What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-08 · 118 added, 90 removed, 317 unchanged (40% of the section changed)

24 unchanged sentences

We intend to pursue strategic investments that leverage our core competencies and relationships with electric utilities, industrial customers, and federal and state governments.

We are currently the largest coal producer in the eastern United States with seven operating underground mining complexes near many of the major eastern utility generating plants and on major coal hauling railroads in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia, as well as a coal-loading terminal in Indiana.

Two of our mines have loading facilities located on the banks of the Ohio River.

In addition to our mining operations, Alliance Resource Properties owns or leases substantially all of our measured, indicated and inferred coal mineral resources and the majority of our proved and probable coal mineral reserves in the Illinois and Appalachia Basins that are (a) leased to our internal mining complexes or (b) near other internal and external coal mining operations.

Two of our mines also have loading facilities located on the Ohio River.

We currently own oil & gas mineral interests in approximately 65,000 net royalty acres in premier oil & gas producing regions of the United States, primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK), and Williston (Bakken) basins, providing us with diversified exposure to industry-leading operators consistent with our general strategy to grow our oil & gas mineral interest business.

We have invested in energy and infrastructure opportunities including our investments in Francis Renewable Energy, LLC ("Francis"), Infinitum Electric, Inc.

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

("NGP ETP IV"), which are in the businesses of, respectively, electric vehicle charging stations, electric motor manufacturing, and private equity investments in renewable energy, the electrification of our economy or the efficient use of energy.

("Infinitum"), NGP Energy Transition, L.P.

("NGP ET IV"), and Ascend Elements, Inc.

("Ascend") which are in the businesses of, respectively, electric vehicle charging stations, electric motor manufacturing, private equity investments in renewable energy, the electrification of our economy or the efficient use of energy, and the manufacturing and recycling of sustainable, engineered battery materials for electric vehicles.

On January 27, 2023, we entered into a one-year collaborative agreement with a third party effective January 1, 2023, committing up to $35.0 million for the acquisition of oil & gas mineral interests in the Midland and Delaware basins (the "Acquisition Agreement").

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of this Quarterly Report on Form 10-Q.

On August 22, 2023, we purchased $25.0 million of Series D Preferred Stock from Ascend, a U.S.

based manufacturer and recycler of sustainable, engineered battery materials for electric vehicles.

On September 8, 2023, we purchased $24.6 million of Series E Preferred Stock from Infinitum, a U.S.

based startup developer and manufacturer of electric motors featuring printed circuit board stators.

For more information about the Ascend and Infinitum investments, please read "Item 1.

Financial Statements (Unaudited)—Note 9 – Equity Investments"

of this Quarterly Report on Form 10-Q.

We have four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties.

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Please read "Item 1.

Financial Statements (Unaudited) — Note 9 – Investments"

Financial Statements (Unaudited) — Note 9 – Equity Investments"

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

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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, its subsidiaries and Alliance Design Group, LLC (collectively referred to as the "Matrix Group"), our investments in Francis, Infinitum, and NGP ETP IV, Wildcat Insurance, LLC, which assists the ARLP Partnership with its insurance requirements, AROP Funding, LLC ("AROP Funding") and Alliance Resource Finance Corporation ("Alliance Finance") and other miscellaneous activities.

● Other, Corporate and Elimination includes marketing and administrative activities, Matrix Design Group, LLC ("Matrix Design"), its subsidiaries and Alliance Design Group, LLC, our investments in Francis, Infinitum, NGP ET IV, and Ascend, Wildcat Insurance, LLC, which assists the ARLP Partnership with its insurance requirements, AROP Funding, LLC ("AROP Funding") and Alliance Resource Finance Corporation ("Alliance Finance"), and other miscellaneous activities.

The eliminations included in Other, Corporate and Elimination primarily represent the intercompany coal royalty transactions described above between our Coal Royalties reportable segment and our coal operations' mines.

Please read "Item 1.

Financial Statements (Unaudited)—Note 9 – Investments"

Financial Statements (Unaudited)—Note 9 – Equity 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, 2023 Compared to Three Months Ended June 30, 2022

Three Months Ended June 30,

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

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Three Months Ended September 30,

(in thousands)

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Total Revenues .

Total revenues for the three months ended June 30, 2023 ("2023 Quarter") increased 3.5% to $641.8 million compared to $619.9 million for the three months ended June 30, 2022 ("2022 Quarter") as a result of higher coal sales price per ton, partially offset primarily by lower average oil & gas sales price per BOE.

Total revenues for the three months ended September 30, 2023 ("2023 Quarter") increased slightly to $636.5 million compared to $632.5 million for the quarter ended September 30, 2022 (the "2022 Quarter") primarily as a result of higher transportation and other revenues, partially offset by lower oil & gas royalties.

Total operating expenses .

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Net income attributable to ARLP .

Increased revenues, partially offset by higher total operating expenses, led to net income attributable to ARLP for the 2023 Quarter of $169.8 million, or $1.30 per basic and diluted limited partner unit, compared to $163.5 million, or $1.23 per basic and diluted limited partner unit, for the 2022 Quarter.

Coal sales increased $28.5 million or 5.4% to $560.3 million for the 2023 Quarter from $531.8 million for the 2022 Quarter.

The increase was attributable to a price variance of $30.2 million due to higher average coal sales prices, partially offset by a volume variance of $1.7 million resulting from reduced tons sold.

Improved price realizations in domestic markets during the 2023 Quarter drove coal sales prices higher by 5.7% in the 2023 Quarter to $62.93 per ton sold, compared to $59.53 per ton sold during the 2022 Quarter.

Net income attributable to ARLP for 2023 Quarter was $153.7 million, or $1.18 per basic and diluted limited partner unit, compared to $167.7 million, or $1.25 per basic and diluted limited partner unit, for the 2022 Quarter as a result of increased total operating expenses and equity method investment losses in the 2023 Quarter, partially offset by increased revenues, higher interest income and lower income tax expense.

Coal sales remained consistent at $549.1 million for the 2023 Quarter compared to $550.6 million for the 2022 Quarter.

The slight decrease was attributable to lower tons sold, which reduced coal sales by $43.7 million, partially offset by the benefit of higher average coal sales prices, which contributed $42.3 million in additional coal sales.

Tons sold decreased by 7.9% primarily due to decreased sales volumes in Appalachia as a result of lock outages, customer plant maintenance, reduced operating units at MC Mining and unique geologic conditions that delayed development of a new district at our Mettiki longwall operation.

Improved domestic pricing, partially offset by lower export price realizations, drove coal sales prices higher by 8.3% in the 2023 Quarter to $64.94 per ton sold, compared to $59.94 per ton sold during the 2022 Quarter.

Coal - Segment Adjusted EBITDA Expense .

Segment Adjusted EBITDA Expense for our coal operations increased 4.7% to $348.3 million, as a result of higher per ton costs.

Segment Adjusted EBITDA Expense per ton sold for our coal operations increased 7.8% to $37.85 per ton sold in the 2023 Quarter compared to $35.12 per ton in the 2022 Quarter, primarily due to certain cost increases, which are discussed below by category:

Segment Adjusted EBITDA Expense per ton sold for our coal operations increased 13.8% to $41.19 per ton sold in the 2023 Quarter compared to $36.20 per ton in the 2022 Quarter, primarily due to lower volumes and certain cost increases, which are discussed below by category:

● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 17.5% to $12.37 per ton in the 2023 Quarter from $10.53 per ton in the 2022 Quarter.

The increase of $0.78 per ton was primarily due to higher incentive benefits and direct labor costs at several mines.

● Workers' compensation expenses per ton produced increased to $0.52 per ton in the 2023 Quarter from $(0.15) per ton in the 2022 Quarter.

The increase of $0.67 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.

The increase of $1.84 per ton was primarily due to higher direct labor costs at several mines.

● Material and supplies expenses per ton produced increased 5.7% to $13.93 per ton in the 2023 Quarter from $13.18 per ton in the 2022 Quarter.

The increase of $0.75 per ton produced primarily reflects increases of $0.54 per ton for roof support, $0.26 per ton for ventilation related expenses and $0.17 per ton for power and fuel.

These increases were partially offset by decreases of $0.26 per ton in longwall subsidence expense, $0.17 per ton for outside expenses and $0.16 per ton for contract labor used in the mining process .

● Maintenance expenses per ton produced increased 35.4% to $4.86 per ton in the 2023 Quarter from $3.59 per ton in the 2022 Quarter.

The increase of $0.44 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 increased $0.27 per produced ton sold in the 2023 Quarter compared to the 2022 Quarter primarily as a result of higher price realizations, increased excise taxes per ton resulting from a reduced mix of export shipments and higher federal black lung excise tax as a result of the tax rate increasing effective October 1, 2022, partially offset by a favorable mix of tons sold mined in states without severance taxes.

● Outside coal purchases increased $4.1 million in the 2023 Quarter as a result of increased sales from purchased coal, which generally costs more on a per ton basis than our produced coal.

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

● Material and supplies expenses per ton produced decreased 6.1% to $12.84 per ton in the 2023 Quarter from $13.68 per ton in the 2022 Quarter.

The decrease of $0.84 per ton produced primarily reflects decreases of $0.69

per ton for roof support, $0.16 per ton for outside expenses used in the mining process and $0.13 per ton in longwall subsidence expense, partially offset by an increase of $0.17 per ton for various preparation plant expenses.

● 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 sale price realizations in the future.

The increase of $1.27 per ton produced was primarily as a result of reduced production volumes and inflationary cost pressures.

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices increased $0.83 per produced ton sold in the 2023 Quarter compared to the 2022 Quarter primarily as a result of higher price realizations, increased excise taxes per ton resulting from a reduced mix of export shipments, higher federal black lung excise tax as a result of the tax rate increasing effective October 1, 2022 and an unfavorable mix of tons sold mined in states with severance taxes.

● We had outside coal purchases of $11.5 million to meet contractual commitments in the 2023 Quarter as a result of unique geological conditions that delayed development of a new district at our Mettiki longwall operation compared to no sales of outside coal purchases in the 2022 Quarter.

Thus, costs per ton in the 2023 Quarter increased as our cost of outside coal purchases are generally higher on a per ton basis than our produced coal.

Oil & gas royalties.

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Other revenues increased to $18.3 million in the 2023 Quarter from $14.7 million in the 2022 Quarter.

The increase of $4.5 million was primarily due to increased sales of mining technology products by our Matrix Design subsidiary.

The increase of $3.6 million was primarily due to increased transloading revenues and sales of mining technology products by our Matrix Design subsidiary as well as higher revenues from other miscellaneous sales activities.

Depreciation, depletion and amortization.

Depreciation, depletion and amortization expense decreased to $65.4 million for the 2023 Quarter compared to $70.7 million for the 2022 Quarter primarily as a result of reduced coal sales volumes.

Equity method investment income (loss) .

We had an equity method investment loss of $1.8 million in the 2023 Quarter compared to equity method investment income of $2.1 million in the 2022 Quarter.

The change was primarily due to losses attributable to our investment in Francis, partially offset by income from our AllDale III investment.

Income tax expense.

Income tax expense decreased to $3.4 million for the 2023 Quarter compared to $6.6 million for the 2022 Quarter primarily as a result of reduced income from our oil & gas mineral interests.

Transportation revenues and expenses .

Transportation revenues and expenses were $35.0 million and $28.5 million for the 2023 and 2022 Quarters, respectively.

The decrease of $4.9 million was primarily attributable to decreased average third-party transportation rates in the 2022 Quarter and reduced coal shipments for which we arrange third-party transportation.

The increase of $6.5 million was primarily attributable to increased third-party transportation rates in the 2023 Quarter, partially offset by reduced 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 2023 Quarter Segment Adjusted EBITDA of $269.4 million remained consistent with the 2022 Quarter Segment Adjusted EBITDA of $269.3 million.

Our 2023 Quarter Segment Adjusted EBITDA decreased $27.5 million to $247.7 million from the 2022 Quarter Segment Adjusted EBITDA of $275.2 million.

Three Months Ended

September 30,

Increase (Decrease)

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The increase of $11.6 million was primarily attributable to higher coal sales, which increased 9.1% to $342.7 million in the 2023 Quarter from $314.3 million in the 2022 Quarter, partially offset by increased operating expenses.

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

Coal sales price per ton sold in the 2023 Quarter increased by 9.8% compared to the 2022 Quarter reflecting improved domestic price realizations.

Tons sold increased by 4.0% compared to the 2022 Quarter due primarily to increased volumes from the Hamilton and Warrior mines.

Segment Adjusted EBITDA Expense increased 10.3% to $214.7 million in the 2023 Quarter from $194.7 million in the 2022 Quarter primarily as a result of increased sales volumes and higher expenses per ton.

Segment Adjusted EBITDA Expense per ton increased by 6.0% compared to the 2022 Quarter resulting from higher labor-related expenses and maintenance costs as well as increased sales-related expenses due to higher price realizations.

The increase in coal sales reflects higher coal sales price realizations of $56.66 per ton sold in the 2023 Quarter compared to $51.44 per ton sold in the 2022 Quarter due to improved domestic pricing, partially offset by lower export price realizations.

Segment Adjusted EBITDA Expense increased 9.4% to $213.2 million in the 2023 Quarter from $195.0 million in the 2022 Quarter primarily as a result of higher operating expenses per ton.

Segment Adjusted EBITDA Expense per ton increased by 10.5% compared to the 2022 Quarter resulting from increased sales-related expenses due to higher price realizations and higher labor-related, roof support and maintenance costs due to days lost by a sizable roof fall in July and a longwall move in August at our Hamilton mine.

Appalachia Coal Operations – Segment Adjusted EBITDA decreased 26.6% to $74.8 million for the 2023 Quarter from $102.0 million in the 2022 Quarter.

The decrease of $14.8 million was primarily attributable to lower coal sales, which decreased 5.3% to $228.5 million in the 2023 Quarter from $241.4 million in the 2022 Quarter, and higher operating expenses.

Coal sales volumes decreased by 8.5% compared to the 2022 Quarter as a result of reduced export sales across the region and lower production from our MC Mining operation.

Coal sales prices increased by 3.5% compared to the 2022 Quarter primarily due to improved price realizations in domestic markets.

Segment Adjusted EBITDA Expense increased slightly to $119.3 million in the 2023 Quarter from $117.4 million in the 2022 Quarter due to higher per ton expenses, partially offset by reduced sales volumes.

Segment Adjusted EBITDA Expense per ton increased $4.20 per ton sold to $42.04 compared to $37.84 per ton sold in the 2022 Quarter, as a result of increased labor-related expenses, purchased coal, and higher inventory charges, partially offset by increased recoveries and lower selling expenses due to a greater mix of coal sales from operations in states with lower severance taxes per ton during the 2023 Quarter.

Oil & Gas Royalties – Segment Adjusted EBITDA decreased 22.8% to $29.1 million in the 2023 Quarter compared to $37.6 million in the 2022 Quarter primarily due to lower average sales price per BOE, partially offset by higher BOE sold.

Higher BOE volumes during the 2023 Quarter resulted from increased drilling and completion activities on our properties and additional volumes from oil & gas mineral interest acquisitions.

Coal Royalties – Segment Adjusted EBITDA increased 20.2% to $11.0 million for the 2023 Quarter compared to $9.1 million for the 2022 Quarter as a result of higher average royalty rates per ton received from our mining subsidiaries, partially offset by fewer royalty tons sold.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Six Months Ended June 30,

The decrease of $27.2 million was primarily attributable to lower coal sales, which decreased 12.7% to $206.4 million in the 2023 Quarter from $236.3 million in the 2022 Quarter.

Tons sold decreased by 21.7% compared to the 2022 Quarter as a result of reduced volumes across the region primarily from lock outages, customer plant maintenance, reduced operating units at MC Mining and unique geologic conditions that delayed development of a new district at our Mettiki longwall operation.

Improved domestic pricing, partially offset by lower export price realizations, drove coal sales prices higher by 11.6% as compared to the 2022 Quarter.

Segment Adjusted EBITDA Expense decreased 2.0% to $132.0 million in the 2023 Quarter from $134.7 million in the 2022 Quarter due to reduced sales volumes, partially offset by higher per ton operating expenses.

Segment Adjusted EBITDA Expense per ton increased by 25.3% compared to the 2022 Quarter due primarily to lower production volumes, purchased coal and increased labor-related, roof support, maintenance and selling expenses per ton.

Oil & Gas Royalties – Segment Adjusted EBITDA decreased to $31.4 million in the 2023 Quarter compared to $39.4 million in the 2022 Quarter.

The decrease primarily resulted from lower price realizations, which decreased by 31.2%, partially offset by record oil & gas volumes, which increased 28.2% to 772 MBOE sold in the 2023 Quarter.

Higher volumes during the 2023 Quarter resulted from increased drilling and completion activities on our interests and the acquisition of additional oil & gas mineral interests.

Coal Royalties – Segment Adjusted EBITDA was $9.9 million for the 2023 Quarter, representing a decrease of $1.3 million compared to the 2022 Quarter, as a result of lower royalty tons sold and increased selling expenses, partially offset by higher average royalty rates per ton received from the Partnership's mining subsidiaries.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Nine Months Ended September 30,

(in thousands)

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Total Revenues .

Total revenues for the six months ended June 30, 2023 ("2023 Period") increased 20.4% to $1.30 billion compared to $1.08 billion for the six months ended June 30, 2022 ("2022 Period") as a result of significantly higher coal sales.

Coal sales increased 23.8% to $1.14 billion in the 2023 Period from $920.2 million in the 2022 Period due to $204.0 million in higher price realizations in domestic markets, which reflects a 21.8% increase to $65.57 per ton sold compared to $53.83 per ton sold in the 2022 Period, and $15.0 million in increased coal sales volumes, reflecting a 1.6% increase compared to the 2022 Period.

Total revenues for the nine months ended September 30, 2023 ("2023 Period") increased 13.1% to $1.94 billion compared to $1.72 billion for the nine months ended September 30, 2022 ("2022 Period") primarily as a result of higher coal sales.

Coal sales prices and coal sales revenues during the 2023 Period were higher by 16.8% and 14.8%, respectively, compared to the 2022 Period.

Total operating expenses .

Total operating expenses increased to $913.5 million in the 2023 Period, compared to $816.7 million in the 2022 Period, due primarily to higher per ton costs on certain expense items discussed in more detail below and increased coal sales volumes.

Total operating expenses increased to $1.38 billion in the 2023 Period, compared to $1.27 billion in the 2022 Period, due primarily to higher per ton costs on certain expense items discussed in more detail below and sale of higher cost purchased coal.

Net income attributable to ARLP .

Increased revenues and lower income tax expense, partially offset by higher total operating expenses, led net income attributable to ARLP for the 2023 Period to $361.0 million, or $2.75 per basic and diluted limited partner unit, compared to $201.6 million, or $1.51 per basic and diluted limited partner unit, for the 2022 Period.

Increased revenues and lower income tax expense were partially offset by higher total operating expenses in the 2023 Period, resulting in higher net income attributable to ARLP for the 2023 Period of $514.7 million, or $3.93 per basic and diluted limited partner unit, compared to $369.3 million, or $2.76 per basic and diluted limited partner unit, for the 2022 Period.

Coal sales increased $217.5 million to $1.69 billion for the 2023 Period compared to $1.47 billion for the 2022 Period.

The increase reflects the benefit of higher average coal sales prices, which contributed $242.7 million in additional coal sales, partially offset by lower tons sold, which reduced coal sales by $25.2 million.

Higher price realizations in domestic markets drove coal sales prices higher by 16.8% in the 2023 Period to $65.36 per ton sold, compared to $55.96 per ton sold during the 2022 Period.

Coal - Segment Adjusted EBITDA Expense .

Segment Adjusted EBITDA Expense for our coal operations increased 16.9% to $672.9 million, as a result of higher coal sales volumes and inflationary cost pressures.

Segment Adjusted EBITDA Expense for our coal operations increased 12.5% to $1.02 billion, as a result of higher per ton costs.

On a per ton basis, Segment Adjusted EBITDA Expense for our coal operations increased 14.4% to $39.54 per ton sold in the 2023 Period compared to $34.55 per ton in the 2022 Period, primarily due to certain cost increases, which are discussed below by category:

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● Material and supplies expenses per ton produced increased 3.7% to $13.57 per ton in the 2023 Period from $13.08 per ton in the 2022 Period.

The increase of $0.37 per ton produced primarily reflects increases of $0.27 per ton for ventilation related expenses, $0.21 per ton for various preparation plant expenses, $0.15 per ton for safety related materials and supplies and $0.12 per ton for power and fuel, partially offset by a decrease of $0.49 per ton for roof support.

The increase of $0.49 per ton produced primarily reflects increases of $0.26 per ton for ventilation related expenses, $0.14 per ton for various preparation plant expenses and $0.14 per ton for power and fuel, partially offset by a decrease of $0.15 per ton for roof support.

● Maintenance expenses per ton produced increased 27.7% to $4.43 per ton in the 2023 Period from $3.47 per ton in the 2022 Period.

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● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $0.94 per produced ton sold in the 2023 Period compared to the 2022 Period primarily as a result of higher price realizations, increased excise taxes per ton resulting from a reduced mix of export shipments and higher federal black lung excise tax as a result of the tax rate increasing effective October 1, 2022, partially offset by a favorable mix of tons sold mined in states without severance taxes.

● Outside coal purchases increased $15.6 million in the 2023 Period as a result of increased sales of purchased coal to meet contractual commitments at our Mettiki longwall operation which experienced unique geological conditions that delayed development of a new district.

Purchased coal generally costs more on a per ton basis than our produced coal.

Oil & gas royalties.

Oil & gas royalty revenues decreased to $101.7 million in the 2023 Period compared to $111.4 million for the 2022 Period.

The decrease of $9.7 million was primarily due to lower average sales price per BOE, which decreased by 32.8%, partially offset by higher BOE volumes.

Other revenues .

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Vernon transloading revenues, oil & gas lease bonus revenues and other miscellaneous sales and revenue activities.

Other revenues increased to $37.3

million in the 2023 Period from $25.7 million in the 2022 Period.

The increase of $11.6 million was primarily due to increased sales of mining technology products by our Matrix Design subsidiary.

Other revenues increased to $55.6 million in the 2023 Period from $40.3 million in the 2022 Period.

The increase of $15.3 million was primarily due to increased transloading revenues and sales of mining technology products by our Matrix Design subsidiary as well as higher revenues from other miscellaneous sales activities.

Income tax expense.

Income tax expense decreased to $8.2 million for the 2023 Period compared to $49.0 million for the 2022 Period as a result of our recognition of a one-time non-cash income tax charge of $37.3 million during the 2022 Period when Alliance Minerals elected to be treated as a taxable entity for federal and state income tax purposes.

Income tax expense decreased to $11.6 million for the 2023 Period compared to $55.6 million for the 2022 Period primarily as a result of our recognition of a one-time non-cash income tax charge of $37.3 million during the 2022 Period when Alliance Minerals elected to be treated as a taxable entity for federal and state income tax purposes.

Segment Adjusted EBITDA.

Our 2023 Period Segment Adjusted EBITDA increased $118.8 million to $561.3 million from the 2022 Period Segment Adjusted EBITDA of $442.5 million.

Six Months Ended

Our 2023 Period Segment Adjusted EBITDA increased 12.7% to $809.0 million from the 2022 Period Segment Adjusted EBITDA of $717.7 million.

Nine Months Ended

September 30,

Increase (Decrease)

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(2) 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.

(3) 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 GAAP 'net income' to non-GAAP 'Segment Adjusted EBITDA' and reconciliation of GAAP 'Operating Expenses' to non-GAAP 'Segment Adjusted EBITDA Expense.'"

income' to non-GAAP 'Segment Adjusted EBITDA' and reconciliation of GAAP 'Operating Expenses' to non-GAAP 'Segment Adjusted EBITDA Expense.'"

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

1 unchanged sentence

Illinois Basin Coal Operations – Segment Adjusted EBITDA increased 29.6% to $384.0 million in the 2023 Period from $296.3 million in the 2022 Period.

The increase of $76.0 million was primarily attributable to higher coal sales, which increased 22.9% to $668.7 million in the 2023 Period from $544.3 million in the 2022 Period, partially offset by increased operating expenses.

The increase in coal sales reflects higher coal sales price per ton, which increased by 17.4% compared to the 2022 Period reflecting increased domestic prices, and increased tons sold, which rose 4.6% in the 2023 Period as a result of increased sales volumes at the Warrior, Gibson South and Hamilton mines.

Segment Adjusted EBITDA Expense increased 13.3% to $421.7 million in the 2023 Period from $372.3 million in the 2022 Period primarily as a result of increased sales volumes and higher expenses per ton.

The increase of $87.7 million was primarily attributable to higher coal sales, which increased 17.8% to $1.01 billion in the 2023 Period from $858.6 million in the 2022 Period, partially offset by increased operating expenses.

The increase in coal sales reflects higher coal sales price per ton, which increased by 14.7% compared to the 2022 Period reflecting increased domestic prices, and increased tons sold, which rose 2.7% in the 2023 Period as a result of increased sales volumes at the Warrior and Gibson South mines.

Segment Adjusted EBITDA Expense increased 11.9% to $634.9 million in the 2023 Period from $567.3 million in the 2022 Period primarily as a result of increased sales volumes and higher operating expenses per ton.

Segment Adjusted EBITDA Expense per ton increased $2.86 per ton sold to $34.69 from $31.83 per ton sold in the 2022 Period primarily as a result of inflationary pressures on numerous expense items, including labor-related expenses, maintenance costs and increased sales-related expenses due to higher price realizations.

Appalachia Coal Operations – Segment Adjusted EBITDA increased 8.5% to $301.0 million for the 2023 Period from $277.5 million in the 2022 Period.

The increase of $50.6 million was primarily attributable to higher coal sales, which increased 25.1% to $470.4 million in the 2023 Period from $375.9 million in the 2022 Period, due to increased prices.

Coal sales prices increased by 31.6% compared to the 2022 Period primarily due to increased export and domestic price realizations in the region.

Partially offsetting higher prices, coal sales volumes decreased 4.9% compared to the 2022 Period as a result of reduced export sales from our Tunnel Ridge operation and lower production across the region.

Segment Adjusted EBITDA Expense increased 21.9% to $245.1 million in the 2023 Period from $201.1 million in the 2022 Period due to higher per ton expenses.

Segment Adjusted EBITDA Expense per ton increased 28.2% to $47.90 compared to $37.36 per ton sold in the 2022 Period, as a result of increased longwall move days at the Tunnel Ridge and Mettiki mines, reduced recoveries at the MC Mining operation and inflationary pressures on certain expense items, most notably labor-related expenses and materials and maintenance costs, and increased sales-related expenses due to higher price realizations.

The increase of $23.5 million was primarily attributable to higher coal sales, which increased 10.6% to $676.8 million in the 2023 Period from $612.2 million in the 2022 Period, due to increased prices, partially offset by reduced sales volumes.

Coal sales prices increased by 24.3% compared to the 2022 Period primarily due to increased domestic price realizations in the region.

Coal sales volumes decreased 11.0% compared to the 2022 Period as a result of reduced export sales from our Tunnel Ridge operation and lower production across the region due to lock outages, customer plant maintenance, reduced operating units at MC Mining, and unique geologic conditions that delayed development of a new district at our Mettiki longwall operation.

Segment Adjusted EBITDA Expense increased 12.3% to $377.1 million in the 2023 Period from $335.8 million in the 2022 Period due to higher per ton operating expenses, partially offset by lower volumes.

Segment Adjusted EBITDA Expense per ton increased 26.2% to $50.12 compared to $39.70 per ton sold in the 2022 Period, as a result of lower volumes previously discussed, purchased coal and inflationary pressures on certain expense items, most notably labor-related expenses and materials and maintenance costs, and increased sales-related expenses due to higher price realizations.

Oil & Gas Royalties – Segment Adjusted EBITDA decreased to $90.5 million for the 2023 Period from $107.9 million in the 2022 Period.

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Coal Royalties – Segment Adjusted EBITDA increased 1.2% to $31.0 million for the 2023 Period from $30.6 million in the 2022 Period.

The increase of $1.6 million was a result of higher average royalty rates per ton, partially offset by reduced royalty tons sold.

The slight increase was a result of higher average royalty rates per ton, partially offset by reduced royalty tons sold.

Reconciliation of GAAP "net income"

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Segment Adjusted EBITDA is a key component of consolidated EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others.

We believe that the presentation of EBITDA provides useful information to investors regarding our performance and results of operations because EBITDA, when used in conjunction with related GAAP

financial measures, (i) provides additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provides investors with the financial analytical framework upon which we base financial, operational, compensation and planning decisions and (iii) presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.

We believe that the presentation of EBITDA provides useful information to investors regarding our performance and results of operations because EBITDA, when used in conjunction with related GAAP financial measures, (i) provides additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provides investors with the financial analytical framework upon which we base financial, operational, compensation and planning decisions and (iii) presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.

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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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in our Annual Report on Form 10-K for the year ended December 31, 2022.

Oil & Gas Acquisitions — As of June 30, 2023, we have purchased mineral interests for $1.1 million and $3.9 million for the three and six months ended June 30, 2023, respectively, with cash on hand under our $35.0 million Acquisition Agreement.

Future acquisitions under the Acquisition Agreement are expected to be funded with cash on hand or cash generated from operations.

Oil & Gas Acquisitions — As of September 30, 2023, we have purchased oil & gas mineral interests for $10.0 million and $13.9 million for the three and nine months ended September 30, 2023, respectively, with cash on hand.

Future oil & gas mineral interest acquisitions are expected to be funded with cash on hand or cash generated from operations.

On February 22, 2023, we closed on the JC Resources Acquisition for $72.3 million, which was funded with cash on hand.

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of this Quarterly Report on Form 10-Q for additional information about the Acquisition Agreement and the JC Resources Acquisition.

On August 22, 2023, we purchased $25.0 million of Series D Preferred Stock from Ascend with cash on hand.

On September 8, 2023, we purchased $24.6 million of Series E Preferred Stock from Infinitum with cash on hand.

Please read "Item 1.

Financial Statements (Unaudited) – Note 9 – Equity Investments"

of this Quarterly Report on Form 10-Q for additional information about the Ascend and Infinitum investments.

Credit Facility — On January 13, 2023, Alliance Coal, as borrower, entered into a Credit Agreement (the "Credit Agreement") with various financial institutions.

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Unit Repurchase Program — In May 2018, the Board of Directors approved the establishment of a unit repurchase program authorizing us to repurchase up to $100 million of ARLP common units.

In January 2023, the Board

of Directors authorized a $93.5 million increase to the unit repurchase program, which had $6.5 million of available capacity as of December 31, 2022.

In January 2023, the Board of Directors authorized a $93.5 million increase to the unit repurchase program, which had $6.5 million of available capacity as of December 31, 2022.

The program has no time limit and we may repurchase units from time to time in the open market or in other privately negotiated transactions.

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

During the six months ended June 30, 2023, we repurchased and retired 929,842 units at an average price of $20.90 for an aggregate purchase price of $19.4 million.

During the nine months ended September 30, 2023, we repurchased and retired 929,842 units at an average price of $20.90 for an aggregate purchase price of $19.4 million.

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

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of this Quarterly Report on Form 10-Q for more information on the unit repurchase program.

Repurchase of Senior Notes — During the six months ended June 30, 2023, we repurchased $60.8 million of our 7.5% senior notes due 2025.

In July 2023, we redeemed an additional $50.0 million of our Senior Notes.

At June 30, 2023, the aggregate principal amount of our outstanding 7.5% senior notes due 2025 was $339.2 million.

We expect to continue additional purchases with available cash flows.

Repurchase or Redemption of Senior Notes — During the nine months ended September 30, 2023, we repurchased or redeemed $115.4 million of our 7.5% senior notes due 2025.

At September 30, 2023, the aggregate principal amount of our outstanding 7.5% senior notes due 2025 was $284.6 million.

We expect to continue making additional purchases or redemptions with available cash flows and/or additional borrowings.

Shelf Registration Statement — We currently have an effective universal shelf Registration Statement on Form S-3 that provides for the registration and sale of an unspecified amount of our equity or debt securities.

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Cash provided by operating activities was $735.4 million for the 2023 Period compared to $556.2 million for the 2022 Period.

The increase in cash provided by operating activities was primarily due to an increase in net income adjusted for non-cash items and favorable working capital changes related primarily to trade receivables and workers' compensation accruals.

These increases were partially offset by unfavorable working capital changes related primarily to accrued payroll and related benefits accruals, as well as miscellaneous other changes compared to the 2022 Period.

These increases were partially offset by unfavorable working capital changes related primarily to inventories, accrued taxes other than income taxes, as well as miscellaneous other changes compared to the 2022 Period.

Net cash used in investing activities was $444.5 million for the 2023 Period compared to $247.5 million for the 2022 Period.

The increase in cash used in investing activities was primarily attributable to an increase in capital expenditures, change in accounts payable and accrued liabilities and the acquisition of oil & gas reserves under the JC Resources Acquisition and the Acquisition Agreement.

These increases were partially offset by decreases in contributions to equity method investments and purchases of equity securities compared to the 2022 period.

The increase in cash used in investing activities was primarily attributable to increases in capital expenditures, changes in accounts payable and accrued liabilities, purchases of equity securities and acquisitions of oil & gas reserves including the JC Resources Acquisition.

These increases were partially offset by decreased equity method investments.

Please read "Item 1.

Financial Statements (Unaudited) - Note 2 – Acquisitions"

of this Quarterly Report on Form 10-Q for additional information about the JC Resources Acquisition and the Acquisition Agreement.

of this Quarterly Report on Form 10-Q for additional information about the JC Resources Acquisition and other oil & gas reserve acquisitions.

Net cash used in financing activities was $389.7 million for the 2023 Period compared to $152.6 million for the 2022 Period.

The increase in cash used in financing activities was primarily attributable to increased cash distributions paid to unitholders, the repurchase of senior notes during the 2023 Period, debt issuance costs, settlements under deferred compensation plans and the purchase of units under the unit repurchase program.

The increase in cash used in financing activities was primarily attributable to increased cash distributions paid to unitholders, the repurchase and redemption of senior notes during the 2023 Period, debt issuance costs, settlements under deferred compensation plans and the purchase of units under the unit repurchase program.

These increases were partially offset by increased long-term borrowings.

Cash Requirements

Management anticipates having sufficient cash flow to meet 2023 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 June 30, 2023 cash and cash equivalents of $284.9 million, cash flows from operations, or borrowings under our Revolving Credit Facility and Securitization Facility, if necessary.

Management anticipates having sufficient cash flow to meet 2023 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, 2023 cash and cash equivalents of $197.2 million, cash flows from operations, or borrowings under our Revolving Credit Facility and Securitization Facility, if necessary.

We currently project average estimated annual maintenance capital expenditures over the next five years of approximately $7.05 per ton produced.

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

On June 30, 2023, we had $5.0 million in letters of credit outstanding under this agreement.

On September 30, 2023, we had $5.0 million in letters of credit outstanding under this agreement.

Related-Party Transactions

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For more information regarding our investments, please read "Item 1.

Financial Statements (Unaudited) — Note 9 – Investments"

Financial Statements (Unaudited) — Note 9 – Equity 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