UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 20172018
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 number: 001-14901

CNXCONSOL Coal Resources LP
(Exact name of registrant as specified in its charter)

Delaware 47-3445032
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

1000 CONSOL Energy Drive, Suite 100
Canonsburg, PA 15317-6506
(724) 485-4000485-3300
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)


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.
Yes  x    No  o
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).
Yes  x    No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  o    Accelerated filer  ox Non-accelerated filer  o  (Do not check if a smaller reporting company)
 Smaller Reporting Company  o Emerging growth companyGrowth Company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o    No  x
CNXCONSOL Coal Resources LP had 11,718,63515,909,323 common units, 11,611,067 subordinated units 3,956,496 Class A Preferred Units and a 1.7% general partner interest outstanding at July 31, 2017.15, 2018.
 

TABLE OF CONTENTS

  Page
 Part I. Financial Information 
   
Item 1.Financial Statements 
 Consolidated Statements of Operations for the three and six months ended June 30, 20172018 and 20162017
5
 Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 20172018 and 20162017
6
 Consolidated Balance Sheets at June 30, 20172018 and December 31, 20162017
7
 
Consolidated Statement of Partners'Partners’ Capital for the six months ended June 30, 20172018
8
 Consolidated Statements of Cash Flows for the six months ended June 30, 20172018 and 20162017
9
 Notes to the Consolidated Financial Statements
10
   
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
20
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
3135
   
Item 4.
Controls and Procedures
3135
   
 Part II. Other Information 
   
Item 1.
Legal Proceedings
3336
   
Item 1A.
Risk Factors
3336
   
Item 4.
Mine Safety Disclosures
33
Item 5.Other Information
3336
   
Item 6.
Exhibits
3436
   
 
Signatures
3537



Significant Relationships and Other Terms Referenced in this Quarterly Report

“Affiliated Company Credit Agreement” refers to an agreement entered into on November 28, 2017 among the Partnership and certain of its subsidiaries (collectively, the “Credit Parties”), CONSOL Energy, as lender and administrative agent, and PNC Bank, National Association, as collateral agent (“PNC”). The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275 million to be provided by CONSOL Energy, as lender;

“Class A Preferred Units” meansrefers to the convertible preferred units representing limited partner interests in CNXCONSOL Coal Resources LP. The Partnership issued 3,956,496 Class A Preferred Units to CONSOL EnergyCNX on September 30, 2016. KeyOn October 2, 2017 the 3,956,496 Class A Preferred Units were converted to common units on a one-for-one basis, in accordance with our Partnership Agreement. The key terms of the Class A Preferred Units includewere described in our Annual Report on Form 10-K for the following:year ended December 31, 2016;
▪
Distributions: Distributions on each outstanding Class A Preferred Unit will be cumulative, and will accumulate at 11% per annum (the “Class A Preferred Unit Distribution Rate”) for each calendar quarter beginning with the quarter ending December 31, 2016 until such time as the Partnership pays the full cumulative Class A Preferred Unit distribution in respect of such Class A Preferred Unit with respect to such calendar quarter or such Class A Preferred Unit is converted in accordance with the Partnership Agreement (as defined herein), whether or not such Class A Preferred distributions have been declared. Subject to certain exceptions, a holder of Class A Preferred Units (currently, CONSOL Energy) will be entitled to receive Class A Preferred distributions out of any assets of the Partnership legally available for the payment of distributions at the Class A Preferred Unit Distribution Rate when, as, and if declared by the Board of Directors of our general partner to be paid by the Partnership in accordance with the Partnership Agreement, will be paid quarterly, in arrears, at the election of the Partnership either in additional Class A Preferred Units or in cash;
▪
Voting: Holders of Class A Preferred Units will have such voting rights as if their Class A Preferred Units were converted, on a one-for-one basis, into common units and will vote together with the holders of common units as a single class. Holders of Class A Preferred Units will be entitled to vote as a separate class on any matter that adversely affects the rights, privileges or preferences of the Class A Preferred Units in any material respect or as required by applicable law or regulation;
▪
Conversion at the Election of the Holder: Class A Units are convertible, at the election of the holder, into common units on a one-for-one basis (i) at any time after September 30, 2017, (ii) with respect to the Partnership’s dissolution or liquidation and (iii) with respect to certain change of control events as described in the Partnership Agreement;
▪
Conversion at the Election of the Partnership: All, but not less than all, of the outstanding Class A Preferred Units are convertible, at the election of the Partnership, into common units on a one-for-one basis, on or after September 30, 2019; provided, that (i) no “Class A Preferred Unit Payment Default” arising from the Partnership’s failure to pay in full any Class A Preferred Unit distribution, has occurred and is continuing; (ii) the volume-weighted average trading price of the common units over the 15-day trading period ending on the trading day immediately prior to the date of the conversion notice is equal to or greater than 140% of the issue price of the Class A Preferred Units; and (iii) the average trading volume is at least 35,000 common units (subject to customary anti-dilution adjustments) with respect to any 20 trading days within the 30-trading day period ending on the trading day immediately prior to the date of the conversion notice;
▪
Restrictions on Transfer: Prior to September 30, 2017, other than transfers to affiliates, CONSOL Energy may not transfer any Class A Preferred Units without the approval of the Partnership;

“CNX Coal Finance”CNX” refers to CNX Coal FinanceResources Corporation a Delaware corporation and a direct, wholly-owned subsidiary of the Partnership;its consolidated subsidiaries on or after November 28, 2017 and to CONSOL Energy Inc. and its consolidated subsidiaries prior to November 28, 2017;

“CNX Coal Resources LP,” the "Partnership,” “we,” “our,” “us” and similar terms, when used in a historical context, refer to CNX Coal Resources LP, a Delaware limited partnership, and its subsidiaries;

“CNX Operating” refers to CNX Operating LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of the Partnership;

“CNX Thermal Holdings” refers to CNX Thermal Holdings LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of CNX Operating; subsequent to the PA Mining Acquisition, CNX Thermal Holdings owns a 25% undivided interest in the assets, liabilities, revenues and expenses comprising the Pennsylvania Mining Complex;

the “commoncommon units” refer to the limited partner interests in CNXCONSOL Coal Resources LP. The holders of common units are entitled to participate in partnership distributions and are entitled to exercise the rights or privileges of limited partners under the Partnership Agreement. The common units are listed on the New York Stock Exchange under the symbol “CCR”;

“Conrhein” refers to Conrhein Coal Company, a Pennsylvania general partnership and a wholly owned subsidiary of CONSOL Energy;

“CONSOL Coal Finance” refers to CONSOL Coal Finance Corporation, a Delaware corporation and a direct, wholly owned subsidiary of the Partnership;

“CONSOL Coal Resources LP,” the “Partnership,” “we,” “our,” “us” and similar terms refer to CONSOL Coal Resources LP, a Delaware limited partnership, and its subsidiaries, with common units listed for trading on the New York Stock Exchange under the ticker “CCR.” Prior to November 28, 2017, we were called CNX Coal Resources LP and our common units traded on the New York Stock Exchange under the ticker “CNXC”;

“CONSOL Energy” and our “sponsor” refer to CONSOL Energy Inc., a Delaware corporation and the parent of our general partner, and its subsidiaries other than our general partner, us and our subsidiaries;

“CONSOL Operating” refers to CONSOL Operating LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of the Partnership;

“CONSOL Thermal Holdings” refers to CONSOL Thermal Holdings LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of CONSOL Operating; following the PA Mining Acquisition, CONSOL Thermal Holdings owns a 25% undivided interest in the assets, liabilities, revenues and expenses comprising the Pennsylvania Mining Complex;

“CPCC” refers to CONSOL Pennsylvania Coal Company LLC, a Delaware limited liability company and a wholly-ownedwholly owned subsidiary of CONSOL Energy;

“Conrhein” refers to Conrhein Coal Company, a Pennsylvania general partnership and a wholly-owned subsidiary of CONSOL Energy;

our “general partner” refers to CNXCONSOL Coal Resources GP LLC, a Delaware limited liability company and our general partner;

"IPO"“IPO” refers to the completion of the Partnership'sPartnership’s initial public offering on July 7, 2015;

“Omnibus Agreement” refers to the Omnibus Agreement dated July 7, 2015, as replaced by the First Amended and Restated Omnibus Agreement dated as of September 30, 2016;2016, and as amended by the First Amendment to the First Amended and Restated Omnibus Agreement, dated November 28, 2017;

"“PA Mining Acquisition"Acquisition” refers to a transaction which closed on September 30, 2016, wherewherein the Partnership and its wholly owned subsidiary, CNXCONSOL Thermal Holdings, entered into a Contribution Agreement with CONSOL Energy,CNX, CPCC and Conrhein, under which CNXCONSOL Thermal Holdings acquired an undivided 6.25% of the contributing parties’ right,


title and interest in and to the Pennsylvania Mining Complex (which represents an aggregate 5% undivided interest in and to the Pennsylvania Mining Complex);

the “Partnership“Partnership Agreement” refers to the First Amended and Restated Agreement of Limited Partnership of the Partnership, as replaced by the Second Amended and Restated Agreement of Limited Partnership of the Partnership dated as of September 30, 2016;2016, as replaced by the Third Amended and Restated Partnership Agreement dated as of November 28, 2017;

the “Pennsylvania“Pennsylvania Mining Complex” refers to the coal mines, coal reserves and related assets and operations, located primarily in southwestern Pennsylvania. The Pennsylvania Mining Complex was owned 80% by CONSOL EnergyCNX and 20% by CNXCONSOL Thermal Holdings prior tofrom July 2015 until the PA Mining Acquisition; and subsequent toclosing of the PA Mining Acquisition in September 2016. Following the PA Mining Acquisition until November 28, 2017, the Pennsylvania Mining Complex was owned 75% by CONSOL Energy,CNX and its subsidiaries and 25% by CNXCONSOL Thermal Holdings; andHoldings. In connection with the separation on November 28, 2017, CNX’s 75% undivided interest in the Pennsylvania Mining Complex was transferred to CONSOL Energy;

“PNC Revolving Credit Facility” refers to a credit agreement that the “preferredPartnership entered into on July 7, 2015, as borrower, and certain subsidiaries of the Partnership, as guarantors, for a $400 million revolving credit facility with PNC, as administrative agent, and other lender parties. On November 28, 2017, in connection with the separation, the Partnership paid all fees and other amounts outstanding under the PNC Revolving Credit Facility and terminated the PNC Revolving Credit Facility and the related loan documents;

“preferred units” refer to any limited partnership interests, other than the common units and subordinated units, issued in accordance with the Partnership Agreement that, as determined by our general partner, have special voting rights to which our common units are not entitled. As of the date of this Quarterly Report on Form 10-Q, the onlythere are no outstanding preferred units;

“SEC” refers to the United States Securities and Exchange Commission;

“separation” refers to the separation of the coal business from CNX’s other businesses and the creation, as a result of the distribution, of an independent, publicly traded company (CONSOL Energy) to hold the assets and liabilities associated with the coal business (including CNX’s interest in the general partner and in us) after the distribution;

“sponsor” or “our sponsor” refers to CNX prior to the completion of the separation on November 28, 2017 and to CONSOL Energy following the completion of the separation; and

“subordinated units” refer to limited partner interests in CONSOL Coal Resources LP having the rights and obligations specified with respect to subordinated units arein the Class A Preferred Units.Partnership Agreement. In connection with the completion of the IPO, we issued 11,611,067 subordinated units to CNX. In connection with the separation and the Affiliated Company Credit Agreement, all of the subordinated units were transferred directly to CONSOL Energy.







PART I : FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
CNXCONSOL COAL RESOURCES LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except unit data)
(unaudited)

Three Months Ended
June 30,		 Six Months Ended
June 30,		Three Months Ended
June 30,		 Six Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
Coal Revenue$75,927
 $62,640
 $155,039
 $119,181
$92,674
 $75,927
 $180,426
 $155,039
Freight Revenue4,441
 2,797
 7,511
 6,066
4,361
 4,441
 8,833
 7,511
Other Income2,104
 1,780
 3,202
 1,768
1,022
 2,104
 3,299
 3,202
Total Revenue and Other Income82,472
 67,217
 165,752
 127,015
98,057
 82,472
 192,558
 165,752
              
Operating and Other Costs 1
50,232
 46,046
 100,115
 84,536
57,299
 50,232
 109,586
 100,115
Depreciation, Depletion and Amortization10,277
 10,422
 20,798
 20,739
11,896
 10,277
 22,710
 20,798
Freight Expense4,441
 2,797
 7,511
 6,066
4,361
 4,441
 8,833
 7,511
Selling, General and Administrative Expenses 2
3,652
 1,969
 6,935
 3,897
3,341
 3,652
 6,361
 6,935
Interest Expense2,396
 2,076
 4,853
 4,054
Interest Expense, Net 3
1,784
 2,396
 3,735
 4,853
Total Costs70,998
 63,310
 140,212
 119,292
78,681
 70,998
 151,225
 140,212
Net Income$11,474
 $3,907
 $25,540
 $7,723
$19,376
 $11,474
 $41,333
 $25,540
Less: Net Income Attributable to CONSOL Energy Pre-PA Mining Acquisition—
 1,300
 —
 2,617
Net Income Attributable to General and Limited Partner Ownership Interest in CNX Coal Resources$11,474
 $2,607
 $25,540
 $5,106


 

 

 

Net Income Attributable to General and Limited Partner Ownership Interest in CONSOL Coal Resources$19,376
 $11,474
 $41,333
 $25,540
Less: General Partner Interest in Net Income192
 51
 435
 102
328
 192
 700
 435
Less: Net Income Allocable to Class A Preferred Units1,851
 —
 3,702
 —
—
 1,851
 —
 3,702
Limited Partner Interest in Net Income$9,431
 $2,556
 $21,403
 $5,004
Net Income Allocable to Limited Partner Units$19,048
 $9,431
 $40,633
 $21,403
              
Net Income per Limited Partner Unit - Basic$0.40
 $0.11
 $0.92
 $0.22
$0.69
 $0.40
 $1.48
 $0.92
Net Income per Limited Partner Unit - Diluted$0.40
 $0.11
 $0.91
 $0.22
$0.69
 $0.40
 $1.47
 $0.91
              
Limited Partner Units Outstanding - Basic23,329,702
 23,222,134
 23,311,004
 23,222,134
27,520,333
 23,329,702
 27,501,543
 23,311,004
Limited Partner Units Outstanding - Diluted23,470,050
 23,301,391
 23,444,923
 23,254,115
27,588,062
 23,470,050
 27,578,427
 23,444,923
              
Cash Distributions Declared per Unit 3
       
Cash Distributions Declared per Unit 4
       
Common Unit$0.5125
 $0.5125
 $1.0250
 $1.0250
$0.5125
 $0.5125
 $1.0250
 $1.0250
Subordinated Unit$0.5125
 $—
 $1.0250
 $0.5125
$0.5125
 $0.5125
 $1.0250
 $1.0250


1 Related Party of $761 and $867 and $1,270for the three months ended and$1,739 $1,447 and $2,536$1,739 for the six months ended June 30, 20172018 and June 30, 2016,2017, respectively.
2 Related Party of $737$1,953 and $1,190$737 for the three months ended and $1,454$3,598 and $2,305$1,454 for the six months ended June 30, 20172018 and June 30, 2016,2017, respectively.
3Related party of $1,784 and $0 for the three months ended and $3,735 and $0 for the six months ended June 30, 2018 and June 30, 2017, respectively.
4 Represents the cash distributions declared related to the period presented. See Note 1415 - Subsequent Events.



The accompanying notes are an integral part of these consolidated financial statements.


CNXCONSOL COAL RESOURCES LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(unaudited)

Three Months Ended
June 30,		 Six Months Ended
June 30,		Three Months Ended
June 30,		 Six Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
Net Income$11,474
 $3,907
 $25,540
 $7,723
$19,376
 $11,474
 $41,333
 $25,540
              
Recognized Net Actuarial Gain(40) (22) (79) (47)(2) (40) (4) (79)
Other Comprehensive Loss(40) (22) (79) (47)(2) (40) (4) (79)
              
Comprehensive Income$11,434
 $3,885
 $25,461
 $7,676
$19,374
 $11,434
 $41,329
 $25,461










































The accompanying notes are an integral part of these consolidated financial statements.


CNXCONSOL COAL RESOURCES LP
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)  (Unaudited)  
June 30,
2017		 December 31,
2016		June 30,
2018		 December 31,
2017
ASSETS      
Current Assets:      
Cash$6,608
 $9,785
$646
 $1,533
Trade Receivables26,025
 23,418
22,857
 31,473
Other Receivables1,152
 515
1,514
 1,970
Inventories14,007
 11,491
11,018
 12,303
Prepaid Expenses2,680
 3,512
3,698
 4,428
Total Current Assets50,472
 48,721
39,733
 51,707
Property, Plant and Equipment:      
Property, Plant and Equipment883,343
 876,690
927,658
 910,468
Less—Accumulated Depreciation, Depletion and Amortization462,587
 442,178
505,299
 483,410
Total Property, Plant and Equipment—Net420,756
 434,512
422,359
 427,058
Other Assets:      
Other19,107
 21,063
14,507
 15,474
Total Other Assets19,107
 21,063
14,507
 15,474
TOTAL ASSETS$490,335
 $504,296
$476,599
 $494,239
LIABILITIES AND PARTNERS' CAPITAL   
LIABILITIES AND PARTNERS’ CAPITAL
   
Current Liabilities:      
Accounts Payable$16,003
 $18,797
$21,470
 $19,718
Accounts Payable—Related Party
2,196
 1,666
3,455
 3,071
Other Accrued Liabilities44,403
 44,318
40,390
 44,179
Total Current Liabilities62,602
 64,781
65,315
 66,968
Long-Term Debt:      
Revolver, Net of Debt Issuance and Financing Fees187,292
 197,843
Affiliated Company Credit Agreement—Related Party
160,500
 196,583
Capital Lease Obligations109
 146
6,961
 73
Total Long-Term Debt187,401
 197,989
167,461
 196,656
Other Liabilities:      
Pneumoconiosis Benefits2,613
 2,057
4,584
 3,833
Workers’ Compensation3,131
 3,090
Workers’ Compensation
3,452
 3,404
Asset Retirement Obligations9,320
 9,346
9,422
 9,615
Other437
 463
605
 607
Total Other Liabilities15,501
 14,956
18,063
 17,459
TOTAL LIABILITIES265,504
 277,726
250,839
 281,083
Partners' Capital:   
Class A Preferred Units (3,956,496 Units Outstanding at June 30, 2017 and December 31, 2016)69,151
 69,151
Common Units (11,718,635 Units Outstanding at June 30, 2017; 11,618,456 Units Outstanding at December 31, 2016)140,607
 140,967
Subordinated Units (11,611,067 Units Outstanding at June 30, 2017 and December 31, 2016)(8,880) (7,631)
Partners’ Capital:
   
Common Units (15,909,323 Units Outstanding at June 30, 2018; 15,789,106 Units Outstanding at December 31, 2017)213,126
 205,974
Subordinated Units (11,611,067 Units Outstanding at June 30, 2018 and December 31, 2017)(9,983) (15,225)
General Partner Interest12,223
 12,274
12,178
 11,964
Accumulated Other Comprehensive Income11,730
 11,809
10,439
 10,443
Total Partners' Capital224,831
 226,570
TOTAL LIABILITIES AND PARTNERS' CAPITAL$490,335
 $504,296
Total Partners’ Capital
225,760
 213,156
TOTAL LIABILITIES AND PARTNERS’ CAPITAL
$476,599
 $494,239

The accompanying notes are an integral part of these consolidated financial statements.


CNXCONSOL COAL RESOURCES LP
CONSOLIDATED STATEMENT OF PARTNERS'PARTNERS’ CAPITAL
(Dollars in thousands)


  Limited Partners      Limited Partners      
Class A Preferred Units Common Subordinated General Partner Accumulated Other Comprehensive Income TotalCommon Subordinated General Partner Accumulated Other Comprehensive Income Total
Balance at December 31, 2016$69,151
 $140,967
 $(7,631) $12,274
 $11,809
 $226,570
Balance at December 31, 2017$205,974
 $(15,225) $11,964
 $10,443
 $213,156
(unaudited)                    
Net Income3,702
 10,751
 10,652
 435
 —
 25,540
23,490
 17,143
 700
 —
 41,333
Unitholder Distributions(3,702) (12,011) (11,901) (486) —
 (28,100)(16,306) (11,901) (486) —
 (28,693)
Unit Based Compensation
 1,707
 —
 —
 —
 1,707
Tax Cost from Unit Based Compensation
 (807) —
 —
 —
 (807)
Unit-Based Compensation867
 —
 —
 —
 867
Units Withheld for Taxes(899) —
 —
 —
 (899)
Actuarially Determined Long-Term Liability Adjustments—
 —
 —
 —
 (79) (79)—
 —
 —
 (4) (4)
Balance at June 30, 2017$69,151
 $140,607
 $(8,880) $12,223
 $11,730
 $224,831
Balance at June 30, 2018$213,126
 $(9,983) $12,178
 $10,439
 $225,760








































The accompanying notes are an integral part of these consolidated financial statements.


CNXCONSOL COAL RESOURCES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
Six Months Ended
June 30,		Six Months Ended
June 30,
2017 20162018 2017
Cash Flows from Operating Activities:      
Net Income$25,540
 $7,723
$41,333
 $25,540
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:      
Depreciation, Depletion and Amortization20,798
 20,739
22,710
 20,798
(Gain) Loss on Sale of Assets(1,400) 12
Unit Based Compensation1,707
 615
Gain on Sale of Assets(62) (1,400)
Unit-Based Compensation867
 1,707
Other Adjustments to Net Income449
 449
—
 449
Changes in Operating Assets:      
Accounts and Notes Receivable(3,244) (2,931)9,072
 (3,244)
Inventories(2,516) 1,122
1,285
 (2,516)
Prepaid Expenses832
 1,764
930
 832
Changes in Other Assets326
 (3,884)967
 326
Changes in Operating Liabilities:      
Accounts Payable(2,460) (2,353)1,723
 (2,460)
Accounts Payable—Related Party530
 (3,075)384
 530
Other Operating Liabilities84
 2,959
(1,466) 84
Changes in Other Liabilities108
 1,691
470
 108
Net Cash Provided by Operating Activities40,754
 24,831
78,213
 40,754
Cash Flows from Investing Activities:      
Capital Expenditures(5,472) (6,501)(12,179) (5,472)
Proceeds from Sales of Assets1,500
 19
165
 1,500
Net Cash Used in Investing Activities(3,972) (6,482)(12,014) (3,972)
Cash Flows from Financing Activities:      
Payments on Miscellaneous Borrowings(52) (35)
Net (Payments on) Proceeds from Revolver(11,000) 13,000
Payments on Capitalized Leases(1,411) (52)
Net Payments on Related Party Long-Term Notes(36,083) —
Net Payments on Revolver—
 (11,000)
Payments for Unitholder Distributions(28,100) (24,288)(28,693) (28,100)
Tax Cost from Unit-Based Compensation(807) —
Net Change in Parent Advances—
 (4,597)
Units Withheld for Taxes(899) (807)
Net Cash Used in Financing Activities(39,959) (15,920)(67,086) (39,959)
Net (Decrease) Increase in Cash(3,177) 2,429
Net Decrease in Cash(887) (3,177)
Cash at Beginning of Period9,785
 6,534
1,533
 9,785
Cash at End of Period$6,608
 $8,963
$646
 $6,608
   
Non-Cash Investing and Financing Activities:   
Capital Lease$11,495
 $—




The accompanying notes are an integral part of these consolidated financial statements.


CNXCONSOL COAL RESOURCES LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)thousands, except per unit amounts)
NOTE 1—BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States ("(“U.S. GAAP"GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)adjustments) considered necessary for a fair presentation have been included.

On September 30, 2016, the Partnership and its wholly owned subsidiary, CNX Thermal, entered into a Contribution Agreement (the “Contribution Agreement”) with CONSOL Energy, CPCC and Conrhein and together with CPCC, (the “Contributing Parties”), under which CNX Thermal acquired an undivided 6.25% of the Contributing Parties’ right, title and interest in and to the Pennsylvania Mining Complex (which represents an aggregate 5% undivided interest in and to the Pennsylvania Mining Complex)("PA Mining Acquisition"). The PA Mining Acquisition was a transaction between entities under common control; therefore, the partnership recorded the assets and liabilities of the acquired 5% of Pennsylvania Mining Complex at their carrying amounts to CONSOL Energy on the date of the transaction. The difference between CONSOL Energy’s net carrying amount and the total consideration paid to CONSOL Energy was recorded as a capital transaction with CONSOL Energy, which resulted in a reduction in partners’ capital. The Partnership recast its historical consolidated financial statements to retrospectively reflect the additional 5% interest in Pennsylvania Mining Complex as if the business was owned for all periods presented; however, the consolidated financial statements are not necessarily indicative of the results of operations that would have occurred if the Partnership had owned it during the periods reported.

For the three and six months ended June 30, 20172018 and 2016,2017, the unaudited consolidated financial statementsConsolidated Financial Statements include the accounts of CNXCONSOL Operating and CNXCONSOL Thermal Holdings, wholly-ownedwholly owned and controlled subsidiaries.

Reclassifications:

Certain amounts have been reclassifiedOn November 28, 2017, CONSOL Energy was separated from CNX into an independent, publicly traded coal company via a pro rata distribution of all of CONSOL Energy’s common stock to conform withCNX’s stockholders. CONSOL Energy was originally formed as CONSOL Mining Corporation in Delaware on June 21, 2017 to hold CNX’s coal business including its interest in the current reporting classifications with no effect on previously reported net income or partners' capital.Pennsylvania Mining Complex and certain related coal assets, including CNX’s ownership interest in the Partnership and our general partner, CNX’s terminal operations at the Port of Baltimore and undeveloped coal reserves located in the Northern Appalachian, Central Appalachian and Illinois basins and certain related coal assets and liabilities. As part of the separation, CONSOL Mining Corporation changed its name to CONSOL Energy Inc. and its ticker to “CEIX”, CNX changed its name to CNX Resources Corporation and its ticker to “CNX”, the Partnership changed its name to CONSOL Coal Resources LP and its ticker to “CCR” and the general partner changed its name to CONSOL Coal Resources GP LLC.

Recent Accounting Pronouncements:

In March 2017,June 2018, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Update 2017-072018-07 - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting. The Update requires entities to (1) disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. Because the Partnership does not present an income from operations subtotal, that requirement is not applicable. Additionally, the Partnership's service cost component is deemed immaterial, and therefore, the other components of net benefit cost will not be presented separately. For public entities, the amendments in this Update are effectiveupdate seek to simplify accounting for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted asnonemployee share-based payments by clarifying and improving the areas of the beginning of a fiscal year for which financial statements have not been issued. The adoption of this guidance is not expected to have an impact on the Partnership's financial statements.

In January 2017, the FASB issued Update 2017-01 - Business Combinations (Topic 805). This update clarifies the definition of a businessoverall measurement objective, measurement date, and awards with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.performance conditions. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017,2018, including interim periods within those fiscal years. The adoption ofManagement does not expect this new guidance will notupdate to have a material impact on the Partnership's financial statements.

In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09 "Revenue from Contracts with Customers (Topic 606)", which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. The objective of the amendments in this update is to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards ("IFRS"). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and should disclose sufficient information, both qualitative and quantitative,


to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The following updates to Topic 606 were made during 2016:
In March 2016, the FASB updated Topic 606 by issuing ASU 2016-08 "Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which clarifies how an entity determines whether it is a principal or an agent for goods or services promised to a customer as well as the nature of the goods or services promised to their customers.
In April 2016,January 2018, the FASB issued Update 2016-10 - Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which seeks to address implementation issues in the areas of identifying performance obligations and licensing.
In May 2016, the FASB issued Update 2016-12 - Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients. The update, which was issued in response to feedback received by the FASB-IASB joint revenue recognition transition resource group (TRG), seeks to address implementation issues in the areas of collectibility, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition.
In December 2016, the FASB issued Updated 2016-20 - Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. This update applies technical corrections or improvements specific to Update 2014-09. The technical corrections seek to address implementation issues in the areas of loan guarantee fees, contract costs - impairment testing, contract costs - interaction of impairment testing with guidance in other topics, provisions for losses on construction-type and production-type contracts, the scope of Topic 606, disclosure of remaining performance obligations, disclosure of prior-period performance obligations, contract modifications example, contract asset versus receivable, refund liability, advertising costs, fixed-odds wagering contracts in the casino industry, and cost capitalization for advisers to private and public funds.

The new standards are effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as annual reporting periods beginning after December 15, 2016. Management continues to evaluate the impacts that these standards will have on the Partnership's financial statements, specifically as it relates to contracts that contain positive electric power price related adjustments. The Partnership anticipates using the modified retrospective approach at adoption as it relates to ASU 2014-09.

In August 2016, the FASB issued Update 2016-15 - Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. This update seeks to reduce the existing diversity in practice of the presentation and classification of specific cash flow issues. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Partnership's financial statements.
In February 2016, the FASB issued Update 2016-022018-01 - Leases (Topic 842). Land Easement Practical Expedient for Transition to Topic 842. This update, is intendedif elected, would not require an entity to improve financial reporting about leasing transactions. This update will require lesseesreassess the accounting treatment of existing land easements not currently accounted for as a lease under Topic 840. Once an entity adopts Topic 842, it should apply that Topic prospectively to recognize all leases with terms greater than 12 months on their balance sheetnew (or modified) land easements to determine whether the arrangement should be accounted for as lease liabilities with a corresponding right-of-use asset. This update maintains the dual model for lease accounting, requiring leases to be classified as either operating or finance, with lease classification determined in a manner similar to existing lease guidance. The basic principle is that leases of all types convey the right to direct the use and obtain substantially all the economic benefits of an identified asset, meaning they create an asset and liability for lessees. Lessees will classify leases as either finance leases (comparable to current capital leases) or operating leases (comparable to current operating leases). Costs for a finance lease will be split between amortization and interest expense, with a single lease expense reported for operating leases. This update also will require both qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.lease. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this update is permitted for all entities. Management is currently evaluating the impact this guidance may have on the Partnership'sPartnership’s financial statements.

In 2016, the FASB issued a new lease accounting standard which requires lessees to put most leases on their balance sheets, but recognize the expenses in their income statements in a manner similar to current practice. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Expenses related to leases determined to be operating leases will be recognized on a straight-line basis, while those determined to be financing leases will be recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement. The ultimate impact of the standard will depend on the Partnership's lease portfolio as of the adoption date. CONSOL Energy has started compiling and reviewing its population of leases and assessing its systems and internal controls relating to the Partnership's accounting for leases. In addition to monitoring FASB activity regarding  ASU 2016-02, the Partnership continues to monitor various non-authoritative groups with respect to implementation issues that could affect its assessment. These changes will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.









NOTE 2—REVENUE:

The following table disaggregates our revenue by major source for the three and six months ended June 30, 2018:
 Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
Coal Revenue$92,674
 $180,426
Freight Revenue4,361
 8,833
Total Revenue from Contracts with Customers$97,035
 $189,259

ASU 2014-09 - Revenue from Contracts with Customers. On January 1, 2018, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) for all contracts using the modified retrospective method. There was no cumulative adjustment to the opening balance of retained earnings as a result of initially applying the new revenue standard. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We do not expect the adoption of the new revenue standardto have a material impact to our net income on an ongoing basis. Our revenue continues to be recognized when title passes to the customer.

Coal Revenue

Revenues are recognized when title passes to the customers and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. Our coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price related adjustments in addition to a fixed base price per ton. None of the Partnership's coal contracts allow for retroactive adjustments to pricing after title to the coal has passed.

Some of our contracts span multiple years and have annual pricing modification, based upon market-driven or inflationary adjustments, where no additional value is exchanged. Also, our contracts contain favorable electric power price related adjustments, which represent market-driven price adjustments, wherein there is no additional value being exchanged. Management believes that the invoice price is the most appropriate rate at which to recognize revenue.

While we do, from time to time, experience costs of obtaining coal customer contracts with amortization periods greater than one year, those costs would be immaterial to our net income. As of and for the three and six months ended June 30, 2018, we do not have any capitalized costs to obtain customer contracts on our balance sheet nor have we recognized any amortization of previously existing capitalized costs of obtaining customer contracts. Further, the Partnership has not recognized any revenue in the current period that is not a result of current period performance.

Freight Revenue

Some of our coal contracts require that we sell our coal at locations other than our central preparation plant. The cost to transport our coal to the ultimate sales point is passed through to our customers and we recognize the freight revenue equal to the transportation cost when title of the coal passes to the customer.
NOTE 2—3—NET INCOME PER LIMITED PARTNER AND GENERAL PARTNER INTEREST:
The Partnership allocates net income among our general partner and limited partners using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, we allocate our net income to our limited partners and our general partner in accordance with the terms of our partnership agreement.Partnership Agreement. We also allocate any earnings in excess of distributions to our limited partners and our general partner in accordance with the terms of our partnership agreement.Partnership Agreement. We allocate any distributions in excess of earnings for the period to our general partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the incentive distribution rights, as set forth in the partnership agreement. Net income attributable to the PA Mining

Acquisition for periods prior to September 30, 2016 was not allocated to the limited partners for purposes of calculating net income per limited partner unit.Partnership Agreement.
Diluted net income per limited partner unit reflects the potential dilution that could occur if securities or agreements to issue common units, such as awards under the long-term incentive plan, were exercised, settled or converted into common units. When it is determined that potential common units resulting from an award subject to performance or market conditions should be included in the diluted net income per limited partner unit calculation, the impact is reflected by applying the treasury stock method.

The following table illustrates the Partnership'sPartnership’s calculation of net income per unit for common units and subordinated partner units (in thousands, except for per unit information):
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
 2017 2016 2017 2016 2018 2017 2018 2017
Net Income $11,474
 $3,907
 $25,540
 $7,723
 $19,376
 $11,474
 $41,333
 $25,540
Less: Net Income Attributable to CONSOL Energy, Pre-PA Mining Acquisition —
 1,300
 —
 2,617
Less: General Partner Interest in Net Income 192
 51
 435
 102
 328
 192
 700
 435
Less: Net Income Allocable to Class A Preferred Units 1,851
 —
 3,702
 —
 —
 1,851
 —
 3,702
Net Income Allocable to Limited Partner Units $9,431
 $2,556
 $21,403
 $5,004
 $19,048
 $9,431
 $40,633
 $21,403
                
Limited Partner Interest in Net Income - Common Units $4,737
 $1,278
 $10,751
 $2,502
Effect of Subordinated Distribution Suspension - Common Units —
 2,918
 —
 2,918
Net Income Allocable to Common Units - Basic & Diluted $4,737
 $4,196
 $10,751
 $5,420
 $11,013
 $4,737
 $23,490
 $10,751
                
Limited Partner Interest in Net Income - Subordinated Units $4,694
 $1,278
 $10,652
 $2,502
Effect of Subordinated Distribution Suspension - Subordinated Units —
 (2,918) —
 (2,918)
Net Income Allocable to Subordinated Units - Basic & Diluted $4,694
 $(1,640) $10,652
 $(416) $8,035
 $4,694
 $17,143
 $10,652
                
Weighted Average Limited Partner Units Outstanding - Basic                
Common Units 11,718,635
 11,611,067
 11,699,937
 11,611,067
 15,909,266
 11,718,635
 15,890,476
 11,699,937
Subordinated Units 11,611,067
 11,611,067
 11,611,067
 11,611,067
 11,611,067
 11,611,067
 11,611,067
 11,611,067
Total 23,329,702
 23,222,134
 23,311,004
 23,222,134
 27,520,333
 23,329,702
 27,501,543
 23,311,004
                
Weighted Average Limited Partner Units Outstanding - Diluted                
Common Units 11,858,983
 11,690,324
 11,833,856
 11,643,048
 15,976,995
 11,858,983
 15,967,360
 11,833,856
Subordinated Units 11,611,067
 11,611,067
 11,611,067
 11,611,067
 11,611,067
 11,611,067
 11,611,067
 11,611,067
Total 23,470,050
 23,301,391
 23,444,923
 23,254,115
 27,588,062
 23,470,050
 27,578,427
 23,444,923
                
Net Income Per Limited Partner Unit - Basic                
Common Units $0.40
 $0.36
 $0.92
 $0.47
 $0.69
 $0.40
 $1.48
 $0.92
Subordinated Units $0.40
 $(0.14) $0.92
 $(0.04) $0.69
 $0.40
 $1.48
 $0.92
Net Income Per Limited Partner Unit - Basic $0.40
 $0.11
 $0.92
 $0.22
 $0.69
 $0.40
 $1.48
 $0.92
                
Net Income Per Limited Partner Unit - Diluted                
Common Units $0.40
 $0.36
 $0.91
 $0.47
 $0.69
 $0.40
 $1.47
 $0.91
Subordinated Units $0.40
 $(0.14) $0.92
 $(0.04) $0.69
 $0.40
 $1.48
 $0.92
Net Income Per Limited Partner Unit - Diluted $0.40
 $0.11
 $0.91
 $0.22
 $0.69
 $0.40
 $1.47
 $0.91

The outstanding Class A Preferred Units were converted on a one-to-one basis into common units on October 2, 2017, under the terms of the Partnership Agreement. As a result, the Partnership issued an aggregate of 3,956,496 Common Units to CNX and canceled the Class A Preferred Units. Following the conversion of the Class A Preferred Units into Common Units, no Class A Preferred Units are outstanding.
There were 126,799 and 365,131 phantom units excluded from the computation of the diluted earnings per unit because their effect would be anti-dilutive for the three and six months ended June 30, 2018 and June 30, 2017, respectively. Diluted net income per limited partner unit does not reflect the potential dilution that could occur if the preferred units of the partnership were converted to common units because the effect would be anti-dilutive for the three and six months ended June 30, 2017. If certain conditions are met, preferred units can be converted by election of the holder, partnership, or by change in control. There were 365,131 phantom units excluded from the computation of the diluted earnings per share because their effect would be anti-dilutive for the three and six months ended June 30, 2017. There were no phantom units excluded from the computation of the diluted earnings per share because their effect would be anti-dilutive for the three and six months ended June 30, 2016.
NOTE 3—ACQUISITION:
On September 30, 2016, the Partnership and its wholly owned subsidiary, CNX Thermal Holdings, entered into a Contribution Agreement with CONSOL Energy, CPCC and Conrhein and together with CPCC, under which CNX Thermal Holdings acquired an undivided 6.25% of the Contributing Parties’ right, title and interest in and to the Pennsylvania Mining Complex (which represents an aggregate 5% undivided interest in and to the Pennsylvania Mining Complex), in exchange for (i) cash consideration in the amount of $21,500 and (ii) the Partnership’s issuance of 3,956,496 Class A Preferred Units representing limited partner interests in the Partnership at an issue price of $17.01 per Class A Preferred Unit (the “Class A Preferred Unit Issue Price”), or an aggregate $67,300 in equity consideration. The Class A Preferred Unit Issue Price was calculated as the volume-weighted average trading price of the Partnership’s common units over the trailing 15-day trading period ending on September 29, 2016 (or $14.79), plus a 15% premium. The PA Mining Acquisition was consummated on September 30, 2016. Our general partner elected not to contribute capital to retain its 2% interest. As of June 30, 2017, our general partner's ownership interest was 1.7%. Following the PA Mining Acquisition and including interests it held previously, CNX Thermal holds an aggregate 25% undivided interest in and to the Pennsylvania Mining Complex.

The PA Mining Acquisition was a transaction between entities under common control; therefore, the Partnership recorded the assets and liabilities of the acquired 5% undivided interest in the Pennsylvania Mining Complex at their carrying amounts to CONSOL Energy on the date of the transaction. The difference between CONSOL Energy's net carrying amount and the total consideration paid to CONSOL Energy was recorded as a capital transaction with CONSOL Energy, which resulted in a reduction in partners’ capital. The $67,300 in equity consideration was a non-cash transaction that impacted the investing and financing activities of the Partnership by $6,524 of excess consideration paid over the net carrying amount and $60,776 of carrying amount paid from equity consideration in the three and nine months ended September 30, 2016.


NOTE 4—INVENTORIES:
June 30,
2017		 December 31,
2016		June 30,
2018		 December 31,
2017
Coal$4,292
 $1,950
$1,231
 $2,853
Supplies9,715
 9,541
9,787
 9,450
Total Inventories$14,007
 $11,491
$11,018
 $12,303



Inventories are stated at the lower of cost or net realizable value. The cost of coal inventories is determined by the first-in, first-out (FIFO) method. Coal inventory costs include labor, supplies, equipment costs, operating overhead, depreciation, depletion and amortization, and other related costs. The cost of supplies inventory is determined by the average cost method and includes operating and maintenance supplies to be used in our coal operations.








NOTE 5—PROPERTY, PLANT AND EQUIPMENT:

 June 30,
2017		 December 31,
2016
Coal and other plant and equipment$582,670
 $576,917
Coal properties and surface lands121,336
 121,241
Airshafts93,739
 92,938
Mine development81,538
 81,538
Coal advance mining royalties4,060
 4,056
Total property, plant and equipment883,343
 876,690
Less: Accumulated depreciation, depletion and amortization462,587
 442,178
Total Net Property, Plant and Equipment$420,756
 $434,512
 June 30,
2018		 December 31,
2017
Coal and Other Plant and Equipment$622,411
 $607,314
Coal Properties and Surface Lands122,874
 122,377
Airshafts97,143
 95,566
Mine Development81,538
 81,538
Coal Advance Mining Royalties3,692
 3,673
Total Property, Plant and Equipment927,658
 910,468
Less: Accumulated Depreciation, Depletion and Amortization505,299
 483,410
Total Property, Plant and Equipment, Net$422,359
 $427,058

Coal reserves are controlled either through fee ownership or by lease. The duration of the leases vary; however, the lease terms generally are extended automatically to the exhaustion of economically recoverable reserves, as long as active mining continues. Coal interests held by lease provide the same rights as fee ownership for mineral extraction and are legally considered real property interests.

As of June 30, 20172018 and December 31, 2016,2017, property, plant and equipment includes gross assets under capital lease of $662$11,881 and $631,$625, respectively. Accumulated amortization for capital leases was $460$1,596 and $398$473 at June 30, 20172018 and December 31, 2016,2017, respectively. Amortization expense for assets under capital leases approximated $24$968 and $14$24 for the three months ended and $48$1,295 and $30$48 for the six months ended June 30, 20172018 and 2016,2017, respectively, and is included in Depreciation, Depletion and Amortization in the accompanying Consolidated Statements of Operations.
NOTE 6—OTHER ACCRUED LIABILITIES:

 June 30,
2017		 December 31, 2016
Subsidence liability$27,839
 $26,887
Accrued payroll and benefits4,653
 4,052
Equipment lease rental2,881
 2,442
Litigation2,505
 2,507
Accrued other taxes998
 2,504
Other3,027
 3,683
Current portion of long-term liabilities:   
Workers' compensation1,358
 1,380
Asset retirement obligations881
 591
Long-term disability105
 128
Capital leases89
 88
Pneumoconiosis benefits67
 56
Total Other Accrued Liabilities$44,403
 $44,318
 June 30,
2018		 December 31, 2017
Subsidence Liability$22,815
 $22,430
Accrued Payroll and Benefits4,138
 3,219
Accrued Interest (Related Party)1,976
 824
Accrued Other Taxes1,893
 1,399
Equipment Lease Rental490
 2,906
Longwall Equipment Buyout—
 5,658
Other2,731
 5,069
Current Portion of Long-Term Liabilities:   
Capital Leases3,412
 77
Workers’ Compensation1,424
 1,381
Asset Retirement Obligations1,202
 881
Pneumoconiosis Benefits176
 195
Long-Term Disability133
 140
Total Other Accrued Liabilities$40,390
 $44,179
NOTE 7—REVOLVING CREDIT FACILITY:

 June 30,
2017		 December 31,
2016
Revolver, carrying amount$190,000
 $201,000
Less: Debt issuance and financing fees2,708
 3,157
Revolver, net$187,292
 $197,843



Revolving Credit Facility
NOTE 7—LONG-TERM DEBT:

Obligations under our $400,000 senior secured
 June 30,
2018		 December 31,
2017
Affiliated Company Credit Agreement$160,500
 $196,583
    
Total Long-Term Debt$160,500
 $196,583

Affiliated Company Credit Agreement
On November 28, 2017, the Partnership and the other Credit Parties entered into the Affiliated Company Credit Agreement by and among the Credit Parties, CONSOL Energy, as lender and administrative agent, and PNC. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275,000 to be provided by CONSOL Energy, as lender. In connection with certain lendersthe completion of the separation and the Partnership’s entry into the Affiliated Company Credit Agreement, the Partnership made an initial draw of $200,583, the net proceeds of which were used to repay the PNC Bank N.A,Revolving Credit Facility, to provide working capital for the Partnership following the separation and for other general corporate purposes. Additional drawings under the Affiliated Company Credit Agreement are available for general partnership purposes. The Affiliated Company Credit Agreement matures on February 27, 2023. The collateral obligations under the Affiliated Company Credit Agreement generally mirror the PNC Revolving Credit Facility, including the list of entities that act as administrative agent,guarantors thereunder. The obligations under the Affiliated Company Credit Agreement are guaranteed by ourthe Partnership’s subsidiaries and are secured by substantially all of ourthe assets of the Partnership and our subsidiaries’ assetsits subsidiaries pursuant to athe security agreement and various mortgages. CONSOL Energy is not a guarantor of our

Interest on outstanding obligations under our revolving credit facility.

Affiliated Company Credit Agreement accrues at a fixed rate ranging from 3.75% to 4.75%, depending on the total net leverage ratio. The unused portion of our revolving credit facilityAffiliated Company Credit Agreement is subject to a commitment fee of 0.50% per annum. Interest on outstanding indebtedness under our revolving credit facility accrues, at our option, at a rate based on either:

The highestPartnership had available capacity under the Affiliated Company Credit Agreement of (i) PNC Bank N.A.’s prime rate, (ii) the federal funds open rate plus 0.50%,$114,500 and (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 1.50% to 2.50% depending on the total leverage ratio; or

the LIBOR rate plus a margin ranging from 2.50% to 3.50% depending on the total leverage ratio.

As$78,417 as of June 30, 2017, the revolving credit facility had $190,000 of borrowings outstanding, leaving $210,000 of unused capacity, which is subject to a quarterly maximum total leverage ratio covenant described below. At2018 and December 31, 2016, the revolving credit facility had $201,000 of borrowings outstanding, leaving $199,000 unused capacity.2017, respectively. Interest on outstanding borrowings under the revolving credit facilityAffiliated Company Credit Agreement was accrued at a rate of 4.00% and 4.25% as of June 30, 2017 was accrued at 4.17% based on a weighted average LIBOR rate of 1.17%, plus a weighted average margin of 3.00%. Interest on outstanding borrowings under the revolving credit facility at2018 and December 31, 2016 was accrued at 3.99% based on a weighted average LIBOR rate2017, respectively. The Affiliated Company Credit Agreement contains certain covenants and conditions that, among other things, limit the Partnership’s ability to: (i) incur or guarantee additional debt; (ii) make cash distributions (subject to certain limited exceptions); provided that we will be able to make cash distributions of 0.74%, plus a weighted average marginavailable cash to partners so long as no event of 3.25%.default is continuing or would result therefrom; (iii) incur certain liens or permit them to exist; (iv) make particular investments and loans; provided that we will be able to increase our ownership percentage of our undivided interest in the Pennsylvania Mining Complex and make investments in the Pennsylvania Mining Complex in accordance with our ratable ownership; (v) enter into certain types of transactions with affiliates; (vi) merge or consolidate with another company; and (vii) transfer, sell or otherwise dispose of assets. The Partnership is also subject to covenants that require the Partnership to maintain certain financial ratios.

Our revolving credit facility matures on July 7, 2020 and requires compliance with conditions precedent that must be satisfied prior to any borrowing as well as ongoing compliance with certain affirmative and negative covenants. The revolving credit facility requires thatFor example, the Partnership is obligated to maintain a minimum interest coverageat the end of each fiscal quarter (a) maximum first lien gross leverage ratio of at least 3.002.75 to 1.00 which is calculated as the ratio of trailing 12 months Adjusted EBITDA, as defined in the credit agreement, to cash interest expense of the Partnership, measured quarterly. The Partnership must also maintainand (b) a maximum total net leverage ratio not greater than 3.50of 3.25 to 1.00, (or 4.00 to 1.00each of which will be calculated on a consolidated basis for twothe Partnership and its restricted subsidiaries at the end of each fiscal quarters after consummation of a material acquisition), which is calculated as the ratio of total consolidated indebtedness to trailing 12 months Adjusted EBITDA, as defined in the credit agreement, measured quarterly.quarter. At June 30, 2017,2018, the interest coveragePartnership was in compliance with its debt covenants with the first lien gross leverage ratio was 10.91at 1.45 to 1.00 and the total net leverage ratio was 1.89at 1.45 to 1.00.
NOTE 8—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

The Partnership is obligated to CONSOL Energy for medical and disability benefits to certain CPCC employees and their dependents resulting from occurrences of coal workers'workers’ pneumoconiosis disease and is also obligated to CONSOL Energy to compensate certain individuals who are entitled benefits under workers'workers’ compensation laws.

 CWP Workers' Compensation
 Three Months Ended
June 30,		 Six Months Ended
June 30,		 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2017 2016 2017 2016 2017 2016 2017 2016
Service cost$283
 $204
 $566
 $395
 $320
 $325
 $641
 $650
Interest cost18
 18
 36
 36
 33
 33
 65
 66
Amortization of actuarial gain(34) (20) (68) (42) (8) (5) (17) (10)
State administrative fees and insurance bond premiums—
 —
 —
 —
 41
 42
 98
 76
Net periodic benefit cost$267
 $202
 $534
 $389
 $386
 $395
 $787
 $782

The Partnership does not expect to contribute to CONSOL Energy's CWP plan in 2017 as it intends to pay benefit claims as they become due. For the six months ended June 30, 2017, $34 of CWP benefit claims have been paid.



The Partnership does not expect to contribute to CONSOL Energy's Workers’ Compensation plan in 2017 as it intends to pay benefit claims as they become due. For the six months ended June 30, 2017, $756 of Workers’ Compensation benefits, state administrative fees and surety bond premiums have been paid.
 CWP 
Workers’ Compensation
 Three Months Ended
June 30,		 Six Months Ended
June 30,		 Three Months Ended
June 30,		 Six Months Ended
June 30,
 2018 2017 2018 2017 2018 2017 2018 2017
Service Cost$372
 $283
 $745
 $566
 $366
 $320
 $732
 $641
Interest Cost36
 18
 72
 36
 35
 33
 70
 65
Amortization of Actuarial Gain(5) (34) (11) (68) (1) (8) (3) (17)
State Administrative Fees and Insurance Bond Premiums—
 —
 —
 —
 22
 41
 29
 98
Net Periodic Benefit Cost$403
 $267
 $806
 $534
 $422
 $386
 $828
 $787
NOTE 9—FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Partnership determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources (including LIBOR-based discount rates), while unobservable inputs reflect the Partnership'sPartnership’s own assumptions of what market participants would use.

The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level One - Quoted prices for identical instruments in active markets.

Level Two - The fair value of the assets and liabilities included in Level 2 are based on standard industry income approach models that use significant observable inputs, including LIBOR-based discount rates.

Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity. The significant unobservable inputs used in the fair value measurement of the Partnership'sPartnership’s third party guarantees are the credit risk of the third party and the third party surety bond markets.

In those cases when the inputs used to measure fair value meet the definition of more than one level of the fair value hierarchy, the lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.

The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

Long-term debt: The fair value of long-term debt is measured using unadjusted quoted market prices or estimated using discounted cash flow analyses. The discounted cash flow analyses are based on current market rates for instruments with similar cash flows.

The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:
 June 30, 2017 December 31, 2016
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Revolving Credit Facility$190,000
 $190,000
 $201,000
 $201,000
 June 30, 2018 December 31, 2017
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Affiliated Company Credit Agreement - Related Party$160,500
 $160,500
 $196,583
 $196,583
The Partnership’s debt obligations are valued through reference to the applicable underlying benchmark rate and, as a result, constitute Level 2 fair value measurements.


NOTE 10—COMMITMENTS AND CONTINGENT LIABILITIES:

The Partnership is subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations (including environmental remediation), employment and contract disputes and other claims and actions arising out of the normal course of its business. We accrue the estimated loss for these lawsuits and claims when the loss is probable and can be estimated. Our current estimated accruals related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of the Partnership. It is possible that the aggregate loss in the future with respect to these lawsuits and claims could ultimately be material to the financial position, results of operations or cash flows of the Partnership; however, such amounts cannot be reasonably estimated.



At June 30, 2017,2018, the Partnership iswas contractually obligated to CONSOL Energy for financial guarantees and letters of credit to certain third parties which were issued by CONSOL Energy on behalf of the Partnership. The maximum potential total of future payments that we could be required to make under these instruments is $72,504.$85,539. The instruments are comprised of $720 employee-related and other$301 of letters of credit expiring in the next three years, $62,508$75,841 of environmental surety bonds expiring within the next three years, and $9,276$9,397 of employee-related and other surety bonds expiring within the next three years. Employee-related financial guarantees have primarily been provided to support various state workers’ compensation and federal black lung self-insurance programs. Environmental financial guarantees have primarily been provided to support various performance bonds related to reclamation and other environmental issues. Other guarantees have been extended to support insurance policies, legal matters, full and timely payments of mining equipment leases, and various other items necessary in the normal course of business. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credit are recorded as liabilities on the financial statements. The Partnership’s management believes that these guarantees will expire without being funded, and therefore the commitments will not have a material adverse effect on the financial condition of the Partnership.

NOTE 11—RECEIVABLES FINANCING AGREEMENT

On November 30, 2017, (i) CONSOL Marine Terminals LLC, formerly known as CNX Marine Terminals LLC, as an originator of receivables, (ii) CPCC, as an originator of receivables and as initial servicer of the receivables for itself and the other originators (collectively, the “Originators”), each a wholly owned subsidiary of CONSOL Energy, and (iii) CONSOL Funding LLC (the “SPV”), as buyer, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”). Concurrently, (i) CONSOL Thermal Holdings, as sub-originator, and (ii) CPCC, as buyer and as initial servicer of the receivables for itself and CONSOL Thermal Holdings, entered into a Sub-Originator Agreement (the “Sub-Originator PSA”). In addition, on that date, the SPV entered into a Receivables Financing Agreement (the “Receivables Financing Agreement”) by and among (i) the SPV, as borrower, (ii) CPCC, as initial servicer, (iii) PNC, as administrative agent, LC Bank and lender, and (iv) the additional persons from time to time party thereto as lenders. Together, the Purchase and Sale Agreement, the Sub-Originator PSA and the Receivables Financing Agreement establish the primary terms and conditions of an accounts receivable securitization program (the “Securitization”).

Pursuant to the Securitization, (i) CONSOL Thermal Holdings will sell current and future trade receivables to CPCC and (ii) the Originators will sell and/or contribute current and future trade receivables (including receivables sold to CPCC by CONSOL Thermal Holdings) to the SPV and the SPV will, in turn, pledge its interests in the receivables to PNC, which will either make loans or issue letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the Securitization may not exceed $100,000. Loans under the Securitization will accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the Securitization also will accrue a program fee and participation fee, respectively, equal to 4.00% per annum. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments. The SPV’s assets and credit are not available to satisfy the debts and obligations owed to the creditors of CONSOL Energy, CONSOL Thermal Holdings or any of the Originators. CONSOL Thermal Holdings, the Originators and CPCC as servicer are independently liable for their own customary representations, warranties, covenants and indemnities. In addition, CONSOL Energy has guaranteed the performance of the obligations of CONSOL Thermal Holdings, the Originators and CPCC as servicer, and will guarantee the obligations of any additional originators or successor servicer that may become party to the Securitization. However, neither CONSOL Energy nor its affiliates will guarantee collectability of receivables or the creditworthiness of obligors thereunder.

The Securitization contains various customary representations and warranties, covenants and default provisions which provide for the termination and acceleration of the commitments and loans under the Securitization in circumstances including,


but not limited to, failure to make payments when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

As of June 30, 2018, the Partnership, through CONSOL Thermal Holdings, sold $22,857 of trade receivables to CPCC. The Partnership has not derecognized the receivables due to its continued involvement in the collections efforts.

The Securitization expires on August 30, 2018. CONSOL expects to renew the Securitization with PNC Bank for a three-year term.
NOTE 12—RELATED PARTY:

CONSOL Energy

In conjunction with the IPO, the Partnership entered into several agreements, including an omnibus agreement, with CONSOL Energy.CNX. In connection with the PA Mining Acquisition, described in Note 3, on September 30, 2016, the then General Partner and the Partnership entered into the First Amended and Restated Omnibus Agreement (the “Amended Omnibus Agreement”) with CONSOL EnergyCNX and certain of its subsidiaries. Under the Amended Omnibus Agreement, CONSOL Energy willCNX would indemnify the Partnership for certain liabilities, including those relating to:

all tax liabilities attributable to the assets contributed to the Partnership in connection with the PA Mining Acquisition (the “First Drop Down Assets”) arising prior to the closing of the PA Mining Acquisition or otherwise related to the Contributing Parties’contributing parties’ contribution of the First Drop Down Assets to the Partnership in connection with the PA Mining Acquisition; and
certain operational and title matters related to the First Drop Down Assets, including the failure to have (i) the ability to operate under any governmental license, permit or approval or (ii) such valid title to the First Drop Down Assets, in each case, that is necessary for the Partnership to own or operate the First Drop Down Assets in substantially the same manner as owned or operated by the Contributing Parties prior to the Acquisition.

The Partnership willwould indemnify CONSOL EnergyCNX for certain liabilities relating to the First Drop Down Assets, including those relating to:
the use, ownership or operation of the First Drop Down Assets; and
the Partnership’s operation of the First Drop Down Assets under permits and/or bonds, letters of credit, guarantees, deposits and other pre-payments held by CONSOL Energy.CNX.

The Amended Omnibus Agreement also amended the Partnership’s obligations to CONSOL EnergyCNX with respect to the payment of an annual administrative support fee and reimbursement for the provision of certain management and operating services provided by CONSOL Energy,CNX, in each case to reflect structural changes in how those services are provided to the Partnership by CNX.

On November 28, 2017, in connection with the separation, the general partner, the Partnership, CNX, CONSOL Energy.Energy and certain of its subsidiaries entered into the First Amendment to the First Amended and Restated Omnibus Agreement (the “First Amendment to Omnibus Agreement”), dated September 30, 2016, to, among other things:

add CONSOL Energy as a party to the omnibus agreement;
eliminate the right-of-first offer to the Partnership for the 75% of the Pennsylvania Mining Complex not owned by the Partnership;
effect an assignment of all of CNX’s rights and obligations under the omnibus agreement to CONSOL Energy and remove CNX as a party to and, except with respect to CNX’s obligations under Article II of the omnibus agreement, eliminate all of CNX’s obligations under, the omnibus agreement, as amended by the First Amendment to Omnibus Agreement; and
make certain adjustments to the indemnification obligations of the parties.

Charges for services from CONSOL Energy include the following:
Three Months Ended
June 30,		 Six Months Ended
June 30,		Three Months Ended
June 30,		 Six Months Ended
June 30,
2017 2016 2017 20162018 2017 2018 2017
Operating and Other Costs$867
 $1,270
 $1,739
 $2,536
$761
 $867
 $1,447
 $1,739
Selling, General and Administrative Expenses737
 1,190
 1,454
 2,305
1,953
 737
 3,598
 1,454
Total Service from CONSOL Energy$1,604
 $2,460
 $3,193
 $4,841
Total Services from CONSOL Energy$2,714
 $1,604
 $5,045
 $3,193



Operating and Other Costs includes service costs for pension and insurance expenses. Selling, General and Administrative Expenses include charges for incentive compensation, an annual administrative support fee and reimbursement for the provision of certain management and operating services provided by CONSOL Energy. Since November 28, 2017, certain administrative services historically incurred by the Partnership are now incurred by CONSOL Energy and the Partnership's portion is reimbursed to CONSOL Energy.

For the three months ended June 30, 2018, $1,976 of interest was incurred on the Affiliated Company Credit Agreement, of which $1,784 is included in Interest Expense in the Consolidated Statements of Operations, and $192 was capitalized and included in Property, Plant, and Equipment on the Consolidated Balance Sheets. For the six months ended June 30, 2018, $4,110 of interest was incurred on the Affiliated Company Credit Agreement, of which $3,735 is included in Interest Expense in the Consolidated Statements of Operations, and $375 was capitalized and included in Property, Plant, and Equipment on the Consolidated Balance Sheets. Interest is calculated based upon a fixed rate, determined quarterly, depending on the total net leverage ratio. For the three and six months ended June 30, 2018, the weighted average interest rate was 4.01% and 4.13%, respectively. See Note 7 - Long-Term Debt for more information.

At June 30, 20172018 and December 31, 2016,2017, the Partnership had a net payable to CONSOL Energy in the amount of $2,196$3,455 and $1,666,$3,071, respectively. This payable includes reimbursements for business expenses, executive fees, stock-based compensation and other items under the Omnibus Agreement.


NOTE 12—13—LONG-TERM INCENTIVE PLAN:

Under the CNXCONSOL Coal Resources LP 2015 Long-Term Incentive Plan (the “LTIP”), our general partner may issue long-term equity basedequity-based awards to directors, officers and employees of our general partner or its affiliates, or to any consultants, affiliates of our general partner or other individuals who perform services for us. These awards are intended to compensate the recipients thereof based on the performance of our common units and their continued service during the vesting period, as
well as to align their long-term interests with those of our unitholders. We are responsible for the cost of awards granted
under the LTIP and all determinations with respect to awards to be made under the LTIP arewill be made by the board of directors
of our general partner or any committee thereof that may be established for such purpose or by any delegate of the board of
directors or such committee, subject to applicable law, which we refer to as the plan administrator.

The LTIP limits the number of units that may be delivered pursuant to vested awards to 2,300,000 common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units subject to awards that are canceled,
forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminated without delivery of the
common units will be available for delivery pursuant to other awards.

The Partnership's general partner has granted equity-based phantom units that vest over a period of a director’s continued service with the Partnership. The phantom units will be paid in common units upon vesting or an amount of cash equal to the fair market value of a unit based on the vesting date. The awards may accelerate upon a change in control of the Partnership. Compensation expense is recognized on a straight-line basis over athe requisite service period, which is generally the vesting term. The Partnership recognized $840compensation expense of $510 and $1,707 of compensation expense$840 for the three months ended and $867 and $1,707 for the six months ended June 30, 2017, respectively. The Partnership recognized $3082018 and $615 of compensation expense for the three and six months ended June 30, 2016, respectively. Compensation expense2017 respectively, which is included in Selling, General and Administrative ExpensesExpense in the Consolidated Statements of Operations. As of June 30, 2017,2018, there is $7,226$2,398 of unearned compensation that will vest over a weighted average period of 2.291.38 years. The total fair value of phantom units vested during the three months ended June 30, 2018 and June 30, 2017 was $50 and $0, respectively. The total fair value of phantom units vested during the six months ended June 30, 2018 and June 30, 2017 was $2,468 and $1,134, respectively. The following represents the nonvested phantom units and their corresponding weighted average grant date fair value:
Number of Units Weighted Average Grant Date Fair Value per UnitNumber of Units Weighted Average Grant Date Fair Value per Unit
Nonvested at December 31, 2016381,934
 $7.90
Nonvested at December 31, 2017401,409
 $14.87
Granted383,478
 $18.94
18,807
 $15.95
Vested(142,421) $7.96
(176,643) $13.97
Forfeited(16,766) $13.21
(9,928) $15.27
Nonvested at June 30, 2017606,225
 $10.20
Nonvested at June 30, 2018233,645
 $15.62
  


NOTE 13—14—FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND FINANCE SUBSIDIARY OF POSSIBLE FUTURE PUBLIC DEBT:

The Partnership filed a Registration Statement on Form S-3 (333-215962) with the SEC on March 10, 2017, which was declared effective by the SEC on March 14, 2017, with the SEC to register the offer and sale of various securities including debt securities. The registration statement registers guarantees of debt securities by CNXCONSOL Operating and CNXCONSOL Thermal Holdings ("(“Subsidiary Guarantors"Guarantors”). The Subsidiary Guarantors are 100% owned by the Partnership and any guarantees by the Subsidiary Guarantors will be full and unconditional and joint and several. In addition, the registration statement also includes CNXCONSOL Coal Finance, which was formed for the sole purpose of co-issuing future debt securities with the Partnership. CNXCONSOL Coal Finance is wholly owned by the Partnership, has no assets or any liabilities and its activities will be limited to co-issuing debt securities and engaging in other activities incidental thereto. The Partnership does not have any other subsidiaries other than the Subsidiary Guarantors and CNXCONSOL Coal Finance. In addition, the Partnership has no assets or operations independent of the Subsidiary Guarantors, and there are no significant restrictions upon the ability of the Subsidiary Guarantors to distribute funds to the Partnership by dividend or loan other than under the Credit Agreement described in these notes. In the event that more than one of the Subsidiary Guarantors guarantee public debt securities of the Partnership in the future, those guarantees will be full and unconditional and will constitute the joint and several obligations of the Subsidiary Guarantors. None of the assets of the Partnership, the Subsidiary Guarantors or CNXCONSOL Coal Finance represent restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended.




NOTE 14—15—SUBSEQUENT EVENTS:

On July 27, 2017,25, 2018, the Board of Directors of our general partner declared a cash distribution to the Partnership'sPartnership’s unitholders for the quarter ended June 30, 20172018 of $0.5125 per common and subordinated units and $0.4678 per Class A Preferred Unit.unit. The cash distribution will be paid on August 15, 20172018 to the unitholders of record at the close of business on August 7, 2017.8, 2018.



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

Unless otherwise indicated, the following discussion and analysis of the financial condition and results of operations of our Partnership reflect a 25% undivided interest in the assets, liabilities and results of operations of the Pennsylvania Mining Complex. As used in the following discussion and analysis of the financial condition and results of operations of our Partnership, the terms “we,” “our,” “us,” or like terms refer to the Partnership with respect to its 25% undivided interest in the Pennsylvania Mining Complex’s combined assets, liabilities revenues and costs. All amounts except per unit or per ton are displayed in thousands.
Overview

We are a growth-oriented master limited partnership formed by CONSOL EnergyCNX in 2015 to manage and further develop all of its thermalactive coal operations in Pennsylvania. Our primary strategy for growing our business and increasing distributions to our unitholders is to increase operating efficiencies to maximize realizations and make acquisitions that increase our distributable cash flow. The primary component of our growth strategy is based upon our expectation of future divestitures by CONSOL Energy to us of portions of its retained 75% undivided interest in the Pennsylvania Mining Complex. At June 30, 2017,2018, the Partnership'sPartnership’s assets include a 25% undivided interest in, and operational control over, CONSOL Energy'sEnergy’s Pennsylvania Mining Complex, which consists of three underground mines and related infrastructure that produce high-Btu bituminous thermal coal that is sold primarily to electric utilities in the eastern United States, our core market.States. We believe that our ability to efficiently produce and deliver large volumes of high-quality coal at competitive prices, the strategic location of our mines, and the industry experience of our management team position us as a leading producer of high-Btu thermal coal in the Northern Appalachian Basin and the eastern United States. CONSOL Energy's strategy is to increase shareholder value through the development and growth of its existing natural gas assets, selective acquisition of natural gas and natural gas liquid acreage leases within its footprint, and through its participation in global coal markets. Ultimately, CONSOL Energy's intent is to separate the Gas Exploration and Production division and the Coal division, including CONSOL Energy's remaining ownership in Pennsylvania Mining Complex. With that in mind, on July 11, 2017 a registration statement on Form 10 was filed with the U.S. Securities and Exchange Commission.

On September 30, 2016, the Partnership and its wholly owned subsidiary, CNXCONSOL Thermal Holdings, entered into a Contribution Agreement (the “Contribution Agreement”) with CONSOL Energy,CNX, CPCC and Conrhein and together with CPCC, (the(collectively, the “Contributing Parties”), under which CNXCONSOL Thermal Holdings completed the PA Mining Acquisition to acquire an undivided 6.25% of the Contributing Parties’ right, title and interest in and to the Pennsylvania Mining Complex (which represents an aggregate 5% undivided interest in and to the Pennsylvania Mining Complex). The PA Mining AcquisitionThis acquisition was a transaction between entities under common control; therefore, the Partnership recorded the assets and liabilities of the acquired 5% of Pennsylvania Mining Complex at their carrying amounts on CONSOL Energy'sCNX’s financial statements at the date of the transaction. The difference between CONSOL Energy’sCNX’s net carrying amount and the total consideration paid to CONSOL EnergyCNX was recorded as a capital transaction with CONSOL Energy,CNX, which resulted in a reduction in partners’ capital. The Partnership recast its historical consolidated financial statements to retrospectively reflect ownership of the additional 5% (a total 25%) interest in the Pennsylvania Mining Complex as if the business was owned for all periods presented; however, the consolidated financial statements are not necessarily indicative of the results of operations that would have occurred if the Partnership had owned it during the periods reported.

On November 28, 2017, CONSOL Energy was separated from CNX into an independent, publicly traded coal company via a pro rata distribution of all of CONSOL Energy’s common stock to CNX’s stockholders. CONSOL Energy was originally formed as CONSOL Mining Corporation in Delaware on June 21, 2017 to hold CNX’s coal business including its interest in the Pennsylvania Mining Complex and certain related coal assets, including CNX’s ownership interest in the Partnership and our general partner, CNX’s terminal operations at the Port of Baltimore and undeveloped coal reserves located in the Northern Appalachian, Central Appalachian and Illinois basins and certain related coal assets and liabilities. As part of the separation, CONSOL Mining Corporation changed its name to CONSOL Energy Inc. and its ticker to “CEIX”, CNX changed its name to CNX Resources Corporation and its ticker to “CNX”, the Partnership changed its name to CONSOL Coal Resources LP and its ticker to “CCR” and the general partner changed its name to CONSOL Coal Resources GP LLC.

How We Evaluate Our Operations

Our management team uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability. The metrics include: (i) coal production, sales volumes and average sales price;revenue per ton; (ii) cost of coal sold, a non-GAAP financial measure; (iii) cash cost of coal sold, a non-GAAP financial measure; (iv) average cash margin per ton, an operating ratio derived from non-GAAP financial measures, (iv)measures; (v) adjusted EBITDA, a non-GAAP financial measure; and (v)(vi) distributable cash flow, a non-GAAP financial measure.

Cost of coal sold, cash cost of coal sold, average cash margin per ton, adjusted EBITDA and distributable cash flow normalize the volatility contained within comparable GAAP measures by adjusting certain non-operating or non-cash

transactions. Each of these non-GAAP metrics are used as supplemental financial measures by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:

• our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure;

• the ability of our assets to generate sufficient cash flow to make distributions to our partners;

• our ability to incur and service debt and fund capital expenditures;


• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities; and

• the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.
   
TheThese non-GAAP financial measures should not be considered an alternative to total costs, net income, operating cash flow, or any other measure of financial performance or liquidity presented in accordance with GAAP. These measures exclude some, but not all, items that affect net income or net cash, and these measures and the way we calculate them may vary from those of other companies. As a result, the items presented below may not be comparable to similarly titled measures of other companies.

Reconciliation of Non-GAAP Financial Measures

We evaluate our cost of coal sold and cash cost of coal sold on a cost per ton basis. Our cost of coal sold per ton represents our costs of coal sold divided by the tons of coal we sell. We define cost of coal sold as operating and other production costs related to produced tons sold, along with changes in coal inventory, both in volumes and carrying values. The cost of coal sold per ton includes items such as direct operating costs, royalty and production taxes, direct administration, and depreciation, depletion and amortization costs.costs on production assets. Our costs exclude any indirect costs such as selling, general and administrative costs, freight expenses, interest expenses and other costs not directly attributable to the production of coal. The GAAP measure most directly comparable to cost of coal sold is total costs. The cash cost of coal sold includes cost of coal sold less depreciation, depletion and amortization cost on production assets. The GAAP measure most directly comparable to cash cost of coal sold is total costs.

We define average cash margin per ton as average coal revenue per ton, net of average cash cost of coal sold per ton, less depreciation, depletion and amortization.ton. The GAAP measure most directly comparable to average cash margin per ton sold is total coal revenue.

We define adjusted EBITDA as (i) net income (loss) before net interest expense, depreciation, depletion and amortization, as adjusted for (ii) certain non-cash items, such as long-term incentive awards including phantom units under the CNXCONSOL Coal Resources LP 2015 Long-Term Incentive Plan ("Unit Based Compensation"(“Unit-Based Compensation”). The GAAP measure most directly comparable to adjusted EBITDA is net income.

We define distributable cash flow as (i) net income (loss) before net interest expense, depreciation, depletion and amortization, as adjusted for (ii) certain non-cash items, such as Unit BasedUnit-Based Compensation, less net cash interest paid and estimated maintenance capital expenditures, which is defined as those forecasted average capital expenditures required to maintain, over the long-term, the operating capacity of our capital assets. These estimated capital expenditures do not reflect the actual cash capital incurred in the period presented. Distributable cash flow will not reflect changes in working capital balances. The GAAP measures most directly comparable to distributable cash flow are net income and net cash provided by operating activities. We define distribution coverage ratio as a ratio of the distributable cash flow to the distributions, which is the $0.5125 per quarter distribution for all limited partner units, including common and subordinated units, issued for the periods presented.

The following table presents a reconciliation of cash cost of coal sold to total costs, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated (in thousands).


Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 20162018 2017 2018 2017
Total Costs$70,998
 $63,310
 $140,212
 $119,292
$78,681
 $70,998
 $151,225
 $140,212
Freight Expense(4,441) (2,797) (7,511) (6,066)(4,361) (4,441) (8,833) (7,511)
Selling, General and Administrative Expenses(3,652) (1,969) (6,935) (3,897)(3,341) (3,652) (6,361) (6,935)
Interest Expense(2,396) (2,076) (4,853) (4,054)(1,784) (2,396) (3,735) (4,853)
Other Costs (Non-Production)(934) (2,564) (2,427) (6,196)(4,239) (934) (8,265) (2,427)
Depreciation, Depletion and Amortization (Non-Production)(550) (749) (1,100) (2,307)(543) (550) (1,083) (1,100)
Cost of Coal Sold$59,025
 $53,155
 $117,386
 $96,772
$64,413
 $59,025
 $122,948
 $117,386
Depreciation, Depletion and Amortization (Production)(11,353) (9,727) $(21,627) $(19,698)
Cash Cost of Coal Sold$53,060
 $49,298
 $101,321
 $97,688


The following table presents a reconciliation of average cash margin per ton to coal revenue, the most directly comparable GAAP financial measure for each of the periods indicated (in thousands, except per ton information).


Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 20162018 2017 2018 2017
Total Coal Revenue$75,927
 $62,640
 $155,039
 $119,181
Coal Revenue$92,674
 $75,927
 $180,426
 $155,039
Operating and Other Costs50,232
 46,046
 100,115
 84,536
57,299
 50,232
 109,586
 100,115
Less: Other Costs (Non-Production)(4,239) (934) (8,265) (2,427)
Cash Cost of Coal Sold53,060
 49,298
 101,321
 97,688
Depreciation, Depletion and Amortization10,277
 10,422
 20,798
 20,739
11,896
 10,277
 22,710
 20,798
Less: Other Costs (Non-Production)(934) (2,564) (2,427) (6,196)
Less: Depreciation, Depletion and Amortization (Non-Production)(550) (749) (1,100) (2,307)(543) (550) (1,083) (1,100)
Total Cost of Coal Sold$59,025
 $53,155
 $117,386
 $96,772
Cost of Coal Sold$64,413
 $59,025
 $122,948
 $117,386
Total Tons Sold1,697
 1,543
 3,387
 2,858
1,958
 1,697
 3,614
 3,387
Average Sales Price Per Ton Sold$44.75
 $40.61
 $45.77
 $41.70
Average Revenue Per Ton Sold$47.34
 $44.75
 $49.93
 $45.77
Average Cash Cost Per Ton Sold26.99
 29.08
 28.01
 28.91
Depreciation, Depletion and Amortization Per Ton Sold5.91
 5.71
 6.02
 5.74
Average Cost Per Ton Sold34.79
 34.46
 34.65
 33.86
32.90
 34.79
 34.03
 34.65
Average Margin Per Ton Sold9.96
 6.15
 11.12
 7.84
14.44
 9.96
 15.90
 11.12
Add: Total Depreciation, Depletion and Amortization Costs Per Ton Sold5.71
 6.50
 5.74
 6.47
5.91
 5.71
 6.02
 5.74
Average Cash Margin Per Ton Sold$15.67
 $12.65
 $16.86
 $14.31
$20.35
 $15.67
 $21.92
 $16.86

The following table presents a reconciliation of adjusted EBITDA to net income, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated. The table also presents a reconciliation of distributable cash flow to net income and operating cash flows, the most directly comparable GAAP financial measures, on a historical basis for each of the periods indicated (in thousands).

Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 20162018 2017 2018 2017
Net Income$11,474
 $3,907
 $25,540
 $7,723
$19,376
 $11,474
 $41,333
 $25,540
Plus:              
Interest Expense2,396
 2,076
 4,853
 4,054
1,784
 2,396
 3,735
 4,853
Depreciation, Depletion and Amortization10,277
 10,422
 20,798
 20,739
11,896
 10,277
 22,710
 20,798
Unit Based Compensation841
 307
 1,707
 615
Unit-Based Compensation508
 841
 867
 1,707
Adjusted EBITDA$24,988
 $16,712
 $52,898
 $33,131
$33,564
 $24,988
 $68,645
 $52,898
Less:              
Cash Interest2,539
 1,789
 4,700
 3,756
2,130
 2,539
 2,958
 4,700
PA Mining Acquisition Adjusted EBITDA1
—
 3,368

—
 6,733
Distributions to Preferred Units1,851
 —
 3,702
 —
Distributions to Preferred Units1
—
 1,851
 —
 3,702
Estimated Maintenance Capital Expenditures8,976
 6,752
 17,965
 13,452
9,085
 8,976
 18,048
 17,965
Distributable Cash Flow$11,622
 $4,803
 $26,531
 $9,190
$22,349
 $11,622
 $47,639
 $26,531
              
Net Cash Provided by Operating Activities$23,092
 $21,320
 $40,754
 $24,831
$48,949
 $23,092
 $78,213
 $40,754
Plus:              
Interest Expense2,396
 2,076
 4,853
 4,054
1,784
 2,396
 3,735
 4,853
Other, Including Working Capital(500) (6,684) 7,291
 4,246
(17,169) (500) (13,303) 7,291
Adjusted EBITDA$24,988
 $16,712
 $52,898
 $33,131
$33,564
 $24,988
 $68,645
 $52,898
Less:              
Cash Interest2,539
 1,789
 4,700
 3,756
2,130
 2,539
 2,958
 4,700
PA Mining Acquisition Adjusted EBITDA1
—
 3,368
 —
 6,733
Distributions to Preferred Units1,851
 —
 3,702
 —
Distributions to Preferred Units1
—
 1,851
 —
 3,702
Estimated Maintenance Capital Expenditures8,976
 6,752
 17,965
 13,452
9,085
 8,976
 18,048
 17,965
Distributable Cash Flow$11,622
 $4,803
 $26,531
 $9,190
$22,349
 $11,622
 $47,639
 $26,531
Minimum Quarterly Distributions$14,348
 $12,228
 $28,694
 $24,456
Distribution Coverage Ratio$1.6
 $1.0
 $1.7
 $1.1
1PA Mining Acquisition Adjusted EBITDA relatesDistributions to the amount of Adjusted EBITDA acquired with the PA Mining Acquisition recasted for all periods presented.Preferred Units represents income attributable to preferred units prior to conversion.




Results of Operations

Three Months Ended June 30, 20172018 Compared with the Three Months Ended June 30, 20162017

Total net income was $19,376 for the three months ended June 30, 2018 compared to $11,474 for the three months ended June 30, 2017 compared to $3,907 for the three months ended June 30, 2016.2017. Our results of operations for each of these periods are presented in the table below. Variances are discussed following the table.
For the Three Months EndedFor the Three Months Ended
June 30,June 30,
2017 2016 Variance2018 2017 Variance
(in thousands)(in thousands)
Revenue:          
Coal Revenue$75,927
 $62,640
 $13,287
$92,674
 $75,927
 $16,747
Freight Revenue4,441
 2,797
 1,644
4,361
 4,441
 (80)
Other Income2,104
 1,780
 324
1,022
 2,104
 (1,082)
Total Revenue and Other Income82,472
 67,217
 15,255
98,057
 82,472
 15,585
Cost of Coal Sold:          
Operating Costs49,298
 43,482
 5,816
53,060
 49,298
 3,762
Depreciation, Depletion and Amortization9,727
 9,673
 54
11,353
 9,727
 1,626
Total Cost of Coal Sold59,025
 53,155
 5,870
64,413
 59,025
 5,388
Other Costs:          
Other Costs934
 2,564
 (1,630)4,239
 934
 3,305
Depreciation, Depletion and Amortization550
 749
 (199)543
 550
 (7)
Total Other Costs1,484
 3,313
 (1,829)4,782
 1,484
 3,298
Freight Expense4,441
 2,797
 1,644
4,361
 4,441
 (80)
Selling, General and Administrative Expenses3,652
 1,969
 1,683
3,341
 3,652
 (311)
Interest Expense2,396
 2,076
 320
1,784
 2,396
 (612)
Total Costs70,998
 63,310
 7,688
78,681
 70,998
 7,683
Net Income$11,474
 $3,907
 $7,567
$19,376
 $11,474
 $7,902
Adjusted EBITDA$24,988
 $16,712
 $8,276
$33,564
 $24,988
 $8,576
Distributable Cash Flow$11,622
 $4,803
 $6,819
$22,349
 $11,622
 $10,727
Distribution Coverage Ratio1.6
 1.0
 0.6





Coal Production Rates

The table below presents total tons produced from the Pennsylvania Mining Complex on our 25% undivided interest basis for the periods indicated:
 Three Months Ended June 30, Three Months Ended June 30,
Mine 2017 2016 Variance 2018 2017 Variance
Bailey 785
 680
 105
 863
 785
 78
Enlow Fork 631
 611
 20
 697
 631
 66
Harvey 287
 198
 89
 361
 287
 74
Total 1,703
 1,489
 214
 1,921
 1,703
 218

Coal production was 1,921 tons for the three months ended June 30, 2018 compared to 1,703 tons for the three months ended June 30, 2017 compared to 1,489 tons for the three months ended June 30, 2016.2017. The Partnership'sPartnership’s coal production increased 214218 tons to satisfy market demand.
Coal Operations

Coal revenue and cost components on a per unit basis for the three months ended June 30, 2018 and 2017 and 2016 were as indicatedare detailed in the table below. Our operations also include various costs such as selling, general and administrative, freight and other costs not included in our unit cost analysis because these costs are not directly associated with coal production.
Three Months Ended June 30,Three Months Ended June 30,
2017 2016 Variance2018 2017 Variance
Total Tons Sold (in thousands)1,697
 1,543
 154
1,958
 1,697
 261
Average Sales Price Per Ton Sold$44.75
 $40.61
 $4.14
Average Revenue Per Ton Sold$47.34
 $44.75
 $2.59
    

    

Operating Costs Per Ton Sold (Cash Cost)$29.08
 $27.96
 $1.12
Average Cash Cost Per Ton Sold$26.99
 $29.08
 $(2.09)
Depreciation, Depletion and Amortization Per Ton Sold (Non-Cash Cost)5.71
 6.50
 (0.79)5.91
 5.71
 0.2
Total Costs Per Ton Sold$34.79
 $34.46
 $0.33
$32.90
 $34.79
 $(1.89)
Average Margin Per Ton Sold$9.96
 $6.15
 $3.81
$14.44
 $9.96
 $4.48
Add: Depreciation, Depletion and Amortization Costs Per Ton Sold5.71
 6.50
 (0.79)5.91
 5.71
 0.20
Average Cash Margin Per Ton Sold (1)$15.67
 $12.65
 $3.02
$20.35
 $15.67
 $4.68
(1) Average cash margin per ton is an operating ratio derived from non-GAAP measures. See “– How We Evaluate Our Operations – Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.


Revenue and Other Income

Coal revenue was $92,674 for the three months ended June 30, 2018 compared to $75,927 for the three months ended June 30, 2017 compared to $62,640 for the three months ended June 30, 2016.2017. The $13,287$16,747 increase was attributable to a 154$2.59 per ton higher average revenue and a 261 ton increase in tons sold and a $4.14 per ton higher average sales price.sold. The increase in tons sold was primarily due to increaseddriven by improved production from all mining operations across the Pennsylvania Mining Complex, which was supported by strong demand from our domestic power plant customers in part due to higher natural gas pricesboth the domestic and more normal power plant coal inventory levels versus the year-ago period.export markets.  The higher average sales price per ton sold in the 20172018 period was primarily driven by improved pricing under our netback contracts, which resulted from stronger PJM West power prices during the result of a tighter supply-demand balancequarter as compared to the year-ago quarter, and by improved realizations in the international thermalexport markets.  PJM West day-ahead power prices averaged 19% higher in the three months ended June 30, 2018 compared to the three months ended June 30, 2017, and crossover metallurgical coal markets that we serve. Theprompt month prices for the API 2 index (the benchmark price reference for coal imported into northwest Europe) was up moreaveraged 17% higher than 50% induring the second quarter of 2017 compared to the second quarter of 2016, and the global coking coal prices were up by an even greater percentage in the period-to-period comparison.year-ago quarter.

Freight revenue, which is completely offset in freight expense, is the amount billed to customers based on the weight of coal shipped and negotiated freight rates for rail transportation. Freight revenue increased $1,644decreased $80 in the period-to-period comparison due to increaseddecreased shipments to customers where we were contractually obligated to provide transportation services.

Other income is comprised of income generated by the Partnership not in the ordinary course of business. Other income increased $324 inwas $1,022 for the three months ended June 30, 2018, compared to $2,104 for the three months ended June 30, 2017. The


$1,082 period-to-period comparisondecrease was primarily due to a $1,403 gain that occurred during the three months ended June 30, 2017 related to an agreement to avoid mining approximately 85 acres of reserves as well asreserves. This decrease was offset, in part, by an increase of $295 in sales of externally purchased coal in 2017 for blending purposes only. These increases in other income were offset, in part, by a contract buyoutThe remaining variance is attributable to various transactions that occurred in the prior year.





throughout both periods, none of which are individually material.

Cost of Coal Sold

Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both volumes and carrying values of coal inventory. The costs of coal sold per ton include items such as direct operating costs, royalty and production taxes, direct administration expenses, and depreciation, depletion, and amortization costs.costs on production assets. Total cost of coal sold was $64,413 for the three months ended June 30, 2018, or $5,388 higher than the $59,025 for the three months ended June 30, 2017, or $5,870 higher than the $53,1552017. Total costs per ton sold were $32.90 per ton for the three months ended June 30, 2016. Total costs per ton sold were2018 compared to $34.79 per ton for the three months ended June 30, 2017 compared to $34.46 per ton for the three months ended June 30, 2016.2017. The increase in the total cost of coal sold was primarily driven by an increase in production tonsproduction-related costs as more coal was mined to meet market demand. In addition,demand, as well as an increase in mine development activity. However, the averageincreased production resulted in an overall decrease in the total cost per ton sold increased due to additional costs related to an increase in development mining footage, offset in part by a 7% improvement in productivity for the three months, as measured by tons per employee-hour, as compared to the year-ago period.sold.

Total Other Costs

Total other costs is comprised of various costs that are not allocated to each individual mine and therefore are not included in unit costs. Total other costs decreased $1,829increased $3,298 for the three months ended June 30, 20172018 compared to the three months ended June 30, 2016. The decrease is2017. This was primarily attributable to $847 ofan increase in current quarter costs in the prior year related to temporarily idling one of the longwalls at the Pennsylvania Mining Complex to optimize the production schedule, and prior year costs of $668 related to discretionary 401(k) contribution accruals. In addition, accrued litigation contingency decreased $928 in the period-to-period comparison due to settling and estimating various litigation issues, none of which are material. These were offset, in part, by an increase of $478 in the period-to-period comparison related to the cost ofexternally purchased coal sold for blending purposes only.only, discretionary employee benefit expense, and demurrage charges.

Selling, General, and Administrative Expense

Selling, general, and administrative expenses increased $1,683 period-to-period, primarily due to an increase in short term incentive compensation paid to employees based on the results of operations achieved at our mines. In the prior year, the short term incentive compensation plan had been suspended in response to the poor market conditions that existedremained materially consistent in the period. Legal and consulting fees have also increased in the current period due to various transactions throughout both periods, none of which were individually material.period-to-period comparison.

Interest Expense

Interest expense for the three months ended June 30, 2018 was $1,784, which primarily relates to obligations under our revolving credit facility, increased $320Affiliated Company Credit Agreement. For the three months ended June 30, 2017, $2,396 of interest expense was incurred, primarily on the PNC Revolving Credit Facility. The decrease was primarily attributable to a lower average daily balance outstanding under the Affiliated Company Credit Agreement than had been drawn on the PNC Revolving Credit Facility in the period-to-period comparison primarily due to rising interest rates.previous year. For a detailed explanation of our liquidity and financing arrangements, please read Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity.”

Adjusted EBITDA

Adjusted EBITDA was $33,564 for the three months ended June 30, 2018 compared to $24,988 for the three months ended June 30, 2017 compared to $16,712 for the three months ended June 30, 2016.2017. The $8,276$8,576 increase was primarily a result of a $4.14$2.59 per ton increase in the average sales price and a $2.09 per ton offset, in part, by a $1.12 increasedecrease in the cash cost of coal sales per ton which resultedsold, resulting in a net $5,125$9,163 increase in Adjusted EBITDA. AnIn addition, an increase of 154261 tons of additional sales alsosold resulted in ana $4,090 increase in Adjusted EBITDA of $1,948.EBITDA. The remaining variance is due to changes in other income and other costs as discussed above and various other transactions that occurred throughout both periods, none of which are individually material.

Distributable Cash Flow

Distributable cash flow was $22,349 for the three months ended June 30, 2018 compared to $11,622 for the three months ended June 30, 2017 compared to $4,803 for the three months ended June 30, 2016.2017. The $6,819$10,727 increase was attributedprimarily attributable to a $8,276$8,576 increase in Adjusted EBITDA as discussed above, and a $3,368 decrease in the PA Mining Acquisition Adjusted EBITDA. These increases were offset, in part, by a $1,851 increasedecrease in distributions to holders of the Class A Preferred Units, which were all converted to common units on October 2, 2017, and ana $409 decrease in cash interest paid, offset, in part, by a $109 increase of $2,224 in Estimated Maintenance Capital Expenditures. The remaining variance was due to various transactions throughout both periods, none of which are individually material.



Six Months Ended June 30, 20172018 Compared with the Six Months Ended June 30, 20162017

Total net income was $41,333 for the six months ended June 30, 2018 compared to $25,540 for the six months ended June 30, 2017 compared to $7,723 for the six months ended June 30, 2016.2017. Our results of operations for each of these periods are presented in the table below. Variances are discussed following the table.
For the Six Months EndedFor the Six Months Ended
June 30,June 30,
2017 2016 Variance2018 2017 Variance
(in thousands)(in thousands)
Revenue:          
Coal Revenue$155,039
 $119,181
 $35,858
$180,426
 $155,039
 25,387
Freight Revenue7,511
 6,066
 1,445
8,833
 7,511
 1,322
Other Income3,202
 1,768
 1,434
3,299
 3,202
 97
Total Revenue and Other Income165,752
 127,015
 38,737
192,558
 165,752
 26,806
Cost of Coal Sold:          
Operating Costs97,688
 78,340
 19,348
101,321
 97,688
 3,633
Depreciation, Depletion and Amortization19,698
 18,432
 1,266
21,627
 19,698
 1,929
Total Cost of Coal Sold117,386
 96,772
 20,614
122,948
 117,386
 5,562
Other Costs:          
Other Costs2,427
 6,196
 (3,769)8,265
 2,427
 5,838
Depreciation, Depletion and Amortization1,100
 2,307
 (1,207)1,083
 1,100
 (17)
Total Other Costs3,527
 8,503
 (4,976)9,348
 3,527
 5,821
Freight Expense7,511
 6,066
 1,445
8,833
 7,511
 1,322
Selling, General and Administrative Expenses6,935
 3,897
 3,038
6,361
 6,935
 (574)
Interest Expense4,853
 4,054
 799
3,735
 4,853
 (1,118)
Total Costs140,212
 119,292
 20,920
151,225
 140,212
 11,013
Net Income$25,540
 $7,723
 $17,817
$41,333
 $25,540
 $15,793
Adjusted EBITDA$52,898
 $33,131
 $19,767
$68,645
 $52,898
 $15,747
Distributable Cash Flow$26,531
 $9,190
 $17,341
$47,639
 $26,531
 $21,108
Distribution Coverage Ratio1.7
 1.1
 0.6





Coal Production Rates

The table below presents total tons produced from the Pennsylvania Mining Complex on our 25% undivided interest basis for the periods indicated:
 Six Months Ended June 30, Six Months Ended June 30,
Mine 2017 2016 Variance 2018 2017 Variance
Bailey 1,559
 1,381
 178
 1,816
 1,559
 257
Enlow Fork 1,306
 1,240
 66
 1,201
 1,306
 (105)
Harvey 565
 226
 339
 579
 565
 14
Total 3,430
 2,847
 583
 3,596
 3,430
 166

Coal production was 3,596 tons for the six months ended June 30, 2018 compared to 3,430 tons for the six months ended June 30, 2017 compared to 2,847 tons for the six months ended June 30, 2016.2017. The Partnership'sPartnership’s coal production increased 583166 tons to satisfy market demand.demand, offset, in part, by adverse geological conditions at the Enlow Fork mine.
Coal Operations

Coal revenue and cost components on a per unit basis for the six months ended June 30, 2018 and 2017 and 2016 were as indicatedare detailed in the table below. Our operations also include various costs such as selling, general and administrative, freight and other costs not included in our unit cost analysis because these costs are not directly associated with coal production.
Six Months Ended June 30,Six Months Ended June 30,
2017 2016 Variance2018 2017 Variance
Total Tons Sold (in thousands)3,387
 2,858
 529
3,614
 3,387
 227
Average Sales Price Per Ton Sold$45.77
 $41.70
 $4.07
Average Revenue Per Ton Sold$49.93
 $45.77
 $4.16
         

Operating Costs Per Ton Sold (Cash Cost)$28.91
 $27.39
 $1.52
Average Cash Cost Per Ton Sold$28.01
 $28.91
 $(0.90)
Depreciation, Depletion and Amortization Per Ton Sold (Non-Cash Cost)5.74
 6.47
 (0.73)6.02
 5.74
 0.28
Total Costs Per Ton Sold$34.65
 $33.86
 $0.79
$34.03
 $34.65
 $(0.62)
Average Margin Per Ton Sold$11.12
 $7.84
 $3.28
$15.90
 $11.12
 $4.78
Add: Depreciation, Depletion and Amortization Costs Per Ton Sold5.74
 6.47
 (0.73)6.02
 5.74
 0.28
Average Cash Margin Per Ton Sold (1)$16.86
 $14.31
 $2.55
$21.92
 $16.86
 $5.06
(1) Average cash margin per ton is an operating ratio derived from non-GAAP measures. See “– How We Evaluate Our Operations – Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.


Revenue and Other Income

Coal revenue was $180,426 for the six months ended June 30, 2018 compared to $155,039 for the six months ended June 30, 2017 compared to $119,181 for the six months ended June 30, 2016.2017. The $35,858$25,387 increase was attributable to a 529 ton increase in tons sold and a $4.07$4.16 per ton higher average sales price.revenue and a 227 increase in tons sold. The increase in tons sold was primarily due to increaseddriven by improved production from our Bailey Mine, which was supported by strong demand from our domestic power plant customers in part due to higher natural gas pricesboth the domestic and more normal power plant coal inventory levels versus the year-ago period.export markets. The higher average sales price per ton sold in the 20172018 period was primarily driven by improved pricing under our netback contracts, which resulted from stronger PJM West power prices during the resultfirst half of a tighter supply-demand balance2018 as compared to the first half of 2017, and by improved realizations in the international thermalexport markets. PJM West day-ahead power prices averaged 35% higher for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, and crossover metallurgical coal markets that we serve. Theprompt month prices for the API 2 index (the benchmark price reference for coal imported into northwest Europe) was up moreaveraged 11% higher than 60% induring the first half of 2017 compared to the first half of 2016, and the global coking coal prices were up by an even greater percentage in the period-to-period comparison.year-ago period.

Freight revenue, which is completely offset in freight expense, is the amount billed to customers based on the weight of coal shipped and negotiated freight rates for rail transportation. Freight revenue increased $1,445$1,322 in the period-to-period comparison due to increased shipments to customers where we were contractually obligated to provide transportation services.


Other income is comprised of income generated by the Partnership not in the ordinary course of business. Other income increased $1,434 inwas $3,299 for the six months ended June 30, 2018, compared to $3,202 for the six months ended June 30, 2017. The $97 period-to-period comparisonincrease was primarily due to an increase of $1,597 in sales of externally purchased coal for blending purposes only, offset partially by a $1,403 gain that occurred during the six months ended June 30, 2017 related to an agreement to avoid mining approximately 85 acres of reserves as well as sales of externally purchased coal in 2017 for blending purposes only, offset by a contract buyoutreserves. The remaining variance is attributable to various transactions that occurred in the prior year.




throughout both periods, none of which are individually material.

Cost of Coal Sold

Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both volumes and carrying values of coal inventory. The costs of coal sold per ton include items such as direct operating costs, royalty and production taxes, direct administration expenses, and depreciation, depletion, and amortization costs.costs on production assets. Total cost of coal sold was $122,948 for the six months ended June 30, 2018, or $5,562 higher than the $117,386 for the six months ended June 30, 2017, or $20,614 higher than the $96,7722017. Total costs per ton sold were $34.03 per ton for the six months ended June 30, 2016. Total costs per ton sold were2018 compared to $34.65 per ton for the six months ended June 30, 2017 compared to $33.86 per ton for the six months ended June 30, 2016.2017. The increase in the total cost of coal sold was primarily driven by an increase in production tonsproduction-related costs as more coal was mined to meet market demand. In addition,demand, as well as an increase in mine development activity. However, the averageincreased production resulted in an overall decrease in the total cost per ton sold increased due to additional costs related to an increase in development mining footage, offset in part by a 7% improvement in productivity for the six months, as measured by tons per employee-hour, as compared to the year-ago period.sold.


Total Other Costs

Total other costs is comprised of various costs that are not allocated to each individual mine and therefore are not included in unit costs. Total other costs decreased $4,976increased $5,821 for the six months ended June 30, 20172018 compared to the six months ended June 30, 2016.2017. The decrease isincrease was primarily attributable to $4,517 ofan increase in current year costs in the prior year related to temporarily idling one of the longwalls at the Pennsylvania Mining Complex to optimize the production schedule and $668 related to discretionary 401(k) contribution accruals. In addition, the accrued litigation contingency decreased $908 in the period-to-period comparison due to settling and estimating various litigation issues, none of which are material. These were offset, in part, by an increase of $1,329 in the period-to-period comparison related to the cost ofexternally purchased coal sold for blending purposes only.only, discretionary employee benefit expense, and demurrage charges.

Selling, General, and Administrative Expense

Selling, general, and administrative expenses increased $3,038 period-to-period, due to an increase in short term incentive compensation paid to employees based on the results of operations achieved at our mines. In the prior year, the short term incentive compensation plan was suspended in response to the poor market conditions that existed. Legal and consulting fees also increasedremained materially consistent in the period-to-period comparison due to various transactions throughout both periods, none of which were individually material.comparison.

Interest Expense

Interest expense for the six months ended June 30, 2018 was $3,735, which primarily relates to obligations under our revolving credit facility, increased $799Affiliated Company Credit Agreement. For the six months ended June 30, 2017, $4,853 of interest expense was incurred, primarily on the PNC Revolving Credit Facility. The decrease was primarily attributable to a lower average daily balance outstanding under the Affiliated Company Credit Agreement than had been drawn on the PNC Revolving Credit Facility in the period-to-period comparison primarily due to rising interest rates.previous year. For a detailed explanation of our liquidity and financing arrangements, please read Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity.”

Adjusted EBITDA

Adjusted EBITDA was $68,645 for the six months ended June 30, 2018 compared to $52,898 for the six months ended June 30, 2017 compared to $33,131 for the six months ended June 30, 2016.2017. The $19,767$15,747 increase was primarily a result of $4.07a $4.16 per ton increase in the average sales price and a $0.90 per ton offset in part, by a $1.52 increasedecrease in the cash cost of coal sales per ton, which resultedsold, resulting in a net $8,637$18,287 increase in Adjusted EBITDA. AnIn addition, an increase of 529227 tons of additional sales alsosold resulted in ana $3,827 increase in Adjusted EBITDA of $7,570.EBITDA. The remaining variance is due to changes in other income and other costs as discussed above and various other transactions that occurred throughout both periods, none of which are individually material.

Distributable Cash Flow

Distributable cash flow was $47,639 for the six months ended June 30, 2018 compared to $26,531 for the six months ended June 30, 2017 compared to $9,190 for the six months ended June 30, 2016.2017. The $17,341$21,108 increase was attributedprimarily attributable to a $19,767$15,747 increase in Adjusted EBITDA as discussed above, and a $6,733 decrease in the PA Mining Acquisition Adjusted EBITDA, offset, in part by a $3,702 increasedecrease in distributions to holders of the Class A Preferred Units, which were all converted to common units on October 2, 2017, and ana $1,742 decrease in cash interest paid, offset, in part, by a $83 increase of $4,513 in Estimated Maintenance Capital Expenditures. The remaining variance was due to various transactions throughout both periods, none of which are individually material.







Capital Resources and Liquidity

Liquidity and Financing Arrangements

We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our revolving credit facilityAffiliated Company Credit Agreement, and, if necessary, the issuance of additional equity or debt securities. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and our long-term capital expenditure requirements and to make quarterly cash distributions as declared by the board of directors of our general partner. The partnershipPartnership filed a universal shelf registration statement on Form S-3 (333-215962) with the SEC on March 10, 2017, which was declared effective by the SEC on March 14, 2017, with the SEC for an aggregate amount of $750,000 to provide the Partnership with additional flexibility to access capital markets quickly.

We expect the cash flow generated from operations in 2018 to be improved compared to 2017, as we expect strong demand from the export and domestic thermal markets. Additionally, in the first quarter of 2018, we took advantage of a strong leasing market and bought out longwall shields, terminating the operating leases and refinancing them as capital leases. The financing rates on the new capital leases are significantly below our weighted average cost of capital, and the transactions are immediately accretive to our cash flows. In aggregate, we expect an approximate $2,500 reduction in 2018 cash spending as a result of these refinancings. The financing charges on these capital leases are fixed and will insulate us from future increases in interest rates. Furthermore, through consistent cost control measures, we expect to provide adequate cash flows to meet our maintenance capital requirements. We started the coarse refuse disposal area project in 2017, which is expected to continue through 2021. Our partnership agreement2018 capital needs are expected to be between $31,000 to $36,000, which is increased from 2017 levels due to additional expected capital expenditures related to the refuse disposal area project, as well as additional equipment maintenance costs and other purchases.

From time to time we change our exposure to various countries depending on the economics and profitability of coal sales. Given that coal markets are global, we expect, if possible, to offset any adverse impact from tariffs that may be imposed by governments in the countries in which one or more of our end users are located, by reallocating our customer base to other countries or to the domestic US markets.

We expect to provide adequate cash flows and liquidity to meet reasonable increases in the cost of supplies that are passed on from our suppliers. We will also continue to seek alternate sources of supplies and replacement material to offset any unexpected increase in the cost of supplies.

Our Partnership Agreement requires that we distribute all of our available cash to our unitholders. As a result, we expect to rely primarily upon external financing sources, including commercial bank borrowingsunder the Affiliated Company Credit Agreement and the issuance of debt and equity securities to fund our acquisitions and expansion capital expenditures, if any.

On July 27, 2017,25, 2018, the Board of Directors of our general partner declared a cash distribution to the Partnership'sPartnership’s unitholders for the quarter ended June 30, 20172018 of $0.5125 per common and subordinated unit and $0.4678 per Class A Preferred Unit.unit. The cash distribution will be paid on August 15, 20172018 to the unitholders of record at the close of business on August 7, 2017.8, 2018.

Credit Facility (PNC Revolving Credit Facility and Affiliated Company Credit Agreement)

Obligations under ourOn July 7, 2015, the Partnership, as borrower, and certain subsidiaries of the Partnership, as guarantors, entered into the PNC Revolving Credit Facility for a $400,000 senior secured revolving credit facility with certain lenders and PNC, Bank N.A., as administrative agent, and other lender parties thereto. On November 28, 2017, in connection with the separation, the Partnership paid all fees and other amounts outstanding, which aggregated to $200,583, under the PNC Revolving Credit Facility and terminated the PNC Revolving Credit Facility and the related loan documents.

On November 28, 2017, the Partnership and the other Credit Parties entered into the Affiliated Company Credit Agreement by and among the Credit Parties, CONSOL Energy, as lender and administrative agent, and PNC. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275,000 to be provided by CONSOL Energy, as lender. In connection with the completion of the separation and the Partnership’s entry into the Affiliated Company Credit Agreement, the Partnership made an initial draw of $200,583, the net proceeds of which were used to repay the PNC Revolving Credit Facility, to provide working capital for the Partnership following the separation and for other general corporate purposes. Additional drawings under the Affiliated Company Credit Agreement are available for general partnership purposes. The Affiliated Company Credit Agreement matures on February 27, 2023. The collateral obligations under the Affiliated Company Credit Agreement generally mirror the PNC Revolving Credit Facility, including the list of entities that act as guarantors thereunder. The obligations under the Affiliated Company Credit Agreement are guaranteed


by ourthe Partnership’s subsidiaries (the “guarantor subsidiaries”) and are secured by substantially all of ourthe assets of the Partnership and our subsidiaries’ assetsits subsidiaries pursuant to athe security agreement and various mortgages. CONSOL Energy is not a guarantor of our

Interest on outstanding obligations under our revolving credit facility.

Affiliated Company Credit Agreement accrues at a fixed rate ranging from 3.75% to 4.75% depending on the total net leverage ratio. The unused portion of our revolving credit facilityAffiliated Company Credit Agreement is subject to a commitment fee of 0.50% per annum. Interest on outstanding indebtedness under our revolving credit facility accrues, at our option, at a rate based on either:

The highest of (i) PNC Bank N.A.’s prime rate, (ii) the federal funds open rate plus 0.50%, and (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 1.50% to 2.50% depending on the total leverage ratio; or

the LIBOR rate plus a margin ranging from 2.50% to 3.50% depending on the total leverage ratio.

As of June 30, 2017,2018, the revolving credit facilityPartnership had $190,000$160,500 of borrowings outstanding under the Affiliated Company Credit Agreement, leaving $210,000$114,500 of unused capacity, which is subject to a quarterly maximum total leverage ratio covenant described below.capacity. Interest on outstanding borrowings under the revolving credit facilityAffiliated Company Credit Agreement at June 30, 20172018 was accrued at 4.17% based on a weighted average LIBOR rate of 1.17%, plus a weighted average margin of 3.00%4.00%.

Our revolving credit facility matures on July 7, 2020The Affiliated Company Credit Agreement contains certain covenants and requires compliance with conditions precedent that, must be satisfied prior to any borrowing as well as ongoing compliance with certain affirmative and negative covenants.

Affirmative covenants include, among others, requirements relating to: (i)other things, limit the preservation of existence; (ii) the payment of obligations, including taxes; (iii) the maintenance of properties and equipment, insurance and books and records; (iv) compliance with laws and material contracts; (v) use of proceeds; (vi) the subordination of intercompany loans; (vii) compliance with anti-terrorism, anti-money laundering, anti-corruption and sanctions laws; and (viii) collateral.

Negative covenants include, among others, restrictions on our and our guarantor subsidiaries’Partnership’s ability to: (i) create, incur assume or sufferguarantee additional debt; (ii) make cash distributions (subject to exist indebtedness; (ii) create or permit to exist liens on their properties; (iii) make or pay any dividends or distributions; certain limited exceptions); provided that we will be able to make cash distributions of available cash to partners so long as no event of default
is continuing or would result therefrom; (iv) merge with(iii) incur certain liens or into another person, liquidate or dissolve, acquire all or substantially all of the assets of any going concern or going line of business or acquire all or a substantial portion of another person’s assets; (v)permit them to exist; (iv) make particular investments and loans; provided that we will be able to increase our ownership percentage of our undivided interest in the Pennsylvania Mining Complex and make investments in the Pennsylvania Mining Complex in accordance with our ratable ownership; (v) enter into certain types of transactions with affiliates; (vi) merge or consolidate with another company; and (vii) transfer, sell transfer, convey, assign or otherwise dispose of our assets or properties other than inassets. The Partnership is also subject to covenants that require the ordinary course of business and other select instances; (vii) deal with any affiliate except inPartnership to maintain certain financial ratios. For example, the ordinary course of business on


terms no less favorable to us than we would otherwise receive in an arm’s length transaction; (viii) amend organizational documents or any documentation governing certain material debt; and (ix) amend, waive or grant a consent under any material contract. In addition, we arePartnership is obligated to maintain at the end of each fiscal quarter (x) a minimum interest coverage(a) maximum first lien gross leverage ratio of at least 3.002.75 to 1.00 and (y)(b) a maximum total net leverage ratio of no greater than 3.503.25 to 1.00, (or 4.00 to 1.00each of which will be calculated on a consolidated basis for twothe Partnership and its restricted subsidiaries at the end of each fiscal quarters after consummation of a material acquisition).quarter. At June 30, 2017,2018, the interest coveragePartnership was in compliance with its debt covenants with the first lien gross leverage ratio was 10.91at 1.45 to 1.00 and the total net leverage ratio was 1.89at 1.45 to 1.00.

Our revolvingReceivables Financing Agreement

On November 30, 2017, (i) CONSOL Marine Terminals LLC, formerly known as CNX Marine Terminals LLC, as an originator of receivables, (ii) CPCC, as an originator of receivables and as initial servicer of the receivables for itself and the other Originators, each a wholly owned subsidiary of CONSOL Energy, and (iii) the SPV, a Delaware special purpose entity and wholly owned subsidiary of CONSOL Energy, as buyer, entered into the Purchase and Sale Agreement. Concurrently, (i) CONSOL Thermal Holdings, as sub-originator, and (ii) CPCC, as buyer and as initial servicer of the receivables for itself and CONSOL Thermal Holdings, entered into the Sub-Originator PSA. In addition, on that date, the SPV entered into the Receivables Financing Agreement by and among (i) the SPV, as borrower, (ii) CPCC, as initial servicer, (iii) PNC, as administrative agent, LC Bank and lender, and (iv) the additional persons from time to time party thereto as lenders. Together, the Purchase and Sale Agreement, the Sub-Originator PSA and the Receivables Financing Agreement establish the primary terms and conditions of the Securitization.

Pursuant to the Securitization, (i) CONSOL Thermal Holdings will sell current and future trade receivables to CPCC and (ii) the Originators will sell and/or contribute current and future trade receivables (including receivables sold to CPCC by CONSOL Thermal Holdings) to the SPV and the SPV will, in turn, pledge its interests in the receivables to PNC, which will either make loans or issue letters of credit facilityon behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the Securitization may not exceed $100,000.

Loans under the Securitization will accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the Securitization also contains eventswill accrue a program fee and a letter of credit participation fee, respectively, equal to 4.00% per annum. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments equal to 0.60% per annum.

The SPV’s assets and credit are not available to satisfy the debts and obligations owed to the creditors of CONSOL Energy, CONSOL Thermal Holdings or any of the Originators. CONSOL Thermal Holdings, the Originators and CPCC as servicer are independently liable for their own customary representations, warranties, covenants and indemnities. In addition, CONSOL Energy has guaranteed the performance of the obligations of CONSOL Thermal Holdings, the Originators and CPCC as servicer, and will guarantee the obligations of any additional originators or successor servicer that may become party to the Securitization. However, neither CONSOL Energy nor its affiliates will guarantee collectability of receivables or the creditworthiness of obligors thereunder.



The agreements comprising the Securitization contain various customary representations and warranties, covenants and default provisions which provide for the termination and acceleration of the commitments and loans under the Securitization in certain circumstances including, but not limited to, cross-defaultfailure to make payments when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other debt, breachesmaterial indebtedness.

As of representations and warranties, changeJune 30, 2018, the Partnership, through CONSOL Thermal Holdings, had sold $22,857 of control events and breaches of covenants.trade receivables to CPCC. The Partnership has not derecognized the receivables due to its continued involvement in the collection efforts.

The Securitization expires on August 30, 2018. CONSOL expects to renew the Securitization with PNC Bank for a three-year term.
Cash Flows
Six Months Ended June 30,Six Months Ended June 30,
2017 2016 Variance2018 2017 Variance
(in thousands)(in thousands)
Cash flows provided by operating activities$40,754
 $24,831
 $15,923
$78,213
 $40,754
 $37,459
Cash used in investing activities$(3,972) $(6,482) $2,510
$(12,014) $(3,972) $(8,042)
Cash used in financing activities$(39,959) $(15,920) $(24,039)$(67,086) $(39,959) $(27,127)

Six Months Ended June 30, 20172018 Compared with the Six Months Ended June 30, 2016:2017:

Cash flows provided by operating activities increased $15,923$37,459 in the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to an increase in Adjusted EBITDA of $19,767 innet income for the period-to-period comparison,reasons set forth above and the remaining variance relates to various changesa change in working capital.

Cash used in investing activities decreased $2,510increased $8,042 in the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 as a result of decreasedincreased capital expenditures of $1,029$6,707 and increaseddecreased proceeds from the sale of assets of $1,481.$1,335. The decreaseincrease in capital expenditures is due to the following items:

Six Months Ended June 30,Six Months Ended June 30,
2017 2016 Variance2018 2017 Variance
(in thousands)(in thousands)
Refuse Storage Area$4,410
 $667
 $3,743
Building and Infrastructure$3,184
 $3,987
 $(803)4,206
 3,184
 1,022
Equipment Purchases and Rebuilds1,253
 1,511
 (258)2,845
 1,253
 1,592
Refuse Storage Area667
 270
 397
Water Treatment Systems66
 142
 (76)
Other302
 591
 (289)718
 368
 350
Total Capital Expenditures$5,472
 $6,501
 $(1,029)$12,179
 $5,472
 $6,707


Cash flows used in financing activities increased by $24,039$27,127 from $15,920 for the six months ended June 30, 2016 to $39,959 for the six months ended June 30, 2017.2017 to $67,086 for the six months ended June 30, 2018. The increase was primarily due to a $24,000 difference$36,083 of net payments made in the Revolving Credit Facility activity in the period-to-period comparison, which was comprised of $13,000 in borrowings during the six months ended June 30, 2016 versus2018 under the Affiliated Company Credit Agreement, which was effective as of November 28, 2017. This increase was partially offset by $11,000 of net payments that were made on the PNC Revolving Credit Facility during the six months ended June 30, 2017. The increaseThere was also attributable to an increase in cash distributions of $3,812 inno activity on the period-to-period comparison. This increase was due to cash distributions on Class A Preferred Units forPNC Revolving Credit Facility during the six months ended June 30, 2018 due to its termination on November 28, 2017. There were no Class A Preferred UnitsIn addition, payments on capitalized leases increased $1,359 in the period-to-period comparison as a result of June 30, 2016.the refinancing of the longwall shields at the Bailey and Harvey mines. The remaining varianceincrease is dueattributable to various transactions that occurred throughout both periods, none of which arewere individually material.


Off-Balance Sheet Arrangements

We do not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that have or are reasonably likely to have a material current or future effect on our financial condition,


changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources which are not disclosed in the Notes to the Unaudited Consolidated Financial Statements ofin this Form 10-Q.



Contractual Obligations

OurThe following is a summary of our significant contractual obligations at June 30, 2018 (in thousands):

 Payments Due by Year
 Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Total
Long-Term Debt$—
 $—
 $160,500
 $—
 $160,500
Interest on Long-Term Debt6,420
 12,840
 10,700
 —
 29,960
Capital (Finance) Lease Obligations3,412
 6,958
 4
 —
 10,374
Interest on Capital (Finance) Lease Obligations426
 340
 1
 —
 767
Operating Lease Obligations6,179
 10,633
 5,612
 2,096
 24,520
Long-Term Liabilities - Employee Related (a)1,733
 3,637
 1,050
 3,704
 10,124
Other Long-Term Liabilities (b)32,169
 1,226
 1,017
 7,443
 41,855
Total Contractual Obligations$50,339
 $35,634
 $178,884
 $13,243
 $278,100

(a) Long-term liabilities - employee related include the revolving credit facility, operating leases, capital leases, asset retirement obligationsliabilities for work-related injuries and illnesses.
(b) Other long-term liabilities include mine reclamation and closure and other long-term liability commitments. Since December 31, 2016, there have been no material changes to our contractual obligations within the ordinary course of business.costs.

FORWARD-LOOKING STATEMENTS

We are including the following cautionary statement in this Quarterly Report on Form 10-Q to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of us. With the exception of historical matters, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements (as defined in Section 21E of the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," "will,"“believe,” “continue,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” “will,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q; we disclaim any obligation to update these statements.statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following: generation of sufficient distributable cash flow to support the payment of minimum quarterly distributions;

changes in coal prices or the costs of mining or transporting coal;
uncertainty in estimating economically recoverable coal reserves and replacement of reserves;
our ability to develop our existing coal reserves, acquire additional reserves and successfully execute our mining plans;
changes in general economic conditions, both domestically and globally;
competitive conditions within the coal industry;
changes in the consumption patterns of coal-fired power plants and steelmakers and other factors affecting the demand for coal by coal-fired power plants and steelmakers;
the availability and price of coal to the consumer compared to the price of alternative and competing fuels;
competition from the same and alternative energy sources;
energy efficiency and technology trends;
our ability to successfully implement our business plan and strategy for growth; plan;
the price and availability of debt and equity financing;
operating hazards and other risks incidental to coal mining;


major equipment failures and difficulties in obtaining equipment, parts and raw materials;
availability, reliability and costs of transporting coal;
adverse or abnormal geologic conditions, which may be unforeseen;
natural disasters, weather-related delays, casualty losses and other matters beyond our control;
operating in a single geographic area;
interest rates;
our reliance on a few major customers;
labor availability, relations and other workforce factors;
defaults by our sponsorCONSOL Energy under our operating agreement, and employee services agreement; changesagreement and Affiliated Company Credit Agreement;
restrictions in availability and cost of capital; our Affiliated Company Credit Agreement that may adversely affect our business;
changes in our tax status;
delays in the receipt of, failure to receive or revocation of necessary governmental permits; defects in title or loss of any leasehold interests with respect to our properties;
the effect of existing and future laws and government regulations, including the enforcement and interpretation of environmental laws thereof;
the effect of new or expanded greenhouse gas regulations;
the effects of litigation;
conflicts of interest that may cause our general partner or CONSOL Energy to favor their own interest to our detriment;
the requirement that we distribute all of our available cash; and
other factors discussed in our 20162017 Annual Report on Form 10-K under “Risk Factors,” as updated by any subsequent Form 10-Qs,Quarterly Reports on Forms 10-Q, which are on file at the Securities and Exchange Commission.


SEC.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk, see Item 7A, "Quantitative“Quantitative and Qualitative Disclosures About Market Risk,"” of our Annual Report on Form 10-K for the year ended December 31, 2016.2017. There have been no material changes to our exposures to market risk since December 31, 2016.2017.
ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of ourthe management of the Partnership’s general partner, including the Chief Executive Officer and the Chief Financial Officer of ourthe general partner, an evaluation of the effectiveness of our disclosure controls and procedures pursuant to


Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), was conducted as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer of ourthe Partnership’s general partner have concluded that the Partnership'sPartnership’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 20172018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART II: OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
Refer to paragraph one within Part 1, Item 1. Financial Statements, "Note“Note 10. Commitments and Contingent Liabilities,"” which is incorporated herein by reference.
ITEM 1A.    RISK FACTORS

In addition to the other information set forth in this quarterly report, you should carefully consider the factors discussed in the “Risk“Part I - Item 1A. Risk Factors” Section inof our 20162017 Form 10-K.10-K, as updated by any subsequent Form 10-Qs. These described risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 4.    MINE SAFETY DISCLOSURES
The 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 exhibitExhibit 95 to this quarterly report.
ITEM 5.    OTHER INFORMATION

On July 25, 2017, the board of directors of our general partner accepted the retirement of Lorraine Ritter, as the Chief Financial Officer and Chief Accounting Officer of our general partner, effective as of August 2, 2017.  The board of directors of our general partner also approved a Separation of Employment and General Release Agreement with Ms. Ritter as of the same date (the “Separation Agreement”) pursuant to which Ms. Ritter agreed to waive all claims and other causes of action she has or may have against our general partner that arose at or prior to the retirement of her employment with our general partner. In consideration for the foregoing release, the Separation Agreement provides for, among other things, the following: (i) a cash payment in the amount of $933,075, (ii) continued vesting of all unvested equity grants made to Ms. Ritter under the CNX Coal Resources LP 2015 Long-Term Incentive Plan and the equity compensation plan established by CONSOL Energy and (iii) payment by our general partner of all Ms. Ritter’s COBRA premiums for a period of 36 months following her retirement of employment with CNX Coal Resources GP LLC.

On July 25, 2017, the board of directors of our general partner appointed David Khani as the Chief Financial Officer of CNX Coal Resources GP LLC, effective as of August 2, 2017.  Mr. Khani, age 53, served as the Vice President - Finance of CONSOL Energy from September 1, 2011 until March 1, 2013 and as the Executive Vice President and Chief Financial Officer of CONSOL Energy from March 1, 2013 until his appointment as our general partner’s Chief Financial Officer.  Effective May 30, 2014, Mr. Khani became a director and the Chief Financial Officer of the general partner of CONE Midstream Partners LP.  Mr. Khani has also served as a director of CNX Coal Resources GP LLC since March 16, 2015.  Prior to joining CONSOL Energy, Mr. Khani worked for Lehman Brothers, Bear Stearns, Prudential Securities and FBR Capital Markets & Co. (“FBR”) from September 1993 to August 2011, including most recently as the Co-Director of Research at FBR.  Prior to this role, Mr. Khani served as a Director of Research at FBR and the Managing Director and Co-Head of FBR’s Energy and Natural Resources Group.  Mr. Khani managed and built equity research teams as well as provided commodity, industry, and company researchQuarterly Report on oil and gas, exploration and production, local gas distribution, master limited partnerships and coal mining.
There are no family relationships between Mr. Khani and any director, executive officer, or person nominated or chosen by our general partner to become a director or executive officer. Mr. Khani does not have a direct or indirect material interest in any transaction or arrangement in which our general Partner or the Partnership is a participant.

Mr. Khani will be paid an annual salary of to be set by the board of directors of our general partner and will be able to participate in the CNX Coal Resources LP 2015 Long-Term Incentive Plan.

On July 25, 2017, the board of directors of our general partner also appointed John Rothka as the Chief Accounting Officer of our general partner, effective as of August 2, 2017. Mr. Rothka, age 40, served as the Controller of CNX Coal Resources GP LLC from July 2015 until his appointment as our general partner’s Chief Accounting Officer. Mr. Rothka joined CONSOL Energy’s Accounting Department in September 2005, where he served in positions of increasing responsibility, and was promoted to Senior Manager in February 2012 until July 2015. Prior to joining CONSOL Energy, Mr. Rothka began his professional career at the accounting firm of Aronson LLC from September 1999 to November 2002 before joining Deloitte


from November 2002 to September 2005, where he held several positions of increasing responsibilities in the audit and assurance groups.

There are no family relationships between Mr. Rothka and any director, executive officer or person nominated or chosen by our general partner to become a director or executive officer. Mr. Rothka does not have a direct or indirect material interest in any transaction or arrangement in which our General Partner or the Partnership is a participant.

Mr. Rothka will be paid an annual salary to be set by the board of directors of our general partner and will be able to participate in the CNX Coal Resources LP 2015 Long-Term Incentive Plan.Form 10-Q.

ITEM 6.    EXHIBITS

ExhibitsDescriptionMethod of Filing
   
31.1
Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002Filed herewith
   
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
   
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Filed herewith
   
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Filed herewith
   
95
Mine Safety and Health Administration Safety Data.Filed herewith
   
101Interactive Data File (Form 10-Q for the quarterly period ended June 30, 2017,2018, furnished in XBRL).Filed herewith



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.

Dated: August 1, 20172, 2018
 CNXCONSOL Coal Resources LP
    
 By: CNXCONSOL Coal Resources GP LLC, its general partner
 By: /s/ JAMES A. BROCK
   James A. Brock
   
Chief Executive Officer, Chairman of the Board and Director
(Duly Authorized Officer and Principal Executive Officer)
    
 By: CNXCONSOL Coal Resources GP LLC, its general partner
 By: /s/ LORRAINE L. RITTERDAVID M. KHANI
   Lorraine L. RitterDavid M. Khani
   
Chief Financial Officer and Chief Accounting OfficerDirector
(Duly Authorized Officer and Principal Financial Officer)
By:CONSOL Coal Resources GP LLC, its general partner
By:/s/ JOHN M. ROTHKA
John M. Rothka
Chief Accounting Officer
(Duly Authorized Officer and Principal Accounting Officer)


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