Toggle SGML Header (+)


Section 1: 10-Q (10-Q)

ALLIANCE RESOURCE PARTNERS LPP1YP1YP1YP1YP1YP1YP1YP1YP1YP1YP1Y250000000001086600--12-312019Q3false00010866002017-01-012017-12-310001086600arlp:AllianceMineralsMemberarlp:CavalierMineralsMember2019-01-012019-09-300001086600arlp:MergerAndSimplificationAgreementMember2018-05-012019-09-3000010866002018-05-310001086600us-gaap:PhantomShareUnitsPSUsMemberarlp:SupplementalEmployeeRetirementPlanAndDeferredCompensationPlansMember2019-01-012019-09-300001086600arlp:ArlpLtipMember2018-12-310001086600us-gaap:IntersegmentEliminationMember2019-01-012019-09-3000010866002022-01-01arlp:IllinoisBasinSegmentMember2019-09-3000010866002022-01-01arlp:AppalachiaSegmentMember2019-09-3000010866002021-01-01arlp:IllinoisBasinSegmentMember2019-09-3000010866002021-01-01arlp:AppalachiaSegmentMember2019-09-3000010866002020-01-01arlp:IllinoisBasinSegmentMember2019-09-3000010866002020-01-01arlp:AppalachiaSegmentMember2019-09-3000010866002019-01-01us-gaap:CorporateAndOtherMember2019-09-3000010866002019-01-01arlp:IllinoisBasinSegmentMember2019-09-3000010866002019-01-01arlp:AppalachiaSegmentMember2019-09-3000010866002022-01-012019-09-3000010866002021-01-012019-09-3000010866002020-01-012019-09-3000010866002019-01-012019-09-300001086600us-gaap:ShippingAndHandlingMemberarlp:IllinoisBasinSegmentMember2019-07-012019-09-300001086600us-gaap:ShippingAndHandlingMemberarlp:AppalachiaSegmentMember2019-07-012019-09-300001086600us-gaap:RoyaltyMemberarlp:RoyaltyRevenuesMember2019-07-012019-09-300001086600us-gaap:ProductAndServiceOtherMemberus-gaap:CorporateAndOtherMember2019-07-012019-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:RoyaltyRevenuesMember2019-07-012019-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:IllinoisBasinSegmentMember2019-07-012019-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:AppalachiaSegmentMember2019-07-012019-09-300001086600us-gaap:OperatingSegmentsMemberus-gaap:CorporateAndOtherMember2019-07-012019-09-300001086600us-gaap:OperatingSegmentsMemberarlp:RoyaltyRevenuesMember2019-07-012019-09-300001086600us-gaap:OperatingSegmentsMemberarlp:IllinoisBasinSegmentMember2019-07-012019-09-300001086600us-gaap:OperatingSegmentsMemberarlp:AppalachiaSegmentMember2019-07-012019-09-300001086600us-gaap:IntersegmentEliminationMemberus-gaap:ProductAndServiceOtherMember2019-07-012019-09-300001086600us-gaap:IntersegmentEliminationMemberus-gaap:CorporateAndOtherMember2019-07-012019-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:IllinoisBasinSegmentMember2019-07-012019-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:CoalProductsAndServicesRevenueMember2019-07-012019-09-300001086600arlp:CoalProductsAndServicesRevenueMemberus-gaap:CorporateAndOtherMember2019-07-012019-09-300001086600arlp:CoalProductsAndServicesRevenueMemberarlp:IllinoisBasinSegmentMember2019-07-012019-09-300001086600arlp:CoalProductsAndServicesRevenueMemberarlp:AppalachiaSegmentMember2019-07-012019-09-300001086600us-gaap:RoyaltyMember2019-07-012019-09-300001086600us-gaap:ProductAndServiceOtherMember2019-07-012019-09-300001086600us-gaap:OperatingSegmentsMember2019-07-012019-09-300001086600us-gaap:ShippingAndHandlingMemberarlp:IllinoisBasinSegmentMember2019-01-012019-09-300001086600us-gaap:ShippingAndHandlingMemberarlp:AppalachiaSegmentMember2019-01-012019-09-300001086600us-gaap:RoyaltyMemberarlp:RoyaltyRevenuesMember2019-01-012019-09-300001086600us-gaap:ProductAndServiceOtherMemberus-gaap:CorporateAndOtherMember2019-01-012019-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:RoyaltyRevenuesMember2019-01-012019-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:IllinoisBasinSegmentMember2019-01-012019-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:AppalachiaSegmentMember2019-01-012019-09-300001086600us-gaap:OperatingSegmentsMemberus-gaap:CorporateAndOtherMember2019-01-012019-09-300001086600us-gaap:OperatingSegmentsMemberarlp:RoyaltyRevenuesMember2019-01-012019-09-300001086600us-gaap:OperatingSegmentsMemberarlp:IllinoisBasinSegmentMember2019-01-012019-09-300001086600us-gaap:OperatingSegmentsMemberarlp:AppalachiaSegmentMember2019-01-012019-09-300001086600us-gaap:IntersegmentEliminationMemberus-gaap:ProductAndServiceOtherMember2019-01-012019-09-300001086600us-gaap:IntersegmentEliminationMemberus-gaap:CorporateAndOtherMember2019-01-012019-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:IllinoisBasinSegmentMember2019-01-012019-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:CoalProductsAndServicesRevenueMember2019-01-012019-09-300001086600arlp:CoalProductsAndServicesRevenueMemberus-gaap:CorporateAndOtherMember2019-01-012019-09-300001086600arlp:CoalProductsAndServicesRevenueMemberarlp:IllinoisBasinSegmentMember2019-01-012019-09-300001086600arlp:CoalProductsAndServicesRevenueMemberarlp:AppalachiaSegmentMember2019-01-012019-09-300001086600us-gaap:RoyaltyMember2019-01-012019-09-300001086600us-gaap:ProductAndServiceOtherMember2019-01-012019-09-300001086600us-gaap:OperatingSegmentsMember2019-01-012019-09-300001086600us-gaap:ShippingAndHandlingMemberarlp:IllinoisBasinSegmentMember2018-07-012018-09-300001086600us-gaap:ShippingAndHandlingMemberarlp:AppalachiaSegmentMember2018-07-012018-09-300001086600us-gaap:ProductAndServiceOtherMemberus-gaap:CorporateAndOtherMember2018-07-012018-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:IllinoisBasinSegmentMember2018-07-012018-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:AppalachiaSegmentMember2018-07-012018-09-300001086600us-gaap:OperatingSegmentsMemberus-gaap:CorporateAndOtherMember2018-07-012018-09-300001086600us-gaap:OperatingSegmentsMemberarlp:IllinoisBasinSegmentMember2018-07-012018-09-300001086600us-gaap:OperatingSegmentsMemberarlp:AppalachiaSegmentMember2018-07-012018-09-300001086600us-gaap:IntersegmentEliminationMemberus-gaap:ProductAndServiceOtherMember2018-07-012018-09-300001086600us-gaap:IntersegmentEliminationMemberus-gaap:CorporateAndOtherMember2018-07-012018-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:IllinoisBasinSegmentMember2018-07-012018-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:CoalProductsAndServicesRevenueMember2018-07-012018-09-300001086600arlp:CoalProductsAndServicesRevenueMemberus-gaap:CorporateAndOtherMember2018-07-012018-09-300001086600arlp:CoalProductsAndServicesRevenueMemberarlp:IllinoisBasinSegmentMember2018-07-012018-09-300001086600arlp:CoalProductsAndServicesRevenueMemberarlp:AppalachiaSegmentMember2018-07-012018-09-300001086600us-gaap:ProductAndServiceOtherMember2018-07-012018-09-300001086600us-gaap:OperatingSegmentsMember2018-07-012018-09-300001086600us-gaap:ShippingAndHandlingMemberus-gaap:CorporateAndOtherMember2018-01-012018-09-300001086600us-gaap:ShippingAndHandlingMemberarlp:IllinoisBasinSegmentMember2018-01-012018-09-300001086600us-gaap:ShippingAndHandlingMemberarlp:AppalachiaSegmentMember2018-01-012018-09-300001086600us-gaap:ProductAndServiceOtherMemberus-gaap:CorporateAndOtherMember2018-01-012018-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:IllinoisBasinSegmentMember2018-01-012018-09-300001086600us-gaap:ProductAndServiceOtherMemberarlp:AppalachiaSegmentMember2018-01-012018-09-300001086600us-gaap:OperatingSegmentsMemberus-gaap:CorporateAndOtherMember2018-01-012018-09-300001086600us-gaap:OperatingSegmentsMemberarlp:IllinoisBasinSegmentMember2018-01-012018-09-300001086600us-gaap:OperatingSegmentsMemberarlp:AppalachiaSegmentMember2018-01-012018-09-300001086600us-gaap:IntersegmentEliminationMemberus-gaap:ProductAndServiceOtherMember2018-01-012018-09-300001086600us-gaap:IntersegmentEliminationMemberus-gaap:CorporateAndOtherMember2018-01-012018-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:IllinoisBasinSegmentMember2018-01-012018-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:CoalProductsAndServicesRevenueMember2018-01-012018-09-300001086600us-gaap:IntersegmentEliminationMemberarlp:AppalachiaSegmentMember2018-01-012018-09-300001086600arlp:CoalProductsAndServicesRevenueMemberus-gaap:CorporateAndOtherMember2018-01-012018-09-300001086600arlp:CoalProductsAndServicesRevenueMemberarlp:IllinoisBasinSegmentMember2018-01-012018-09-300001086600arlp:CoalProductsAndServicesRevenueMemberarlp:AppalachiaSegmentMember2018-01-012018-09-300001086600us-gaap:ProductAndServiceOtherMember2018-01-012018-09-300001086600us-gaap:OperatingSegmentsMember2018-01-012018-09-300001086600arlp:IllinoisBasinSegmentMember2019-08-150001086600arlp:WingAcquisitionMember2019-06-212019-06-210001086600arlp:AllianceMineralsMemberarlp:CavalierMineralsMember2019-01-012019-09-300001086600arlp:BluegrassMineralsManagementLlcMemberarlp:CavalierMineralsMember2018-01-012018-09-300001086600us-gaap:NoncontrollingInterestMember2019-09-300001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001086600us-gaap:NoncontrollingInterestMember2019-06-300001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-3000010866002019-06-300001086600us-gaap:NoncontrollingInterestMember2019-03-310001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-3100010866002019-03-310001086600us-gaap:NoncontrollingInterestMember2018-12-310001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001086600us-gaap:NoncontrollingInterestMember2018-09-300001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-09-300001086600us-gaap:NoncontrollingInterestMember2018-06-300001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-06-3000010866002018-06-300001086600us-gaap:NoncontrollingInterestMember2018-03-310001086600us-gaap:GeneralPartnerMember2018-03-310001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-03-3100010866002018-03-310001086600us-gaap:NoncontrollingInterestMember2017-12-310001086600us-gaap:GeneralPartnerMember2017-12-310001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-3100010866002018-05-012019-09-300001086600us-gaap:PensionPlansDefinedBenefitMember2019-07-012019-09-300001086600us-gaap:PensionPlansDefinedBenefitMember2019-01-012019-09-300001086600us-gaap:PensionPlansDefinedBenefitMember2018-07-012018-09-300001086600us-gaap:PensionPlansDefinedBenefitMember2018-01-012018-09-300001086600arlp:AllDaleMineralsIiiMember2017-02-280001086600arlp:IllinoisBasinSegmentMember2019-08-160001086600srt:RestatementAdjustmentMemberus-gaap:AccountingStandardsUpdate201602Member2019-01-010001086600arlp:BluegrassMineralsManagementLlcMemberarlp:CavalierMineralsMember2019-09-300001086600arlp:BluegrassMineralsManagementLlcMemberarlp:CavalierMineralsMember2019-01-030001086600us-gaap:RevolvingCreditFacilityMember2019-01-012019-09-300001086600arlp:CavalierMineralsCreditAgreementMember2015-10-062015-10-060001086600us-gaap:StandbyLettersOfCreditMember2017-01-270001086600us-gaap:RevolvingCreditFacilityMember2017-01-270001086600arlp:SwinglineSubfacilityMember2017-01-270001086600arlp:CavalierMineralsCreditAgreementMember2015-10-060001086600arlp:AllianceResourcePartnersLpSecuritizationFacilityMember2014-12-050001086600arlp:CavalierMineralsCreditAgreementMember2019-09-300001086600us-gaap:LimitedPartnerMember2019-09-300001086600us-gaap:LimitedPartnerMember2019-06-300001086600us-gaap:LimitedPartnerMember2019-03-310001086600us-gaap:LimitedPartnerMember2018-12-310001086600us-gaap:LimitedPartnerMember2018-09-300001086600us-gaap:LimitedPartnerMember2018-06-300001086600us-gaap:LimitedPartnerMember2018-03-310001086600us-gaap:LimitedPartnerMember2017-12-310001086600arlp:AllDaleMineralsIiiMemberarlp:AllDaleMineralsIiiMember2019-01-012019-09-300001086600arlp:AlldaleIAndIiMember2019-01-012019-09-300001086600arlp:ManagingGeneralPartnerMemberarlp:AllianceResourceOperatingPartnersMember2018-07-012018-09-300001086600arlp:ManagingGeneralPartnerMemberarlp:AllianceCoalMember2018-07-012018-09-300001086600us-gaap:StandbyLettersOfCreditMember2019-09-300001086600srt:MinimumMember2019-09-300001086600srt:MaximumMember2019-09-300001086600arlp:KodiakGasServicesLlcMember2019-02-082019-02-080001086600arlp:KodiakGasServicesLlcMember2019-02-080001086600arlp:KodiakGasServicesLlcMember2017-07-190001086600arlp:AlldalePartnershipsMember2019-09-300001086600arlp:AllDaleMineralsIiiMember2019-09-300001086600arlp:AlldalePartnershipsMember2019-06-300001086600arlp:AlldaleIAndIiMember2019-01-020001086600arlp:AllDaleMineralsIiiMember2018-12-310001086600arlp:AlldalePartnershipsMember2018-09-300001086600arlp:AllDaleMineralsIiiMember2018-09-300001086600arlp:AlldalePartnershipsMember2018-06-300001086600arlp:AllDaleMineralsIiiMember2017-12-3100010866002019-05-152019-05-150001086600arlp:DefinedBenefitPensionPlan2019Member2019-10-012019-10-310001086600arlp:DefinedBenefitPensionPlan2019Member2019-01-012019-09-300001086600arlp:DefinedBenefitPensionPlan2018Member2019-01-012019-09-300001086600us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-07-012019-09-300001086600us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-01-012019-09-300001086600us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2018-07-012018-09-300001086600us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2018-01-012018-09-300001086600arlp:EquipmentFinancingMember2019-05-172019-05-170001086600arlp:FourthAmendedAndRestatedCreditAgreementMemberus-gaap:EurodollarMember2019-09-300001086600us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-09-300001086600us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2018-12-310001086600arlp:EquipmentFinancingMember2019-05-170001086600arlp:SeniorUnsecuredNotesDueMay2025Member2017-04-240001086600us-gaap:RevolvingCreditFacilityMember2019-09-300001086600arlp:SeniorUnsecuredNotesDueMay2025Member2019-09-300001086600arlp:EquipmentFinancingMember2019-09-300001086600arlp:AllianceResourcePartnersLpSecuritizationFacilityMember2019-09-300001086600us-gaap:RevolvingCreditFacilityMember2018-12-310001086600arlp:SeniorUnsecuredNotesDueMay2025Member2018-12-310001086600arlp:AllianceResourcePartnersLpSecuritizationFacilityMember2018-12-310001086600us-gaap:ShippingAndHandlingMember2019-07-012019-09-300001086600us-gaap:ShippingAndHandlingMember2019-01-012019-09-300001086600us-gaap:ShippingAndHandlingMember2018-07-012018-09-300001086600us-gaap:ShippingAndHandlingMember2018-01-012018-09-300001086600arlp:CoalProductsAndServicesRevenueMember2019-07-012019-09-300001086600arlp:CoalProductsAndServicesRevenueMember2019-01-012019-09-300001086600arlp:CoalProductsAndServicesRevenueMember2018-07-012018-09-300001086600arlp:CoalProductsAndServicesRevenueMember2018-01-012018-09-3000010866002017-12-310001086600arlp:AlldaleIAndIiMember2019-07-012019-09-300001086600arlp:AlldaleIAndIiMember2019-01-030001086600arlp:WingAcquisitionMember2019-07-012019-09-300001086600arlp:WingAcquisitionMember2018-07-012018-09-300001086600arlp:AlldaleIAndIiMember2018-07-012018-09-300001086600arlp:WingAcquisitionMember2018-01-012018-09-300001086600arlp:AlldaleIAndIiMember2018-01-012018-09-300001086600arlp:WingAcquisitionMember2019-01-012019-09-300001086600us-gaap:IntersegmentEliminationMember2019-09-300001086600us-gaap:CorporateAndOtherMember2019-09-300001086600arlp:RoyaltyRevenuesMember2019-09-300001086600arlp:IllinoisBasinSegmentMember2019-09-300001086600arlp:AppalachiaSegmentMember2019-09-300001086600us-gaap:IntersegmentEliminationMember2018-09-300001086600us-gaap:CorporateAndOtherMember2018-09-300001086600arlp:RoyaltyRevenuesMember2018-09-300001086600arlp:IllinoisBasinSegmentMember2018-09-300001086600arlp:AppalachiaSegmentMember2018-09-3000010866002018-09-300001086600arlp:IllinoisBasinSegmentMember2019-08-162019-08-160001086600arlp:SupplementalEmployeeRetirementPlanAndDeferredCompensationPlansMember2019-07-012019-09-300001086600arlp:ArlpLtipMember2019-07-012019-09-300001086600arlp:SupplementalEmployeeRetirementPlanAndDeferredCompensationPlansMember2019-01-012019-09-300001086600arlp:ArlpLtipMember2019-01-012019-09-300001086600arlp:SupplementalEmployeeRetirementPlanAndDeferredCompensationPlansMember2018-07-012018-09-300001086600arlp:ArlpLtipMember2018-07-012018-09-300001086600arlp:SupplementalEmployeeRetirementPlanAndDeferredCompensationPlansMember2018-01-012018-09-300001086600arlp:ArlpLtipMember2018-01-012018-09-300001086600arlp:AssetsHeldUnderFinanceLeaseMember2019-09-300001086600arlp:AssetsHeldUnderFinanceLeaseMember2018-12-310001086600arlp:AlldaleIAndIiMember2019-09-3000010866002019-11-050001086600us-gaap:PhantomShareUnitsPSUsMemberarlp:SupplementalEmployeeRetirementPlanAndDeferredCompensationPlansMember2019-09-300001086600us-gaap:PhantomShareUnitsPSUsMemberarlp:SupplementalEmployeeRetirementPlanAndDeferredCompensationPlansMember2018-12-310001086600us-gaap:IntersegmentEliminationMember2019-07-012019-09-300001086600us-gaap:CorporateAndOtherMember2019-07-012019-09-300001086600arlp:RoyaltyRevenuesMember2019-07-012019-09-300001086600arlp:IllinoisBasinSegmentMember2019-07-012019-09-300001086600arlp:AppalachiaSegmentMember2019-07-012019-09-300001086600us-gaap:IntersegmentEliminationMember2019-01-012019-09-300001086600us-gaap:CorporateAndOtherMember2019-01-012019-09-300001086600arlp:RoyaltyRevenuesMember2019-01-012019-09-300001086600arlp:IllinoisBasinSegmentMember2019-01-012019-09-300001086600arlp:AppalachiaSegmentMember2019-01-012019-09-300001086600us-gaap:IntersegmentEliminationMember2018-07-012018-09-300001086600us-gaap:CorporateAndOtherMember2018-07-012018-09-300001086600arlp:RoyaltyRevenuesMember2018-07-012018-09-300001086600arlp:IllinoisBasinSegmentMember2018-07-012018-09-300001086600arlp:AppalachiaSegmentMember2018-07-012018-09-300001086600us-gaap:IntersegmentEliminationMember2018-01-012018-09-300001086600us-gaap:CorporateAndOtherMember2018-01-012018-09-300001086600arlp:RoyaltyRevenuesMember2018-01-012018-09-300001086600arlp:IllinoisBasinSegmentMember2018-01-012018-09-300001086600arlp:AppalachiaSegmentMember2018-01-012018-09-300001086600arlp:WkyCoalplayMember2014-11-170001086600arlp:AlldalePartnershipsMember2019-07-012019-09-300001086600arlp:AllDaleMineralsIiiMember2019-07-012019-09-300001086600arlp:AllDaleMineralsIiiMember2019-01-012019-09-300001086600arlp:AlldalePartnershipsMember2018-07-012018-09-300001086600arlp:AllDaleMineralsIiiMember2018-07-012018-09-300001086600arlp:AllDaleMineralsIiiMember2018-01-012018-09-300001086600arlp:WkyCoalplayMember2019-01-012019-09-300001086600arlp:SupplementalEmployeeRetirementPlanAndDeferredCompensationPlansMember2019-09-300001086600arlp:ArlpLtipMember2019-09-300001086600arlp:AlldaleIAndIiMember2019-01-032019-01-030001086600arlp:WingAcquisitionMember2019-08-022019-08-020001086600arlp:BluegrassMineralsManagementLlcMemberarlp:CavalierMineralsMember2019-01-012019-09-300001086600arlp:AlldaleIAndIiMember2019-01-012019-09-300001086600us-gaap:NoncontrollingInterestMember2019-07-012019-09-300001086600us-gaap:LimitedPartnerMember2019-07-012019-09-300001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001086600us-gaap:NoncontrollingInterestMember2019-04-012019-06-300001086600us-gaap:LimitedPartnerMember2019-04-012019-06-300001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-3000010866002019-04-012019-06-300001086600us-gaap:NoncontrollingInterestMember2018-07-012018-09-300001086600us-gaap:LimitedPartnerMember2018-07-012018-09-300001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-07-012018-09-300001086600arlp:AllDaleMineralsIiiMember2019-01-012019-09-3000010866002019-11-142019-11-1400010866002019-08-142019-08-1400010866002019-02-142019-02-1400010866002018-11-142018-11-1400010866002018-08-142018-08-1400010866002018-05-152018-05-1500010866002018-02-142018-02-1400010866002018-01-012018-12-310001086600us-gaap:NoncontrollingInterestMember2019-01-012019-03-310001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-3100010866002019-01-012019-03-310001086600us-gaap:NoncontrollingInterestMember2018-04-012018-06-300001086600us-gaap:GeneralPartnerMember2018-04-012018-06-300001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-04-012018-06-3000010866002018-04-012018-06-300001086600us-gaap:NoncontrollingInterestMember2018-01-012018-03-310001086600us-gaap:GeneralPartnerMember2018-01-012018-03-310001086600us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-03-3100010866002018-01-012018-03-310001086600us-gaap:LimitedPartnerMember2019-01-012019-03-310001086600us-gaap:LimitedPartnerMember2018-04-012018-06-300001086600us-gaap:LimitedPartnerMember2018-01-012018-03-310001086600arlp:SeniorUnsecuredNotesDueMay2025Member2017-04-242017-04-240001086600arlp:FourthAmendedAndRestatedCreditAgreementMember2017-01-272017-01-270001086600arlp:FourthAmendedAndRestatedCreditAgreementMember2019-01-012019-09-3000010866002019-07-012019-09-3000010866002019-01-012019-09-3000010866002018-07-012018-09-3000010866002018-01-012018-09-300001086600us-gaap:ScenarioAdjustmentMemberarlp:AlldaleIAndIiMember2019-09-300001086600arlp:AlldaleIAndIiMember2019-09-300001086600arlp:WingAcquisitionMember2019-08-020001086600srt:ScenarioPreviouslyReportedMemberarlp:AlldaleIAndIiMember2019-01-0300010866002019-09-3000010866002018-12-31iso4217:USDxbrli:purearlp:itemxbrli:sharesiso4217:USDxbrli:sharesutr:acrearlp:companyarlp:segment

Table of Contents

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 September 30, 2019

OR

   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 November 5, 2019, 128,130,003 common units are outstanding.

Table of Contents

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 September 30, 2019 and December 31, 2018

1

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2019 and 2018

2

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018

3

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018

4

Notes to Condensed Consolidated Financial Statements

5

1.     Organization and Presentation

5

2.     New Accounting Standards

6

3.     Acquisitions

7

4.     Long-Lived Asset Impairment

10

5.     Contingencies

10

6.     Inventories

10

7.     Leases

11

8.     Fair Value Measurements

12

9.     Long-Term Debt

12

10.   Variable Interest Entities

14

11.   Investments

16

12.   Partners' Capital

16

13.   Revenue from Contracts with Customers

19

14.   Earnings per Limited Partner Unit

20

15.   Workers' Compensation and Pneumoconiosis

21

16.   Compensation Plans

21

17.   Components of Pension Plan Net Periodic Benefit Cost

23

18.   Segment Information

23

19.   Subsequent Events

26

ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

27

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

41

ITEM 4.

Controls and Procedures

42

Forward-Looking Statements

43

PART II

OTHER INFORMATION

ITEM 1.

Legal Proceedings

45

ITEM 1A.

Risk Factors

45

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

ITEM 3.

Defaults Upon Senior Securities

45

ITEM 4.

Mine Safety Disclosures

45

ITEM 5.

Other Information

45

ITEM 6.

Exhibits

46

i

Table of Contents

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)

September 30, 

December 31, 

2019

    

2018

ASSETS

    

 

CURRENT ASSETS:

Cash and cash equivalents

$

31,817

$

244,150

Trade receivables

 

182,094

 

174,914

Other receivables

 

524

 

395

Inventories, net

 

114,100

 

59,206

Advance royalties, net

 

1,229

 

1,274

Prepaid expenses and other assets

    

 

11,600

    

 

20,747

Total current assets

 

341,364

 

500,686

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment, at cost

 

3,673,436

 

2,925,808

Less accumulated depreciation, depletion and amortization

 

(1,647,933)

 

(1,513,450)

Total property, plant and equipment, net

 

2,025,503

 

1,412,358

OTHER ASSETS:

Advance royalties, net

 

51,863

 

42,923

Equity method investments

 

28,721

 

161,309

Equity securities

 

122,094

Goodwill

136,399

136,399

Operating lease right-of-use assets

18,990

Other long-term assets

 

24,249

 

18,979

Total other assets

 

260,222

 

481,704

TOTAL ASSETS

$

2,627,089

$

2,394,748

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:

Accounts payable

$

91,445

$

96,397

Accrued taxes other than income taxes

 

17,611

 

16,762

Accrued payroll and related expenses

 

48,535

 

43,113

Accrued interest

 

13,175

 

5,022

Workers' compensation and pneumoconiosis benefits

 

11,181

 

11,137

Current finance lease obligations

 

31,507

 

46,722

Current operating lease obligations

 

4,431

 

Other current liabilities

 

22,139

 

19,718

Current maturities, long-term debt, net

 

69,694

 

92,000

Total current liabilities

 

309,718

 

330,871

LONG-TERM LIABILITIES:

Long-term debt, excluding current maturities, net

 

637,090

 

564,004

Pneumoconiosis benefits

 

74,188

 

68,828

Accrued pension benefit

 

38,583

 

43,135

Workers' compensation

 

45,645

 

41,669

Asset retirement obligations

 

132,436

 

127,655

Long-term finance lease obligations

 

2,388

 

10,595

Long-term operating lease obligations

 

14,624

 

Other liabilities

 

21,126

 

20,304

Total long-term liabilities

 

966,080

 

876,190

Total liabilities

 

1,275,798

 

1,207,061

PARTNERS' CAPITAL:

ARLP Partners' Capital:

Limited Partners - Common Unitholders 128,391,191 and 128,095,511 units outstanding, respectively

 

1,389,959

 

1,229,268

Accumulated other comprehensive loss

 

(50,692)

 

(46,871)

Total ARLP Partners' Capital

 

1,339,267

 

1,182,397

Noncontrolling interest

12,024

5,290

Total Partners' Capital

1,351,291

1,187,687

TOTAL LIABILITIES AND PARTNERS' CAPITAL

$

2,627,089

$

2,394,748

See notes to condensed consolidated financial statements.

1

Table of Contents

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except unit and per unit data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2019

    

2018

    

2019

    

2018

    

SALES AND OPERATING REVENUES:

Coal sales

$

420,005

$

460,330

$

1,357,331

$

1,359,865

Oil & gas royalties

13,969

36,254

Transportation revenues

 

20,024

 

28,697

 

82,892

 

76,014

Other revenues

 

10,728

 

8,731

 

31,905

 

35,138

Total revenues

 

464,726

 

497,758

 

1,508,382

 

1,471,017

EXPENSES:

Operating expenses (excluding depreciation, depletion and amortization)

 

278,254

 

308,404

 

895,255

 

896,843

Transportation expenses

 

20,024

 

28,697

 

82,892

 

76,014

Outside coal purchases

 

10,599

 

 

15,910

 

1,442

General and administrative

 

17,885

 

15,836

 

55,218

 

49,513

Depreciation, depletion and amortization

 

72,348

 

70,196

 

220,400

 

204,194

Settlement gain

 

 

(80,000)

Asset impairment

 

15,190

 

 

15,190

 

Total operating expenses

 

414,300

 

423,133

 

1,284,865

 

1,148,006

INCOME FROM OPERATIONS

 

50,426

 

74,625

 

223,517

 

323,011

Interest expense (net of interest capitalized for the three and nine months ended September 30, 2019 and 2018 of $298, $330, $790 and $891, respectively)

 

(11,698)

 

(9,840)

 

(33,831)

 

(30,653)

Interest income

 

92

 

32

 

321

 

121

Equity method investment income

 

659

 

5,980

 

1,533

 

14,555

Equity securities income

 

 

3,989

 

12,906

 

11,567

Acquisition gain

 

 

177,043

 

Other expense

 

(228)

 

(812)

 

(370)

 

(2,201)

INCOME BEFORE INCOME TAXES

 

39,251

 

73,974

 

381,119

 

316,400

INCOME TAX EXPENSE (BENEFIT)

 

50

 

5

 

130

 

(2)

NET INCOME

39,201

73,969

380,989

316,402

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

(117)

 

(236)

 

(7,407)

 

(571)

NET INCOME ATTRIBUTABLE TO ARLP

$

39,084

$

73,733

$

373,582

$

315,831

NET INCOME ATTRIBUTABLE TO ARLP

GENERAL PARTNER

$

$

$

$

1,560

LIMITED PARTNERS

$

39,084

$

73,733

$

373,582

$

314,271

EARNINGS PER LIMITED PARTNER UNIT - BASIC AND DILUTED

$

0.30

$

0.55

$

2.86

$

2.35

WEIGHTED-AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED

 

128,391,191

 

131,169,538

 

128,311,609

 

131,090,838

See notes to condensed consolidated financial statements.

2

Table of Contents

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

    

September 30, 

September 30, 

2019

    

2018

    

2019

    

2018

    

NET INCOME

$

39,201

$

73,969

$

380,989

$

316,402

OTHER COMPREHENSIVE INCOME (LOSS):

Defined benefit pension plan

Amortization of prior service cost (1)

46

46

139

140

Amortization of net actuarial loss (1)

 

980

 

767

 

2,941

 

2,705

Total defined benefit pension plan adjustments

 

1,026

 

813

 

3,080

 

2,845

Pneumoconiosis benefits

Net actuarial loss

 

 

 

(3,465)

 

Amortization of net actuarial loss (gain) (1)

 

(1,145)

 

1

 

(3,436)

 

2

Total pneumoconiosis benefits adjustments

 

(1,145)

 

1

 

(6,901)

 

2

OTHER COMPREHENSIVE INCOME (LOSS)

 

(119)

 

814

 

(3,821)

 

2,847

COMPREHENSIVE INCOME

39,082

74,783

377,168

319,249

Less: Comprehensive income attributable to noncontrolling interest

(117)

(236)

(7,407)

(571)

COMPREHENSIVE INCOME ATTRIBUTABLE TO ARLP

$

38,965

$

74,547

$

369,761

$

318,678

(1)Amortization of prior service cost and net actuarial gain or loss is included in the computation of net periodic benefit cost (see Notes 15 and 17 for additional details).

See notes to condensed consolidated financial statements.

3

Table of Contents

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

September 30, 

    

2019

    

2018

    

CASH FLOWS FROM OPERATING ACTIVITIES

$

408,418

$

579,267

CASH FLOWS FROM INVESTING ACTIVITIES:

Property, plant and equipment:

Capital expenditures

 

(241,142)

 

(184,408)

Increase in accounts payable and accrued liabilities

 

319

 

673

Proceeds from sale of property, plant and equipment

 

892

 

2,361

Contributions to equity method investments

 

 

(15,600)

Distributions received from investments in excess of cumulative earnings

2,309

 

1,685

Payments for acquisitions of businesses, net of cash acquired

 

(320,232)

 

Cash received from redemption of equity securities

134,288

 

Net cash used in investing activities

 

(423,566)

 

(195,289)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under securitization facility

153,500

 

182,600

Payments under securitization facility

(179,000)

 

(255,000)

Proceeds from equipment financing

10,000

 

Payments on equipment financing

(1,021)

 

Borrowings under revolving credit facilities

 

300,000

 

70,000

Payments under revolving credit facilities

 

(235,000)

 

(100,000)

Payments on finance lease obligations

 

(23,270)

 

(22,106)

Payments for purchases of units under unit repurchase program

(5,251)

 

(21,070)

Net settlement of withholding taxes on issuance of units in deferred compensation plans

 

(7,817)

 

(2,081)

Cash contribution by General Partner

 

 

41

Cash contribution by affiliated entity

 

2,142

Cash obtained in Simplification Transactions

 

1,139

Distributions paid to Partners

(208,653)

 

(206,682)

Other

 

(673)

 

(1,362)

Net cash used in financing activities

 

(197,185)

 

(352,379)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(212,333)

 

31,599

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

244,150

 

6,756

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

31,817

$

38,355

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest

$

23,931

$

21,797

Cash paid for income taxes

$

$

34

SUPPLEMENTAL NON-CASH ACTIVITY:

Accounts payable for purchase of property, plant and equipment

$

14,904

$

16,309

Assets acquired by finance lease

$

$

835

Right-of-use assets acquired by operating lease

$

25,321

$

Market value of common units issued under deferred compensation plans before tax withholding requirements

$

17,415

$

6,142

Acquisition of businesses:

Fair value of assets assumed

$

629,475

$

Previously held equity-method investments

(307,322)

Cash paid, net of cash acquired

(320,232)

Fair value of liabilities assumed

$

1,921

$

See notes to condensed consolidated financial statements.

4

Table of Contents

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 "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, the holding company for the coal mining operations of Alliance Resource Operating Partners, L.P.

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.  

AllDale I & II Acquisition

On January 3, 2019 (the "AllDale Acquisition Date"), we acquired all of the limited partner interests not owned by Cavalier Minerals JV, LLC ("Cavalier Minerals") in AllDale Minerals LP ("AllDale I") and AllDale Minerals II, LP ("AllDale II", and collectively with AllDale I, "AllDale I & II") and the general partner interests in AllDale I & II (the "AllDale Acquisition").  As a result of the AllDale Acquisition and our previous investments held through Cavalier Minerals, we acquired control of approximately 43,000 net royalty acres in premier oil & gas resource plays.  The AllDale Acquisition provides us with diversified exposure to industry leading operators and is consistent with our general business strategy to grow our Minerals segment. See Note 3 – Acquisitions for more information.

Wing Acquisition

On August 2, 2019, our subsidiary AR Midland, LP ("AR Midland") closed on an agreement with Wing Resources LLC and Wing Resources II LLC (collectively, "Wing") to acquire approximately 9,000 net royalty acres in the Midland Basin, with exposure to more than 400,000 gross acres (the "Wing Acquisition").  The Wing Acquisition enhances our ownership position in the Permian Basin, expands our exposure to industry leading operators and furthers our business strategy to grow our Minerals segment.  Following the Wing Acquisition, we control approximately 52,000 net royalty acres in premier oil & gas resource plays.  See Note 3 – Acquisitions for more information.

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 September 30, 2019 and December 31, 2018, the results of our operations and comprehensive income for the three and nine months ended September 30, 2019 and 2018, and the cash flows for the nine months ended September 30, 2019 and 2018.  All intercompany transactions and accounts have been eliminated.

5

Table of Contents

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 of the information normally included with financial statements prepared in accordance with generally accepted accounting principles ("GAAP") of the United 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, 2018.

 

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, 2019.

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.

Leases

We lease buildings and equipment under operating lease agreements that provide for the payment of minimum rentals.  We also have noncancelable lease agreements with third parties for land and equipment under finance lease obligations.  Some of our arrangements within these agreements have both lease and non-lease components, which are generally accounted for separately.  We have elected a practical expedient to account for lease and non-lease components as a single lease component for leases of buildings and office equipment.  Our leases have lease terms of one year to 20 years, some of which include automatic renewals up to ten years which are likely to be exercised, and some of which include options to terminate the lease within one year.  We also hold numerous mineral reserve leases with both related parties as well as third parties, none of which are accounted for as an operating lease or as a finance lease.  

We review each agreement to determine if an arrangement within the agreement contains a lease at the inception of an arrangement.  Once an arrangement is determined to contain either an operating or finance lease with a term greater than 12 months, we recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term based on the present value of lease payments over the lease term. The lease term includes all noncancelable periods defined in the lease as well as periods covered by options to extend the lease that we are reasonably certain to exercise.  As an implicit borrowing rate cannot be determined under most of our leases, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Expenses related to leases determined to be operating leases will be recognized on a straight-line basis over the lease term including any reasonably assured renewal periods, while those determined to be finance leases will be recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement.  The determination of whether a lease is accounted for as a finance lease or an operating lease requires management to make estimates primarily about the fair value of the asset and its estimated economic useful life.

2.NEW ACCOUNTING STANDARDS

New Accounting Standards Issued and Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) ("ASU 2016-02").  ASU 2016-02 requires lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet and disclose key information about lease arrangements. Leases are now classified as either finance or operating, with the resulting classification affecting the pattern of expense recognition in the income statement.  We elected to use the modified retrospective transition method which allows a cumulative effect adjustment on the balance sheet upon adoption. The adoption of the standard resulted in the recognition of approximately $25.0 million in additional net lease assets and respective lease liabilities as of January 1, 2019.  

As part of our transition there are a number of practical expedients available in the new standard.  We elected a package of practical expedients that, among other things, allows us to not reassess the lease classification of expired or

6

Table of Contents

existing leases. In addition to the package of practical expedients, we also elected to use a practical expedient allowing us to use hindsight in determining the lease term for existing leases.

New Accounting Standards Issued and Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13").  ASU 2016-13 changes the impairment model for most financial assets and certain other instruments to require the use of a new forward-looking "expected loss" model that generally will result in earlier recognition of allowances for losses.  The new standard will require disclosure of significantly more information related to these items.  ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for the fiscal year beginning after December 15, 2018, including interim periods.  We do not have a history of credit losses on our financial instruments, accordingly we do not anticipate ASU 2016-13 will have a material impact on our condensed consolidated financial statements.  

3.ACQUISITIONS

Wing

On August 2, 2019 (the "Wing Acquisition Date"), our subsidiary, AR Midland closed on an agreement with Wing to acquire approximately 9,000 net royalty acres in the Midland Basin, with exposure to more than 400,000 gross acres, for a cash purchase price of $144.9 million.  When we entered into the agreement on June 21, 2019, we provided a cash deposit of $10.9 million to Wing, which was held in escrow and applied to the purchase price upon closing of the transaction.  The balance of the purchase price was funded with cash on hand and borrowings under our Revolving Credit Facility discussed in Note 9 – Long-Term Debt.  The Wing Acquisition enhances our ownership position in the Permian Basin, expands our exposure to industry leading operators and furthers our business strategy to grow our Minerals segment.  Concurrent with the Wing Acquisition, JC Resources LP, an entity owned by Joseph W. Craft III, the Chairman, President and Chief Executive Officer of MGP ("Mr. Craft"), acquired from Wing, in a separate transaction, mineral interests that we elected not to acquire.

Because the mineral interests acquired in the Wing Acquisition include royalty interests in both producing properties and unproved properties, we have determined that the acquisition should be accounted for as a business combination and the underlying assets should be recorded at fair value as of the Wing Acquisition Date on our condensed consolidated balance sheet. We consider our fair value measurements to be preliminary as we continue to obtain additional information from operators regarding reserve and production quantities and projections for the mineral interests we acquired.

The following table summarizes the fair value allocation of assets acquired as of the Wing Acquisition Date:

As of August 2, 2019

(in thousands)

Mineral interests in proved properties

$

55,619

Mineral interests in unproved properties

87,441

Receivables

1,867

Net assets acquired

$

144,927

The fair value of the mineral interests was determined using an income approach primarily comprised of a discounted cash flow model.  The assumptions used in the discounted cash flow model included estimated production, projected cash flows, forward oil & gas prices and a risk adjusted discount rate.  Certain assumptions used are not observable in active markets; therefore, the fair value measurements represent Level 3 fair value measurements.  The carrying value of the receivables represent their fair value given their short-term nature.

7

Table of Contents

The amounts of revenue and earnings from the mineral interests acquired in the Wing Acquisition included in our condensed consolidated statements of income since the Wing Acquisition Date are as follows:

Three Months Ended

September 30, 

2019

    

(in thousands)

Revenue

$

1,136

Net income

 

460

The following represents the pro forma revenues and net income for the three and nine months ended September 30, 2019 and 2018 as if the mineral interests acquired in the Wing Acquisition had been included in our consolidated results since January 1, 2018.  These amounts have been calculated after applying our accounting policies.  

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2019

    

2018

    

2019

    

2018

(in thousands)

Total revenues

As reported

$

464,726

$

497,758

$

1,508,382

$

1,471,017

Pro forma

465,296

499,449

1,512,953

1,475,575

Net income

As reported

$

39,201

$

73,969

$

380,989

$

316,402

Pro forma

39,730

75,564

385,280

320,713

AllDale I & II

On the AllDale Acquisition Date, we acquired all of the limited partner interests not owned by Cavalier Minerals in AllDale I & II and the general partner interests in AllDale I & II for $176.2 million, which was funded with cash on hand and borrowings under the Revolving Credit Facility.  As a result of the AllDale Acquisition and our previous investments held through Cavalier Minerals, we acquired control of approximately 43,000 net royalty acres strategically positioned in the core of the Permian (Delaware and Midland), Anadarko (SCOOP/STACK), Williston (Bakken) and Appalachian basins.  The AllDale Acquisition provides us with diversified exposure to industry leading operators and is consistent with our general business strategy to grow our Minerals segment.  

Because the underlying mineral interests held by AllDale I & II include royalty interests in both producing properties and unproved properties, we have determined that the AllDale Acquisition should be accounted for as a business combination and the underlying assets and liabilities of AllDale I & II should be recorded at their AllDale Acquisition Date fair value on our condensed consolidated balance sheet.

The final total fair value of the cash paid in the AllDale Acquisition and our previous investments were as follows:

As of January 3, 2019

(in thousands)

Cash

$

176,205

Previously held investments

307,322

Total

$

483,527

Prior to the AllDale Acquisition Date, we accounted for our investments in AllDale I & II, held through Cavalier Minerals, as equity method investments. The combined fair value of our equity method investments on the AllDale Acquisition Date was $307.3 million.  We re-measured our equity method investments, which had an aggregate carrying value of $130.3 million immediately prior to the AllDale Acquisition.  The re-measurement resulted in a gain of $177.0 million which is recorded in the Acquisition gain line item in our condensed consolidated statements of income.

8

Table of Contents

During the three months ended September 30, 2019, we finalized our purchase price accounting, which resulted in adjustments to our mineral interests in proved and unproved properties due to additional information received from operators of the mineral interests about reserve and production quantities and projections that represented facts and circumstances that existed as of the AllDale Acquisition Date.  In addition, we reduced our receivables by $1.3 million as a result of information received from operators concerning royalty payments owed to us from production that occurred prior to the AllDale Acquisition Date.  The following table summarizes the preliminary and final fair value allocation of assets acquired and liabilities assumed as of the AllDale Acquisition Date:

Preliminary

Adjustments

Final

(in thousands)

Cash and cash equivalents

$

900

$

900

Mineral interests in proved properties

159,617

24,415

184,032

Mineral interests in unproved properties

314,084

(22,894)

291,190

Receivables

10,602

(1,276)

9,326

Accounts payable

(1,921)

(1,921)

Net assets acquired

$

483,282

$

483,527

Our previous equity method investments in AllDale I & II were held through Cavalier Minerals.  Bluegrass Minerals Management, LLC ("Bluegrass Minerals") continues to hold a 4% membership interest (the "Bluegrass Interest") as well as a profits interest in Cavalier Minerals as it did before the AllDale Acquisition.  This Bluegrass Interest represents an indirect noncontrolling interest in AllDale I & II.  The AllDale Acquisition Date fair value of the Bluegrass Interest was $12.3 million.  

The fair value of our previous equity method investments, the mineral interests and the Bluegrass Interest were determined using an income approach primarily comprised of discounted cash flow models.  The assumptions used in the discounted cash flow models include estimated production, projected cash flows, forward oil & gas prices and a risk adjusted discount rate.  Certain assumptions used are not observable in active markets, therefore the fair value measurements represent Level 3 fair value measurements.  AllDale I & II's carrying value of the receivables and accounts payable represent their fair value given their short-term nature.  

The amounts of revenue and earnings, exclusive of the acquisition gain, of AllDale I & II included in our condensed consolidated statements of income since the AllDale Acquisition Date are as follows:

Three Months Ended

Nine Months Ended

 

September 30, 

September 30, 

2019

    

2019

(in thousands)

Revenue

$

13,042

$

36,198

Net income

 

5,046

 

14,028

The following represents the pro forma revenues and net income for the three and nine months ended September 30, 2018 as if AllDale I & II had been included in our consolidated results since January 1, 2018.  These amounts have been calculated after applying our accounting policies.  Pro forma information is not necessary for the three and nine months ended September 30, 2019 as the AllDale Acquisition occurred at the beginning of the year.  Additionally, our results have been adjusted to remove the effect of our past equity method investments in AllDale I & II.

9

Table of Contents

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2018

    

2018

  

(in thousands)

Total revenues

As reported

$

497,758

$

1,471,017

Pro forma

 

508,186

 

1,498,080

Net income

As reported

$

73,969

$

316,402

Pro forma

 

71,460

 

310,757

4.LONG-LIVED ASSET IMPAIRMENT

We ceased coal production effective August 16, 2019 at our Dotiki mine to focus on maximizing production at our lower-cost mines in our Illinois Basin segment.  Accordingly, we adjusted the carrying value of Dotiki's assets from $35.9 million to their fair value of $25.8 million and accrued scheduled payments of $5.1 million to WKY CoalPlay for leased reserves from which we may not receive future economic benefit, resulting in an impairment charge of $15.2 million.  See Note 10 – Variable Interest Entities for more information about WKY CoalPlay.

The fair value of Dotiki's assets was determined using a market approach, which represents Level 3 fair value measurement under the fair value hierarchy.  The fair value analysis used assumptions of marketability of certain assets at our Dotiki mine.

5.CONTINGENCIES

Various lawsuits, claims and regulatory proceedings incidental to our business are pending against the ARLP Partnership.  We record accruals for potential losses related to these matters when, in management's opinion, such losses are 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 were different from management's current opinion and in amounts greater than our accruals, then they could have a material adverse effect.

6.INVENTORIES

Inventories consist of the following:

    

September 30, 

December 31, 

2019

    

2018

 

(in thousands)

Coal

$

76,483

$

20,929

Supplies (net of reserve for obsolescence of $5,564 and $5,453, respectively)

 

37,617

 

38,277

Total inventories, net

$

114,100

$

59,206

10

Table of Contents

7.LEASES

The components of lease expense were as follows:

    

Three Months Ended

Nine Months Ended

 

September 30, 

September 30, 

2019

    

2019

(in thousands)

Finance lease cost:

Amortization of right-of-use assets

$

3,630

$

12,647

Interest on lease liabilities

 

495

 

1,828

Operating lease cost

 

1,873

 

7,282

Short-term lease cost

84

380

Variable lease cost

 

334

 

1,009

Total lease cost

$

6,416

$

23,146

Supplemental cash flow information related to leases was as follows: