[PART I FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS (Unaudited)](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) Unaudited condensed consolidated financial statements and notes detail financial position, performance, and cash flows for Q1 2022 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | ASSETS / LIABILITIES AND PARTNERS' CAPITAL | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------------- | :---------------------------- | :------------------------------- | | Total current assets | $404,697 | $339,228 | | Total property, plant and equipment, net | $1,691,606 | $1,698,678 | | Total other assets | $129,244 | $121,500 | | **TOTAL ASSETS** | **$2,225,547** | **$2,159,406** | | Total current liabilities | $202,056 | $177,577 | | Total long-term liabilities | $790,098 | $755,760 | | **Total liabilities** | **$992,154** | **$933,337** | | Total Partners' Capital | $1,233,393 | $1,226,069 | [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Condensed Consolidated Statements of Income (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Coal sales | $388,360 | $287,487 | | Oil & gas royalties | $30,927 | $13,999 | | Total revenues | $460,863 | $318,622 | | Total operating expenses | $373,028 | $282,294 | | Income from operations | $87,835 | $36,328 | | Income before income taxes | $79,657 | $24,814 | | Income tax expense (benefit) | $42,715 | $(12) | | Net income attributable to ARLP | $36,652 | $24,748 | | Earnings per limited partner unit - basic and diluted | $0.28 | $0.19 | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net income | $36,942 | $24,826 | | Other comprehensive income | $790 | $2,231 | | Comprehensive income attributable to ARLP | $37,442 | $26,979 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Cash flows from operating activities | $89,036 | $54,647 | | Net cash used in investing activities | $(45,525) | $(22,737) | | Net cash used in financing activities | $(37,723) | $(53,041) | | Net change in cash and cash equivalents | $5,788 | $(21,131) | | Cash and cash equivalents at end of period | $128,191 | $34,443 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the company's organization, accounting policies, debt, taxes, equity, segment information, and subsequent events [1. Organization and Presentation](index=9&type=section&id=1.%20Organization%20and%20Presentation) This note describes ARLP's formation, NASDAQ listing, and a significant tax status change for Alliance Minerals - ARLP is a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol **"ARLP"**, formed in May 1999[18](index=18&type=chunk) - Alliance Minerals changed its federal income tax status from a pass-through entity to a taxable entity effective **January 1, 2022**, anticipated to reduce the total income tax burden on oil & gas royalties[18](index=18&type=chunk) [2. New Accounting Standards](index=11&type=section&id=2.%20New%20Accounting%20Standards) This note discusses the adoption of new accounting standards and their impact on financial statements - Adopted ASU 2021-10, Government Assistance (Topic 832), on **January 1, 2022**, which did not have a material impact on the condensed consolidated financial statements[26](index=26&type=chunk) [3. Contingencies](index=11&type=section&id=3.%20Contingencies) This note outlines ongoing litigation related to labor practices and management's assessment of potential financial impact - The company is party to litigation alleging violations of the Fair Labor Standards Act and Kentucky Wage and Hour Act related to compensation for "donning" and "doffing" equipment and overtime calculation[27](index=27&type=chunk) - Management believes the plaintiffs' claims are without merit and intends to defend the litigation vigorously, not expecting a material adverse effect on results of operations or financial position[28](index=28&type=chunk)[29](index=29&type=chunk) [4. Inventories](index=13&type=section&id=4.%20Inventories) This note provides a breakdown of inventory values, including coal and supplies, for the reported periods Inventories (in thousands) | Inventories (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------- | :------------- | :---------------- | | Coal | $56,084 | $24,845 | | Supplies, net | $39,661 | $35,457 | | Total inventories, net | $95,745 | $60,302 | [5. Fair Value Measurements](index=13&type=section&id=5.%20Fair%20Value%20Measurements) This note details the fair value measurement of long-term debt, classified as a Level 2 measurement Fair Value Measurements (in thousands) | Fair Value Measurements (in thousands) | March 31, 2022 (Level 2) | December 31, 2021 (Level 2) | | :------------------------------------- | :----------------------- | :-------------------------- | | Long-term debt | $438,553 | $457,758 | - The estimated fair value of long-term debt is based on currently available interest rates in active markets for similar debt, classified as a **Level 2 measurement**[33](index=33&type=chunk) [6. Long-Term Debt](index=14&type=section&id=6.%20Long-Term%20Debt) This note provides details on the company's long-term debt, credit facilities, and compliance with debt covenants Long-Term Debt (in thousands) | Long-Term Debt (in thousands) | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | Senior notes | $400,000 | $400,000 | | November 2019 equipment financing | $29,295 | $31,972 | | Total long-term debt, net | $423,251 | $427,009 | - As of March 31, 2022, the company had **$44.1 million** of letters of credit outstanding and **$415.4 million** available for borrowing under its **$459.5 million** Revolving Credit Facility[35](index=35&type=chunk) - The company was in compliance with all covenants of the Credit Agreement as of March 31, 2022, with a debt to cash flow ratio of **0.88 to 1.0** and a cash flow to interest expense ratio of **12.91 to 1.0**[36](index=36&type=chunk) - The **$100.0 million** accounts receivable securitization facility was reduced to **$60.0 million** in January 2021 and extended to January 2023, with no outstanding balance as of March 31, 2022[41](index=41&type=chunk) [7. Income Taxes](index=16&type=section&id=7.%20Income%20Taxes) This note details income tax components and the impact of Alliance Minerals' tax election on the effective tax rate Income Tax Components (in thousands) | Income Tax Components (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Current Federal | $5,034 | $(1) | | Deferred Federal | $34,920 | $(11) | | Total Income tax expense (benefit) | $42,715 | $(12) | - Alliance Minerals' Tax Election resulted in a one-time non-cash deferred tax liability of **$37.3 million** and a corresponding increase to income tax expense for Q1 2022, reducing net income by approximately **$0.29** per basic and diluted limited partner unit[49](index=49&type=chunk) - The effective income tax rate for Q1 2022 was greater than the federal statutory rate primarily due to the Tax Election, partially offset by the portion of income not subject to income taxes[51](index=51&type=chunk) [8. Variable Interest Entities](index=20&type=section&id=8.%20Variable%20Interest%20Entities) This note explains the consolidation of Cavalier Minerals as a VIE and the equity method accounting for AllDale III - Cavalier Minerals is consolidated as a variable interest entity (VIE) because the company is the managing member and a substantial equity owner, with Bluegrass Minerals' equity accounted for as noncontrolling interest[57](index=57&type=chunk)[58](index=58&type=chunk) - AllDale III is also a VIE, but the company is not the primary beneficiary and accounts for its **13.9%** ownership interest using the equity method[59](index=59&type=chunk)[60](index=60&type=chunk) [9. Investment](index=22&type=section&id=9.%20Investment) This note provides a summary of the equity method investment activity for AllDale III AllDale III Equity Method Investment (in thousands) | AllDale III Equity Method Investment (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $26,325 | $27,268 | | Equity method investment income | $883 | $62 | | Distributions received | $(1,014) | $(423) | | Ending balance | $26,194 | $26,907 | [10. Partners' Capital](index=22&type=section&id=10.%20Partners'%20Capital) This note details distributions paid and declared, as well as unit repurchase activity and changes in partners' capital Distributions Paid/Declared | Distributions Paid/Declared | Per Unit Cash Distribution (2022) | Total Distribution (in thousands) (2022) | | :-------------------------- | :-------------------------------- | :--------------------------------------- | | February 14, 2022 | $0.2500 | $32,750 | | May 13, 2022 (declared) | $0.3500 | — | | Total | $0.6000 | $32,750 | - No unit repurchases were made during the three months ended March 31, 2022, with **5,460,639 units** repurchased for an aggregate of **$93.5 million** since inception, leaving **$6.5 million** remaining authorization[66](index=66&type=chunk) Partners' Capital (in thousands) | Partners' Capital (in thousands) | March 31, 2022 | January 1, 2022 | | :------------------------------- | :------------- | :-------------- | | Balance at beginning of period | $1,226,069 | $1,072,267 | | Net income attributable to ARLP | $36,652 | $24,748 | | Balance at end of period | $1,233,393 | $1,099,906 | [11. Revenue from Contracts with Customers](index=24&type=section&id=11.%20Revenue%20from%20Contracts%20with%20Customers) This note provides a breakdown of revenues by type and details unsatisfied coal supply contracts Revenue Type (in thousands) | Revenue Type (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Coal sales | $388,360 | $287,487 | | Oil & gas royalties | $30,927 | $13,999 | | Transportation revenues | $29,372 | $11,068 | | Other revenues | $12,204 | $6,068 | | Total revenues | $460,863 | $318,622 | Unsatisfied Coal Supply Contracts (in thousands) | Unsatisfied Coal Supply Contracts (in thousands) | 2022 | 2023 | 2024 | Thereafter | Total | | :----------------------------------------------- | :---------- | :---------- | :---------- | :--------- | :---------- | | Illinois Basin Coal Operations coal revenues | $835,565 | $467,537 | $244,936 | $35,747 | $1,583,785 | | Appalachia Coal Operations coal revenues | $436,639 | $235,295 | $136,936 | — | $808,870 | | Total coal revenues | $1,272,204 | $702,832 | $381,872 | $35,747 | $2,392,655 | [12. Earnings per Limited Partner Unit](index=24&type=section&id=12.%20Earnings%20per%20Limited%20Partner%20Unit) This note presents the calculation of basic and diluted earnings per limited partner unit Earnings Per Unit (in thousands, except per unit data) | Earnings Per Unit (in thousands, except per unit data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income attributable to ARLP | $36,652 | $24,748 | | Net income attributable to ARLP available to limited partners | $35,100 | $24,330 | | Weighted-average limited partner units outstanding | 127,195 | 127,195 | | Earnings per limited partner unit - basic and diluted | $0.28 | $0.19 | [13. Workers' Compensation and Pneumoconiosis](index=26&type=section&id=13.%20Workers'%20Compensation%20and%20Pneumoconiosis) This note details the liabilities and net periodic benefit costs associated with workers' compensation and pneumoconiosis claims Workers' Compensation Liability (in thousands) | Workers' Compensation Liability (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $53,448 | $54,739 | | Accruals increase | $2,275 | $1,672 | | Payments | $(2,804) | $(2,410) | | Ending balance | $53,206 | $54,233 | Pneumoconiosis Net Periodic Benefit Cost (in thousands) | Pneumoconiosis Net Periodic Benefit Cost (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Service cost | $947 | $1,031 | | Interest cost | $747 | $636 | | Net periodic benefit cost | $1,954 | $2,710 | [14. Common Unit-Based Compensation Plans](index=27&type=section&id=14.%20Common%20Unit-Based%20Compensation%20Plans) This note outlines activity and expense related to non-vested LTIP grants, SERP, and Directors' Deferred Compensation Plans Non-Vested LTIP Grants | Non-Vested LTIP Grants | Number of Units | | :--------------------- | :-------------- | | At January 1, 2022 | 3,130,475 | | Granted | 687,719 | | Forfeited | (17,063) | | At March 31, 2022 | 3,801,131 | - LTIP expense for Q1 2022 was **$2.3 million**, compared to **$0.7 million** for Q1 2021, with total unrecognized compensation expense of **$17.6 million** expected over a weighted-average period of **1.6 years**[80](index=80&type=chunk) SERP and Directors' Deferred Compensation Plan Activity | SERP and Directors' Deferred Compensation Plan Activity | Number of Units | | :------------------------------------------------------ | :-------------- | | Phantom units outstanding as of January 1, 2022 | 668,698 | | Granted | 12,370 | | Phantom units outstanding as of March 31, 2022 | 681,068 | - Total SERP and Directors' Deferred Compensation Plan expense was **$0.2 million** for Q1 2022, compared to **$0.04 million** for Q1 2021[84](index=84&type=chunk) [15. Components of Pension Plan Net Periodic Benefit Costs](index=30&type=section&id=15.%20Components%20of%20Pension%20Plan%20Net%20Periodic%20Benefit%20Costs) This note details the components of pension plan net periodic benefit costs and expected contributions Pension Plan Net Periodic Benefit Cost (in thousands) | Pension Plan Net Periodic Benefit Cost (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Interest cost | $932 | $860 | | Expected return on plan assets | $(1,665) | $(1,671) | | Net periodic benefit cost | $(203) | $377 | - The company does not expect to make contributions to the Pension Plan during 2022 due to contribution relief provided by the American Rescue Plan Act[88](index=88&type=chunk) [16. Segment Information](index=30&type=section&id=16.%20Segment%20Information) This note provides financial and operational data for the company's four reportable segments and other categories - The company operates in four reportable segments: Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties, and Coal Royalties, along with an "Other, Corporate and Elimination" category[89](index=89&type=chunk)[94](index=94&type=chunk) - The Oil & Gas Royalties segment includes approximately **57,000 net royalty acres** primarily in the Permian, Anadarko, and Williston basins[110](index=110&type=chunk) Segment Performance (in thousands) | Segment Performance (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $460,863 | $318,622 | | Segment Adjusted EBITDA | $170,904 | $109,821 | | Total assets | $2,225,547 | $2,151,180 | | Capital expenditures | $59,153 | $31,437 | [17. Subsequent Events](index=33&type=section&id=17.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, including new investments - On **April 5, 2022**, the company committed to invest up to **$50 million** in Francis Renewable Energy, LLC (EV charging stations) through preferred equity interests, with an initial **$20 million** funded via a convertible note[101](index=101&type=chunk)[102](index=102&type=chunk) - On **April 29, 2022**, the company purchased **$32.6 million** of Series D Preferred Stock from Infinitum Electric, Inc., to be accounted for as an equity investment without a readily determinable fair value[103](index=103&type=chunk)[106](index=106&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=36&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance, condition, and operational results for Q1 2022 compared to Q1 2021 [Summary of Business and Operations](index=36&type=section&id=Summary%20of%20Business%20and%20Operations) ARLP is a diversified natural resource company generating income from coal production/marketing and oil & gas mineral interests - ARLP is a diversified natural resource company generating operating and royalty income from coal production/marketing and oil & gas mineral interests, positioning itself as the **second-largest coal producer** in the eastern United States[109](index=109&type=chunk) - The company operates in four reportable segments: Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties, and Coal Royalties, with an additional "Other, Corporate and Elimination" category[110](index=110&type=chunk) [Financial Performance Comparison (Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021)](index=38&type=section&id=Financial%20Performance%20Comparison%20(Three%20Months%20Ended%20March%2031,%202022%20Compared%20to%20Three%20Months%20Ended%20March%2031,%202021)) This section compares key financial metrics and operational performance for Q1 2022 against Q1 2021 Financial Performance Comparison (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (%) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :--------- | | Total revenues | $460,863 | $318,622 | 44.6% | | Income before income taxes | $79,657 | $24,814 | 221.0% | | Net income attributable to ARLP | $36,652 | $24,748 | 48.1% | | Earnings per limited partner unit | $0.28 | $0.19 | 47.4% | Coal Performance | Coal Performance | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (%) | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Tons sold (in thousands) | 8,162 | 6,828 | 19.5% | | Coal sales (in thousands) | $388,360 | $287,487 | 35.1% | | Average sales price per ton | $47.58 | $42.10 | 13.0% | Oil & Gas Royalties Performance | Oil & Gas Royalties Performance | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (%) | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | BOE sold (in thousands) | 505 | 400 | 26.3% | | Royalties (in thousands) | $30,927 | $13,999 | 120.9% | | Average sales price per BOE | $61.26 | $35.02 | 74.9% | - Segment Adjusted EBITDA Expense for coal operations increased **32.3%** to **$268.5 million**, with per-ton expense rising **10.7%** to **$32.90**, driven by higher sales volumes and inflationary cost pressures, partially offset by decreased production taxes and royalty expenses[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Other revenues increased by **$6.1 million** to **$12.2 million**, primarily due to increased sales of mining technology products by the Matrix Design subsidiary[124](index=124&type=chunk) - Income tax expense increased to **$42.7 million** from a **$0.01 million** benefit, primarily due to a one-time **$37.3 million** non-cash charge from Alliance Minerals' tax election[125](index=125&type=chunk) Segment Adjusted EBITDA (in thousands) | Segment Adjusted EBITDA (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Increase (%) | | :------------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Illinois Basin Coal Operations | $78,215 | $57,673 | 35.6% | | Appalachia Coal Operations | $51,103 | $31,506 | 62.2% | | Oil & Gas Royalties | $28,552 | $11,946 | 139.0% | | Coal Royalties | $10,348 | $7,273 | 42.3% | | Total Segment Adjusted EBITDA | $170,904 | $109,821 | 55.6% | [Reconciliation of Non-GAAP Financial Measures](index=44&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 - Segment Adjusted EBITDA is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, and general and administrative expenses, used to evaluate core operating performance[135](index=135&type=chunk) Reconciliation to Net Income (in thousands) | Reconciliation to Net Income (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Consolidated Segment Adjusted EBITDA | $170,904 | $109,821 | | Net income attributable to ARLP | $36,652 | $24,748 | - Segment Adjusted EBITDA Expense includes operating expenses and other income (expense), excluding transportation expenses, and is used to assess the operating performance of segments[138](index=138&type=chunk) Reconciliation to Operating Expenses (in thousands) | Reconciliation to Operating Expenses (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Segment Adjusted EBITDA Expense | $261,180 | $197,717 | | Operating expenses (excluding DDA) | $261,746 | $196,520 | [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity position, cash flow activities, and anticipated capital expenditures - Management anticipates sufficient liquidity from existing cash balances, future cash flows from operations and investments, and borrowings under credit facilities to meet financial obligations[142](index=142&type=chunk) - Cash provided by operating activities increased to **$89.0 million** for Q1 2022 from **$54.6 million** for Q1 2021, primarily due to increased net income and favorable working capital changes[144](index=144&type=chunk) - Net cash used in investing activities increased to **$45.5 million** for Q1 2022 from **$22.7 million** for Q1 2021, mainly due to an increase in capital expenditures[145](index=145&type=chunk) - Net cash used in financing activities decreased to **$37.7 million** for Q1 2022 from **$53.0 million** for Q1 2021, primarily due to reduced borrowings and payments on credit facilities, partially offset by increased cash distributions[145](index=145&type=chunk) - Anticipated total capital expenditures for 2022 are estimated in a range of **$230.0 million to $240.0 million**, with average estimated annual maintenance capital expenditures over the next five years of approximately **$5.66 per ton produced**[148](index=148&type=chunk) [Related-Party Transactions](index=49&type=section&id=Related-Party%20Transactions) This section outlines various transactions and relationships with related parties - Related-party transactions include coal mineral leases with foundations, use of aircraft, administrative services for Mr. Craft's oil & gas interests, and interests in WKY CoalPlay, Bluegrass Minerals, and AllDale III[150](index=150&type=chunk) [New Accounting Standards](index=49&type=section&id=New%20Accounting%20Standards) This section refers to Note 2 for details on recently adopted accounting standards - Refer to Note 2 for a discussion of new accounting standards[151](index=151&type=chunk) [Other Information (Insurance)](index=49&type=section&id=Other%20Information%20(Insurance)) This section provides information regarding the company's annual property and casualty insurance program - The company renewed its annual property and casualty insurance program effective **December 1, 2021**, with a maximum limit of **$100.0 million** per occurrence and a **10%** participating interest retained in the commercial property program[152](index=152&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=51&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces significant commodity price risk for coal, oil, and natural gas, credit risk with utilities and brokerage firms, and interest rate risk on variable-rate borrowings - The company has significant exposure to commodity price risk for coal, oil, and natural gas, with short-term coal contracts increasing exposure to price declines and oil & gas prices significantly impacting royalty revenues[155](index=155&type=chunk) - Credit risk is primarily with U.S. electric utilities and global brokerage firms, managed by evaluating creditworthiness and taking steps like obtaining letters of credit or prepayments[157](index=157&type=chunk) - Interest rate risk exists on variable-rate borrowings under the Revolving Credit Facility and Securitization Facility, though historically earnings have not been materially affected, and no interest rate derivatives are currently used[159](index=159&type=chunk) - The company does not have material exposure to currency exchange-rate risks as almost all transactions are denominated in United States dollars[158](index=158&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=52&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - Disclosure controls and procedures were evaluated under the supervision of management, including the CEO and CFO, and concluded to be **effective** as of **March 31, 2022**[161](index=161&type=chunk) - No changes in internal control over financial reporting were identified during the quarterly period ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[162](index=162&type=chunk) [FORWARD-LOOKING STATEMENTS](index=54&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section identifies forward-looking statements and outlines numerous factors that could cause actual results to differ materially from these statements - Forward-looking statements are based on current expectations and beliefs, but are subject to numerous uncertainties and business risks that could cause actual results to differ materially[164](index=164&type=chunk) - Key risk factors include macroeconomic and market volatility, changes in coal, oil, and natural gas prices and demand, environmental concerns, regulatory changes, operational disruptions, and the success of new investments[164](index=164&type=chunk)[167](index=167&type=chunk) [PART II OTHER INFORMATION](index=58&type=section&id=PART%20II%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=58&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in multiple lawsuits alleging labor law violations, with potential damages ranging from $22.2 million to $143.7 million - Multiple lawsuits allege violations of the Fair Labor Standards Act and Kentucky Wage and Hour Act related to compensation for "donning" and "doffing" equipment and overtime calculation[170](index=170&type=chunk) - The alleged damages in these lawsuits collectively range from approximately **$22.2 million to $143.7 million**[170](index=170&type=chunk) - Management believes the claims are without merit and intends to vigorously defend the litigation, not expecting a material adverse effect on the business, financial position, or results of operations[170](index=170&type=chunk) [ITEM 1A. RISK FACTORS](index=58&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section directs readers to the risk factors discussed in the Annual Report on Form 10-K, emphasizing potential unknown or immaterial risks - 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, 2021[171](index=171&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial could also materially adversely affect the business, financial condition, and/or operating results in the future[171](index=171&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=58&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company has a unit repurchase program with $6.5 million remaining authorization, having repurchased $93.5 million in units since inception - A unit repurchase program was established in May 2018, authorizing the repurchase of up to **$100 million** of ARLP common units, with no time limit[172](index=172&type=chunk) - No unit repurchases were made during the three months ended March 31, 2022[173](index=173&type=chunk) - Since inception, **5,460,639 units** have been repurchased and retired for an aggregate purchase price of **$93.5 million**, leaving **$6.5 million** remaining authorized under the program[173](index=173&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=59&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[173](index=173&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=59&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Information concerning mine safety violations and other regulatory matters is included in Exhibit 95.1 of this Quarterly Report on Form 10-Q - Information concerning mine safety violations or other regulatory matters is included in Exhibit 95.1 to this Quarterly Report on Form 10-Q[174](index=174&type=chunk) [ITEM 5. OTHER INFORMATION](index=60&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section states that there is no other information to report - No other information is reported in this section[176](index=176&type=chunk) [ITEM 6. EXHIBITS](index=60&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including organizational documents, credit agreements, and certifications - The report includes various exhibits such as organizational documents (e.g., Fourth Amended and Restated Agreement of Limited Partnership), amendments to credit facilities, and certifications (e.g., Section 302 and 906 of the Sarbanes-Oxley Act)[176](index=176&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk) [SIGNATURES](index=63&type=section&id=SIGNATURES) The report is duly signed by key executives of Alliance Resource Management GP, LLC, the general partner of Alliance Resource Partners, L.P - The report is signed by Joseph W. Craft, III, President, Chief Executive Officer and Chairman of Alliance Resource Management GP, LLC, and Megan J. Cordle, Vice President, Controller and Chief Accounting Officer[181](index=181&type=chunk)

Financial Data and Key Metrics Changes - Alliance Resource Partners reported a significant increase in key operating and financial metrics for Q1 2022 compared to Q1 2021, with coal sales volumes rising by 19.5% and production volumes increasing by 14.7% [6] - Total revenues increased by 44.6%, income before income taxes surged by 221%, and EBITDA rose by 61.5% year-over-year [7] - Net income for Q1 2022 increased by 48.1% to $36.7 million, despite a one-time noncash deferred income tax charge of $37.3 million [9][10] Business Line Data and Key Metrics Changes - Coal sales price per ton increased by 13%, while oil and gas prices jumped by 74.9% per BOE, and coal royalty revenue climbed by 9.2% per ton [7] - The coal operations increased planned sales volumes by 500,000 tons in response to strong customer demand, with 94% of sales volumes now priced and committed for delivery in 2022 [12][13] - The Oil & Gas Royalties segment is expected to perform better than initially anticipated, with total BOE sales volumes projected to increase by 4% to 13% [24] Market Data and Key Metrics Changes - The U.S. and international thermal coal markets reacted strongly to high natural gas prices, incentivizing coal-fired power generation, particularly in Europe [16][17] - European coal generation in March 2022 exceeded the five-year average and doubled over 2021 levels due to sanctions on Russian coal [17] - The forward natural gas curve supports strong demand for coal, with domestic utilities actively seeking security of supply [20] Company Strategy and Development Direction - The company aims to utilize strong cash flows from existing assets to pursue opportunities in energy transition areas, focusing on five verticals for cash allocation [26][30] - Investments in technology development, including smart cameras and energy storage, are being explored to capitalize on core competencies [30][34] - The company plans to invest up to $90 million over the next 12 months in two entrepreneurial companies, Francis Energy and Infinitum Electric, which align with energy transition goals [35][36] Management's Comments on Operating Environment and Future Outlook - Management highlighted that the energy market conditions have improved due to underinvestment in fossil fuel production and geopolitical tensions, leading to increased global commodity prices [15][16] - The company expects coal export prices to remain higher than domestic prices for at least the next 18 months, with uncommitted coal likely sold into export markets [18][19] - Management remains cautious about supply chain challenges and inflationary pressures but anticipates improved operating margins from coal [13][22] Other Important Information - The company ended Q1 2022 with liquidity of $603.6 million and reduced total leverage to approximately 0.8 times trailing adjusted EBITDA [12] - A 40% increase in cash distribution to unitholders was announced, with management targeting distribution increases of 10% to 15% per quarter for the remainder of the year [25] Q&A Session Summary Question: Updated 2022 coal sales price guidance - Management explained that the wide range in coal sales price guidance reflects market volatility and transportation challenges, with the midpoint being targeted based on current pricing [39][40] Question: Pricing in domestic and export markets - Management refrained from providing specific pricing details but noted that higher prices in the met market are influencing overall pricing [42][43] Question: Use of cash strategy and investments - Management confirmed that 30% of free cash flow is targeted for distributions, with ongoing evaluations of investment opportunities in both energy transition and coal sectors [46][48] Question: Coal tonnage recovery from transportation constraints - Management indicated improvements in transportation and expects to make up lost coal tonnage primarily in Q2 2022 [58][59] Question: Investment criteria for acquisitions - Management stated that while returns in the coal space are more predictable, they maintain rigorous underwriting standards for mineral investments and are cautious about larger acquisitions [60][62]

PART I [Business](index=15&type=section&id=ITEM%201.%20BUSINESS) ARLP is a diversified natural resource company producing and marketing coal, and generating royalty income from its mineral interests [General Overview](index=15&type=section&id=General) ARLP is a diversified natural resource company generating income from coal production and mineral royalties, listed on NASDAQ as 'ARLP' - ARLP is a diversified natural resource company generating income from coal production and marketing, as well as royalty income from coal and oil & gas mineral interests across the United States[21](index=21&type=chunk) - The company is the **second-largest coal producer** in the eastern U.S., with seven underground mining complexes in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia[22](index=22&type=chunk) - ARLP owns mineral and royalty interests in approximately **1.5 million gross acres** in premier U.S. oil & gas producing regions, primarily the Permian, Anadarko, and Williston Basins[23](index=23&type=chunk) - Strategic growth in the Oil & Gas Royalties segment has been driven by key acquisitions: the **Boulders Acquisition in 2021**, the **Wing Acquisition in 2019**, and the **AllDale I & II Acquisition in 2019**[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) [Coal Mining Operations](index=18&type=section&id=Coal%20Mining%20Operations) ARLP's coal mining operations produced 32.2 million tons in 2021, primarily from the Illinois Basin and Appalachia, with sales to domestic and international markets 2021 Coal Sales & Production Summary | Metric | Value | | :--- | :--- | | Tons Sold | 32.3 million | | Tons Produced | 32.2 million | | Domestic Utility Sales | 81.6% of tons sold | | International Market Sales | 12.5% of tons sold | Coal Production by Region (Tons in millions) | Region | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Illinois Basin | 22.2 | 17.9 | 29.5 | | Appalachia | 10.0 | 9.1 | 10.5 | | **Total** | **32.2** | **27.0** | **40.0** | - In 2021, approximately **77.9% of sales tonnage** was sold under long-term contracts with terms ranging from 2021 to 2026[53](index=53&type=chunk) - Louisville Gas and Electric Company was a major customer, accounting for over **10% of total revenue** in 2021[58](index=58&type=chunk) [Mineral Interest Activities](index=27&type=section&id=Mineral%20Interest%20Activities) ARLP's mineral interests include oil & gas royalties from 57,000 net acres and coal royalties from significant reserves leased to mining operations - The company holds approximately **57,000 net royalty acres** for oil & gas, primarily in the Permian, Anadarko, and Williston Basins[63](index=63&type=chunk) Oil & Gas Production (2019-2021) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Oil (MBbls) | 825 | 948 | 741 | | Natural gas (MMcf) | 3,490 | 3,635 | 3,664 | | NGLs (MBbls) | 357 | 337 | 364 | | **Total BOE (MBbls)** | **1,764** | **1,892** | **1,716** | - The Coal Royalties segment includes **422.9 million tons of proven and probable reserves** and **1.17 billion tons of measured, indicated, and inferred coal mineral resources**, which are leased to mining operations[77](index=77&type=chunk) Coal Royalty Tons Sold by Region (Tons in millions) | Region | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Illinois Basin | 18.9 | 16.6 | 20.9 | | Appalachia | 1.3 | 2.3 | 2.1 | | **Total** | **20.2** | **18.9** | **23.0** | [Environmental, Health, and Safety Regulations](index=38&type=section&id=Environmental,%20Health,%20and%20Safety%20Regulations) ARLP's operations are subject to extensive environmental, health, and safety regulations, significantly impacting costs and future coal demand - Operations are heavily regulated in areas such as employee health and safety, permits, air and water quality, and reclamation, which increases the cost of doing business[96](index=96&type=chunk) - The Federal Mine Safety and Health Act (FMSHA) and the MINER Act impose stringent safety standards and penalties, significantly affecting operating costs[105](index=105&type=chunk)[107](index=107&type=chunk) - Regulations under the Clean Air Act (CAA) affecting coal-fired power plants, such as MATS and CSAPR, have led to plant retirements and could reduce future coal demand[126](index=126&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - Future regulation of Greenhouse Gas (GHG) emissions, both domestically and internationally (e.g., the Paris Agreement), poses a significant risk to the long-term demand for fossil fuels[140](index=140&type=chunk) [Human Capital](index=60&type=section&id=Human%20Capital) As of December 31, 2021, ARLP employed 2,990 union-free personnel, prioritizing competitive compensation, benefits, and workplace safety - As of December 31, 2021, the company employed **2,990 full-time employees**, with a completely union-free workforce[167](index=167&type=chunk) - Workplace safety is a fundamental part of the company culture. The Non-Fatal Days Lost (NFDL) rating for 2021 was **3.26**, below the preliminary industry average[169](index=169&type=chunk) - The company offers competitive compensation packages, including base salary, incentive compensation, and comprehensive health benefits with no out-of-pocket premiums for employees[168](index=168&type=chunk)[170](index=170&type=chunk) [Risk Factors](index=63&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces diverse risks including partnership structure, business operations, volatile commodity prices, extensive environmental regulations, and tax implications for unitholders - **Investment Risks:** Cash distributions are not guaranteed and were suspended in 2020 before resuming in 2021. Unitholders have limited voting rights and do not elect the general partner[181](index=181&type=chunk)[190](index=190&type=chunk) - **Business & Operational Risks:** The business is exposed to global economic conditions, the impacts of pandemics like COVID-19, reliance on key customers, and potential for cyber-attacks[208](index=208&type=chunk)[210](index=210&type=chunk)[226](index=226&type=chunk) - **Industry & Regulatory Risks:** The company faces volatile coal and oil & gas prices, intense competition, and extensive, costly environmental regulations. Legislative initiatives related to hydraulic fracturing and climate change could significantly impact demand and operations[230](index=230&type=chunk)[276](index=276&type=chunk)[294](index=294&type=chunk) - **Tax Risks:** The partnership's tax treatment is crucial; if treated as a corporation, cash available for distribution would be substantially reduced. Unitholders are required to pay taxes on their share of taxable income regardless of cash distributions received[339](index=339&type=chunk)[350](index=350&type=chunk) [Properties](index=121&type=section&id=ITEM%202.%20PROPERTIES) This section details ARLP's coal properties, with 547.1 million tons of proven and probable reserves, and oil & gas interests with 15.9 million BOE of proved reserves [Coal Mineral Resources and Reserves](index=121&type=section&id=Coal%20Mineral%20Resources%20and%20Reserves) As of December 31, 2021, ARLP held 547.1 million tons of proven and probable coal reserves and 1.17 billion tons of resources in key basins Coal Mineral Resources & Reserves (as of Dec 31, 2021) | Category | Tons (in millions) | | :--- | :--- | | Mineral Resources (exclusive of reserves) | 1,165.5 | | Proven & Probable Mineral Reserves | 547.1 | - Material properties with detailed disclosures include Henderson/Union, River View, Hamilton, Gibson South, and Tunnel Ridge[383](index=383&type=chunk) - Reserve and resource estimates were prepared by the independent engineering firm RESPEC Company, LLC[372](index=372&type=chunk) [Oil & Gas Reserves](index=144&type=section&id=Oil%20%26%20Gas%20Reserves) As of December 31, 2021, ARLP's net proved oil & gas reserves totaled 15.9 million BOE, primarily in Permian, Anadarko, and Williston Basins Net Proved Oil & Gas Reserves (as of Dec 31, 2021) | Category | Crude Oil (MBbl) | Natural Gas (MMcf) | NGLs (MBbl) | Total (MBOE) | | :--- | :--- | :--- | :--- | :--- | | Proved Developed | 5,493 | 28,426 | 3,039 | 13,269 | | Proved Undeveloped | 1,353 | 4,126 | 578 | 2,618 | | **Total Proved** | **6,846** | **32,552** | **3,617** | **15,887** | - **95%** of the 2021 year-end proved reserve estimates were audited by the independent petroleum engineering firm Netherland, Sewell & Associates, Inc. (NSAI)[452](index=452&type=chunk) - Proved undeveloped reserves (PUDs) decreased from **4,533 MBOE** at the start of 2021 to **2,618 MBOE** at year-end, primarily due to transfers to proved developed status and negative revisions[446](index=446&type=chunk) [Legal Proceedings](index=151&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) ARLP faces lawsuits alleging wage and hour violations with potential damages up to $143.7 million, which management intends to vigorously defend - ARLP subsidiaries are defendants in multiple lawsuits alleging violations of the Fair Labor Standards Act and state wage laws related to compensation for 'donning and doffing' equipment and overtime calculations[467](index=467&type=chunk) - The plaintiffs in two of the lawsuits allege collective damages ranging from approximately **$22.2 million to $143.7 million**[467](index=467&type=chunk) - Management believes the claims are without merit and does not expect the litigation to have a material adverse effect on the business, though the outcome is not certain[467](index=467&type=chunk) [Mine Safety Disclosures](index=152&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section provides mine safety violation disclosures as required by the Dodd-Frank Act, detailed in Exhibit 95.1 of the Form 10-K - Information regarding mine safety violations required by the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 95.1 to this Form 10-K[468](index=468&type=chunk) PART II [Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities](index=153&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY,%20RELATED%20UNITHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) ARLP's common units trade on NASDAQ under 'ARLP', with a $100 million unit repurchase program having $6.5 million remaining authorization - The company's common units are listed on the NASDAQ Global Select Market under the symbol '**ARLP**'[470](index=470&type=chunk) - A unit repurchase program authorized up to **$100 million** was established in May 2018. As of year-end 2021, **$93.5 million** had been used to repurchase **5,460,639 units**, with **$6.5 million** remaining[473](index=473&type=chunk)[474](index=474&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=154&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) ARLP's 2021 financial performance improved significantly with revenues of $1.57 billion and net income of $178.2 million, driven by higher coal sales and oil & gas prices [Results of Operations](index=160&type=section&id=Results%20of%20Operations) In 2021, total revenues increased 18.2% to $1.57 billion, resulting in a net income of $178.2 million, a significant turnaround from 2020 - Total revenues increased **18.2%** to **$1.57 billion** in 2021 from **$1.33 billion** in 2020, primarily due to increased coal sales volumes and higher oil & gas prices[506](index=506&type=chunk) Financial Performance (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Income (Loss) Attributable to ARLP | $178.2 million | ($129.2 million) | | Coal Tons Sold | 32.3 million | 28.2 million | | Average Coal Sales Price per Ton | $42.98 | $43.68 | | Segment Adjusted EBITDA | $549.3 million | $446.5 million | - The Illinois Basin segment's Adjusted EBITDA increased **24.0%** to **$265.3 million**, driven by a **16.5%** increase in sales volumes[521](index=521&type=chunk) - The Oil & Gas Royalties segment's Adjusted EBITDA increased **72.9%** to **$68.8 million**, primarily due to significantly higher sales price realizations per BOE[521](index=521&type=chunk) [Liquidity and Capital Resources](index=179&type=section&id=Liquidity%20and%20Capital%20Resources) ARLP maintained strong 2021 liquidity with $425.2 million in operating cash flow, $122.4 million cash, and $415.4 million available credit - Cash provided by operating activities was **$425.2 million** for 2021, an increase from **$400.6 million** in 2020[551](index=551&type=chunk) - As of December 31, 2021, the company had **$122.4 million** in cash and cash equivalents and **$415.4 million** available for borrowing under its Revolving Credit Facility[555](index=555&type=chunk)[741](index=741&type=chunk) - Total long-term debt was **$443.1 million** as of December 31, 2021[215](index=215&type=chunk) - Estimated 2022 cash requirements, including capital expenditures and debt payments, are projected to be between **$380.0 million and $400.0 million**[555](index=555&type=chunk) [Critical Accounting Policies and Estimates](index=181&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies involve significant estimates for goodwill, oil & gas reserves, workers' compensation, and asset retirement obligations - Key estimates include goodwill impairment, oil & gas reserve values, asset retirement obligations, and liabilities for workers' compensation and pneumoconiosis benefits[563](index=563&type=chunk) - In 2020, the company recorded a **$132.0 million** non-cash goodwill impairment charge related to the Hamilton mine due to weakened coal market conditions[573](index=573&type=chunk) - The aggregate undiscounted cost of final mine closure (asset retirement obligations) is estimated at **$229.4 million** as of December 31, 2021[591](index=591&type=chunk) - Accrued liabilities for workers' compensation and pneumoconiosis benefits totaled **$53.4 million** and **$111.3 million**, respectively, at year-end 2021, based on actuarial estimates[581](index=581&type=chunk)[582](index=582&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=191&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) ARLP is exposed to commodity price, credit, and interest rate risks, with some mitigation from long-term coal contracts - **Commodity Price Risk:** The company is exposed to price volatility for coal, oil, and natural gas. In 2021, **77.9% of coal tonnage** was sold under long-term contracts, which helps mitigate risk. The company does not currently use commodity price hedges[599](index=599&type=chunk)[601](index=601&type=chunk) - **Credit Risk:** Risk is concentrated with U.S. electric utilities and international brokerage firms. This is managed through credit evaluations, and when necessary, letters of credit or prepayments[602](index=602&type=chunk) - **Interest Rate Risk:** The company has exposure on its variable-rate Revolving Credit Facility and Securitization Facility, but no balances were outstanding at December 31, 2021. Fixed-rate debt totaled **$443.1 million**[606](index=606&type=chunk) [Financial Statements and Supplementary Data](index=194&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents ARLP's audited consolidated financial statements for 2021, including balance sheets, income statements, cash flows, and detailed notes Key Financial Statement Balances (as of Dec 31, 2021) | Account | Amount (in thousands) | | :--- | :--- | | Total Assets | $2,159,406 | | Total Liabilities | $933,337 | | Total Partners' Capital | $1,226,069 | | **Total Liabilities and Partners' Capital** | **$2,159,406** | Key Income Statement Items (for year ended Dec 31, 2021) | Account | Amount (in thousands) | | :--- | :--- | | Total Revenues | $1,569,976 | | Income from Operations | $219,203 | | Net Income Attributable to ARLP | $178,157 | | Earnings Per Unit (Basic & Diluted) | $1.36 | - The financial statements are accompanied by **25 detailed notes** that explain the company's accounting policies and provide breakdowns of significant financial statement line items, such as debt, acquisitions, and segment information[610](index=610&type=chunk) [Controls and Procedures](index=282&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management and independent auditors concluded that ARLP's disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[916](index=916&type=chunk) - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[920](index=920&type=chunk) - The independent registered public accounting firm, Grant Thornton LLP, provided an unqualified opinion on the effectiveness of the company's internal control over financial reporting[922](index=922&type=chunk)[925](index=925&type=chunk) PART III [Directors, Executive Officers and Corporate Governance of the General Partner](index=288&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE%20OF%20THE%20GENERAL%20PARTNER) This section details the executive officers and directors of ARLP's general partner, including governance structure and code of ethics - Joseph W. Craft III is the Chairman, President, and Chief Executive Officer of the general partner and indirectly owns it[934](index=934&type=chunk) - The Board of Directors' Audit Committee is composed of **four members**, all of whom have been determined to be independent under NASDAQ and SEC rules[955](index=955&type=chunk) - The company has adopted a code of ethics for its principal executive officer and senior financial officers, which is available on its website[962](index=962&type=chunk) [Executive Compensation](index=298&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Executive compensation, overseen by the Compensation Committee, includes base salary, annual cash incentives, and long-term equity awards tied to performance - The primary components of executive compensation are base salary, an annual cash Short-Term Incentive Plan (STIP), and equity awards under the Long-Term Incentive Plan (LTIP)[980](index=980&type=chunk) - CEO Joseph W. Craft III's compensation is distinct due to his significant equity ownership. His annual base salary has been **$1** since February 2016, and he has not received a STIP bonus since 2005[979](index=979&type=chunk) - The 2021 STIP was based on an EBITDA performance target of **$371.1 million**, which the company exceeded[987](index=987&type=chunk) - LTIP awards granted in 2021 consist of restricted units that cliff vest on January 1, 2024, contingent on achieving an aggregate EBITDA target for the 2021-2023 period[996](index=996&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters](index=327&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20UNITHOLDER%20MATTERS) This section details beneficial ownership of ARLP's common units, with Joseph W. Craft III holding 15.3% and all directors/executive officers holding 16.8% Beneficial Ownership of Common Units (as of Feb 2, 2022) | Beneficial Owner | Percentage Owned | | :--- | :--- | | Joseph W. Craft III | 15.3% | | Kathleen S. Craft | 12.8% | | All directors and executive officers as a group | 16.8% | [Certain Relationships and Related Transactions, and Director Independence](index=328&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS,%20AND%20DIRECTOR%20INDEPENDENCE) ARLP engages in related-party transactions, including administrative services, aircraft sharing, and coal leases, reviewed by the Conflicts Committee - The general partner is reimbursed for all direct and indirect expenses incurred on ARLP's behalf; total costs billed were approximately **$0.7 million** in 2021[1072](index=1072&type=chunk) - The company has aircraft time-sharing and pilot expense reimbursement agreements with JC Land, LLC, an affiliate of CEO Joseph W. Craft III[1073](index=1073&type=chunk)[1074](index=1074&type=chunk)[1076](index=1076&type=chunk) - ARLP has coal lease agreements with the Craft Foundations for properties operated by the Tunnel Ridge and MC Mining complexes, involving royalty payments[847](index=847&type=chunk)[1077](index=1077&type=chunk) - The Board of Directors has **four independent directors**: Messrs. Torrence, Carter, Druten, and Robinson, who comprise the Audit, Compensation, and Conflicts Committees[1081](index=1081&type=chunk) [Principal Accountant Fees and Services](index=331&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) This section details fees paid to independent accounting firms, Grant Thornton LLP in 2021 and Ernst & Young LLP in 2020, for audit and tax services Accountant Fees (in thousands) | Fee Type | 2021 (Grant Thornton) | 2020 (Ernst & Young) | | :--- | :--- | :--- | | Audit Fees | $670 | $1,349 | | Tax Fees | $0 | $339 | | **Total** | **$670** | **$1,688** | - The Audit Committee is responsible for pre-approving all auditing and permitted non-audit services performed by the independent registered public accounting firm[1085](index=1085&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=332&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including corporate documents and required certifications - Lists all financial statements and schedules included in the report, such as the Condensed Financial Information of Registrant (Schedule I)[1087](index=1087&type=chunk)[1089](index=1089&type=chunk) - Includes an index of all exhibits filed with the report, such as governance documents, material contracts, debt agreements, and compensation plans[1090](index=1090&type=chunk) - Certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are filed as exhibits[1115](index=1115&type=chunk)[1116](index=1116&type=chunk)[1117](index=1117&type=chunk) - Technical Report Summaries for material mining properties and the audit report for oil & gas reserves are included as exhibits[1120](index=1120&type=chunk)

Alliance Resource Partners, L.P. (NASDAQ:ARLP) Q4 2021 Earnings Conference Call January 31, 2022 10:00 AM ET Company Participants Brian Cantrell - Senior Vice President and Chief Financial Officer Joe Craft - Chairman, President and Chief Executive Officer Conference Call Participants Nathan Martin - The Benchmark Company Scott Ferguson - Pacific Value Lucas Pipes - B. Riley Securities Arthur Calavritinos - ANC Capital Operator Greetings. Welcome to Alliance Resource Partners, L.P. Fourth Quarter 2021 Earni ...

Alliance Resource Partners, L.P. (NASDAQ:ARLP) Q3 2021 Earnings Conference Call October 25, 2021 10:00 AM ET Company Participants Brian L. Cantrell - SVP and CFO Joseph W. Craft, III - President and CEO Conference Call Participants Nathan Martin - Benchmark Company Shelly McNulty - Loomis Sayles Matthew Fields - Bank of America Merrill Lynch Scott Ferguson - Pacific Value Arthur Calavritinos - ANC Capital Andrew Cosgrove - Bloomberg Operator Greetings, and welcome to Alliance Resource Partners L.P. Third Q ...

[PART I FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [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, including balance sheets, statements of operations, comprehensive income, and cash flows, for periods ended June 30, 2021 and 2020, highlighting the company's return to profitability in Q2 2021 with **$44.2 million** net income [Condensed Consolidated Financial Statements](index=5&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Total assets decreased to **$2.116 billion** as of June 30, 2021, from **$2.166 billion** at year-end 2020, while total liabilities decreased more significantly, leading to increased partners' capital and a return to profitability in Q2 2021 with **$44.2 million** net income Condensed Consolidated Balance Sheet (in $ thousands) | Balance Sheet Highlights | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $260,953 | $245,774 | | **Total Assets** | **$2,115,513** | **$2,166,016** | | **Total Current Liabilities** | $203,730 | $214,605 | | **Total Liabilities** | **$980,993** | **$1,093,749** | | **Total Partners' Capital** | **$1,134,520** | **$1,072,267** | Condensed Consolidated Statements of Operations (in $ thousands, except per unit data) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $362,443 | $255,202 | $681,065 | $605,965 | | **Income (Loss) from Operations** | $55,007 | $(35,100) | $91,335 | $(167,780) | | **Net Income (Loss)** | $44,165 | $(46,679) | $68,991 | $(191,386) | | **Net Income (Loss) Attributable to ARLP** | $44,035 | $(46,664) | $68,783 | $(191,447) | | **EPS - Basic and Diluted** | $0.34 | $(0.37) | $0.53 | $(1.51) | Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in $ thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $158,216 | $170,168 | | **Net Cash used in Investing Activities** | $(50,247) | $(87,463) | | **Net Cash used in Financing Activities** | $(125,794) | $(84,081) | | **Net Change in Cash** | $(17,825) | $(1,376) | | **Cash at End of Period** | $37,749 | $35,106 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies and financial items, including **$157.0 million** in non-cash asset and goodwill impairments in Q1 2020, the Q1 2021 restructuring into a new Coal Royalties segment, and specifics on long-term debt and revenue disaggregation - In the first quarter of 2020, the company recorded **$23.5 million** in non-cash asset impairment charges in its Illinois Basin segment and a **$132.0 million** goodwill impairment charge related to the Hamilton mine, driven by adverse market conditions and the impact of the COVID-19 pandemic[23](index=23&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) Long-Term Debt Summary (in $ thousands) | Debt Component | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Revolving credit facility | $— | $87,500 | | Senior notes | $400,000 | $400,000 | | Securitization facility | $38,100 | $55,900 | | Equipment financings & other | $53,674 | $60,380 | | **Total Principal** | **$491,774** | **$603,780** | | Less current maturities | ($55,558) | ($73,199) | | **Total Long-Term Debt** | **$436,216** | **$530,581** | - Beginning in Q1 2021, the company restructured its reportable segments to manage its coal royalty activities separately from its coal mining operations, creating a new Coal Royalties segment[89](index=89&type=chunk)[90](index=90&type=chunk) Segment Adjusted EBITDA (in $ thousands) | Segment | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | Illinois Basin Coal Operations | $70,623 | $22,667 | $128,296 | $66,000 | | Appalachia Coal Operations | $41,641 | $30,279 | $73,147 | $77,581 | | Oil & Gas Royalties | $15,379 | $6,881 | $27,325 | $20,636 | | Coal Royalties | $6,782 | $3,757 | $14,055 | $10,666 | | **Consolidated Segment Adjusted EBITDA** | **$136,092** | **$62,056** | **$245,913** | **$173,757** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=34&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This MD&A details the company's significant operational and financial recovery in H1 2021, driven by a **51.3%** increase in coal sales volume and higher oil & gas prices, leading to a **119.3%** increase in Segment Adjusted EBITDA and resumed unitholder distributions [Results of Operations](index=36&type=section&id=Results%20of%20Operations) ARLP reported **$44.0 million** net income in Q2 2021, a turnaround from a **$46.7 million** net loss in Q2 2020, driven by a **42.0%** increase in total revenues to **$362.4 million** and a **51.3%** rise in coal sales volume - The company's financial results for Q2 2021 showed significant improvement compared to Q2 2020, benefiting from reduced disruptions from the COVID-19 pandemic which had negatively impacted global energy demand in the prior year[112](index=112&type=chunk)[113](index=113&type=chunk) Q2 2021 vs Q2 2020 Key Operating Metrics | Metric | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Coal - Tons sold (thousands) | 7,846 | 5,186 | | Coal - Avg. Sales Price ($/ton) | $41.55 | $45.56 | | Coal - Segment Adj. EBITDA Expense ($/ton) | $27.90 | $36.67 | | Oil & Gas - BOE sold (thousands) | 391 | 411 | | Oil & Gas - Avg. Sales Price ($/BOE) | $43.73 | $18.92 | - Illinois Basin Coal Operations' Segment Adjusted EBITDA surged **211.6%** to **$70.6 million** in Q2 2021, driven by a **61.9%** increase in sales volumes as demand recovered from pandemic lows[124](index=124&type=chunk)[128](index=128&type=chunk) - Oil & Gas Royalties' Segment Adjusted EBITDA grew **123.5%** to **$15.4 million** in Q2 2021, primarily due to significantly higher sales price realizations per Barrel of Oil Equivalent (BOE)[124](index=124&type=chunk)[130](index=130&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$158.2 million** cash from operations in H1 2021, reduced capital expenditures to **$55.6 million**, **$437.7 million** available under its Revolving Credit Facility, and resumed unitholder distributions - The company believes existing cash, future cash flows from operations, and borrowing availability will be sufficient to meet working capital, capital expenditures, debt payments, and distribution payments[155](index=155&type=chunk) Six-Month Cash Flow and Capex Summary (in $ millions) | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Cash from Operations | $158.2 | $170.2 | | Cash used in Investing | $(50.2) | $(87.5) | | Cash used in Financing | $(125.8) | $(84.1) | | Capital Expenditures | $55.6 | $84.2 | - As of June 30, 2021, the company had **$437.7 million** available for borrowing under its Revolving Credit Facility and was in compliance with all debt covenants, with a debt to cash flow ratio of **1.08 to 1.0** (well below the maximum of 2.5 to 1.0)[163](index=163&type=chunk)[164](index=164&type=chunk) - Distributions to unitholders, which had been suspended after February 2020, resumed with a **$0.10 per unit** payment in May 2021[158](index=158&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=57&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks include commodity price fluctuations for coal, oil, and natural gas, credit risk from its customer base, and interest rate risk on variable-rate debt, with minimal exchange rate risk - The company's main market risks are commodity price fluctuations for coal, oil, and gas, credit risk with utility and brokerage customers, and interest rate risk on variable-rate debt under its Revolving Credit and Securitization facilities[178](index=178&type=chunk)[180](index=180&type=chunk)[184](index=184&type=chunk) - A **one percentage point** increase in interest rates on the Securitization Facility would result in an annualized increase in interest expense of **$0.4 million** based on the June 30, 2021 balance[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with security enhancements implemented following a non-material cyber incident to strengthen internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2021[185](index=185&type=chunk) - Following a non-material cyber incident during the quarter, the company implemented security enhancements like two-factor authentication and improved network backup processes to strengthen its internal controls[186](index=186&type=chunk) [PART II OTHER INFORMATION](index=63&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=63&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is defending multiple lawsuits alleging wage and hour law violations, with claims ranging from **$22.2 million** to **$143.7 million**, but believes the claims lack merit and expects no material adverse effect - The company is defending multiple lawsuits alleging violations of wage and hour laws, with plaintiffs in two of the cases claiming damages ranging from approximately **$22.2 million** to **$143.7 million**[194](index=194&type=chunk) [Item 1A. Risk Factors](index=63&type=section&id=ITEM%201A.%20Risk%20Factors) This section refers to the risk factors detailed in the 2020 Annual Report on Form 10-K, indicating no material changes to previously disclosed risks that could affect the business - The report refers investors to the risk factors disclosed in the 2020 Annual Report on Form 10-K, stating they could materially affect the business[195](index=195&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No common units were repurchased in Q2 2021; since inception, **5,460,639** units have been repurchased for **$93.5 million**, with **$6.5 million** remaining under the authorized program - No units were repurchased in Q2 2021[196](index=196&type=chunk) - Since inception, the company has repurchased **5,460,639** units for **$93.5 million**, with **$6.5 million** remaining under the authorized program[197](index=197&type=chunk) [Other Items (3, 4, 5, 6)](index=63&type=section&id=Other%20Items%20(3,%204,%205,%206)) This section confirms no defaults on senior securities, refers to Exhibit 95.1 for mine safety disclosures, reports no other material information, and lists filed exhibits - The company reports no defaults on senior securities[198](index=198&type=chunk) - Mine safety disclosures as required by the Dodd-Frank Act are provided in Exhibit 95.1 to the report[198](index=198&type=chunk)

Financial Data and Key Metrics Changes - Total revenues increased by 13.8% to $362.4 million compared to the sequential quarter, while net income jumped 77.9% to $44 million or $0.34 per unit, and EBITDA climbed 25.7% to $118.6 million [6] - Compared to the 2020 quarter, total revenues increased by 42%, net income rose by $90.7 million, and EBITDA surged by 145.9% [9] - Free cash flow generated in the quarter was $79.4 million, with $12.7 million returned to unit holders and $59.5 million used to reduce total debt and finance lease obligations [8] Business Segment Data and Key Metrics Changes - Coal sales volumes increased by 14.9% during the quarter, leading coal sales revenues to rise by 13.4% to $326 million compared to the sequential quarter [10][11] - The royalty business segment delivered $22.2 million of segment adjusted EBITDA, a 15.3% increase over the sequential quarter, with oil and gas royalties contributing $15.4 million [12] Market Data and Key Metrics Changes - Power demand in primary U.S. markets surged by 7.5% through the first half of 2021, with coal consumption expected to rebound by 16% for the full year [13][14] - International coal demand is rising due to global economic expansion post-COVID-19, with U.S. thermal coal exports projected to increase to 41-45 million short tons this year [15] Company Strategy and Development Direction - The company is increasing its full year 2021 guidance for coal sales volumes by approximately 6% to 32.9 million tons due to favorable coal market fundamentals [13] - The company is actively evaluating opportunities to increase production and sales in response to strong coal demand and pricing through 2022 [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the current tight labor market may limit production increases despite strong demand [16] - The company is optimistic about the contribution of its royalty segment to consolidated results, expecting continued growth in oil and gas production [17] Other Important Information - The company ended the quarter with liquidity of $500.5 million and reduced total leverage to 1.08 times, a 32.1% improvement since the beginning of the year [8] Q&A Session Summary Question: Inquiry about incremental pricing and commitments - Management indicated that some pricing was secured before the recent price increase, but they have factored this into their guidance, raising the average sales price by approximately $0.50 a ton [20] Question: Discussion on pricing trends in the market - Management confirmed that they are seeing strong pricing levels and do not anticipate a decrease in prices due to tight supply in the domestic market [24] Question: Potential priorities for free cash flow - Management stated that uncertainty in future prices makes it difficult to specify cash flow capital allocations at this time, but they will provide clarity in future calls [26] Question: Comments on cost pressures and guidance - Management acknowledged inflationary pressures from steel, oil, and labor, but noted that increased production is coming from lower-cost mines [28] Question: Discussion on leverage and capital allocation - Management emphasized a focus on growth opportunities while maintaining a target leverage level of one time [35] Question: Inquiry about labor relations and union activity - Management clarified that they are a non-union operator and are focused on maintaining good relationships with employees amid a tight labor market [38] Question: Discussion on the royalty portfolio and its value - Management highlighted that the standalone value of their oil and gas royalty segment is not fully reflected in current valuations, with potential for increased activity as commodity prices improve [42]

Alliance Resource Partners, L.P. (NASDAQ:ARLP) Q1 2021 Earnings Conference Call April 26, 2021 10:00 AM ET Company Participants Brian Cantrell - Senior VP and Chief Financial Officer Joe Craft - Chairman, President and Chief Executive Officer Conference Call Participants Nathan Martin - Seaport Global Lucas Pipes - B. Riley Matthew Fields - Bank of America Scott Ferguson - Pacific Value Operator Good day, and welcome to the Alliance Resource Partners L.P. First Quarter 2021 Earnings Conference Call. All par ...