What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-07 · 138 added, 231 removed, 87 unchanged (81% of the section changed)

11 unchanged sentences

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

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

Our strategy is to provide our customers with reliable, baseload fuel for electricity generation to meet their load expectations.

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 particularly in the face of expanding energy demand and the electrification of the economy.

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

Our strategy is to provide our customers with reliable, baseload fuel for electricity generation to meet load expectations.

The primary focus of our business is to maximize the value of our existing mineral assets, both in the production of coal from our mining assets and the leasing and development of our coal and oil & gas mineral ownership.

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

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.

We believe that our diverse and rich resource base and strategic investments will allow us to continue to create long-term value for unitholders.

We are the second 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 also have loading facilities located on the Ohio River.

In addition to our mining operations, Alliance Resource Properties owns or leases substantially all of our coal mineral resources and the majority of our coal mineral reserves in the Illinois and Appalachia Basins that are (a) leased to our internal mining complexes or (b) near our coal mining operations but not yet leased.

We currently own oil & gas mineral interests in approximately 69,000 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.

We currently own mineral interests in approximately 70,000 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 Infinitum Electric, Inc.

(“Infinitum”), NGP Energy Transition, L.P.

(“NGP ET IV”), and Ascend Elements, Inc.

("Ascend") which are in the businesses of:

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 February 19, 2024, we renewed our collaborative agreement with a third-party to acquire oil & gas mineral interests in the Midland and Delaware Basins (the "Acquisition Agreement") for an additional one-year term, committing up to $25.0 million.

For more information about the Acquisition Agreement please read "Item 1.

Financial Statements (Unaudited)—Note 3 – Acquisitions" of this Quarterly Report on Form 10-Q.

In June 2024, we completed a private placement of $400 million in aggregate principal amount of 8.625% senior unsecured notes due 2029.

A portion of the net proceeds from the offering was used to fund the redemption of our outstanding 7.5% senior notes due 2025 and the remaining proceeds were used for general corporate purposes.

In connection with consummation of the notes offering, we entered into an amendment to our Credit Agreement.

For more information, please read "Item 1.

Financial Statements (Unaudited)—Note 8 – Long-term Debt" of this Quarterly Report on Form 10-Q.

(“Ascend”) which are in the businesses of, respectively, 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.

In February 2025, we committed to invest up to $25.0 million of limited partner interests in Gavin Generation Holdings A, LP (“Gavin Generation”), which is sponsored by a private equity firm.

This commitment represents an interest of approximately 5.0% in Gavin Generation (based on total commitments).

As of March 31, 2025, we have not funded any portion of our capital commitment.

For more information about the Gavin Generation investment, please read “Item 1.

Financial Statements (Unaudited)—Note 3 – Variable Interest Entities” 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.

3 unchanged sentences

Our Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties.

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

● Illinois Basin Coal Operations reportable segment includes (a) the Gibson County Coal, LLC (“Gibson”) mining complex, (b) the Warrior Coal, LLC mining complex, (c) the River View Coal, LLC (“River View”) mining complex, which includes the River View and Henderson County mines and (d) the Hamilton County Coal, LLC (“Hamilton”) mining complex.

The segment also includes our Mt.

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

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

Vernon coal-loading terminal in Indiana which operates on the Ohio River, Mid-America Carbonates, LLC and other support services, and certain of our idled or closed mining complexes.

● Appalachia Coal Operations reportable segment includes (a) the Mettiki Coal, LLC and Mettiki Coal (WV), LLC (collectively, “Mettiki”) mining complex, (b) the Tunnel Ridge, LLC (“Tunnel Ridge”) mining complex and (c) the MC Mining, LLC (“MC Mining”) mining complex.

● Oil & Gas Royalties reportable segment includes oil & gas mineral interests held by Alliance Minerals as well as our equity method investment in AllDale III.

Please read “Item 1.

Financial Statements (Unaudited) — Note 11 – Equity Investments" of this Quarterly Report on Form 10-Q for more information on AllDale III.

● Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties.

Approximately 63% of the coal sold by our mines is leased from our Coal Royalty entities.

● Other, Corporate and Elimination includes marketing and administrative activities, Matrix Design Group, LLC, 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.

Financial Statements (Unaudited) — Note 3 – Variable Interest Entities” of this Quarterly Report on Form 10-Q for more information on AllDale III.

● Coal Royalties reportable segment includes substantially all of our coal mineral resources and the majority of our coal mineral reserves 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.

● Other, Corporate and Elimination includes marketing and administrative activities, certain of our subsidiaries, primarily consisting of Matrix Design Group, LLC, its subsidiaries, and Alliance Design Group, LLC, Bitiki KY, LLC, which holds our crypto-mining activities, our non oil & gas equity investments, 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 11 – Equity Investments" and —Note 8 – Long-Term Debt" 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, 2024 Compared to Three Months Ended September 30, 2023

Financial Statements (Unaudited)—Note 3 – Variable Interest Entities, Note 7 – Equity Investments, and Note 8 – Long-Term Debt” of this Quarterly Report on Form 10-Q for more information on our investments in Infinitum, Ascend, and NGP ET IV as well as AROP Funding and Alliance Finance.

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Consolidated Information

Three Months Ended

Increase (Decrease)

(in thousands)

Consolidated Total

Tons produced

Volume - BOE (1)

Oil & gas royalties

Total revenues

Total revenues for the three months ended September 30, 2024 ("2024 Quarter") decreased 3.6% to $613.6 million compared to $636.5 million for the three months ended September 30, 2023 ("2023 Quarter") primarily as a result of reduced coal sales prices and lower transportation revenues.

Total operating expenses

Total operating expenses increased to $512.5 million in the 2024 Quarter, compared to $471.1 million in the 2023 Quarter, primarily due to higher per ton costs on certain expense items discussed below.

Net income attributable to ARLP

Net income attributable to ARLP for the 2024 Quarter was $86.3 million, or $0.66 per basic and diluted limited partner unit, compared to $153.7 million, or $1.18 per basic and diluted limited partner unit, for the 2023 Quarter as a result of lower revenues and increased total operating expenses.

Segment Adjusted EBITDA Expense (2)

Net income of ARLP

Segment Adjusted EBITDA (2)

(1) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).

(2) For definitions of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to their respective comparable GAAP financial measures, please see below under “— Reconciliation of Non-GAAP Financial Measures.”

Total Revenues

Total revenues for the three months ended March 31, 2025 (“2025 Quarter”) decreased 17.1% to $540.5 million compared to $651.7 million for the three months ended March 31, 2024 (“2024 Quarter”) primarily as a result of reduced coal sales volumes and prices as well as lower transportation revenues.

● Coal sales decreased to $468.5 million for the 2025 Quarter compared to $561.9 million for the 2024 Quarter.

The decrease was attributable to lower average coal sales prices, which reduced coal sales by $11.5 million, and lower tons sold, which reduced coal sales by $5.0 million.

Coal sales prices decreased by 2.1% primarily as a result of reduced export price realizations from our Appalachian segment.

Coal sales volumes decreased slightly as reduced sales at our Hamilton and MC Mining operations were primarily offset by increased sales volumes from our Gibson South and Mettiki mines.

Coal - Segment Adjusted EBITDA Expense

Segment Adjusted EBITDA Expense for our coal operations increased 10.9% to $386.3 million, as a result of higher per ton costs, partially offset by lower coal sales volumes.

Segment Adjusted EBITDA Expense per ton sold for our coal operations increased 11.9% to $46.11 per ton sold in the 2024 Quarter compared to $41.19 per ton in the 2023 Quarter, primarily due to reduced production, higher beginning inventory cost per ton at several mines, increased longwall move days at our Hamilton and Tunnel Ridge operations and challenging mining conditions at our Appalachian mines that lowered recoveries and increased per ton expenses as well as certain other per ton cost increases, which are discussed below by category:

● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 17.5% to $14.54 per ton in the 2024 Quarter from $12.37 per ton in the 2023 Quarter.

The increase of $2.17 per ton was primarily due to higher direct labor costs at several mines.

● Material and supplies expenses per ton produced increased 14.4% to $15.94 per ton in the 2024 Quarter from $13.93 per ton in the 2023 Quarter.

The increase of $2.01 per ton produced primarily reflects increases of $0.86 per ton for environmental and longwall subsidence expense, $0.49 per ton for outside expenses, $0.47 per ton for roof support, and $0.39 per ton for power and fuel , partially offset by a decrease of $0.29 per ton for contract labor used in the mining process .

● Maintenance expenses per ton produced increased 16.3% to $5.65 per ton in the 2024 Quarter from $4.86 per ton in the 2023 Quarter.

The increase of $0.79 per ton produced was primarily a result of higher maintenance costs at several mines.

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

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes decreased $0.28 per produced ton sold in the 2024 Quarter compared to 2023 Quarter primarily as a result of lower price realizations and a favorable mix of tons sold mined in states without severance taxes.

● We had outside coal purchases of $8.2 million in the 2024 Quarter compared to $11.5 million in the 2023 Quarter.

This benefited costs per ton in the 2024 Quarter since the cost of outside coal purchases are generally higher on a per ton basis than our produced coal.

For a definition of Segment Adjusted EBITDA Expense and related reconciliation to its comparable GAAP financial measure, please see "Item 1.

Financial Statements (Unaudited) – Note 18 – Segment Information."

Depreciation, depletion and amortization

Depreciation, depletion and amortization expense increased to $73.0 million for the 2024 Quarter compared to $65.4 million for the 2023 Quarter primarily due to increased sales of higher depreciation cost tons at our Tunnel Ridge mine as a result of lower production volumes at the mine in the 2024 Quarter.

Transportation revenues and expenses

The decrease was attributable to lower tons sold, which reduced coal sales by $58.5 million and lower average coal sales prices, which reduced coal sales by $34.9 million.

Coal sales volumes decreased due primarily to decreased tons sold from our Hamilton mine as a result of lower domestic demand and lower production levels at Tunnel Ridge due to challenging mining conditions and a longwall move during the 2025 Quarter.

Coal sales prices decreased by 6.9% as a result of lower domestic price realizations at several mines in the Illinois Basin and reduced export price realizations from our MC Mining and Mettiki mines.

● Transportation revenues and expenses were $10.2 million and $30.8 million for 2025 and 2024 Quarters, respectively.

The decrease of $10.4 million was primarily attributable to decreased average third-party transportation rates in the 2024 Quarter and decreased coal shipments for which we arrange third-party transportation.

The decrease of $20.6 million was primarily attributable to lower third-party transportation rates in the 2025 Quarter and decreased 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 Expense

Segment Adjusted EBITDA Expense decreased 3.4% to $346.2 million primarily related to our coal operations which decreased 6.2% to $332.2 million, as a result of lower coal sales volumes, partially offset by higher per ton costs.

Segment Adjusted EBITDA Expense per ton sold for our coal operations increased 4.7% to $42.75 per ton sold in the 2025 Quarter compared to $40.85 per ton in the 2024 Quarter, primarily due to lower production volumes, an increased sales mix of tons from higher cost operations, lower recoveries at our Appalachian mines, increased longwall move days at our Mettiki and Tunnel Ridge operations, and challenging mining conditions at the Tunnel Ridge mine as well as the following per ton cost increase:

● Labor and benefit expenses per ton produced, excluding workers’ compensation, increased 5.9% to $13.23 per ton in the 2025 Quarter from $12.49 per ton in the 2024 Quarter.

The increase of $0.74 per ton was primarily due to higher direct labor costs at several mines.

Segment Adjusted EBITDA Expense increases per ton for our coal operations were partially offset by the following decreases:

● Material and supplies expenses per ton produced decreased 9.2% to $13.51 per ton in the 2025 Quarter from $14.88 per ton in the 2024 Quarter.

The decrease of $1.37 per ton produced primarily reflects decreases of $0.72 per ton for roof support, $0.54 per ton for contract labor used in the mining process, $0.27 per ton for ventilation related expenses, and $0.20 per ton for outside expenses, partially offset by an increase of $0.20 per ton for various preparation plant expenses .

● Maintenance expenses per ton produced decreased 6.9% to $4.86 per ton in the 2025 Quarter from $5.22 per ton in the 2024 Quarter.

The decrease of $0.36 per ton produced was primarily a result of lower maintenance costs at several mines.

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes decreased $0.35 per produced ton sold in the 2025 Quarter compared to 2024 Quarter primarily as a result of lower price realizations, partially offset by an unfavorable mix of tons sold mined in states with severance taxes.

Change in fair value of digital assets

We recorded a decrease of $5.6 million in the fair value of our digital assets during the 2025 Quarter compared to an increase of $11.9 million during the 2024 Quarter reflecting the movement in the price of bitcoin during each period.

Net income attributable to ARLP

Net income attributable to ARLP for the 2025 Quarter was $74.0 million, or $0.57 per basic and diluted limited partner unit, compared to $158.1 million, or $1.21 per basic and diluted limited partner unit, for the 2024 Quarter as a result of lower revenues and a decrease in the fair value of our digital assets, partially offset by lower operating expenses.

Segment Adjusted EBITDA

Our 2025 Quarter Segment Adjusted EBITDA decreased $80.1 million to $180.5 million from the 2024 Quarter Segment Adjusted EBITDA of $260.6 million.

For a definition of Segment Adjusted EBITDA and related reconciliation to its comparable GAAP financial measure, please see "Item 1.

Financial Statements (Unaudited) – Note 18 – Segment Information."

Segment Information

Three Months Ended

September 30,

Increase (Decrease)

(in thousands)

Segment Adjusted EBITDA

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other, Corporate and Elimination (1)

Total Segment Adjusted EBITDA (2)

Coal - Tons sold

Illinois Basin Coal Operations

Appalachia Coal Operations

Total tons sold

Illinois Basin Coal Operations

Appalachia Coal Operations

Total coal sales

Other revenues

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Other, Corporate and Elimination

Total other revenues

Segment Adjusted EBITDA Expense

Illinois Basin Coal Operations

Segment Adjusted EBITDA

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other, Corporate and Elimination (1)

Total Segment Adjusted EBITDA Expense (2)

Other revenues

Segment Adjusted EBITDA Expense

Segment Adjusted EBITDA

Oil & Gas Royalties

1 unchanged sentence

Oil & gas royalties

Other revenues

Segment Adjusted EBITDA Expense

Segment Adjusted EBITDA

Coal Royalties

1 unchanged sentence

Intercompany coal royalties

(1) Other, Corporate and Elimination includes the elimination of intercompany coal royalty revenues and expenses between our Coal Royalties Segment and our Coal Operations Segments.

(2) For definitions of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to their respective comparable GAAP financial measures, please see "Item 1.

Financial Statements (Unaudited) – Note 18 – Segment Information."

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

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

Other revenues

Segment Adjusted EBITDA Expense

Segment Adjusted EBITDA

(1) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).

(2) Represents tons sold by our coal operations segments associated with coal reserves leased from our Coal Royalties Segment.

Illinois Basin Coal Operations – Segment Adjusted EBITDA decreased 10.1% to $126.2 million in the 2025 Quarter from $140.3 million in the 2024 Quarter.

The decrease of $17.8 million was primarily attributable to lower coal sales volumes and higher operating expenses.

Sales volumes decreased by 1.4% compared to the 2023 Quarter due primarily to reduced domestic demand, partially offset by increased export sales volumes from our Gibson South operation.

Segment Adjusted EBITDA Expense increased 5.8% to $225.5 million in the 2024 Quarter from $213.2 million in the 2023 Quarter, primarily as a result of higher operating expenses per ton, partially offset by reduced sales volumes.

Segment Adjusted EBITDA Expense per ton for the 2024 Quarter increased by 7.2% compared to the 2023 Quarter due primarily to reduced production and higher beginning inventory cost per ton at our Hamilton and River View mines.

Increased expenses and lower production at our Hamilton mine during the 2024 Quarter was partially attributable to increased longwall move days compared to the 2023 Quarter.

The decrease of $14.1 million was primarily attributable to lower coal sales volumes and prices, partially offset by lower operating expenses.

Sales volumes decreased by 6.1% compared to the 2024 Quarter due primarily to decreased tons sold from our Hamilton mine as a result of the timing of committed sales.

Coal sales price per ton decreased by 4.2% compared to the 2024 Quarter as a result of lower domestic price realizations at several mines in the region.

Segment Adjusted EBITDA Expense decreased 9.9% to $210.0 million in the 2025 Quarter from $233.1 million in the 2024 Quarter, primarily as a result of reduced sales volumes and lower operating expenses per ton.

Segment Adjusted EBITDA Expense per ton for the 2025 Quarter decreased by 4.0% compared to the 2024 Quarter due primarily to increased production and lower maintenance and materials and supplies costs at several mines in the region as well as reduced longwall move days at our Hamilton mine.

Appalachia Coal Operations – Segment Adjusted EBITDA decreased 79.0% to $15.6 million for the 2025 Quarter from $74.2 million in the 2024 Quarter.

The decrease of $37.3 million was primarily attributable to lower coal sales, which decreased 5.6% to $194.8 million in the 2024 Quarter from $206.4 million in the 2023 Quarter, and higher operating expenses.

The decrease in coal sales reflects lower price realizations.

Average coal sales price per ton decreased by 5.8% compared to the 2023 Quarter as a result of reduced export price realizations from our Mettiki and MC Mining operations.

Segment Adjusted EBITDA Expense increased 19.5% to $157.8 million in the 2024 Quarter from $132.0 million in the 2023 Quarter due to increased per ton operating expenses.

Segment Adjusted EBITDA Expense per ton for the 2024 Quarter increased by 19.3% compared to the 2023 Quarter due to a longwall move at our Tunnel Ridge operation, increased subsidence related expenses and challenging mining conditions at all three operations that lowered recoveries, and increased costs related to roof control and maintenance.

Oil & Gas Royalties – Segment Adjusted EBITDA decreased 8.5% to $28.7 million in the 2024 Quarter compared to $31.4 million in the 2023 Quarter due to reduced average sales prices, which decreased by 9.8%, partially offset by increased oil & gas volumes, which rose 11.9% to 864 MBOE sold in the 2024 Quarter compared to 772 MBOE in the 2023 Quarter as a result of increased drilling and completion activities on our interests and acquisitions of additional oil & gas mineral interests.

Coal Royalties – Segment Adjusted EBITDA increased by 11.6% to $11.1 million in the 2024 Quarter compared to $9.9 million in the 2023 Quarter due to increased royalty tons sold and reduced expenses, partially offset by reduced prices.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Consolidated Information

Total Revenues

Total revenues for the nine months ended September 30, 2024 ("2024 Period") decreased 4.3% to $1.86 billion compared to $1.94 billion for the nine months ended September 30, 2023 ("2023 Period") primarily due to lower coal sales and transportation revenues, partially offset by higher oil & gas royalties and other revenues.

Total operating expenses

Total operating expenses increased to $1.48 billion in the 2024 Period, compared to $1.38 billion in the 2023 Period, primarily due to the sale of higher cost purchased coal, higher per ton costs on certain expense items discussed below and a $15.3 million litigation expense accrual in the 2024 Period relating to the settlement (which is subject to court approval) of certain litigation as described in "Part II - Item 1.

Legal Proceedings" of this Quarterly Report on Form 10-Q.

Net income attributable to ARLP

Net income attributable to ARLP for the 2024 Period was $344.5 million, or $2.64 per basic and diluted limited partner unit, compared to $514.7 million, or $3.93 per basic and diluted limited partner unit, for the 2023 Period as a result of lower revenues and increased total operating expenses, partially offset by an increase in the fair value of our digital assets.

Coal sales decreased to $1.61 billion for the 2024 Period compared to $1.69 billion for the 2023 Period.

The decrease was attributable to lower coal sales volumes, which reduced coal sales by $60.5 million, and lower average coal sales prices, which reduced coal sales by $20.6 million.

Coal sales volumes decreased by 3.6% primarily due to reduced tons sold from our River View and Tunnel Ridge mines due to reduced domestic demand, partially offset by increased export sales volumes from our Gibson South operation.

Coal sales prices decreased slightly in the 2024 Period primarily due to reduced domestic pricing at our Tunnel Ridge mine, which benefited from significantly elevated pricing during the 2023 Period, and lower export price realizations from our Mettiki and MC Mining operations.

Coal - Segment Adjusted EBITDA Expense

Segment Adjusted EBITDA Expense for our coal operations increased 7.4% to $1.10 billion, as a result of higher per ton costs, partially offset by lower coal sales volumes.

Segment Adjusted EBITDA Expense per ton sold for our coal operations increased 11.4% to $44.04 per ton sold in the 2024 Period compared to $39.54 per ton in the 2023 Period, primarily due to certain cost increases, which are discussed below by category:

● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 14.5% to $13.52 per ton in the 2024 Period from $11.81 per ton in the 2023 Period.

The increase of $1.71 per ton was primarily due to higher direct labor costs at several mines.

● Material and supplies expenses per ton produced increased 14.9% to $15.59 per ton in the 2024 Period from $13.57 per ton in the 2023 Period.

The increase of $2.02 per ton produced primarily reflects increases of $0.56 per ton for environmental and longwall subsidence expense, $0.45 per ton for roof support, $0.40 per ton for outside expenses, and $0.27 per ton for power and fuel .

● Maintenance expenses per ton produced increased 21.2% to $5.37 per ton in the 2024 Period from $4.43 per ton in the 2023 Period.

The increase of $0.94 per ton produced was primarily a result of higher maintenance costs at several mines.

● We had outside coal purchases of $27.9 million in the 2024 Period compared to $15.7 million in the 2023 Period.

The increase of outside coal purchases negatively impacted costs per ton in the 2024 Period as our cost of outside coal purchases are generally higher on a per ton basis than our produced coal.

For a definition of Segment Adjusted EBITDA Expense and related reconciliation to its comparable GAAP financial measure, please see "Item 1.

Financial Statements (Unaudited) – Note 18 – Segment Information."

Change in fair value of digital assets

We recorded an $8.4 million increase in the fair value of our digital assets reflecting the increase in the price of bitcoin during the 2024 Period.

Effective January 1, 2024, we adopted new accounting guidance which clarifies the accounting and disclosure requirements for certain crypto assets.

The new guidance requires us to measure our digital assets at fair value and include the change in net income.

Please see "Item 1.

Financial Statements (Unaudited) – Note 6 – Digital Assets" for more information on our digital assets.

Transportation revenues and expenses

Transportation revenues and expenses were $82.1 million and $95.7 million for 2024 and 2023 Periods, respectively.

The decrease of $13.6 million was primarily attributable to decreased coal shipments for which we arrange third-party transportation, partially offset by increased average third-party transportation rates in the 2024 Period.

Transportation revenues are recognized when title to the coal passes to the customer and recognized in an amount equal to the corresponding transportation expenses.

The decrease of $58.6 million was primarily attributable to lower coal sales, which decreased 29.3% to $135.3 million in the 2025 Quarter from $191.2 million in the 2024 Quarter.

The decrease in coal sales reflects lower coal sales volumes and price realizations.

Tons sold decreased by 22.7% in the 2025 Quarter compared to the 2024 Quarter primarily as a result of lower production levels at Tunnel Ridge due to challenging mining conditions and a longwall move during the 2025 Quarter.

Average coal sales price per ton decreased by 8.5% compared to the 2024 Quarter primarily due to reduced export price realizations from our MC Mining and Mettiki mines, partially offset by a greater mix of higher priced sales tons from these two operations during the 2025 Quarter.

Segment Adjusted EBITDA

Our 2024 Period Segment Adjusted EBITDA decreased $154.2 million to $654.8 million from the 2023 Period Segment Adjusted EBITDA of $809.0 million.

For a definition of Segment Adjusted EBITDA and related reconciliation to its comparable GAAP financial measure, please see "Item 1.

Financial Statements (Unaudited) – Note 18 – Segment Information."

Segment Information

Nine Months Ended

September 30,

Increase (Decrease)

(in thousands)

Expense increased 2.6% to $120.6 million in the 2025 Quarter from $117.5 million in the 2024 Quarter due to increased per ton operating expenses and reduced volumes.

Segment Adjusted EBITDA Expense per ton for the 2025 Quarter increased by 32.7% compared to the 2024 Quarter due to lower recoveries across the region, increased longwall move days at our Mettiki and Tunnel Ridge operations, and challenging mining conditions at the Tunnel Ridge mine.

Oil & Gas Royalties – Segment Adjusted EBITDA decreased to $29.9 million in the 2025 Quarter compared to $31.4 million in the 2024 Quarter due to a reduction in oil & gas royalty volumes, which decreased by 2.0%, and higher expenses.

Coal Royalties – Segment Adjusted EBITDA decreased to $9.4 million in the 2025 Quarter compared to $12.4 million in the 2024 Quarter due to lower royalty tons sold and reduced average royalty rates per ton received from the Partnership’s mining subsidiaries.

Reconciliation of Non-GAAP Financial Measures

Segment Adjusted EBITDA

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other, Corporate and Elimination (1)

Total Segment Adjusted EBITDA (2)

Coal - Tons sold

Illinois Basin Coal Operations

Appalachia Coal Operations

Total tons sold

Illinois Basin Coal Operations

Appalachia Coal Operations

Total coal sales

Other revenues

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other, Corporate and Elimination

Total other revenues

We define Segment Adjusted EBITDA (a non-GAAP financial measure) as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization and general and administrative expenses adjusted for certain items that we characterize as unrepresentative of our ongoing operations.

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

We believe that the presentation of consolidated Adjusted EBITDA provides useful information to investors regarding our performance and results of operations because Adjusted 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 measure by our management for reasons similar to those stated in the previous explanation of Adjusted EBITDA.

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

(in thousands)

Noncontrolling interest

Net income attributable to ARLP

General and administrative

Depreciation, depletion and amortization

Interest expense, net

Change in fair value of digital assets

Litigation expense accrual

Income tax expense

Consolidated Segment Adjusted EBITDA

Segment Adjusted EBITDA Expense

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other, Corporate and Elimination (1)

Total Segment Adjusted EBITDA Expense (2)

Oil & Gas Royalties

Volume - BOE (3)

Oil & gas royalties

Coal Royalties

Volume - Tons sold (4)

Intercompany coal royalties

n/m Percentage change not meaningful.

(1) Other, Corporate and Elimination includes the elimination of intercompany coal royalty revenues and expenses between our Coal Royalties Segment and our Coal Operations Segments.

(2) For definitions of Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense and related reconciliations to their respective comparable GAAP financial measures, please see "Item 1.

Financial Statements (Unaudited) – Note 18 – Segment Information."

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

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

Illinois Basin Coal Operations – Segment Adjusted EBITDA decreased 2.9% to $373.0 million in the 2024 Period from $384.0 million in the 2023 Period.

The decrease of $11.0 million was primarily attributable to increased operating expenses, partially offset by higher coal sales, which increased 2.9% to $1.04 billion in the 2024 Period from $1.01 billion in the 2023 Period.

The increase in coal sales reflects higher coal sales price realizations of $57.19 per ton sold in the 2024 Period compared to $55.26 per ton sold in the 2023 Period due to improved domestic pricing, partially offset by a slight reduction in sales volumes.

Segment Adjusted EBITDA Expense increased 6.3% to $674.8 million in the 2024 Period from $634.9 million in the 2023 Period primarily as a result of higher operating expenses per ton.

Segment Adjusted EBITDA Expense per ton increased by 6.9% compared to the 2023 Period resulting from reduced production and lower recoveries at our River View and Hamilton operations.

Appalachia Coal Operations – Segment Adjusted EBITDA decreased 47.8% to $157.1 million for the 2024 Period from $301.1 million in the 2023 Period.

The decrease of $144.0 million was primarily attributable to lower coal sales, which decreased 16.3% to $566.8 million in the 2024 Period from $676.8 million in the 2023 Period, and higher operating expenses.

The decrease in coal sales reflects lower sales volumes and prices.

Coal sales volumes decreased by 10.8% compared to the 2023 Period primarily due to reduced production at our Tunnel Ridge operation as a result of lower demand.

Average coal sales prices decreased by 6.1% compared to the 2023 Period as a result of reduced domestic pricing from our Tunnel Ridge mine, which benefited from significantly elevated pricing during the 2023 Period, and lower export price realizations from our Mettiki and MC Mining operations.

Segment Adjusted EBITDA Expense increased 9.3% to $412.1 million in the 2024 Period from $377.1 million in the 2023 Period due to increased operating expenses per ton, partially offset by lower sales volumes.

Segment Adjusted EBITDA Expense per ton for the 2024 Period increased by 22.5% compared to the 2023 Period due to reduced production as a result of challenging mining conditions that lowered recoveries and increased costs related to labor, roof control, outside expenses, and maintenance during the 2024 Period.

Oil & Gas Royalties – Segment Adjusted EBITDA increased to $91.4 million in the 2024 Period compared to $90.5 million in the 2023 Period.

Improved Segment Adjusted EBITDA in the 2024 Period was due to record oil & gas volumes, which rose to 2,579 MBOE sold in the 2024 Period, representing an increase of 12.3% compared to the 2023 Period as a result of increased drilling and completion activities on our interests and acquisitions of additional oil & gas mineral interests.

Coal Royalties – Segment Adjusted EBITDA increased to $33.5 million for the 2024 Period compared to $31.0 million for the 2023 Period.

Higher average royalty rates per ton and increased royalty tons sold contributed to improved results for the 2024 Period.

We define Segment Adjusted EBITDA Expense (a non-GAAP financial measure) as the sum of operating expenses, coal purchases and other expenses as adjusted to remove certain items from operating expenses that we characterize as unrepresentative of our ongoing operations.

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.

We also review Segment Adjusted EBITDA Expense on a per ton basis for cost trends at our coal operations by dividing Segment Adjusted EBITDA expense by coal sales volumes.

The following is a reconciliation of operating expenses, the most comparable GAAP financial measure, to consolidated Segment Adjusted EBITDA Expense:

Three Months Ended

(in thousands)

Operating expenses (excluding depreciation, depletion and amortization)

Litigation expense accrual

Outside coal purchases

Other expense (income)

Consolidated Segment Adjusted EBITDA Expense

Liquidity and Capital Resources

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Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Accounts Receivable Securitization

In January 2024, we extended the term of the accounts receivable securitization facility (the "Securitization Facility") to January 2025 and increased the borrowing availability under the facility to $90.0 million.

For additional information on the Securitization Facility, please see "Item 1.

Financial Statements (Unaudited) – Note 8 – Long-Term Debt."

February 2024 Equipment Financing

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

For additional information on the February 2024 Equipment Financing, please see "Item 1.

Financial Statements (Unaudited) – Note 8 – Long-Term Debt."

8.625% Senior Notes due 2029

On June 12, 2024, the Intermediate Partnership and Alliance Finance (as co-issuer) issued an aggregate principal amount of $400 million of senior unsecured notes due 2029 in a private placement to qualified institutional buyers.

For additional information on the 8.625% Senior Notes due 2029, please see "Item 1.

Financial Statements (Unaudited) – Note 8 – Long-Term Debt."

7.5% Senior Notes due 2025

In June 2024, we redeemed the entire outstanding balance of $284.6 million of our 7.5% Senior Notes due 2025.

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 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 million of ARLP common units from that date.

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 remaining of the original $100.0 million authorized as of December 31, 2022.

As a result, we were authorized to repurchase up to a total of $100.0 million of ARLP common units from that date.

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.

No units were repurchased during the nine months ended September 30, 2024.

No units were repurchased during the three months ended March 31, 2025.

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.

The remaining authorized amount for unit repurchases under this program was $80.6 million as of March 31, 2025.

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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Unregistered Sales of Equity Securities and Use of Proceeds” of this Quarterly Report on Form 10-Q for more information on the unit repurchase program.

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.

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

Cash provided by operating activities was $634.7 million for the 2024 Period compared to $730.3 million for the 2023 Period.

The decrease in cash provided by operating activities was primarily due to the decrease in net income adjusted for non-cash items and unfavorable working capital changes primarily related to accounts payable.

These decreases were partially offset by favorable working capital changes primarily related to trade receivables, inventories, and miscellaneous other changes compared to the 2023 Period.

Net cash used in investing activities was $337.4 million for the 2024 Period compared to $439.4 million for the 2023 Period.

The decrease in cash used in investing activities was primarily due to acquisitions of oil & gas reserves including the JC Resources Acquisition and purchase of investments in the 2023 Period and change in accounts payable and accrued liabilities.

These decreases were partially offset by increased capital expenditures during the 2024 Period.

Net cash used in financing activities was $161.7 million for the 2024 Period compared to $389.7 million for the 2023 Period.

The decrease in cash used in financing activities was primarily attributable to the issuance of our 8.625% Senior Notes due 2029, borrowings under our February 2024 Equipment Financing and the purchase of units under our repurchase program in the 2023 Period.

These decreases were partially offset by the redemption of our remaining 7.5% Senior Notes due 2025.

Accounts Receivable Securitization

In January 2025, we extended the term of the accounts receivable securitization facility (the “Securitization Facility”) to January 2026.

The borrowing availability under the facility is a maximum of $75.0 million.

For additional information on the Securitization Facility, please see “Item 1.

Financial Statements (Unaudited) – Note 8 – Long-Term Debt.”

Cash provided by operating activities was $145.7 million for the 2025 Quarter compared to $209.7 million for the 2024 Quarter.

These decreases were partially offset by favorable working capital changes primarily related to accounts payable and inventories compared to the 2024 Quarter.

Net cash used in investing activities was $93.1 million for the 2025 Quarter compared to $120.5 million for the 2024 Quarter.

The decrease in cash used in investing activities was primarily due to the decrease in capital expenditures

in the 2025 Quarter as compared to the 2024 Quarter.

This decrease was partially offset by a change in accounts payable and accrued liabilities during the 2025 Quarter.

Net cash used in financing activities was $108.3 million for the 2025 Quarter compared to $15.0 million for the 2024 Quarter.

The increase in cash used in financing activities was primarily attributable to decreased borrowings under our securitization facility and reduced proceeds from equipment financings in the 2025 Quarter as compared to the 2024 Quarter.

These increases were partially offset by reduced payments under the securitization facility in the 2025 Quarter.

Cash Requirements

Management anticipates having sufficient cash flow to meet 2024 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, 2024 cash and cash equivalents of $195.4 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 2025 cash requirements, including capital expenditures, scheduled payments on long-term debt, lease obligations, asset retirement obligation costs and workers’ compensation and pneumoconiosis costs, with our March 31, 2025 cash and cash equivalents of $81.3 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 $7.28 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 September 30, 2024, we had $5.0 million in letters of credit outstanding under this agreement.

On March 31, 2025, we had $5.0 million in letters of credit outstanding under this agreement.

Related-Party Transactions

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Craft III Foundation and The Kathleen S.

Craft Foundation, (2) the use of aircraft, and (3) the purchase of oil & gas mineral interests from JC Resources LP, an entity owned by Mr.

Craft Foundation, and (2) the use of aircraft.

We also have related-party transactions with (a) WKY CoalPlay, LLC, a company owned by entities related to Mr.

Craft, regarding three mineral leases, and (b) with

entities in which we hold equity investments.

Craft, regarding three mineral leases, and (b) entities in which we hold equity investments.

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

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Please read our Annual Report on Form 10-K for the year ended December 31, 2024, “Item 8.

Financial Statements and Supplementary Data — Note 3 – Acquisitions and Note 20 – Related-Party Transactions" for additional information concerning the JC Resources Acquisition and our related-party transactions.

Financial Statements and Supplementary Data — Note 4 – Acquisitions and Note 21 – Related-Party Transactions” for additional information concerning related-party transactions.

New Accounting Standards

2 unchanged sentences

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