ALLIANCE RESOURCE PARTNERS LP Fair Value Disclosure
5.FAIR VALUE MEASUREMENTS
The following table summarizes certain fair value measurements within the hierarchy not included elsewhere in these notes:
Fair Value | |||||||||||||
| Carrying | | Level 1 | | Level 2 | | Level 3 | | |||||
(in thousands) | |||||||||||||
December 31, 2025 | |||||||||||||
Recorded on a recurring basis: | |||||||||||||
Digital assets | $ | 51,834 | $ | 51,834 | $ | — | $ | — | |||||
Contingent consideration | $ | 18,000 | $ | — | $ | — | $ | 18,000 | |||||
Additional disclosures: | |||||||||||||
Long-term debt | $ | 463,456 | $ | — | $ | 508,844 | $ | — | |||||
December 31, 2024 | |||||||||||||
Recorded on a recurring basis: | |||||||||||||
Digital assets | $ | 45,037 | $ | 45,037 | $ | — | $ | — | |||||
Contingent consideration | $ | 13,100 | $ | — | $ | — | $ | 13,100 | |||||
Additional disclosures: | |||||||||||||
Long-term debt | $ | 490,387 | $ | — | $ | 523,461 | $ | — | |||||
The carrying amounts for cash equivalents, accounts receivable, accounts payable, accrued and other liabilities, approximate fair value due to the short maturity of those instruments.
The fair value of our digital assets is based on an exchange quoted price. See Note 7 – Digital Assets for more information on our digital assets.
The fair value measurement of our contingent consideration liability is determined using an option approach methodology simulation based on significant inputs not observable in active markets representing a Level 3 fair value measurement under the fair value hierarchy. Our contingent consideration liability is associated with our acquisition of our Hamilton County Coal, LLC (“Hamilton”) mine in 2015 wherein we agreed to pay the seller additional consideration for the acquisition if the average quarterly sales price exceeds a defined threshold price in any future quarter subject to a maximum of $110.0 million reduced for any payments made under an overriding royalty agreement with the sellers relating to mineral interests controlled by our Hamilton mine. We have paid $16.1 million under this contingent consideration agreement and $0.7 million under the overriding royalty agreement as of December 31, 2025.
The estimated fair value of our long-term debt, including current maturities, is based on interest rates that we believe are currently available to us in active markets for issuance of debt with similar terms and remaining maturities. See Note 12 – Long-Term Debt for additional information on our long-term debt.
Quantitative Information about Level 3 Fair Value Measurements
Contingent Consideration
Our option approach methodology simulation generates an expected payment for each quarter in Hamilton’s expected mine life by using proprietary internal estimates of our uncommitted coal sales prices and generating a simulated uncommitted coal sales price by applying unobservable inputs through a million simulations. This simulated coal sales price is then used in a calculation of the expected future payments using our proprietary committed coal sales prices and production for each quarter. We then calculate the present value of the estimated future payments. The following table presents quantitative information about certain significant unobservable inputs used in the fair value measurement for our contingent consideration liability. The use of significant unobservable inputs results in uncertainty as of the reporting date, as changes in these unobservable inputs could significantly raise or lower the estimated fair value.
| Valuation Technique(s) |
| Unobservable Input |
| Range/Amount | ||
December 31, 2025 | |||||||
Contingent Consideration | Option approach methodology simulation | Cost of Debt | 5.46% - 8.35% | ||||
Coal price volatility | 9.2% | ||||||
Market price of risk adjustment (annual) | 6.7% | ||||||
December 31, 2024 | |||||||
Contingent Consideration | Option approach methodology simulation | Cost of Debt | 6.51% - 8.56% | ||||
Coal price volatility | 6.2% | ||||||
Market price of risk adjustment (annual) | 6.2% |
| (a) | Averages represent the arithmetic average of the inputs and is not weighted by a relative fair value or notional amount. |
The following table represents changes in our contingent consideration liability:
Year Ended December 31, | |||||||
| 2025 | 2024 |
| ||||
(in thousands) | |||||||
Beginning balance | $ | 13,100 | $ | 9,900 | |||
11,340 | 10,989 | ||||||
Payments | (6,440) | (7,789) | |||||
Ending balance | $ | 18,000 | $ | 13,100 | |||
| (1) | Noncash changes in the fair value of our continent consideration liability are included in the Operating expenses (excluding depreciation, depletion and amortization) line item within our consolidated statements of income. |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 26, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.