10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

OR

oTRANSITION 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 (State or other jurisdiction of incorporation or organization)	73-1564280 (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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  [X ] Yes   [   ] No

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

Large Accelerated Filer [X]	Accelerated Filer [   ]	Non-Accelerated Filer [   ]	Smaller Reporting Company [   ]
		(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[   ] Yes   [X] No

As of May 9, 2013, 36,963,054 common units are outstanding.

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 March 31, 2013 and December 31, 2012	1
	Condensed Consolidated Statements of Income for the three months ended March 31, 2013 and 2012	2
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012	3
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012	4
	Notes to Condensed Consolidated Financial Statements	5
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	26
ITEM 4.	Controls and Procedures	27
	Forward-Looking Statements	28
PART II
OTHER INFORMATION
ITEM 1.	Legal Proceedings	30
ITEM 1A.	Risk Factors	30
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
ITEM 3.	Defaults Upon Senior Securities	30
ITEM 4.	Mine Safety Disclosures	30
ITEM 5.	Other Information	30
ITEM 6.	Exhibits	31

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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)

	March 31,			December 31,
ASSETS	2013			2012
CURRENT ASSETS:
Cash and cash equivalents	$	28,677		$	28,283
Trade receivables	168,270			172,724
Other receivables	1,097			1,019
Due from affiliates	157			658
Inventories	50,628			46,660
Advance royalties	11,492			11,492
Prepaid expenses and other assets	14,874			20,476
Total current assets	275,195			281,312
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost	2,434,704			2,361,863
Less accumulated depreciation, depletion and amortization	(886,497		)	(832,293		)
Total property, plant and equipment, net	1,548,207			1,529,570
OTHER ASSETS:
Advance royalties	24,955			23,267
Equity investments in affiliates	115,525			88,513
Due from affiliate	4,862			3,084
Other long-term assets	30,794			30,226
Total other assets	176,136			145,090
TOTAL ASSETS	$	1,999,538		$	1,955,972
LIABILITIES AND PARTNERS’ CAPITAL
CURRENT LIABILITIES:
Accounts payable	$	97,282		$	100,174
Due to affiliates	407			327
Accrued taxes other than income taxes	25,048			19,998
Accrued payroll and related expenses	39,038			38,501
Accrued interest	6,398			1,435
Workers’ compensation and pneumoconiosis benefits	9,468			9,320
Current capital lease obligations	1,069			1,000
Other current liabilities	23,603			19,572
Current maturities, long-term debt	18,000			18,000
Total current liabilities	220,313			208,327
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities	768,000			773,000
Pneumoconiosis benefits	61,306			59,931
Accrued pension benefit	31,457			31,078
Workers’ compensation	70,347			68,786
Asset retirement obligations	82,017			81,644
Long-term capital lease obligations	18,260			18,613
Other liabilities	9,211			9,147
Total long-term liabilities	1,040,598			1,042,199
Total liabilities	1,260,911			1,250,526
COMMITMENTS AND CONTINGENCIES
PARTNERS’ CAPITAL:
Limited Partners - Common Unitholders 36,963,054 and 36,874,949 units outstanding, respectively	1,051,624			1,020,823
General Partners’ deficit	(271,460		)	(273,113		)
Accumulated other comprehensive loss	(41,537		)	(42,264		)
Total Partners’ Capital	738,627			705,446
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	1,999,538		$	1,955,972

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 EndedMarch 31,
	2013			2012
SALES AND OPERATING REVENUES:
Coal sales	$	534,509		$	429,599
Transportation revenues	6,934			6,585
Other sales and operating revenues	6,612			7,402
Total revenues	548,055			443,586
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization)	348,575			273,515
Transportation expenses	6,934			6,585
Outside coal purchases	602			14,181
General and administrative	15,246			14,289
Depreciation, depletion and amortization	64,382			43,033
Total operating expenses	435,739			351,603
INCOME FROM OPERATIONS	112,316			91,983
Interest expense (net of interest capitalized for the three months ended March 31, 2013 and 2012 of $2,531 and $2,954, respectively)	(6,618		)	(5,912		)
Interest income	134			93
Equity in loss of affiliates, net	(3,867		)	(3,778		)
Other income	274			215
INCOME BEFORE INCOME TAXES	102,239			82,601
INCOME TAX BENEFIT	(698		)	(367		)
NET INCOME	$	102,937		$	82,968
GENERAL PARTNERS’ INTEREST IN NET INCOME	$	29,770		$	25,587
LIMITED PARTNERS’ INTEREST IN NET INCOME	$	73,167		$	57,381
BASIC AND DILUTED NET INCOME PER LIMITED PARTNER UNIT (Note 8)	$	1.95		$	1.54
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT	$	1.1075		$	0.99
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED	36,919,002			36,826,980

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 EndedMarch 31,
	2013		2012
NET INCOME	$	102,937	$	82,968
OTHER COMPREHENSIVE INCOME:
Defined benefit pension plan
Amortization of actuarial loss (1)	559		430
Total defined benefit pension plan adjustments	559		430
Pneumoconiosis benefits
Amortization of actuarial loss (1)	168		194
Total pneumoconiosis benefits adjustments	168		194
OTHER COMPREHENSIVE INCOME	727		624
TOTAL COMPREHENSIVE INCOME	$	103,664	$	83,592

(1)Amortization of actuarial loss is included in the computation of net periodic benefit cost (see Notes 9 and 11 for additional details).

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)

	Three Months EndedMarch 31,
	2013			2012
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	199,478		$	114,804
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures	(70,306		)	(105,339		)
Changes in accounts payable and accrued liabilities	(7,608		)	(6,664		)
Proceeds from sale of property, plant and equipment	9			15
Purchases of equity investments in affiliate	(29,700		)	(4,400		)
Payments to affiliate for acquisition and development of coal reserves	(12,064		)	(18,000		)
Advances/loans to affiliate	(1,643		)	(776		)
Other	-			268
Net cash used in investing activities	(121,312		)	(134,896		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility	45,000			-
Payments under revolving credit facility	(50,000		)	-
Payments on capital lease obligations	(284		)	(171		)
Net settlement of employee withholding taxes on vesting of Long-Term Incentive Plan	(3,015		)	(3,734		)
Cash contributions by General Partners	114			150
Distributions paid to Partners	(69,587		)	(60,722		)
Net cash used in financing activities	(77,772		)	(64,477		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	394			(84,569		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	28,283			273,528
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	28,677		$	188,959
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	3,906		$	4,224
NON-CASH INVESTING AND FINANCING ACTIVITY:
Accounts payable for purchase of property, plant and equipment	$	13,364		$	18,314
Market value of common units issued under Long-Term Incentive and Directors Deferred Compensation Plans before minimum statutory tax withholding requirements	$	8,583		$	11,070

See notes to condensed consolidated financial statements.

4

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, the managing general partner of Alliance Resource Partners, L.P, also referred to as our managing general partner.

·References to “SGP” mean Alliance Resource GP, LLC, the special general partner of Alliance Resource Partners, L.P., also referred to as our special general partner.

·References to “Intermediate Partnership” mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P., also referred to as our intermediate partnership.

·References to “Alliance Coal” mean Alliance Coal, LLC, the holding company for the operations of Alliance Resource Operating Partners, L.P., also referred to as our operating subsidiary.

·References to “AHGP” mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

·References to “AGP” mean Alliance GP, LLC, the general partner of Alliance Holdings GP, 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 to acquire, upon completion of ARLP’s initial public offering on August 19, 1999, certain coal production and marketing assets of Alliance Resource Holdings, Inc., a Delaware corporation (“ARH”), consisting of substantially all of ARH’s operating subsidiaries, but excluding ARH.  ARH is owned by Joseph W. Craft III, the President and Chief Executive Officer and a Director of our managing general partner, and Kathleen S. Craft.  SGP, a Delaware limited liability company, is owned by ARH and holds a 0.01% general partner interest in each of ARLP and the Intermediate Partnership.

We are managed by our managing general partner, MGP, a Delaware limited liability company, which holds a 0.99% and a 1.0001% managing general partner interest in ARLP and the Intermediate Partnership, respectively, and a 0.001% managing member interest in Alliance Coal.  AHGP is a Delaware limited partnership that was formed to become the owner and controlling member of MGP.  AHGP completed its initial public offering on May 15, 2006.  AHGP owns directly and indirectly 100% of the members’ interest of MGP, the incentive distribution rights (“IDR”) in ARLP and 15,544,169 common units of ARLP.

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 March 31, 2013 and December 31, 2012, and the results of our operations, comprehensive income and cash flows for the three months ended March 31, 2013 and 2012.  All of our intercompany transactions and accounts have been eliminated.

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These condensed consolidated financial statements and notes are unaudited. However, in the opinion of management, these financial statements reflect all adjustments (which include only 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 for a full year.

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 should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Use of Estimates

The preparation of the ARLP Partnership’s condensed consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) of the United States (“U.S.”) 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.

2.         NEW ACCOUNTING STANDARDS

New Accounting Standards Issued and Adopted

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”).  ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, certain significant amounts reclassified out of AOCI by the respective line items of net income.  ASU 2013-02 does not change the items that must be reported in AOCI.  ASU 2013-02 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2012.  The adoption of ASU 2013-02 did not have a material impact on our condensed consolidated financial statements.

3.         CONTINGENCIES

Various lawsuits, claims and regulatory proceedings incidental to our business 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 were different from management’s current opinion and in amounts greater than our accruals, then they could have a material adverse effect.

4.         ACQUISITION OF BUSINESS

On April 2, 2012, we acquired substantially all of Green River Collieries, LLC’s (“Green River”) assets related to its coal mining business and operations located in Webster and Hopkins Counties, Kentucky for consideration of $100.0 million.  The transaction included the Onton No. 9 mining complex (“Onton mine”), which included the mine, a dock, tugboat, and a lease for the preparation plant, and an estimated 40.0 million tons of coal reserves in the West Kentucky No. 9 coal seam.   The Green River acquisition was consistent with our general business strategy and complements our current coal mining operations.

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During the quarter ended September 30, 2012, we finalized the purchase price allocation related to the assets acquired and liabilities assumed from Green River.  The adjustments to the preliminary fair values resulted from additional information obtained about facts in existence on April 2, 2012.

The following unaudited pro forma information for the three months ended March 31, 2012 for the ARLP Partnership has been prepared for illustrative purposes as if the business combination occurred on January 1, 2011, the year prior to the acquisition date.  The unaudited pro forma results have been prepared based upon Green River’s historical results with respect to the business acquired and estimates of the effects of the transactions that we believe are reasonable and supportable. The results are not necessarily reflective of the consolidated results of operations had the acquisition actually occurred on January 1, 2011, nor are they indicative of future operating results.

	Three Months EndedMarch 31, 2012
	(in thousands)
Total revenues
As reported	$  443,586
Pro forma	$  470,930
Net income
As reported	$    82,968
Pro forma	$    84,249

The revenues and net income related to the acquired business are reflected in our condensed consolidated statements of income beginning April 2, 2012 and totaled $34.0 million and $7.0 million, respectively, for the three months ended March 31, 2013.

The pro forma net income includes adjustments to depreciation, depletion and amortization to reflect the new basis in property, plant and equipment and intangible assets acquired, elimination of income tax expense, and the elimination of interest expense of Green River as its debt was paid off in conjunction with the acquisition.

Synergies from the acquisition are not reflected in the pro forma results.

5.         FAIR VALUE MEASUREMENTS

We apply the provisions of FASB ASC 820, Fair Value Measurement, which, among other things, defines fair value, requires disclosures about assets and liabilities carried at fair value and establishes a hierarchal disclosure framework based upon the quality of inputs used to measure fair value.

Valuation techniques are based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our own market assumptions.  These two types of inputs create the following fair value hierarchy:

·Level 1 – Quoted prices for identical instruments in active markets.

·Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations whose inputs are observable or whose significant value drivers are observable.

·Level 3 – Instruments whose significant value drivers are unobservable.

The carrying amounts for cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of those instruments.  At March 31, 2013 and December 31, 2012, the estimated fair value of our long-term debt, including current maturities, was approximately $834.8 million and $834.3 million, respectively, based on interest rates that we believe are

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currently available to us for issuance of debt with similar terms and remaining maturities (Note 6). The fair value of debt, which is based upon interest rates for similar instruments in active markets, is classified as a Level 2 measurement under the fair value hierarchy.

6.         LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

	March 31, 2013			December 31, 2012
Revolving credit facility	$	150,000		$	155,000
Senior notes	36,000			36,000
Series A senior notes	205,000			205,000
Series B senior notes	145,000			145,000
Term loan	250,000			250,000
	786,000			791,000
Less current maturities	(18,000		)	(18,000		)
Total long-term debt	$	768,000		$	773,000

Our Intermediate Partnership has $36.0 million in senior notes (“Senior Notes”), $205.0 million in Series A and $145.0 million in Series B senior notes (collectively, the “2008 Senior Notes”), a $700 million revolving credit facility (“Revolving Credit Facility”) and a $250 million term loan (collectively, with the Senior Notes, the 2008 Senior Notes and the Revolving Credit Facility, the “ARLP Debt Arrangements”), which are guaranteed by all of the material direct and indirect subsidiaries of our Intermediate Partnership. The ARLP Debt Arrangements contain various covenants affecting our Intermediate Partnership and its subsidiaries restricting, among other things, the amount of distributions by our Intermediate Partnership, the incurrence of additional indebtedness and liens, the sale of assets, the making of investments, the entry into mergers and consolidations and the entry into transactions with affiliates, in each case subject to various exceptions.  The ARLP Debt Arrangements also require the Intermediate Partnership to remain in control of a certain amount of mineable coal reserves relative to its annual production.  In addition, the ARLP Debt Arrangements require our Intermediate Partnership to maintain (a) debt to cash flow ratio of not more than 3.0 to 1.0 and (b) cash flow to interest expense ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters.  The debt to cash flow ratio and cash flow to interest expense ratio were 1.21 to 1.0 and 17.8 to 1.0, respectively, for the trailing twelve months ended March 31, 2013.  We were in compliance with the covenants of the ARLP Debt Arrangements as of March 31, 2013.

At March 31, 2013, we had borrowings of $150.0 million and $23.5 million of letters of credit outstanding with $526.5 million available for borrowing under the Revolving Credit Facility.  We utilize the Revolving Credit Facility, as appropriate, for working capital requirements, anticipated capital expenditures and investments in affiliates, scheduled debt payments and distribution payments.  We incur an annual commitment fee of 0.25% on the undrawn portion of the Revolving Credit Facility.

7.       WHITE OAK TRANSACTIONS

On September 22, 2011 (the “Transaction Date”), we entered into a series of transactions with White Oak Resources LLC (“White Oak”) and related entities to support development of a longwall mining operation currently under construction.  The transactions feature several components, including an equity investment in White Oak (represented by “Series A Units” containing certain distribution and liquidation preferences), the acquisition and lease-back of certain coal reserves and surface rights and a backstop equipment financing facility.  Our initial investment funding to White Oak at the Transaction Date, consummated utilizing existing cash on hand, was $69.5 million and we have funded to White Oak $164.8 million between the Transaction Date and March 31, 2013.  We expect to fund a total of

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approximately $300.5 million to $425.5 million from the Transaction Date through the next approximately two years, which includes the funding made to White Oak at closing and through March 31, 2013 discussed above.  On the Transaction Date, we also entered into a coal handling and services agreement, pursuant to which we are constructing a preparation plant and other surface facilities.  We expect to fund these additional commitments utilizing existing cash balances, future cash flows from operations, borrowings under credit facilities and cash provided from the issuance of debt or equity.   The following information discusses each component of these transactions in further detail.

Hamilton County, Illinois Reserve Acquisition

On the Transaction Date, our subsidiary, Alliance WOR Properties, LLC (“WOR Properties”), acquired from White Oak the rights to approximately 204.9 million tons of proven and probable high-sulfur coal reserves, of which 105.2 million tons are currently being developed for future mining by White Oak, and certain surface properties and rights in Hamilton County, Illinois (the “Reserve Acquisition”).  Hamilton County is adjacent to White County, Illinois, where our White County Coal, LLC Pattiki mine is located.  The asset purchase price of $33.8 million cash paid at closing was allocated to owned and leased coal rights.  During the year ended December 31, 2012, WOR Properties provided $34.6 million to White Oak for development of the acquired coal reserves, fulfilling its initial commitment for further development funding.  During the three months ended March 31, 2013, WOR Properties acquired from White Oak for $12.1 million cash paid at closing, an additional 42.2 million tons of reserves, of which 21.9 million tons are currently being developed for future mining by White Oak, and has a remaining commitment of $42.5 million for additional coal reserve purchases and development funding.

Equity Investment – Series A Units

Concurrent with the Reserve Acquisition, our subsidiary, Alliance WOR Processing, LLC (“WOR Processing”), made an equity investment of $35.7 million in White Oak to purchase Series A Units representing ownership in White Oak.  WOR Processing purchased $66.8 million of additional Series A Units between the Transaction Date and December 31, 2012 and $29.7 million of additional Series A Units during the three months ended March 31, 2013.

WOR Processing’s ownership and member’s voting interest in White Oak at March 31, 2013 were 18.1% based upon currently outstanding voting units.  The remainder of the equity ownership in White Oak, represented by Series B Units, is held by other investors and members of White Oak management.

We continually review all rights provided to WOR Processing and us by various agreements with White Oak and continue to conclude all such rights are protective or participating in nature and do not provide WOR Processing or us the ability to unilaterally direct any of the primary activities of White Oak that most significantly impact its economic performance.  As such, we recognize WOR Processing’s interest in White Oak as an equity investment in affiliate in our consolidated balance sheets.  As of March 31, 2013, WOR Processing had invested $132.2 million in Series A Units of White Oak equity, which represents our current maximum exposure to loss as a result of our equity investment in White Oak exclusive of capitalized interest.  White Oak has made no distributions to us.

We record WOR Processing’s equity in earnings or losses of affiliates under the hypothetical liquidation at book value method of accounting due to the preferences to which WOR Processing is entitled on distributions.  For the three months ended March 31, 2013 and 2012, we were allocated losses of $4.2 million and $4.0 million, respectively.

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Services Agreement

Simultaneous with the closing of the Reserve Acquisition, WOR Processing entered into a Coal Handling and Preparation Agreement (“Services Agreement”) with White Oak pursuant to which WOR Processing committed to construct and operate a coal preparation plant and related facilities and a rail loop and loadout facility to service the White Oak longwall Mine No. 1.  In addition, the Intermediate Partnership agreed to loan $10.5 million to White Oak for the construction of various assets on the surface property, including but not limited to, a bathhouse, office and warehouse (“Construction Loan”).  The Construction Loan has a term of 20 years, with repayment scheduled to begin in 2015.  White Oak has utilized $4.6 million available under the Construction Loan as of March 31, 2013.

8.         NET INCOME PER LIMITED PARTNER UNIT

We apply the provisions of FASB ASC 260, Earnings Per Share, which requires the two-class method in calculating basic and diluted earnings per unit (“EPU”).  Net income is allocated to the general partners and limited partners in accordance with their respective partnership percentages, after giving effect to any special income or expense allocations, including incentive distributions to our managing general partner, the holder of the IDR pursuant to our partnership agreement, which are declared and paid following the end of each quarter. Under the quarterly IDR provisions of our partnership agreement, our managing general partner is entitled to receive 15% of the amount we distribute in excess of $0.275 per unit, 25% of the amount we distribute in excess of $0.3125 per unit, and 50% of the amount we distribute in excess of $0.375 per unit.  Our partnership agreement contractually limits our distributions to available cash; therefore, undistributed earnings of the ARLP Partnership are not allocated to the IDR holder.  In addition, our outstanding 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 (“Deferred Compensation Plan”) include rights to nonforfeitable distributions or distribution equivalents and are therefore considered participating securities.  As such, we allocate undistributed and distributed earnings to these outstanding awards in our calculation of EPU.

The following is a reconciliation of net income used for calculating basic earnings per unit and the weighted average units used in computing EPU for the three months ended March 31, 2013 and 2012 (in thousands, except per unit data):

	Three Months EndedMarch 31,
	2013		2012
Net income	$	102,937	$	82,968
Adjustments:
Managing general partner’s priority distributions	(28,277)		(24,416)
General partners’ 2% equity ownership	(1,493)		(1,171)
Limited partners’ interest in net income	73,167		57,381
Less:
Distributions to participating securities	(569)		(498)
Undistributed earnings attributable to participating securities	(432)		(269)
Net income available to limited partners	$	72,166	$	56,614
Weighted average limited partner units outstanding – basic and diluted	36,919		36,827
Basic and diluted net income per limited partner unit (1)	$	1.95	$	1.54

(1)Diluted EPU gives effect to all dilutive potential common units outstanding during the period using the treasury stock method. Diluted EPU excludes all dilutive potential units calculated under the treasury stock method if their effect is anti-dilutive.  For the three months ended March 31, 2013 and 2012, LTIP, SERP and Deferred Compensation Plan units of 324,315 and 377,229, respectively, were considered anti-dilutive under the treasury stock method.

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9.         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 (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Beginning balance	$	77,046	$	73,201
Accruals increase	3,965		5,923
Payments	(2,876)		(2,906)
Interest accretion	620		684
Ending balance	$	78,755	$	76,902

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 (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Service cost	$	954	$	872
Interest cost	563		576
Amortization of net loss (1)	168		194
Net periodic benefit cost	$	1,685	$	1,642

(1)Amortization of net loss is included in the operating expenses line item within our condensed consolidated statements of income.

10.       COMPENSATION PLANS

Long-Term Incentive Plan

We have the LTIP for certain employees and officers of our managing general partner and its affiliates who perform services for us.  The LTIP awards are grants of non-vested “phantom” or notional units, which upon satisfaction of vesting requirements, entitle the LTIP participant to receive ARLP common units.  Annual grant levels and vesting provisions for designated participants are recommended by our President and Chief Executive Officer, subject to review and approval of the compensation committee of the MGP board of directors (the “Compensation Committee”).  On January 23, 2013, the Compensation Committee determined that the vesting requirements for the 2010 grants of 130,102 restricted units (which is net of 8,028 forfeitures) had been satisfied as of January 1, 2013.  As a result of this vesting, on February 15, 2013, we issued 82,400 unrestricted common units to the LTIP participants. The remaining units were settled in cash to satisfy the individual statutory minimum tax obligations of the LTIP participants.  On January 23, 2013, the Compensation Committee authorized additional grants of up to 156,575 restricted units, of which 146,725 were granted during the three months ended March 31, 2013 and will vest on January 1, 2016, subject to satisfaction of certain financial tests.  The fair value of these 2013 grants is equal to the intrinsic value at the date of grant, which was $63.02 per unit.  LTIP expense

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was $1.7 million and $1.5 million for the three months ended March 31, 2013 and 2012, respectively.  After consideration of the January 1, 2013 vesting and subsequent issuance of 82,400 common units, 2.1 million units remain available under the LTIP for issuance in the future, assuming all grants issued in 2011, 2012 and 2013 currently outstanding are settled with common units, without reduction for tax withholding, and no future forfeitures occur.

As of March 31, 2013, there was $14.7 million in total unrecognized compensation expense related to the non-vested LTIP grants that are expected to vest.  That expense is expected to be recognized over a weighted-average period of 1.9 years.  As of March 31, 2013, the intrinsic value of the non-vested LTIP grants was $22.6 million.  As of March 31, 2013, the total obligation associated with the LTIP was $8.7 million and is included in the partners’ capital-limited partners line item in our condensed consolidated balance sheets.

As provided under the distribution equivalent rights provisions of the LTIP, all non-vested grants include contingent rights to receive quarterly cash distributions in an amount equal to the cash distributions we make to unitholders during the vesting period.

SERP and Directors Deferred Compensation Plan

We utilize the SERP to provide deferred compensation benefits for certain officers and key employees. All allocations made to participants under the SERP are made in the form of “phantom” ARLP units.  The SERP is administered by the Compensation Committee.

Our directors participate in the Deferred Compensation Plan. Pursuant to the Deferred Compensation Plan, for amounts deferred either automatically or at the election of the director, a notional account is established and credited with notional common units of ARLP, described in the Deferred Compensation Plan as “phantom” units.

For both the SERP and Deferred Compensation Plan, when quarterly cash distributions are made with respect to ARLP common units, an amount equal to such quarterly distribution is credited to each participant’s notional account as additional phantom units.  All grants of phantom units under the SERP and Deferred Compensation Plan vest immediately.

For the three months ended March 31, 2013 and 2012, SERP and Deferred Compensation Plan participant notional account balances were credited with a total of 3,937 and 2,000 phantom units, respectively, and the fair value of these phantom units was $61.67 and $73.00, respectively, on a weighted-average basis.  Total SERP and Deferred Compensation Plan expense was approximately $0.3 million and $0.2 million for the three months ended March 31, 2013 and 2012, respectively.

As of March 31, 2013, there were 160,728 total phantom units outstanding under the SERP and Deferred Compensation Plan and the total intrinsic value of the SERP and Deferred Compensation Plan phantom units was $10.2 million.  As of March 31, 2013, the total obligation associated with the SERP and Deferred Compensation Plan was $10.6 million and is included in the partners’ capital-limited partners line item in our condensed consolidated balance sheets.

11.       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 benefit formula for the Pension Plan is a fixed dollar unit based on years of service.

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Components of the net periodic benefit cost for each of the periods presented are as follows (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Service cost	$	760	$	754
Interest cost	852		818
Expected return on plan assets	(1,233)		(956)
Amortization of net loss (1)	559		430
Net periodic benefit cost	$	938	$	1,046

(1)Amortization of net loss is included in the operating expenses line item within our condensed consolidated statements of income.

We previously disclosed in our financial statements for the year ended December 31, 2012 that we expected to contribute $2.4 million to the Pension Plan in 2013.  As of March 31, 2013, we had made no contributions to the Pension Plan.  However, on April 15, 2013, we made a contribution payment of $0.8 million for the 2013 plan year.  We expect to make quarterly contributions of $0.8 million for the remainder of 2013 for the 2013 plan year and, therefore, will contribute approximately $2.4 million to the Pension Plan in 2013.

12.SEGMENT INFORMATION

We operate in the eastern U.S. as a producer and marketer of coal to major utilities and industrial users.  We aggregate multiple operating segments into five reportable segments: the Illinois Basin, Central Appalachia, Northern Appalachia, White Oak and Other and Corporate.  The first three reportable segments correspond to the three major coal producing regions in the eastern U.S.  Similar economic characteristics for our operating segments within each of these three reportable segments include coal quality, coal seam height, mining and transportation methods and regulatory issues.  The White Oak reportable segment includes our activities associated with the White Oak longwall Mine No. 1 development project more fully described below.

The Illinois Basin reportable segment is comprised of multiple operating segments, including Webster County Coal, LLC’s Dotiki mining complex, Gibson County Coal, LLC’s mining complex, which includes the Gibson North mine and Gibson South project, Hopkins County Coal, LLC’s Elk Creek mining complex, White County Coal, LLC’s Pattiki mining complex, Warrior Coal, LLC’s mining complex, Sebree Mining, LLC’s mining complex, which includes the Onton mine, and River View Coal, LLC’s mining complex.  The development of the Gibson South mine is currently underway.  For information regarding the acquisition of the Onton mine, which was added to the Illinois Basin segment in April 2012, please see Note 4.

The Central Appalachian reportable segment is comprised of two operating segments, the MC Mining, LLC and Pontiki Coal, LLC mining complexes.

The Northern Appalachian reportable segment is comprised of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge, LLC (“Tunnel Ridge”) mining complex and the Penn Ridge Coal, LLC (“Penn Ridge”) property.  The Mettiki mining complex includes Mettiki Coal (WV), LLC’s Mountain View mine and Mettiki Coal, LLC’s preparation plant.  In May 2012, longwall production began at the Tunnel Ridge mine.  We are in the process of permitting the Penn Ridge property for future mine development.

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The White Oak reportable segment is comprised of two operating segments, WOR Processing and WOR Properties.  WOR Processing includes both the surface operations at White Oak currently under construction and the equity investment in White Oak.  WOR Properties owns coal reserves acquired from White Oak with a lease-back arrangement (Note 7).

Other and Corporate includes marketing and administrative expenses, Alliance Service, Inc. (“ASI”) and its subsidiary, Matrix Design Group, LLC (“Matrix Design”), Alliance Design Group, LLC (“Alliance Design”) (collectively, Matrix Design and Alliance Design are referred to as the “Matrix Group”), ASI’s ownership of aircraft, the Mt. Vernon Transfer Terminal, LLC (“Mt. Vernon”) dock activities, coal brokerage activity, our equity investment in Mid-America Carbonates, LLC and certain activities of Alliance Resource Properties, LLC.

Reportable segment results as of and for the three months ended March 31, 2013 and 2012 are presented below.

	Illinois Basin		Central Appalachia		Northern Appalachia		White Oak		Other and Corporate		Elimination (1)		Consolidated
	(in thousands)
Reportable segment results as of and for the three months ended March 31, 2013 were as follows:
Total revenues (2)	$	404,823	$	45,025	$	93,792	$	-	$	7,972	$	(3,557)	$	548,055
Segment Adjusted EBITDA Expense (3)	234,145		35,302		73,821		101		9,091		(3,557)		348,903
Segment Adjusted EBITDA (4)(5)	167,221		9,709		16,509		(4,292)		(796)		-		188,351
Total assets (6)	1,046,513		89,543		529,403		272,316		63,202		(1,439)		1,999,538
Capital expenditures (7)	52,031		3,903		8,879		16,953		604		-		82,370
Reportable segment results as of and for the three months ended March 31, 2012 were as follows:
Total revenues (2)	$	342,230	$	41,166	$	47,105	$	-	$	17,104	$	(4,019)	$	443,586
Segment Adjusted EBITDA Expense (3)	201,548		30,754		44,230		135		14,917		(4,103)		287,481
Segment Adjusted EBITDA (4)(5)	136,892		10,210		282		(4,126)		2,399		85		145,742
Total assets (6)	829,320		91,496		492,629		116,886		223,800		(678)		1,753,453
Capital expenditures (7)	54,145		4,101		31,515		24,943		8,635		-		123,339

(1)The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group to our mining operations.

(2)Revenues included in the Other and Corporate column are primarily attributable to the Matrix Group revenues, Mt. Vernon transloading revenues, administrative service revenues from affiliates and brokerage sales.

(3)Segment Adjusted EBITDA Expense includes operating expenses, outside coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to our customers and consequently we do not realize any gain or loss on transportation revenues.  We review Segment Adjusted EBITDA Expense per ton for cost trends.

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

	Three Months Ended
	March 31,
	2013	2012
Segment Adjusted EBITDA Expense	$348,903	$287,481
Outside coal purchases	(602)	(14,181)
Other income	274	215
Operating expenses (excluding depreciation, depletion and amortization)	$348,575	$273,515

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(4)Segment Adjusted EBITDA is defined as net income 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 (in thousands):

	Three Months Ended
	March 31,
	2013	2012
Consolidated Segment Adjusted EBITDA	$188,351	$145,742
General and administrative	(15,246)	(14,289)
Depreciation, depletion and amortization	(64,382)	(43,033)
Interest expense, net	(6,484)	(5,819)
Income tax benefit	698	367
Net income	$102,937	$ 82,968

(5)Includes equity in income (loss) of affiliates for the three months ended March 31, 2013 and 2012 of $(4.2) million and $(4.0) million, respectively, included in the White Oak segment and $0.3 million and $0.2 million, respectively, included in the Other and Corporate segment.

(6)Total assets for the White Oak and Other and Corporate Segments include investments in affiliate of $113.7 million and $1.9 million, respectively, at March 31, 2013 and $40.0 million and $1.7 million, respectively, at March 31, 2012.

(7)Capital expenditures shown above for the three months ended March 31, 2013 and 2012 include $12.1 million and $18.0 million, respectively, for acquisition and development of coal reserves in our condensed consolidated statements of cash flow.

13.SUBSEQUENT EVENTS

On April 26, 2013, we declared a quarterly distribution for the quarter ended March 31, 2013, of $1.13 per unit, on all common units outstanding, totaling approximately $70.9 million (which includes our managing general partner’s incentive distributions), payable on May 15, 2013 to all unitholders of record as of May 8, 2013.

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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:

· 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, the managing general partner of Alliance Resource Partners, L.P., also referred to as our managing general partner.

· References to “SGP” mean Alliance Resource GP, LLC, the special general partner of Alliance Resource Partners, L.P., also referred to as our special general partner.

· References to “Intermediate Partnership” mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P., also referred to as our intermediate partnership.

· References to “Alliance Coal” mean Alliance Coal, LLC, the holding company for the operations of Alliance Resource Operating Partners, L.P., also referred to as our operating subsidiary.

· References to “AHGP” mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

· References to “AGP” mean Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P.

Summary

We are a diversified producer and marketer of coal primarily to major United States (“U.S.”) utilities and industrial users. We began mining operations in 1971 and, since then, have grown through acquisitions and internal development to become the third largest coal producer in the eastern U.S. We operate eleven underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia, including the new Tunnel Ridge, LLC (“Tunnel Ridge”) longwall mine in West Virginia and the Onton No. 9 mining complex (“Onton mine”) in west Kentucky acquired on April 2, 2012.  We are constructing a new mine in southern Indiana and operate a coal loading terminal on the Ohio River at Mt. Vernon, Indiana.  Also, we own a preferred equity interest in White Oak Resources LLC (“White Oak”), and are purchasing and funding development of reserves and constructing surface facilities at White Oak’s new longwall mining complex in southern Illinois.  As is customary in the coal industry, we have entered into long-term coal supply agreements with many of our customers.

We have five reportable segments: Illinois Basin, Central Appalachia, Northern Appalachia White Oak and Other and Corporate.  The first three reportable segments correspond to the three major coal producing regions in the eastern U.S.  Factors similarly affecting financial performance of our operating segments within each of these three reportable segments include coal quality, coal seam height, mining and transportation methods and regulatory issues.  The White Oak segment includes our activities associated with the White Oak longwall Mine No. 1 development project in southern Illinois more fully described below.

· Illinois Basin reportable segment is comprised of multiple operating segments, including Webster County Coal, LLC’s Dotiki mining complex (“Dotiki”), Gibson County Coal, LLC’s mining complex, which includes the Gibson North mine and Gibson South project, Hopkins County Coal, LLC’s Elk Creek mining complex, White County Coal, LLC’s Pattiki mining complex (“Pattiki”), Warrior Coal, LLC’s mining complex (“Warrior”), Sebree Mining, LLC mining complex (“Sebree”), which includes the Onton mine, Steamport, LLC and certain Sebree reserves, River View Coal, LLC’s mining complex (“River View”), CR Services, LLC, and certain properties of Alliance Resource Properties, LLC (“Alliance Resource Properties”), ARP

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	Sebree, LLC and ARP Sebree South, LLC. The development of the Gibson South mine is currently underway and we are in the process of permitting the Sebree property for future mine development. For information regarding the acquisition of the Onton mine, which was added to the Illinois Basin segment in April 2012, please read “Item 1. Financial Statements (Unaudited) – Note 4. Acquisition of Business” of this Quarterly Report on Form 10-Q.
·	Central Appalachian reportable segment is comprised of two operating segments, the Pontiki Coal, LLC and MC Mining, LLC (“MC Mining”) mining complexes.
·	Northern Appalachian reportable segment is comprised of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge mining complex and the Penn Ridge Coal, LLC (“Penn Ridge”) property. The Mettiki mining complex includes Mettiki Coal (WV), LLC’s Mountain View mine and Mettiki Coal, LLC’s preparation plant. In May 2012, longwall production began at the Tunnel Ridge mine. We are in the process of permitting the Penn Ridge property for future mine development.
·	White Oak reportable segment is comprised of two operating segments, Alliance WOR Properties, LLC (“WOR Properties”) and Alliance WOR Processing, LLC (“WOR Processing”). WOR Processing includes both the surface operations at White Oak currently under construction and the equity investment in White Oak. WOR Properties owns reserves acquired from White Oak and is committed to acquiring additional reserves from White Oak with a lease-back arrangement. WOR Properties has also completed initial funding commitments to White Oak for development of these reserves. The White Oak reportable segment also includes two loans to White Oak from our Intermediate Partnership, one for the acquisition of mining equipment (which was paid off and terminated in June 2012) and another to construct certain surface facilities. For more information on White Oak, please read “Item 1. Financial Statements (Unaudited) – Note 7. White Oak Transactions” of this Quarterly Report on Form 10-Q.
·	Other and Corporate reportable segment includes marketing and administrative expenses, Alliance Service, Inc. (“ASI”) and its subsidiary, Matrix Design Group, LLC (“Matrix Design”), Alliance Design Group, LLC (collectively, Matrix Design and Alliance Design Group, LLC are referred to as the “Matrix Group”), ASI’s ownership of aircraft, the Mt. Vernon Transfer Terminal, LLC (“Mt. Vernon”) dock activities, coal brokerage activity, our equity investment in Mid-America Carbonates, LLC (“MAC”) and certain activities of Alliance Resource Properties.

Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012

We reported net income of $102.9 million for the three months ended March 31, 2013 (“2013 Quarter”) compared to $83.0 million for the three months ended March 31, 2012 (“2012 Quarter”). This increase of $19.9 million was principally due to record coal production and increased coal sales volumes, which rose to 9.8 million tons produced and 9.7 million tons sold in the 2013 Quarter compared to 8.5 million tons produced and 7.8 million tons sold in the 2012 Quarter.  The increases in tons produced and tons sold resulted from the start-up of longwall production at the Tunnel Ridge mine in May 2012, the addition of the Onton mine acquired in April 2012 and increased tons produced and sold from our Gibson North, River View, Warrior and Pattiki mines.  Higher operating expenses during the 2013 Quarter resulted primarily from the increased sales and record production volumes, which particularly impacted labor and related benefits expense, materials and supplies expense, maintenance costs and sales-related expenses.  These increases in operating expenses were offset partially by lower outside coal purchases in the 2013 Quarter.

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	Three Months Ended March 31,
	2013	2012	2013	2012
	(in thousands)		(per ton sold)
Tons sold	9,698	7,812	N/A	N/A
Tons produced	9,819	8,512	N/A	N/A
Coal sales	$534,509	$429,599	$55.12	$54.99
Operating expenses and outside coal purchases	$349,177	$287,696	$36.01	$36.83

Coal sales.  Coal sales for the 2013 Quarter increased 24.4% to $534.5 million from $429.6 million for the 2012 Quarter.  The increase of $104.9 million in coal sales reflected the benefit of increased tons sold (contributing $103.7 million in additional coal sales) and higher average coal sales prices (contributing $1.2 million in additional coal sales).  Average coal sales prices increased slightly to $55.12 per ton in the 2013 Quarter as compared to $54.99 per ton sold in the 2012 Quarter, primarily as a result of higher priced Central Appalachian coal sales.

Operating expenses and outside coal purchases.  Operating expenses and outside coal purchases combined increased 21.4% to $349.2 million for the 2013 Quarter from $287.7 million for the 2012 Quarter, primarily due to increased coal sales and record production volumes.  On a per ton basis, operating expenses and outside coal purchases decreased 2.2% to $36.01 per ton sold.  In addition to the impact of record production volumes and increased sales volumes, operating expenses were impacted by various other factors, the most significant of which are also discussed below:

· Labor and benefit expenses per ton produced, excluding workers’ compensation, decreased 5.4% to $11.67 per ton in the 2013 Quarter from $12.33 per ton in the 2012 Quarter. This decrease of $0.66 per ton was primarily attributable to lower labor cost per ton resulting from higher longwall production at our Tunnel Ridge mine, which began production in May 2012, improved coal recoveries from our River View and Gibson mines and improved mining conditions at our Pattiki mine, partially offset by lower coal recoveries at our Dotiki mine reflecting its recent transition to a new coal seam;

· Workers compensation expenses per ton produced decreased to $0.72 per ton in the 2013 Quarter from $1.04 per ton in the 2012 Quarter. The decrease of $0.32 per ton produced resulted primarily from increased production discussed above and favorable reserve adjustments;

· Materials and supplies expenses per ton produced decreased 9.1% to $11.41 per ton in the 2013 Quarter from $12.55 per ton in the 2012 Quarter. The decrease of $1.14 per ton produced resulted primarily from production benefits discussed above and a decrease in cost for certain products and services, primarily roof support (decrease of $0.50 per ton), certain safety-related materials and supplies (decrease of $0.21 per ton), ventilation related materials and supplies (decrease of $0.19 per ton) and power and fuel used in the mining process (decrease of $0.15 per ton);

· Maintenance expenses per ton produced decreased 8.6% to $3.93 per ton in the 2013 Quarter from $4.30 per ton in the 2012 Quarter. The decrease of $0.37 per ton produced was primarily from the benefits of newer equipment and increased production at our new Tunnel Ridge mine and improved coal recoveries at certain locations as discussed above; and

· Outside coal purchases decreased to $0.6 million for the 2013 Quarter compared to $14.1 million in the 2012 Quarter. The decrease of $13.5 million was primarily attributable to decreased coal brokerage volumes and coal for sale into the metallurgical export markets. Coal purchase costs per ton are typically higher than our production costs per ton thus significantly lower volumes of coal purchases, like the 2013 Quarter, generally reduce our overall total expenses per ton.

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Operating expenses and outside coal purchases per ton decreases discussed above were offset by the following increases:

· Operating expenses increased in the 2013 Quarter due to greater sales from coal inventories compared to the 2012 Quarter. The 2013 Quarter ended with 492,000 tons of coal inventories compared to 1,065,000 at the end of the 2012 Quarter. Coal inventories increased only 136,000 tons during the 2013 Quarter compared to an increase of 897,000 tons during the 2012 Quarter;

· Production taxes and royalties expenses (which are incurred as a percentage of coal sales prices and volumes) increased $0.26 per produced ton sold in the 2013 Quarter compared to the 2012 Quarter, primarily resulting from an increased mix of sales and production from certain mines in states with higher severance tax rates and a reduced mix of purchased tons sold (discussed above), which typically have minimal, if any, production taxes or royalty obligations; and

· Capitalization of mine development expenses related to the construction of the Tunnel Ridge mine declined $13.1 million in the 2013 Quarter compared to the 2012 Quarter. Capitalized development ceased in May 2012 with the startup of longwall production.

Other sales and operating revenues.  Other sales and operating revenues are principally comprised of Mt. Vernon transloading revenues, Matrix Design sales and other outside services and administrative services revenue from affiliates.  Other sales and operating revenues decreased to $6.6 million in the 2013 Quarter from $7.4 million in the 2012 Quarter.  The decrease of $0.8 million was primarily due to decreased Matrix Design sales.

General and administrative.  General and administrative expenses for the 2013 Quarter increased to $15.2 million compared to $14.3 million in the 2012 Quarter.  The increase of $0.9 million was primarily due to the higher incentive-based compensation.

Depreciation, depletion and amortization.  Depreciation, depletion and amortization expense increased to $64.4 million for the 2013 Quarter from $43.0 million for the 2012 Quarter.  The increase of $21.4 million was attributable to additional depreciation expense related to the expansion of longwall production capacity at the new Tunnel Ridge mine, the addition of the Onton mine and capital expenditures related to production expansion and infrastructure investments at various mines.

Interest expense.  Interest expense, net of capitalized interest, increased to $6.6 million for the 2013 Quarter from $5.9 million for the 2012 Quarter.  The increase of $0.7 million was principally attributable to increased borrowings under our revolving credit facility and lower capitalized interest.  This increase was partially offset by the August 2012 repayment of $18.0 million on our original senior notes issued in 1999 and reduced interest expense resulting from lower rates and fees under our term loan and revolving credit facility entered into during May 2012.  The term loan and revolving credit facility are discussed in more detail below under “–Debt Obligations.”

Transportation revenues and expenses.  Transportation revenues and expenses were $6.9 million and $6.6 million for the 2013 and 2012 Quarters, respectively.  The increase of $0.3 million was primarily attributable to increased tonnage for which we arrange transportation at certain mines, partially offset by a decrease in average transportation rates in the 2013 Quarter.  The cost of transportation services are passed through to our customers.  Consequently, we do not realize any gain or loss on transportation revenues.

Equity in loss of affiliates, net.  Equity in loss of affiliates, net includes our equity investments in MAC and White Oak.  For the 2013 Quarter, equity in loss of affiliates was $3.9 million compared to $3.8 million for the 2012 Quarter, which was primarily attributable to losses allocated to us from our equity investment in White Oak.

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Segment Adjusted EBITDA.  Our 2013 Quarter Segment Adjusted EBITDA increased $42.6 million, or 29.2%, to $188.4 million from the 2012 Quarter Segment Adjusted EBITDA of $145.7 million.  Segment Adjusted EBITDA, tons sold, coal sales, other sales and operating revenues and Segment Adjusted EBITDA Expense by segment are (in thousands):

	Three Months Ended March 31,
	2013		2012		Increase/(Decrease)
Segment Adjusted EBITDA
Illinois Basin	$	167,221	$	136,892	$	30,329	22.2%
Central Appalachia	9,709		10,210		(501)		(4.9)%
Northern Appalachia	16,509		282		16,227		(1)
White Oak	(4,292)		(4,126)		(166)		(4.0)%
Other and Corporate	(796)		2,399		(3,195)		(1)
Elimination	-		85		(85)		(1)
Total Segment Adjusted EBITDA (2)	$	188,351	$	145,742	$	42,609	29.2%
Tons sold
Illinois Basin	7,706		6,513		1,193		18.3%
Central Appalachia	550		509		41		8.1%
Northern Appalachia	1,442		708		734		(1)
White Oak	-		-		-		-
Other and Corporate	-		82		(82)		(1)
Elimination	-		-		-		-
Total tons sold	9,698		7,812		1,886		24.1%
Coal sales
Illinois Basin	$	400,320	$	337,980	$	62,340	18.4%
Central Appalachia	44,804		40,948		3,856		9.4%
Northern Appalachia	89,385		43,958		45,427		(1)
White Oak	-		-		-		-
Other and Corporate	-		6,713		(6,713)		(1)
Elimination	-		-		-		-
Total coal sales	$	534,509	$	429,599	$	104,910	24.4%
Other sales and operating revenues
Illinois Basin	$	1,045	$	460	$	585	(1)
Central Appalachia	207		16		191		(1)
Northern Appalachia	945		554		391		70.6%
White Oak	-		-		-		-
Other and Corporate	7,972		10,391		(2,419)		(23.3)%
Elimination	(3,557)		(4,019)		462		11.5%
Total other sales and operating revenues	$	6,612	$	7,402	$	(790)	(10.7)%
Segment Adjusted EBITDA Expense
Illinois Basin	$	234,145	$	201,548	$	32,597	16.2%
Central Appalachia	35,302		30,754		4,548		14.8%
Northern Appalachia	73,821		44,230		29,591		66.9%
White Oak	101		135		(34)		(25.2)%
Other and Corporate	9,091		14,917		(5,826)		(39.1)%
Elimination	(3,557)		(4,103)		546		13.3%
Total Segment Adjusted EBITDA Expense (3)	$	348,903	$	287,481	$	61,422	21.4%

(1)  Percentage change was greater than or equal to 100%.

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(2)Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income before net interest expense, income taxes, depreciation, depletion and amortization, and general and administrative expenses.  Segment Adjusted EBITDA is a key component of consolidated EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to assess:

· the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;

· the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness;

· our operating performance and return on investment compared to those of other companies in the coal energy sector, without regard to financing or capital structures; and

· the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

Segment Adjusted EBITDA is also used as a supplemental financial measure by our management for reasons similar to those stated in the previous explanation of EBITDA.  In addition, the exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA allows management 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.

The following is a reconciliation of consolidated Segment Adjusted EBITDA to net income, the most comparable GAAP financial measure (in thousands):

	Three Months Ended
	March 31,
	2013		2012
Segment Adjusted EBITDA	$	188,351	$	145,742
General and administrative	(15,246)		(14,289)
Depreciation, depletion and amortization	(64,382)		(43,033)
Interest expense, net	(6,484)		(5,819)
Income tax benefit	698		367
Net income	$	102,937	$	82,968

(3)Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, outside coal purchases and other income.  Transportation expenses are excluded as these expenses are passed through to our customers and, consequently, we do not realize any gain or loss on transportation revenues.  Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments.  Segment Adjusted EBITDA Expense is a key component of EBITDA in addition to coal sales and other sales and operating revenues.  The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses.  Outside coal purchases are included in Segment Adjusted EBITDA Expense because tons sold and coal sales include sales from outside coal purchases.

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The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to operating expense, the most comparable GAAP financial measure (in thousands):

	Three Months Ended
	March 31,
	2013		2012
Segment Adjusted EBITDA Expense	$	348,903	$		287,481
Outside coal purchases	(602)		(14,181)
Other income	274		215
Operating expense (excluding depreciation, depletion and amortization)	$	348,575	$	273,515

Illinois Basin – Segment Adjusted EBITDA increased 22.2% to $167.2 million in the 2013 Quarter from $136.9 million in the 2012 Quarter.  The increase of $30.3 million was primarily attributable to increased tons sold, which increased 18.3% to 7.7 million tons in the 2013 Quarter.  Coal sales increased 18.4% to $400.3 million in the 2013 Quarter compared to $338.0 million in the 2012 Quarter. The increase of $62.3 million reflects tons produced and sold from the Onton mine acquired in April 2012 and increases from our Gibson North, River View, Warrior and Pattiki mines, partially offset by lower coal recoveries at our Dotiki mine related to its recent transition into a new coal seam.  Total Segment Adjusted EBITDA Expense for the 2013 Quarter increased 16.2% to $234.1 million from $201.5 million in the 2012 Quarter primarily due to increased production and sales volumes noted above.  Although Total Segment Adjusted EBITDA Expense increased, Total Segment Adjusted EBITDA Expense per ton decreased $0.57 per ton sold to $30.38 from $30.95 per ton sold, primarily as a result of increased coal production discussed above as well as certain cost decreases described above under “–Operating expenses and outside coal purchases.”

Central Appalachia – Segment Adjusted EBITDA decreased 4.9% to $9.7 million for the 2013 Quarter compared to $10.2 million in the 2012 Quarter.  The decrease of $0.5 million was primarily attributable to lower production volumes resulting from difficult mining conditions at our MC Mining mine during the 2013 Quarter related to its transition into a new mining area, partially offset by higher coal sales price per ton, which increased to $81.46 per ton sold in the 2013 Quarter from $80.48 per ton sold in the 2012 Quarter, and higher tons sold reflecting delayed contract shipments experienced during the 2012 Quarter.  Segment Adjusted EBITDA Expense for the 2013 Quarter increased 14.8% to $35.3 million from $30.8 million in the 2012 Quarter and increased $3.75 per ton sold to $64.19 compared to $60.44 per ton sold in the 2012 Quarter, reflecting higher inventory costs and difficult mining conditions described above.

Northern Appalachia – Segment Adjusted EBITDA increased to $16.5 million for the 2013 Quarter as compared to $0.3 million in the 2012 Quarter.  This increase of $16.2 million was primarily attributable to increased tons produced and sold from longwall operations at our Tunnel Ridge mine which began production in May 2012.  The start-up of longwall production at Tunnel Ridge was also the primary reason for the 66.9% increase in Segment Adjusted EBITDA Expense in the 2013 Quarter to $73.8 million compared to $44.2 million in the 2012 Quarter.  Although Segment Adjusted EBITDA increased in the 2013 Quarter, Segment Adjusted EBITDA Expense per ton decreased by $11.26 per ton sold to $51.19 from $62.45 in the 2012 Quarter, primarily due to lower cost per ton from longwall production at Tunnel Ridge and lower costs at our Mettiki mining complex due to reduced coal processing expenses and outside coal purchases.

White Oak – Segment Adjusted EBITDA was $(4.3) million and $(4.1) million, respectively, in the 2013 and 2012 Quarters primarily attributable to losses allocated to us from our equity interest in White Oak.

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Other and Corporate – Segment Adjusted EBITDA decreased $3.2 million in the 2013 Quarter from the 2012 Quarter.  This decrease was primarily attributable to lower coal brokerage sales and lower Matrix Group safety equipment sales.  Segment Adjusted EBITDA Expense decreased 39.1% to $9.1 million for the 2013 Quarter, primarily due to decreased outside coal purchases.

Liquidity and Capital Resources

Liquidity

We have historically satisfied our working capital requirements and funded our capital expenditures and debt service obligations with cash generated from operations, cash provided by the issuance of debt or equity and borrowings under credit facilities.  We believe that existing cash balances, future cash flows from operations, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet our working capital requirements, capital expenditures and additional equity investments, debt payments, commitments and distribution payments.  Our ability to satisfy our obligations and planned expenditures will depend upon our future operating performance and access to and cost of financing sources, which will be affected by prevailing economic conditions generally and in the coal industry specifically, which are beyond our control.  Based on our recent operating results, current cash position, anticipated future cash flows and sources of financing that we expect to have available, we do not anticipate any significant liquidity constraints in the foreseeable future.  However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected.  Please read “Item 1A. Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2012.

Cash Flows

Cash provided by operating activities was $199.5 million for the 2013 Quarter compared to $114.8 million for the 2012 Quarter.  Cash provided by operating activities primarily benefited from higher net income, reduced growth in coal inventory and a decrease in the change in accounts payable for the 2013 Quarter compared to the 2012 Quarter.

Net cash used in investing activities was $121.3 million for the 2013 Quarter compared to $134.9 million for the 2012 Quarter.  The decrease in cash used in investing activities was primarily attributable to a decrease in capital expenditures due to the completion of Tunnel Ridge mine development during the second quarter of 2012 and lower capital expenditures for mine infrastructure and equipment at various mines, particularly the Dotiki and River View mines.  These decreases were offset by an increase in funding of the White Oak project during the 2013 Quarter.  For information regarding White Oak, please read “Item 1. Financial Statements (Unaudited) – Note 7. White Oak Transactions” of this Quarterly Report on Form 10-Q.

Net cash used in financing activities was $77.8 million for the 2013 Quarter compared to $64.5 million for the 2012 Quarter.  The increase in cash used in financing activities was primarily attributable to increased distributions paid to partners in the 2013 Quarter and net payments under our revolving credit facility during the 2013 Quarter, which is discussed in more detail below under “–Debt Obligations.”

Capital Expenditures

Capital expenditures decreased to $70.3 million in the 2013 Quarter from $105.3 million in the 2012 Quarter.  See “–Cash Flows” above for additional information regarding capital expenditures.

Our anticipated total capital expenditures for the year ending December 31, 2013 are estimated in a range of $370.0 to $400.0 million, which includes expenditures for mine expansion and infrastructure projects, maintenance capital, continued development of the Gibson South mine, and reserve acquisitions and construction of surface facilities related to the White Oak mine development project.  In addition,

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ARLP continues to expect to fund approximately $70.0 to $90.0 million of its preferred equity investment commitment to White Oak in 2013.  Management anticipates funding remaining 2013 capital requirements with cash and cash equivalents ($28.7 million as of March 31, 2013), cash flows from operations, borrowings under the revolving credit facility and, if necessary, accessing the debt or equity capital markets.  We will continue to have significant capital requirements over the long-term, which may require us to obtain additional debt or equity capital.  The availability and cost of additional capital will depend upon prevailing market conditions, the market price of our common units and several other factors over which we have limited control, as well as our financial condition and results of operations.

Debt Obligations

Credit Facility.  On May 23, 2012, our Intermediate Partnership entered into a credit agreement (the “Credit Agreement”) with various financial institutions for a revolving credit facility (the “Revolving Credit Facility”) of $700 million and a term loan (the “Term Loan”) in the aggregate principal amount of $250 million (collectively, the Revolving Credit Facility and Term Loan are referred to as the “Credit Facility”).  The Credit Facility replaced the $142.5 million revolving credit facility that was scheduled to mature September 25, 2012 and the $300 million term loan agreement dated December 29, 2010 that was prepaid and terminated early on May 23, 2012.  The aggregate unpaid principal amount of $300 million and all unpaid interest was repaid using the proceeds of the Term Loan and borrowings under the Revolving Credit Facility.  Our Intermediate Partnership did not incur any early termination penalties in connection with the prepayment of the term loan.  Borrowings under the Credit Agreement bear interest at a Base Rate or Eurodollar Rate, at our election, plus an applicable margin that fluctuates depending upon the ratio of Consolidated Debt to Consolidated Cash Flow (each as defined in the Credit Agreement).  We have elected a Eurodollar Rate which, with applicable margin, was 1.86% on borrowings outstanding as of March 31, 2013.  The Credit Facility matures May 23, 2017, at which time all amounts outstanding are required to be repaid.  Interest is payable quarterly, with principal of the Term Loan due as follows:  commencing with the quarter ending June 30, 2014 and for each quarter thereafter ending on March 31, 2016, an amount per quarter equal to 2.50% of the aggregate amount of the Term Loan advances outstanding; for each quarter beginning June 30, 2016 through December 31, 2016, 20% of the aggregate amount of the Term Loan advances outstanding; and the remaining balance of the Term Loan advances at maturity.  We have the option to prepay the Term Loan at any time in whole or in part subject to terms and conditions described in the Credit Agreement.  Upon a “change in control” (as defined by the Credit Agreement), the unpaid principal amount of the Credit Facility, all interest thereon and all other amounts payable under the Credit Agreement would become due and payable.

At March 31, 2013, we had borrowings of $150.0 million and $23.5 million of letters of credit outstanding with $526.5 million available for borrowing under the Revolving Credit Facility.  We utilize the Revolving Credit Facility, as appropriate, for working capital requirements, capital expenditures, debt payments and distribution payments.  We incur an annual commitment fee of 0.25% on the undrawn portion of the Credit Facility.

Senior Notes.  Our Intermediate Partnership has $36.0 million principal amount of 8.31% senior notes due August 20, 2014, payable in two remaining annual installments with interest payable semi-annually (“Senior Notes”).

Series A Senior Notes.  On June 26, 2008, our Intermediate Partnership entered into a Note Purchase Agreement (the “2008 Note Purchase Agreement”) with a group of institutional investors in a private placement offering.  We issued $205.0 million of Series A senior notes, which bear interest at 6.28% and mature on June 26, 2015 with interest payable semi-annually.

Series B Senior Notes.  On June 26, 2008, we issued under the 2008 Note Purchase Agreement $145.0 million of Series B senior notes (together with the Series A senior notes, the “2008 Senior Notes”), which bear interest at 6.72% and mature on June 26, 2018 with interest payable semi-annually.

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The Senior Notes, 2008 Senior Notes and the Credit Facility described above (collectively, “ARLP Debt Arrangements”) are guaranteed by all of the material direct and indirect subsidiaries of our Intermediate Partnership. The ARLP Debt Arrangements contain various covenants affecting our Intermediate Partnership and its subsidiaries restricting, among other things, the amount of distributions by our Intermediate Partnership, the incurrence of additional indebtedness and liens, the sale of assets, the making of investments, the entry into mergers and consolidations and the entry into transactions with affiliates, in each case subject to various exceptions.  The ARLP Debt Arrangements also require the Intermediate Partnership to remain in control of a certain amount of mineable coal reserves relative to its annual production.  In addition, the ARLP Debt Arrangements require our Intermediate Partnership to maintain (a) debt to cash flow ratio of not more than 3.0 to 1.0 and (b) cash flow to interest expense ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters.  The debt to cash flow ratio and cash flow to interest expense ratio were 1.21 to 1.0 and 17.8 to 1.0, respectively, for the trailing twelve months ended March 31, 2013.  We were in compliance with the covenants of the ARLP Debt Arrangements as of March 31, 2013.

Other.  In addition to the letters of credit available under the Credit Facility discussed above, we also have agreements with two banks to provide additional letters of credit in an aggregate amount of $31.1 million to maintain surety bonds to secure certain asset retirement obligations and our obligations for workers’ compensation benefits.  At March 31, 2013, we had $30.7 million in letters of credit outstanding under agreements with these two banks.

Related-Party Transactions

We have continuing related-party transactions with our managing general partner, AHGP and SGP and its affiliates. These related-party transactions relate principally to the provision of administrative services to AHGP and Alliance Resource Holdings II, Inc. and their respective affiliates, mineral and equipment leases with SGP and its affiliates, and a timesharing agreement for the use of aircraft.  We also have ongoing transactions with White Oak and related entities to support development of a longwall mining operation currently under construction.

Please read our Annual Report on Form 10-K for the year ended December 31, 2012, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Related-Party Transactions” for additional information concerning related-party transactions.

New Accounting Standards

New Accounting Standards Issued and Adopted

In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”).  ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, certain significant amounts reclassified out of AOCI by the respective line items of net income.  ASU 2013-02 does not change the items that must be reported in AOCI.  ASU 2013-02 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2012.  The adoption of ASU 2013-02 did not have a material impact on our condensed consolidated financial statements.

Other Information

IRS Notice

On April 12, 2013, the Internal Revenue Service (“IRS”) mailed a “Notice of Beginning of Administrative Proceeding” (“NBAP”) for an audit of the income tax return of Alliance Coal, the holding

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company for the operations of our Intermediate Partnership, for the tax year ending December 31, 2011.  We believe this is a routine audit of our lower tier subsidiary’s income, gain, deductions, losses and credits.  Our tax matters partner and our tax advisors intend to cooperate fully with the IRS.  We are making this disclosure to satisfy the IRS requirement that we notify ARLP’s limited partners of this NBAP within 75 days from the receipt of the NBAP from the IRS.  A copy of the NBAP is attached as an exhibit hereto.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk

We have significant long-term coal supply agreements.  Virtually all of the long-term coal supply agreements are subject to price adjustment provisions, which permit an increase or decrease periodically in the contract price to principally reflect changes in specified price indices or items such as taxes, royalties or actual production costs resulting from regulatory changes.

We have exposure to price risk for items that are used directly or indirectly in the normal course of coal production such as steel, electricity and other supplies. We manage our risk for these items through strategic sourcing contracts for normal quantities required by our operations.  We do not utilize any commodity price-hedges or other derivatives related to these risks.

Credit Risk

Most of our sales tonnage is consumed by electric utilities.  Therefore, our credit risk is primarily with domestic electric power generators.  Our policy is to independently evaluate each customer’s creditworthiness prior to entering into transactions and to constantly monitor outstanding accounts receivable against established credit limits. When deemed appropriate by our credit management department, we will take steps to reduce our credit exposure to customers that do not meet our credit standards or whose credit has deteriorated. These steps may include obtaining letters of credit or cash collateral, requiring prepayments for shipments or establishing customer trust accounts held for our benefit in the event of a failure to pay.

Exchange Rate Risk

Almost all of our transactions are denominated in U.S. dollars, and as a result, we do not have material exposure to currency exchange-rate risks.

Interest Rate Risk

Borrowings under the Credit Facility are at variable rates and, as a result, we have interest rate exposure. Historically, our earnings have not been materially affected by changes in interest rates.  We do not utilize any interest rate derivative instruments related to our outstanding debt.  We had $150.0 million in borrowings under the Revolving Credit Facility and $250.0 million outstanding under the Term Loan Agreement at March 31, 2013.  A one percentage point increase in the interest rates related to the Revolving Credit Facility and Term Loan Agreement would result in an annualized increase in 2013 interest expense of $4.0 million, based on borrowing levels at March 31, 2013.  With respect to our fixed-rate borrowings, a one percentage point increase in interest rates would result in a decrease of approximately $12.3 million in the estimated fair value of these borrowings.

As of March 31, 2013, the estimated fair value of the ARLP Debt Arrangements was approximately $834.8 million.  The fair values of long-term debt are estimated using discounted cash flow analyses, based upon our current incremental borrowing rates for similar types of borrowing arrangements as of March 31, 2013.  There were no other changes in our quantitative and qualitative disclosures about market risk as set forth in our Annual Report on Form 10-K for the year ended December 31, 2012.

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ITEM 4.          CONTROLS AND PROCEDURES

We maintain controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file with the Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.  As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) as of March 31, 2013.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures are effective as of March 31, 2013.

During the quarterly period ended March 31, 2013, there have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with this evaluation that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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FORWARD-LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 10-Q may constitute “forward-looking statements.”  These statements are based on our beliefs as well as assumptions made by, and information currently available to, us.  When used in this document, the words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “may,” “project,” “will,” and similar expressions identify forward-looking statements.  Without limiting the foregoing, all statements relating to our future outlook, anticipated capital expenditures, future cash flows and borrowings and sources of funding are forward-looking statements. These statements reflect our current views with respect to future events and are subject to numerous assumptions that we believe are reasonable, but are open to a wide range of uncertainties and business risks, and actual results may differ materially from those discussed in these statements.  Among the factors that could cause actual results to differ from those in the forward-looking statements are:

·changes in competition in coal markets and our ability to respond to such changes;

·changes in coal prices, which could affect our operating results and cash flows;

·risks associated with the expansion of our operations and properties;

·legislation, regulations, and court decisions and interpretations thereof, including those relating to the environment, mining, miner health and safety and health care;

·deregulation of the electric utility industry or the effects of any adverse change in the coal industry, electric utility industry, or general economic conditions;

·dependence on significant customer contracts, including renewing customer contracts upon expiration of existing contracts;

·changing global economic conditions or in industries in which our customers operate;

·liquidity constraints, including those resulting from any future unavailability of financing;

·customer bankruptcies, cancellations or breaches to existing contracts, or other failures to perform;

·customer delays, failure to take coal under contracts or defaults in making payments;

·adjustments made in price, volume or terms to existing coal supply agreements;

·fluctuations in coal demand, prices and availability;

·our productivity levels and margins earned on our coal sales;

·unexpected changes in raw material costs;

·unexpected changes in the availability of skilled labor;

·our ability to maintain satisfactory relations with our employees;

·any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments or projections associated with post-mine reclamation and workers’ compensation claims;

·any unanticipated increases in transportation costs and risk of transportation delays or interruptions;

·unexpected operational interruptions due to geologic, permitting, labor, weather-related or other factors;

·risks associated with major mine-related accidents, such as mine fires, or interruptions;

·results of litigation, including claims not yet asserted;

·difficulty maintaining our surety bonds for mine reclamation as well as workers’ compensation and black lung benefits;

·difficulty in making accurate assumptions and projections regarding pension, black lung benefits and other post-retirement benefit liabilities;

·coal market’s share of electricity generation, including as a result of environmental concerns related to coal mining and combustion and the cost and perceived benefits of other sources of electricity, such as natural gas, nuclear energy and renewable fuels;

·uncertainties in estimating and replacing our coal reserves;

·a loss or reduction of benefits from certain tax deductions and credits;

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·difficulty obtaining commercial property insurance, and risks associated with our participation (excluding any applicable deductible) in the commercial insurance property program;

·difficulty in making accurate assumptions and projections regarding future revenues and costs associated with equity investments in companies we do not control; and

·other factors, including those discussed in “Part II. Item 1A. Risk Factors” and “Part II. Item 1. Legal Proceedings” of this Quarterly Report on Form 10-Q.

If one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may differ materially from those described in any forward-looking statement.  When considering forward-looking statements, you should also keep in mind the risks described in “Risk Factors” below.  These risks could also cause our actual results to differ materially from those contained in any forward-looking statement.  We disclaim any obligation to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

You should consider the information above when reading or considering any forward-looking statements contained in:

·this Quarterly Report on Form 10-Q;

·other reports filed by us with the SEC;

·our press releases;

·our website http://www.arlp.com; and

·written or oral statements made by us or any of our officers or other authorized persons acting on our behalf.

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PART II

OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The information in Note 3. Contingencies to the Unaudited Condensed Consolidated Financial Statements included in “Part I. Item 1. Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q herein is hereby incorporated by reference. See also “Item 3. Legal Proceedings” of the Annual Report on Form 10-K for the year ended December 31, 2012.

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A  “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 which could materially affect our business, financial condition or future results.  The risks described in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q are not our only risks.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial based on current knowledge and factual circumstances, if such knowledge or facts change, also may materially adversely affect our business, financial condition and/or operating results in the future.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Quarterly Report on Form 10-Q.

ITEM 5.OTHER INFORMATION

None.

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ITEM 6.EXHIBITS

			Incorporated by Reference
Exhibit Number		Exhibit Description	Form	SEC File No. and Film No.	Exhibit	Filing Date	Filed Herewith*
31.1		Certification of Joseph W. Craft III, President and Chief Executive Officer of Alliance Resource Management GP, LLC, the managing general partner of Alliance Resource Partners, L.P., dated May 9, 2013, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Brian L. Cantrell, Senior Vice President and Chief Financial Officer of Alliance Resource Management GP, LLC, the managing general partner of Alliance Resource Partners, L.P., dated May 9, 2013, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Joseph W. Craft III, President and Chief Executive Officer of Alliance Resource Management GP, LLC, the managing general partner of Alliance Resource Partners, L.P., dated May 9, 2013, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Brian L. Cantrell, Senior Vice President and Chief Financial Officer of Alliance Resource Management GP, LLC, the managing general partner of Alliance Resource Partners, L.P., dated May 9, 2013, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95.1		Federal Mine Safety and Health Act Information
99.1		Alliance Coal, LLC Notice of Beginning of Administrative Proceeding
101		Interactive Data File (Form 10-Q for the quarter ended March 31, 2013 filed in XBRL).
*	Or furnished, in the case of Exhibits 32.1 and 32.2.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in Tulsa, Oklahoma, on May 9, 2013.

ALLIANCE RESOURCE PARTNERS, L.P.
By:	Alliance Resource Management GP, LLC
	its managing general partner
	/s/ Joseph W. Craft, III
	Joseph W. Craft, III
	President, Chief Executive Officer
	and Director, duly authorized to sign on behalf of the registrant.
	/s/ Brian L. Cantrell
	Brian L. Cantrell
	Senior Vice President and
	Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Joseph W. Craft III certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Alliance Resource Partners, L.P.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the quarterly period ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2013

/s/ Joseph W. Craft III

Joseph W. Craft III

President, Chief Executive

Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Brian L. Cantrell, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Alliance Resource Partners, L.P.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this  report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the quarterly period ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2013

/s/ Brian L. Cantrell

Brian L. Cantrell

Senior Vice President and

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Alliance Resource Partners, L.P. (the “Partnership”) on Form 10-Q for the three months ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph W. Craft III, President and Chief Executive Officer of Alliance Resource Management GP, LLC, the managing general partner of the Partnership, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership.

By: /s/ Joseph W. Craft III                        

Joseph W. Craft III

President and Chief Executive Officer

of Alliance Resource Management GP, LLC

(the managing general partner of Alliance Resource Partners, L.P.)

Date:  May 9, 2013

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate document.  A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Alliance Resource Partners, L.P. (the “Partnership”) on Form 10-Q for the three months ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian L. Cantrell, Senior Vice President and Chief Financial Officer of Alliance Resource Management GP, LLC, the managing general partner of the Partnership, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership.

By: /s/ Brian L. Cantrell___________

Brian L. Cantrell

Senior Vice President and

Chief Financial Officer

of Alliance Resource Management GP, LLC

(the managing general partner of Alliance Resource Partners, L.P.)

Date: May 9, 2013

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate document.  A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.

EX-95.1

EXHIBIT 95.1

Federal Mine Safety and Health Act Information

Workplace safety is fundamental to our culture.  Our operating subsidiaries empower their employees to be actively involved in continuous efforts to prevent accidents.  By providing a work environment that rewards safety and encourages employee participation in the safety process, our mining operations strive to be the leaders in safety performance in our industry.

We are also a leader in developing and implementing new technologies to improve safety throughout the industry.  For example, our subsidiary, Matrix Design, has developed two innovative technologies designed to improve safety in underground mining operations – a portable, wireless communication and electronic tracking system designed to allow surface personnel the ability to communicate with and locate underground mining personnel and a proximity detection system designed to improve the safety of continuous mining units as well as other mobile equipment used in underground operations.  Matrix Design has completed installation of its communication and tracking system at our operating subsidiaries and has either installed or received orders to install this vital safety system at over half of the operating underground coal mines in the U.S.  In addition, Matrix Design is in the process of installing its proximity detection systems at our operating subsidiaries’ underground coal mines.

Our industry is focused on improving employee safety and its safety performance is continuously monitored, including through the mining industry standard of “non-fatal days lost,” or “NFDL,” which reflects both the frequency and severity of injuries incurred and, we believe, is a better measure of safety performance than compliance statistics.  As indicated in the chart below, these efforts have resulted in significant safety improvements as the industry average NFDL as of the end of 2012, as reported(a) by the Mine Safety and Health Administration (“MSHA”), has decreased approximately 60% since 1999.

(a)Data compiled for all U.S. underground bituminous coal mines and related surface facilities from the MSHA report “Mine Injury and Worktime, Quarterly Closeout Edition.”  Data for 1999 through 2011 reflects the “January – December, Final” report for each year.  Data for 2012 reflects the “January – December, Preliminary” report.

EXHIBIT 95.1

During this same time period, the combined NFDL rating of our operating subsidiaries has averaged approximately one-third lower than the industry average.

Our mining operations are subject to extensive and stringent compliance standards established pursuant to the Federal Mine Safety and Health Act of 1977, as amended by the MINER Act (as amended, the “Mine Act”).  MSHA monitors and rigorously enforces compliance with these standards, and our mining operations are inspected frequently.  Citations and orders are issued by MSHA under Section 104 of the Mine Act for violations of the Mine Act or any mandatory health or safety standard, rule, order or regulation promulgated under the Mine Act.  A Section 104(a) “Significant and Substantial” or “S&S” citation is generally issued in a situation where the conditions created by the violation do not cause imminent danger, but in the opinion of the MSHA inspector could significantly and substantially contribute to the cause and effect of a mine safety or health hazard.  During the three months ended March 31, 2013, our mines were subject to 1,956 MSHA inspection days with an average of only 0.15 S&S citations written per inspection day.

We endeavor to comply at all times with all Mine Act regulations.  However, the Mine Act has been construed as authorizing MSHA to issue citations and orders pursuant to the legal doctrine of strict liability, or liability without fault.  If, in the opinion of an MSHA inspector, a condition exists that violates the Mine Act or regulations promulgated thereunder, then a citation or order will be issued regardless of whether we had any knowledge of, or fault in, the existence of that condition.  Many of the Mine Act standards include one or more subjective elements, so that issuance of a citation often depends on the opinions or experience of the MSHA inspector involved and the frequency of citations will vary from inspector to inspector.

The number of citations issued also is affected by the size of the mine, in that the number of citations issued generally increases with the size of the mine.  Our mines typically are larger in scale than most underground coal mines in the U.S. in terms of area, production and employee hours.

We take all allegations of violations of Mine Act standards seriously, and if we disagree with the assertions of an MSHA inspector, we exercise our right to challenge those findings by “contesting” the citation or order pursuant to the procedures established by the Mine Act and its regulations.  During the three months ended March 31, 2013, our operating subsidiaries have contested approximately 18% of all citations and 47% of S&S citations issued by MSHA inspectors.  These contest proceedings frequently result in the dismissal or modification of previously issued citations, substantial reductions in the penalty amounts originally assessed by MSHA, or both.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd–Frank Act”) requires issuers to include in periodic reports filed with the SEC certain information relating to citations or orders for violations of standards under the Mine Act.  The following tables include information required by the Dodd–Frank Act for the three months ended March 31, 2013.  The mine data retrieval system maintained by MSHA may show information that is different than what is provided herein.  Any such difference may be attributed to the need to update that information on MSHA’s system and/or other factors.

EXHIBIT 95.1       

Subsidiary Name / MSHA Identification Number (1)	Section 104(a) S&S Citations(2)	Section 104(b) Orders (3)	Section 104(d) Citations and Orders (4)	Section 110(b)(2) Violations (5)	Section 107(a)Orders (6)	Total Dollar Value of MSHA Assessments Proposed (in thousands)(7)
Illinois Basin Operations
Webster County Coal, LLC (KY)
1502132	20	-	-	-	-	$	37.9
Warrior Coal, LLC (KY)
1505230	-	-	-	-	-	$	-
1512083	-	-	-	-	-	$	-
1513514	-	-	-	-	-	$	-
1516460	-	-	-	-	-	$	-
1517216	55	-	4	-	-	$	102.0
1517232	27	-	-	-	-	$	21.8
1517678	-	-	-	-	-	$	-
1517740	-	-	-	-	-	$	-
1517758	-	-	-	-	-	$	-
1514335	2	-	-	-	-	$	1.1
Hopkins County Coal, LLC (KY)
1502013	-	-	-	-	-	$	0.3
1511935	-	-	-	-	-	$	-
1517377	-	-	-	-	-	$	-
1517515	-	-	-	-	-	$	-
1518826	29	-	1	-	-	$	54.2
1517378	-	-	-	-	-	$	-
River View Coal, LLC (KY)
1503178	-	-	-	-	-	$	-
1519374	32	-	-	-	-	$	54.4
White County Coal, LLC (IL)
1102662	-	-	-	-	-	$	-
1103058	8	-	-	-	-	$	76.0
Alliance WOR Processing, LLC (IL)
1103242	-	-	-	-	-	$	-
Gibson County Coal, LLC (IN)
1202388	-	-	-	-	-	$	-
1202215	11	-	-	-	-	$	88.1
Sebree Mining, LLC (KY)
1519264	-	-	-	-	-	$	-
1518547	9	-	-	-	-	$	67.9
1518864	-	-	-	-	-	$	-
1517044	-	-	-	-	-	$	-
Central Appalachian Operations
Pontiki Coal, LLC (KY)
1508413	-	-	-	-	-	$	-
1509571	-	-	-	-	-	$	-
1514324	1	-	-	-	-	$	-
1518839	5	-	-	-	-	$	11.6
1518056	-	-	-	-	-	$	-
MC Mining, LLC (KY)
1508079	19	1	-	-	-	$	110.7
1517733	1	-	-	-	-	$	5.9
1519515	6	-	-	-	-	$	2.2
Northern Appalachian Operations
Mettiki Coal, LLC (MD)
1800621	-	-	-	-	-	$	-
1800671	-	-	-	-	-	$	0.7
Mettiki Coal (WV), LLC
4609028	13	-	2	-	-	$	48.0
Tunnel Ridge, LLC (PA/WV)
4608864	43	2	-	-	-	$	153.6
Other
4403236	-	-	-	-	-	$	-
4403255	-	-	-	-	-	$	-
4406630	-	-	-	-	-	$	-
4406867	-	-	-	-	-	$	-

EXHIBIT 95.1   

Subsidiary Name / MSHA Identification Number (1)	Total Number of Mining Related Fatalities	Received Notice of Pattern of Violations Under Section 104(e) (yes/no) (8)	Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no) (8)	Legal Actions Pending as of Last Day of Period	Legal Actions Initiated During Period	Legal Actions Resolved During Period
Illinois Basin Operations
Webster County Coal, LLC (KY)
1502132	-	No	No	39	3	6
Warrior Coal, LLC (KY)
1505230	-	No	No	-	-	-
1512083	-	No	No	-	-	-
1513514	-	No	No	-	-	-
1516460	-	No	No	-	-	-
1517216	-	No	No	36	4	4
1517232	-	No	No	2	-	-
1517678	-	No	No	-	-	-
1517740	-	No	No	-	-	-
1517758	-	No	No	-	-	-
1514335	-	No	No	2	-	-
Hopkins County Coal, LLC (KY)
1502013	-	No	No	3	2	-
1511935	-	No	No	-	-	-
1517377	-	No	No	-	-	-
1517515	-	No	No	-	-	-
1518826	-	No	No	30	4	1
1517378	-	No	No	-	-	-
River View Coal, LLC (KY)
1503178	-	No	No	-	-	-
1519374	-	No	No	25	5	2
White County Coal, LLC (IL)
1102662	-	No	No	-	-	-
1103058	-	No	No	25	3	-
Alliance WOR Processing, LLC (IL)
1103242	-	No	No	1	-	-
Gibson County Coal, LLC (IN)
1202388	-	No	No	1	-	2
1202215	-	No	No	11	-	12
Sebree Mining, LLC (KY)
1519264	-	No	No	-	-	-
1518547	-	No	No	7	6	-
1518864	-	No	No	-	-	-
1517044	-	No	No	-	-	-
Central Appalachian Operations
Pontiki Coal, LLC (KY)
1508413	-	No	No	-	-	-
1509571	-	No	No	-	-	-
1514324	-	No	No	5	2	-
1518839	-	No	No	17	-	19
1518056	-	No	No	-	-	-
MC Mining, LLC (KY)
1508079	-	No	No	43	4	2
1517733	-	No	No	-	-	-
1519515	-	No	No	-	-	-
Northern Appalachian Operations
Mettiki Coal, LLC (MD)
1800621	-	No	No	-	-	-
1800671	-	No	No	-	-	-
Mettiki Coal (WV), LLC
4609028	-	No	No	5	2	7
Tunnel Ridge, LLC (PA/WV)
4608864	-	No	No	7	2	1
Other
4403236	-	No	No	-	-	-
4403255	-	No	No	-	-	-
4406630	-	No	No	-	-	-
4406867	-	No	No	-	-	-

EXHIBIT 95.1

The number of legal actions pending as of March 31, 2013 that fall into each of the following categories is as follows:

Subsidiary Name / MSHA Identification Number (1)	Contests of Citations and Orders	Contests of Proposed Penalties	Complaints for Compensation	Complaints of Discharge/ Discrimination/ Interference	Applications for Temporary Relief	Appeals of Judges Rulings
Illinois Basin Operations
Webster County Coal, LLC (KY)
1502132	5	34	-	-	-	-
Warrior Coal, LLC (KY)
1505230	-	-	-	-	-	-
1512083	-	-	-	-	-	-
1513514	-	-	-	-	-	-
1516460	-	-	-	-	-	-
1517216	7	29	-	-	-	-
1517232	-	2	-	-	-	-
1517678	-	-	-	-	-	-
1517740	-	-	-	-	-	-
1517758	-	-	-	-	-	-
1514335	-	2	-	-	-	-
Hopkins County Coal, LLC (KY)
1502013	-	3	-	-	-	-
1511935	-	-	-	-	-	-
1517377	-	-	-	-	-	-
1517515	-	-	-	-	-	-
1518826	5	25	-	-	-	1
1517378	-	-	-	-	-	-
River View Coal, LLC (KY)
1503178	-	-	-	-	-	-
1519374	4	21	-	-	-	-
White County Coal, LLC (IL)
1102662	-	-	-	-	-	-
1103058	-	25	-	-	-	-
Alliance WOR Processing, LLC (IL)
1103242	-	1	-	-	-	-
Gibson County Coal, LLC (IN)
1202388	-	1	-	-	-	-
1202215	2	9	-	-	-	-
Sebree Mining, LLC (KY)
1519264	-	-	-	-	-	-
1518547	-	7	-	-	-	-
1518864	-	-	-	-	-	-
1517044	-	-	-	-	-	-
Central Appalachian Operations
Pontiki Coal, LLC (KY)
1508413	-	-	-	-	-	-
1509571	-	-	-	-	-	-
1514324	-	4	-	1	-	-
1518839	-	17	-	-	-	-
1518056	-	-	-	-	-	-
MC Mining, LLC (KY)
1508079	-	43	-	-	-	-
1517733	-	-	-	-	-	-
1519515	-	-	-	-	-	-
Northern Appalachian Operations
Mettiki Coal, LLC (MD)
1800621	-	-	-	-	-	-
1800671	-	-	-	-	-	-
Mettiki Coal (WV), LLC
4609028	-	5	-	-	-	-
Tunnel Ridge, LLC (PA/WV)
4608864	-	7	-	-	-	-
Other
4403236	-	-	-	-	-	-
4403255	-	-	-	-	-	-
4406630	-	-	-	-	-	-
4406867	-	-	-	-	-	-

EXHIBIT 95.1

(1)The statistics reported for each of our subsidiaries listed above are segregated into specific MSHA identification numbers.

(2)Mine Act section 104(a) S&S citations shown above are for alleged violations of mandatory health or safety standards that could significantly and substantially contribute to a coal mine health and safety hazard.  It should be noted that, for purposes of this table, S&S citations that are included in another column, such as Section 104(d) citations, are not also included as Section 104(a) S&S citations in this column.

(3)Mine Act section 104(b) orders are for alleged failures to totally abate a citation within the period of time specified in the citation.

(4)Mine Act section 104(d) citations and orders are for an alleged unwarrantable failure (i.e. aggravated conduct constituting more than ordinary negligence) to comply with mandatory health or safety standards.

(5)Mine Act section 110(b)(2) violations are for alleged failure to make reasonable efforts to eliminate a known violation of a mandatory safety or health standard that substantially proximately caused, or reasonably could have been expected to cause, death or serious bodily injury.

(6)Mine Act section 107(a) orders are for alleged conditions or practices which could reasonably be expected to cause death or serious physical harm before such condition or practice can be abated and result in orders of immediate withdrawal from the area of the mine affected by the condition.

(7)Amounts shown include assessments proposed by MSHA during the three months ended March 31, 2013 on all citations and orders, including those citations and orders that are not required to be included within the above chart.

(8)Mine Act section 104(e) written notices are for an alleged pattern of violations of mandatory health or safety standards that could significantly and substantially contribute to a coal mine safety or health hazard, or the potential to have such a pattern.

EX-99.1

Exhibit 99.1

Internal Revenue Service	Department of the Treasury
Large Business & International
Mail Stop 4139 JP 55 N Robinson Oklahoma City, OK 73102 THE TAX MATTERS PARTNER Alliance Coal LLC PO Box 22027 Tulsa, OK 74121	Date: April 12, 2013 Taxpayer Identification Number: Name of Partnership: Alliance Coal LLC Partnership ID Number: 73-0956034 Tax Year Ended: December 31, 2011 Person to Contact: John Peil Employee Identification Number: 1000668398 Contact Hours: 8:00 AM - 4:30 PM Telephone Number (not toll free): 405-297-4863

Notice of beginning of administrative proceeding

We’re starting our audit of your partnership’s federal tax return

By law, we’re required to notify you that we’re beginning our audit of your partnership’s federal tax return. As a partner, you may already be aware of this audit, which we’ll conduct with your partnership’s Tax Matters Partner.

What you need to do

During the audit, most of our communication will be directly with your partnership’s Tax Matters Partner. It’s your responsibility to regularly communicate with your Tax Matters Partner to stay informed about the audit’s progress. Our records show that the most recent address for the partnership where you can contact your Tax Matters Partner is:

Alliance Coal LLC

PO Box 22027

Tulsa, OK 74121

Keep in mind that the results of the audit will apply to all partners, even if you choose to stay uninformed, or your Tax Matters Partner doesn’t keep you updated. Please contact your Tax Matters Partner if you’d like to participate in this audit.

If you’re the Tax Matters Partner

As a Tax Matters Partner, you’re required to keep all partners informed of any IRS proceedings and related court cases. Additionally, you must provide us with the name, address, profits interest, and Taxpayer Identification number for each person who was a partner during the tax year that we’re auditing. If you haven’t already provided this information, or if it needs to be updated, please send it to the IRS address shown on this letter. The responsibilities of the Tax Matters Partner are set forth in Treasury Regulation (26 C.F.R.) §301.6223(g)-1.

Letter 1787 (Rev. 12-2011)

Catalog Number 62157C

If you’re a pass-thru partner

All pass-thru partners, including estates, trusts, S corporations, partnerships, or nominees of another person, are required to send a copy of this notice to anyone who holds an interest in your entity. You must send a copy within 30 days of receiving this notice. For more information on the responsibilities of pass-thru partners, see Treasury Regulation (26 C.F.R) Section 301.6223(h)-1.

What to expect

Because you’re a partner, your own return may be affected if we make any adjustments to the partnership’s return as a result of the audit. Your share of interest in the partnership will determine how much your return may be affected by any adjustments. We’ll notify you if we make any partnership-related adjustments.

Additional information

·  Visit www.irs.gov and search for “tax matters partner.” You can also find the following online:

—  Publication 1, Your Rights as a Taxpayer

—  Publication 541, Partnerships

·  Keep this notice for your records.

If you have questions, you may write or call the IRS contact person whose name, address and telephone number are listed at the top of this letter. If you write, please enclose a copy of this letter, and include your telephone number with the most convenient time for us to call you. If our number is outside of your local calling area, there may be a long distance charge.

Sincerely,

John Peil

Internal Revenue Agent

Letter 1787 (Rev. 12-2011)

Catalog Number 62157C

XML

COMPENSATION PLANS (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended	3 Months Ended				0 Months Ended	36 Months Ended	3 Months Ended
	Feb. 15, 2013 ARLP LTIP	Mar. 31, 2013 ARLP LTIP	Mar. 31, 2012 ARLP LTIP	Mar. 31, 2013 ARLP LTIP Phantom Share Units (PSUs)	Jan. 23, 2013 ARLP LTIP Phantom Share Units (PSUs)	Jan. 02, 2013 ARLP LTIP, 2010 Grants Phantom Share Units (PSUs)	Dec. 31, 2012 ARLP LTIP, 2010 Grants Phantom Share Units (PSUs)	Mar. 31, 2013 SERP and Deferred Compensation Plans	Mar. 31, 2012 SERP and Deferred Compensation Plans	Mar. 31, 2013 SERP and Deferred Compensation Plans Phantom Share Units (PSUs)	Mar. 31, 2012 SERP and Deferred Compensation Plans Phantom Share Units (PSUs)
Compensation Plans
Units for which vesting requirements were deemed satisfied						130,102
Forfeited (in units)							8,028
Common units issued upon vesting	82,400
Common units granted				146,725						3,937	2,000
Additional grants authorized (in units)					156,575
Fair value as intrinsic value at date of grant (in dollars per unit)				$ 63.02						$ 61.67	$ 73.00
Share based compensation expense		$ 1.7	$ 1.5					$ 0.3	$ 0.2
Units available for grant		2,100,000
Unrecognized compensation expense		14.7
Weighted-average period for recognition of expense		1 year 10 months 24 days
Intrinsic value of outstanding grants				22.6						10.2
Total unit based obligation recorded		$ 8.7						$ 10.6
Units outstanding										160,728

XML

LONG-TERM DEBT (Details 2) (USD $) In Millions, unless otherwise specified	12 Months Ended			3 Months Ended
	Mar. 31, 2013 ARLP Debt Arrangements	Mar. 31, 2013 ARLP Debt Arrangements Maximum	Mar. 31, 2013 ARLP Debt Arrangements Minimum	Mar. 31, 2013 Revolving credit facility
Long-Term Debt
Revolving credit facility				$ 700
ARLP debt arrangements requirements, debt to cash flow ratio		3.0
ARLP debt arrangements requirements, cash flow to interest expense ratio			3.0
ARLP debt arrangements requirements, period over which the ratios are required to be maintained	1 year
Actual debt to cash flow ratio for trailing twelve months	1.21
Actual cash flow to interest expense ratio for trailing twelve months	17.8
Letters of credit outstanding				23.5
Line of credit facility, available for borrowing capacity				$ 526.5
Annual commitment fee percentage, undrawn portion				0.25%

XML

WORKERS' COMPENSATION AND PNEUMOCONIOSIS (Tables)

3 Months Ended

Mar. 31, 2013

Accrued Workers Compensation And Pneumoconiosis Benefits

Reconciliation of Changes in Workers Compensation Liability

The changes in the workers’ compensation liability (including current and long-term liability balances) for each of the periods presented were as follows (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Beginning balance	$	77,046	$	73,201
Accruals increase	3,965		5,923
Payments	(2,876)		(2,906)
Interest accretion	620		684
Ending balance	$	78,755	$	76,902

Black Lung

Accrued Workers Compensation And Pneumoconiosis Benefits

Components of Net Periodic Benefit Cost

Components of the net periodic benefit cost for each of the periods presented are as follows (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Service cost	$	954	$	872
Interest cost	563		576
Amortization of net loss (1)	168		194
Net periodic benefit cost	$	1,685	$	1,642

(1) Amortization of net loss is included in the operating expenses line item within our condensed consolidated statements of income.

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SEGMENT INFORMATION (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Reconciliation of consolidated Segment Adjusted EBITDA Expense to operating expenses (excluding depreciation, depletion and amortization)
Segment Adjusted EBITDA Expense	$ 348,903	[1]	$ 287,481	[1]
Outside coal purchases	(602)		(14,181)
Other income	274		215
Operating expenses (excluding depreciation, depletion and amortization)	$ 348,575		$ 273,515

[1] Segment Adjusted EBITDA Expense includes operating expenses, outside coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to our customers and consequently we do not realize any gain or loss on transportation revenues. We review Segment Adjusted EBITDA Expense per ton for cost trends.

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WORKERS' COMPENSATION AND PNEUMOCONIOSIS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Reconciliation of the changes in workers' compensation liability
Beginning balance	$ 77,046	$ 73,201
Accruals increase	3,965	5,923
Payments	(2,876)	(2,906)
Interest accretion	620	684
Ending balance	$ 78,755	$ 76,902

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NEW ACCOUNTING STANDARDS

3 Months Ended

Mar. 31, 2013

NEW ACCOUNTING STANDARDS

NEW ACCOUNTING STANDARDS

2.         NEW ACCOUNTING STANDARDS

New Accounting Standards Issued and Adopted

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”).  ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, certain significant amounts reclassified out of AOCI by the respective line items of net income.  ASU 2013-02 does not change the items that must be reported in AOCI.  ASU 2013-02 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2012.  The adoption of ASU 2013-02 did not have a material impact on our condensed consolidated financial statements.

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SEGMENT INFORMATION (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Reconciliation of consolidated Segment Adjusted EBITDA to net income
Consolidated Segment Adjusted EBITDA	$ 188,351	[1],[2]	$ 145,742	[1],[2]
General and administrative	(15,246)		(14,289)
Depreciation, depletion and amortization	(64,382)		(43,033)
Interest expense, net	(6,484)		(5,819)
Income tax benefit	698		367
NET INCOME	$ 102,937		$ 82,968

[1] Segment Adjusted EBITDA is defined as net income 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 (in thousands):

[2] Includes equity in income (loss) of affiliates for the three months ended March 31, 2013 and 2012 of $(4.2) million and $(4.0) million, respectively, included in the White Oak segment and $0.3 million and $0.2 million, respectively, included in the Other and Corporate segment.

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ACQUISITION OF BUSINESS (Details) (Green River, USD $) In Millions, unless otherwise specified	Apr. 02, 2012 T
Green River
Acquisition Of Business
Consideration paid	$ 100.0
Coal reserves (in tons)	40,000,000

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ORGANIZATION AND PRESENTATION (Details)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Ownership interests
Ownership percentage by general partners	2.00%	2.00%
ARLP | SGP
Ownership interests
Ownership percentage by general partners	0.01%
ARLP | MGP
Ownership interests
Ownership percentage by general partners	0.99%
ARLP | AHGP
Ownership interests
Ownership percentage of managing general partner by parent	100.00%
Units owned by parent	15,544,169
Intermediate Partnership | SGP
Ownership interests
Ownership percentage by general partners	0.01%
Intermediate Partnership | MGP
Ownership interests
Ownership percentage by general partners	1.0001%
Alliance Coal | MGP
Ownership interests
Ownership percentage by general partners	0.001%

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SUBSEQUENT EVENTS (Details) (Subsequent Event, USD $) In Millions, except Per Share data, unless otherwise specified	0 Months Ended
	Apr. 26, 2013
Subsequent Event
Subsequent event
Distributions declared per unit	$ 1.13
Approximate distribution to be paid	$ 70.9

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ACQUISITION OF BUSINESS (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Acquisition Of Business
Total revenues, As reported	$ 548,055,000	$ 443,586,000
Net income, as reported	102,937,000	82,968,000
Green River
Acquisition Of Business
Total revenues, Pro forma		470,930,000
Net income, Pro forma		84,249,000
Revenue of acquired business reflected in condensed consolidated statements of income	34,000,000
Net income of acquired business reflected in condensed consolidated statements of income	$ 7,000,000

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FAIR VALUE MEASUREMENTS (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
FAIR VALUE MEASUREMENTS
Fair value of long-term debt, including current maturities	$ 834.8	$ 834.3

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ORGANIZATION AND PRESENTATION

3 Months Ended

Mar. 31, 2013

ORGANIZATION AND PRESENTATION

ORGANIZATION AND PRESENTATION

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, the managing general partner of Alliance Resource Partners, L.P, also referred to as our managing general partner.

· References to “SGP” mean Alliance Resource GP, LLC, the special general partner of Alliance Resource Partners, L.P., also referred to as our special general partner.

· References to “Intermediate Partnership” mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P., also referred to as our intermediate partnership.

· References to “Alliance Coal” mean Alliance Coal, LLC, the holding company for the operations of Alliance Resource Operating Partners, L.P., also referred to as our operating subsidiary.

· References to “AHGP” mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

· References to “AGP” mean Alliance GP, LLC, the general partner of Alliance Holdings GP, 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 to acquire, upon completion of ARLP’s initial public offering on August 19, 1999, certain coal production and marketing assets of Alliance Resource Holdings, Inc., a Delaware corporation (“ARH”), consisting of substantially all of ARH’s operating subsidiaries, but excluding ARH.  ARH is owned by Joseph W. Craft III, the President and Chief Executive Officer and a Director of our managing general partner, and Kathleen S. Craft.  SGP, a Delaware limited liability company, is owned by ARH and holds a 0.01% general partner interest in each of ARLP and the Intermediate Partnership.

We are managed by our managing general partner, MGP, a Delaware limited liability company, which holds a 0.99% and a 1.0001% managing general partner interest in ARLP and the Intermediate Partnership, respectively, and a 0.001% managing member interest in Alliance Coal.  AHGP is a Delaware limited partnership that was formed to become the owner and controlling member of MGP.  AHGP completed its initial public offering on May 15, 2006.  AHGP owns directly and indirectly 100% of the members’ interest of MGP, the incentive distribution rights (“IDR”) in ARLP and 15,544,169 common units of ARLP.

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 March 31, 2013 and December 31, 2012, and the results of our operations, comprehensive income and cash flows for the three months ended March 31, 2013 and 2012.  All of our intercompany transactions and accounts have been eliminated.

These condensed consolidated financial statements and notes are unaudited. However, in the opinion of management, these financial statements reflect all adjustments (which include only 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 for a full year.

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 should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Use of Estimates

The preparation of the ARLP Partnership’s condensed consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) of the United States (“U.S.”) 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.

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LONG-TERM DEBT (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Long-Term Debt
Long-term debt including current and non-current	$ 786,000	$ 791,000
Less current maturities	(18,000)	(18,000)
Total long-term debt	768,000	773,000
Revolving credit facility
Long-Term Debt
Revolving credit facility	150,000	155,000
Senior notes
Long-Term Debt
Long-term debt including current and non-current	36,000	36,000
Series A Senior Notes
Long-Term Debt
Long-term debt including current and non-current	205,000	205,000
Series B Senior Notes
Long-Term Debt
Long-term debt including current and non-current	145,000	145,000
Term loan
Long-Term Debt
Long-term debt including current and non-current	$ 250,000	$ 250,000

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COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS (Details) (Pension Plan, USD $)	0 Months Ended	3 Months Ended					12 Months Ended
	Apr. 15, 2013	Mar. 31, 2013		Mar. 31, 2012		Dec. 31, 2012	Dec. 31, 2013 Forecast
Defined Benefit Plan Disclosure
Service cost		$ 760,000		$ 754,000
Interest cost		852,000		818,000
Expected return on plan assets		(1,233,000)		(956,000)
Amortization of net loss		559,000	[1]	430,000	[1]
Net periodic benefit cost		938,000		1,046,000
Employer contribution	800,000	0					2,400,000
Expected contribution for pension plan in 2013						2,400,000
Expected quarterly contribution for the remainder of 2013		$ 800,000

[1] Amortization of net loss is included in the operating expenses line item within our condensed consolidated statements of income.

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 28,677		$ 28,283
Trade receivables	168,270		172,724
Other receivables	1,097		1,019
Due from affiliates	157		658
Inventories	50,628		46,660
Advance royalties	11,492		11,492
Prepaid expenses and other assets	14,874		20,476
Total current assets	275,195		281,312
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost	2,434,704		2,361,863
Less accumulated depreciation, depletion and amortization	(886,497)		(832,293)
Total property, plant and equipment, net	1,548,207		1,529,570
OTHER ASSETS:
Advance royalties	24,955		23,267
Equity investments in affiliates	115,525		88,513
Due from affiliate	4,862		3,084
Other long-term assets	30,794		30,226
Total other assets	176,136		145,090
TOTAL ASSETS	1,999,538	[1]	1,955,972
CURRENT LIABILITIES:
Accounts payable	97,282		100,174
Due to affiliates	407		327
Accrued taxes other than income taxes	25,048		19,998
Accrued payroll and related expenses	39,038		38,501
Accrued interest	6,398		1,435
Workers' compensation and pneumoconiosis benefits	9,468		9,320
Current capital lease obligations	1,069		1,000
Other current liabilities	23,603		19,572
Current maturities, long-term debt	18,000		18,000
Total current liabilities	220,313		208,327
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities	768,000		773,000
Pneumoconiosis benefits	61,306		59,931
Accrued pension benefit	31,457		31,078
Workers' compensation	70,347		68,786
Asset retirement obligations	82,017		81,644
Long-term capital lease obligations	18,260		18,613
Other liabilities	9,211		9,147
Total long-term liabilities	1,040,598		1,042,199
Total liabilities	1,260,911		1,250,526
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited Partners - Common Unitholders 36,963,054 and 36,874,949 units outstanding, respectively	1,051,624		1,020,823
General Partners' deficit	(271,460)		(273,113)
Accumulated other comprehensive loss	(41,537)		(42,264)
Total Partners' Capital	738,627		705,446
TOTAL LIABILITIES AND PARTNERS' CAPITAL	$ 1,999,538		$ 1,955,972

[1] Total assets for the White Oak and Other and Corporate Segments include investments in affiliate of $113.7 million and $1.9 million, respectively, at March 31, 2013 and $40.0 million and $1.7 million, respectively, at March 31, 2012.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
NET INCOME	$ 102,937		$ 82,968
OTHER COMPREHENSIVE INCOME:
Total adjustments	727		624
TOTAL COMPREHENSIVE INCOME	103,664		83,592
Defined benefit pension plan
OTHER COMPREHENSIVE INCOME:
Amortization of actuarial loss	559	[1]	430	[1]
Total adjustments	559		430
Pneumoconiosis benefits
OTHER COMPREHENSIVE INCOME:
Amortization of actuarial loss	168	[1]	194	[1]
Total adjustments	$ 168		$ 194

[1] Amortization of actuarial loss is included in the computation of net periodic benefit cost (see Notes 9 and 11 for additional details).

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NET INCOME PER LIMITED PARTNER UNIT (Details) (USD $)	3 Months Ended
	Mar. 31, 2013
Excess Of $0.275 Per Unit
Incentive distributions
General partner incentive distribution percentage	15.00%
Threshold distribution of net income per unit (in dollars per unit)	$ 0.275
Excess Of $0.3125 Per Unit
Incentive distributions
General partner incentive distribution percentage	25.00%
Threshold distribution of net income per unit (in dollars per unit)	$ 0.3125
Excess Of $0.375 Per Unit
Incentive distributions
General partner incentive distribution percentage	50.00%
Threshold distribution of net income per unit (in dollars per unit)	$ 0.375

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ACQUISITION OF BUSINESS (Tables)

3 Months Ended

Mar. 31, 2013

ACQUISITION OF BUSINESS

Summary of Unaudited Pro Forma Information

	Three Months EndedMarch 31, 2012
	(in thousands)
Total revenues
As reported	$  443,586
Pro forma	$  470,930
Net income
As reported	$    82,968
Pro forma	$    84,249

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NET INCOME PER LIMITED PARTNER UNIT (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
NET INCOME PER LIMITED PARTNER UNIT
Net income	$ 102,937		$ 82,968
Managing general partner's priority distributions	(28,277)		(24,416)
General partners' 2% equity ownership	(1,493)		(1,171)
LIMITED PARTNERS' INTEREST IN NET INCOME	73,167		57,381
Distributions to participating securities	(569)		(498)
Undistributed earnings attributable to participating securities	(432)		(269)
Net income available to limited partners	$ 72,166		$ 56,614
Weighted average limited partner units outstanding - basic and diluted	36,919,002		36,826,980
Basic and Diluted Net income per limited partner unit (in dollars per unit)	$ 1.95	[1]	$ 1.54	[1]
Ownership percentage by general partners	2.00%		2.00%
Anti-dilutive under the treasury stock method (in shares)	324,315		377,229

[1] Diluted EPU gives effect to all dilutive potential common units outstanding during the period using the treasury stock method. Diluted EPU excludes all dilutive potential units calculated under the treasury stock method if their effect is anti-dilutive. For the three months ended March 31, 2013 and 2012, LTIP, SERP and Deferred Compensation Plan units of 324,315 and 377,229, respectively, were considered anti-dilutive under the treasury stock method.

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NET INCOME PER LIMITED PARTNER UNIT (Tables)

3 Months Ended

Mar. 31, 2013

NET INCOME PER LIMITED PARTNER UNIT

Reconciliation of net Income

The following is a reconciliation of net income used for calculating basic earnings per unit and the weighted average units used in computing EPU for the three months ended March 31, 2013 and 2012 (in thousands, except per unit data):

	Three Months EndedMarch 31,
	2013		2012
Net income	$	102,937	$	82,968
Adjustments:
Managing general partner’s priority distributions	(28,277)		(24,416)
General partners’ 2% equity ownership	(1,493)		(1,171)
Limited partners’ interest in net income	73,167		57,381
Less:
Distributions to participating securities	(569)		(498)
Undistributed earnings attributable to participating securities	(432)		(269)
Net income available to limited partners	$	72,166	$	56,614
Weighted average limited partner units outstanding – basic and diluted	36,919		36,827
Basic and diluted net income per limited partner unit (1)	$	1.95	$	1.54

(1) Diluted EPU gives effect to all dilutive potential common units outstanding during the period using the treasury stock method. Diluted EPU excludes all dilutive potential units calculated under the treasury stock method if their effect is anti-dilutive.  For the three months ended March 31, 2013 and 2012, LTIP, SERP and Deferred Compensation Plan units of 324,315 and 377,229, respectively, were considered anti-dilutive under the treasury stock method.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$ 199,478	$ 114,804
Property, plant and equipment:
Capital expenditures	(70,306)	(105,339)
Changes in accounts payable and accrued liabilities	(7,608)	(6,664)
Proceeds from sale of property, plant and equipment	9	15
Purchases of equity investments in affiliate	(29,700)	(4,400)
Payments to affiliate for acquisition and development of coal reserves	(12,064)	(18,000)
Advances/loans to affiliate	(1,643)	(776)
Other		268
Net cash used in investing activities	(121,312)	(134,896)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility	45,000
Payments under revolving credit facility	(50,000)
Payments on capital lease obligations	(284)	(171)
Net settlement of employee withholding taxes on vesting of Long-Term Incentive Plan	(3,015)	(3,734)
Cash contributions by General Partners	114	150
Distributions paid to Partners	(69,587)	(60,722)
Net cash used in financing activities	(77,772)	(64,477)
NET CHANGE IN CASH AND CASH EQUIVALENTS	394	(84,569)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	28,283	273,528
CASH AND CASH EQUIVALENTS AT END OF PERIOD	28,677	188,959
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	3,906	4,224
NON-CASH INVESTING AND FINANCING ACTIVITY:
Accounts payable for purchase of property, plant and equipment	13,364	18,314
Market value of common units issued under Long-Term Incentive and Directors Deferred Compensation Plans before minimum statutory tax withholding requirements	$ 8,583	$ 11,070

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical)	Mar. 31, 2013	Dec. 31, 2012
CONDENSED CONSOLIDATED BALANCE SHEETS
Limited Partners, Common Unitholders, units outstanding	36,963,054	36,874,949

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COMPENSATION PLANS

3 Months Ended

Mar. 31, 2013

COMPENSATION PLANS

COMPENSATION PLANS

10.       COMPENSATION PLANS

Long-Term Incentive Plan

We have the LTIP for certain employees and officers of our managing general partner and its affiliates who perform services for us.  The LTIP awards are grants of non-vested “phantom” or notional units, which upon satisfaction of vesting requirements, entitle the LTIP participant to receive ARLP common units.  Annual grant levels and vesting provisions for designated participants are recommended by our President and Chief Executive Officer, subject to review and approval of the compensation committee of the MGP board of directors (the “Compensation Committee”).  On January 23, 2013, the Compensation Committee determined that the vesting requirements for the 2010 grants of 130,102 restricted units (which is net of 8,028 forfeitures) had been satisfied as of January 1, 2013.  As a result of this vesting, on February 15, 2013, we issued 82,400 unrestricted common units to the LTIP participants. The remaining units were settled in cash to satisfy the individual statutory minimum tax obligations of the LTIP participants.  On January 23, 2013, the Compensation Committee authorized additional grants of up to 156,575 restricted units, of which 146,725 were granted during the three months ended March 31, 2013 and will vest on January 1, 2016, subject to satisfaction of certain financial tests.  The fair value of these 2013 grants is equal to the intrinsic value at the date of grant, which was $63.02 per unit.  LTIP expense was $1.7 million and $1.5 million for the three months ended March 31, 2013 and 2012, respectively.  After consideration of the January 1, 2013 vesting and subsequent issuance of 82,400 common units, 2.1 million units remain available under the LTIP for issuance in the future, assuming all grants issued in 2011, 2012 and 2013 currently outstanding are settled with common units, without reduction for tax withholding, and no future forfeitures occur.

As of March 31, 2013, there was $14.7 million in total unrecognized compensation expense related to the non-vested LTIP grants that are expected to vest.  That expense is expected to be recognized over a weighted-average period of 1.9 years.  As of March 31, 2013, the intrinsic value of the non-vested LTIP grants was $22.6 million.  As of March 31, 2013, the total obligation associated with the LTIP was $8.7 million and is included in the partners’ capital-limited partners line item in our condensed consolidated balance sheets.

As provided under the distribution equivalent rights provisions of the LTIP, all non-vested grants include contingent rights to receive quarterly cash distributions in an amount equal to the cash distributions we make to unitholders during the vesting period.

SERP and Directors Deferred Compensation Plan

We utilize the SERP to provide deferred compensation benefits for certain officers and key employees. All allocations made to participants under the SERP are made in the form of “phantom” ARLP units.  The SERP is administered by the Compensation Committee.

Our directors participate in the Deferred Compensation Plan. Pursuant to the Deferred Compensation Plan, for amounts deferred either automatically or at the election of the director, a notional account is established and credited with notional common units of ARLP, described in the Deferred Compensation Plan as “phantom” units.

For both the SERP and Deferred Compensation Plan, when quarterly cash distributions are made with respect to ARLP common units, an amount equal to such quarterly distribution is credited to each participant’s notional account as additional phantom units.  All grants of phantom units under the SERP and Deferred Compensation Plan vest immediately.

For the three months ended March 31, 2013 and 2012, SERP and Deferred Compensation Plan participant notional account balances were credited with a total of 3,937 and 2,000 phantom units, respectively, and the fair value of these phantom units was $61.67 and $73.00, respectively, on a weighted-average basis.  Total SERP and Deferred Compensation Plan expense was approximately $0.3 million and $0.2 million for the three months ended March 31, 2013 and 2012, respectively.

As of March 31, 2013, there were 160,728 total phantom units outstanding under the SERP and Deferred Compensation Plan and the total intrinsic value of the SERP and Deferred Compensation Plan phantom units was $10.2 million.  As of March 31, 2013, the total obligation associated with the SERP and Deferred Compensation Plan was $10.6 million and is included in the partners’ capital-limited partners line item in our condensed consolidated balance sheets.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	May 09, 2013
Document and Entity Information
Entity Registrant Name	ALLIANCE RESOURCE PARTNERS LP
Entity Central Index Key	0001086600
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		36,963,054
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

3 Months Ended

Mar. 31, 2013

COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

11.       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 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 (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Service cost	$	760	$	754
Interest cost	852		818
Expected return on plan assets	(1,233)		(956)
Amortization of net loss (1)	559		430
Net periodic benefit cost	$	938	$	1,046

(1) Amortization of net loss is included in the operating expenses line item within our condensed consolidated statements of income.

We previously disclosed in our financial statements for the year ended December 31, 2012 that we expected to contribute $2.4 million to the Pension Plan in 2013.  As of March 31, 2013, we had made no contributions to the Pension Plan.  However, on April 15, 2013, we made a contribution payment of $0.8 million for the 2013 plan year.  We expect to make quarterly contributions of $0.8 million for the remainder of 2013 for the 2013 plan year and, therefore, will contribute approximately $2.4 million to the Pension Plan in 2013.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
SALES AND OPERATING REVENUES:
Coal sales	$ 534,509		$ 429,599
Transportation revenues	6,934		6,585
Other sales and operating revenues	6,612		7,402
Total revenues	548,055		443,586
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization)	348,575		273,515
Transportation expenses	6,934		6,585
Outside coal purchases	602		14,181
General and administrative	15,246		14,289
Depreciation, depletion and amortization	64,382		43,033
Total operating expenses	435,739		351,603
INCOME FROM OPERATIONS	112,316		91,983
Interest expense (net of interest capitalized for the three months ended March 31, 2013 and 2012 of $2,531 and $2,954, respectively)	(6,618)		(5,912)
Interest income	134		93
Equity in loss of affiliates, net	(3,867)		(3,778)
Other income	274		215
INCOME BEFORE INCOME TAXES	102,239		82,601
INCOME TAX BENEFIT	(698)		(367)
NET INCOME	102,937		82,968
GENERAL PARTNERS' INTEREST IN NET INCOME	29,770		25,587
LIMITED PARTNERS' INTEREST IN NET INCOME	$ 73,167		$ 57,381
BASIC AND DILUTED NET INCOME PER LIMITED PARTNER UNIT (Note 8) (in dollars per unit)	$ 1.95	[1]	$ 1.54	[1]
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT (in dollars per unit)	$ 1.1075		$ 0.99
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING - BASIC AND DILUTED (in units)	36,919,002		36,826,980

[1] Diluted EPU gives effect to all dilutive potential common units outstanding during the period using the treasury stock method. Diluted EPU excludes all dilutive potential units calculated under the treasury stock method if their effect is anti-dilutive. For the three months ended March 31, 2013 and 2012, LTIP, SERP and Deferred Compensation Plan units of 324,315 and 377,229, respectively, were considered anti-dilutive under the treasury stock method.

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FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2013

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

5.         FAIR VALUE MEASUREMENTS

We apply the provisions of FASB ASC 820, Fair Value Measurement, which, among other things, defines fair value, requires disclosures about assets and liabilities carried at fair value and establishes a hierarchal disclosure framework based upon the quality of inputs used to measure fair value.

Valuation techniques are based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our own market assumptions.  These two types of inputs create the following fair value hierarchy:

· Level 1 – Quoted prices for identical instruments in active markets.

· Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations whose inputs are observable or whose significant value drivers are observable.

· Level 3 – Instruments whose significant value drivers are unobservable.

The carrying amounts for cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of those instruments.  At March 31, 2013 and December 31, 2012, the estimated fair value of our long-term debt, including current maturities, was approximately $834.8 million and $834.3 million, respectively, based on interest rates that we believe are currently available to us for issuance of debt with similar terms and remaining maturities (Note 6). The fair value of debt, which is based upon interest rates for similar instruments in active markets, is classified as a Level 2 measurement under the fair value hierarchy.

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ACQUISITION OF BUSINESS

3 Months Ended

Mar. 31, 2013

ACQUISITION OF BUSINESS

ACQUISITION OF BUSINESS

4.         ACQUISITION OF BUSINESS

On April 2, 2012, we acquired substantially all of Green River Collieries, LLC’s (“Green River”) assets related to its coal mining business and operations located in Webster and Hopkins Counties, Kentucky for consideration of $100.0 million.  The transaction included the Onton No. 9 mining complex (“Onton mine”), which included the mine, a dock, tugboat, and a lease for the preparation plant, and an estimated 40.0 million tons of coal reserves in the West Kentucky No. 9 coal seam.   The Green River acquisition was consistent with our general business strategy and complements our current coal mining operations.

During the quarter ended September 30, 2012, we finalized the purchase price allocation related to the assets acquired and liabilities assumed from Green River.  The adjustments to the preliminary fair values resulted from additional information obtained about facts in existence on April 2, 2012.

The following unaudited pro forma information for the three months ended March 31, 2012 for the ARLP Partnership has been prepared for illustrative purposes as if the business combination occurred on January 1, 2011, the year prior to the acquisition date.  The unaudited pro forma results have been prepared based upon Green River’s historical results with respect to the business acquired and estimates of the effects of the transactions that we believe are reasonable and supportable. The results are not necessarily reflective of the consolidated results of operations had the acquisition actually occurred on January 1, 2011, nor are they indicative of future operating results.

	Three Months EndedMarch 31, 2012
	(in thousands)
Total revenues
As reported	$  443,586
Pro forma	$  470,930
Net income
As reported	$    82,968
Pro forma	$    84,249

The revenues and net income related to the acquired business are reflected in our condensed consolidated statements of income beginning April 2, 2012 and totaled $34.0 million and $7.0 million, respectively, for the three months ended March 31, 2013.

The pro forma net income includes adjustments to depreciation, depletion and amortization to reflect the new basis in property, plant and equipment and intangible assets acquired, elimination of income tax expense, and the elimination of interest expense of Green River as its debt was paid off in conjunction with the acquisition.

Synergies from the acquisition are not reflected in the pro forma results.

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LONG-TERM DEBT (Tables)

3 Months Ended

Mar. 31, 2013

LONG-TERM DEBT

Schedule of Long-Term Debt Instruments

Long-term debt consists of the following (in thousands):

	March 31, 2013			December 31, 2012
Revolving credit facility	$	150,000		$	155,000
Senior notes	36,000			36,000
Series A senior notes	205,000			205,000
Series B senior notes	145,000			145,000
Term loan	250,000			250,000
	786,000			791,000
Less current maturities	(18,000		)	(18,000		)
Total long-term debt	$	768,000		$	773,000

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SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2013

SEGMENT INFORMATION

SEGMENT INFORMATION

12. SEGMENT INFORMATION

We operate in the eastern U.S. as a producer and marketer of coal to major utilities and industrial users.  We aggregate multiple operating segments into five reportable segments: the Illinois Basin, Central Appalachia, Northern Appalachia, White Oak and Other and Corporate.  The first three reportable segments correspond to the three major coal producing regions in the eastern U.S.  Similar economic characteristics for our operating segments within each of these three reportable segments include coal quality, coal seam height, mining and transportation methods and regulatory issues.  The White Oak reportable segment includes our activities associated with the White Oak longwall Mine No. 1 development project more fully described below.

The Illinois Basin reportable segment is comprised of multiple operating segments, including Webster County Coal, LLC’s Dotiki mining complex, Gibson County Coal, LLC’s mining complex, which includes the Gibson North mine and Gibson South project, Hopkins County Coal, LLC’s Elk Creek mining complex, White County Coal, LLC’s Pattiki mining complex, Warrior Coal, LLC’s mining complex, Sebree Mining, LLC’s mining complex, which includes the Onton mine, and River View Coal, LLC’s mining complex.  The development of the Gibson South mine is currently underway.  For information regarding the acquisition of the Onton mine, which was added to the Illinois Basin segment in April 2012, please see Note 4.

The Central Appalachian reportable segment is comprised of two operating segments, the MC Mining, LLC and Pontiki Coal, LLC mining complexes.

The Northern Appalachian reportable segment is comprised of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge, LLC (“Tunnel Ridge”) mining complex and the Penn Ridge Coal, LLC (“Penn Ridge”) property.  The Mettiki mining complex includes Mettiki Coal (WV), LLC’s Mountain View mine and Mettiki Coal, LLC’s preparation plant.  In May 2012, longwall production began at the Tunnel Ridge mine.  We are in the process of permitting the Penn Ridge property for future mine development.

The White Oak reportable segment is comprised of two operating segments, WOR Processing and WOR Properties.  WOR Processing includes both the surface operations at White Oak currently under construction and the equity investment in White Oak.  WOR Properties owns coal reserves acquired from White Oak with a lease-back arrangement (Note 7).

Other and Corporate includes marketing and administrative expenses, Alliance Service, Inc. (“ASI”) and its subsidiary, Matrix Design Group, LLC (“Matrix Design”), Alliance Design Group, LLC (“Alliance Design”) (collectively, Matrix Design and Alliance Design are referred to as the “Matrix Group”), ASI’s ownership of aircraft, the Mt. Vernon Transfer Terminal, LLC (“Mt. Vernon”) dock activities, coal brokerage activity, our equity investment in Mid-America Carbonates, LLC and certain activities of Alliance Resource Properties, LLC.

Reportable segment results as of and for the three months ended March 31, 2013 and 2012 are presented below.

	Illinois Basin		Central Appalachia		Northern Appalachia		White Oak		Other and Corporate		Elimination (1)		Consolidated
	(in thousands)
Reportable segment results as of and for the three months ended March 31, 2013 were as follows:
Total revenues (2)	$	404,823	$	45,025	$	93,792	$	-	$	7,972	$	(3,557)	$	548,055
Segment Adjusted EBITDA Expense (3)	234,145		35,302		73,821		101		9,091		(3,557)		348,903
Segment Adjusted EBITDA (4)(5)	167,221		9,709		16,509		(4,292)		(796)		-		188,351
Total assets (6)	1,046,513		89,543		529,403		272,316		63,202		(1,439)		1,999,538
Capital expenditures (7)	52,031		3,903		8,879		16,953		604		-		82,370
Reportable segment results as of and for the three months ended March 31, 2012 were as follows:
Total revenues (2)	$	342,230	$	41,166	$	47,105	$	-	$	17,104	$	(4,019)	$	443,586
Segment Adjusted EBITDA Expense (3)	201,548		30,754		44,230		135		14,917		(4,103)		287,481
Segment Adjusted EBITDA (4)(5)	136,892		10,210		282		(4,126)		2,399		85		145,742
Total assets (6)	829,320		91,496		492,629		116,886		223,800		(678)		1,753,453
Capital expenditures (7)	54,145		4,101		31,515		24,943		8,635		-		123,339

(1) The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group to our mining operations.

(2) Revenues included in the Other and Corporate column are primarily attributable to the Matrix Group revenues, Mt. Vernon transloading revenues, administrative service revenues from affiliates and brokerage sales.

(3) Segment Adjusted EBITDA Expense includes operating expenses, outside coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to our customers and consequently we do not realize any gain or loss on transportation revenues.  We review Segment Adjusted EBITDA Expense per ton for cost trends.

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

	Three Months Ended
	March 31,
	2013	2012
Segment Adjusted EBITDA Expense	$348,903	$287,481
Outside coal purchases	(602)	(14,181)
Other income	274	215
Operating expenses (excluding depreciation, depletion and amortization)	$348,575	$273,515

(4) Segment Adjusted EBITDA is defined as net income 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 (in thousands):

	Three Months Ended
	March 31,
	2013	2012
Consolidated Segment Adjusted EBITDA	$188,351	$145,742
General and administrative	(15,246)	(14,289)
Depreciation, depletion and amortization	(64,382)	(43,033)
Interest expense, net	(6,484)	(5,819)
Income tax benefit	698	367
Net income	$102,937	$ 82,968

(5) Includes equity in income (loss) of affiliates for the three months ended March 31, 2013 and 2012 of $(4.2) million and $(4.0) million, respectively, included in the White Oak segment and $0.3 million and $0.2 million, respectively, included in the Other and Corporate segment.

(6) Total assets for the White Oak and Other and Corporate Segments include investments in affiliate of $113.7 million and $1.9 million, respectively, at March 31, 2013 and $40.0 million and $1.7 million, respectively, at March 31, 2012.

(7) Capital expenditures shown above for the three months ended March 31, 2013 and 2012 include $12.1 million and $18.0 million, respectively, for acquisition and development of coal reserves in our condensed consolidated statements of cash flow.

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NET INCOME PER LIMITED PARTNER UNIT

3 Months Ended

Mar. 31, 2013

NET INCOME PER LIMITED PARTNER UNIT

NET INCOME PER LIMITED PARTNER UNIT

8.         NET INCOME PER LIMITED PARTNER UNIT

We apply the provisions of FASB ASC 260, Earnings Per Share, which requires the two-class method in calculating basic and diluted earnings per unit (“EPU”).  Net income is allocated to the general partners and limited partners in accordance with their respective partnership percentages, after giving effect to any special income or expense allocations, including incentive distributions to our managing general partner, the holder of the IDR pursuant to our partnership agreement, which are declared and paid following the end of each quarter. Under the quarterly IDR provisions of our partnership agreement, our managing general partner is entitled to receive 15% of the amount we distribute in excess of $0.275 per unit, 25% of the amount we distribute in excess of $0.3125 per unit, and 50% of the amount we distribute in excess of $0.375 per unit.  Our partnership agreement contractually limits our distributions to available cash; therefore, undistributed earnings of the ARLP Partnership are not allocated to the IDR holder.  In addition, our outstanding 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 (“Deferred Compensation Plan”) include rights to nonforfeitable distributions or distribution equivalents and are therefore considered participating securities.  As such, we allocate undistributed and distributed earnings to these outstanding awards in our calculation of EPU.

The following is a reconciliation of net income used for calculating basic earnings per unit and the weighted average units used in computing EPU for the three months ended March 31, 2013 and 2012 (in thousands, except per unit data):

	Three Months EndedMarch 31,
	2013		2012
Net income	$	102,937	$	82,968
Adjustments:
Managing general partner’s priority distributions	(28,277)		(24,416)
General partners’ 2% equity ownership	(1,493)		(1,171)
Limited partners’ interest in net income	73,167		57,381
Less:
Distributions to participating securities	(569)		(498)
Undistributed earnings attributable to participating securities	(432)		(269)
Net income available to limited partners	$	72,166	$	56,614
Weighted average limited partner units outstanding – basic and diluted	36,919		36,827
Basic and diluted net income per limited partner unit (1)	$	1.95	$	1.54

(1) Diluted EPU gives effect to all dilutive potential common units outstanding during the period using the treasury stock method. Diluted EPU excludes all dilutive potential units calculated under the treasury stock method if their effect is anti-dilutive.  For the three months ended March 31, 2013 and 2012, LTIP, SERP and Deferred Compensation Plan units of 324,315 and 377,229, respectively, were considered anti-dilutive under the treasury stock method.

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LONG-TERM DEBT

3 Months Ended

Mar. 31, 2013

LONG-TERM DEBT

LONG-TERM DEBT

6.         LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

	March 31, 2013			December 31, 2012
Revolving credit facility	$	150,000		$	155,000
Senior notes	36,000			36,000
Series A senior notes	205,000			205,000
Series B senior notes	145,000			145,000
Term loan	250,000			250,000
	786,000			791,000
Less current maturities	(18,000		)	(18,000		)
Total long-term debt	$	768,000		$	773,000

Our Intermediate Partnership has $36.0 million in senior notes (“Senior Notes”), $205.0 million in Series A and $145.0 million in Series B senior notes (collectively, the “2008 Senior Notes”), a $700 million revolving credit facility (“Revolving Credit Facility”) and a $250 million term loan (collectively, with the Senior Notes, the 2008 Senior Notes and the Revolving Credit Facility, the “ARLP Debt Arrangements”), which are guaranteed by all of the material direct and indirect subsidiaries of our Intermediate Partnership. The ARLP Debt Arrangements contain various covenants affecting our Intermediate Partnership and its subsidiaries restricting, among other things, the amount of distributions by our Intermediate Partnership, the incurrence of additional indebtedness and liens, the sale of assets, the making of investments, the entry into mergers and consolidations and the entry into transactions with affiliates, in each case subject to various exceptions.  The ARLP Debt Arrangements also require the Intermediate Partnership to remain in control of a certain amount of mineable coal reserves relative to its annual production.  In addition, the ARLP Debt Arrangements require our Intermediate Partnership to maintain (a) debt to cash flow ratio of not more than 3.0 to 1.0 and (b) cash flow to interest expense ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters.  The debt to cash flow ratio and cash flow to interest expense ratio were 1.21 to 1.0 and 17.8 to 1.0, respectively, for the trailing twelve months ended March 31, 2013.  We were in compliance with the covenants of the ARLP Debt Arrangements as of March 31, 2013.

At March 31, 2013, we had borrowings of $150.0 million and $23.5 million of letters of credit outstanding with $526.5 million available for borrowing under the Revolving Credit Facility.  We utilize the Revolving Credit Facility, as appropriate, for working capital requirements, anticipated capital expenditures and investments in affiliates, scheduled debt payments and distribution payments.  We incur an annual commitment fee of 0.25% on the undrawn portion of the Revolving Credit Facility.

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WHITE OAK TRANSACTIONS

3 Months Ended

Mar. 31, 2013

WHITE OAK TRANSACTIONS

WHITE OAK TRANSACTIONS

7.        WHITE OAK TRANSACTIONS

On September 22, 2011 (the “Transaction Date”), we entered into a series of transactions with White Oak Resources LLC (“White Oak”) and related entities to support development of a longwall mining operation currently under construction.  The transactions feature several components, including an equity investment in White Oak (represented by “Series A Units” containing certain distribution and liquidation preferences), the acquisition and lease-back of certain coal reserves and surface rights and a backstop equipment financing facility.  Our initial investment funding to White Oak at the Transaction Date, consummated utilizing existing cash on hand, was $69.5 million and we have funded to White Oak $164.8 million between the Transaction Date and March 31, 2013.  We expect to fund a total of approximately $300.5 million to $425.5 million from the Transaction Date through the next approximately two years, which includes the funding made to White Oak at closing and through March 31, 2013 discussed above.  On the Transaction Date, we also entered into a coal handling and services agreement, pursuant to which we are constructing a preparation plant and other surface facilities.  We expect to fund these additional commitments utilizing existing cash balances, future cash flows from operations, borrowings under credit facilities and cash provided from the issuance of debt or equity.   The following information discusses each component of these transactions in further detail.

Hamilton County, Illinois Reserve Acquisition

On the Transaction Date, our subsidiary, Alliance WOR Properties, LLC (“WOR Properties”), acquired from White Oak the rights to approximately 204.9 million tons of proven and probable high-sulfur coal reserves, of which 105.2 million tons are currently being developed for future mining by White Oak, and certain surface properties and rights in Hamilton County, Illinois (the “Reserve Acquisition”).  Hamilton County is adjacent to White County, Illinois, where our White County Coal, LLC Pattiki mine is located.  The asset purchase price of $33.8 million cash paid at closing was allocated to owned and leased coal rights.  During the year ended December 31, 2012, WOR Properties provided $34.6 million to White Oak for development of the acquired coal reserves, fulfilling its initial commitment for further development funding.  During the three months ended March 31, 2013, WOR Properties acquired from White Oak for $12.1 million cash paid at closing, an additional 42.2 million tons of reserves, of which 21.9 million tons are currently being developed for future mining by White Oak, and has a remaining commitment of $42.5 million for additional coal reserve purchases and development funding.

Equity Investment – Series A Units

Concurrent with the Reserve Acquisition, our subsidiary, Alliance WOR Processing, LLC (“WOR Processing”), made an equity investment of $35.7 million in White Oak to purchase Series A Units representing ownership in White Oak.  WOR Processing purchased $66.8 million of additional Series A Units between the Transaction Date and December 31, 2012 and $29.7 million of additional Series A Units during the three months ended March 31, 2013.

WOR Processing’s ownership and member’s voting interest in White Oak at March 31, 2013 were 18.1% based upon currently outstanding voting units.  The remainder of the equity ownership in White Oak, represented by Series B Units, is held by other investors and members of White Oak management.

We continually review all rights provided to WOR Processing and us by various agreements with White Oak and continue to conclude all such rights are protective or participating in nature and do not provide WOR Processing or us the ability to unilaterally direct any of the primary activities of White Oak that most significantly impact its economic performance.  As such, we recognize WOR Processing’s interest in White Oak as an equity investment in affiliate in our consolidated balance sheets.  As of March 31, 2013, WOR Processing had invested $132.2 million in Series A Units of White Oak equity, which represents our current maximum exposure to loss as a result of our equity investment in White Oak exclusive of capitalized interest.  White Oak has made no distributions to us.

We record WOR Processing’s equity in earnings or losses of affiliates under the hypothetical liquidation at book value method of accounting due to the preferences to which WOR Processing is entitled on distributions.  For the three months ended March 31, 2013 and 2012, we were allocated losses of $4.2 million and $4.0 million, respectively.

Services Agreement

Simultaneous with the closing of the Reserve Acquisition, WOR Processing entered into a Coal Handling and Preparation Agreement (“Services Agreement”) with White Oak pursuant to which WOR Processing committed to construct and operate a coal preparation plant and related facilities and a rail loop and loadout facility to service the White Oak longwall Mine No. 1.  In addition, the Intermediate Partnership agreed to loan $10.5 million to White Oak for the construction of various assets on the surface property, including but not limited to, a bathhouse, office and warehouse (“Construction Loan”).  The Construction Loan has a term of 20 years, with repayment scheduled to begin in 2015.  White Oak has utilized $4.6 million available under the Construction Loan as of March 31, 2013.

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WORKERS' COMPENSATION AND PNEUMOCONIOSIS

3 Months Ended

Mar. 31, 2013

WORKERS' COMPENSATION AND PNEUMOCONIOSIS

WORKERS' COMPENSATION AND PNEUMOCONIOSIS

9.         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 (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Beginning balance	$	77,046	$	73,201
Accruals increase	3,965		5,923
Payments	(2,876)		(2,906)
Interest accretion	620		684
Ending balance	$	78,755	$	76,902

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 (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Service cost	$	954	$	872
Interest cost	563		576
Amortization of net loss (1)	168		194
Net periodic benefit cost	$	1,685	$	1,642

(1) Amortization of net loss is included in the operating expenses line item within our condensed consolidated statements of income.

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WHITE OAK TRANSACTIONS (Details) (USD $)	3 Months Ended		0 Months Ended	3 Months Ended		15 Months Ended	18 Months Ended	3 Months Ended		0 Months Ended	3 Months Ended	12 Months Ended	0 Months Ended	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Sep. 22, 2011 White Oak	Mar. 31, 2013 White Oak	Mar. 31, 2012 White Oak	Dec. 31, 2012 White Oak	Mar. 31, 2013 White Oak	Mar. 31, 2013 White Oak Minimum	Mar. 31, 2013 White Oak Maximum	Sep. 22, 2011 White Oak Reserve Acquisition	Mar. 31, 2013 White Oak Reserve Acquisition	Dec. 31, 2012 White Oak Reserve Acquisition	Sep. 22, 2011 White Oak Reserve Acquisition, rights purchased on Transaction Date T	Mar. 31, 2013 White Oak Reserve Acquisition, rights purchased on Transaction Date T	Mar. 31, 2013 White Oak Reserve Acquisition, rights purchased during first quarter of 2013 T	Mar. 31, 2013 White Oak Services Agreement
White oak transactions
Amount funded by partnership			$ 69,500,000				$ 164,800,000
Total expected funding by partnership								300,500,000	425,500,000
Expected period of funding				2 years
Coal reserves, rights purchased, approximate tonnage													204,900,000		42,200,000
Coal reserves tonnage developed for future mining														105,200,000	21,900,000
Payment for acquisition of coal reserves and other assets	12,064,000	18,000,000								33,800,000	12,100,000	34,600,000
Commitment for additional coal reserve acquisitions											42,500,000
Purchase of equity investment			35,700,000	29,700,000		66,800,000
Voting Interest (as a percent)				18.10%			18.10%
Equity method investment, net				132,200,000			132,200,000
Distributions from White Oak							0
Allocated losses				4,200,000	4,000,000
Additional commitment for construction loan																10,500,000
Term of construction loan																20 years
Construction Loan Utilized																$ 4,600,000

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ORGANIZATION AND PRESENTATION (Policies)

3 Months Ended

Mar. 31, 2013

ORGANIZATION AND PRESENTATION

Basis Of Presentation

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 March 31, 2013 and December 31, 2012, and the results of our operations, comprehensive income and cash flows for the three months ended March 31, 2013 and 2012.  All of our intercompany transactions and accounts have been eliminated.

These condensed consolidated financial statements and notes are unaudited. However, in the opinion of management, these financial statements reflect all adjustments (which include only 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 for a full year.

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 should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.

Use of Estimates

Use of Estimates

The preparation of the ARLP Partnership’s condensed consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) of the United States (“U.S.”) 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.

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COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS (Tables) (Defined benefit pension plan)

3 Months Ended

Mar. 31, 2013

Defined benefit pension plan

Defined Benefit Plan Disclosure

Components of Net Periodic Benefit Cost

Components of the net periodic benefit cost for each of the periods presented are as follows (in thousands):

	Three Months EndedMarch 31,
	2013		2012
Service cost	$	760	$	754
Interest cost	852		818
Expected return on plan assets	(1,233)		(956)
Amortization of net loss (1)	559		430
Net periodic benefit cost	$	938	$	1,046

(1) Amortization of net loss is included in the operating expenses line item within our condensed consolidated statements of income.

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SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013 segment		Mar. 31, 2012		Dec. 31, 2012
Segment Reporting Information
Number of reportable segments	5
Number of reportable segments corresponding to major coal producing regions of eastern U.S.	3
Reportable segment results:
Total revenues	$ 548,055	[1]	$ 443,586	[1]
Segment Adjusted EBITDA Expense	348,903	[2]	287,481	[2]
Segment Adjusted EBITDA	188,351	[3],[4]	145,742	[3],[4]
Total assets	1,999,538	[5]	1,753,453	[5]	1,955,972
Capital expenditures	82,370	[6]	123,339	[6]
Equity in income (loss) of affiliates, net	(3,867)		(3,778)
Equity investments in affiliates	115,525				88,513
Payments to affiliate for development of coal reserves	12,064		18,000
Illinois Basin
Reportable segment results:
Total revenues	404,823	[1]	342,230	[1]
Segment Adjusted EBITDA Expense	234,145	[2]	201,548	[2]
Segment Adjusted EBITDA	167,221	[3],[4]	136,892	[3],[4]
Total assets	1,046,513	[5]	829,320	[5]
Capital expenditures	52,031	[6]	54,145	[6]
Central Appalachia
Segment Reporting Information
Number of operating segments within the reportable segment	2
Reportable segment results:
Total revenues	45,025	[1]	41,166	[1]
Segment Adjusted EBITDA Expense	35,302	[2]	30,754	[2]
Segment Adjusted EBITDA	9,709	[3],[4]	10,210	[3],[4]
Total assets	89,543	[5]	91,496	[5]
Capital expenditures	3,903	[6]	4,101	[6]
Northern Appalachia
Reportable segment results:
Total revenues	93,792	[1]	47,105	[1]
Segment Adjusted EBITDA Expense	73,821	[2]	44,230	[2]
Segment Adjusted EBITDA	16,509	[3],[4]	282	[3],[4]
Total assets	529,403	[5]	492,629	[5]
Capital expenditures	8,879	[6]	31,515	[6]
White Oak
Segment Reporting Information
Number of operating segments within the reportable segment	2
Reportable segment results:
Segment Adjusted EBITDA Expense	101	[2]	135	[2]
Segment Adjusted EBITDA	(4,292)	[3],[4]	(4,126)	[3],[4]
Total assets	272,316	[5]	116,886	[5]
Capital expenditures	16,953	[6]	24,943	[6]
Equity in income (loss) of affiliates, net	(4,200)		(4,000)
Equity investments in affiliates	113,700		40,000
Other And Corporate
Reportable segment results:
Total revenues	7,972	[1]	17,104	[1]
Segment Adjusted EBITDA Expense	9,091	[2]	14,917	[2]
Segment Adjusted EBITDA	(796)	[3],[4]	2,399	[4]
Total assets	63,202	[5]	223,800	[5]
Capital expenditures	604	[6]	8,635	[6]
Equity in income (loss) of affiliates, net	300		200
Equity investments in affiliates	1,900		1,700
Elimination
Reportable segment results:
Total revenues	(3,557)	[1],[7]	(4,019)	[1],[7]
Segment Adjusted EBITDA Expense	(3,557)	[2],[7]	(4,103)	[2],[7]
Segment Adjusted EBITDA			85	[3],[4],[7]
Total assets	$ (1,439)	[5],[7]	$ (678)	[5],[7]

[1] Revenues included in the Other and Corporate column are primarily attributable to the Matrix Group revenues, Mt. Vernon transloading revenues, administrative service revenues from affiliates and brokerage sales.

[2] Segment Adjusted EBITDA Expense includes operating expenses, outside coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to our customers and consequently we do not realize any gain or loss on transportation revenues. We review Segment Adjusted EBITDA Expense per ton for cost trends.

[3] Segment Adjusted EBITDA is defined as net income 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 (in thousands):

[4] Includes equity in income (loss) of affiliates for the three months ended March 31, 2013 and 2012 of $(4.2) million and $(4.0) million, respectively, included in the White Oak segment and $0.3 million and $0.2 million, respectively, included in the Other and Corporate segment.

[5] Total assets for the White Oak and Other and Corporate Segments include investments in affiliate of $113.7 million and $1.9 million, respectively, at March 31, 2013 and $40.0 million and $1.7 million, respectively, at March 31, 2012.

[6] Capital expenditures shown above for the three months ended March 31, 2013 and 2012 include $12.1 million and $18.0 million, respectively, for acquisition and development of coal reserves in our condensed consolidated statements of cash flow.

[7] The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group to our mining operations.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Interest expense, interest capitalized	$ 2,531	$ 2,954

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CONTINGENCIES

3 Months Ended

Mar. 31, 2013

CONTINGENCIES

CONTINGENCIES

3.         CONTINGENCIES

Various lawsuits, claims and regulatory proceedings incidental to our business 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 were different from management’s current opinion and in amounts greater than our accruals, then they could have a material adverse effect.

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SEGMENT INFORMATION (Tables)

3 Months Ended

Mar. 31, 2013

SEGMENT INFORMATION

Schedule of Segment Reporting Information, by Segment

	Illinois Basin		Central Appalachia		Northern Appalachia		White Oak		Other and Corporate		Elimination (1)		Consolidated
	(in thousands)
Reportable segment results as of and for the three months ended March 31, 2013 were as follows:
Total revenues (2)	$	404,823	$	45,025	$	93,792	$	-	$	7,972	$	(3,557)	$	548,055
Segment Adjusted EBITDA Expense (3)	234,145		35,302		73,821		101		9,091		(3,557)		348,903
Segment Adjusted EBITDA (4)(5)	167,221		9,709		16,509		(4,292)		(796)		-		188,351
Total assets (6)	1,046,513		89,543		529,403		272,316		63,202		(1,439)		1,999,538
Capital expenditures (7)	52,031		3,903		8,879		16,953		604		-		82,370
Reportable segment results as of and for the three months ended March 31, 2012 were as follows:
Total revenues (2)	$	342,230	$	41,166	$	47,105	$	-	$	17,104	$	(4,019)	$	443,586
Segment Adjusted EBITDA Expense (3)	201,548		30,754		44,230		135		14,917		(4,103)		287,481
Segment Adjusted EBITDA (4)(5)	136,892		10,210		282		(4,126)		2,399		85		145,742
Total assets (6)	829,320		91,496		492,629		116,886		223,800		(678)		1,753,453
Capital expenditures (7)	54,145		4,101		31,515		24,943		8,635		-		123,339

(1) The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group to our mining operations.

(2) Revenues included in the Other and Corporate column are primarily attributable to the Matrix Group revenues, Mt. Vernon transloading revenues, administrative service revenues from affiliates and brokerage sales.

(3) Segment Adjusted EBITDA Expense includes operating expenses, outside coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to our customers and consequently we do not realize any gain or loss on transportation revenues.  We review Segment Adjusted EBITDA Expense per ton for cost trends.

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

	Three Months Ended
	March 31,
	2013	2012
Segment Adjusted EBITDA Expense	$348,903	$287,481
Outside coal purchases	(602)	(14,181)
Other income	274	215
Operating expenses (excluding depreciation, depletion and amortization)	$348,575	$273,515

(4) Segment Adjusted EBITDA is defined as net income 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 (in thousands):

	Three Months Ended
	March 31,
	2013	2012
Consolidated Segment Adjusted EBITDA	$188,351	$145,742
General and administrative	(15,246)	(14,289)
Depreciation, depletion and amortization	(64,382)	(43,033)
Interest expense, net	(6,484)	(5,819)
Income tax benefit	698	367
Net income	$102,937	$ 82,968

(5) Includes equity in income (loss) of affiliates for the three months ended March 31, 2013 and 2012 of $(4.2) million and $(4.0) million, respectively, included in the White Oak segment and $0.3 million and $0.2 million, respectively, included in the Other and Corporate segment.

(6) Total assets for the White Oak and Other and Corporate Segments include investments in affiliate of $113.7 million and $1.9 million, respectively, at March 31, 2013 and $40.0 million and $1.7 million, respectively, at March 31, 2012.

(7) Capital expenditures shown above for the three months ended March 31, 2013 and 2012 include $12.1 million and $18.0 million, respectively, for acquisition and development of coal reserves in our condensed consolidated statements of cash flow.

Reconciliation of Consolidated Segment Adjusted EBITDA Expense to Operating Expenses

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

	Three Months Ended
	March 31,
	2013	2012
Segment Adjusted EBITDA Expense	$348,903	$287,481
Outside coal purchases	(602)	(14,181)
Other income	274	215
Operating expenses (excluding depreciation, depletion and amortization)	$348,575	$273,515

Reconciliation of Consolidated Segment Adjusted EBITDA to Net Income

Consolidated Segment Adjusted EBITDA is reconciled to net income as follows (in thousands):

	Three Months Ended
	March 31,
	2013	2012
Consolidated Segment Adjusted EBITDA	$188,351	$145,742
General and administrative	(15,246)	(14,289)
Depreciation, depletion and amortization	(64,382)	(43,033)
Interest expense, net	(6,484)	(5,819)
Income tax benefit	698	367
Net income	$102,937	$ 82,968

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WORKERS' COMPENSATION AND PNEUMOCONIOSIS (Details 2) (Black Lung, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Black Lung
Accrued Workers Compensation And Pneumoconiosis Benefits
Service cost	$ 954		$ 872
Interest cost	563		576
Amortization of net loss	168	[1]	194	[1]
Net periodic benefit cost	$ 1,685		$ 1,642

[1] Amortization of net loss is included in the operating expenses line item within our condensed consolidated statements of income.

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2013

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

13. SUBSEQUENT EVENTS

On April 26, 2013, we declared a quarterly distribution for the quarter ended March 31, 2013, of $1.13 per unit, on all common units outstanding, totaling approximately $70.9 million (which includes our managing general partner’s incentive distributions), payable on May 15, 2013 to all unitholders of record as of May 8, 2013.