Core Concept - The article discusses investment strategies focusing on identifying companies with strong potential for growth while avoiding those likely to decline, particularly in the context of the basic materials sector and the impact of the AI revolution. Group 1: Investment Strategies - The concept of avoiding poorly rated companies can lead to better investment returns, as evidenced by the performance of S&P 500 companies rated by Moody's in 2020 [3][10]. - Eric Fry's presentation emphasizes the importance of selecting stocks that are expected to rise while avoiding those that are likely to fall, particularly in an era characterized by rapid changes in the market [4][31]. Group 2: Basic Materials Sector Analysis - Tronox Holdings PLC (TROX) is highlighted as a key player in the titanium dioxide market, which is cyclical and dependent on demand from industries like automotive and construction [7][8]. - Despite current low trading prices for Tronox shares, there is optimism for recovery due to ongoing demand for titanium dioxide, supported by recent insider buying [9][12][13]. - The article contrasts Tronox with Alliance Resource Partners LP (ARLP), which is facing challenges due to high extraction costs in the coal industry and declining earnings [22][25][29]. Group 3: Market Trends and Future Outlook - The demand for lithium-ion batteries is expected to rise significantly due to advancements in AI technology and the shift from traditional energy sources [18][21]. - Albemarle Corp. is positioned to benefit from this trend, with a strong balance sheet and low-cost assets, while ARLP is likely to struggle against cheaper competitors and market dynamics [21][30].

PART I FINANCIAL INFORMATION [ITEM 1. Financial Statements (Unaudited)](index=5&type=section&id=ITEM%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements of Alliance Resource Partners, L.P. and its subsidiaries, including balance sheets, statements of income, comprehensive income, and cash flows for the periods ended June 30, 2025, and December 31, 2024 (balance sheet) or June 30, 2024 (income, comprehensive income, cash flows) It also includes detailed notes explaining accounting policies, new standards, variable interest entities, fair value measurements, inventories, digital assets, investments, long-term debt, workers' compensation, pension plans, contingencies, partners' capital, unit-based compensation, revenue recognition, income taxes, earnings per unit, and segment information [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show the financial position of ARLP and its subsidiaries as of June 30, 2025, and December 31, 2024 Key changes include a decrease in cash and cash equivalents, an increase in digital assets and inventories, and a slight decrease in total assets and total liabilities Partners' Capital also saw a decrease Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------- | :-------------- | :---------------- | :----- | | Cash and cash equivalents | $55,004 | $136,962 | $(81,958) | | Digital assets | $58,030 | $45,037 | $12,993 | | Inventories, net | $138,712 | $120,661 | $18,051 | | Total current assets | $461,126 | $513,230 | $(52,104) | | Total assets | $2,869,446 | $2,915,730 | $(46,284) | | Total current liabilities | $234,850 | $233,142 | $1,708 | | Total long-term liabilities | $822,106 | $829,055 | $(6,949) | | Total liabilities | $1,056,956 | $1,062,197 | $(5,241) | | Total Partners' Capital | $1,812,490 | $1,853,533 | $(41,043) | [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The condensed consolidated statements of income show a significant decrease in total revenues and net income for both the three and six months ended June 30, 2025, compared to the same periods in 2024 This was primarily driven by lower coal sales, increased depreciation, and an impairment loss on investments, partially offset by a positive change in the fair value of digital assets Income Statement Highlights (in thousands, except per unit data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenues | $547,463 | $593,350 | $(45,887) | $1,087,931 | $1,245,047 | $(157,116) | | Total operating expenses | $458,745 | $475,930 | $(17,185) | $904,935 | $967,332 | $(62,397) | | Income from operations | $88,718 | $117,420 | $(28,702) | $182,996 | $277,715 | $(94,719) | | Change in fair value of digital assets | $12,856 | $(3,748) | $16,604 | $7,282 | $8,105 | $(823) | | Impairment loss on investments | $(25,000) | — | $(25,000) | $(25,000) | — | $(25,000) | | Net income attributable to ARLP | $59,410 | $100,187 | $(40,777) | $133,393 | $258,244 | $(124,851) | | Earnings per Limited Partner Unit | $0.46 | $0.77 | $(0.31) | $1.03 | $1.98 | $(0.95) | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income attributable to ARLP decreased for both the three and six months ended June 30, 2025, compared to 2024, primarily due to lower net income, despite positive other comprehensive income adjustments from defined benefit pension plans, pneumoconiosis benefits, foreign currency translation, and unrealized gains on debt securities Comprehensive Income Highlights (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :--------------------------------------- | :----------------------------- | :----------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Net income | $61,025 | $101,509 | $(40,484) | $136,585 | $261,076 | $(124,491) | | Other comprehensive income | $11,194 | $957 | $10,237 | $11,464 | $1,880 | $9,584 | | Comprehensive income attributable to ARLP | $70,604 | $101,144 | $(30,540) | $144,857 | $260,124 | $(115,267) | - Change in unrealized gains on debt securities contributed **$10.9 million** to other comprehensive income for both the three and six months ended June 30, 2025[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flows from operating activities significantly decreased for the six months ended June 30, 2025, compared to 2024, primarily due to lower net income and unfavorable working capital changes Net cash used in investing activities decreased due to lower capital expenditures, while net cash used in financing activities increased substantially due to reduced debt proceeds compared to the prior year Cash Flow Highlights (in thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :--------------------------------- | :----------------------------- | :----------------------------- | :----------- | | Cash flows from operating activities | $297,379 | $425,439 | $(128,060) | | Net cash used in investing activities | $(168,253) | $(222,993) | $54,740 | | Net cash used in financing activities | $(211,160) | $(58,556) | $(152,604) | | Net change in cash and cash equivalents | $(81,958) | $143,890 | $(225,848) | | Cash and cash equivalents at end of period | $55,004 | $203,703 | $(148,699) | - Capital expenditures decreased to **$153.8 million** in 2025 from **$225.3 million** in 2024[16](index=16&type=chunk) - Financing activities in 2024 included significant borrowings from long-term debt (**$400.0 million**) and equipment financings (**$54.6 million**) which were not present in 2025[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering the company's organization, significant accounting policies, new accounting standards, variable interest entities, fair value measurements, inventory valuation, digital assets, investments, long-term debt, workers' compensation and pneumoconiosis liabilities, pension plan costs, contingencies, partners' capital changes, common unit-based compensation, revenue recognition, income taxes, earnings per unit calculations, and segment-specific financial data [1. Organization and Presentation](index=9&type=section&id=1.%20Organization%20and%20Presentation) Alliance Resource Partners, L.P. (ARLP) is a Delaware limited partnership primarily engaged in coal production and marketing, managed by its general partner MGP The financial statements are unaudited, prepared under SEC interim reporting rules, and reflect management's estimates - ARLP is a Delaware limited partnership listed on NASDAQ, formed in May 1999, and managed by its general partner, MGP[19](index=19&type=chunk) - The condensed consolidated financial statements are unaudited and prepared pursuant to SEC interim reporting rules, not including all information normally included with GAAP financial statements[21](index=21&type=chunk) - Interim results are not necessarily indicative of results to be expected for the full year ending December 31, 2025[22](index=22&type=chunk) [2. New Accounting Standards](index=11&type=section&id=2.%20New%20Accounting%20Standards) ARLP is evaluating the impact of recently issued FASB ASUs ASU 2023-09 (Income Taxes) is effective for fiscal years beginning after December 15, 2024, and is not expected to materially affect financial results but will enhance disclosures ASU 2024-03 (Expense Disaggregation) is effective for fiscal years beginning after December 15, 2026, and its impact is still being evaluated - ASU 2023-09 (Income Taxes) is effective for fiscal years beginning after December 15, 2024, and is not expected to materially affect financial results but will result in enhanced disclosures[31](index=31&type=chunk) - ASU 2024-03 (Expense Disaggregation) is effective for fiscal years beginning after December 15, 2026, and its impact on results of operations, cash flows, financial condition, and related disclosures is still being evaluated[32](index=32&type=chunk)[33](index=33&type=chunk) [3. Variable Interest Entities](index=13&type=section&id=3.%20Variable%20Interest%20Entities) ARLP consolidates AllDale I & II and Cavalier Minerals as VIEs where it is the primary beneficiary due to power to direct activities and substantial equity ownership It does not consolidate AllDale III, NGP ET IV, and Gavin Generation, as it is not the primary beneficiary, despite holding equity interests - ARLP consolidates AllDale I & II and Cavalier Minerals as variable interest entities (VIEs) because it has the power to direct their most significant economic activities and substantial equity ownership[37](index=37&type=chunk) - ARLP does not consolidate AllDale III, NGP ET IV, and Gavin Generation, as it is not the primary beneficiary for these VIEs[41](index=41&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk) - ARLP committed to invest up to **$25.0 million** in Gavin Generation in February 2025, funding **$22.1 million** by August 6, 2025[45](index=45&type=chunk) [4. Fair Value Measurements](index=15&type=section&id=4.%20Fair%20Value%20Measurements) ARLP measures digital assets at fair value based on exchange quoted prices (Level 1) Contingent consideration and debt securities are measured using Level 3 fair value measurements, relying on unobservable inputs like option approach methodology simulations for contingent consideration and a combination of market and option-pricing models for debt securities Fair Value Measurements (in thousands) | Asset/Liability | June 30, 2025 Carrying Value | June 30, 2025 Fair Value (Level) | December 31, 2024 Carrying Value | December 31, 2024 Fair Value (Level) | | :---------------------- | :----------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | | Digital assets | $58,030 | $58,030 (Level 1) | $45,037 | $45,037 (Level 1) | | Contingent consideration | $10,677 | $10,677 (Level 3) | $13,100 | $13,100 (Level 3) | | Debt securities | $13,046 | $13,046 (Level 3) | — | — | | Long-term debt | $477,054 | $510,517 (Level 2) | $490,387 | $523,461 (Level 2) | - The fair value measurement of contingent consideration liability uses an option approach methodology simulation based on unobservable inputs (Level 3)[50](index=50&type=chunk)[53](index=53&type=chunk) - The fair value measurement of debt securities uses a combination of market approaches and option-pricing models with unobservable inputs (Level 3)[51](index=51&type=chunk)[58](index=58&type=chunk) [5. Inventories](index=21&type=section&id=5.%20Inventories) Total inventories, net, increased to $138.7 million as of June 30, 2025, from $120.7 million as of December 31, 2024 This increase was primarily driven by higher coal inventory, which saw a lower of cost or net realizable value adjustment of $2.7 million in Q2 2025, significantly less than the $24.6 million adjustment in Q4 2024 Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------- | :-------------- | :---------------- | :----- | | Coal | $55,171 | $37,290 | $17,881 | | Finished goods | $14,586 | $14,197 | $389 | | Work in process | $1,778 | $1,560 | $218 | | Raw materials | $6,975 | $7,192 | $(217) | | Supplies | $60,202 | $60,422 | $(220) | | Total inventories, net | $138,712 | $120,661 | $18,051 | - Lower of cost or net realizable value adjustments to coal inventories were **$2.7 million** as of June 30, 2025, compared to **$24.6 million** as of December 31, 2024[60](index=60&type=chunk) [6. Digital Assets](index=21&type=section&id=6.%20Digital%20Assets) ARLP's digital assets, primarily Bitcoin, increased in fair value to $58.0 million as of June 30, 2025, from $45.0 million at December 31, 2024, reflecting an increase in Bitcoin's market price Digital Assets (in thousands, except unit data) | Asset | June 30, 2025 Units | June 30, 2025 Cost Basis | June 30, 2025 Fair Value | December 31, 2024 Cost Basis | December 31, 2024 Fair Value | | :------ | :------------------ | :----------------------- | :----------------------- | :--------------------------- | :--------------------------- | | Bitcoin | 541.39 | $24,496 | $58,030 | $18,748 | $45,037 | [7. Investments](index=21&type=section&id=7.%20Investments) ARLP holds equity method investments in AllDale III and NGP ET IV, and equity securities in Infinitum and Ascend A $25.0 million impairment loss was recorded on the Ascend investment in Q2 2025 due to its recapitalization, which converted preferred stock to common stock and involved a new convertible note financing Equity Method Investments (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $33,555 | $45,693 | $35,532 | $46,503 | | Contributions | $513 | $665 | $1,391 | $1,290 | | Net loss on equity method investments | $(1,536) | $(152) | $(3,542) | $(705) | | Distributions received | $(2,904) | $(1,118) | $(3,753) | $(2,000) | | Ending balance | $29,628 | $45,088 | $29,628 | $45,088 | - A **$25.0 million** impairment loss was recorded on the equity investment in Ascend during Q2 2025 due to its recapitalization and conversion of preferred stock to common stock, which was deemed to have no value[68](index=68&type=chunk) - ARLP participated in Ascend's convertible note financing with a **$3.1 million** commitment, funding **$2.1 million** by June 30, 2025, classified as available-for-sale debt securities with a fair value of **$13.0 million** and **$10.9 million** in unrealized gains[66](index=66&type=chunk)[67](index=67&type=chunk) [8. Long-Term Debt](index=25&type=section&id=8.%20Long-Term%20Debt) ARLP's long-term debt, net of current maturities, decreased to $449.6 million as of June 30, 2025, from $463.7 million at December 31, 2024 The company maintains a $425.0 million revolving credit facility and a $75.0 million term loan, along with $400.0 million in 8.625% Senior Notes due 2029 issued in June 2024 A $75.0 million accounts receivable securitization facility was extended to January 2026 Long-Term Debt (in thousands) | Debt Type | June 30, 2025 Principal | December 31, 2024 Principal | | :-------------------------------- | :-------------------------- | :-------------------------- | | Revolving credit facility | $0 | $0 | | Term loan | $38,672 | $45,703 | | 8.625% Senior notes due 2029 | $400,000 | $400,000 | | Securitization facility | $0 | $0 | | February 2024 equipment financing | $38,382 | $44,684 | | Total long-term debt, net of current maturities | $449,579 | $463,718 | - ARLP had **$384.0 million** available for borrowing under the Revolving Credit Facility and **$60.2 million** available under the Securitization Facility as of June 30, 2025[71](index=71&type=chunk)[78](index=78&type=chunk) - The company was in compliance with all covenants of the Credit Agreement as of June 30, 2025[74](index=74&type=chunk) [9. Workers' Compensation and Pneumoconiosis](index=29&type=section&id=9.%20Workers'%20Compensation%20and%20Pneumoconiosis) The workers' compensation liability increased slightly to $49.2 million as of June 30, 2025, from $47.9 million at the beginning of the year, primarily due to a valuation loss from a decrease in the discount rate Pneumoconiosis benefits resulted in a net periodic benefit cost of $5.6 million for the six months ended June 30, 2025, a decrease from $6.5 million in the prior year Workers' Compensation Liability (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $48,511 | $47,561 | $47,870 | $47,975 | | Ending balance | $49,234 | $47,194 | $49,234 | $47,194 | | Valuation loss (gain) | $496 | $(795) | $496 | $(795) | - The 2025 valuation loss was due to a decrease in the discount rate from **5.17%** on December 31, 2024, to **4.92%** on June 30, 2025[81](index=81&type=chunk) Pneumoconiosis Benefits Net Periodic Benefit Cost (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net periodic benefit cost | $2,807 | $3,255 | $5,564 | $6,513 | [10. Components of Pension Plan Net Periodic Benefit Cost](index=29&type=section&id=10.%20Components%20of%20Pension%20Plan%20Net%20Periodic%20Benefit%20Cost) The company's defined benefit pension plan generated a net periodic benefit credit of $(793) thousand for the six months ended June 30, 2025, consistent with the prior year The plan is closed to new applicants, and no material contributions are expected in 2025 Pension Plan Net Periodic Benefit Credit (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net periodic benefit credit | $(397) | $(374) | $(793) | $(796) | - The Pension Plan is closed to new applicants and participants are no longer receiving benefit accruals for service[84](index=84&type=chunk) - No material contributions to the Pension Plan are expected during 2025[86](index=86&type=chunk) [11. Contingencies](index=30&type=section&id=11.%20Contingencies) ARLP settled a class action lawsuit related to alleged Fair Labor Standards Act violations for $15.3 million in April 2024, with final court approval pending in Q4 2025 Management believes the ultimate outcome of this and other pending legal matters will not materially adversely affect financial condition, results of operations, or liquidity, assuming the settlement is upheld - A settlement agreement for **$15.3 million** was reached in April 2024 for class action lawsuits alleging Fair Labor Standards Act violations[87](index=87&type=chunk) - The **$15.3 million** settlement amount was paid into an escrow account on July 10, 2025, with a hearing for final court approval scheduled for the fourth quarter of 2025[87](index=87&type=chunk) - Management believes the ultimate outcome of other outstanding lawsuits, claims, and regulatory proceedings will not have a material adverse effect on financial condition, results of operations, or liquidity[88](index=88&type=chunk) [12. Partners' Capital](index=31&type=section&id=12.%20Partners'%20Capital) Total Partners' Capital decreased to $1.81 billion as of June 30, 2025, from $1.85 billion at December 31, 2024 This was primarily due to distributions paid to partners, partially offset by comprehensive income Quarterly cash distributions were maintained at $0.70 per unit for Q1 and Q2 2025, but the Q3 2025 distribution was declared at $0.60 per unit Total Partners' Capital (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :---------------------- | :-------------- | :---------------- | :----- | | Total Partners' Capital | $1,812,490 | $1,853,533 | $(41,043) | Distributions Paid to Partners (in thousands) | Period | Per Unit Cash Distribution | Total Cash Distribution | | :---------------- | :------------------------- | :---------------------- | | Q1 2025 | $0.70 | $90,891 | | Q2 2025 | $0.70 | $90,739 | | Q3 2025 (declared) | $0.60 | N/A | | Total 6 months 2025 | $1.40 | $181,630 | | Total 2024 | $2.80 | $363,430 | - Total comprehensive income attributable to ARLP for the six months ended June 30, 2025, was **$144.9 million**, compared to **$260.1 million** for the same period in 2024[12](index=12&type=chunk) [13. Common Unit-Based Compensation Plan](index=32&type=section&id=13.%20Common%20Unit-Based%20Compensation%20Plan) The Long-Term Incentive Plan (LTIP) had 1,198,240 non-vested restricted units outstanding as of June 30, 2025, with a weighted-average grant date fair value of $22.58 per unit LTIP expense for the six months ended June 30, 2025, was $4.2 million, slightly down from $4.4 million in 2024 Non-vested LTIP Grants | Metric | January 1, 2025 | June 30, 2025 | | :-------------------------- | :-------------- | :-------------- | | Number of units | 1,458,564 | 1,198,240 | | Weighted-average grant date fair value per unit | $17.60 | $22.58 | - LTIP expense for grants of restricted units was **$4.2 million** for the six months ended June 30, 2025, compared to **$4.4 million** for the same period in 2024[95](index=95&type=chunk) - As of June 30, 2025, there was **$14.5 million** in total unrecognized compensation expense related to non-vested LTIP restricted unit grants, expected to be recognized over a weighted-average period of **1.5 years**[95](index=95&type=chunk) [14. Revenue from Contracts with Customers](index=34&type=section&id=14.%20Revenue%20from%20Contracts%20with%20Customers) Total consolidated revenues decreased for both the three and six months ended June 30, 2025, compared to 2024, primarily due to lower coal sales and transportation revenues The company has significant unsatisfied performance obligations from coal supply contracts, totaling $3.61 billion, with the majority ($3.04 billion) from Illinois Basin Coal Operations Total Consolidated Revenues (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------ | :----------------------------- | :----------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenues | $547,463 | $593,350 | $(45,887) | $1,087,931 | $1,245,047 | $(157,116) | Unsatisfied Performance Obligations from Coal Supply Contracts (in thousands) as of June 30, 2025 | Segment | 2025 | 2026 | 2027 | 2028 and Thereafter | Total | | :-------------------------- | :--------- | :----------- | :--------- | :------------------ | :---------- | | Illinois Basin Coal Operations | $609,685 | $1,036,588 | $653,033 | $739,113 | $3,038,419 | | Appalachia Coal Operations | $350,752 | $135,861 | $62,005 | $27,000 | $575,618 | | Total coal revenues | $960,437 | $1,172,449 | $715,038 | $766,113 | $3,614,037 | [15. Income Taxes](index=35&type=section&id=15.%20Income%20Taxes) Income tax expense increased to $9.5 million for the six months ended June 30, 2025, from $8.8 million in 2024 The effective income tax rates are lower than the federal statutory rate due to a portion of income not subject to income taxes Tax years 2020-2024 remain open for examination, with IRS audits ongoing for 2020 and 2021 lower-tier partnership returns Income Tax Expense (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Current Federal | $4,340 | $4,506 | $9,063 | $9,224 | | Current State | $285 | $317 | $605 | $655 | | Deferred Federal | $593 | $(839) | $(184) | $(966) | | Deferred State | $130 | $(124) | $46 | $(104) | | Total Income tax expense | $5,348 | $3,860 | $9,530 | $8,809 | - The effective income tax rates are less than the federal statutory rate, primarily due to the portion of income not subject to income taxes[100](index=100&type=chunk) - Tax years 2020 through 2024 remain open to examination by tax authorities, and lower-tier partnership income tax returns for 2020 and 2021 are being audited by the IRS[101](index=101&type=chunk) [16. Earnings per Limited Partner Unit](index=35&type=section&id=16.%20Earnings%20per%20Limited%20Partner%20Unit) Basic and diluted earnings per limited partner unit (EPU) decreased significantly to $1.03 for the six months ended June 30, 2025, from $1.98 in 2024, reflecting the overall decline in net income attributable to ARLP The two-class method is used for EPU calculation, allocating net income to limited partners and participating securities Earnings per Limited Partner Unit (in thousands, except per unit data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to ARLP | $59,410 | $100,187 | $133,393 | $258,244 | | Earnings per limited partner unit - basic and diluted | $0.46 | $0.77 | $1.03 | $1.98 | - The two-class method is used for calculating basic and diluted EPU, allocating net income to limited partners and participating securities (LTIP restricted unit awards)[102](index=102&type=chunk) - Participating securities were considered anti-dilutive for both the three and six months ended June 30, 2025 and 2024[103](index=103&type=chunk) [17. Segment Information](index=37&type=section&id=17.%20Segment%20Information) ARLP operates in four reportable segments: Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties, and Coal Royalties, plus an "Other, Corporate and Elimination" category For the six months ended June 30, 2025, all segments experienced a decrease in Segment Adjusted EBITDA compared to 2024, with Appalachia Coal Operations seeing the most significant decline Segment Adjusted EBITDA (in thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------------- | :----------------------------- | :----------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Illinois Basin Coal Operations | $114,229 | $118,023 | $(3,794) | $240,402 | $258,301 | $(17,899) | | Appalachia Coal Operations | $29,425 | $45,319 | $(15,894) | $45,016 | $119,554 | $(74,538) | | Oil & Gas Royalties | $29,883 | $31,258 | $(1,375) | $59,767 | $62,660 | $(2,893) | | Coal Royalties | $11,817 | $9,955 | $1,862 | $21,212 | $22,399 | $(1,187) | | Total Segment Adjusted EBITDA | $185,354 | $204,555 | $(19,201) | $366,397 | $462,914 | $(96,517) | - Illinois Basin Coal Operations saw increased sales volumes but lower prices, leading to a decrease in Segment Adjusted EBITDA[141](index=141&type=chunk)[156](index=156&type=chunk) - Appalachia Coal Operations experienced significant declines in both sales volumes and price realizations, resulting in a substantial decrease in Segment Adjusted EBITDA, exacerbated by challenging mining conditions[142](index=142&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on ARLP's financial condition and operational results for the three and six months ended June 30, 2025, compared to 2024 It details the company's strategy as a diversified natural resource company, segment performance, liquidity, capital resources, and cash flow changes, highlighting the impact of lower coal prices and an investment impairment on overall profitability [Summary](index=43&type=section&id=Summary%20(MD%26A)) ARLP is a diversified natural resource company focused on coal production and marketing in the eastern U.S., and oil & gas royalty income from premier basins The company also invests in energy and infrastructure opportunities, including electric motor manufacturing, renewable energy, and battery materials - ARLP is the second largest coal producer in the eastern United States with seven operating underground mining complexes[119](index=119&type=chunk) - The company owns mineral interests in approximately **70,000 net royalty acres** in premier oil & gas producing regions (Permian, Anadarko, Williston basins)[121](index=121&type=chunk) - ARLP has invested in energy and infrastructure opportunities, including Infinitum Electric (electric motors), NGP Energy Transition (renewable energy), Ascend Elements (battery materials), and Gavin Generation (coal-fired power plant)[122](index=122&type=chunk)[125](index=125&type=chunk) [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=46&type=section&id=Three%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202024) Consolidated total revenues decreased by 7.7% to $547.5 million, and net income attributable to ARLP decreased by 40.7% to $59.4 million This was primarily due to lower average coal sales prices and transportation revenues, an impairment loss on investments, and increased depreciation, partially offset by higher coal sales volumes and a positive change in digital asset fair value Consolidated Performance (3 Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :--------- | :--------- | :------- | :------- | | Tons sold | 8,382 | 7,851 | 531 | 6.8% | | Tons produced | 8,105 | 8,437 | (332) | (3.9)% | | Total revenues | $547,463 | $593,350 | $(45,887) | (7.7)% | | Coal sales | $485,469 | $512,659 | $(27,190) | (5.3)% | | Net income of ARLP | $59,410 | $100,187 | $(40,777) | (40.7)% | | Segment Adjusted EBITDA | $182,304 | $202,004 | $(19,700) | (9.8)% | - Coal sales prices decreased by **11.3%** due to lower domestic price realizations from the roll-off of higher-priced legacy contracts[130](index=130&type=chunk) - Segment Adjusted EBITDA Expense per ton sold for coal operations decreased **9.0%** to **$41.27 per ton**, primarily due to an increased sales mix from lower cost operations, improved recoveries, and reduced longwall move days[129](index=129&type=chunk)[141](index=141&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=51&type=section&id=Six%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202024) Consolidated total revenues decreased by 12.6% to $1.09 billion, and net income attributable to ARLP decreased by 48.3% to $133.4 million This decline was primarily due to lower coal sales volumes and prices, reduced transportation revenues, increased depreciation, and the impairment loss on investments, partially offset by reduced operating expenses Consolidated Performance (6 Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :--------- | :--------- | :------- | :------- | | Tons sold | 16,153 | 16,525 | (372) | (2.3)% | | Tons produced | 16,562 | 17,551 | (989) | (5.6)% | | Total revenues | $1,087,931 | $1,245,047 | $(157,116) | (12.6)% | | Coal sales | $953,980 | $1,074,538 | $(120,558) | (11.2)% | | Net income of ARLP | $133,393 | $258,244 | $(124,851) | (48.3)% | | Segment Adjusted EBITDA | $362,819 | $462,558 | $(99,739) | (21.6)% | - Coal sales prices decreased by **9.2%** due to lower domestic price realizations from the roll-off of higher-priced legacy contracts and reduced export price realizations[146](index=146&type=chunk) - Appalachia Coal Operations Segment Adjusted EBITDA decreased by **62.3%** due to lower coal sales volumes and price realizations, and increased per ton operating expenses from challenging mining conditions at Tunnel Ridge mine[157](index=157&type=chunk)[158](index=158&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=56&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures, specifically Segment Adjusted EBITDA and Segment Adjusted EBITDA Expense, to their most comparable GAAP measures (Net Income attributable to ARLP and Operating Expenses, respectively) These measures are used by management and external users to assess core operating performance and cash flow generation Consolidated Segment Adjusted EBITDA (in thousands) | Period | 2025 | 2024 | Change | | :----------------------------- | :--------- | :--------- | :------- | | Three Months Ended June 30 | $182,304 | $202,004 | $(19,700) | | Six Months Ended June 30 | $362,819 | $462,558 | $(99,739) | Consolidated Segment Adjusted EBITDA Expense (in thousands) | Period | 2025 | 2024 | Change | | :----------------------------- | :--------- | :--------- | :------- | | Three Months Ended June 30 | $353,450 | $363,171 | $(9,721) | | Six Months Ended June 30 | $699,620 | $721,498 | $(21,878) | [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) ARLP expects to meet its working capital, capital expenditure, debt service, and distribution obligations using existing cash, future cash flows, and credit facilities Cash and cash equivalents decreased significantly to $55.0 million as of June 30, 2025 The company has $80.6 million remaining under its unit repurchase program - Cash and cash equivalents decreased to **$55.0 million** as of June 30, 2025, from **$137.0 million** at December 31, 2024[9](index=9&type=chunk)[172](index=172&type=chunk) - Cash provided by operating activities decreased to **$297.3 million** for the six months ended June 30, 2025, from **$425.4 million** in 2024[168](index=168&type=chunk) - Net cash used in financing activities increased to **$211.2 million** for the six months ended June 30, 2025, from **$58.6 million** in 2024, primarily due to reduced debt proceeds compared to the prior year[170](index=170&type=chunk)[171](index=171&type=chunk) - **$80.6 million** remains authorized under the unit repurchase program as of June 30, 2025; no units were repurchased during the six months ended June 30, 2025[167](index=167&type=chunk) - Anticipated total capital expenditures for 2025 are estimated in a range of **$285.0 million** to **$320.0 million**[172](index=172&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=61&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) ARLP faces commodity price risk from coal, oil, and natural gas sales, influenced by long-term contracts with price adjustments and short-term contracts exposing it to market volatility The company also has credit risk with domestic electric utilities and global brokerage firms, and minor exchange rate risk as most transactions are USD-denominated Interest rate risk exists on variable-rate borrowings, though historical impact has not been material [Commodity Price Risk](index=61&type=section&id=Commodity%20Price%20Risk) ARLP has significant exposure to commodity price risk for coal, oil, and natural gas While long-term coal sales contracts have price adjustment provisions, short-term contracts increase exposure to declining prices The company does not currently use commodity price hedges - ARLP has significant long-term coal sales contracts subject to price adjustment provisions, but short-term contracts increase exposure to declining coal prices[176](index=176&type=chunk)[180](index=180&type=chunk) - A significant decline in oil & gas prices would have a significant impact on oil & gas royalty revenues[180](index=180&type=chunk) - Historically, ARLP has not utilized commodity price-hedges or other derivatives but may do so in the future[181](index=181&type=chunk) [Credit Risk](index=63&type=section&id=Credit%20Risk) ARLP's credit risk is primarily with domestic electric utilities and reputable global brokerage firms The company manages this risk by evaluating customer creditworthiness, monitoring receivables, and taking steps like obtaining letters of credit or requiring prepayments when necessary - Credit risk is primarily with domestic electric power generators and reputable global brokerage firms[182](index=182&type=chunk) - Creditworthiness is independently evaluated, and steps like obtaining letters of credit or requiring prepayments are taken to reduce exposure to customers with deteriorating credit[182](index=182&type=chunk) [Exchange Rate Risk](index=63&type=section&id=Exchange%20Rate%20Risk) ARLP has minimal exposure to currency exchange-rate risks as almost all transactions are denominated in United States dollars However, fluctuations in foreign currencies could adversely affect the competitiveness of its coal in international markets - Almost all transactions are denominated in United States dollars, resulting in no material exposure to currency exchange-rate risks[183](index=183&type=chunk) - Changes in foreign currency exchange rates could provide foreign competitors with a competitive advantage or lead to overseas purchasers seeking decreased prices for coal[183](index=183&type=chunk) [Interest Rate Risk](index=63&type=section&id=Interest%20Rate%20Risk) ARLP has interest rate exposure on variable-rate borrowings under its Revolving Credit Facility and Securitization Facility Historically, earnings have not been materially affected by interest rate changes, and the company has not used interest rate derivative instruments - Borrowings under the Revolving Credit Facility and Securitization Facility are at variable rates, creating interest rate exposure[184](index=184&type=chunk) - Historically, earnings have not been materially affected by changes in interest rates, and interest rate derivative instruments have not been utilized[184](index=184&type=chunk) [ITEM 4. Controls and Procedures](index=63&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that ARLP's disclosure controls and procedures were effective as of June 30, 2025 No material changes in internal control over financial reporting were identified during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2025[188](index=188&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended June 30, 2025[189](index=189&type=chunk) [Forward-Looking Statements](index=66&type=section&id=Forward-Looking%20Statements) This section identifies forward-looking statements within the report and outlines numerous factors that could cause actual results to differ materially from these statements These factors include declines in coal demand, macroeconomic conditions, commodity price volatility, geopolitical events, regulatory changes, competition, operational risks, and financial market conditions - Forward-looking statements are identified by words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "foresee," "may," "outlook," "plan," "project," "potential," "should," "will," "would," and similar expressions[192](index=192&type=chunk) - Factors that could cause actual results to differ materially include: decline in the coal industry's share of electricity generation, changes in macroeconomic and market conditions, changes in commodity prices, impacts of geopolitical events, and changes in competition[192](index=192&type=chunk) - Other risks include: changes in equipment, raw material, service or labor costs, increases in transportation costs, operational interruptions, results of litigation, and evolving cybersecurity risks[195](index=195&type=chunk) PART II OTHER INFORMATION [ITEM 1. Legal Proceedings](index=70&type=section&id=ITEM%201.%20Legal%20Proceedings) ARLP settled six class action lawsuits related to alleged Fair Labor Standards Act violations for $15.3 million in April 2024 The settlement amount was paid into an escrow account in July 2025, with final court approval pending in Q4 2025 Management believes the ultimate exposure, if litigation resumes, will not be material - Six class action lawsuits alleging violations of the Fair Labor Standards Act and state law were settled for **$15.3 million** in April 2024[198](index=198&type=chunk) - The **$15.3 million** settlement was paid into an escrow account on July 10, 2025, following preliminary approval, with final court approval scheduled for the fourth quarter of 2025[198](index=198&type=chunk) - Management believes the ultimate exposure, if litigation were to resume, will not be material to results of operations or financial position[198](index=198&type=chunk) [ITEM 1A. Risk Factors](index=70&type=section&id=ITEM%201A.%20Risk%20Factors) This section refers readers to the comprehensive risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2024, noting that additional unknown or currently immaterial risks could also adversely affect the business - Readers should carefully consider the risk factors discussed in Part I - Item 1A. "Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2024[199](index=199&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial could materially adversely affect the business, financial condition, and/or operating results in the future[199](index=199&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=70&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) ARLP has an authorized unit repurchase program of $100.0 million, with $80.6 million remaining as of June 30, 2025 No units were repurchased during the three months ended June 30, 2025 Since inception, 6,390,446 units have been repurchased for $112.9 million - The unit repurchase program has **$80.6 million** remaining authorized as of June 30, 2025[167](index=167&type=chunk) - No units were repurchased during the three months ended June 30, 2025[201](index=201&type=chunk) - Since the inception of the program, **6,390,446 units** have been repurchased for an aggregate purchase price of **$112.9 million**[201](index=201&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=71&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[203](index=203&type=chunk) [ITEM 4. Mine Safety Disclosures](index=72&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95.1 of this Quarterly Report - Mine safety disclosures are included in Exhibit 95.1 to this Quarterly Report on Form 10-Q[205](index=205&type=chunk) [ITEM 5. Other Information](index=72&type=section&id=ITEM%205.%20Other%20Information) During the three months ended June 30, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated any Rule 10b5-1(c) trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[206](index=206&type=chunk) [ITEM 6. Exhibits](index=72&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, indentures, certifications (Sarbanes-Oxley Act Sections 302 and 906), mine safety information, and interactive data files - Exhibits include organizational documents (e.g., Certificate of Limited Partnership, Agreement of Limited Partnership)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - Certifications from the President and CEO, and Senior Vice President and CFO are included pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (Exhibits 31.1, 31.2, 32.1, 32.2)[207](index=207&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk) - Federal Mine Safety and Health Act Information is provided as Exhibit 95.1, and Interactive Data Files (Inline XBRL) as Exhibits 101 and 104[211](index=211&type=chunk)

Core Insights - Alliance Resource Partners, L.P. (ARLP) reported a resilient performance in Q2 2025 despite facing challenges such as lower coal pricing and decreased transportation revenues [1][8] - The company experienced a 7.7% year-over-year decline in total revenues, amounting to $547.5 million, primarily due to an 11.3% drop in average coal sales prices [1][8] - Net income for the quarter decreased to $59.4 million from $100.2 million in Q2 2024, influenced by lower revenues, increased depreciation, and a $25 million non-cash impairment on a battery materials equity investment [1] - Adjusted EBITDA was reported at $161.9 million, reflecting a 1.2% sequential increase [1][8] - The company updated its FY25 guidance, anticipating improved production at Tunnel Ridge and higher sales from the Illinois Basin, alongside cost efficiencies and strong contracted commitments [1] Revenue and Sales Performance - Total revenues for Q2 2025 were $547.5 million, down 7.7% year-over-year [1][8] - Average coal sales prices fell by 11.3%, contributing to the revenue decline [1] - Oil & Gas royalty volumes increased by 7.7% year-over-year, indicating a positive trend in this segment [8] Financial Metrics - Net income for Q2 2025 was $59.4 million, a significant decrease from $100.2 million in the same quarter of the previous year [1] - Adjusted EBITDA for the quarter was $161.9 million, showing a slight increase of 1.2% sequentially [1][8] - The company declared a quarterly cash distribution of $0.60 per unit [8] Future Outlook - Alliance Resource Partners added 17.4 million committed and priced tons for 2025-2029, enhancing long-term sales visibility [8] - The company remains optimistic about production improvements and cost efficiencies, which are expected to support its updated FY25 guidance [1]

Core Insights - Alliance Resource Partners, L.P. (NASDAQ: ARLP) is well-managed and has substantial cash reserves, but it has reached a critical turning point in its business strategy [1] Company Analysis - The company recognizes that merely selling coal to U.S. power plants is no longer a sustainable business model [1] - The focus of the research is primarily on small- to mid-cap companies, which are often overlooked by investors, while also occasionally analyzing large-cap companies for a broader market perspective [1]

Financial Data and Key Metrics Changes - Total revenues for Q2 2025 were $547.5 million, down from $593.4 million in Q2 2024, primarily due to lower coal sales prices and transportation revenues, partially offset by higher coal sales volumes [4] - Average coal sales price per ton decreased by 11.3% year-over-year to $57.92, driven by the roll-off of higher-priced legacy contracts and a higher proportion of Illinois Basin tons [4] - Net income for Q2 2025 was $59.4 million, compared to $100.2 million in Q2 2024, reflecting variances in revenues and higher depreciation expenses [9] - Adjusted EBITDA for the quarter was $161.9 million, down 10.8% year-over-year but up 1.2% sequentially [10] Business Line Data and Key Metrics Changes - Coal production in Q2 2025 was 8.1 million tons, a 3.9% decrease compared to Q2 2024, while coal sales volumes increased by 6.8% to 8.4 million tons [4] - In the Illinois Basin, coal sales volumes increased by 15.2% year-over-year, driven by record shipments from Riverview and Hamilton mines [5] - Coal sales volumes in Appalachia decreased by 16.8% year-over-year due to challenging mining conditions at Tunnel Ridge [5][6] - Royalty segment revenues were $53.1 million, up 0.2% year-over-year, with oil and gas royalty volumes increasing by 7.7% [8] Market Data and Key Metrics Changes - Eastern utility inventories were 18% below the prior year, indicating a tightening market [18] - Year-to-date electricity generation in key Eastern regions was up over 18% compared to last year, driven by warmer temperatures and increased coal generation [18] - The company is seeing multiple domestic customer solicitations for long-term supply contracts, indicating strong demand for coal [11][12] Company Strategy and Development Direction - The company is optimistic about the long-term outlook due to supportive regulatory actions and strong domestic coal market fundamentals [18][21] - The company is increasing its volume guidance for the Illinois Basin to 25 to 25.75 million tons based on solid domestic demand [12] - The company is exploring opportunities in energy infrastructure related to data centers and evaluating investments in coal power plants [37] Management's Comments on Operating Environment and Future Outlook - Management noted that the current regulatory environment is the most favorable for coal in decades, with actions taken to support coal-fired power plants [21][22] - The company expects second-half results from Appalachia to improve following the completion of a longwall move at Tunnel Ridge [7] - Management expressed cautious optimism about growth opportunities in sales volumes next year, despite potential lower average coal sales prices [19] Other Important Information - The company generated free cash flow of $79 million after investing $65.3 million in coal operations [11] - The quarterly distribution rate was adjusted to $0.60 per unit, reflecting a strategic decision to strengthen the balance sheet and provide flexibility for growth opportunities [22][33] Q&A Session Summary Question: Can you provide more details on the $25 million investment for the acquisition of the Gavin Power plant? - The investment allows participation as an LP investor in a fund set up for the acquisition, which is expected to be accretive upon closing [28] Question: Can you clarify the board's decision to lower the distribution despite a strong outlook? - The adjustment aligns with a more sustainable operating margin and allows for additional cash flow to pursue growth opportunities [32][33] Question: What are the potential growth opportunities being considered? - The company is looking at investments in minerals, energy infrastructure for data centers, and potential acquisitions of coal plants [36][37] Question: How do you see the impact of the recent trade deal on guidance? - There is potential for increased manufacturing demand in the Eastern U.S., which could benefit coal demand [62] Question: How do you anticipate demand growth pacing? - Demand is expected to stabilize as utilities maintain inventory levels, correlating with coal purchases [67][70] Question: Has the decline in Chinese demand for seaborne coal impacted U.S. pricing? - Domestic pricing remains prioritized, but there are signs of improved pricing for exports, which could increase next year [75] Question: Will there be continued investments in royalty assets? - The company plans to invest in its royalty segment, primarily targeting the Permian and Delaware Basins [77]

Financial Data and Key Metrics Changes - Total revenues for Q2 2025 were $547.5 million, down from $593.4 million in Q2 2024, primarily due to lower coal sales prices and transportation revenues, partially offset by higher coal sales volumes [4] - Average coal sales price per ton decreased by 11.3% year-over-year to $57.92, driven by the roll-off of higher-priced legacy contracts and a higher proportion of Illinois Basin tons [4] - Net income for Q2 2025 was $59.4 million, compared to $100.2 million in Q2 2024, reflecting variances in revenues and higher depreciation expenses [9] - Adjusted EBITDA for the quarter was $161.9 million, down 10.8% year-over-year but up 1.2% sequentially [10] Business Line Data and Key Metrics Changes - Coal production in Q2 2025 was 8.1 million tons, a decrease of 3.9% compared to Q2 2024, while coal sales volumes increased by 6.8% to 8.4 million tons [4] - In the Illinois Basin, coal sales volumes increased by 15.2% year-over-year, driven by record shipments from Riverview and Hamilton mines [5] - Coal sales volumes in Appalachia decreased by 16.8% year-over-year due to challenging mining conditions at Tunnel Ridge [5] - Segment adjusted EBITDA expense per ton sold for coal operations was $41.27, a decrease of 9% year-over-year [6] Market Data and Key Metrics Changes - Total coal inventory at the end of Q2 2025 was 1.2 million tons, down 200,000 tons from the previous quarter [5] - Year-to-date electricity generation in key Eastern regions was up over 18% compared to last year, with utility inventories 18% below the prior year [18] - The domestic coal market is showing strong fundamentals, driven by increased demand for electricity and natural gas prices remaining elevated [18] Company Strategy and Development Direction - The company is optimistic about long-term growth opportunities, having committed an additional 17.4 million tons for delivery from 2025 to 2029 [12] - The company is increasing its volume guidance for the Illinois Basin to 25 to 25.75 million tons based on solid domestic demand [12] - The company is focused on maintaining margins through cost savings and is exploring investments in high-quality basins for oil and gas royalties [20][76] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the domestic coal market, citing supportive actions from the current administration and increased demand from AI data centers and manufacturing [18][21] - The company anticipates improved results from Appalachia in the second half of 2025 following the completion of a longwall move at Tunnel Ridge [5] - Management noted that the current regulatory environment is the most favorable for coal in decades, which is expected to support demand [23] Other Important Information - The company generated free cash flow of $79 million after investing $65.3 million in coal operations [11] - The quarterly distribution rate was adjusted to $0.60 per unit, reflecting a strategic decision to strengthen the balance sheet and provide financial flexibility for growth opportunities [22][32] Q&A Session Summary Question: Can you provide more details on the $25 million investment for the acquisition of the Gavin Power plant? - The investment was made to participate as a limited partner in a fund set up to acquire the Gavin Power plant, which is expected to be accretive upon closing [28] Question: What is the rationale behind the distribution cut despite a strong outlook for domestic coal? - The distribution was adjusted to align with a more sustainable operating margin and to provide flexibility for growth opportunities, not due to declining fortunes [32] Question: What growth opportunities are being considered? - The company is exploring investments in minerals, energy infrastructure for data centers, and potential acquisitions of coal plants [36] Question: How many customers will benefit from the recent legislation? - The legislation is expected to help utilities maintain and operate fossil fuel plants, which could stabilize and potentially increase demand for coal [40] Question: What is the outlook for coal pricing given the decline in Chinese demand for seaborne coal? - Domestic pricing remains prioritized, and there are signs of improved pricing for exports, which could lead to higher export tonnage next year [74] Question: Will there be continued investments in royalty assets? - The company plans to invest in its royalty segment, primarily targeting the Permian and Delaware Basins, with a goal of over $100 million in investments annually [76]

Core Insights - Alliance Resource Partners, L.P. (ARLP) reported a revenue of $547.46 million for Q2 2025, reflecting a year-over-year decline of 7.7% and an EPS of $0.55, down from $0.79 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $583.02 million by 6.1%, and the EPS also missed the consensus estimate of $0.61 by 9.84% [1] Financial Performance Metrics - The company’s operating revenues from oil & gas royalties were $35.47 million, exceeding the average estimate of $32.49 million [4] - Transportation revenues were reported at $8.56 million, significantly lower than the estimated $28.46 million, marking a 68% decline year-over-year [4] - Other sales generated $17.96 million, slightly above the estimated $19.13 million, with a year-over-year increase of 2.3% [4] - Coal sales amounted to $485.47 million, slightly above the average estimate of $483.17 million, but represented a year-over-year decline of 5.3% [4] Stock Performance - Over the past month, shares of Alliance Resource Partners have returned +9.6%, outperforming the Zacks S&P 500 composite's +4.9% change [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential for outperformance in the near term [3]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Q2 2025 Financial & Operational Highlights](index=1&type=section&id=Q2%202025%20Financial%20%26%20Operational%20Highlights) ARLP's Q2 2025 saw reduced revenues and net income, driven by lower coal prices and an investment impairment, despite increased sales volumes, alongside a $0.60 per unit distribution and updated 2025 guidance Q2 2025 Key Financial Data | Metric | Q2 2025 | Q2 2024 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Total Revenues | $547.5 Million | $593.4 Million | -7.7% | | Net Income | $59.4 Million | $100.2 Million | -40.8% | | Net Income Per Basic and Diluted Unit | $0.46 | $0.77 | -40.3% | | Adjusted EBITDA | $161.9 Million | $181.4 Million | -10.8% | - Coal sales volume increased to **8.4 million tons**, a **6.8% year-over-year increase**, with Hamilton and River View mines setting monthly shipment records in June 2025[3](index=3&type=chunk)[4](index=4&type=chunk) - Added **17.4 million tons** of committed and priced coal sales (including **1.1 million tons** of customer options) for the period 2025-2029[4](index=4&type=chunk) - Oil and gas royalty BOE (Barrels of Oil Equivalent) sales volume increased **7.7% year-over-year**, flat with Q1 2025[4](index=4&type=chunk) - Declared a quarterly cash distribution of **$0.60 per unit**, an annualized rate of **$2.40 per unit**[4](index=4&type=chunk) [CEO Commentary](index=3&type=section&id=CEO%20Commentary) CEO Joseph W. Craft III noted strong Q2 performance, increased coal shipments, and significant new contracts, emphasizing robust domestic coal demand and its critical role in grid reliability, supported by favorable government policies - Tunnel Ridge mine expects improved productivity and lower unit costs in H2 2025 after completing its longwall move[8](index=8&type=chunk) - Coal shipments reached **8.4 million tons**, up **6.8%** from Q2 2024 and **7.9% sequentially**, with Hamilton and River View mines setting monthly shipment records in June[8](index=8&type=chunk) - Added **17.4 million tons** of committed and priced coal sales this quarter, bringing the year's total new commitments to **35.1 million tons** for delivery over the next four and a half years[8](index=8&type=chunk) - Domestic market fundamentals remain constructive, with strong coal consumption driven by rising natural gas prices and increased power demand, leading to improved dispatch economics for coal-fired generation[8](index=8&type=chunk) [Financial Performance Analysis](index=1&type=section&id=Financial%20Performance%20Analysis) [Consolidated Financial Results](index=1&type=section&id=Consolidated%20Financial%20Results) ARLP's consolidated revenues and net income declined year-over-year for both Q2 and H1 2025, primarily due to lower coal prices, reduced transportation revenues, and a $25 million investment impairment, partially offset by higher sales volumes and digital asset value [Three Months Ended June 30, 2025 vs. 2024](index=1&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20vs.%202024) ARLP's Q2 2025 saw a decline in total revenues and net income compared to Q2 2024, driven by lower coal sales prices and an investment impairment, despite increased coal sales volumes Q2 2025 vs. Q2 2024 Consolidated Financial Data | Metric | Q2 2025 | Q2 2024 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Total Revenues | $547.5 Million | $593.4 Million | -7.7% | | Coal Sales Price (Per Ton) | $57.92 | $65.30 | -11.3% | | Coal Sales Volume | 8.4 Million Tons | 7.9 Million Tons | +6.8% | | Net Income | $59.4 Million | $100.2 Million | -40.8% | | Net Income Per Basic and Diluted Unit | $0.46 | $0.77 | -40.3% | | Adjusted EBITDA | $161.9 Million | $181.4 Million | -10.8% | - Total revenues decreased primarily due to an **11.3% decline in coal sales price** and reduced transportation revenues, partially offset by a **6.8% increase in coal sales volume**[3](index=3&type=chunk) - Net income decreased due to lower revenues, increased depreciation, and a **$25 million non-cash impairment loss** on an investment in preferred stock of a battery materials company in Q2 2025, partially offset by a **$16.6 million increase in digital asset fair value**[3](index=3&type=chunk)[5](index=5&type=chunk) [Six Months Ended June 30, 2025 vs. 2024](index=3&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20vs.%202024) ARLP's H1 2025 saw a significant decline in total revenues and net income compared to H1 2024, primarily driven by reduced coal sales and transportation revenues, along with an investment impairment H1 2025 vs. H1 2024 Consolidated Financial Data | Metric | H1 2025 | H1 2024 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1.09 Billion | $1.25 Billion | -12.6% | | Net Income | $133.4 Million | $258.2 Million | -48.3% | | Net Income Per Basic and Diluted Unit | $1.03 | $1.98 | -48.0% | | Adjusted EBITDA | $321.9 Million | $419.9 Million | -23.3% | - Total revenues decreased **12.6%** primarily due to reduced coal sales and transportation revenues[7](index=7&type=chunk) - Net income decreased due to lower revenues, increased depreciation, and a **$25 million investment impairment loss**, partially offset by reduced operating expenses[7](index=7&type=chunk) [Sequential Quarter Comparison (Q2 2025 vs. Q1 2025)](index=3&type=section&id=Sequential%20Quarter%20Comparison%20(Q2%202025%20vs.%20Q1%202025)) ARLP's Q2 2025 saw a slight sequential increase in total revenues and Adjusted EBITDA, but net income declined due to an investment impairment and higher expenses, despite increased coal sales volumes Q2 2025 vs. Q1 2025 Consolidated Financial Data | Metric | Q2 2025 | Q1 2025 | Sequential Change | | :--- | :--- | :--- | :--- | | Total Revenues | $547.5 Million | $540.5 Million | +1.3% | | Net Income | $59.4 Million | $73.983 Million | -19.7% | | Adjusted EBITDA | $161.9 Million | $159.935 Million | +1.2% | - Total revenues increased **$7.0 million sequentially**, primarily due to a **7.9% increase in coal sales volume**, partially offset by a decrease in coal sales price per ton[6](index=6&type=chunk) - Net income decreased **$14.6 million sequentially** due to a **$25 million investment impairment loss** and increased operating and depreciation expenses, partially offset by higher revenues and increased digital asset fair value[6](index=6&type=chunk) [Segment Results and Analysis](index=4&type=section&id=Segment%20Results%20and%20Analysis) Q2 2025 coal operations saw mixed regional sales volumes and lower average prices, while oil and gas royalties declined due to lower prices, and coal royalties increased from higher volumes and reduced expenses [Coal Operations](index=4&type=section&id=Coal%20Operations) Coal operations in Q2 2025 experienced increased sales volumes in the Illinois Basin but a decline in Appalachia, with varying sales prices and improved unit costs across regions Illinois Basin Coal Operations Key Data | Metric | Q2 2025 | Q2 2024 | Year-over-Year Change | Q1 2025 | Sequential Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales Volume (Million Tons) | 6.665 | 5.787 | 15.2% | 6.042 | 10.3% | | Coal Sales Price Per Ton | $51.59 | $57.37 | (10.1)% | $55.15 | (6.5)% | | Segment Adjusted EBITDA Expense Per Ton | $34.69 | $37.35 | (7.1)% | $34.75 | (0.2)% | | Segment Adjusted EBITDA | $114.2 Million | $118.0 Million | (3.2)% | $126.2 Million | (9.5)% | Appalachian Coal Operations Key Data | Metric | Q2 2025 | Q2 2024 | Year-over-Year Change | Q1 2025 | Sequential Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Sales Volume (Million Tons) | 1.717 | 2.064 | (16.8)% | 1.729 | (0.7)% | | Coal Sales Price Per Ton | $82.49 | $87.54 | (5.8)% | $78.24 | 5.4% | | Segment Adjusted EBITDA Expense Per Ton | $65.71 | $66.26 | (0.8)% | $69.73 | (5.8)% | | Segment Adjusted EBITDA | $29.4 Million | $45.3 Million | (35.1)% | $15.6 Million | 88.7% | - Illinois Basin coal sales volume increased **15.2% year-over-year** and **10.3% sequentially**, primarily due to higher volumes from Hamilton and River View mines; coal sales price per ton decreased **10.1%** and **6.5%**, respectively[11](index=11&type=chunk) - Appalachian coal sales volume decreased **16.8% year-over-year**, primarily due to lower production at Tunnel Ridge; coal sales price per ton decreased **5.8% year-over-year** but increased **5.4% sequentially**[11](index=11&type=chunk) - Total coal inventory at the end of Q2 2025 was **1.2 million tons**, a decrease of **1.4 million tons** from Q2 2024 and **0.2 million tons** from the prior quarter[11](index=11&type=chunk) - Illinois Basin Segment Adjusted EBITDA expense per ton decreased **7.1% year-over-year**, primarily due to lower maintenance and materials costs, improved recovery, and fewer longwall move days at Hamilton. Appalachian Segment Adjusted EBITDA expense per ton decreased **5.8% sequentially**, mainly due to improved recovery and increased production at the Mettiki mine[12](index=12&type=chunk) [Royalties](index=4&type=section&id=Royalties) Royalty segment performance in Q2 2025 was mixed, with oil and gas royalties declining due to lower prices despite higher volumes, while coal royalties increased from higher sales volumes and reduced expenses Oil and Gas Royalties Key Data | Metric | Q2 2025 | Q2 2024 | Year-over-Year Change | Q1 2025 | Sequential Change | | :--- | :--- | :--- | :--- | :--- | :--- | | BOE Sales Volume (Million BOE) | 0.880 | 0.817 | 7.7% | 0.880 | —% | | Average Sales Price (Per BOE) | $40.30 | $44.60 | (9.6)% | $41.00 | (1.7)% | | Segment Adjusted EBITDA | $29.9 Million | $31.3 Million | (4.4)% | $29.9 Million | —% | Coal Royalties Key Data | Metric | Q2 2025 | Q2 2024 | Year-over-Year Change | Q1 2025 | Sequential Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Royalty Sales Volume (Million Tons) | 5.492 | 4.973 | 10.4% | 5.072 | 8.3% | | Royalty Revenue Per Ton | $3.21 | $3.33 | (3.6)% | $3.11 | 3.2% | | Segment Adjusted EBITDA | $11.8 Million | $10.0 Million | 18.7% | $9.4 Million | 25.8% | - Oil and gas royalty Segment Adjusted EBITDA decreased to **$29.9 million** from **$31.3 million** in Q2 2024, primarily due to a **9.6% decrease in average sales price per BOE**, partially offset by a **7.7% increase in sales volume**[13](index=13&type=chunk) - Coal royalty Segment Adjusted EBITDA increased to **$11.8 million**, up from **$10.0 million** in Q2 2024 and **$9.4 million** in the prior quarter, primarily due to increased royalty sales volume and lower expenses[14](index=14&type=chunk) [Balance Sheet & Liquidity](index=5&type=section&id=Balance%20Sheet%20%26%20Liquidity) As of June 30, 2025, ARLP maintained strong liquidity of **$499.2 million** with manageable debt levels, despite reduced cash, and held **$58.0 million** in digital assets Key Balance Sheet & Liquidity Metrics as of June 30, 2025 | Metric | Amount | | :--- | :--- | | Total Debt and Finance Leases | $477.4 Million | | Total Leverage Ratio (Debt / Trailing Twelve Months Adjusted EBITDA) | 0.77 Times | | Net Leverage Ratio (Debt / Trailing Twelve Months Adjusted EBITDA) | 0.69 Times | | Total Liquidity | $499.2 Million | | Cash and Cash Equivalents | $55.0 Million | | Available Borrowings Under Revolving Credit and Accounts Receivable Securitization Facilities | $444.2 Million | | Bitcoin Held | 542 | | Digital Assets (Bitcoin) Value | $58.0 Million | [Distributions](index=6&type=section&id=Distributions) ARLP declared a **$0.60 per unit** Q2 2025 cash distribution, with the board considering various financial factors and anticipating higher after-tax distributions in 2025 due to the restoration of 100% bonus depreciation under OBBBA Q2 2025 Cash Distribution Details | Metric | Amount/Date | | :--- | :--- | | Distribution Per Unit | $0.60 | | Annualized Distribution Rate | $2.40 | | Payment Date | August 14, 2025 | | Record Date | August 7, 2025 | - Per Treasury regulations, **100%** of ARLP's distributions to non-U.S. investors are considered effectively connected income with a U.S. trade or business, subject to federal income tax withholding at the highest applicable effective rate plus **10%**[18](index=18&type=chunk) - The board considered operating cash flow, capital needs, distribution coverage, debt costs, and potential investment opportunities when determining distribution levels. Due to OBBBA restoring **100% bonus depreciation**, after-tax distributions for most outstanding units in 2025 are expected to exceed the prior tax law's **$0.70 per unit** distribution rate[22](index=22&type=chunk) [Outlook & Guidance](index=6&type=section&id=Outlook%20%26%20Guidance) [Management Outlook](index=6&type=section&id=Management%20Outlook) Management adjusted 2025 coal sales guidance, increasing Illinois Basin volumes and oil and gas royalties while lowering Appalachian volumes, anticipating maintained margins despite potentially lower average coal prices due to increased production and reduced unit costs, with a positive outlook on domestic coal market fundamentals - 2025 coal sales guidance midpoint remains largely unchanged, but regional composition adjusted: Illinois Basin full-year guidance midpoint increased by **0.625 million tons**, while Appalachian full-year guidance decreased by **1.0 million tons**[19](index=19&type=chunk) - Oil and gas royalty segment's 2025 BOE sales volume guidance midpoint increased by approximately **5%**, despite lower oil prices[20](index=20&type=chunk) - Average coal sales prices are expected to potentially decrease next year, but increased production and completed capital projects are anticipated to lower unit costs, aiming to maintain margins similar to this year[20](index=20&type=chunk) - Domestic thermal market fundamentals are strong, driven by data center expansion and domestic manufacturing growth. Recent government policies, such as OBBBA, support fossil fuel baseload generation, reinforcing coal's critical role in maintaining grid reliability[20](index=20&type=chunk)[21](index=21&type=chunk) [2025 Full Year Guidance](index=9&type=section&id=2025%20Full%20Year%20Guidance) ARLP provided comprehensive full-year 2025 guidance, detailing coal sales volumes, prices, and Segment Adjusted EBITDA expenses for both Illinois Basin and Appalachia, alongside oil and gas and coal royalty projections, and consolidated financial estimates including capital expenditures 2025 Coal Operations Sales Volume Guidance (Million Short Tons) | Region | Sales Volume Range | | :--- | :--- | | Illinois Basin Sales Volume | 25.00 — 25.75 | | Appalachian Sales Volume | 7.75 — 8.25 | | Total Sales Volume | 32.75 — 34.00 | 2025-2026 Committed and Priced Sales Tons Guidance (Million Short Tons) | Year | Domestic / Export / Total | | :--- | :--- | | 2025 | 29.5 / 2.8 / 32.3 | | 2026 (Includes 0.9 Million Option Tons) | 25.3 / 1.3 / 26.6 | 2025 Coal Sales Price Per Ton Guidance | Region | Price Range | | :--- | :--- | | Illinois Basin | $50.00 — $53.00 | | Appalachian | $79.00 — $83.00 | | Total | $57.00 — $61.00 | 2025 Segment Adjusted EBITDA Expense Per Ton Guidance | Region | Expense Range | | :--- | :--- | | Illinois Basin | $34.00 — $37.00 | | Appalachian | $58.00 — $62.00 | | Total | $39.00 — $43.00 | 2025 Oil and Gas Royalty Guidance | Metric | Range | | :--- | :--- | | Oil (Thousand Barrels) | 1,650 — 1,750 | | Natural Gas (Thousand MCF) | 6,300 — 6,700 | | Liquids (Thousand Barrels) | 825 — 875 | | Segment Adjusted EBITDA Expense (as a % of Oil and Gas Royalty Revenues) | ~14.0% | 2025 Coal Royalty Guidance | Metric | Range | | :--- | :--- | | Royalty Sales Volume (Million Short Tons) | 23.75 — 25.25 | | Royalty Revenue Per Ton | $3.20 — $3.40 | | Royalty Segment Adjusted EBITDA Expense Per Ton | $1.20 — $1.30 | 2025 Consolidated Financial Estimates (Million $) | Metric | Range | | :--- | :--- | | Depreciation, Depletion and Amortization | $280 — $300 | | General and Administrative Expenses | $80 — $85 | | Net Interest Expense | $38 — $42 | | Income Tax Expense | $20 — $22 | | Total Capital Expenditures | $285 — $320 | | Growth Capital Expenditures | $5 — $10 | | Maintenance Capital Expenditures | $280 — $310 | [Company Information](index=10&type=section&id=Company%20Information) [About Alliance Resource Partners, L.P.](index=10&type=section&id=About%20Alliance%20Resource%20Partners%2C%20L.P.) ARLP is a diversified energy company, the second-largest coal producer in the eastern U.S., supplying coal to various users, generating royalty income from mineral interests, and positioning itself as a future energy partner through infrastructure investments - ARLP is the **second-largest coal producer in the eastern U.S.**, supplying coal to domestic and international utility, metallurgical, and industrial users[29](index=29&type=chunk) - The company generates operating and royalty income from its mineral interests in strategic U.S. coal and oil and gas producing regions[29](index=29&type=chunk) - ARLP is committed to becoming a reliable energy partner for the future by investing in growth and development opportunities in energy and related infrastructure[29](index=29&type=chunk) [Forward-Looking Statements & Risk Factors](index=10&type=section&id=Forward-Looking%20Statements%20%26%20Risk%20Factors) This section highlights that statements and projections are forward-looking, subject to risks and uncertainties that could cause actual results to differ, including declining coal share, commodity price volatility, geopolitical events, macroeconomic shifts, regulatory changes, operational disruptions, and cybersecurity risks - Statements and projections in this press release are forward-looking, and actual results may differ materially due to risks and uncertainties, excluding the potential impact of any mergers, acquisitions, or other business combinations that may occur after the release date[31](index=31&type=chunk)[32](index=32&type=chunk) - Key risks include the decline of the coal industry's share in power generation, changes in macroeconomic and market conditions, commodity price volatility, geopolitical event impacts, regulatory and legal changes (including environmental regulations), liquidity constraints, customer defaults, operational disruptions, increased transportation costs, litigation outcomes, and cybersecurity risks[32](index=32&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk) [Condensed Consolidated Financial Statements](index=15&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Statements of Income and Operating Data](index=15&type=section&id=Statements%20of%20Income%20and%20Operating%20Data) The condensed consolidated statements of income and operating data detail revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024, illustrating the impact of various operational and non-operational items on profitability Condensed Consolidated Statements of Income and Operating Data (Summary) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales Volume (Thousand Tons) | 8,382 | 7,851 | 16,153 | 16,525 | | Production Volume (Thousand Tons) | 8,105 | 8,437 | 16,562 | 17,551 | | Mineral Interest Volume (BOE) | 880 | 817 | 1,760 | 1,715 | | **Sales and Operating Revenues:** | | | | | | Coal Sales | $485,469 Million | $512,659 Million | $953,980 Million | $1,074,538 Million | | Oil and Gas Royalties | $35,473 Million | $36,429 Million | $71,557 Million | $73,459 Million | | Transportation Revenues | $8,558 Million | $26,701 Million | $18,758 Million | $57,454 Million | | Other Revenues | $17,963 Million | $17,561 Million | $43,636 Million | $39,596 Million | | **Total Revenues** | **$547,463 Million** | **$593,350 Million** | **$1,087,931 Million** | **$1,245,047 Million** | | **Expenses:** | | | | | | Operating Expenses (Excluding Depreciation, Depletion and Amortization) | $346,288 Million | $351,605 Million | $685,724 Million | $715,464 Million | | Transportation Expenses | $8,558 Million | $26,701 Million | $18,758 Million | $57,454 Million | | Purchased Coal | $7,179 Million | $10,608 Million | $14,524 Million | $19,720 Million | | General and Administrative Expenses | $20,380 Million | $20,562 Million | $40,960 Million | $42,691 Million | | Depreciation, Depletion and Amortization | $76,340 Million | $66,454 Million | $144,969 Million | $132,003 Million | | **Total Operating Expenses** | **$458,745 Million** | **$475,930 Million** | **$904,935 Million** | **$967,332 Million** | | **Operating Income** | **$88,718 Million** | **$117,420 Million** | **$182,996 Million** | **$277,715 Million** | | Interest Expense, Net | $(9,252) Million | $(9,277) Million | $(17,686) Million | $(17,026) Million | | Change in Fair Value of Digital Assets | $12,856 Million | $(3,748) Million | $7,282 Million | $8,105 Million | | Investment Impairment Loss | $(25,000) Million | — | $(25,000) Million | — | | **Net Income Attributable to ARLP** | **$59,410 Million** | **$100,187 Million** | **$133,393 Million** | **$258,244 Million** | | **Net Income Per Basic and Diluted Unit** | **$0.46** | **$0.77** | **$1.03** | **$1.98** | [Balance Sheets](index=16&type=section&id=Balance%20Sheets) The condensed consolidated balance sheets present ALP's financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and partners' capital, with notable changes in cash and digital assets Condensed Consolidated Balance Sheets (Summary) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and Cash Equivalents | $55,004 Million | $136,962 Million | | Accounts Receivable, Net | $177,659 Million | $166,829 Million | | Inventories, Net | $138,712 Million | $120,661 Million | | Digital Assets | $58,030 Million | $45,037 Million | | **Total Current Assets** | **$461,126 Million** | **$513,230 Million** | | Property, Plant and Equipment, Net | $2,174,944 Million | $2,166,270 Million | | **Total Assets** | **$2,869,446 Million** | **$2,915,730 Million** | | **Liabilities and Partners' Capital** | | | | Accounts Payable | $98,248 Million | $98,188 Million | | **Total Current Liabilities** | **$234,850 Million** | **$233,142 Million** | | Long-Term Debt, Excluding Current Portion, Net | $439,023 Million | $450,885 Million | | **Total Long-Term Liabilities** | **$822,106 Million** | **$829,055 Million** | | **Total Liabilities** | **$1,056,956 Million** | **$1,062,197 Million** | | Partners' Capital Attributable to ARLP | $1,793,137 Million | $1,832,747 Million | | **Total Partners' Capital** | **$1,812,490 Million** | **$1,853,533 Million** | | **Total Liabilities and Partners' Capital** | **$2,869,446 Million** | **$2,915,730 Million** | [Statements of Cash Flows](index=17&type=section&id=Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows detail cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024, showing decreased operating cash flow, continued investment, and significant financing outflows Condensed Consolidated Statements of Cash Flows (Summary) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $297,379 Million | $425,439 Million | | Net Cash Used in Investing Activities | $(168,253) Million | $(222,993) Million | | Capital Expenditures | $(153,793) Million | $(225,288) Million | | Net Cash Used in Financing Activities | $(211,160) Million | $(58,556) Million | | Distributions Paid to Partners | $(181,630) Million | $(181,982) Million | | Net Change in Cash and Cash Equivalents | $(81,958) Million | $143,890 Million | | Cash and Cash Equivalents at End of Period | $55,004 Million | $203,703 Million | [Reconciliation of Non-GAAP Financial Measures](index=18&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) [EBITDA, Adjusted EBITDA, DCF, and DCR Reconciliation](index=18&type=section&id=EBITDA%2C%20Adjusted%20EBITDA%2C%20DCF%2C%20and%20DCR%20Reconciliation) This section reconciles GAAP net income to non-GAAP metrics like EBITDA, Adjusted EBITDA, DCF, and DCR, defining their utility for investors while clarifying they are not GAAP substitutes - EBITDA is defined as net income attributable to ARLP plus net interest expense, income taxes, and depreciation, depletion, and amortization. Adjusted EBITDA further adjusts EBITDA for certain items considered not representative of ongoing operations[42](index=42&type=chunk) - Distributable Cash Flow (DCF) is defined as Adjusted EBITDA less equity method investment earnings, interest expense, interest income, income taxes, and estimated maintenance capital expenditures, plus equity method investment distributions and litigation expense accruals. Distribution Coverage Ratio (DCR) is defined as DCF divided by distributions paid to partners[42](index=42&type=chunk) - Management believes these non-GAAP measures provide investors with useful information regarding the company's performance and cash flow generation capabilities, serving as an analytical framework for management's financial, operational, compensation, and planning decisions[43](index=43&type=chunk) Reconciliation of Net Income Attributable to ARLP to EBITDA, Adjusted EBITDA, DCF, and DCR | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Three Months Ended March 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to ARLP | $59,410 Million | $100,187 Million | $133,393 Million | $258,244 Million | $73,983 Million | | Depreciation, Depletion and Amortization | $76,340 Million | $66,454 Million | $144,969 Million | $132,003 Million | $68,629 Million | | Interest Expense, Net | $12,042 Million | $9,979 Million | $24,097 Million | $18,750 Million | $12,055 Million | | Income Tax Expense | $5,348 Million | $3,860 Million | $9,530 Million | $8,809 Million | $4,182 Million | | **EBITDA** | **$149,780 Million** | **$177,694 Million** | **$304,141 Million** | **$412,722 Million** | **$154,361 Million** | | Change in Fair Value of Digital Assets | $(12,856) Million | $3,748 Million | $(7,282) Million | $(8,105) Million | $5,574 Million | | Investment Impairment Loss | $25,000 Million | — | $25,000 Million | — | — | | **Adjusted EBITDA** | **$161,924 Million** | **$181,442 Million** | **$321,859 Million** | **$419,867 Million** | **$159,935 Million** | | Estimated Maintenance Capital Expenditures | $(59,004) Million | $(65,471) Million | $(120,571) Million | $(136,196) Million | $(61,567) Million | | **Distributable Cash Flow** | **$90,693 Million** | **$102,440 Million** | **$174,818 Million** | **$242,498 Million** | **$84,125 Million** | | Distributions Paid to Partners | $90,739 Million | $90,736 Million | $181,630 Million | $181,982 Million | $90,891 Million | | **Distribution Coverage Ratio** | **1.00** | **1.13** | **0.96** | **1.33** | **0.93** | - The **$25 million investment impairment loss** represents a write-down of an investment in preferred stock of a battery materials company, which converted to common stock during the quarter[48](index=48&type=chunk) - Maintenance capital expenditures are capital outlays required to maintain the existing infrastructure of coal assets over the long term, estimated to average **$7.28 per ton** annually for the 2025 planning period[48](index=48&type=chunk) [Free Cash Flow Reconciliation](index=19&type=section&id=Free%20Cash%20Flow%20Reconciliation) This section reconciles GAAP net cash from operating activities to non-GAAP free cash flow, defined as operating cash flow minus capital expenditures and related payables, emphasizing its role as a supplemental liquidity measure - Free cash flow is defined as net cash provided by operating activities less capital expenditures and changes in accounts payable and accrued liabilities related to property, plant, and equipment acquisitions[47](index=47&type=chunk) - Free cash flow is a supplemental liquidity measure used by management to assess the ability to generate excess cash flow from operations[47](index=47&type=chunk) Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Three Months Ended March 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $151,693 Million | $215,766 Million | $297,379 Million | $425,439 Million | $145,686 Million | | Capital Expenditures | $(67,017) Million | $(101,442) Million | $(153,793) Million | $(225,288) Million | $(86,776) Million | | Changes in Accounts Payable and Accrued Liabilities | $(5,644) Million | $613 Million | $(11,840) Million | $4,944 Million | $(6,196) Million | | **Free Cash Flow** | **$79,032 Million** | **$114,937 Million** | **$131,746 Million** | **$205,095 Million** | **$52,714 Million** | [Segment Adjusted EBITDA Expense and Segment Adjusted EBITDA Reconciliation](index=20&type=section&id=Segment%20Adjusted%20EBITDA%20Expense%20and%20Segment%20Adjusted%20EBITDA%20Reconciliation) This section reconciles Segment Adjusted EBITDA Expense and Segment Adjusted EBITDA, defining them as adjusted operating expenses and Adjusted EBITDA, respectively, used by management to evaluate the operational performance of individual segments, especially coal operations - Segment Adjusted EBITDA expense is defined as operating expenses, purchased coal (where applicable), and other revenues or expenses, adjusted to exclude certain operating expense items not representative of ongoing operations. Transportation expenses are excluded as these costs are passed through to customers, and the company does not realize any profit from them[50](index=50&type=chunk) - Segment Adjusted EBITDA is defined as Adjusted EBITDA adjusted for general and administrative expenses. Segment Adjusted EBITDA – Coal Operations represents Adjusted EBITDA from wholly-owned subsidiary Alliance Coal, used to evaluate the operational performance of the Illinois Basin and Appalachian segments[54](index=54&type=chunk) Reconciliation of Operating Expenses to Segment Adjusted EBITDA Expense | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Three Months Ended March 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Expenses | $346,288 Million | $351,605 Million | $685,724 Million | $715,464 Million | $339,436 Million | | Purchased Coal | $7,179 Million | $10,608 Million | $14,524 Million | $19,720 Million | $7,345 Million | | **Segment Adjusted EBITDA Expense** | **$353,450 Million** | **$363,171 Million** | **$699,620 Million** | **$721,498 Million** | **$346,170 Million** | | Segment Adjusted EBITDA Expense – Non-Coal Operations | $(7,550) Million | $(6,996) Million | $(21,497) Million | $(11,009) Million | $(13,947) Million | | **Segment Adjusted EBITDA Expense – Coal Operations** | **$345,900 Million** | **$356,175 Million** | **$678,123 Million** | **$710,489 Million** | **$332,223 Million** | Reconciliation of Adjusted EBITDA to Segment Adjusted EBITDA | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Three Months Ended March 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $161,924 Million | $181,442 Million | $321,859 Million | $419,867 Million | $159,935 Million | | General and Administrative Expenses | $20,380 Million | $20,562 Million | $40,960 Million | $42,691 Million | $20,580 Million | | **Segment Adjusted EBITDA** | **$182,304 Million** | **$202,004 Million** | **$362,819 Million** | **$462,558 Million** | **$180,515 Million** | | Segment Adjusted EBITDA – Non-Coal Operations | $(40,413) Million | $(41,775) Million | $(80,723) Million | $(91,434) Million | $(40,310) Million | | **Segment Adjusted EBITDA – Coal Operations** | **$141,891 Million** | **$160,229 Million** | **$282,096 Million** | **$371,124 Million** | **$140,205 Million** |

Industry Overview - The Zacks Coal industry is experiencing significant challenges due to a decline in coal usage in U.S. thermal power plants, with further weakening demand projected for 2025 as coal-fired units are retired and renewable energy sources gain traction [1][4] - Current U.S. estimated recoverable coal reserves stand at approximately 252 billion short tons, with 58% being underground mineable coal, but the industry's prospects are hindered by a shift towards renewable energy and the gradual shutdown of coal-powered generation units [2][4] - The coal industry is ranked 228 out of 245 Zacks industries, placing it in the bottom 7%, indicating a lackluster performance outlook [6][8] Production and Consumption Trends - U.S. coal production is expected to reach 520 million short tons (MMst) in 2025, a slight increase from 512 MMst in 2024, but is projected to decline by 9% to 475 MMst in 2026 due to increased competition from cleaner energy sources [5] - The share of coal in U.S. electricity generation is anticipated to decrease from 17% in 2025 to 15% in 2026, reflecting the ongoing transition to cleaner energy [4] Export and Market Performance - The coal industry is likely to face reduced export volumes in 2025 and 2026, influenced by a strong U.S. dollar and competition from natural gas and renewables [1][3] - Over the past year, coal stocks have underperformed, losing 8.7% compared to a 3.1% decline in the Zacks Oil-Energy sector and an 11.7% gain in the Zacks S&P 500 composite [10] Valuation Metrics - The coal industry is currently trading at a trailing 12-month EV/EBITDA ratio of 5.58X, significantly lower than the Zacks S&P 500 composite's 17.64X, indicating a challenging valuation environment [13] Key Companies - **Alliance Resource Partners (ARLP)**: Expected to produce between 32.75-34.75 million short tons in 2025, with a Zacks Rank 2 (Buy) and a current distribution yield of 10.49% [17][18] - **SunCoke Energy (SXC)**: Plans to produce 4 million tons of domestic coke in 2025, with a focus on metallurgical coal, and holds a Zacks Rank 3 (Hold) with a dividend yield of 5.64% [22][23]

One stock to keep an eye on is Alliance Resource Partners (ARLP) . ARLP is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 10.37, which compares to its industry's average of 10.81. ARLP's Forward P/E has been as high as 11.04 and as low as 6.34, with a median of 8.73, all within the past year. Finally, investors should note that ARLP has a P/CF ratio of 6.13. This metric takes into account a company's operating cash flow and can be used to ...