Alliance Resource Partners(ARLP) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION ITEM 1. Financial Statements (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 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 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 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] Condensed Consolidated Statements of Cash Flows 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] - 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] Notes to Condensed Consolidated Financial Statements 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 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] - 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] - Interim results are not necessarily indicative of results to be expected for the full year ending December 31, 2025[22] 2. New Accounting Standards 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] - 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][33] 3. Variable Interest Entities 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] - ARLP does not consolidate AllDale III, NGP ET IV, and Gavin Generation, as it is not the primary beneficiary for these VIEs[41][44][46] - ARLP committed to invest up to $25.0 million in Gavin Generation in February 2025, funding $22.1 million by August 6, 2025[45] 4. Fair Value Measurements 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][53] - The fair value measurement of debt securities uses a combination of market approaches and option-pricing models with unobservable inputs (Level 3)[51][58] 5. Inventories 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] 6. Digital Assets 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 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] - 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][67] 8. Long-Term Debt 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][78] - The company was in compliance with all covenants of the Credit Agreement as of June 30, 2025[74] 9. Workers' Compensation and Pneumoconiosis 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] 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 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] - No material contributions to the Pension Plan are expected during 2025[86] 11. Contingencies 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] - 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] - 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] 12. Partners' Capital 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] 13. Common Unit-Based Compensation Plan 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] - 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] 14. Revenue from Contracts with Customers 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 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] - 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] 16. Earnings per Limited Partner Unit 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] - Participating securities were considered anti-dilutive for both the three and six months ended June 30, 2025 and 2024[103] 17. Segment Information 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][156] - 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][157][158] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - The company owns mineral interests in approximately 70,000 net royalty acres in premier oil & gas producing regions (Permian, Anadarko, Williston basins)[121] - 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][125] Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 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] - 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][141] Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 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] - 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][158] Reconciliation of Non-GAAP Financial Measures 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 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][172] - 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] - 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][171] - $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] - Anticipated total capital expenditures for 2025 are estimated in a range of $285.0 million to $320.0 million[172] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 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 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][180] - A significant decline in oil & gas prices would have a significant impact on oil & gas royalty revenues[180] - Historically, ARLP has not utilized commodity price-hedges or other derivatives but may do so in the future[181] Credit Risk 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] - 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] Exchange Rate Risk 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] - 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] Interest Rate Risk 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] - Historically, earnings have not been materially affected by changes in interest rates, and interest rate derivative instruments have not been utilized[184] ITEM 4. Controls and Procedures 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] - 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] Forward-Looking Statements 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] - 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] - 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] PART II OTHER INFORMATION ITEM 1. Legal Proceedings 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] - 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] - Management believes the ultimate exposure, if litigation were to resume, will not be material to results of operations or financial position[198] ITEM 1A. Risk Factors 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] - 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] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - No units were repurchased during the three months ended June 30, 2025[201] - Since the inception of the program, 6,390,446 units have been repurchased for an aggregate purchase price of $112.9 million[201] ITEM 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[203] ITEM 4. Mine Safety Disclosures 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] ITEM 5. Other Information 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] ITEM 6. Exhibits 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][208][209] - 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][209][211] - 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]