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Item 1. Financial Statements

2024-05-09 compared with 2023-11-08 · 226 added, 335 removed, 415 unchanged (57% of the section changed)

4 unchanged sentences

(In thousands, except unit data)

September 30,

CURRENT ASSETS:

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Advance royalties

Digital assets

Prepaid expenses and other assets

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Limited Partners - Common Unitholders 128,061,981 and 127,125,437 units outstanding, respectively

General Partner's interest

Accumulated other comprehensive loss

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TOTAL LIABILITIES AND PARTNERS' CAPITAL

*Recast as discussed in Note 1 – Organization and Presentation.

See notes to condensed consolidated financial statements.

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Three Months Ended

Nine Months Ended

September 30,

SALES AND OPERATING REVENUES:

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INCOME FROM OPERATIONS

Interest expense (net of interest capitalized for the three and nine months ended September 30, 2023 and 2022 of $ 1,809 , $ 264 , $ 4,432 and $ 505 , respectively)

Interest expense (net of interest capitalized for the three months ended March 31, 2024 and 2023 of $ 2,298 and $ 1,407 , respectively)

Interest income

Equity method investment income (loss)

Other income (expense)

Change in fair value of digital assets

Other expense

INCOME BEFORE INCOME TAXES

7 unchanged sentences

WEIGHTED-AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED

* Recast as discussed in Note 1 – Organization and Presentation.

See notes to condensed consolidated financial statements .

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Three Months Ended

Nine Months Ended

September 30,

OTHER COMPREHENSIVE INCOME:

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(1) Amortization of prior service cost and net actuarial loss is included in the computation of net periodic benefit cost (credit) (see Notes 15 and 17 for additional details).

* Recast as discussed in Note 1 – Organization and Presentation.

See notes to condensed consolidated financial statements.

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(In thousands)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

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Contributions to equity method investments

Purchase of equity securities

JC Resources acquisition

Payments for acquisitions of businesses

Escrow deposit for oil & gas reserve acquisition

Oil & gas reserve acquisition

Oil & gas reserve asset acquisitions

Net cash used in investing activities

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Payments under securitization facility

Proceeds from equipment financings

Payments on equipment financings

Borrowings under revolving credit facilities

Payments under revolving credit facilities

Borrowing under long-term debt

Payments on long-term debt

Payments on finance lease obligations

Payment of debt issuance costs

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Cash paid for interest

Cash paid for income taxes

SUPPLEMENTAL NON-CASH ACTIVITY:

Accounts payable for purchase of property, plant and equipment

Right-of-use assets acquired by operating lease

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

* Recast as discussed in Note 1 – Organization and Presentation.

See notes to condensed consolidated financial statements.

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Significant Relationships Referenced in Notes to Condensed Consolidated Financial Statements

● References to "we,"

"us,"

"our"

or "ARLP Partnership"

mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.

● References to "ARLP"

mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.

● References to "MGP"

mean Alliance Resource Management GP, LLC, ARLP's general partner.

● References to "Mr.

mean Joseph W.

● References to "we," "us," "our" or "ARLP Partnership" mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.

● References to "ARLP" mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.

● References to "MGP" mean Alliance Resource Management GP, LLC, ARLP's general partner.

● References to "Mr.

Craft" mean Joseph W.

Craft III, the Chairman, President and Chief Executive Officer of MGP.

● References to "Intermediate Partnership"

mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.

● References to "Alliance Coal"

mean Alliance Coal, LLC, an indirect wholly owned subsidiary of ARLP.

● References to "Alliance Minerals"

mean Alliance Minerals, LLC, an indirect wholly owned subsidiary of ARLP.

● References to "Alliance Resource Properties"

mean Alliance Resource Properties, LLC, an indirect wholly owned subsidiary of ARLP.

ARLP is a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol "ARLP."

ARLP was formed in May 1999 and completed its initial public offering on August 19, 1999 when it acquired substantially all of the coal production and marketing assets of Alliance Resource Holdings, Inc., a Delaware corporation, and its subsidiaries.

● References to "Intermediate Partnership" mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.

● References to "Alliance Coal" mean Alliance Coal, LLC, an indirect wholly owned subsidiary of ARLP.

● References to "Alliance Minerals" mean Alliance Minerals, LLC, an indirect wholly owned subsidiary of ARLP.

● References to "Alliance Resource Properties" mean Alliance Resource Properties, LLC, an indirect wholly owned subsidiary of ARLP.

ARLP is a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol "ARLP." ARLP was formed in May 1999 and completed its initial public offering on August 19, 1999 when it acquired substantially all of the coal production and marketing assets of Alliance Resource Holdings, Inc., a Delaware corporation, and its subsidiaries.

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

JC Resources Acquisition

On February 22, 2023, we acquired approximately 2,682 oil & gas net royalty acres in the Delaware Basin from JC Resources LP ("JC Resources"), an entity owned by Mr.

Craft, for $ 72.3 million, which was funded with cash on hand ("JC Resources Acquisition").

Because JC Resources is owned by Mr.

Craft, the JC Resources Acquisition is accounted for as a reorganization of entities under common control, whereby the assets and liabilities acquired from JC Resources are combined with the ARLP Partnership at their historical amounts for all periods presented.

The recasting of 2022 for the JC Resources Acquisition increased revenues by $ 4.0 million and $ 10.0 million for the three and nine months ended September 30, 2022, respectively, and increased income from operations, net income and comprehensive income by $ 3.1 million and $ 6.6 million for the three and nine months ended September 30, 2022, respectively.

We did not recast historical earnings per limited partner unit as pre-acquisition earnings from the JC Resources Acquisition were allocated to our general partner.

For more information on this acquisition please see Note 2 – Acquisitions.

Ascend Investment

On August 22, 2023, we purchased $ 25.0 million of Series D Preferred Stock (the "Ascend Preferred Stock") from Ascend Elements, Inc.

("Ascend"), a U.S.-based manufacturer and recycler of sustainable, engineered battery materials for electric vehicles.

The Ascend Preferred Stock provides for non-cumulative dividends when and if declared by Ascend's board of directors.

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

Our investment in Ascend furthers our business strategy to pursue opportunities that support the advancement of energy and related infrastructure and leverage our core competencies and relationships.

For more information on this investment please see Note 9 – Equity Investments.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts and operations of the ARLP Partnership and present our financial position as of September 30, 2023 and December 31, 2022, the results of our operations and comprehensive income for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022.

The accompanying condensed consolidated financial statements include the accounts and operations of the ARLP Partnership and present our financial position as of March 31, 2024 and December 31, 2023 and the results of our operations, comprehensive income and cash flows for the three months ended March 31, 2024 and 2023.

All intercompany transactions and accounts have been eliminated.

These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and do not include all the information normally included with financial statements prepared in accordance with generally accepted accounting principles ("GAAP") of the United States.

Certain immaterial amounts in the prior quarter have been reclassified to conform to the current quarter presentation.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and on deposit, including highly liquid investments with maturities of three months or less.

At times the ARLP Partnership maintains deposits in federally insured financial institutions in excess of stated federally insured limits.

Management monitors the credit ratings and concentration of risk with these financial institutions on a continuing basis to safeguard cash deposits.

Based on this monitoring and other diligence, including discussions with representatives of the financial institutions, we have no reason to believe that any of the financial institutions in which we have deposits in excess of stated federally insured limits are facing financial difficulties, defaults or limited liquidity situations that would cause us to be unable to access to our deposits.

Digital Assets

We began our crypto-mining activities during the second half of 2020 as we started mining bitcoin as a pilot project to monetize already paid for, yet underutilized, electricity load.

We continue to periodically be awarded digital assets through our crypto-mining activities.

The awards are accounted for as revenue and valued at the exchange quoted price at the time they are awarded.

Beginning January 1, 2024, with our adoption of the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60) ("ASU 2023-08"), the digital assets we hold are subsequently remeasured to fair value based on the exchange quoted price as of the balance sheet date and included on our condensed consolidated balance sheets within the Digital assets line item.

The fair value of our digital assets are based on the exchange quoted price and represent a Level 1 input under the fair value hierarchy.

The activity from remeasurement of digital assets to fair value is reflected in our condensed consolidated statements of income within the Change in fair value of digital assets line item.

Digital assets sold for cash nearly immediately after they are awarded to us for mining activities are presented as cash flows from operating activities, while other sales are reflected as cash flows from investing activities in our condensed consolidated statements of cash flows.

Our realized gains or losses are determined as the difference between the proceeds received when the digital assets are sold and our cost basis in the digital assets.

Our cost basis is the value of the digital assets when they are awarded less any impairment recognized prior to our adoption of ASU 2023-08.

We use a first-in, first-out methodology to assign costs to our digital assets in the calculation of our realized gains or losses.

See Note 6 – Digital Assets for additional information.

NEW ACCOUNTING STANDARDS

New Accounting Standards Issued and Adopted

In December 2023, the FASB issued ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60) ("ASU 2023-08"), which requires an entity to measure certain digital assets at fair value with changes in the fair value recognized in net income.

In addition, the guidance requires additional disclosures related to digital assets once adopted.

We adopted ASU 2023-08, effective January 1, 2024, which resulted in a cumulative-effect adjustment to increase the opening balance of Partners' Capital of $ 6.2 million.

See Note 6 – Digital Assets for more information on our digital assets.

New Accounting Standards Issued and Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("ASU 2023-07").

ASU 2023-07 primarily requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker ("CODM"), the amount and composition of other segment items, and the title and position of the CODM.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted.

We are currently evaluating the impact of adopting ASU 2023-07, but do not expect it to have a material effect on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ("ASU 2023-09").

ASU 2023-09 primarily requires enhanced disclosures to (1) disclose specific categories in the rate reconciliation, (2) disclose the amount of income taxes paid and expensed disaggregated by federal, state, and foreign taxes, with further disaggregation by individual jurisdictions if certain criteria are met, and (3) disclose income (loss) from continuing operations before income tax (benefit) disaggregated between domestic and foreign.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact of adopting ASU 2023-09, but do not expect it to have a material effect on our consolidated financial statements.

ACQUISITION S

As discussed in Note 1 – Organization and Presentation, on February 22, 2023, we completed the JC Resources Acquisition, which gives us increased exposure to a prolific area of the Delaware Basin that is within close proximity to reserves that we currently own.

This acquisition was approved by the conflicts committee of MGP's board of directors, which is comprised entirely of independent directors.

Because JC Resources is under common control with us, we recorded the acquisition at JC Resources' carrying value for each period presented.

The carrying value of the mineral interests as well as related receivables and payables at February 22, 2023 was $ 65.0 million inclusive of $ 25.4 million and $ 37.8 million of mineral interests in proved and unproved properties, respectively.

The JC Resources Acquisition increased revenues included in our condensed consolidated statements of income by $ 3.0 million and $ 8.3 million for the three and nine months ended September 30, 2023, respectively.

Acquisition Agreement

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.

Under the agreement, the third party assists us in the identification, evaluation, and acquisition of target oil & gas mineral interests.

On February 19, 2024, we renewed this agreement for an additional one-year term, committing up to $ 25.0 million.

the agreement, the third party assists us in the identification, evaluation, and acquisition of target oil & gas mineral interests.

In exchange for these services, the third party receives a participation share, partially funded by the third party, and is paid a periodic management fee.

As of September 30, 2023, we have purchased $ 4.0 million and $ 3.8 million of

oil & gas mineral interests in proved and unproved properties, respectively, pursuant to this agreement.

During the three months ended March 31, 2024, we purchased $ 0.3 million and $ 0.1 million of oil & gas mineral interests in proved and unproved properties, respectively, pursuant to this agreement.

Management fees paid under this agreement have been immaterial.

Miscellaneous Acquisitions

In addition to the acquisitions under the collaborative agreement discussed above, we purchased $ 3.6 million and $ 2.5 million of oil & gas mineral interests in proved and unproved properties, respectively, within the Midland and Delaware Basins during the nine months ended September 30, 2023.

In addition to the acquisitions under the collaborative agreement discussed above, we purchased $ 0.3 million and $ 1.2 million of oil & gas mineral interests in proved and unproved properties, respectively, during the three months ended March 31, 2024.

CONTINGENCIES

Certain of our subsidiaries are party to litigation in which the plaintiffs allege violations of the Fair Labor Standards Act and state law due to alleged failure to compensate for time "donning"

and "doffing"

equipment and to account for certain bonuses in the calculation of overtime rates and pay.

The plaintiffs seek class and collective action certification, which we oppose, and the courts have not yet made definitive final rulings on those issues.

We believe our ultimate exposure, if any, will not be material to our results of operations or financial position;

however, if our current belief as to the merit of the claims is not upheld, it is reasonably possible that the ultimate resolution of these matters could result in a potential loss that may be material to our results of operations.

Certain of our subsidiaries are party to litigation in which the plaintiffs allege violations of the Fair Labor Standards Act and state law due to alleged failure to compensate for time "donning" and "doffing" equipment and to account for certain bonuses in the calculation of overtime rates and pay.

In April 2024, we entered into a settlement agreement with the plaintiffs pursuant to which we agreed to settle such litigation for $ 15.3 million.

As a result of reaching this settlement, which is subject to court approval, we have accrued $ 15.3 million as of March 31, 2024.

Our $ 15.3 million accrual is included in the Other current liabilities line item on our condensed consolidated balance sheet.

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

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

However, if the results of these matters are different from management's current expectations and in amounts greater than our accruals, such matters could have a material adverse effect on our business and operations.

However, if the results of these matters are different from management's current expectations and in amounts greater than our accruals (if any), such matters could have a material adverse effect on our business and operations.

Inventories consist of the following:

September 30,

(in thousands)

Finished goods (net of reserve for obsolescence of $ 745 and $ 728 , respectively)

Work in process

Raw materials

Supplies (net of reserve for obsolescence of $ 7,719 and $ 7,439 , respectively)

Total inventories, net

During the nine months ended September 30, 2023, we recorded lower of cost or net realizable value adjustments of $ 14.2 million to our coal inventories as a result of lower coal sale prices and higher cost per ton primarily due to the impact of the Mettiki longwall being idle since June 2023 as a result of delayed development of a new longwall district.

During the three months ended March 31, 2024, we recorded lower of cost or net realizable value adjustments of $ 7.3 million to our coal inventories.

These adjustments are a result of lower coal sale prices and higher cost per ton primarily due to a longwall move at Hamilton County Coal, LLC ("Hamilton") and ongoing development activities at the Henderson County mine at our River View Coal, LLC ("River View") mining complex.

Certain of our subsidiaries, primarily consisting of Matrix Design Group, LLC, its subsidiaries, and Alliance Design Group, LLC (collectively referred to as "Matrix Group"), manufacture a variety of products for our mining operations and third parties.

These products are primarily consumed internally by our mining operations with associated inventory historically presented as supplies inventory.

Recently Matrix Group has been increasing its production of

products with the intention to increase third-party sales.

We have therefore presented our manufactured goods inventories in the table above separately from our historical presentation of supplies inventory.

DIGITAL ASSETS

The following table sets forth our digital assets as shown on the condensed consolidated balance sheet:

March 31, 2024

Digital assets:

(in thousands, except unit data)

The following table represents a reconciliation of the fair values of our digital assets:

Three Months Ended

Digital assets:

(in thousands)

Beginning balance

Change in fair value gains

Ending balance

As discussed in Note 2 – New Accounting Standards, our beginning balance is inclusive of a cumulative-effect adjustment of $ 6.2 million as of January 1, 2024.

Additions are the result of awarded digital assets received from our crypto-mining activities, while dispositions are the result of sales and payments for services.

During the three months ended March 31, 2024, we had digital asset dispositions of $ 0.9 million, inclusive of realized gains of $ 0.6 million.

FAIR VALUE MEASUREMENTS

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

September 30, 2023

March 31, 2024

December 31, 2023

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The carrying amounts for cash equivalents, accounts receivable, accounts payable, accrued and other liabilities approximate fair value due to the short maturity of those instruments.

The estimated fair value of our long-term debt, including current maturities, is based on interest rates that we believe are currently available to us in active markets for issuance of debt with similar terms and remaining maturities (See Note 6 – Long-Term Debt).

The fair value of debt, which is based upon these interest rates, is classified as a Level 2 measurement under the fair value hierarchy.

See Note 8 – Long-Term Debt for additional information on our long-term debt.

LONG-TERM DEBT

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Debt Issuance Costs

September 30,

(in thousands)

1 unchanged sentence

Securitization facility

November 2019 equipment financing

June 2020 equipment financing

February 2024 equipment financing

Less current maturities

1 unchanged sentence

Credit Facility

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

The Credit Agreement provides for a $ 425 million revolving credit facility, which includes a sublimit of $ 15.0 million for swingline borrowings and permits the issuance of letters of credit up to the full amount of $ 425 million (the "Revolving Credit Facility"), and for a term loan in an aggregate principal amount of $ 75 million (the "Term Loan").

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

The Credit Agreement matures on March 9, 2027, at which time the aggregate outstanding principal amount of all Revolving Credit Facility advances and all Term Loan advances are required to be repaid in full.

The Credit Agreement will instead mature on January 30, 2025, if on that date our Senior Notes, as discussed below, are still outstanding and Alliance Coal does not have liquidity of at least $ 200 million.

Interest is payable quarterly, with principal of the Term Loan due in quarterly installments equal to 6.25 % of the original principal amount of the Term Loan beginning with the quarter ending June 30, 2023 and the balance payable at maturity.

The Revolving Credit Facility replaces the $ 459.5 million revolving credit facility, which included a sublimit of $ 125.0 million for the issuance of letters of credit and a sublimit of $ 15.0 million for swingline borrowings, extended to the Intermediate Partnership under its Fifth Amended and Restated Credit Agreement, dated as of March 9, 2020 that would have expired on March 9, 2024.

We incurred debt issuance costs during the nine months ended September 30, 2023 of $ 11.7 million in connection with the Credit Agreement.

These debt issuance costs are deferred and amortized as a component of interest expense over the term of the Revolving Credit Facility.

Interest is payable quarterly, with principal on the Term Loan due in quarterly installments equal to 6.25 % of the original principal amount of the Term Loan beginning with the quarter ending June 30, 2023 and the balance payable at maturity.

The Revolving Credit Facility is underwritten by a syndicate of eighteen financial institutions and the obligations of the lenders are individual obligations, which means the failure of one or more lenders to be able to fund its obligation does not relieve the remaining lenders from funding their obligations.

Based on our diligence, including discussions with representatives of certain of these financial institutions, as of September 30, 2023 we have no reason to believe that the banks within our syndicate are facing financial difficulties, defaults or limited liquidity situations that would cause them to be unable to fund their obligations under the Credit Agreement.

Based on our diligence, including discussions with representatives of certain of these financial institutions, as of March 31, 2024 we have no reason to believe that the banks within our syndicate are facing financial difficulties, defaults or limited liquidity situations that would cause them to be unable to fund their obligations under the Credit Agreement.

However, should any of the banks in our syndicate experience conditions in the future that limit their ability to fund their obligations, the amount available under the Revolving Credit Facility could be reduced.

The Credit Agreement is guaranteed by ARLP and certain of its subsidiaries, including the Intermediate Partnership and most of the direct and indirect subsidiaries of Alliance Coal (the "Subsidiary Guarantors").

Agreement also is secured by substantially all of the assets of the Subsidiary Guarantors and Alliance Coal.

The Credit Agreement also is secured by substantially all of the assets of the Subsidiary Guarantors and Alliance Coal.

Borrowings under the Credit Agreement bear interest, at our option, at either (i) an adjusted one-month, three-month or six-month term rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York, plus the applicable margin or (ii) the base rate plus the applicable margin.

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The applicable margin for borrowings under the Credit Agreement are determined by reference to the Consolidated Debt to Consolidated Cash Flow Ratio.

For borrowings under the Term Loan, we elected the three-month term rate, with applicable margin, which was 8.55 % as of September 30, 2023.

At September 30, 2023, we had $ 41.0 million of letters of credit outstanding with $ 384.0 million available for borrowing under the Revolving Credit Facility.

For borrowings under the Term Loan, we elected the three-month term rate, with applicable margin, which was 8.46 % as of March 31, 2024.

At March 31, 2024, we had $ 41.0 million of letters of credit outstanding with $ 384.0 million available for borrowing under the Revolving Credit Facility.

We incurred an annual commitment fee of 0.50 % on the undrawn portion of the Revolving Credit Facility.

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

The debt of Alliance Coal to cash flow ratio, consolidated debt of Alliance Coal and the Intermediate Partnership to cash flow ratio, and interest coverage ratio were 0.10 to 1.0, 0.43 to 1.0 and 95.83 to 1.0, respectively, for the trailing twelve months ended September 30, 2023.

We were in compliance with the covenants of the Credit Agreement as of September 30, 2023 and anticipate remaining in compliance with the covenants.

On April 24, 2017, the Intermediate Partnership and Alliance Resource Finance Corporation (as co-issuer), a wholly owned subsidiary of the Intermediate Partnership ("Alliance Finance"), issued an aggregate principal amount of $ 400.0 million of senior unsecured notes due 2025 ("Senior Notes") in a private placement to qualified institutional buyers.

The Senior Notes have a term of eight years , maturing on May 1, 2025 (the "Term") and accrue interest at an annual rate of 7.5 % .

The debt of Alliance Coal to cash flow ratio, consolidated debt of Alliance Coal and the Intermediate Partnership to cash flow ratio, and interest coverage ratio were 0.21 to 1.0 , 0.59 to 1.0 and 59.18 to 1.0 , respectively, for the trailing twelve months ended March 31, 2024.

We were in compliance with the covenants of the Credit Agreement as of March 31, 2024 and anticipate remaining in compliance with the covenants.

The Senior Notes have a term of eight years , maturing on May 1, 2025 and accrue interest at an annual rate of 7.5 % .

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

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

During the nine months ended September 30, 2023, we repurchased or redeemed $ 115.4 million of our Senior Notes.

The gain on extinguishment of the Senior Notes is immaterial.

Accounts Receivable Securitization

Certain direct and indirect wholly owned subsidiaries of our Intermediate Partnership are party to a $ 60.0 million accounts receivable securitization facility ("Securitization Facility").

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

Certain direct and indirect wholly owned subsidiaries of our Intermediate Partnership are party to a $ 90.0 million accounts receivable securitization facility ("Securitization Facility") which matures in January 2025.

After the sale, Alliance Coal, as servicer of the assets, collects the receivables on behalf of AROP Funding.

The Securitization Facility bears interest based on a short-term bank yield index.

On September 30, 2023, we had $ 11.7 million of letters of credit outstanding with $ 48.3 million available for borrowing under the Securitization Facility.

On March 31, 2024, we had $ 11.7 million of letters of credit outstanding with $ 33.3 million available for borrowing under the Securitization Facility.

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

In January 2023, we extended the term of the Securitization Facility to January 2024.

The Securitization Facility was previously scheduled to mature in January 2023.

At September 30, 2023, we did no t have any outstanding borrowings under the Securitization Facility.

November 2019 Equipment Financing

On November 6, 2019, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $ 53.1 million in exchange for conveying its interest in certain

equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "November 2019 Equipment Financing").

The November 2019 Equipment Financing contains customary terms and events of default and an implicit interest rate of 4.75 % , providing for a four-year term with forty-seven monthly payments of $ 1.0 million and a balloon payment of $ 11.6 million upon maturity on November 6, 2023.

Upon maturity, the equipment reverted to the Intermediate Partnership.

June 2020 Equipment Financing

On June 5, 2020, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $ 14.7 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "June 2020 Equipment Financing").

The June 2020 Equipment Financing contains customary terms and events of default and provides for forty-eight monthly payments with an implicit interest rate of 6.1 % , maturing on June 5, 2024.

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

February 2024 Equipment Financing

On February 28, 2024, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $ 54.6 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "February 2024 Equipment Financing").

The February 2024 Equipment Financing contains customary terms and events of default and provides for forty-eight monthly payments with an implicit interest rate of 8.29 % , maturing on February 28, 2028.

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

Components of income tax expense are as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Income tax expense

On March 15, 2022, Alliance Minerals changed its U.S.

federal income tax status from a pass-through entity to a taxable entity via a "check the box"

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

The Tax Election resulted in the recognition of an initial deferred tax liability of $ 37.3 million and a corresponding increase to income tax expense for the nine months ended September 30, 2022.

The effective income tax rate for our income tax expense for the three and nine months ended September 30, 2023 is less than the federal statutory rate, primarily due to the portion of income not subject to income taxes.

The effective income tax rate for our income tax expense for the three and nine months ended September 30, 2022 is less than the federal statutory rate, primarily due to the portion of income not subject to income taxes, partially offset by the effect of the Tax Election.

Our 2020 through 2022 tax years remain open to examination by tax authorities, and lower-tier partnership income tax returns for the tax years ended December 31, 2020 and 2021 are being audited by the Internal Revenue Service.

The effective income tax rates for our income tax expense for the three months ended March 31, 2024 and 2023 are less than the federal statutory rate, primarily due to the portion of income not subject to income taxes.

Our 2020 through 2023 tax years remain open to examination by tax authorities, and certain lower-tier partnership income tax returns for the tax years ended December 31, 2020 and 2021 are being audited by the Internal Revenue Service.

VARIABLE INTEREST ENTITIES

Cavalier Minerals

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

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

AllDale I & II and Cavalier Minerals

We own the general partner interests and, including the limited partner interests we hold through our ownership in Cavalier Minerals JV, LLC ("Cavalier Minerals"), approximately 97 % of the limited partner interests in AllDale Minerals LP ("AllDale I") and AllDale Minerals II, LP ("AllDale II", and collectively with AllDale I, "AllDale I & II").

As the general partner of AllDale I & II, we are entitled to receive 20.0 % of all distributions from AllDale I & II with the remaining 80.0 % allocated to limited partners based upon ownership percentages.

Cavalier Minerals owns approximately 72 % of the limited partner interests in AllDale I & II.

We own the managing member interest and a 96 % member interest in Cavalier Minerals.

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

All members have recovered their investment and Bluegrass Minerals began receiving its profits interest distributions in late 2022.

We hold the managing member interest in Cavalier Minerals.

We have concluded that Cavalier Minerals is a variable interest entity ("VIE") which we consolidate as the primary beneficiary because we are the managing member and a substantial equity owner in Cavalier Minerals.

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

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

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

Alliance Minerals completed funding of this commitment in 2018.

Alliance Minerals' limited partner interest in AllDale III is 13.9 %.

The AllDale III Partnership Agreement includes a 25 % profits interest for the general partner, subject to a return hurdle equal to the greater of 125 % of cumulative capital contributions and a 10 % internal rate of return, and following an 80/20 "catch-up"

provision for the general partner.

Since AllDale III is structured as a limited partnership with the limited partners (1) not having the ability to remove the general partner and (2) not participating significantly in the operational decisions, we concluded that AllDale III is a VIE.

We are not the primary beneficiary of AllDale III as we do not have the power to direct the activities that most significantly impact AllDale III's economic performance.

We account for our ownership interest in the income or loss of AllDale III as an equity method investment.

We record equity income or loss based on AllDale III's distribution structure.

See Note 9 – Equity Investments for more information.

On April 5, 2022, we invested $ 20 million in Francis Renewable Energy, LLC ("Francis"), in the form of a convertible note.

We have concluded that AllDale I, AllDale II and Cavalier Minerals are variable interest entities ("VIEs") which we consolidate as the primary beneficiary because we have the power to direct the activities that most significantly impact the economic performance of AllDale I, AllDale II and Cavalier Minerals in addition to having substantial equity ownership.

Our share of Cavalier Minerals' investment in AllDale I & II is eliminated in consolidation and Bluegrass Minerals' investment in Cavalier Minerals is accounted for as noncontrolling ownership interest on our condensed consolidated balance sheets.

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

The following table presents the carrying amounts and classification of AllDale I & II's assets and liabilities included in our condensed consolidated balance sheets:

Assets (liabilities):

(in thousands)

Cash and cash equivalents

Trade receivables

Total property, plant and equipment, net

Accounts payable

Accrued taxes other than income taxes

AllDale Minerals III, LP ("AllDale III") owns oil & gas mineral interests in areas around the oil & gas mineral interests we own.

Alliance Minerals owns a 13.9 % limited partner interest in AllDale III.

Alliance Minerals' investment in AllDale III is subject to a 25 % profits interest for the general partner that is subject to a return hurdle equal to the greater of 125 % of cumulative capital contributions and a 10 % internal rate of return, and following an 80/20 "catch-up" provision for the general partner.

We have concluded that AllDale III is a VIE that we do not consolidate because we are not the primary beneficiary and AllDale III is structured as a limited partnership with the limited partners (1) not having the ability to remove the general partner and (2) not participating significantly in the operational decisions.

We are not the primary beneficiary of AllDale III because we do not have the power to direct the activities that most significantly impact AllDale III's economic performance.

See Note 11 – Equity Investments for more information about the accounting for our investment in AllDale III.

On April 5, 2022, we invested $ 20 million in Francis Renewable Energy, LLC ("Francis"), in the form of a convertible note.

Our convertible note matured on April 1, 2023 and was converted into a preferred equity interest in Francis.

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Subsequent to the conversion on April 1, 2023, we participate in earnings and losses and are eligible to receive distributions.

As of September 30, 2023, we held approximately 17.0 % of Francis' equity.

We have concluded that Francis is a VIE as the management structure is similar to a limited partnership with the non-managing members (i) not having the ability to remove the managing member and (ii) not participating significantly in the operational decisions.

We are not the primary beneficiary of Francis as we do not have the power to direct the activities that most significantly impact Francis's economic performance.

We account for our ownership interest in the income or loss of Francis as an equity method investment.

Following the conversion of our note to preferred equity, we record equity income or loss based on Francis' distribution structure.

See Note 9 – Equity Investments for more information.

As of March 31, 2024, we held approximately 16.7 % of Francis' equity.

We have concluded that Francis is a VIE that we do not consolidate because we are not the primary beneficiary and Francis' management structure is similar to a limited partnership with the non-managing members (i) not having the ability to remove the managing member and (ii) not participating significantly in the operational decisions.

We are not the primary beneficiary of Francis because we do not have the power to direct the activities that most significantly impact Francis's economic performance.

See Note 11 – Equity Investments for more information about the accounting for our investment in Francis.

On June 2, 2022, we committed to purchase $ 25.0 million of limited partner interests in NGP Energy Transition, L.P.

("NGP ET IV"), a private equity fund sponsored by NGP and focused on investments that are part of the global transition toward a lower carbon economy.

This commitment represents a 3.6 % interest in NGP ET IV.

As of September 30, 2023, we have funded $ 6.3 million of this commitment.

We have concluded that NGP ET IV is a VIE as it is structured as a limited partnership with limited partners (i) not having the ability to remove the general partner and (ii) not participating significantly in the operational decisions.

We are not the primary beneficiary of NGP ET IV as we do not have the power to direct the activities that most significantly impact NGP ET IV's economic performance.

We account for our ownership interest in the income or loss of NGP ET IV as an equity method investment.

See Note 9 – Equity Investments for more information.

As of March 31, 2023, we have funded $ 7.2 million of this commitment.

We have concluded that NGP ET IV is a VIE that we do not consolidate because we are not the primary beneficiary and NGP ET IV is structured as a limited partnership with limited partners (i) not having the ability to remove the general partner and (ii) not participating significantly in the operational decisions.

We are not the primary beneficiary of NGP ET IV because we do not have the power to direct the activities that most significantly impact NGP ET IV's economic performance.

See Note 11 – Equity Investments for more information about the accounting for our investment in NGP ET IV.

EQUITY INVESTMENT S

As discussed in Note 8 – Variable Interest Entities, we account for our ownership interest in the income or loss of AllDale III as an equity method investment.

We account for our ownership interest in the income or loss of AllDale III as an equity method investment.

We record equity income or loss based on AllDale III's distribution structure.

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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Ending balance

As discussed in Note 8 – Variable Interest Entities, we account for our ownership interest in the income or loss of Francis as an equity method investment.

We account for our ownership interest in the income or loss of Francis as an equity method investment.

Prior to the conversion of our convertible note, we did not participate in Francis' earnings or losses;

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Beginning balance

Contributions

Equity method investment loss

Ending balance

As discussed in Note 8 – Variable Interest Entities, we account for our ownership interest in the income or loss of NGP ET IV as an equity method investment.

We account for our ownership interest in the income or loss of NGP ET IV as an equity method investment.

The changes in our equity method investment in NGP ET IV were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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Ending balance

During 2022, we purchased $ 42.0 million of Series D Preferred Stock ("Series D Preferred Stock") in Infinitum Electric, Inc.

("Infinitum"), a Texas-based startup developer and manufacturer of electric motors featuring printed circuit board stators.

On September 8, 2023, we purchased $ 24.6 million of Series E Preferred Stock ("Series E Preferred Stock"

and, together with the "Series D Preferred Stock,"

the "Infinitum Preferred Stock") in Infinitum.

During 2022, we purchased $ 42.0 million of Series D Preferred Stock ("Series D Preferred Stock") in Infinitum Electric, Inc.

("Infinitum"), a Texas-based startup developer and manufacturer of electric motors featuring printed circuit board stators.

On September 8, 2023, we purchased $ 24.6 million of Series E Preferred Stock ("Series E Preferred Stock" and, together with the "Series D Preferred Stock," the "Infinitum Preferred Stock") in Infinitum.

The Infinitum Preferred Stock provides for non-cumulative dividends when and if declared by Infinitum's board of directors.

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

Each share of

Infinitum Preferred Stock is convertible, at any time, at our option, into shares of common stock of Infinitum.

We account for our ownership interest in Infinitum as an equity investment without a readily determinable fair value.

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Therefore, we use a measurement alternative other than fair value to account for our investment.

On August 22, 2023, we purchased $ 25.0 million of Ascend Preferred Stock from Ascend, a U.S.-based manufacturer and recycler of sustainable, engineered battery materials for electric vehicles.

On August 22, 2023, we purchased $ 25.0 million of Series D Preferred Stock (the "Ascend Preferred Stock") in Ascend Elements, Inc.

("Ascend"), a U.S.-based manufacturer and recycler of sustainable, engineered battery materials for electric vehicles.

The Ascend Preferred Stock provides for non-cumulative dividends when and if declared by Ascend's board of directors.

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February 14, 2024

August 14, 2023

November 14, 2023 (1)

(1) On October 27, 2023, we declared this quarterly distribution payable on November 14, 2023 to all unitholders of record as of November 7, 2023.

May 15, 2024 (1)

(1) On April 26, 2024, we declared this quarterly distribution payable on May 15, 2024 to all unitholders of record as of May 8, 2024.

Unit Repurchase Program

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

As a result, we are authorized to repurchase up to a total of $ 100.0 million of ARLP common units.

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

In January 2023, the board of directors of MGP authorized a $ 93.5 million increase to the unit repurchase program authorizing us to be able to repurchase up to a total of $ 100.0 million of ARLP common units from that date.

No units were repurchased during the three months ended March 31, 2024.

During the three months ended March 31, 2023, we repurchased and retired 860,060 units at an average unit price of $ 21.17 for an aggregate purchase price of $ 18.2 million.

Since inception of the unit repurchase program, we have repurchased and retired 6,390,446 units at an average unit price of $ 17.67 for an aggregate purchase price of $ 112.9 million.

Change in Partners' Capital

The following tables present the quarterly change in Partners' Capital for the nine months ended September 30, 2023 and 2022:

The following tables present the quarterly change in Partners' Capital for the three months ended March 31, 2024 and 2023:

Limited Partner

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Balance at January 1, 2024

Comprehensive income:

Actuarially determined long-term liability adjustments

Total comprehensive loss

Settlement of deferred compensation plans

Purchase of units under unit repurchase program

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to affiliate noncontrolling interest

JC Resources acquisition - See Note 1

Cash retained by JC Resources in acquisition - See Note 1

Distributions to Partners

Balance at March 31, 2023

Cumulative-effect adjustment (see Note 2)

Comprehensive income:

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Distributions to Partners

Balance at June 30, 2023

Comprehensive income:

Actuarially determined long-term liability adjustments

Total comprehensive income

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Distributions to Partners

Balance at September 30, 2023

Balance at March 31, 2024

Limited Partner

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Total comprehensive income

Settlement of deferred compensation plans

Purchase of units under unit repurchase program

Common unit-based compensation

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Distributions from consolidated company to affiliate noncontrolling interest

Cash retained by JC Resources in acquisition - See Note 1

JC Resources acquisition

Cash retained by JC Resources in acquisition

Distributions to Partners

Balance at March 31, 2023

Comprehensive income:

Actuarially determined long-term liability adjustments

Total comprehensive income

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Cash retained by JC Resources in acquisition - See Note 1

Distributions to Partners

Balance at June 30, 2022

Comprehensive income:

Actuarially determined long-term liability adjustments

Total comprehensive income

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Cash retained by JC Resources in acquisition - See Note 1

Distributions to Partners

Balance at September 30, 2022

* Recast as discussed in Note 1 – Organization and Presentation.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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(in thousands)

Three Months Ended September 30, 2023

Oil & gas royalties

Coal royalties

Transportation revenues

Other revenues

Total revenues

Three Months Ended September 30, 2022

Oil & gas royalties *

Coal royalties

Transportation revenues

Other revenues

Total revenues

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Oil & gas royalties

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Total revenues

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Oil & gas royalties

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Total revenues

* Recast as discussed in Note 1 – Organization and Presentation.

The following table illustrates the amount of our transaction price for all current coal supply contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2023 and disaggregated by segment and contract duration.

The following table illustrates the amount of our transaction price for all current coal supply contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2024 and disaggregated by segment and contract duration.

(in thousands)

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EARNINGS PER LIMITED PARTNER UNIT

We utilize the two-class method in calculating basic and diluted earnings per limited partner unit ("EPU").

Subsequent to the JC Resources Acquisition, which is discussed in more detail in Note 1 – Organization and Presentation, net income attributable to ARLP is allocated to limited partners and participating securities with nonforfeitable distributions or distribution equivalents, while net losses attributable to ARLP are allocated only to limited partners but not to participating securities.

Prior to the JC Resources Acquisition, in addition to limited partners and participating securities allocations, amounts are also allocated to our general partner for historical earnings from the mineral interests acquired in the JC Resources Acquisition.

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

The following is a reconciliation of net income attributable to ARLP used for calculating basic and diluted earnings per unit and the weighted-average units used in computing EPU for the three and nine months ended September 30, 2023 and 2022:

We utilize the two-class method in calculating basic and diluted earnings per limited partner unit ("EPU").

Subsequent to the acquisition of oil & gas net royalty acres from JC Resources LP on February 22, 2023 (the "JC Resources Acquisition"), net income attributable to ARLP is allocated to limited partners and participating securities with nonforfeitable distributions or distribution equivalents, while net losses attributable to ARLP are allocated only to limited partners but not to participating securities.

Prior to the JC Resources Acquisition, in addition to limited partners and participating securities allocations, amounts were also allocated to our general partner for historical earnings from the mineral interests acquired in the JC Resources Acquisition.

The following is a reconciliation of net income attributable to ARLP used for calculating basic and diluted earnings per unit and the weighted-average units used in computing EPU:

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per unit data)

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Earnings per limited partner unit - basic and diluted (1)

(1) Recast as discussed in Note 1 – Organization and Presentation.

(1) Diluted EPU gives effect to all potentially dilutive common units outstanding during the period using the treasury stock method.

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

The combined total of LTIP, SERP and Directors' Deferred Compensation Plan units of 2,759 and 2,878 for the three and nine months ended September 30, 2023, respectively, and 3,754 and 3,431 for the three and nine months ended September 30, 2022, respectively, were considered anti-dilutive under the treasury stock method .

The combined total of LTIP, SERP and Directors' Deferred Compensation Plan units of 2,175 and 3,147 for the three months ended March 31, 2024 and 2023, respectively, were considered anti-dilutive under the treasury stock method .

WORKERS' COMPENSATION AND PNEUMOCONIOSIS

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Beginning balance

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Interest accretion

Valuation loss (gain) (1)

Ending balance

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

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

The valuation loss in 2023 is due to adverse claims development.

The valuation gain in 2022 is due to an increase in the discount rate from 2.41 % on December 31, 2021 to 4.22 % on June 30, 2022.

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

The deductible level may vary by claim year.

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

Our receivables for traumatic injury claims under this policy as of September 30, 2023 are $ 4.1 million and are included in Other long-term assets on our condensed consolidated balance sheet.

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

Our receivables for traumatic injury claims under this policy as of March 31, 2024 are $ 4.1 million and are included in Other long-term assets on our condensed consolidated balance sheet.

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

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Black lung benefits:

Interest cost (1)

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Long-Term Incentive Plan

A summary of non-vested LTIP grants as of and for the nine months ended September 30, 2023 is as follows:

A summary of non-vested LTIP grants of restricted units is as follows:

Number of units

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( 1,582,422 )

Non-vested grants at September 30, 2023

Non-vested grants at March 31, 2024

(1) The restricted units granted during 2024 have certain minimum-value guarantees per unit, regardless of whether or not the awards vest.

(2) During the nine months ended September 30, 2023, we issued 860,060 unrestricted common units to the LTIP participants.

The remaining vested units were settled in cash to satisfy tax withholding obligations of the LTIP participants.

LTIP expense for grants of restricted units was $ 2.7 million and $ 2.4 million for the three months ended September 30, 2023 and 2022, respectively, and $ 7.7 million and $ 6.8 million for the nine months ended September 30, 2023 and 2022, respectively.

The total obligation associated with LTIP grants of restricted units as of September 30, 2023 was $ 16.8 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

As of September 30, 2023, there was $ 12.7 million in total unrecognized compensation expense related to the non-vested LTIP restricted unit grants that are expected to vest.

(2) During the three months ended March 31, 2024, we issued 936,544 unrestricted common units to the LTIP participants.

The remaining vested units were settled in cash to satisfy tax withholding.

LTIP expense for grants of restricted units was $ 2.0 million and $ 2.3 million for the three months ended March 31, 2024 and 2023, respectively.

The total obligation associated with LTIP grants of restricted units as of March 31, 2024 was $ 11.2 million and is included in the partners' capital Limited partners-common unitholders line item on our condensed consolidated balance sheets.

As of March 31, 2024, there was $ 16.7 million in total unrecognized compensation expense related to the non-vested LTIP restricted unit grants that are expected to vest.

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

Supplemental Executive Retirement Plan and Directors' Deferred Compensation Plan

A summary of SERP and Directors' Deferred Compensation Plan activity as of and for the nine months ended September 30, 2023 is as follows:

A summary of SERP and Directors' Deferred Compensation Plan activity is as follows:

Number of units

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Phantom units outstanding as of January 1, 2024

Phantom units outstanding as of September 30, 2023

(1) During the nine months ended September 30, 2023, we purchased 27,576 ARLP common units on the open market to settle the account of a participant under the SERP.

Units purchased and delivered to the participant were net of units settled in cash to satisfy tax withholding obligations.

Total SERP and Directors' Deferred Compensation Plan expense was $ 0.6 million and $ 0.4 million for the three months ended September 30, 2023 and 2022, respectively, and $ 1.8 million and $ 0.9 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, the total obligation associated with the SERP and Directors' Deferred Compensation Plan was $ 15.7 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

Phantom units outstanding as of March 31, 2024

Total SERP and Directors' Deferred Compensation Plan expense was $ 0.7 million and $ 0.6 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the total obligation associated with the SERP and Directors' Deferred Compensation Plan was $ 17.1 million and is included in the partners' capital Limited partners-common unitholders line item on our condensed consolidated balance sheets.

COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

Eligible employees at certain of our mining operations participate in a defined benefit plan (the "Pension Plan") that we sponsor.

The Pension Plan is currently closed to new applicants and participants in the Pension Plan are no longer receiving benefit accruals for service.

The benefit formula for the Pension Plan is a fixed dollar unit based on years of service.

Components of the net periodic benefit cost for each of the periods presented are as follows:

Components of the net periodic benefit credit for each of the periods presented are as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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Net periodic benefit credit (1)

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

As a result of certain pension plan relief provided by the American Rescue Plan Act enacted in March 2021, we do not expect to make contributions to the Pension Plan during 2023.

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

We do not expect to make material contributions to the Pension Plan during 2024.

SEGMENT INFORMATION

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

In addition, we continue to position ourselves as a reliable energy partner for the future as we pursue opportunities that support the advancement of energy and related infrastructure.

We operate in the United States as a diversified natural resource company 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.

We aggregate multiple operating segments into four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties.

We also have an "all other"

category referred to as Other, Corporate and Elimination.

Our two coal operations reportable segments correspond to major coal producing regions in the eastern

United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

We also have an "all other" category referred to as Other, Corporate and Elimination.

Our two coal operations reportable segments correspond to major coal producing regions in the eastern United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

The two coal operations reportable segments include seven mining complexes operating in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia and a coal loading terminal in Indiana on the Ohio River.

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

The Illinois Basin Coal Operations reportable segment includes (a) the Gibson County Coal mining complex, (b) the Warrior mining complex, (c) the River View mining complex and (d) the Hamilton mining complex.

The Illinois Basin Coal Operations reportable segment includes (a) the Gibson County Coal, LLC's mining complex, (b) the Warrior Coal, LLC mining complex, (c) the River View mining complex and (d) the 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 and other support services, and our non-operating mining complexes.

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

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

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

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, NGP ET IV, and Ascend (see Note 9 – Equity Investments), Wildcat Insurance, which assists the ARLP Partnership with its insurance requirements, AROP Funding and Alliance Finance (both discussed in Note 6 – Long-Term Debt) and other miscellaneous activities.

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 mining complexes.

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

The Oil & Gas Royalties reportable segment includes oil & gas mineral interests held by Alliance Minerals through its consolidated subsidiaries as well as equity interests held in AllDale III (Note 11 – Equity Investments).

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

Approximately 64 % 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, the Matrix Group, our investments in Francis, Infinitum, NGP ET IV, and Ascend (see Note 11 – Equity Investments), Wildcat Insurance, LLC which assists the ARLP Partnership with its insurance requirements, AROP Funding and Alliance Finance (both discussed in Note 8 – Long-Term Debt) and our crypto-mining 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.

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(in thousands)

Three Months Ended September 30, 2023

Revenues - Outside

Revenues - Intercompany

Total revenues (2)

Segment Adjusted EBITDA Expense (3)

Segment Adjusted EBITDA (4)

Capital expenditures (5)

Three Months Ended September 30, 2022

Revenues - Outside (1)

Revenues - Intercompany

Total revenues (2)

Segment Adjusted EBITDA Expense (1) (3)

Segment Adjusted EBITDA (1) (4)

Capital expenditures

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Revenues - Outside (1)

4 unchanged sentences

Capital expenditures (4)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Revenues - Outside (1)

3 unchanged sentences

Segment Adjusted EBITDA (3)

Total assets (1)

Capital expenditures (4)

(1) Recast for the JC Resources Acquisition as discussed in Note 1 – Organization and Presentation.

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

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

Transportation expenses are excluded as transportation revenues are recognized in an amount equal to transportation expenses when title passes to the customer.

The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to Operating expenses (excluding depreciation, depletion and amortization) :

(1) Revenues included in the Other, Corporate and Elimination column are attributable to intercompany eliminations, which are primarily intercompany coal royalty eliminations, outside revenues at the Matrix Group and awarded digital assets received for our crypto-mining activities.

(2) Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, coal purchases, if applicable, and other income or expense as adjusted to remove certain items from operating expenses that we characterize as unrepresentative of our ongoing operations such as litigation accruals.

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.

Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments.

Segment Adjusted EBITDA Expense is a key component of Segment Adjusted EBITDA in addition to coal sales, royalty revenues and other revenues.

The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses.

The following is a reconciliation of Operating expenses (excluding depreciation, depletion and amortization), the most comparable GAAP financial measure, to consolidated Segment Adjusted EBITDA Expense:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Operating expenses (excluding depreciation, depletion and amortization)

Litigation expense accrual

Outside coal purchases

Other expense (income)

Other expense

Segment Adjusted EBITDA Expense

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

Management therefore is able to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments.

Consolidated Segment Adjusted EBITDA is reconciled to net income as follows:

(3) Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization and general and administrative expenses modified for certain items that we characterize as unrepresentative of our ongoing operations, such as the change in fair value of digital assets and litigation accruals.

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.

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.

The following is a reconciliation of Net income , the most comparable GAAP financial measure, to Consolidated Segment Adjusted EBITDA:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

Interest expense, net

Change in fair value of digital assets

Litigation expense accrual

Income tax expense

Consolidated Segment Adjusted EBITDA

(5) Capital expenditures for the three and nine months ended September 30, 2023 exclude $ 10.0 million and $ 13.9 million, respectively, paid towards the oil & gas reserve acquisitions.

Capital expenditures for the nine months ended September 30, 2023 also exclude the $ 72.3 million paid for the JC Resources Acquisition (See Note 2 – Acquisitions) .

(4) Capital expenditures exclude $ 72.3 million paid for the JC Resources Acquisition for the three months ended March 31, 2023 and $ 1.8 million and $ 2.8 million paid towards oil & gas reserve acquisitions for the three months ended March 31, 2024 and 2023 respectively.

(See Note 3 – Acquisitions) .

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

What changed 10-Q

Item 1. Financial Statements