limited partner units outstanding – basic and diluted

2 unchanged sentences

Diluted EPU excludes all potentially dilutive units calculated under the treasury stock method if their effect is anti-dilutive.

The combined total of LTIP, SERP and Directors' Deferred Compensation Plan units of 2,328 and 1,706 for the three and nine months ended September 30, 2021 , respectively, and 661 and 656 for the three and nine months ended September 30, 2020, respectively, were considered anti-dilutive under the treasury stock method .

The combined total of LTIP, SERP and Directors' Deferred Compensation Plan units of 3,139 and 1,237 for the three months ended March 31, 2022 and 2021 , respectively, were considered anti-dilutive under the treasury stock method .

WORKERS' COMPENSATION AND PNEUMOCONIOSIS

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Interest accretion

Valuation loss (gain) (1)

Ending balance

(1) Our estimate of the liability for the present value of current workers′ compensation benefits is based on our actuarial calculations.

Our actuarial calculations are based on a blend of actuarial projection methods and numerous assumptions including claims development patterns, mortality, medical costs and interest rates.

The valuation gain in 2021 is due to an increase in the discount rate from 1.95 % on December 31, 2020 to 2.34 % on June 30, 202 1 .

We conducted a mid-year 2020 review of our actuarial assumptions, which resulted in a valuation loss in 2020 due to unfavorable changes in claims development and a decrease in the discount rate from 2.81 % on December 31, 2019 to 2.05 % on June 30, 2020.

We limit our exposure to traumatic injury claims by purchasing a high deductible insurance policy that starts paying benefits after deductibles for a claim have been met.

1 unchanged sentence

Our workers' compensation liability above is presented on a gross basis and does not include our expected receivables on our insurance policy.

Our receivables for traumatic injury claims under this policy as of September 30, 2021 are $ 7.1 million and are included in Other long-term assets on our condensed consolidated balance sheet.

Our receivables for traumatic injury claims under this policy as of March 31, 2022 are $ 5.7 million and are included in Other long-term assets on our condensed consolidated balance sheet.

Certain of our mine operating entities are liable under state statutes and the Federal Coal Mine Health and Safety Act of 1969, as amended, to pay pneumoconiosis, or black lung, benefits to eligible employees and former employees and their dependents.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Net periodic benefit cost

(1) Interest cost and net amortization are included in the Other expense line item within our condensed consolidated statements of operations.

(1) Interest cost and net amortization are included in the Other income (expense) line item within our condensed consolidated statements of income.

COMMON UNIT-BASED COMPENSATION PLANS

13 unchanged sentences

If it is not probable the financial tests for a particular grant of restricted units will be met, any previously paid DER amounts for that grant are reversed from Partners’ Capital and recorded as compensation expense and any future DERs, for that grant, if any, will be recognized as compensation expense when paid.

A summary of non-vested LTIP grants as of and for the nine months ended September 30, 2021 is as follows:

A summary of non-vested LTIP grants as of and for the three months ended March 31, 2022 is as follows:

Number of units

3 unchanged sentences

Non-vested grants at January 1, 2022

Non-vested grants at September 30, 2021

(1) 921,430 units and 896,760 units have a minimum-value guarantee of $ 2.53 and $ 3.79 per unit, respectively, regardless of whether or not the awards vest.

LTIP expense for grants of restricted units was $ 1.7 million and $ 1.6 million for the three months ended September 30, 2021 and 2020, respectively, and $ 3.8 million and $ 2.5 million for the nine months ended September 30, 2021 and 2020, respectively.

LTIP expense for grants of restricted units for the nine months ended September 30, 2020 includes the reversal of $ 4.8 million of cumulative previously recognized expense for the 2019 Grants, which were determined to be not probable of vesting, offset in part by related DERs for the 2019 Grants previously recorded to equity and then expensed.

The total obligation associated with LTIP grants of restricted units as of September 30, 2021 was $ 5.1 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

As of September 30, 2021, there was $ 12.6 million in total unrecognized compensation expense related to the non-vested LTIP restricted unit grants that are expected to vest.

Non-vested grants at March 31, 2022

(1) The restricted units granted during 2022 have minimum-value guarantees of either $ 9.62 or $ 6.41 per unit, regardless of whether or not the awards vest.

LTIP expense for grants of restricted units was $ 2.3 million and $ 0.7 million for the three months ended March 31, 2022 and 2021, respectively.

The total obligation associated with LTIP grants of restricted units as of March 31, 2022 was $ 9.0 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

As of March 31, 2022, there was $ 17.6 million in total unrecognized compensation expense related to the non-vested LTIP restricted unit grants that are expected to vest.

That expense is expected to be recognized over a weighted-average period of 1.6 years.

9 unchanged sentences

All grants of phantom units under the SERP and Directors' Deferred Compensation Plan vest immediately.

A summary of SERP and Directors' Deferred Compensation Plan activity as of and for the nine months ended September 30, 2021 is as follows:

A summary of SERP and Directors' Deferred Compensation Plan activity as of and for the three months ended March 31, 2022 is as follows:

Number of units

3 unchanged sentences

Phantom units outstanding as of January 1, 2022

Phantom units outstanding as of September 30, 2021

(1) During the nine months ended September 30, 2021, we issued 102,962 ARLP common units purchased on the open market to a participant under the SERP.

Units issued were net of units settled in cash to satisfy tax withholding obligations.

Total SERP and Directors' Deferred Compensation Plan expense was $ 0.1 million for the three months ended September 30, 2021 and 2020, and $ 0.3 million and $ 0.4 million for the nine months ended September 30, 2021, and 2020, respectively.

As of September 30, 2021, the total obligation associated with the SERP and Directors' Deferred Compensation Plan was $ 13.3 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

Phantom units outstanding as of March 31, 2022

Total SERP and Directors' Deferred Compensation Plan expense was $ 0.2 million and $ 0.04 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the total obligation associated with the SERP and Directors' Deferred Compensation Plan was $ 13.8 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

Net periodic benefit cost (1)

(1) Net periodic benefit cost for the Pension Plan is included in the Other expense line item within our condensed consolidated statements of operations.

During the nine months ended September 30, 2021, we made contribution payments totaling $ 3.3 million to the Pension Plan for the 2020 plan year.

As a result of certain pension plan contribution relief provided by the American Rescue Plan Act enacted in March 2021, we do not expect to make additional contributions to the Pension Plan during 2021 or 2022.

(1) Net periodic benefit cost for the Pension Plan is included in the Other income (expense) line item within our condensed consolidated statements of income.

As a result of certain pension plan contribution relief provided by the American Rescue Plan Act enacted in March 2021, we do not expect to make contributions to the Pension Plan during 2022.

SEGMENT INFORMATION

7 unchanged sentences

The operations within our Oil & Gas Royalties reportable segment primarily include receiving royalties and lease bonuses for our oil & gas mineral interests.

Our Coal Royalties reportable segment includes coal reserves controlled by Alliance Resource Properties, which are either (a) leased to certain of our coal mining entities or (b) unleased but near our coal mining operations.

Beginning in the first quarter of 2021, we began to strategically view and manage our coal royalty activities separately from our coal mining operations since acquiring and managing a variety of royalty producing assets have similar management attributes.

As a result, we restructured our reportable segments to better reflect this strategic view in how we manage our business and allocate resources.

Prior periods have been recast to include Alliance Resource Properties within our new Coal Royalties reportable segment with offsetting recast adjustments primarily to our coal operations reportable segments and to a lesser extent, our Other, Corporate and Elimination category.

Eliminations reported in Other, Corporate and Elimination were also recast to reflect intercompany royalty revenues and offsetting intercompany royalty expense resulting from our new Coal Royalties reportable segment.

The Illinois Basin Coal Operations reportable segment includes currently operating mining complexes (a) the Gibson County Coal, LLC ("Gibson") mining complex, which includes the Gibson South mine, (b) the Warrior Coal, LLC ("Warrior") mining complex, (c) the River View Coal, LLC ("River View") mining complex and (d) the Hamilton mining complex.

The Illinois Basin Coal Operations reportable segment also includes our currently operating Mt.

Our Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties, which are either (a) leased to our mining complexes or (b) near our coal mining operations but not yet leased.

The Illinois Basin Coal Operations reportable segment includes operating mining complexes (a) the Gibson County Coal, LLC ("Gibson") mining complex, which includes the Gibson South mine, (b) the Warrior Coal, LLC ("Warrior") mining complex, (c) the River View Coal, LLC ("River View") mining complex and (d) the Hamilton County Coal, LLC ("Hamilton") mining complex.

The segment also includes our Mt.

Vernon Transfer Terminal, LLC ("Mt.

Vernon") coal loading terminal in Indiana on the Ohio River.

Our Coal Royalties reportable segment discussed below, controls other coal reserves near our Illinois Basin operations which have not yet been leased to our Illinois Basin mining entities.

The Illinois Basin Coal Operations reportable segment also includes Mid-America Carbonates, LLC ("MAC") and other support services as well as non-operating mining complexes including (a) the Gibson North mine, which ceased production in the fourth quarter of 2019, (b) Webster County Coal, LLC's Dotiki mining complex, (c) White County Coal, LLC's Pattiki mining complex, (d) Hopkins County Coal, LLC's mining complex, and (e) Sebree Mining, LLC's mining complex.

The Appalachia Coal Operations reportable segment includes currently operating mining complexes (a) the Mettiki mining complex, (b) the Tunnel Ridge, LLC mining complex ("Tunnel Ridge") and (c) the MC Mining, LLC mining complex.

Vernon") coal-loading terminal in Indiana which operates on the Ohio River, Mid-America Carbonates, LLC ("MAC") and other support services, and our non-operating Illinois Basin mining complexes.

The Appalachia Coal Operations reportable segment includes operating mining complexes (a) the Mettiki mining complex, (b) the Tunnel Ridge, LLC ("Tunnel Ridge") mining complex and (c) the MC Mining, LLC ("MC Mining") mining complex.

The Mettiki mining complex includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant.

Our Coal Royalties reportable segment discussed below, controls the Penn Ridge coal reserves near our Tunnel Ridge operations which have not yet been leased to Tunnel Ridge.

The Oil & Gas Royalties reportable segment includes oil & gas mineral interests held by AR Midland, LP and AllDale I & II and includes Alliance Minerals' equity interests in both AllDale III (Note 9 – Investment) and Cavalier Minerals.

The Coal Royalties reportable segment includes coal reserves controlled by Alliance Resource Properties, that are either (a) leased to certain of our mining complexes in both the Illinois Basin Coal Operations and Appalachia Coal Operations reportable segments or (b) near our coal mining operations but not yet leased to our coal mining entities.

About two thirds of the coal sold by our Coal Operations' mines is leased from our Coal Royalties entities.

The Oil & Gas Royalties reportable segment includes oil & gas mineral interests held by AR Midland, LP ("AR Midland") and AllDale I & II and includes Alliance Minerals' equity interests in both AllDale III (Note 9 – Investment) and Cavalier Minerals.

The Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties that are (a) leased to certain of our mining complexes in both the Illinois Basin Coal Operations and Appalachia Coal Operations reportable segments or (b) located near our operations and external mining operations.

Approximately two thirds of the coal sold by our Coal Operations' mines is leased from our Coal Royalties entities.

Other, Corporate and Elimination includes marketing and administrative activities, Matrix Design Group, LLC and its subsidiaries ("Matrix Design"), Alliance Design Group, LLC ("Alliance Design") (collectively, Matrix Design and Alliance Design referred to as the "Matrix Group"), Pontiki Coal, LLC's workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"), which assists the ARLP Partnership with its insurance requirements, AROP Funding and Alliance Finance (both discussed in Note 6 – Long-Term Debt) and other miscellaneous activities.

4 unchanged sentences

(in thousands)

Three Months Ended September 30, 2021

Revenues - Outside

Revenues - Intercompany

Total revenues (1)

Segment Adjusted EBITDA Expense (2)

Segment Adjusted EBITDA (3)

Capital expenditures

Three Months Ended September 30, 2020

Revenues - Outside

Revenues - Intercompany

Total revenues (1)

Segment Adjusted EBITDA Expense (2)

Segment Adjusted EBITDA (3)

Capital expenditures

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Revenues - Outside

4 unchanged sentences

Capital expenditures

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Revenues - Outside

4 unchanged sentences

Capital expenditures

(1) Revenues included in the Other, Corporate and Elimination column are attributable to intercompany eliminations, which are primarily the coal royalties intercompany eliminations, outside revenues at the Matrix Group and other outside miscellaneous sales and revenue activities.

(1) Revenues included in the Other, Corporate and Elimination column are attributable to intercompany eliminations, which are primarily intercompany coal royalty eliminations, outside revenues at the Matrix Group and other outside miscellaneous sales and revenue activities.

(2) Segment Adjusted EBITDA Expense includes operating expenses, coal purchases and other income.

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Segment Adjusted EBITDA Expense

Outside coal purchases

Other expense

Other income (expense)

Operating expenses (excluding depreciation, depletion and amortization)

(3) Segment Adjusted EBITDA is defined as net income (loss) attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and asset and goodwill impairments.

(3) Segment Adjusted EBITDA is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, and general and administrative expenses.

Management therefore is able 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.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Depreciation, depletion and amortization

Asset impairments

Goodwill impairment

Interest expense, net

Income tax expense

Net income (loss) attributable to ARLP

Income tax (expense) benefit

Net income attributable to ARLP

Noncontrolling interest

Net income (loss)

SUBSEQUENT EVENTS

Other than the events described below and in Note 10, there were no subsequent events.

On October 13, 2021, ARLP acquired approximately 1,480 oil & gas net royalty acres in the Delaware Basin from Boulders Royalty Corp.

for a purchase price of $ 31.0 million, which was funded with cash on hand.

This acquisition enhances our ownership position in the Permian Basin and furthers our business strategy to grow our Oil & Gas Royalties segment.

On April 5, 2022, we committed to invest up to $ 50 million in Francis Renewable Energy, LLC ("Francis") through the purchase of preferred equity interests, subject to adjustment in certain circumstances, which when completed will make us the second largest shareholder in Francis.

Francis currently is active in the installation, management and operation of metered-for-fee, public-access electric vehicle (“EV”) charging stations.

Founded in 2015 and based in Tulsa, Oklahoma, Francis is a leading operator of EV chargers in the state of Oklahoma with plans to service states across the Midwest and Eastern U.S.

Francis also develops and constructs EV charging stations for third-party customers.

Francis’ goal is to provide EV drivers convenient, affordable, easy to use public access to charging stations.

Our investment in Francis furthers our business strategy to develop strategic relationships to invest in attractive opportunities in the fast-growing energy infrastructure transition.

We funded our first commitment payment of $ 20 million on April 5, 2022, in the form of a convertible note with a maturity date of April 1, 2023.

The note converts into preferred equity interests in Francis at maturity, or any time prior at our option.

We have determined the note more closely represents equity as opposed to debt.

Therefore, we will account for the convertible note as an equity method investment although we will not participate in Francis’ earnings or losses and will not be eligible to receive distributions until the note converts.

We have options exercisable over the next 12 months to acquire the remaining preferred equity interests as part of our investment.

On April 29, 2022, we purchased $ 32.6 million of Series D Preferred Stock from Infinitum Electric, Inc.

(“Infinitum”), a Texas-based startup developer and manufacturer of electric motors featuring printed circuit board stators which have the potential to result in motors that are smaller, lighter, quieter, more efficient and capable of operating at a

fraction of the carbon footprint of conventional electric motors.

The preferred stock provides for non-cumulative dividends when and if declared by Infinitum’s board of directors.

Each share is convertible, at any time, at our option, into shares of common stock of Infinitum.

We plan to account for our ownership interest in Infinitum as an equity investment without a readily determinable fair value, wherein we use a measurement alternative other than fair value, because it is not practicable to estimate the fair value due to the lack of a quoted market price for our ownership interests.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements