ALLIANCE RESOURCE PARTNERS LP

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __to__

Commission File No.: 0-26823

ALLIANCE RESOURCE PARTNERS, L.P .

(Exact name of registrant as specified in its charter)

Delaware		73-1564280
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1717 South Boulder Avenue, Suite 400 , Tulsa , Oklahoma 74119

(Address of principal executive offices and zip code)

( 918 ) 295-7600

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X ] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☒	Accelerated Filer ☐	Non-Accelerated Filer ☐	Smaller Reporting Company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common units representing limited partner interests	ARLP	NASDAQ Global Select Market

As of August 8, 2023, 127,125,437 common units are outstanding.

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TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION


		Page

ITEM 1.	Financial Statements (Unaudited)
	ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	4
	Notes to Condensed Consolidated Financial Statements	5
	1. Organization and Presentation	5
	2. Acquisitions	6
	3. Contingencies	6
	4. Inventories	7
	5. Fair Value Measurements	7
	6. Long-Term Debt	8
	7. Income Taxes	10
	8. Variable Interest Entities	10
	9. Investments	12
	10. Partners' Capital	13
	11. Revenue from Contracts with Customers	16
	12. Earnings per Limited Partner Unit	17
	13. Workers' Compensation and Pneumoconiosis	18
	14. Common Unit-Based Compensation Plans	19
	15. Components of Pension Plan Net Periodic Benefit Cost	20
	16. Segment Information	20
ITEM 2.	Management ' s Discussion and Analysis of Financial Condition and Results of Operations	23
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	35
ITEM 4.	Controls and Procedures	36
	Forward-Looking Statements	37

PART II
OTHER INFORMATION

ITEM 1.	Legal Proceedings	39
ITEM 1A.	Risk Factors	39
ITEM 2 .	Unregistered Sales of Equity Securities and Use of Proceeds	39
ITEM 3.	Defaults Upon Senior Securities	40
ITEM 4.	Mine Safety Disclosures	40
ITEM 5.	Other Information	40
ITEM 6.	Exhibits	40

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)


	June 30,		December 31,
	2023		2022*
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	284,899	$	296,023
Trade receivables		213,754		241,412
Other receivables		11,672		8,601
Inventories, net		128,940		77,326
Advance royalties		5,824		7,556
Prepaid expenses and other assets		18,842		26,675
Total current assets		663,931		657,593
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost		4,040,872		3,931,422
Less accumulated depreciation, depletion and amortization		( 2,112,693 )		( 2,050,754 )
Total property, plant and equipment, net		1,928,179		1,880,668
OTHER ASSETS:
Advance royalties		74,476		67,713
Equity method investments		46,789		49,371
Equity securities		42,000		42,000
Operating lease right-of-use assets		17,621		14,950
Other long-term assets		14,947		15,726
Total other assets		195,833		189,760
TOTAL ASSETS	$	2,787,943	$	2,728,021

LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable	$	109,093	$	95,122
Accrued taxes other than income taxes		22,852		22,967
Accrued payroll and related expenses		35,220		39,623
Accrued interest		4,312		5,000
Workers' compensation and pneumoconiosis benefits		14,135		14,099
Other current liabilities		24,377		53,790
Current maturities, long-term debt, net		37,771		24,970
Total current liabilities		247,760		255,571
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities, net		379,427		397,203
Pneumoconiosis benefits		101,578		100,089
Accrued pension benefit		12,028		12,553
Workers' compensation		41,170		39,551
Asset retirement obligations		143,550		142,254
Long-term operating lease obligations		14,645		12,132
Deferred income tax liabilities		35,416		35,814
Other liabilities		25,612		24,828
Total long-term liabilities		753,426		764,424
Total liabilities		1,001,186		1,019,995

COMMITMENTS AND CONTINGENCIES - (NOTE 3)

PARTNERS' CAPITAL:
ARLP Partners' Capital:
Limited Partners - Common Unitholders 127,125,437 and 127,195,219 units outstanding, respectively		1,801,682		1,656,025
General Partner's interest		—		66,548
Accumulated other comprehensive loss		( 39,926 )		( 41,054 )
Total ARLP Partners' Capital		1,761,756		1,681,519
Noncontrolling interest		25,001		26,507
Total Partners' Capital		1,786,757		1,708,026
TOTAL LIABILITIES AND PARTNERS' CAPITAL	$	2,787,943	$	2,728,021

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

See notes to condensed consolidated financial statements.

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except unit and per unit data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022*		2023		2022*
SALES AND OPERATING REVENUES:
Coal sales	$	560,331	$	531,807	$	1,139,115	$	920,167
Oil & gas royalties		33,087		39,287		67,584		72,683
Transportation revenues		30,527		35,385		60,765		64,757
Other revenues		17,891		13,399		37,294		25,693
Total revenues		641,836		619,878		1,304,758		1,083,300

EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization)		334,402		316,850		673,125		578,873
Transportation expenses		30,527		35,385		60,765		64,757
Outside coal purchases		4,209		151		4,209		151
General and administrative		20,130		22,480		41,215		41,102
Depreciation, depletion and amortization		68,639		67,690		134,189		131,830
Total operating expenses		457,907		442,556		913,503		816,713

INCOME FROM OPERATIONS		183,929		177,322		391,255		266,587

Interest expense (net of interest capitalized for the three and six months ended June 30, 2023 and 2022 of $ 1,216 , $ 171 , $ 2,623 and $ 241 , respectively)		( 9,433 )		( 9,397 )		( 22,109 )		( 19,059 )
Interest income		2,625		93		5,415		128
Equity method investment income (loss)		( 1,994 )		1,585		( 1,942 )		2,468
Other income (expense)		177		579		( 396 )		1,146
INCOME BEFORE INCOME TAXES		175,304		170,182		372,223		251,270

INCOME TAX EXPENSE		3,999		6,331		8,240		49,046

NET INCOME		171,305		163,851		363,983		202,224

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		( 1,515 )		( 323 )		( 3,008 )		( 613 )

NET INCOME ATTRIBUTABLE TO ARLP	$	169,790	$	163,528	$	360,975	$	201,611

NET INCOME ATTRIBUTABLE TO ARLP
GENERAL PARTNER	$	—	$	2,050	$	1,384	$	3,481
LIMITED PARTNERS	$	169,790	$	161,478	$	359,591	$	198,130

EARNINGS PER LIMITED PARTNER UNIT - BASIC AND DILUTED	$	1.30	$	1.23	$	2.75	$	1.51

WEIGHTED-AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED		127,183,439		127,195,219		127,236,097		127,195,219

Recast as discussed in Note 1 – Organization and Presentation.

See notes to condensed consolidated financial statements .

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022*		2023		2022*

NET INCOME	$	171,305	$	163,851	$	363,983	$	202,224

OTHER COMPREHENSIVE INCOME:

Defined benefit pension plan
Amortization of prior service cost (1)		46		46		93		93
Amortization of net actuarial loss (1)		171		489		344		972
Total defined benefit pension plan adjustments		217		535		437		1,065

Pneumoconiosis benefits
Amortization of net actuarial loss (1)		346		259		691		519
Total pneumoconiosis benefits adjustments		346		259		691		519

OTHER COMPREHENSIVE INCOME		563		794		1,128		1,584

COMPREHENSIVE INCOME		171,868		164,645		365,111		203,808

Less: Comprehensive income attributable to noncontrolling interest		( 1,515 )		( 323 )		( 3,008 )		( 613 )

COMPREHENSIVE INCOME ATTRIBUTABLE TO ARLP	$	170,353	$	164,322	$	362,103	$	203,195

(1) Amortization of prior service cost and net actuarial loss is included in the computation of net periodic benefit cost (credit) (see Notes 13 and 15 for additional details).

Recast as discussed in Note 1 – Organization and Presentation.

See notes to condensed consolidated financial statements.

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended
	June 30,
	2023		2022*

CASH FLOWS FROM OPERATING ACTIVITIES	$	504,023	$	239,391

CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures		( 185,017 )		( 121,982 )
Change in accounts payable and accrued liabilities		( 25,630 )		8,951
Proceeds from sale of property, plant and equipment		2,468		3,373
Contributions to equity method investments		( 1,334 )		( 20,110 )
Purchase of equity securities		—		( 32,639 )
JC Resources acquisition		( 64,999 )		—
Oil & gas reserve acquisition		( 3,935 )		—
Other		833		( 935 )
Net cash used in investing activities		( 277,614 )		( 163,342 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under securitization facility		—		27,500
Payments under securitization facility		—		( 27,500 )
Payments on equipment financings		( 7,565 )		( 8,696 )
Borrowing under long-term debt		75,000		—
Payments on long-term debt		( 65,474 )		—
Payments on finance lease obligations		( 306 )		( 410 )
Payment of debt issuance costs		( 11,744 )		—
Payments for purchases of units under unit repurchase program		( 19,432 )		—
Payments for tax withholdings related to settlements under deferred compensation plans		( 10,334 )		—
Excess purchase price over the contributed basis from JC Resources acquisition		( 7,251 )		—
Cash retained by JC Resources in acquisition		( 2,933 )		( 4,074 )
Distributions paid to Partners		( 182,868 )		( 78,560 )
Other		( 4,626 )		( 623 )
Net cash used in financing activities		( 237,533 )		( 92,363 )
NET CHANGE IN CASH AND CASH EQUIVALENTS		( 11,124 )		( 16,314 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		296,023		122,403
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	284,899	$	106,089

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	20,242	$	17,506
Cash paid for income taxes	$	5,760	$	10,964

SUPPLEMENTAL NON-CASH ACTIVITY:
Accounts payable for purchase of property, plant and equipment	$	18,651	$	17,276
Right-of-use assets acquired by operating lease	$	2,280	$	99
Market value of common units issued under deferred compensation plans before tax withholding requirements	$	28,906	$	—

Recast as discussed in Note 1 – Organization and Presentation.

See notes to condensed consolidated financial statements.

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND PRESENTATION

Significant Relationships Referenced in Notes to Condensed Consolidated Financial Statements

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

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

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

● References to "Mr. Craft" mean Joseph W. Craft III, the Chairman, President and Chief Executive Officer of MGP.

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

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

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

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

Organization

ARLP is a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol "ARLP." ARLP was formed in May 1999 and completed its initial public offering on August 19, 1999 when it acquired substantially all of the coal production and marketing assets of Alliance Resource Holdings, Inc., a Delaware corporation, and its subsidiaries. We are managed by our general partner, MGP, a Delaware limited liability company which holds a non-economic general partner interest in ARLP.

JC Resources Acquisition

On February 22, 2023, we acquired approximately 2,682 oil & gas net royalty acres in the Delaware Basin from JC Resources LP ("JC Resources"), an entity owned by Mr. Craft, for $ 72.3 million, which was funded with cash on hand ("JC Resources Acquisition"). Because JC Resources is owned by Mr. Craft, the JC Resources Acquisition is accounted for as a reorganization of entities under common control, whereby the assets and liabilities acquired from JC Resources are combined with the ARLP Partnership at their historical amounts for all periods presented. The recasting of 2022 for the JC Resources Acquisition increased revenues by $ 3.4 million and $ 5.9 million for the three and six months ended June 30, 2022, respectively, and increased income from operations, net income and comprehensive income by $ 2.1 million and $ 3.5 million for the three and six months ended June 30, 2022, respectively. We did not recast historical earnings per limited partner unit as pre-acquisition earnings from the JC Resources Acquisition were allocated to our general partner. For more information on this acquisition please see Note 2 – Acquisition.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts and operations of the ARLP Partnership and present our financial position as of June 30, 2023 and December 31, 2022 and the results of our operations and comprehensive income for the three months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023 and 2022. All intercompany transactions and accounts have been eliminated.

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

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States. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.

These condensed consolidated financial statements and notes are unaudited. However, in the opinion of management, these condensed consolidated financial statements reflect all normal recurring adjustments necessary for a fair presentation of the results for the periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year ending December 31, 2023.

Use of Estimates

The preparation of the ARLP Partnership's condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in our condensed consolidated financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and on deposit, including highly liquid investments with maturities of three months or less. At times the ARLP Partnership maintains deposits in federally insured financial institutions in excess of stated federally insured limits. Management monitors the credit ratings and concentration of risk with these financial institutions on a continuing basis to safeguard cash deposits. Based on this monitoring and other diligence, including discussions with representatives of the financial institutions, we have no reason to believe that any of the financial institutions in which we have deposits in excess of stated federally insured limits are facing financial difficulties, defaults or limited liquidity situations that would cause us to be unable to access to our deposits.

2. ACQUISITION S

JC Resources

As discussed in Note 1 – Organization and Presentation, on February 22, 2023, we completed the JC Resources Acquisition, which gives us increased exposure to a prolific area of the Delaware Basin that is within close proximity to reserves that we currently own. This acquisition was approved by the conflicts committee of MGP's board of directors, which is comprised entirely of independent directors. Because JC Resources is under common control with us, we recorded the acquisition at JC Resources' carrying value for each period presented. The carrying value of the mineral interests as well as related receivables and payables at February 22, 2023 was $ 65.0 million inclusive of $ 25.4 million and $ 37.8 million of mineral interests in proved and unproved properties, respectively. The JC Resources Acquisition increased revenues included in our condensed consolidated statements of income by $ 2.4 million and $ 5.4 million for the three and six months ended June 30, 2023, respectively.

Acquisition Agreement

On January 27, 2023, we entered into a one-year collaborative agreement with a third party, effective January 1, 2023, committing up to $ 35.0 million for the acquisition of oil & gas mineral interests in the Midland and Delaware Basins. Under the agreement, the third party assists us in the identification, evaluation, and acquisition of target oil & gas mineral interests. In exchange for these services, the third party receives a participation share, partially funded by the third party, and is paid a periodic management fee. As of June 30, 2023, we have purchased $ 1.9 million and $ 2.1 million of oil & gas mineral interests in proved and unproved properties, respectively, pursuant to this agreement. Management fees paid under this agreement have been immaterial.

3. CONTINGENCIES

Certain of our subsidiaries are party to litigation in which the plaintiffs allege violations of the Fair Labor Standards Act and state law due to alleged failure to compensate for time "donning" and "doffing" equipment and to account for certain bonuses in the calculation of overtime rates and pay. The plaintiffs seek class and collective action certification, which we oppose, and the courts have not yet made definitive final rulings on those issues. We had a mediation with the plaintiffs on June 12, 2023 but no settlement was reached. We are defending this litigation vigorously and continue to believe the plaintiffs' claims are without merit. We believe our ultimate exposure, if any, will not be material to our results of operations or financial position; however, if our current belief that the claims are without merit

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

We also have various other lawsuits, claims and regulatory proceedings incidental to our business that are pending against the ARLP Partnership. We record an accrual for a potential loss related to these matters when, in management's opinion, such loss is probable and reasonably estimable. Based on known facts and circumstances, we believe the ultimate outcome of these outstanding lawsuits, claims and regulatory proceedings will not have a material adverse effect on our financial condition, results of operations or liquidity. However, if the results of these matters are different from management's current expectations and in amounts greater than our accruals, such matters could have a material adverse effect on our business and operations.

4. INVENTORIES

Inventories consist of the following:


	June 30,		December 31,
	2023		2022
	(in thousands)

Coal	$	66,383	$	23,553
Supplies (net of reserve for obsolescence of $ 7,456 and $ 6,601 , respectively)		62,557		53,773
Total inventories, net	$	128,940	$	77,326

5. FAIR VALUE MEASUREMENTS

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


	June 30, 2023			December 31, 2022
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
	(in thousands)
Long-term debt	$ —	$ 429,757	$ —	$ —	$ 424,420	$ —
Total	$ —	$ 429,757	$ —	$ —	$ 424,420	$ —

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

The estimated fair value of our long-term debt, including current maturities, is based on interest rates that we believe are currently available to us in active markets for issuance of debt with similar terms and remaining maturities (See Note 6 – Long-Term Debt). The fair value of debt, which is based upon these interest rates, is classified as a Level 2 measurement under the fair value hierarchy.

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6. LONG-TERM DEBT

Long-term debt consists of the following:


					Unamortized Discount and
	Principal				Debt Issuance Costs
	June 30,		December 31,		June 30,		December 31,
	2023		2022		2023		2022
	(in thousands)
Revolving credit facility	$	—	$	—	$	( 8,806 )	$	( 2,702 )
Term loan		70,312		—		( 1,538 )		—
Senior notes		339,214		400,000		( 1,427 )		( 2,134 )
Securitization facility		—		—		—		—
November 2019 equipment financing		15,425		21,072		—		—
June 2020 equipment financing		4,018		5,937		—		—
		428,969		427,009		( 11,771 )		( 4,836 )
Less current maturities		( 38,194 )		( 24,970 )		423		—
Total long-term debt	$	390,775	$	402,039	$	( 11,348 )	$	( 4,836 )

Credit Facility. On January 13, 2023, Alliance Coal, as borrower, entered into a Credit Agreement (the "Credit Agreement") with various financial institutions. The Credit Agreement provides for a $ 425 million revolving credit facility, which includes a sublimit of $ 15.0 million for swingline borrowings and permits the issuance of letters of credit up to the full amount of $ 425 million (the "Revolving Credit Facility"), and for a term loan in an aggregate principal amount of $ 75 million (the "Term Loan"). The Credit Agreement matures on March 9, 2027, at which time the aggregate outstanding principal amount of all Revolving Credit Facility advances and all Term Loan advances are required to be repaid in full. The Credit Agreement will instead mature on January 30, 2025, if on that date our Senior Notes, as discussed below, are still outstanding and Alliance Coal does not have liquidity of at least $ 200 million. Interest is payable quarterly, with principal of the Term Loan due in quarterly installments equal to 6.25 % of the original principal amount of the Term Loan beginning with the quarter ending June 30, 2023 and the balance payable at maturity. The Revolving Credit Facility replaces the $ 459.5 million revolving credit facility, which included a sublimit of $ 125.0 million for the issuance of letters of credit and a sublimit of $ 15.0 million for swingline borrowings, extended to the Intermediate Partnership under its Fifth Amended and Restated Credit Agreement, dated as of March 9, 2020 that would have expired on March 9, 2024. We incurred debt issuance costs during the six months ended June 30, 2023 of $ 11.7 million in connection with the Credit Agreement. These debt issuance costs are deferred and amortized as a component of interest expense over the term of the Revolving Credit Facility.

The Revolving Credit Facility is underwritten by a syndicate of eighteen financial institutions and the obligations of the lenders are individual obligations, which means the failure of one or more lenders to be able to fund its obligation does not relieve the remaining lenders from funding their obligations. Based on our diligence, including discussions with representatives of certain of these financial institutions, as of June 30, 2023 we have no reason to believe that the banks within our syndicate are facing financial difficulties, defaults or limited liquidity situations that would cause them to be unable to fund their obligations under the Credit Agreement. However, should any of the banks in our syndicate experience conditions in the future that limit their ability to fund their obligations, the amount available under the Revolving Credit Facility could be reduced.

The Credit Agreement is guaranteed by ARLP and certain of its subsidiaries, including the Intermediate Partnership and most of the direct and indirect subsidiaries of Alliance Coal (the "Subsidiary Guarantors"). The Credit Agreement also is secured by substantially all of the assets of the Subsidiary Guarantors and Alliance Coal. Borrowings under the Credit Agreement bear interest, at our option, at either (i) an adjusted term rate plus the applicable margin or (ii) the base rate plus the applicable margin. The base rate is the highest of (i) the Overnight Bank Funding Rate plus 0.50 %, (ii) the Administrative Agent's prime rate, and (iii) the Daily Simple Secured Overnight Financing Rate plus 100 basis points. The applicable margin for borrowings under the Credit Agreement are determined by reference to the Consolidated Debt to Consolidated Cash Flow Ratio and was 0.49 % as of June 30, 2023. At June 30, 2023, we had $ 41.0 million of letters of credit outstanding with $ 384.0 million available for borrowing under the Revolving Credit Facility. We incurred an annual commitment fee of 0.50 % on the undrawn portion of the Revolving Credit Facility. We utilize the Credit

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Agreement, as appropriate, for working capital requirements, capital expenditures and investments, scheduled debt payments and distribution payments.

The Credit Agreement contains various restrictions affecting Alliance Coal and its subsidiaries, including, among other things, restrictions on incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates. In each case, these restrictions are subject to various exceptions. In addition, restrictions apply to cash distributions by Alliance Coal to the Intermediate Partnership if such distribution would result in exceeding a minimum fixed charge coverage ratio (as determined in the Credit Agreement) or in Alliance Coal having liquidity of less than $ 200 million. The Credit Agreement requires us to maintain (a) a debt of Alliance Coal to cash flow ratio of not more than 1.5 to 1.0, (b) a consolidated debt of Alliance Coal and the Intermediate Partnership to cash flow ratio of not more than 2.5 to 1.0 and (c) an interest coverage ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters. The debt of Alliance Coal to cash flow ratio, consolidated debt of Alliance Coal and the Intermediate Partnership to cash flow ratio, and interest coverage ratio were 0.10 to 1.0, 0.49 to 1.0 and 145.52 to 1.0, respectively, for the trailing twelve months ended June 30, 2023. We were in compliance with the covenants of the Credit Agreement as of June 30, 2023 and anticipate remaining in compliance with the covenants.

Senior Notes. On April 24, 2017, the Intermediate Partnership and Alliance Resource Finance Corporation (as co-issuer), a wholly owned subsidiary of the Intermediate Partnership ("Alliance Finance"), issued an aggregate principal amount of $ 400.0 million of senior unsecured notes due 2025 ("Senior Notes") in a private placement to qualified institutional buyers. The Senior Notes have a term of eight years , maturing on May 1, 2025 (the "Term") and accrue interest at an annual rate of 7.5 % . Interest is payable semi-annually in arrears on each May 1 and November 1. The indenture governing the Senior Notes contains customary terms, events of default and covenants relating to, among other things, the incurrence of debt, the payment of distributions or similar restricted payments, undertaking transactions with affiliates and limitations on asset sales. During the six months ended June 30, 2023, we repurchased $ 60.8 million of our Senior Notes. The gain on extinguishment of the Senior Notes is immaterial. In July 2023, we redeemed an additional $ 50.0 million of our Senior Notes.

Accounts Receivable Securitization. Certain direct and indirect wholly owned subsidiaries of our Intermediate Partnership are party to a $ 60.0 million accounts receivable securitization facility ("Securitization Facility"). Under the Securitization Facility, certain subsidiaries sell certain trade receivables on an ongoing basis to our Intermediate Partnership, which then sells the trade receivables to AROP Funding, LLC ("AROP Funding"), a wholly owned bankruptcy-remote special purpose subsidiary of our Intermediate Partnership, which in turn borrows on a revolving basis up to $ 60.0 million secured by the trade receivables. After the sale, Alliance Coal, as servicer of the assets, collects the receivables on behalf of AROP Funding. The Securitization Facility bears interest based on a short-term bank yield index. On June 30, 2023, we had $ 11.7 million of letters of credit outstanding with $ 48.3 million available for borrowing under the Securitization Facility. The agreement governing the Securitization Facility contains customary terms and conditions, including limitations with regards to certain customer credit ratings. In January 2023, we extended the term of the Securitization Facility to January 2024. The Securitization Facility was previously scheduled to mature in January 2023. At June 30, 2023, we did no t have any outstanding borrowings under the Securitization Facility.

November 2019 Equipment Financing. On November 6, 2019, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $ 53.1 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "November 2019 Equipment Financing"). The November 2019 Equipment Financing contains customary terms and events of default and an implicit interest rate of 4.75 % , providing for a four-year term with forty-seven monthly payments of $ 1.0 million and a balloon payment of $ 11.6 million upon maturity on November 6, 2023. Upon maturity, the equipment will revert to the Intermediate Partnership.

June 2020 Equipment Financing. On June 5, 2020, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $ 14.7 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "June 2020 Equipment Financing"). The June 2020 Equipment Financing contains customary terms and events of default and provides for forty-eight monthly payments with an implicit interest rate of 6.1 % , maturing on June 5, 2024. Upon maturity, the equipment will revert to the Intermediate Partnership.

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7. INCOME TAXES

Components of income tax expense are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in thousands)
Current:
Federal	$	3,935	$	6,175	$	8,247	$	11,209
State		272		445		573		831
		4,207		6,620		8,820		12,040
Deferred:
Federal		( 190 )		( 255 )		( 521 )		34,665
State		( 18 )		( 34 )		( 59 )		2,341
		( 208 )		( 289 )		( 580 )		37,006
Income tax expense	$	3,999	$	6,331	$	8,240	$	49,046

On March 15, 2022, Alliance Minerals changed its U.S. federal income tax status from a pass-through entity to a taxable entity via a "check the box" election (the "Tax Election"), which became effective January 1, 2022. The Tax Election resulted in the recognition of an initial deferred tax liability of $ 37.3 million and a corresponding increase to income tax expense for the six months ended June 30, 2022.

The effective income tax rate for our income tax expense for the three months ended June 30, 2023 and 2022 and the six months ended June 30, 2023 is less than the federal statutory rate, primarily due to the portion of income not subject to income taxes. The effective income tax rate for our income tax expense for the six months ended June 30, 2022 is greater than the federal statutory rate, primarily due to the effect of the Tax Election, partially offset by the portion of income not subject to income taxes.

Our 2019 through 2022 tax years remain open to examination by tax authorities. We have been notified by the Internal Revenue Service that lower-tier partnership income tax returns for the tax year ended December 31, 2020 have been selected for audit.

8. VARIABLE INTEREST ENTITIES

Cavalier Minerals

On November 10, 2014, our subsidiary, Alliance Minerals, and Bluegrass Minerals Management, LLC ("Bluegrass Minerals") entered into a limited liability company agreement (the "Cavalier Agreement") to create Cavalier Minerals JV, LLC ("Cavalier Minerals"), which was formed to indirectly acquire oil & gas mineral interests through its ownership in AllDale I & II. Alliance Minerals owns a 96 % member interest in Cavalier Minerals, and Bluegrass Minerals owns a 4 % member interest in Cavalier Minerals and a profits interest which entitles it to receive distributions equal to 25 % of all distributions (including in liquidation) after all members have recovered their investment. Distributions with respect to Bluegrass Minerals' profits interest are offset by all distributions received by Bluegrass Minerals from the former general partners of AllDale I & II. All members have recovered their investment and Bluegrass Minerals began receiving its profits interest distributions in late 2022. We hold the managing member interest in Cavalier Minerals.

We have concluded that Cavalier Minerals is a variable interest entity ("VIE") which we consolidate as the primary beneficiary because we are the managing member and a substantial equity owner in Cavalier Minerals. Bluegrass Minerals' equity ownership of Cavalier Minerals is accounted for as noncontrolling ownership interest in our condensed consolidated balance sheets. In addition, earnings attributable to Bluegrass Minerals are recognized as noncontrolling interest in our condensed consolidated statements of income.

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AllDale III

In February 2017, Alliance Minerals committed to directly invest $ 30.0 million in AllDale Minerals III, LP ("AllDale III") which was created for similar investment purposes as AllDale I & II. Alliance Minerals completed funding of this commitment in 2018. Alliance Minerals' limited partner interest in AllDale III is 13.9 %.

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

Since AllDale III is structured as a limited partnership with the limited partners (1) not having the ability to remove the general partner and (2) not participating significantly in the operational decisions, we concluded that AllDale III is a VIE. We are not the primary beneficiary of AllDale III as we do not have the power to direct the activities that most significantly impact AllDale III's economic performance. We account for our ownership interest in the income or loss of AllDale III as an equity method investment. We record equity income or loss based on AllDale III's distribution structure. See Note 9 – Investments for more information.

Francis

On April 5, 2022, we invested $ 20 million in Francis Renewable Energy, LLC ("Francis"), in the form of a convertible note. Our convertible note matured on April 1, 2023 and was converted into a 17.8 % preferred equity interest in Francis. Prior to conversion, we had determined the note more closely represented equity as opposed to debt. Therefore, we accounted for the convertible note as an equity contribution even though we did not participate in Francis' earnings or losses and were not eligible to receive distributions during the term of the note. Subsequent to the conversion on April 1, 2023, we participate in earnings and losses and are eligible to receive distributions.

We have concluded that Francis is a VIE as the management structure is similar to a limited partnership with the non-managing members (i) not having the ability to remove the managing member and (ii) not participating significantly in the operational decisions. We are not the primary beneficiary of Francis as we do not have the power to direct the activities that most significantly impact Francis's economic performance. We account for our ownership interest in the income or loss of Francis as an equity method investment. Following the conversion of our note to preferred equity, we record equity income or loss based on Francis' distribution structure. See Note 9 – Investments for more information.

NGP ETP IV

On June 2, 2022, we committed to purchase $ 25.0 million of limited partner interests in NGP ETP IV, L.P. ("NGP ETP IV"), a private equity fund sponsored by NGP and focused on investments that are part of the global transition toward a lower carbon economy. This commitment represents a 3.6 % interest in NGP ETP IV. As of June 30, 2023, we have funded $ 5.4 million of this commitment.

We have concluded that NGP ETP IV is a VIE as it is structured as a limited partnership with limited partners (i) not having the ability to remove the general partner and (ii) not participating significantly in the operational decisions. We are not the primary beneficiary of NGP ETP IV as we do not have the power to direct the activities that most significantly impact NGP ETP IV's economic performance. We account for our ownership interest in the income or loss of NGP ETP IV as an equity method investment. See Note 9 – Investments for more information.

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9. INVESTMENT S

AllDale III

As discussed in Note 8 – Variable Interest Entities, we account for our ownership interest in the income or loss of AllDale III as an equity method investment. We record equity income or loss based on AllDale III's distribution structure. The changes in our equity method investment in AllDale III for each of the periods presented were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in thousands)
Beginning balance	$	24,695	$	26,194	$	25,284	$	26,325
Equity method investment income		716		1,585		1,141		2,468
Distributions received		( 960 )		( 1,501 )		( 1,974 )		( 2,515 )
Ending balance	$	24,451	$	26,278	$	24,451	$	26,278

Francis

As discussed in Note 8 – Variable Interest Entities, we account for our ownership interest in the income or loss of Francis as an equity method investment. Prior to the conversion of our convertible note, we did not participate in Francis' earnings or losses; however, upon conversion on April 1, 2023 we began participating. As a development stage company, Francis depends on capital contributions to meet its operating and debt obligations. We currently believe that the carrying value of our investment is recoverable; however, if Francis is unable to raise sufficient funds to continue its operations and meet its debt obligations, it could have an adverse effect on our investment. The changes in our equity method investment in Francis for three and six months ended June 30, 2023 and 2022 were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in thousands)
Beginning balance	$	20,000	$	—	$	20,000	$	—
Contributions		—		20,000		—		20,000
Equity method investment loss		( 2,620 )		—		( 2,620 )		—
Ending balance	$	17,380	$	20,000	$	17,380	$	20,000

NGP ETP IV

As discussed in Note 8 – Variable Interest Entities, we account for our ownership interest in the income or loss of NGP ETP IV as an equity method investment. The changes in our equity method investment in NGP ETP IV for three and six months ended June 30, 2023 and 2022 were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in thousands)
Beginning balance	$	4,254	$	—	$	4,087	$	—
Contributions		794		110		1,334		110
Equity method investment loss		( 90 )		—		( 463 )		—
Ending balance	$	4,958	$	110	$	4,958	$	110

Infinitum

We hold $ 42.0 million of Series D Preferred Stock in Infinitum Electric, Inc. ("Infinitum"), a Texas-based startup developer and manufacturer of electric motors featuring printed circuit board stators. Our preferred stock provides for non-cumulative dividends when and if declared by Infinitum's board of directors. Each share is convertible, at any time, at our option, into shares of common stock of Infinitum. We account for our ownership interest in Infinitum as an equity

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investment without a readily determinable fair value. It is not practicable to estimate the fair value of our investment in Infinitum because of the lack of a quoted market price for our ownership interests. Therefore, we use a measurement alternative other than fair value to account for our investment. There have been no fair value adjustments in our investment in Infinitum subsequent to our purchases. During the period we have not observed any price changes that have occurred to identical or similar securities sold by Infinitum that would indicate an adjustment to the fair value of our investment is warranted.

10. PARTNERS' CAPITAL

Distributions

Distributions paid or declared during 2022 and 2023 were as follows:


Payment Date	Per Unit Cash Distribution		Total Cash Distribution
			(in thousands)

February 14, 2022	$	0.2500	$	32,750
May 13, 2022		0.3500		45,810
August 12, 2022		0.4000		52,338
November 14, 2022		0.5000		65,449
Total	$	1.5000	$	196,347

February 14, 2023	$	0.7000	$	91,938
May 15, 2023		0.7000		90,930
August 14, 2023 (1)		0.7000		—
Total	$	2.1000	$	182,868

(1) On July 28, 2023, we declared this quarterly distribution payable on August 14, 2023 to all unitholders of record as of August 7, 2023.

Unit Repurchase Program

In January 2023, the board of directors of MGP authorized a $ 93.5 million increase to the unit repurchase program, which had $ 6.5 million of available capacity as of December 31, 2022. As a result, we are authorized to repurchase up to a total of $ 100.0 million of ARLP common units. During the six months ended June 30, 2023, we repurchased and retired 929,842 units at an average unit price of $ 20.90 for an aggregate purchase price of $ 19.4 million. Since inception of the unit repurchase program, we have repurchased and retired 6,390,446 units at an average unit price of $ 17.67 for an aggregate purchase price of $ 112.9 million.

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Change in Partners' Capital

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


						Accumulated
	Number of	Limited		General		Other
	Limited Partner	Partners'		Partner's		Comprehensive		Noncontrolling		Total Partners'
	Units	Capital		Capital		Income (Loss)		Interest		Capital
	(in thousands, except unit data)
Balance at January 1, 2023	127,195,219	$	1,656,025	$	66,548	$	( 41,054 )	$	26,507	$	1,708,026
Comprehensive income:
Net income	—		189,801		1,384		—		1,493		192,678
Actuarially determined long-term liability adjustments	—		—		—		565		—		565
Total comprehensive loss											193,243
Settlement of deferred compensation plans	860,060		( 9,320 )		—		—		—		( 9,320 )
Purchase of units under unit repurchase program	( 860,060 )		( 18,209 )		—		—		—		( 18,209 )
Common unit-based compensation	—		2,830		—		—		—		2,830
Distributions on deferred common unit-based compensation	—		( 2,901 )		—		—		—		( 2,901 )
Distributions from consolidated company to affiliate noncontrolling interest	—		—		—		—		( 2,288 )		( 2,288 )
JC Resources acquisition - See Note 1	—		( 7,251 )		( 64,999 )		—		—		( 72,250 )
Cash retained by JC Resources in acquisition - See Note 1	—		—		( 2,933 )		—		—		( 2,933 )
Distributions to Partners	—		( 89,037 )		—		—		—		( 89,037 )
Balance at March 31, 2023	127,195,219		1,721,938		—		( 40,489 )		25,712		1,707,161
Comprehensive income:
Net income	—		169,790		—		—		1,515		171,305
Actuarially determined long-term liability adjustments	—		—		—		563		—		563
Total comprehensive income											171,868
Settlement of deferred compensation plans	—		( 1,014 )		—		—		—		( 1,014 )
Purchase of units under unit repurchase program	( 69,782 )		( 1,223 )		—		—		—		( 1,223 )
Common unit-based compensation	—		3,121		—		—		—		3,121
Distributions on deferred common unit-based compensation	—		( 1,895 )		—		—		—		( 1,895 )
Distributions from consolidated company to noncontrolling interest	—		—		—		—		( 2,226 )		( 2,226 )
Distributions to Partners	—		( 89,035 )		—		—		—		( 89,035 )
Balance at June 30, 2023	127,125,437	$	1,801,682	$	—	$	( 39,926 )	$	25,001	$	1,786,757

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						Accumulated
	Number of	Limited		General		Other
	Limited Partner	Partners'		Partner's		Comprehensive		Noncontrolling		Total Partners'
	Units	Capital		Capital *		Income (Loss)		Interest		Capital *
	(in thousands, except unit data)
Balance at January 1, 2022	127,195,219	$	1,279,183	$	68,075	$	( 64,229 )	$	11,115	$	1,294,144
Comprehensive income:
Net income	—		36,652		1,431		—		290		38,373
Actuarially determined long-term liability adjustments	—		—		—		790		—		790
Total comprehensive income											39,163
Common unit-based compensation	—		2,640		—		—		—		2,640
Distributions on deferred common unit-based compensation	—		( 950 )		—		—		—		( 950 )
Distributions from consolidated company to affiliate noncontrolling interest	—		—		—		—		( 298 )		( 298 )
Cash retained by JC Resources in acquisition - See Note 1	—		—		( 1,590 )		—		—		( 1,590 )
Distributions to Partners	—		( 31,800 )		—		—		—		( 31,800 )
Balance at March 31, 2022	127,195,219		1,285,725		67,916		( 63,439 )		11,107		1,301,309
Comprehensive income:
Net income	—		161,478		2,050		—		323		163,851
Actuarially determined long-term liability adjustments	—		—		—		794		—		794
Total comprehensive loss											164,645
Common unit-based compensation	—		2,340		—		—		—		2,340
Distributions on deferred common unit-based compensation	—		( 1,292 )		—		—		—		( 1,292 )
Distributions from consolidated company to noncontrolling interest	—		—		—		—		( 325 )		( 325 )
Cash retained by JC Resources in acquisition - See Note 1	—		—		( 2,484 )		—		—		( 2,484 )
Distributions to Partners	—		( 44,518 )		—		—		—		( 44,518 )
Balance at June 30, 2022	127,195,219	$	1,403,733	$	67,482	$	( 62,645 )	$	11,105	$	1,419,675

Recast as discussed in Note 1 – Organization and Presentation.

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11. REVENUE FROM CONTRACTS WITH CUSTOMERS

The following table illustrates the disaggregation of our revenues by type, including a reconciliation to our segment presentation as presented in Note 16 – Segment Information.


	Coal Operations				Royalties				Other,
	Illinois								Corporate and
	Basin		Appalachia		Oil & Gas		Coal		Elimination		Consolidated
	(in thousands)
Three Months Ended June 30, 2023

Coal sales	$	331,813	$	228,518	$	—	$	—	$	—	$	560,331
Oil & gas royalties		—		—		33,087		—		—		33,087
Coal royalties		—		—		—		16,567		( 16,567 )		—
Transportation revenues		21,178		9,349		—		—		—		30,527
Other revenues		2,401		375		325		—		14,790		17,891
Total revenues	$	355,392	$	238,242	$	33,412	$	16,567	$	( 1,777 )	$	641,836

Three Months Ended June 30, 2022

Coal sales	$	290,389	$	241,418	$	—	$	—	$	—	$	531,807
Oil & gas royalties *		—		—		39,287		—		—		39,287
Coal royalties		—		—		—		14,525		( 14,525 )		—
Transportation revenues		21,449		13,936		—		—		—		35,385
Other revenues		1,659		328		669		—		10,743		13,399
Total revenues	$	313,497	$	255,682	$	39,956	$	14,525	$	( 3,782 )	$	619,878

Six Months Ended June 30, 2023

Coal sales	$	668,723	$	470,392	$	—	$	—	$	—	$	1,139,115
Oil & gas royalties		—		—		67,584		—		—		67,584
Coal royalties		—		—		—		32,080		( 32,080 )		—
Transportation revenues		42,506		18,259		—		—		—		60,765
Other revenues		4,569		850		1,365		—		30,510		37,294
Total revenues	$	715,798	$	489,501	$	68,949	$	32,080	$	( 1,570 )	$	1,304,758

Six Months Ended June 30, 2022

Coal sales	$	544,294	$	375,873	$	—	$	—	$	—	$	920,167
Oil & gas royalties *		—		—		72,683		—		—		72,683
Coal royalties		—		—		—		29,692		( 29,692 )		—
Transportation revenues		40,340		24,417		—		—		—		64,757
Other revenues		3,559		691		793		—		20,650		25,693
Total revenues	$	588,193	$	400,981	$	73,476	$	29,692	$	( 9,042 )	$	1,083,300

Recast as discussed in Note 1 – Organization and Presentation.

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


							2026 and
	2023		2024		2025		Thereafter		Total
	(in thousands)

Illinois Basin Coal Operations coal revenues	$	762,478	$	925,042	$	344,601	$	243,600	$	2,275,721
Appalachia Coal Operations coal revenues		452,387		574,481		325,425		1,600		1,353,893
Total coal revenues (1)	$	1,214,865	$	1,499,523	$	670,026	$	245,200	$	3,629,614

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(1) Coal revenues generally consists of consolidated revenues excluding our Oil & Gas Royalties segment as well as intercompany revenues from our Coal Royalties segment .

12 . EARNINGS PER LIMITED PARTNER UNIT

We utilize the two-class method in calculating basic and diluted earnings per limited partner unit ("EPU"). Subsequent to the JC Resources Acquisition, which is discussed in more detail in Note 1 – Organization and Presentation, net income attributable to ARLP is allocated to limited partners and participating securities with nonforfeitable distributions or distribution equivalents, while net losses attributable to ARLP are allocated only to limited partners but not to participating securities. Prior to the JC Resources Acquisition, in addition to limited partners and participating securities allocations, amounts are also allocated to our general partner for historical earnings from the mineral interests acquired in the JC Resources Acquisition.

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

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022 (1)
	(in thousands, except per unit data)

Net income attributable to ARLP	$	169,790	$	163,528	$	360,975	$	201,611
Adjustment:
General partner's interest in net income attributable to ARLP		—		( 2,050 )		( 1,384 )		( 3,481 )

Limited partners' interest in net income attributable to ARLP		169,790		161,478		359,591		198,130

Less:
Distributions to participating securities		( 2,396 )		( 1,720 )		( 4,828 )		( 3,272 )
Undistributed earnings attributable to participating securities		( 2,071 )		( 3,645 )		( 4,981 )		( 3,245 )

Net income attributable to ARLP available to limited partners	$	165,323	$	156,113	$	349,782	$	191,613

Weighted-average limited partner units outstanding – basic and diluted		127,183		127,195		127,236		127,195

Earnings per limited partner unit - basic and diluted (2)	$	1.30	$	1.23	$	2.75	$	1.51

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

(2) Diluted EPU gives effect to all potentially dilutive common units outstanding during the period using the treasury stock method. Diluted EPU excludes all potentially dilutive units calculated under the treasury stock method if their effect is anti-dilutive. The combined total of LTIP, SERP and Directors' Deferred Compensation Plan units of 2,577 and 2,896 for the three and six months ended June 30, 2023, respectively, and 3,529 and 3,289 for the three and six months ended June 30, 2022, respectively, were considered anti-dilutive under the treasury stock method .

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13. WORKERS' COMPENSATION AND PNEUMOCONIOSIS

The changes in the workers' compensation liability, including current and long-term liability balances, for each of the periods presented were as follows:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
	(in thousands)
Beginning balance	$ 50,017	$ 53,206	$ 49,452	$ 53,448
Changes in accruals	2,196	2,271	6,070	4,546
Payments	( 2,646 )	( 3,278 )	( 6,505 )	( 6,082 )
Interest accretion	551	287	1,101	574
Valuation loss (gain) (1)	990	( 5,265 )	990	( 5,265 )
Ending balance	$ 51,108	$ 47,221	$ 51,108	$ 47,221

(1) Our estimate of the liability for the present value of current workers′ compensation benefits is based on our actuarial calculations. Our actuarial calculations are based on a blend of actuarial projection methods and numerous assumptions including claims development patterns, mortality, medical costs and interest rates. The valuation loss in 2023 is due to adverse claims development. The valuation gain in 2022 is due to an increase in the discount rate from 2.41 % on December 31, 2021 to 4.22 % on June 30, 2022.

We limit our exposure to traumatic injury claims by purchasing a high deductible insurance policy that starts paying benefits after deductibles for a claim have been met. The deductible level may vary by claim year. Our workers' compensation liability above is presented on a gross basis and does not include our expected receivables on our insurance policy. Our receivables for traumatic injury claims under this policy as of June 30, 2023 are $ 4.1 million and are included in Other long-term assets on our condensed consolidated balance sheet.

Certain of our mine operating entities are liable under state statutes and the Federal Coal Mine Health and Safety Act of 1969, as amended, to pay pneumoconiosis, or black lung, benefits to eligible employees and former employees and their dependents. Components of the net periodic benefit cost for each of the periods presented are as follows:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
	(in thousands)
Service cost	$ 675	$ 954	$ 1,344	$ 1,901
Interest cost (1)	1,238	749	2,476	1,496
Net amortization (1)	346	259	691	519
Net periodic benefit cost	$ 2,259	$ 1,962	$ 4,511	$ 3,916

(1) Interest cost and net amortization are included in the Other income (expense) line item within our condensed consolidated statements of income.

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14. COMMON UNIT-BASED COMPENSATION PLANS

Long-Term Incentive Plan

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


	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)

Non-vested grants at January 1, 2023	3,697,133	$	7.40		75,126
Granted (1)	447,225		21.54
Vested (2)	( 1,291,330 )		5.02
Forfeited	( 145,584 )		6.86
Non-vested grants at June 30, 2023	2,707,444		10.90		50,061

(1) The restricted units granted during 2023 have certain minimum-value guarantees per unit, regardless of whether or not the awards vest.

(2) During the six months ended June 30, 2023, we issued 860,060 unrestricted common units to the LTIP participants. The remaining vested units were settled in cash to satisfy tax withholding obligations of the LTIP participants.

LTIP expense for grants of restricted units was $ 2.7 million and $ 2.1 million for the three months ended June 30, 2023 and 2022, respectively, and $ 4.9 million and $ 4.4 million for the six months ended June 30, 2023 and 2022, respectively. The total obligation associated with LTIP grants of restricted units as of June 30, 2023 was $ 14.1 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets. As of June 30, 2023, there was $ 15.4 million in total unrecognized compensation expense related to the non-vested LTIP restricted unit grants that are expected to vest. That expense is expected to be recognized over a weighted-average period of 1.1 years.

Supplemental Executive Retirement Plan and Directors' Deferred Compensation Plan

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


	Number of units	Weighted average grant date fair value per unit		Intrinsic value
				(in thousands)

Phantom units outstanding as of January 1, 2023	742,540	$	20.28	$	15,088
Granted	49,480		19.72
Settled (1)	( 49,331 )		20.27
Phantom units outstanding as of June 30, 2023	742,689		20.38		13,732

(1) During the six months ended June 30, 2023, we purchased 27,576 ARLP common units on the open market to settle the account of a participant under the SERP. Units purchased and delivered to the participant were net of units settled in cash to satisfy tax withholding obligations.

Total SERP and Directors' Deferred Compensation Plan expense was $ 0.6 million and $ 0.3 million for the three months ended June 30, 2023 and 2022, respectively, and $ 1.2 million and $ 0.6 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, the total obligation associated with the SERP and Directors' Deferred Compensation Plan was $ 15.1 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

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15. COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

Eligible employees at certain of our mining operations participate in a defined benefit plan (the "Pension Plan") that we sponsor. The Pension Plan is currently closed to new applicants and participants in the Pension Plan are no longer receiving benefit accruals for service. The benefit formula for the Pension Plan is a fixed dollar unit based on years of service. Components of the net periodic benefit cost for each of the periods presented are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in thousands)
Interest cost	$	1,296	$	936	$	2,591	$	1,868
Expected return on plan assets		( 1,517 )		( 1,664 )		( 3,115 )		( 3,329 )
Amortization of prior service cost		46		46		93		93
Amortization of net loss		171		489		344		972
Net periodic benefit credit (1)	$	( 4 )	$	( 193 )	$	( 87 )	$	( 396 )

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

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

16. SEGMENT INFORMATION

We operate in the United States as a diversified natural resource company that generates operating and royalty income from the production and marketing of coal to major domestic and international utilities, metallurgical and industrial users as well as royalty income from oil & gas mineral interests. In addition, we continue to position ourselves as a reliable energy partner for the future as we pursue opportunities that support the advancement of energy and related infrastructure. We aggregate multiple operating segments into four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties. We also have an "all other" category referred to as Other, Corporate and Elimination. Our two coal operations reportable segments correspond to major coal producing regions in the eastern United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues. The two coal operations reportable segments include seven mining complexes operating in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia and a coal loading terminal in Indiana on the Ohio River. Our Oil & Gas Royalties reportable segment includes our oil & gas mineral interests which are located primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK) and Williston (Bakken) basins. The operations within our Oil & Gas Royalties reportable segment primarily include receiving royalties and lease bonuses for our oil & gas mineral interests. Our Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties, which are either (a) leased to our mining complexes or (b) near our coal mining operations but not yet leased.

The Illinois Basin Coal Operations reportable segment includes (a) the Gibson County Coal mining complex, (b) the Warrior mining complex, (c) the River View mining complex and (d) the Hamilton mining complex. The segment also includes our Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") coal loading terminal in Indiana which operates on the Ohio River, Mid-America Carbonates, LLC and other support services, and our non-operating mining complexes.

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

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

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

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Appalachia Coal Operations reportable segments or (b) located near our operations and external mining operations. Approximately two-thirds of the coal sold by our Coal Operations' mines is leased from our Coal Royalties entities.

Other, Corporate and Elimination includes marketing and administrative activities, Matrix Design Group, LLC, its subsidiaries, and Alliance Design Group, LLC (collectively referred to as the "Matrix Group"), our investments in Francis, Infinitum and NGP ETP IV (see Note 9 – Investments), Wildcat Insurance, which assists the ARLP Partnership with its insurance requirements, AROP Funding and Alliance Finance (both discussed in Note 6 – Long-Term Debt) and other miscellaneous activities. The eliminations included in Other, Corporate and Elimination primarily represent the intercompany coal royalty transactions described above between our Coal Royalties reportable segment and our coal operations' mines.

Reportable segment results are presented below.


	Coal Operations				Royalties				Other,
	Illinois								Corporate and
	Basin		Appalachia		Oil & Gas		Coal		Elimination		Consolidated
	(in thousands)
Three Months Ended June 30, 2023

Revenues - Outside	$	355,392	$	238,242	$	33,412	$	—	$	14,790	$	641,836
Revenues - Intercompany		—		—		—		16,567		( 16,567 )		—
Total revenues (2)		355,392		238,242		33,412		16,567		( 1,777 )		641,836

Segment Adjusted EBITDA Expense (3)		214,666		119,319		3,562		5,597		( 4,710 )		338,434
Segment Adjusted EBITDA (4)		119,551		109,573		29,050		10,970		222		269,366
Capital expenditures (5)		57,469		31,309		40		—		725		89,543

Three Months Ended June 30, 2022

Revenues - Outside (1)	$	313,497	$	255,682	$	39,956	$	—	$	10,743	$	619,878
Revenues - Intercompany		—		—		—		14,525		( 14,525 )		—
Total revenues (2)		313,497		255,682		39,956		14,525		( 3,782 )		619,878

Segment Adjusted EBITDA Expense (1) (3)		194,697		117,369		3,582		5,398		( 4,624 )		316,422
Segment Adjusted EBITDA (1) (4)		97,352		124,377		37,638		9,127		839		269,333
Capital expenditures		35,343		22,491		—		—		4,995		62,829

Six Months Ended June 30, 2023

Revenues - Outside	$	715,798	$	489,501	$	68,949	$	—	$	30,510	$	1,304,758
Revenues - Intercompany		—		—		—		32,080		( 32,080 )		—
Total revenues (2)		715,798		489,501		68,949		32,080		( 1,570 )		1,304,758

Segment Adjusted EBITDA Expense (3)		421,735		245,118		7,986		10,985		( 8,094 )		677,730
Segment Adjusted EBITDA (4)		251,559		226,123		59,095		21,095		3,441		561,313
Total assets		830,821		470,929		758,816		322,926		404,451		2,787,943
Capital expenditures (5)		119,451		63,814		42		400		1,310		185,017

Six Months Ended June 30, 2022

Revenues - Outside (1)	$	588,193	$	400,981	$	73,476	$	—	$	20,650	$	1,083,300
Revenues - Intercompany		—		—		—		29,692		( 29,692 )		—
Total revenues (2)		588,193		400,981		73,476		29,692		( 9,042 )		1,083,300

Segment Adjusted EBITDA Expense (1) (3)		372,286		201,084		6,859		10,217		( 12,568 )		577,878
Segment Adjusted EBITDA (1) (4)		175,567		175,480		68,473		19,475		3,525		442,520
Total assets (1)		748,291		457,724		734,760		288,509		171,389		2,400,673
Capital expenditures		71,890		40,836		—		—		9,256		121,982

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

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

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(3) Segment Adjusted EBITDA Expense includes operating expenses, coal purchases, if applicable, and other income. Transportation expenses are excluded as transportation revenues are recognized in an amount equal to transportation expenses when title passes to the customer.

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


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2023	2022	2023	2022
	(in thousands)
Operating expenses (excluding depreciation, depletion and amortization)	$ 334,402	$ 316,850	$ 673,125	$ 578,873
Outside coal purchases	4,209	151	4,209	151
Other expense (income)	( 177 )	( 579 )	396	( 1,146 )
Segment Adjusted EBITDA Expense	$ 338,434	$ 316,422	$ 677,730	$ 577,878

(4) Segment Adjusted EBITDA is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, and general and administrative expenses. Management therefore is able to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments. Consolidated Segment Adjusted EBITDA is reconciled to net income as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	(in thousands)
Net income	$	171,305	$	163,851	$	363,983	$	202,224
Noncontrolling interest		( 1,515 )		( 323 )		( 3,008 )		( 613 )
Net income attributable to ARLP	$	169,790	$	163,528	$	360,975	$	201,611
General and administrative		20,130		22,480		41,215		41,102
Depreciation, depletion and amortization		68,639		67,690		134,189		131,830
Interest expense, net		6,808		9,304		16,694		18,931
Income tax expense		3,999		6,331		8,240		49,046
Consolidated Segment Adjusted EBITDA	$	269,366	$	269,333	$	561,313	$	442,520

(5) Capital expenditures for the three and six months ended June 30, 2023 exclude $ 1.1 million and $ 3.9 million, respectively, paid towards the Acquisition Agreement. Capital expenditures for the six months ended June 30, 2023 also exclude the $ 72.3 million paid for the JC Resources Acquisition (See Note 2 – Acquisitions) .

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Significant relationships referenced in this management's discussion and analysis of financial condition and results of operations include the following: