What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 180 added, 58 removed, 210 unchanged (53% of the section changed)

22 unchanged sentences

We are a diversified natural resource company operating in the United States that generates operating and royalty income from the production and marketing of coal to major domestic and international utilities and industrial users as well as royalty income from oil & gas mineral interests located in strategic producing regions across the United States.

We began coal mining operations in 1971 and, since then, have grown through acquisitions and internal development in strategic producing regions to become the second-largest coal producer in the eastern United States.

We began coal mining operations in 1971 and, since then, have grown through acquisitions and internal development in strategic producing regions to become the largest coal producer in the eastern United States.

Our mining operations are located near many of the major eastern utility generating plants and on major coal hauling railroads in the eastern United States.

12 unchanged sentences

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.

● 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.

● Illinois Basin Coal Operations reportable segment includes operating mining complexes (a) the Gibson County Coal, LLC mining complex, which includes the Gibson South mine, (b) the Warrior Coal, LLC 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 which operates on the Ohio River, Mid-America Carbonates, LLC ("MAC") and other support services, and our non-operating Illinois Basin mining complexes.

Vernon Transfer Terminal, LLC ("Mt.

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

● 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.

● 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.

● 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 and Cavalier Minerals.

Please read "Item 1.

Financial Statements (Unaudited) — Note 9 – Investment"

Financial Statements (Unaudited) — Note 9 – Investments"

of this Quarterly Report on Form 10-Q for more information on AllDale III.

1 unchanged sentence

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, LLC ("AROP Funding") and Alliance Resource Finance Corporation ("Alliance Finance") (both discussed in Note 6 – Long-Term Debt) and other miscellaneous activities.

("Infinitum") and NGP ETP IV, L.P.

("NGP ETP IV"), Wildcat Insurance, LLC ("Wildcat Insurance"), which assists the ARLP Partnership with its insurance requirements, AROP Funding, LLC ("AROP Funding") and Alliance Resource Finance Corporation ("Alliance Finance"), Pontiki Coal, LLC's workers' compensation and pneumoconiosis liabilities 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 6 – Long-Term Debt"

of this Quarterly Report on Form 10-Q for more information on AROP Funding and Alliance Finance.

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Total revenues for the three months ended March 31, 2022 ("2022 Quarter") increased 44.6% to $460.9 million compared to $318.6 million for the three months ended March 31, 2021 (the "2021 Quarter") as a result of higher coal sales volumes and prices, which rose 19.5% and 13.0%, respectively, and higher oil & gas royalty volumes and prices, which increased by 26.3% and 74.9%, respectively.

Total operating expenses increased to $373.0 million in the 2022 Quarter, compared to $282.3 million in the 2021 Quarter, due primarily to increased coal sales volumes and inflationary cost pressures.

Income before income taxes increased 221.0% to $79.7 million in the 2022 Quarter as compared to $24.8 million in the 2021 Quarter.

During the 2022 Quarter, we recognized a one-time non-cash income tax charge of $37.3 million and current income tax expense of $4.8 million associated with our election to have Alliance Minerals treated as a taxable entity for federal and state income tax purposes.

Reflecting higher revenues, partially offset by increased total operating and income tax expenses, net income attributable to ARLP for the 2022 Quarter increased to $36.7 million, or $0.28 per basic and diluted limited partner unit, compared to $24.7 million, or $0.19 per basic and diluted limited partner unit, for the 2021 Quarter.

Three Months Ended March 31,

Financial Statements (Unaudited) — Note 9 – Investments"

and — Note 6 – Long-Term Debt"

of this Quarterly Report on Form 10-Q for more information on our investments in Francis, Infinitum and NGP ETP IV as well as AROP Funding and Alliance Finance.

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Total revenues for the three months ended June 30, 2022 ("2022 Quarter") increased 70.1% to a record $616.5 million compared to $362.4 million for the three months ended June 30, 2021 (the "2021 Quarter") as a result of higher coal sales prices and volumes, which rose 43.3% and 13.9%, respectively, and higher oil & gas royalty prices and volumes, which increased by 64.7% and 27.6%, respectively.

Total operating expenses increased to $441.2 million in the 2022 Quarter, compared to $307.4 million in the 2021 Quarter, due primarily to increased coal sales volumes, inflationary cost pressures and an increase of a non-cash contingent accrual related to our purchase of the Hamilton mine based upon a projection for higher coal sales price realizations in the future.

Net income attributable to ARLP for the 2022 Quarter increased to $161.5 million, or $1.23 per basic and diluted limited partner unit, compared to $44.0 million, or $0.34 per basic and diluted limited partner unit, for the 2021 Quarter.

Three Months Ended June 30,

(in thousands)

8 unchanged sentences

Coal Royalties - Intercompany royalties

(1) For a definition of Segment Adjusted EBITDA Expense and related reconciliation to comparable generally accepted accounting principles ("GAAP") financial measures, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA Expense"

to GAAP "Operating Expenses."

(1) For a definition of Segment Adjusted EBITDA Expense and related reconciliation to comparable generally accepted accounting principles ("GAAP") financial measures, please see below under “—Reconciliation of non-GAAP ‘Segment Adjusted EBITDA Expense’ to GAAP ‘Operating Expenses.’”

(2) Coal - Segment Adjusted EBITDA Expense is defined as consolidated Segment Adjusted EBITDA Expense excluding expenses of our Oil & Gas Royalties segment and is adjusted for intercompany transactions with our Coal Royalties segment.

1 unchanged sentence

Coal sales increased $205.8 million or 63.1% to $531.8 million for the 2022 Quarter from $326.0 million for the 2021 Quarter.

The increase was attributable to a volume variance of $56.2 million resulting from increased tons sold and a price variance of $44.7 million due to higher average coal sales prices.

Improved coal demand in both the domestic and export markets during the 2022 Quarter drove coal sales volumes higher by 19.5% to 8.2 million tons sold compared to 6.8 million tons sold in the 2021 Quarter.

Coal sales price realizations increased by 13.0% in the 2022 Quarter to $47.58 per ton sold, compared to $42.10 per ton sold during the 2021 Quarter, due to favorable market conditions.

The increase was attributable to a price variance of $160.7 million due to higher average coal sales prices and a volume variance of $45.1 million resulting from increased tons sold.

Improved coal demand in both the domestic and export markets during the 2022 Quarter drove coal sales price realizations higher by 43.3% in the 2022 Quarter to $59.53 per ton sold, compared to $41.55 per ton sold during the 2021 Quarter.

Coal sales volumes increased by 13.9% to 8.9 million tons sold compared to 7.8 million tons sold in the 2021 Quarter, due to favorable market conditions.

Coal - Segment Adjusted EBITDA Expense .

2 unchanged sentences

● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 15.1% to $10.76 per ton in the 2022 Quarter from $9.35 per ton in the 2021 Quarter.

The increase of $0.22 per ton was primarily due to increased labor costs at several mines.

The increase of $1.41 per ton was primarily due to higher labor costs at several mines, including recently implemented incentive bonus programs.

● Material and supplies expenses per ton produced increased 53.3% to $14.06 per ton in the 2022 Quarter from $9.17 per ton in the 2021 Quarter.

The increase of $2.84 per ton produced primarily reflects increases of $1.74 per ton for roof support, $0.53 per ton for contract labor used in the mining process, $0.34 per ton for power and fuel used in the mining process, $0.26 per ton for certain ventilation expenses and $0.25 per ton for various preparation plant expenses, partially offset by a decrease of $0.76 per ton in longwall subsidence expense.

The increase of $4.89 per ton produced primarily reflects inflationary cost pressures, including increases of $1.90 per ton for roof support, $0.57 per ton for power and fuel used in the mining process, $0.43 per ton for contract labor used in the mining process, $0.40 per ton in longwall subsidence expense, $0.37 per ton for various preparation plant expenses and $0.28 per ton for certain ventilation expenses.

● Maintenance expenses per ton produced increased 39.4% to $3.61 per ton in the 2022 Quarter from $2.59 per ton in the 2021 Quarter.

The increase of $1.02 per ton produced was primarily as a result of inflationary cost pressures.

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $1.10 per produced ton sold in the 2022 Quarter compared to the 2021 Quarter primarily as a result of higher price realizations and an unfavorable mix of tons sold mined in states with severance taxes, partially offset by a $0.60 per ton decrease in the federal black lung excise tax, effective January 1, 2022 and decreased excise taxes per ton resulting from a greater mix of export shipments.

● Segment Adjusted EBITDA Expense was also higher as a result of a $6.5 million non-cash contingent accrual in the 2022 Quarter related to our purchase of the Hamilton mine based upon a projection for higher coal sales price realizations in the future.

Segment Adjusted EBITDA Expense increases per ton were partially offset by the following decrease:

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes decreased $0.39 per produced ton sold in the 2022 Quarter compared to the 2021 Quarter primarily as a result of a $0.60 per ton decrease in the federal black lung excise tax, effective January 1, 2022, a favorable state tons sold mix decreasing severance taxes per ton, in addition to decreased excise taxes per ton resulting from a greater mix of export shipments.

● Workers' compensation expenses per ton produced decreased to $(0.15) per ton in the 2022 Quarter from $0.24 per ton in the 2021 Quarter.

The decrease of $0.39 per ton produced primarily reflects a favorable mid-year workers' compensation accrual adjustment in the 2022 Quarter due to an increase in the discount rate.

Oil & gas royalties.

Oil & gas royalty revenues increased to $30.9 million in the 2022 Quarter compared to $14.0 million for the 2021 Quarter.

Oil & gas royalty revenues increased to a record $35.9 million in the 2022 Quarter compared to $17.1 million for the 2021 Quarter.

The increase of $18.8 million was primarily due to significantly higher sales price realizations per BOE and increased volumes in the 2022 Quarter.

Other revenues .

Other revenues were principally comprised of Matrix Design sales and other miscellaneous sales and revenue activities.

Other revenues principally comprised Matrix Design sales and other miscellaneous sales and revenue activities.

Other revenues increased to $13.4 million in the 2022 Quarter from $7.3 million in the 2021 Quarter.

The increase of $6.1 million was primarily due to increased sales of mining technology products by our Matrix Design subsidiary and other smaller variances in the 2022 Quarter.

Depreciation, depletion and amortization.

Depreciation, depletion and amortization expense increased to $63.3 million for the 2022 Quarter compared to $59.2 million for the 2021 Quarter primarily as a result of increased coal sales and oil & gas volumes.

The increase of $6.1 million was primarily due to increased sales of mining technology products by our Matrix Design subsidiary.

General and administrative.

General and administrative expenses for the 2022 Quarter increased to $22.5 million compared to $17.5 million in the 2021 Quarter.

The increase of $5.0 million was primarily due to higher incentive compensation expenses.

Income tax expense (benefit).

Income tax expense increased to $42.7 million for the 2022 Quarter compared to an income tax benefit of $0.01 million for the 2021 Quarter as a result of our election during the 2022 Quarter to convert Alliance Minerals from a partnership pass-through entity to a taxable entity for federal and state income tax purposes.

We recognized a one-time non-cash income tax charge of $37.3 million and a current income tax expense of $4.8 million during the 2022 Quarter associated with this election.

Income tax expense increased to $6.3 million for the 2022 Quarter compared to $0.01 million for the 2021 Quarter as a result of Alliance Minerals' election to be treated as a taxable entity for federal and state income tax purposes beginning in 2022.

Please read "Item 1.

45 unchanged sentences

(1) Other, Corporate and Elimination includes the elimination of intercompany coal royalty revenues and expenses between our Coal Royalties Segment and our Coal Operations Segments in addition to the expenses for the other miscellaneous activities included in this category.

(2) For a definition of Segment Adjusted EBITDA and related reconciliation to comparable GAAP financial measures, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA"

to GAAP "net income."

(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

‘Segment Adjusted EBITDA’ to GAAP ‘net income’ and reconciliation of non-GAAP ‘Segment Adjusted EBITDA Expense’ to GAAP ‘Operating Expenses.’”

(3) Barrels of oil equivalent ("BOE") is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).

(4) Represents tons sold by our Coal Operations Segments associated with coal reserves leased from our Coal Royalties Segment.

(4) Represents tons sold by our Coal Operations Segments that were produced from coal reserves leased from our Coal Royalties Segment.

Illinois Basin Coal Operations – Segment Adjusted EBITDA increased to $97.4 million in the 2022 Quarter from $70.6 million in the 2021 Quarter.

The increase of $26.8 million was primarily attributable to higher coal sales, which increased 38.2% to $290.4 million in the 2022 Quarter from $210.2 million in the 2021 Quarter, partially offset by increased operating expenses.

The increase in coal sales reflects higher tons sold, which rose 23.6% in the 2022 Quarter as a result of increased sales volumes across all mines in the region, and higher coal sales price realizations.

The increase in coal sales reflects higher coal sales price realizations and increased sales volumes.

Coal sales price per ton sold in the 2022 Quarter increased by 28.5% compared to the 2021 Quarter reflecting increased domestic prices and significantly higher export prices due to favorable market conditions.

Coal sales volumes were higher by 7.5% compared to the 2021 Quarter as a result of increased sales volumes at our Gibson South and Hamilton mines.

Segment Adjusted EBITDA Expense increased 38.9% to $194.7 million in the 2022 Quarter from $140.2 million in the 2021 Quarter primarily as a result of increased sales volumes and higher expenses per ton.

Segment Adjusted EBITDA Expense per ton increased $3.81 per ton sold to $30.19 from $26.38 per ton sold in the 2021 Quarter primarily as a result of inflationary cost pressures on numerous expense items, including roof support, power and labor-related expenses, lower recoveries across the region and a longwall move at our Hamilton mine in the 2022 Quarter, partially offset by reduced selling expense.

Segment Adjusted EBITDA Expense per ton increased $7.55 per ton sold to $33.39 from $25.84 per ton sold in the 2021 Quarter primarily as a result of inflationary pressures on numerous expense items, including labor-related expenses and supply and maintenance costs, increased royalty expenses due to higher price realizations, reduced recoveries across the region and a non-cash contingent accrual related to our purchase of the Hamilton mine based upon a projection for higher coal sales price realizations in the future, partially offset by fewer longwall move days at our Hamilton mine during the 2022 Quarter.

Appalachia Coal Operations – Segment Adjusted EBITDA increased 198.7% to $124.4 million for the 2022 Quarter from $41.6 million in the 2021 Quarter.

The increase of $82.8 million was primarily attributable to higher coal sales, which increased 108.4% to $241.4 million in the 2022 Quarter from $115.8 million in the 2021 Quarter, due to increased prices and volumes.

Coal sales prices increased by 16.3% compared to the 2021 Quarter primarily due to significantly higher export price realizations at our Mettiki and MC Mining operations.

Coal sales volumes increased 10.3% compared to the 2021 Quarter as a result of higher export volumes.

Coal sales prices increased by 62.7% compared to the 2021 Quarter primarily due to substantially higher export price realizations at all mines in the region as well as increased domestic pricing at our Tunnel Ridge and Mettiki mines.

Coal sales volumes increased 28.1% compared to the 2021 Quarter as a result of higher domestic sales volumes from our Tunnel Ridge longwall operation and increased export shipments from our Mettiki and MC Mining operations.

Segment Adjusted EBITDA Expense increased 57.6% to $117.4 million in the 2022 Quarter from $74.5 million in the 2021 Quarter due to increased sales volumes and per ton expenses.

Segment Adjusted EBITDA Expense per ton increased $1.07 per ton sold to $36.72 compared to $35.65 per ton sold in the 2021 Quarter, as a result of inflationary cost pressures on numerous expense items, including labor-related expenses and supply and maintenance costs, and a longwall move at our Tunnel Ridge and Mettiki mines in the 2022 Quarter, partially offset by lower subsidence expense and reduced selling expenses.

Oil & Gas Royalties – Segment Adjusted EBITDA increased to $28.6 million for the 2022 Quarter from $11.9 million in the 2021 Quarter.

The increase of $16.7 million was primarily due to significantly higher sales price realizations, which increased 74.9% to a record $61.26 per BOE, and increased volumes in the 2022 Quarter.

Segment Adjusted EBITDA Expense per ton increased $7.09 per ton sold to $37.84 compared to $30.75 per ton sold in the 2021 Quarter, as a result of inflationary pressures on numerous expense items, including labor-related expenses and supply and maintenance costs, increased sales-related expenses due to higher price realizations and reduced recoveries across the region.

Oil & Gas Royalties – Segment Adjusted EBITDA increased to a record $34.6 million for the 2022 Quarter from $15.4 million in the 2021 Quarter.

The increase of $19.2 million was primarily due to significantly higher sales price realizations, which increased 64.7% to $72.03 per BOE, and increased volumes in the 2022 Quarter.

Coal Royalties – Segment Adjusted EBITDA increased 34.6% to $9.1 million for the 2022 Quarter from $6.8 million in the 2021 Quarter.

The increase of $2.3 million was a result of increased royalty tons sold and higher average royalty rates per ton.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Total revenues increased 58.2% to $1.08 billion for the six months ended June 30, 2022 (the "2022 Period"), compared to $681.1 million for the six months ended June 30, 2021 (the "2021 Period"), primarily due to substantial increases in prices and volumes from coal operations and royalties and oil & gas royalties.

Total operating expenses increased to $814.3 million in the 2022 Period, compared to $589.7 million in the 2021 Period, due primarily to increased coal sales volumes and inflationary cost pressures.

During the 2022 Period, we recognized a one-time non-cash income tax charge of $37.3 million and current income tax expense of $10.8 million associated with Alliance Minerals' election to be treated as a taxable entity for federal and state income tax purposes.

Higher revenues, partially offset by increased total operating expenses and income tax expense, led to significantly higher net income attributable to ARLP, which rose 188.1% to $198.1 million for the 2022 Period, or $1.51 per basic and diluted limited partner unit, compared to $68.8 million, or $0.53 per basic and diluted limited partner unit, for the 2021 Period.

Six Months Ended June 30,

(in thousands)

(per ton / per BOE sold)

Coal - Tons sold

Coal - Tons produced

Coal - Coal sales

Coal - Segment Adjusted EBITDA Expense (1) (2)

Oil & Gas Royalties - BOE sold

Oil & Gas Royalties - Royalties (3)

Coal Royalties - Tons sold

Coal Royalties - Intercompany royalties

(1) For a definition of Segment Adjusted EBITDA Expense and related reconciliation to comparable GAAP financial measures, please see below under “—Reconciliation of non-GAAP ‘Segment Adjusted EBITDA’ to GAAP ‘net income’ and reconciliation of non-GAAP ‘Segment Adjusted EBITDA Expense’ to GAAP ‘Operating Expenses.’”

(3) Average sales price per BOE is defined as oil & gas royalty revenues excluding lease bonus revenue divided by total BOE sold.

Coal sales increased $306.7 million or 50.0% to $920.2 million for the 2022 Period from $613.5 million for the 2021 Period.

The increase was attributable to a price variance of $205.5 million due to higher average coal sales prices and a volume variance of $101.2 million resulting from increased tons sold.

Coal sales price realizations increased by 28.7% in the 2022 Period to $53.83 per ton sold, compared to $41.81 per ton sold during the 2021 Period, due to favorable market conditions.

Improved coal demand in both the domestic and export markets during the 2022 Period drove coal sales volumes higher by 16.5% to 17.1 million tons sold compared to 14.7 million tons sold in the 2021 Period.

Coal - Segment Adjusted EBITDA Expense .

Segment Adjusted EBITDA Expense for our coal operations increased 40.0% to $590.5 million, as a result of higher coal sales volumes and inflationary cost pressures.

On a per ton basis, Segment Adjusted EBITDA Expense for our coal operations increased 20.2% to $34.54 per ton sold in the 2022 Period compared to $28.74 per ton in the 2021 Period, primarily due to certain cost increases, which are discussed below by category:

● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 8.6% to $10.20 per ton in the 2022 Period from $9.39 per ton in the 2021 Period.

The increase of $0.81 per ton was primarily due to higher labor costs at several mines including recently implemented incentive bonus programs.

● Material and supplies expenses per ton produced increased 40.2% to $13.42 per ton in the 2022 Period from $9.57 per ton in the 2021 Period.

The increase of $3.85 per ton produced primarily reflects inflationary cost pressures including increases of $1.82 per ton for roof support, $0.48 per ton for contract labor used in the mining process, $0.45 per ton for power and fuel used in the mining process, $0.31 per ton for various preparation plant expenses and $0.27 per ton for certain ventilation expenses.

● Maintenance expenses per ton produced increased 32.7% to $3.41 per ton in the 2022 Period from $2.57 per ton in the 2021 Period.

The increase of $0.84 per ton produced was primarily as a result of inflationary cost pressures.

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $0.39 per produced ton sold in the 2022 Period compared to the 2021 Period primarily as a result of higher price realizations, partially offset by a $0.60 per ton decrease in the federal black lung excise tax, effective January 1, 2022, a favorable mix of tons sold mined in states with severance taxes and decreased excise taxes per ton resulting from a greater mix of export shipments .

● Segment Adjusted EBITDA Expense was also higher as a result of a $6.5 million non-cash contingent accrual in the 2022 Period related to our purchase of the Hamilton mine based upon a projection for higher coal sales price realizations in the future.

Oil & gas royalties.

Oil & gas royalty revenues increased to $66.9 million in the 2022 Period compared to $31.1 million for the 2021 Period.

The increase of $35.8 million was primarily due to significantly higher sales price realizations per BOE and increased volumes in the 2022 Period.

Other revenues .

Other revenues principally comprised Matrix Design sales, Mt.

Vernon transloading revenues and other miscellaneous sales and revenue activities.

Other revenues increased to $25.6 million in the 2022 Period from $13.4 million in the 2021 Period.

The increase of $12.2 million was primarily due to increased sales of mining technology products by our Matrix Design subsidiary and increased coal volumes shipped through our Mt.

Vernon transloading facility.

General and administrative.

General and administrative expenses for the 2022 Period increased to $41.1 million compared to $33.0 million in the 2021 Period.

The increase of $8.1 million was primarily due to higher incentive compensation expenses.

Income tax expense (benefit).

Income tax expense increased to $49.0 million for the 2022 Period compared to an income tax benefit of $0.01 million for the 2021 Period as a result of Alliance Minerals' election during the 2022 Period to be treated as a taxable entity for federal and state income tax purposes.

We recognized a one-time non-cash income tax charge of $37.3 million and a current income tax expense of $10.8 million during the 2022 Period associated with this election.

Please read "Item 1.

Financial Statements (Unaudited)—Note 7 – Income Taxes"

of this Quarterly Report on Form 10-Q.

Transportation revenues and expenses .

Transportation revenues and expenses were $64.8 million and $23.1 million for the 2022 and 2021 Periods, respectively.

The increase of $41.7 million was primarily attributable to increased average third-party transportation rates in the 2022 Period and increased 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.

Our 2022 Period Segment Adjusted EBITDA increased $191.3 million to $437.2 million from the 2021 Period Segment Adjusted EBITDA of $245.9 million.

Segment Adjusted EBITDA, tons sold, coal sales, other revenues, Segment Adjusted EBITDA Expense, oil & gas royalties, BOE volume, coal royalties and coal royalties tons sold by segment are as follows:

Six Months Ended

Increase (Decrease)

(in thousands)

Segment Adjusted EBITDA

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other, Corporate and Elimination (1)

Total Segment Adjusted EBITDA (2)

Coal - Tons sold

Illinois Basin Coal Operations

Appalachia Coal Operations

Total tons sold

Illinois Basin Coal Operations

Appalachia Coal Operations

Total coal sales

Other revenues

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Other, Corporate and Elimination

Total other revenues

Segment Adjusted EBITDA Expense

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other, Corporate and Elimination (1)

Total Segment Adjusted EBITDA Expense (2)

Oil & Gas Royalties

Volume - BOE (3)

Oil & gas royalties

Coal Royalties

Volume - Tons sold (4)

Intercompany coal royalties

‘Segment Adjusted EBITDA’ to GAAP ‘net income’ and reconciliation of non-GAAP ‘Segment Adjusted EBITDA Expense’ to GAAP ‘Operating Expenses.’”

(3) Barrels of oil equivalent ("BOE") is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).

(4) Represents tons sold by our Coal Operations Segments that were produced from coal reserves leased from our Coal Royalties Segment.

Illinois Basin Coal Operations – Segment Adjusted EBITDA increased to $175.6 million in the 2022 Period from $128.3 million in the 2021 Period.

The increase of $47.3 million was primarily attributable to higher coal sales, which increased 38.6% to $544.3 million in the 2022 Period from $392.8 million in the 2021 Period, partially offset by increased operating expenses.

The increase in coal sales reflects higher coal sales price per ton, which increased by 20.5% compared to the 2021 Period reflecting increased domestic prices and significantly higher export prices resulting from favorable market conditions, and increased tons sold, which rose 15.0% in the 2022 Period as a result of increased sales volumes at the Gibson South, River View and Hamilton mines.

Segment Adjusted EBITDA Expense increased 40.1% to $372.3 million in the 2022 Period from $265.8 million in the 2021 Period primarily as a result of increased sales volumes and higher expenses per ton.

Segment Adjusted EBITDA Expense per ton increased $5.69 per ton sold to $31.78 from $26.09 per ton sold in the 2021 Period primarily as a result of inflationary pressures on numerous expense items, including labor-related expenses and supply and maintenance costs, reduced recoveries across the region, a non-cash contingent accrual related to our purchase of the Hamilton mine based upon a projection for higher coal sales price realizations in the future and more longwall move days at our Hamilton mine during the 2022 Period.

Appalachia Coal Operations – Segment Adjusted EBITDA increased 139.9% to $175.5 million for the 2022 Period from $73.1 million in the 2021 Period.

The increase of $102.4 million was primarily attributable to higher coal sales, which increased 70.3% to $375.9 million in the 2022 Period from $220.7 million in the 2021 Period, due to increased prices and volumes.

Coal sales prices increased by 42.1% compared to the 2021 Period primarily due to substantially higher export price realizations and increased domestic pricing in the region.

Coal sales volumes increased 19.9% compared to the 2021 Period as a result of higher sales volumes from our Tunnel Ridge and MC Mining operations.

Segment Adjusted EBITDA Expense increased 35.7% to $201.1 million in the 2022 Period from $148.2 million in the 2021 Period due to increased sales volumes and per ton expenses.

Segment Adjusted EBITDA Expense per ton increased 13.2% to $37.36 compared to $33.01 per ton sold in the 2021 Period, as a result of inflationary pressures on numerous expense items, including labor-related expenses and supply and maintenance costs, increased sales-related expenses due to higher price realizations and reduced recoveries at our Mettiki and MC Mining operations.

Oil & Gas Royalties – Segment Adjusted EBITDA increased to $63.2 million for the 2022 Period from $27.3 million in the 2021 Period.

The increase of $35.9 million was primarily due to significantly higher sales price realizations, which increased 69.4% to $66.61 per BOE, and increased volumes in the 2022 Period.

Coal Royalties – Segment Adjusted EBITDA increased 38.6% to $19.5 million for the 2022 Period from $14.1 million in the 2021 Period.

The increase of $5.4 million was a result of increased royalty tons sold and higher average royalty rates per ton.

Reconciliation of non-GAAP "Segment Adjusted EBITDA"

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Segment Adjusted EBITDA is also used as a supplemental financial measure by our management for reasons similar to those stated in the previous explanation of EBITDA.

In addition, the exclusion of corporate general and administrative expenses from consolidated 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.

In addition, the exclusion of corporate general and administrative expenses from consolidated 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 consolidated Segment Adjusted EBITDA to net income, the most comparable GAAP financial measure:

Three Months Ended

Six Months Ended

(in thousands)

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Noncontrolling interest

Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses and other income (expense).

Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, coal purchases and other income (expense).

Transportation expenses are excluded as these expenses are passed through to our customers and, consequently, we do not realize any gain or loss on transportation revenues.

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Three Months Ended

Six Months Ended

(in thousands)

Segment Adjusted EBITDA Expense

Outside coal purchases

Other income (expense)

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Nevertheless, our ability to satisfy our working capital requirements, 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, including the COVID-19 pandemic.

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 remaining in compliance with the covenants of the Credit Agreement and expect to have sufficient liquidity to fund our operations and growth strategies.

Based on our recent operating cash flow results, current cash position, current unitholder distributions, anticipated future cash flows and sources of financing that we expect to have available, we anticipate remaining 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.

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

Since inception through March 31, 2022, we have purchased units for a total of $93.5 million under the program.

During the three months ended March 31, 2022, we did not repurchase and retire any units.

Since inception through June 30, 2022, we have purchased units for a total of $93.5 million under the program.

During the six months ended June 30, 2022, we did not repurchase and retire any units.

The timing of any future unit repurchases and the ultimate number of units to be purchased will depend on a number of factors, including business and market conditions, our future financial performance, and other capital priorities.

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We may over time, and subject to market conditions, in one or more offerings, offer and sell any of the securities described in the prospectus.

Cash provided by operating activities was $89.0 million for the 2022 Quarter compared to $54.6 million for the 2021 Quarter.

The increase in cash provided by operating activities was primarily due to an increase in net income adjusted for non-cash items and a favorable working capital change related to other assets and liabilities, partially offset by unfavorable working capital changes related to trade receivables, inventories and accrued payroll and related benefits compared to the 2021 Quarter.

Net cash used in investing activities was $45.5 million for the 2022 Quarter compared to $22.7 million for the 2021 Quarter.

The increase in cash used in investing activities was primarily attributable to an increase in capital expenditures during the 2022 Quarter.

Net cash used in financing activities was $37.7 million for the 2022 Quarter compared to $53.0 million for the 2021 Quarter.

The decrease in cash used in financing activities was primarily attributable to reduced borrowings and payments on the Revolving Credit Facility and the Securitization Facility, partially offset by increased cash distributions paid to unitholders compared to the 2021 Quarter.

Cash provided by operating activities was $235.3 million for the 2022 Period compared to $158.2 million for the 2021 Period.

Net cash used in investing activities was $163.3 million for the 2022 Period compared to $50.2 million for the 2021 Period.

The increase in cash used in investing activities was primarily attributable to an increase in capital expenditures, contributions to equity method investments and purchase of equity securities during the 2022 Period.

Net cash used in financing activities was $88.3 million for the 2022 Period compared to $125.8 million for the 2021 Period.

Cash Requirements

Management anticipates having sufficient cash flow to meet 2022 cash requirements, including capital expenditures, scheduled payments on long-term debt, lease obligations, asset retirement obligation costs and workers' compensation and pneumoconiosis costs, with our March 31, 2022 cash and cash equivalents of $128.2 million and cash

flows from operations, or borrowings under our Revolving Credit Facility and Securitization Facility if necessary.

compensation and pneumoconiosis costs, with our June 30, 2022 cash and cash equivalents of $106.1 million and 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 $5.66 per ton produced.

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We also have an agreement with a bank to provide additional letters of credit in an amount of $5.0 million to maintain surety bonds to secure certain asset retirement obligations and our obligations for workers' compensation benefits.

On March 31, 2022, we had $5.0 million in letters of credit outstanding under this agreement.

On June 30, 2022, 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.

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.

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Financial Statements (Unaudited) — Note 8 – Variable Interest Entities"

— Note 9 – Investment"

— Note 9 – Investments"

of this Quarterly Report on Form 10-Q.

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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 2. Management’s Discussion and Analysis