What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-07 compared with 2022-08-08 · 71 added, 70 removed, 320 unchanged (31% of the section changed)

42 unchanged sentences

● 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 and AllDale I & II and includes Alliance Minerals' equity interests in both AllDale III and Cavalier Minerals.

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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.

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

Total revenues for the three months ended September 30, 2022 ("2022 Quarter") increased 51.3% to a record $628.4 million compared to $415.4 million for the three months ended September 30, 2021 (the "2021 Quarter") as a result of significantly higher coal sales and oil & gas royalties revenues.

Coal sales increased $188.3 million to $550.6 million in the 2022 Quarter on the strength of record coal sales prices, which rose 40.5% to $59.94 per ton sold compared to $42.65 per ton sold in the 2021 Quarter, and increased coal sales volumes, which were higher by 8.1% compared to the 2021 Quarter.

Total operating expenses increased to $450.3 million in the 2022 Quarter, compared to $348.7 million in the 2021 Quarter, due primarily to increased coal sales volumes and ongoing inflationary cost pressures.

Net income attributable to ARLP for the 2022 Quarter increased 186.0% to $164.6 million, or $1.25 per basic and diluted limited partner unit, compared to $57.5 million, or $0.44 per basic and diluted limited partner unit, for the 2021 Quarter.

Three Months Ended June 30,

Three Months Ended September 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.

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The increase was attributable to a price variance of $158.8 million due to higher average coal sales prices and a volume variance of $29.5 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.

Improved price realizations and strong coal demand in both the domestic and export markets during the 2022 Quarter drove coal sales prices higher by 40.5% in the 2022 Quarter to $59.94 per ton sold, compared to $42.65 per ton sold during the 2021 Quarter.

Coal sales volumes increased by 8.1% to 9.2 million tons sold compared to 8.5 million tons sold in the 2021 Quarter, due to favorable market conditions.

Coal - Segment Adjusted EBITDA Expense .

Segment Adjusted EBITDA Expense for our coal operations increased 47.1% to $322.0 million, as a result of higher coal sales volumes and inflationary cost pressures.

Segment Adjusted EBITDA Expense for our coal operations increased 37.3% to $337.7 million, as a result of higher coal sales volumes and ongoing inflationary cost pressures.

On a per ton basis, Segment Adjusted EBITDA Expense for our coal operations increased 27.0% to $36.77 per ton sold in the 2022 Quarter compared to $28.95 per ton in the 2021 Quarter, primarily due to certain cost increases, which are discussed below by category:

● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 17.4% to $10.79 per ton in the 2022 Quarter from $9.19 per ton in the 2021 Quarter.

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

The increase of $1.60 per ton was primarily due to higher labor costs at several mines.

● Workers' compensation expenses per ton produced increased to $0.52 per ton in the 2022 Quarter from $(0.07) per ton in the 2021 Quarter.

The increase of $0.59 per ton produced resulted primarily from refunds received in the 2021 Quarter on assessments paid to the state of Kentucky in prior years.

● Material and supplies expenses per ton produced increased 31.6% to $13.66 per ton in the 2022 Quarter from $10.38 per ton in the 2021 Quarter.

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.

The increase of $3.28 per ton produced primarily reflects inflationary cost pressures, including increases of $0.55 per ton for various preparation plant expenses, $0.53 per ton for roof support, $0.43 per ton for contract labor used in the mining process, $0.39 per ton in longwall subsidence expense, $0.32 per ton for ventilation related expenses, $0.28 per ton for power and fuel and $0.22 per ton for outside expenses used in the mining process.

● Maintenance expenses per ton produced increased 24.9% to $3.61 per ton in the 2022 Quarter from $2.89 per ton in the 2021 Quarter.

The increase of $0.72 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:

● 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.

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $0.60 per produced ton sold in the 2022 Quarter compared to the 2021 Quarter primarily as a result of higher price realizations, partially offset by a decrease in the federal black lung excise tax, effective January 1, 2022.

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

● We had no sales of outside coal purchases in the 2022 Quarter compared to $6.1 million in the 2021 Quarter.

Thus, costs per ton in the 2022 Quarter benefited as our cost of outside coal purchases are generally higher on a per ton basis than our produced coal.

Oil & gas royalties.

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 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.

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).

Oil & gas royalty revenues increased to $35.3 million in the 2022 Quarter compared to $20.1 million for the 2021 Quarter.

The increase of $15.2 million was primarily due to significantly higher volumes and sales price realizations per BOE in the 2022 Quarter.

Income tax expense.

Income tax expense increased to $6.6 million for the 2022 Quarter compared to $0.2 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.

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Three Months Ended

September 30,

Increase (Decrease)

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(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 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.’”

'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).

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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.

Coal sales price per ton sold in the 2022 Quarter increased by 35.9% compared to the 2021 Quarter reflecting improved price realizations in both the domestic and export markets.

Coal sales volumes were higher by 6.2% compared to the 2021 Quarter as a result of higher domestic sales volumes.

Segment Adjusted EBITDA Expense increased 30.3% to $195.0 million in the 2022 Quarter from $149.7 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 $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.

Segment Adjusted EBITDA Expense per ton increased $5.88 per ton sold to $31.91 from $26.03 per ton sold in the 2021 Quarter primarily as a result of ongoing inflationary pressures on numerous expense items, including labor-related expenses and supply and maintenance costs as well as increased sales-related expenses due to higher price realizations.

An extended longwall move at our Hamilton mine during the 2022 Quarter also contributed to higher per ton expenses compared to the 2021 Quarter.

Appalachia Coal Operations – Segment Adjusted EBITDA increased 93.5% to $102.0 million for the 2022 Quarter from $52.7 million in the 2021 Quarter.

The increase of $49.3 million was primarily attributable to higher coal sales, which increased 63.4% to $236.3 million in the 2022 Quarter from $144.6 million in the 2021 Quarter, due to increased prices and 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.

Coal sales prices increased by 45.7% compared to the 2021 Quarter primarily due to substantially higher export price realizations and increased domestic pricing at all mines in the region.

Coal sales volumes increased 12.1% 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 MC Mining operation.

Segment Adjusted EBITDA Expense increased 45.9% to $134.7 million in the 2022 Quarter from $92.3 million in the 2021 Quarter due to increased sales volumes and per ton expenses.

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.

Segment Adjusted EBITDA Expense per ton increased $10.14 per ton sold to $43.78 compared to $33.64 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 as well as increased sales-related expenses due to higher price realizations.

Adverse mining conditions and preparation plant maintenance at MC Mining as well as a longwall move at our Tunnel Ridge mine during the 2022 Quarter also contributed to higher per ton expenses compared to the 2021 Quarter.

Oil & Gas Royalties – Segment Adjusted EBITDA increased to a record $35.8 million for the 2022 Quarter from $19.1 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 $16.7 million was primarily due to significantly higher volumes and sales price realizations per BOE.

Coal Royalties – Segment Adjusted EBITDA increased 21.4% to a record $11.2 million for the 2022 Quarter from $9.2 million in the 2021 Quarter.

The increase of $2.0 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.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Total revenues increased 55.6% to $1.71 billion for the nine months ended September 30, 2022 (the "2022 Period"), compared to $1.10 billion for the nine months ended September 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 $1.26 billion in the 2022 Period, compared to $938.4 million in the 2021 Period, due primarily to increased coal sales volumes and ongoing inflationary cost pressures.

Higher revenues, partially offset by increased total operating expenses and income tax expense, led to significantly higher net income attributable to ARLP, which rose 187.1% to $362.7 million for the 2022 Period, or $2.76 per basic and diluted limited partner unit, compared to $126.3 million, or $0.97 per basic and diluted limited partner unit, for the 2021 Period.

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

8 unchanged sentences

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.’”

(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.

Coal sales increased $495.0 million or 50.7% to $1.47 billion for the 2022 Period from $975.7 million for the 2021 Period.

The increase was attributable to a price variance of $363.9 million due to higher average coal sales prices and a volume variance of $131.1 million resulting from increased tons sold.

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● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 11.5% to $10.39 per ton in the 2022 Period from $9.32 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.

The increase of $1.07 per ton was primarily due to higher labor costs at several mines.

● Material and supplies expenses per ton produced increased 37.1% to $13.50 per ton in the 2022 Period from $9.85 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.

The increase of $3.65 per ton produced primarily reflects inflationary cost pressures including increases of $1.39 per ton for roof support, $0.46 per ton for contract labor used in the mining process, $0.40 per ton for power and fuel, $0.39 per ton for various preparation plant expenses and $0.29 per ton for ventilation related expenses.

● Maintenance expenses per ton produced increased 29.9% to $3.48 per ton in the 2022 Period from $2.68 per ton in the 2021 Period.

The increase of $0.80 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.

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $0.46 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 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 .

Oil & gas royalties.

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The increase of $10.7 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.

Income tax expense.

Income tax expense increased to $55.6 million for the 2022 Period compared to $0.2 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 $17.4 million during the 2022 Period related to Alliance Minerals.

Please read "Item 1.

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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

Nine Months Ended

September 30,

Increase (Decrease)

34 unchanged sentences

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

'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).

2 unchanged sentences

The increase of $98.7 million was primarily attributable to higher coal sales, which increased 40.6% to $858.6 million in the 2022 Period from $610.4 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.

The increase in coal sales reflects higher coal sales price per ton, which increased by 25.7% compared to the 2021 Period due to increased domestic prices and significantly higher export prices and increased tons sold, which rose 11.8% in the 2022 Period as a result of increased sales volumes across all mines in the region.

Segment Adjusted EBITDA Expense increased 36.5% to $567.3 million in the 2022 Period from $415.4 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.

Segment Adjusted EBITDA Expense per ton increased $5.76 per ton sold to $31.83 from $26.07 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, increased sales-related expenses due to higher price realizations, reduced recoveries across the region, a non-cash contingent accrual related to our purchase of the Hamilton mine and increased longwall move days at our Hamilton mine during the 2022 Period.

Appalachia Coal Operations – Segment Adjusted EBITDA increased 120.5% to $277.5 million for the 2022 Period from $125.9 million in the 2021 Period.

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Segment Adjusted EBITDA Expense increased 39.6% to $335.8 million in the 2022 Period from $240.5 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.

Segment Adjusted EBITDA Expense per ton increased 19.4% to $39.70 compared to $33.25 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, reduced recoveries at our Mettiki and MC Mining operations and increased longwall move days at our Tunnel Ridge mine during the 2022 Period.

Oil & Gas Royalties – Segment Adjusted EBITDA increased to $98.9 million for the 2022 Period from $46.4 million in the 2021 Period.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

3 unchanged sentences

Interest expense, net

Income tax (expense) benefit

Income tax expense

Net income attributable to ARLP

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

6 unchanged sentences

We believe that existing cash balances, future cash flows from operations and investments, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet our working capital requirements, capital expenditures and additional investments, debt payments, contractual obligations, commitments and any distribution payments.

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, 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.

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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 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.

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

During the nine months ended September 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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Cash provided by operating activities was $548.6 million for the 2022 Period compared to $311.0 million for the 2021 Period.

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 Period.

The increase in cash provided by operating activities was primarily due to an increase in net income adjusted for non-cash items, partially offset by unfavorable working capital changes related to trade receivables and inventories compared to the 2021 Period.

Net cash used in investing activities was $247.5 million for the 2022 Period compared to $80.4 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.

The increase in cash used in investing activities was primarily attributable to an increase in capital expenditures, contributions to equity method investments, the purchase of equity securities in Infinitum and the acquisition of oil & gas mineral interests in the Belvedere Acquisition during the 2022 Period.

Please read "Item 1.

Financial Statements (Unaudited) - Note 3 – Acquisition"

of this Quarterly Report on Form 10-Q for additional information about the Belvedere Acquisition.

Net cash used in financing activities was $145.0 million for the 2022 Period compared to $181.5 million for the 2021 Period.

1 unchanged sentence

Cash Requirements

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.

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 September 30, 2022 cash and cash equivalents of $278.5 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 June 30, 2022, we had $5.0 million in letters of credit outstanding under this agreement.

On September 30, 2022, we had $5.0 million in letters of credit outstanding under this agreement.

Related-Party Transactions

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Craft acquired in 2019.

We also have related-party transactions with (a) WKY CoalPlay, LLC ("WKY CoalPlay") regarding four mineral leases, (b) Bluegrass Minerals Management, LLC ("Bluegrass Minerals") through its noncontrolling ownership interest in our consolidated subsidiary, Cavalier Minerals and (c) with our equity interest in AllDale III.

For more information regarding Bluegrass Minerals and AllDale III, please read "Item 1.

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

— Note 9 – Investments"

We also have related-party transactions with (a) WKY CoalPlay, LLC ("WKY CoalPlay") regarding four mineral leases, and (b) with our equity interest in AllDale III.

For more information regarding AllDale III, please read "Item 1.

Financial Statements (Unaudited) — Note 10 – 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