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

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FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

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

FOR THE TRANSITION PERIOD FROM _____________TO_____________

COMMISSION FILE NO.: 0-26823

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ALLIANCE RESOURCE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 73-1564280
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

1717 SOUTH BOULDER AVENUE, SUITE 600, TULSA, OKLAHOMA 74119
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

(918) 295-7600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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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 [ ]

As of November 10, 2000, 8,982,780 Common Units and 6,422,531
Subordinated Units are outstanding.

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TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Page
----

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999 .............................................................. 1

Consolidated and Combined Statements of Income for the three-month
and nine-month periods ended September 30, 2000 and the Predecessor
periods from January 1, 1999 and July 1, 1999 to August 19, 1999 and
from Commencement of Operations (on August 20, 1999) to
September 30, 1999 ........................................................... 2

Consolidated and Combined Condensed Statements of Cash Flows for
the nine months ended September 30, 2000 and the periods from
Commencement of Operations (on August 20, 1999) to September 30, 1999
and January 1, 1999 to August 19, 1999 (Predecessor) ........................... 3

Consolidated Statement of Partners' Capital (Deficit) from January 1, 2000
to September 30, 2000 .......................................................... 4

Notes to Consolidated and Combined Financial Statements ........................ 5

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ................................. 8

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK .............................................................. 13

FORWARD-LOOKING STATEMENTS ..................................................... 14

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS .............................................................. 15

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ...................................... 15

ITEM 3. DEFAULTS UPON SENIOR SECURITIES ................................................ 15

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS ............................................................... 15

ITEM 5. OTHER INFORMATION .............................................................. 15

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................................... 15

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT UNIT DATA)

ASSETS

SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)

CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 4,219 $ 8,000
Trade receivables ...................................................... 39,572 33,056
Other receivables ...................................................... 16,478 --
Marketable securities (at cost, which approximates fair value) ......... 36,819 42,339
Inventories ............................................................ 11,949 21,130
Advance royalties ...................................................... 1,557 1,557
Prepaid expenses and other assets ...................................... 16,842 923
--------- ---------
Total current assets .............................................. 127,436 107,005

PROPERTY, PLANT AND EQUIPMENT AT COST ..................................... 300,811 278,221
LESS ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION ................. (126,724) (102,709)
--------- ---------
174,087 175,512

OTHER ASSETS:
Advance royalties ...................................................... 7,959 8,306
Coal supply agreements, net ............................................ 17,213 19,879
Other long-term assets ................................................. 3,801 4,112
--------- ---------
$ 330,496 $ 314,814
========= =========

LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

CURRENT LIABILITIES:
Accounts payable ....................................................... $ 25,461 $ 19,377
Due to affiliates ...................................................... 17,654 806
Accrued taxes other than income taxes .................................. 5,357 4,574
Accrued payroll and related expenses ................................... 8,177 8,811
Accrued interest ....................................................... 1,698 5,491
Workers' compensation and pneumoconiosis benefits ...................... 4,391 4,317
Other current liabilities .............................................. 6,423 2,937
--------- ---------
Total current liabilities ......................................... 69,161 46,313

LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities ........................... 230,000 230,000
Accrued pneumoconiosis benefits ........................................ 21,675 21,655
Workers' compensation .................................................. 16,310 15,696
Reclamation and mine closing ........................................... 13,544 13,407
Other liabilities ...................................................... 3,290 3,671
--------- ---------
Total liabilities ................................................. 353,980 330,742

COMMITMENTS AND CONTINGENCIES

PARTNERS' CAPITAL (DEFICIT):
Common Unitholders 8,982,780 units outstanding ......................... 154,388 158,705
Subordinated Unitholder 6,422,531 units outstanding .................... 120,186 123,273
General Partners ....................................................... (298,058) (297,906)
--------- ---------
Total Partners' capital (deficit) ................................. (23,484) (15,928)
--------- ---------
$ 330,496 $ 314,814
========= =========

See notes to unaudited consolidated and combined financial statements.

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(UNAUDITED)

PARTNERSHIP PREDECESSOR PARTNERSHIP PREDECESSOR
--------------------------------- ------------- ----------- ---------------
FROM
COMMENCEMENT FOR THE FOR THE
OF OPERATIONS PERIOD FROM PERIOD FROM
THREE MONTHS (ON AUGUST 20, 1999) JULY 1, 1999 NINE MONTHS JANUARY 1, 1999
ENDED TO TO ENDED TO
SEPTEMBER 30, SEPTEMBER 30, AUGUST 19, SEPTEMBER 30, AUGUST 19,
2000 1999 1999 2000 1999
------------- -------------------- ------------ ------------- ---------------

SALES AND OPERATING REVENUES:

Coal sales ........................................ $ 92,433 $ 43,927 $ 47,669 $ 261,172 $ 217,033
Other sales and operating revenues ................ 621 125 134 1,220 577
---------- ---------- ---------- ---------- -----------
Total revenues .......................... 93,054 44,052 47,803 262,392 217,610
---------- ---------- ---------- ---------- -----------
EXPENSES:
Operating expenses ................................ 69,050 30,456 35,024 192,579 152,066
Outside purchases ................................. 4,567 2,442 2,570 11,860 17,738
General and administrative ........................ 3,610 1,685 1,959 10,822 8,912
Depreciation, depletion and amortization .......... 9,624 4,450 5,246 28,825 24,622
Interest expense (net of interest income and
interest capitalized for the three and nine
months ended September 30, 2000 of
$805 and $2,168, respectively) ................... 4,240 1,627 21 12,502 100
Unusual items ..................................... (9,466) -- -- (9,466) --
---------- ---------- ---------- ---------- -----------
Total operating expenses ............. 81,625 40,660 44,820 247,122 203,438
---------- ---------- ---------- ---------- -----------
INCOME FROM OPERATIONS ............................... 11,429 3,392 2,983 15,270 14,172
OTHER INCOME ......................................... 131 117 334 754 531
---------- ---------- ---------- ---------- -----------
INCOME BEFORE INCOME TAXES ........................... 11,560 3,509 3,317 16,024 14,703
INCOME TAX EXPENSE ................................... -- -- 1,015 -- 4,498
---------- ---------- ---------- ---------- -----------
NET INCOME ........................................... $ 11,560 $ 3,509 $ 2,302 $ 16,024 $ 10,205
========== ========== ========== ========== ===========
GENERAL PARTNERS' INTEREST IN
NET INCOME ...................................... $ 231 $ 70 $ 320
========== ========== ==========
LIMITED PARTNERS' INTEREST IN
NET INCOME ...................................... $ 11,329 $ 3,439 $ 15,704
========== ========== ==========
BASIC NET INCOME PER LIMITED
PARTNER UNIT .................................... $ 0.74 $ 0.22 $ 1.02
========== ========== ==========
DILUTED NET INCOME PER LIMITED
PARTNER UNIT .................................... $ 0.73 $ 0.22 $ 1.01
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-BASIC ............................... 15,405,311 15,405,311 15,405,311
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING-DILUTED ............................. 15,552,017 15,405,311 15,550,287
========== ========== ==========

See notes to unaudited consolidated and combined financial statements.

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

PARTNERSHIP PREDECESSOR
----------------------------------- ----------------
FROM
COMMENCEMENT FOR THE
NINE MONTHS OF OPERATIONS PERIOD FROM
ENDED (ON AUGUST 20, 1999) JANUARY 1, 1999
SEPTEMBER 30, TO TO
2000 SEPTEMBER 30, 1999 AUGUST 19, 1999
------------- -------------------- ----------------

CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES ............. $ 39,786 $ (29,537) $ 32,896

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ...................... (27,194) (10,895) (21,984)
Proceeds from sale of property, plant and equipment ............ 74 66 447
Purchase of marketable securities .............................. (54,751) (34,514) --
Proceeds from the maturity of marketable securities ............ 61,884 8,452 --
--------- --------- ---------
Net cash used in investing activities ............. (19,987) (36,891) (21,537)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from initial public offering (see Note 1) ....... -- 137,872 --
Cash contribution by General Partner ......................... -- 5,917 --
Distributions upon formation (see Note 1) .................... -- (64,750) --
Payment of formation costs ................................... -- (2,919) --
Deferred financing cost ...................................... -- (3,517) --
Payments on long-term debt ................................... -- (1,975) --
Distribution to Partners ..................................... (23,580) -- --
Return of capital to Parent .................................. -- -- (11,359)
--------- --------- ---------
Net cash provided by (used in) financing
activities..................................... (23,580) 70,628 (11,359)
--------- --------- ---------

NET CHANGE IN CASH AND CASH EQUIVALENTS ........................... (3,781) 4,200 --

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................. 8,000 -- --
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................ $ 4,219 $ 4,200 $ --
========= ========= =========

CASH PAID FOR:
Interest ..................................................... $ 18,029 $ -- $ --
========= ========= =========
Income taxes paid through Parent ............................. $ -- $ -- $ 4,510
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Debt transferred from Special General Partner ................ $ -- $ 230,000 $ --
========= ========= =========
Marketable securities transferred from Special General ....... $ -- $ 15,496 $ --
========= ========= =========

See notes to unaudited consolidated and combined financial statements.

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FROM JANUARY 1, 2000 TO SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT UNIT DATA)
(UNAUDITED)

NUMBER OF LIMITED TOTAL
PARTNER UNITS PARTNERS'
--------------------------- GENERAL CAPITAL
COMMON SUBORDINATED COMMON SUBORDINATED PARTNERS (DEFICIT)
--------- ------------ --------- ------------ --------- ---------

Balance at January 1, 2000 ........ 8,982,780 6,422,531 $ 158,705 $ 123,273 $(297,906) $ (15,928)

Distribution to Partners ....... -- -- (13,474) (9,634) (472) (23,580)

Net income ..................... -- -- 9,157 6,547 320 16,024
--------- --------- --------- --------- --------- ---------

Balance at September 30, 2000 ..... 8,982,780 6,422,531 $ 154,388 $ 120,186 $(298,058) $ (23,484)
========= ========= ========= ========= ========= =========

See notes to unaudited consolidated and combined financial statements.

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED)

1. ORGANIZATION AND PRESENTATION

Alliance Resource Partners, L.P. is a Delaware limited partnership that
was formed on May 17, 1999, to acquire, own and operate certain coal production
and marketing assets of Alliance Resource Holdings, Inc., a Delaware corporation
("ARH" or "Parent") (formerly known as Alliance Coal Corporation) and
substantially all of its operating subsidiaries (collectively, the
"Partnership").

Prior to August 20, 1999, (a) MAPCO Coal Inc., a Delaware corporation
and direct wholly-owned subsidiary of ARH merged with and into Alliance Coal,
LLC, a Delaware limited liability company ("Alliance Coal"), which prior to
August 20, 1999 was also a wholly-owned subsidiary of ARH, (b) several other
indirect corporate subsidiaries of ARH were merged with and into corresponding
limited liability companies, each of which is a wholly-owned subsidiary of
Alliance Coal, and (c) two indirect limited liability company subsidiaries of
ARH became subsidiaries of Alliance Coal as a result of the merger described in
clause (a) above. Collectively, the coal production and marketing assets and
operating subsidiaries of ARH acquired by the Partnership are referred to as the
Alliance Resource Group (the "Predecessor"). The Delaware limited partnerships
and limited liability companies that comprise the Partnership are as follows:
Alliance Resource Partners, L.P., Alliance Resource Operating Partners, L.P.
(the "Intermediate Partnership"), Alliance Coal, LLC (the holding company for
operations), Alliance Land, LLC, Alliance Properties, LLC, Backbone Mountain,
LLC, Excel Mining, LLC, Gibson County Coal, LLC, Hopkins County Coal, LLC, MC
Mining, LLC, Mettiki Coal, LLC, Mettiki Coal (WV), LLC, Mt. Vernon Transfer
Terminal, LLC, Pontiki Coal, LLC, Toptiki Coal, LLC, Webster County Coal, LLC,
and White County Coal, LLC.

The accompanying consolidated financial statements include the accounts
and operations of the Partnership and present the financial position as of
September 30, 2000, and the results of its operations, cash flows and changes in
partners' capital (deficit) for the three and nine months ended September 30,
2000. The accompanying combined financial statements include the accounts and
operations of the Predecessor for the periods indicated. All material
intercompany transactions and accounts of the Partnership and Predecessor have
been eliminated.

These consolidated and combined financial statements and notes thereto
for interim periods are unaudited. However, in the opinion of management, these
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the results of the
periods presented. Results for interim periods are not necessarily indicative of
results for a full year.

These consolidated and combined financial statements and notes are
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission for interim reporting and should be read in conjunction with the
consolidated and combined financial statements and notes included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1999.

Initial Public Offering and Concurrent Transactions

On August 20, 1999, the Partnership completed its initial public
offering (the "IPO") of 7,750,000 Common Units ("Common Units") representing
limited partner interests in the Partnership at a price of $19.00 per unit.

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Concurrently with the closing of the IPO, the Partnership entered into
a Contribution and Assumption Agreement (the "Contribution Agreement"), dated
August 20, 1999, among the Partnership and the other parties named therein,
whereby, among other things, ARH contributed its 100% member interest in
Alliance Coal, which is the sole member of fourteen subsidiary operating limited
liability companies, to the Intermediate Partnership which holds a 99.999%
non-managing member interest in Alliance Coal. The Partnership and the
Intermediate Partnership are managed by Alliance Resource Management GP, LLC, a
Delaware limited liability company (the "Managing GP"), which, as a result of
the consummation of the transactions under the Contribution Agreement, holds (a)
a 0.99% and 1.0001% managing general partner interest in the Partnership and the
Intermediate Partnership, respectively, and (b) a 0.001% managing member
interest in Alliance Coal. Also as a result of the consummation of the
transactions completed under the Contribution Agreement, Alliance Resource GP,
LLC, a Delaware limited liability company and wholly-owned subsidiary of ARH
(the "Special GP"), holds, (a) 1,232,780 Common Units, (b) 6,422,531
Subordinated Units ("Subordinated Units") convertible into Common Units in the
future upon the occurrence of certain events and (c) a 0.01% special general
partner interest in each of the Partnership and the Intermediate Partnership.

Concurrently with the closing of the IPO, the Special GP issued and the
Intermediate Partnership assumed the obligations with respect to $180 million
principal amount of 8.31% senior notes due August 20, 2014. The Special GP also
entered into, and the Intermediate Partnership assumed the obligations under, a
$100 million credit facility. The credit facility consists of three tranches,
including a $50 million term loan facility, a $25 million working capital
facility, and a $25 million revolving credit facility. The Partnership has
borrowings outstanding of $50 million under the term loan facility and no
borrowings outstanding under either the working capital facility or the
revolving credit facility at September 30, 2000. The weighted average interest
rate on the term loan facility at September 30, 2000 was 7.99%. The credit
facility agreement expires August 2004. The senior notes and credit facility
contain various restrictive and affirmative covenants, including the amount of
distributions by the Intermediate Partnership and the incurrence of other debt.
The Partnership was in compliance with the covenants of both the senior notes
and credit facility at September 30, 2000.

Consistent with guidance provided by the Emerging Issues Task Force in
Issue No. 87-21 "Change of Accounting Basis in Master Limited Partnership
Transactions", the Partnership maintained the historical cost of the $121
million of net assets received under the Contribution Agreement.

Analysis of Pro Forma Results of Operations

For the nine months ended September 30, 1999, the pro forma total
revenues would have been approximately $216,662,000. For the nine months ended
September 30, 1999, the pro forma net income would have been approximately
$5,362,000 and net income per limited partner unit would have been $0.34. The
pro forma results of operations reflect certain pro forma adjustments to the
historical results of operations as if the Partnership had been formed on
January 1, 1999. The pro forma adjustments include (a) pro forma interest on
debt assumed by the Partnership and (b) the elimination of income tax expense as
income taxes will be borne by the partners and not the Partnership.

2. CONTINGENCIES

Transloading Facility Dispute

The Partnership has been involved in litigation with Seminole Electric
Cooperative, Inc. ("Seminole") with respect to Seminole's termination of a
long-term contract for the transloading of coal from rail to barge through the
Partnership's terminal in Indiana. Seminole filed a lawsuit on December 16,
1998, seeking declaratory relief as to the damages owed to the Partnership as a
result of such

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termination. Rather than pay the damages stipulated in the contract for breach,
Seminole sought the court's agreement that the proper damage award should be
calculated based on the Partnership's loss of net profits from its terminal for
the term of the agreement. Seminole ceased transloading any coal shipments
through this terminal and is transporting coal deliveries by rail under a
separate supply contract.

The parties agreed to submit this dispute to binding arbitration and
filed a joint motion to stay the litigation during the pendency of the
arbitration. The final resolution between the parties, reached in conjunction
with the arbitrator's decision rendered during the third quarter, includes both
future cash payments and amendments to an existing coal supply contract. The
Partnership recorded income of $12.2 million, which is net of litigation
expenses and costs relating to the impairment of certain transloading facility
assets. The net $12.2 million is included in "Unusual items" and the amount due
from Seminole is included in "Other receivables" in the accompanying
consolidated and combined statements of income and balance sheets, respectively.

General Litigation

The Partnership is involved in various lawsuits, claims and regulatory
proceedings, including those conducted by the Mine Safety and Health
Administration, incidental to its business. The Partnership provides for costs
related to litigation and regulatory proceedings (including civil fines issued
as part of the outcome of such proceedings), when a loss is probable and the
amount is reasonably determinable.

The Partnership has recorded an expense of $2.7 million related to
litigation matters previously settled and contingencies associated with other
litigation matters, which is reflected in "Unusual items" in the accompanying
consolidated and combined statements of income. In the opinion of management,
the outcome of such matters to the extent not previously provided for or covered
under insurance, will not have a material adverse effect on the Partnership's
business, financial position or results of operations, although management
cannot give any assurance to that effect.

3. COAL PREPARATION PLANT

On March 23, 2000, the Partnership entered into an arrangement with the
Special GP for construction of a coal preparation plant and ancillary facilities
(collectively the "coal preparation plant") at the Gibson County Coal, LLC
("Gibson County") mining complex currently under development. Under the terms of
the arrangement, the Special GP is constructing the coal preparation plant at an
anticipated cost of approximately $23.1 million and has the option to sell or
lease the coal preparation plant to the Partnership when construction is
completed within the next year. Accumulated costs associated with this
"build-to-suit" facility totaled approximately $16.6 million as of September 30,
2000. The asset and corresponding liability are included in the Partnership's
balance sheet as prepaid expenses and other assets and due to affiliates,
respectively, since it is the Partnership's current intention to enter into an
operating lease agreement with the Special GP or a third party for the use of
the coal preparation plant. In the event that the operating lease is entered
into with either the Special GP or a third party, the Partnership would remove
the corresponding asset and liability associated with the coal preparation plant
from its consolidated balance sheet once construction is completed and the lease
term begins.

4. SUBSEQUENT EVENTS

On October 26, 2000, the Partnership declared a minimum quarterly
distribution for the period from July 1, 2000, to September 30, 2000, of $0.50
per unit, totaling approximately $7,703,000, on all of its Common and
Subordinated Units outstanding, payable on November 14, 2000 to all unitholders
of record on November 2, 2000.

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Effective October 27, 2000, MC Mining, LLC ("MC Mining") settled
litigation filed October 12, 2000 by Garrett Mining, Inc., the contract miner
for MC Mining. As part of such settlement, the Contract Mining Agreement between
the parties was terminated and MC Mining purchased parts inventory and equipment
from Garrett Mining for the fair market value of $2.2 million and mutual waivers
and releases were executed by the parties. MC Mining has entered into an
intercompany support services agreement and an agency agreement with Excel
Mining, LLC ("Excel Mining"), and Gibson County Coal, LLC, respectively, both
affiliates, by which Excel Mining is responsible for conducting all mining
operations. The transition from Garrett Mining to Excel Mining may adversely
impact coal production at MC Mining during the fourth quarter of 2000. In the
opinion of management, the impact on production, if any, will not have a
material adverse effect on the Partnership's business, financial position or
results of operations, although management cannot give any assurance to that
effect.

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

In comparing 2000 to 1999, the Partnership and Predecessor periods for
1999 have been combined. Since the Partnership maintained the historical basis
of the Predecessor's net assets, management believes that the combined
Partnership and Predecessor results for 1999 are comparable with 2000.

SELECTED OPERATING DATA

THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------

Tons sold (000s) 4,051 3,987 11,276 11,332
Tons produced (000s) 3,249 3,624 10,305 10,644
Revenues per ton sold $ 22.97 $ 23.04 $ 23.27 $ 23.09
Cost per ton sold(1) $ 19.06 $ 18.59 $ 19.09 $ 18.82

(1) Cost per ton is based on the total of operating expenses, outside purchases
and general and administrative expenses divided by tons sold.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999

Coal sales. Coal sales for the three months ended September 30, 2000 (the
"2000 Quarter") increased 0.9% to $92.4 million from $91.6 million for the three
months ended September 30, 1999 (the "1999 Quarter"). The increase of $0.8
million is primarily attributable to higher sales volumes in the Partnership's
Illinois Basin operations as electric utility power plants' demand for
high-sulfur coal increased, partially offset by planned reduced participation in
low margin, coal export brokerage markets. The brokerage business is not
expected to be material in the future. Tons sold increased 1.6% to 4.1 million
for the 2000 Quarter from 4.0 million for the 1999 Quarter. Tons produced
decreased 10.3% to 3.2 million tons for the 2000 Quarter from 3.6 million for
the 1999 Quarter.

Other sales and operating revenues. Other sales and operating revenues
increased to $0.6 million for the 2000 Quarter from $0.3 million for the 1999
Quarter. The increase of $0.3 million results from the introduction of a third
party coal synfuel production facility at the Partnership's Hopkins County Coal,
LLC ("Hopkins") operation. Hopkins provides the coal feedstock and receives
various fees for operating

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the third party's coal synfuel facility and providing other services. Alliance
Coal, LLC assists the third party with marketing the coal synfuel and receives a
fee for such services. The synfuel agreements continue through December 2000 and
commitments have been made to extend the agreements through February 2001 with
current negotiations underway to continue the synfuel arrangements beyond this
date. In late October, the Internal Revenue Service ("IRS") issued Rev. Proc.
2000-47, suspending issuance of private letter rulings for most coal synfuel
plants while a review is conducted concerning whether current tax rules
adequately address the evolving synfuel industry. The IRS has requested public
comment on Rev. Proc. 2000-47 by November 27, 2000. The IRS has indicated it
will provide substantial guidance in the form of a general revenue ruling or a
tax regulation to address tax credits granted under Section 29 of the Internal
Revenue Code. Until such guidance is received from the IRS, we cannot give any
assurance that future benefits will be received from the coal synfuel production
facility.

Operating expenses. Operating expenses increased 5.5% to $69.1 million
for the 2000 Quarter from $65.5 million for the 1999 Quarter. The increase of
$3.6 million results from increased sales volumes in the Partnership's Illinois
Basin operations and prolonged adverse mining conditions initially encountered
in May 2000 at the Partnership's Mettiki longwall mine resulting in increased
operating expenses in both instances. The difficult mining conditions at Mettiki
continued through most of August. The remainder of the longwall panel has shown
great improvement allowing for above normal production in September.

Outside purchases. Outside purchases decreased 8.9% to $4.6 million for
the 2000 Quarter compared to $5.0 million for the 1999 Quarter. The decrease of
$0.4 million was the result of lower coal export brokerage volumes. See "Coal
sales" above concerning the decrease in coal export brokerage volumes.

General and administrative. General and administrative expenses were
comparable for the 2000 Quarter and the 1999 Quarter at $3.6 million.

Depreciation, depletion and amortization. Depreciation, depletion and
amortization expenses were comparable for the 2000 Quarter and the 1999 Quarter
at $9.6 million and $9.7 million, respectively.

Interest expense. Interest expense was $4.2 million for the 2000 Quarter
compared to $1.6 million for the 1999 Quarter. The increase reflects the
interest on the $180 million principal amount of 8.31% senior notes and $50
million of borrowings on the term loan facility in connection with the IPO and
concurrent transactions occurring on August 20, 1999. See "Part I, Item 1.
Financial Statements - - Note 1. Organization and Presentation."

Unusual items. The Partnership arbitrated its dispute with Seminole with
respect to Seminole's termination of a long-term contract for the transloading
of coal from rail to barge through the Partnership's terminal in Indiana. The
final resolution between the parties, reached in conjunction with the
arbitrator's decision rendered during the third quarter, includes both future
cash payments and amendments to an existing coal supply contract. The
Partnership recorded income of $12.2 million, which is net of litigation
expenses and cost relating to the impairment of certain transloading facility
assets. Additionally, the Partnership recorded an expense of $2.7 million
related to other litigation matters. The net effect of these unusual items is
$9.5 million. See "Part I, Item 1. Financial Statements -- Note 2.
Contingencies."

Income before income taxes. Income before income taxes increased 69.4% to
$11.6 million for the 2000 Quarter compared with $6.8 million for the 1999
Quarter. The increase of $4.8 million is primarily attributable to the unusual
items recorded during the 2000 Quarter, see "Unusual items" described above,
which was offset by increased operating expenses as a result of prolonged
adverse mining conditions

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13

encountered at the Partnership's Mettiki longwall mine resulting in increased
operating expense from a sandstone intrusion and additional interest expense
associated with the debt incurred concurrent with the closing of the IPO.

Income tax expense. The Partnership's earnings or loss for federal income
taxes purposes will be included in the tax returns of the individual partners.
Accordingly, no recognition is given to income taxes in the accompanying
financial statements of the Partnership. The Predecessor is included in the
consolidated federal income tax return of ARH. Federal and state income taxes
are calculated as if the Predecessor had filed its return on a separate company
basis utilizing an effective income tax rate of 31%.

EBITDA (income from operations before net interest expense, income taxes,
depreciation, depletion and amortization) increased 39.9% to $25.4 million for
the 2000 Quarter compared with $18.2 million for the 1999 Quarter. The $7.2
million increase is primarily attributable to the unusual items recorded during
the 2000 Quarter, see "Unusual items" described above, which was partially
offset by increased operating expenses as a result of prolonged adverse mining
conditions encountered at the Partnership's Mettiki longwall mine.

EBITDA should not be considered as an alternative to net income, income
before income taxes, cash flows from operating activities or any other measure
of financial performance presented in accordance with generally accepted
accounting principles. EBITDA has not been adjusted for unusual items. EBITDA is
not intended to represent cash flow and does not represent the measure of cash
available for distribution, but provides additional information for evaluating
the Partnership's ability to make minimum quarterly distributions. The
Partnership's method of computing EBITDA also may not be the same method used to
compute similar measures reported by other companies, or EBITDA may be computed
differently by the Partnership in different contexts (i.e., public reporting
versus computation under financing agreements).

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

Coal sales. Coal sales were comparable for the nine months ended
September 30, 2000 (the "2000 Period") and the nine months ended September 30,
1999 (the "1999 Period") at $261.2 million and $261.0 million, respectively. The
Partnership has experienced higher sales volumes in the Illinois Basin
operations and at the restructured Pontiki/Excel operation, which were directly
offset by planned reduced participation in low margin, coal export brokerage
markets. The brokerage business is not expected to be material in the future.
Tons sold remained consistent at 11.3 million for the 2000 and 1999 Periods.
Tons produced decreased 3.2% to 10.3 million for the 2000 Period from 10.6
million in the 1999 Period.

Other sales and operating revenues. Other sales and operating revenues
increased to $1.2 million for the 2000 Period from $0.7 million for the 1999
Period. The increase of $0.5 million results from the introduction of a third
party coal synfuel production facility at the Partnership's Hopkins County Coal,
LLC ("Hopkins") operation. Hopkins provides the coal feedstock and receives
various fees for operating the third party's coal synfuel facility and providing
other services. Alliance Coal, LLC assists the third party with marketing the
coal synfuel and receives a fee for such services. The synfuel agreements
continue through December 2000 and commitments have been made to extend the
agreements through February 2001 with current negotiations underway to continue
the synfuel arrangements beyond this date. In late October, the Internal Revenue
Service ("IRS") issued Rev. Proc. 2000-47, suspending issuance of private letter
rulings for most coal synfuel plants while a review is conducted concerning
whether current tax rules adequately address the evolving synfuel industry. The
IRS has requested public comment on Rev. Proc. 2000-47 by November 27, 2000. The
IRS has indicated it will provide substantial guidance in the form of a general
revenue ruling or a tax regulation to address tax credits granted under Section
29 of

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14

the Internal Revenue Code. Until such guidance is received from the IRS, we
cannot give any assurance that future benefits will be received from the coal
synfuel production facility.

Operating expenses. Operating expenses increased 5.5% to $192.6 million
for the 2000 Period from $182.5 million for the 1999 Period. The increase of
$10.1 million was a result of increased production volumes at the Partnership's
restructured Pontiki/Excel operation and prolonged adverse mining conditions at
the Partnership's Mettiki longwall mine resulting in increased operating
expenses, which were partially offset by cost savings as a result of suspended
production at one of the Partnership's surface mines at the Hopkins operation.

Outside purchases. Outside purchases declined 41.2% to $11.9 million
for the 2000 Period from $20.2 million for the 1999 Period. The decrease of $8.3
million was the result of lower coal export brokerage volumes. See "Coal sales"
above concerning the decrease in coal export brokerage volumes.

General and administrative. General and administrative expenses were
comparable for the 2000 Period and the 1999 Period at $10.8 million and $10.6
million, respectively.

Depreciation, depletion and amortization. Depreciation, depletion and
amortization expense were comparable for the 2000 Period and the 1999 Period at
$28.8 million and $29.1 million, respectively.

Interest expense. Interest expense was $12.5 million for the 2000
Period compared to $1.7 million for the 1999 Period. The increase reflects the
interest on the $180 million principal amount of 8.31% senior notes and $50
million of borrowings on the term loan facility in connection with the IPO and
concurrent transactions occurring on August 20, 1999. See "Part I., Item 1.
Financial statements -- Note 1. Organization and Presentation."

Unusual items. The Partnership arbitrated its dispute with Seminole
with respect to Seminole's termination of a long-term contract for the
transloading of coal from rail to barge through the Partnership's terminal in
Indiana. The final resolution between the parties, reached in conjunction with
the arbitrator's decision rendered during the third quarter, included both
future cash payments and amendments to an existing coal supply contract. The
Partnership recorded income of $12.2 million, which is net of litigation
expenses and cost relating to the impairment of certain transloading facility
assets. Additionally, the Partnership recorded an expense of $2.7 million
related to other litigation matters. The net effect of these unusual items is
$9.5 million. See "Part I, Item 1. Financial Statements -- Note 2.
Contingencies."

Income before income taxes. Income before income taxes was $16.0
million for the 2000 Period compared to $18.2 million for the 1999 Period. The
decrease of $2.2 million was primarily attributable to increased operating
expenses as a result of prolonged adverse mining conditions encountered at the
Partnership's Mettiki longwall mine resulting in increased operating expense
from a sandstone intrusion and additional interest expense associated with the
debt incurred concurrent with the closing of the IPO offset by unusual items
recorded during the 2000 Quarter. See "Unusual items" described above.

EBITDA (income from operations before net interest expense, income
taxes, depreciation and depletion and amortization) increased 17.0% to $57.4
million for the 2000 Period compared with $49.0

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15

million for the 1999 Period. The $8.4 million increase is primarily attributable
to the unusual items recorded during the 2000 Period, see "Unusual items"
described above and the increased production and sales volumes at the
Partnership's restructured Pontiki/Excel operation, which was partially offset
by increased operating expenses as a result of adverse mining conditions at the
Partnership's Mettiki longwall mine.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash flows provided by operating activities was $39.8 million in the
2000 Period compared to $3.4 million in the 1999 Period. The increase in cash
flows provided by operating activities is principally attributable to the
Special GP retaining approximately $37.9 million of trade receivables in
conjunction with the IPO and concurrent transactions that occurred on August 20,
1999.

Net cash used in investing activities was $20.0 million for the 2000
Period compared to $58.4 million in the 1999 Period. The decrease is principally
attributable to the purchase of U.S. Treasuries in conjunction with the IPO and
concurrent transactions that occurred on August 20, 1999.

Net cash used in financing activities was $23.6 million for the 2000
Period compared to net cash provided by financing activities of $59.2 million in
the 1999 Period. The decrease was the result of three minimum quarterly
distributions paid in the 2000 Period of $0.50 per unit on its Common and
Subordinated Units outstanding totaling approximately $23.6 million and the net
cash provided by the IPO and concurrent transactions that occurred on August
20, 1999.

Capital Expenditures

Capital expenditures decreased to $27.2 million in the 2000 Period
compared to $32.9 million in the 1999 Period. The decrease is primarily
attributable to a coal reserve acquisition in the 1999 Period.

The Partnership's new Gibson County mining complex currently under
development remains on schedule and budget and should commence production in
November. The Partnership has approved an extension of its existing Pattiki mine
into adjacent coal reserves. The extension will involve capital expenditures of
approximately $30.0 million during the 2000-2003 period and is expected to allow
the Pattiki mine to continue its existing productive level for the next 15
years.

Notes Offering and Credit Facility

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16

under, a $100 million credit facility. The credit facility consists of three
tranches, including a $50 million term loan facility, a $25 million working
capital facility and a $25 million revolving credit facility. The Partnership
has borrowings outstanding of $50 million under the term loan facility and no
borrowings outstanding under either the working capital facility or the
revolving credit facility at September 30, 2000. The weighted average interest
rate on the term loan facility at September 30, 2000, was 7.99%. The credit
facility expires August 2004. The senior notes and credit facility are
guaranteed by Alliance Coal, LLC and all of it subsidiaries. In addition, the
credit facility is secured further by a pledge of treasury securities, which,
upon written notice, are released for purposes of financing qualifying capital
expenditures of the Intermediate Partnership or its subsidiaries. The senior
notes and credit facility contain various restrictive and affirmative covenants,
including the amount of distributions by the Intermediate Partnership and the
incurrence of other debt.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). The Statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. During June 2000, FASB issued SFAS No. 138, which
amends certain provisions of SFAS No. 133. The Partnership does not believe that
adoption of SFAS No. 133, as amended by SFAS No. 138 effective January 1, 2001,
will have a material impact on its financial position, results of operations or
cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Almost all of the Partnership's and the Predecessor's transactions are
denominated in U. S. dollars, and as a result, they do not have material
exposure to currency exchange-rate risks.

The Predecessor did not, and the Partnership does not, engage in any
interest rate, foreign currency exchange rate or commodity price-hedging
transactions.

The Intermediate Partnership assumed obligations under a $100 million
credit facility. Borrowings under the credit facility are at variable rates and,
as a result, the Partnership has interest rate exposure.

As of September 30, 2000, there were no significant changes in the
Partnership's quantitative and qualitative disclosures about market risk as set
forth in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1999.

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17

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements.
These statements are based on the Partnership's beliefs as well as assumptions
made by and information currently available to the Partnership. When used in
this document, the words "anticipate," "believe," "expect," "estimate,"
"forecast," "project," and similar expressions identify forward-looking
statements. These statements reflect the Partnership's current views with
respect to future events and are subject to various risks, uncertainties and
assumptions including but not limited to:

o the Partnership's dependence on significant customer contracts
and the terms of those contracts, including renewing customer
contracts upon expiration and the price of coal sold under new
customer contracts;

o the Partnership's productivity levels and margins that it
earns from the sale of coal;

o the effects of any unanticipated increases in labor costs,
adverse changes in work rules or unexpected cash payments
associated with post-mine reclamation, workers' compensation
claims, and environmental litigation or cleanup;

o the risk of major mine-related accidents or interruptions; and

o the effects of any adverse change in the domestic coal
industry, electric utility industry, or general economic
conditions.

If one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in this Form 10-Q. Except as required by applicable securities
laws, the Partnership does not intend to update these forward-looking
statements.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information under "General Litigation" in Note 2 of the Notes to
Unaudited Consolidated and Combined Financial Statements herein is hereby
incorporated by reference. See also "Item 3. Legal Proceedings" in the Annual
Report on Form 10-K for the period ending December 31, 1999.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

Exhibit No. Description

27.1 -- Financial Data Schedule.

(b) Reports on Form 8-K:

None

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, in Tulsa, Oklahoma, on November 10, 2000.

ALLIANCE RESOURCE PARTNERS, L.P.

By: Alliance Resource Management GP, LLC
its managing general partner

/s/ Michael L. Greenwood
--------------------------------
Michael L. Greenwood
Senior Vice President,
Chief Financial Officer
and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)

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INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

27.1 -- Financial Data Schedule.