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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 JUNE 30, 1999

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

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)

-------------------------------

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 September 24, 1999, 8,982,780 common units were outstanding.

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TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS Page
----
ALLIANCE RESOURCE PARTNERS, L.P.

Balance Sheet as of June 30, 1999............................................... 1

Notes to Balance Sheet ......................................................... 2

ALLIANCE RESOURCE GROUP (PREDECESSOR)

Combined Balance Sheets at June 30, 1999
and December 31, 1998 .......................................................... 4

Combined Statements of Income for the Three Months
Ended June 30, 1999 and 1998 and the Six Months
Ended June 30, 1999 and 1998 ................................................... 5

Combined Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1999 and 1998 ........................................ 6

Notes to Combined Financial Statements ......................................... 7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION .................................. 9

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK .............................................................. 14

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

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS .............................................................. 16

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ...................................... 16

ITEM 3. DEFAULTS UPON SENIOR SECURITIES ................................................ 16

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS ............................................................... 16

ITEM 5. OTHER INFORMATION .............................................................. 16

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................................... 17

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALLIANCE RESOURCE PARTNERS, L.P.

BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)

ASSET

CURRENT ASSET:

Cash................................................................... $ 1,000
========

EQUITY

LIMITED PARTNERS' EQUITY............................................... $ 990
GENERAL PARTNER'S EQUITY............................................... 10
--------
Total partners' equity......................................... $ 1,000
========

See notes to unaudited balance sheet.

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ALLIANCE RESOURCE PARTNERS, L.P.

NOTES TO BALANCE SHEET
JUNE 30, 1999
(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Alliance Resource Partners, L.P., a Delaware limited partnership (the
"Partnership") 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") (formerly known as Alliance Coal Corporation) and
substantially all of its operating subsidiaries. As used herein and unless the
context otherwise requires, references to the Partnership include its
subsidiaries.

Financial information is presented herein for certain direct and
indirect operating subsidiaries of ARH as of June 30, 1999, certain of which
subsequently merged into limited liability companies, and all of which became
operating subsidiaries of the Partnership. See "Note 2. Subsequent
Events--Subsidiary Mergers" below. Those subsidiaries are collectively referred
to herein as Alliance Resource Group (the "Group").

The accompanying balance sheet and notes thereto are unaudited.
However, in the opinion of the management of Alliance Resource Management GP,
LLC, a Delaware limited liability company and the managing general partner of
the Partnership (the "Managing GP"), the balance sheet is fairly presented.

This balance sheet and accompanying 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 balance sheet and notes
included in the Partnership's Registration Statement on Form S-1, as amended
(Registration No. 333-78845) (the "Registration Statement").

2. SUBSEQUENT EVENTS

Initial Public Offering

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.

Subsidiary Mergers

In August 1999 (but prior to August 20, 1999), (i) MAPCO Coal Inc., a
Delaware corporation and a 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, (ii) the other indirect corporate subsidiaries of ARH that were a part of
the Group merged with and into corresponding limited liability companies, each
of which is a wholly owned subsidiary of Alliance Coal and (iii) the two
indirect limited liability company subsidiaries of ARH that were a part of the
Group became subsidiaries of Alliance Coal as a result of the merger described
in clause (i) above.

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Contribution Agreement

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 Alliance Resource Operating Partners, L.P., a
Delaware limited partnership (the "Operating Partnership"). As a result of the
consummation of the transactions contemplated under the Contribution Agreement,
the Partnership holds a 98.9899% limited partner interest in the Operating
Partnership, and the Operating Partnership holds a 99.999% non-managing member
interest in Alliance Coal. The Partnership and the Operating Partnership will
be managed by the Managing GP which, as a result of the consummation of the
transactions contemplated under the Contribution Agreement, holds (i) a 0.99%
and 1.0001% managing general partner interest in the Partnership and the
Operating Partnership, respectively, and (ii) a .001% managing member interest
in Alliance Coal. Also as a result of the consummation of the transactions
contemplated under the Contribution Agreement, Alliance Resource GP, LLC, a
Delaware limited liability company and wholly owned subsidiary of ARH (the
"Special GP"), holds (i) 1,232,780 Common Units, (ii) 6,422,531 subordinated
units ("Subordinated Units") convertible into Common Units in the future upon
the occurrence of certain events and (iii) a .01% special general partner
interest in each of the Partnership and the Operating Partnership.

Notes Offering and Credit Facility

Concurrently with the closing of the IPO, the Special GP issued and
the Operating Partnership assumed the obligations under a $180 million
principal amount of 8.31% senior notes due August 20, 2014. The Special GP also
entered into and the Operating Partnership assumed the obligations under a $100
million credit facility. The senior notes contain various restrictive and
affirmative covenants, including restrictions on the incurrence of other debt.
The credit facility contains various restrictive covenants, including the
amount of distributions by the Operating Partnership and the incurrence of
other debt. The credit facility also contains various financial covenants.

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ALLIANCE RESOURCE GROUP

COMBINED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS)

ASSETS
JUNE 30, DECEMBER 31,
1999 1998
---------- -----------
(UNAUDITED)

CURRENT ASSETS:
Trade receivables ....................................... $ 35,202 $ 31,268
Income tax receivable ................................... 162 503
Inventories ............................................. 24,380 20,055
Advance royalties ....................................... 2,500 2,501
Prepaid expenses and other assets ....................... 218 1,456
---------- ----------
Total current assets ............................... 62,462 55,783

PROPERTY, PLANT AND EQUIPMENT AT COST ...................... 252,675 240,294
LESS ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION ............................................... (85,646) (69,158)
---------- ----------
167,029 171,136

OTHER ASSETS:
Advance royalties ....................................... 7,989 8,880
Coal supply agreements, net ............................. 22,265 24,062
Other long-term assets .................................. 1,939 1,235
---------- ----------
$ 261,684 $ 261,096
========== ==========

LIABILITIES AND NET PARENT INVESTMENT

CURRENT LIABILITIES:
Current maturities, long-term debt ...................... $ 350 $ 350
Accounts payable ........................................ 21,957 24,527
Accrued taxes other than income taxes ................... 5,607 4,526
Accrued payroll and related expenses .................... 7,938 9,269
Workers compensation and pneumoconiosis benefit ......... 4,899 4,707
Other current liabilities ............................... 6,309 5,302
---------- ----------
Total current liabilities .......................... 47,060 48,681
---------- ----------

LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities ............ 1,767 1,687
Deferred income taxes ................................... 2,729 3,906
Accrued pneumoconiosis benefits ......................... 22,635 22,233
Workers' compensation ................................... 13,418 13,934
Reclamation and mine closing ............................ 12,922 12,824
Other liabilities ....................................... 5,409 5,062
---------- ----------
Total liabilities .................................. 105,940 108,327
COMMITMENTS AND CONTINGENCIES
NET PARENT INVESTMENT ...................................... 155,744 152,769
---------- ----------
$ 261,684 $ 261,096
========== ==========

See notes to unaudited combined financial statements

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ALLIANCE RESOURCE GROUP

COMBINED STATEMENTS OF INCOME
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(UNAUDITED)

SALES AND OPERATING REVENUES:
Coal Sales ........................................ $ 86,566 $ 89,870 $ 169,364 $ 177,096
Other sales and operating revenues ................ 179 1,099 443 2,195
---------- ---------- ---------- ----------
Total revenues ............................... 86,745 90,969 169,807 179,291

EXPENSES:
Operating expenses ................................ 60,199 61,910 117,042 120,390
Outside purchases ................................. 6,704 13,734 15,168 24,782
General and administrative ........................ 3,404 3,527 6,953 7,714
Depreciation, depletion and amortization .......... 9,443 10,869 19,376 20,726
Interest expense .................................. 39 41 79 85
---------- ---------- ---------- ----------
Total operating expenses ..................... 79,789 90,081 158,618 173,697
---------- ---------- ---------- ----------

INCOME FROM OPERATIONS ............................... 6,956 888 11,189 5,594
OTHER INCOME ......................................... 156 86 197 198
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES ........................... 7,112 974 11,386 5,792

INCOME TAX EXPENSE ................................... 2,178 302 3,483 1,796
---------- ---------- ---------- ----------
NET INCOME ........................................... $ 4,934 $ 672 $ 7,903 $ 3,996
========== ========== ========== ==========

See notes to unaudited combined financial statements.

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ALLIANCE RESOURCE GROUP

COMBINED CONDENSED STATEMENTS OF CASH FLOW
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)

JUNE 30,
-----------------------------
1999 1998
---------- ----------
(UNAUDITED)

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES .................. $ 18,408 $ 11,704

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchase of business .......................... -- (7,310)
Direct acquisition costs .................................. -- (821)
Purchase of property, plant and equipment ................. (13,626) (12,731)
Proceeds from sale of property, plant and equipment ....... 147 35
---------- ----------
Net cash used in investing activities ................ (13,479) (20,827)
---------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution (return) of capital .......................... (4,929) 9,123
---------- ----------
Net cash provided by (used in) financing activities .. (4,929) 9,123
---------- ----------

NET CHANGE IN CASH AND BALANCE AT END OF PERIOD .............. $ -- $ --
========== ==========

See notes to unaudited combined financial statements.

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ALLIANCE RESOURCE GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)

1. BASIS OF PRESENTATION

The accompanying combined financial statements represent the results of
the following companies which comprised Alliance Resource Group (the "Group")
and which were direct or indirect wholly owned subsidiaries of Alliance Resource
Holdings, Inc. ("ARH") as of June 30, 1999:

o Excel Mining, LLC
o Garrett County Coal Corporation
o Gibson County Coal Corporation
o Hopkins County Coal, LLC
o MAPCO Coal Inc.
o MAPCO Coal Land & Development Corporation
o MAPCO Coal Land Corporation
o MC Mining, Inc.
o Mettiki Coal Corporation
o Mettiki Coal Corporation (West Virginia)
o MLDC Corporation
o Mt. Vernon Coal Transfer Company
o Pontiki Coal Corporation
o Toptiki Coal Corporation
o Webster County Coal Corporation
o White County Coal Corporation

The accompanying 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 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 combined financial
statements and notes included in Alliance Resource Partners, L.P.'s (the
"Partnership") Registration Statement on Form S-1, as amended (Registration No.
333-78845) (the "Registration Statement").

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corporate subsidiaries of ARH that were a part of the Group merged with and into
corresponding limited liability companies, each of which is a wholly owned
subsidiary of Alliance Coal and (iii) the two indirect limited liability company
subsidiaries of ARH that were a part of the Group became subsidiaries of
Alliance Coal as a result of the merger described in clause (i) above. On August
20, pursuant to the Contribution Agreement, among other things, ARH contributed
its ownership interest in Alliance Coal to the Alliance Resource Operating
Partners, L.P. (the "Operating Partnership"). For further information, refer to
the Group's combined financial statements and footnotes for the year ended
December 31, 1998 included in the Partnership's Prospectus, dated August 16,
1999, which forms a part of the Registration Statement.

2. CONTINGENCIES

Transloading Facility Dispute

Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon"), a Delaware limited
liability company and the successor to Mt. Vernon Coal Transfer Company, is
currently involved in litigation with Seminole Electric Cooperative, Inc.
("Seminole") with respect to a long-term contract for the transloading of coal
from rail to barge through Mt. Vernon's terminal in Indiana. Seminole has filed
a lawsuit to terminate this contract and is seeking a declaratory judgment as to
the damages owed to Mt. Vernon. The provisions of the contract stipulate the
calculation of damages to be paid in the event of breach. Rather than pay the
amount of damages stipulated, Seminole is seeking the court's agreement that the
proper damage award should be calculated based on Mt. Vernon's loss of net
profits from the terminal for the term of the agreement.

Seminole has ceased transloading any coal shipments through this terminal
and is transporting coal deliveries under the supply contract by rail. Mt.
Vernon is currently exploring alternative uses for this terminal, including
shipping different products to other customers or selling the terminal. Mt.
Vernon intends to vigorously defend its contract rights and believes that it
will prevail in the determination of the amount of damages Seminole owes under
the contract and believes those damages will be in excess of the carrying value
of this terminal.

General Litigation

The Partnership is involved in various lawsuits, claims and regulatory
proceedings incidental to its business. In the opinion of management, the
outcome of such matters will not have a material adverse effect on the
Partnership's business, combined financial position or results of operations.

3. SUBSEQUENT EVENTS

Initial Public Offering

On August 20, 1999, the Partnership completed its initial public
offering, and pursuant to the Contribution Agreement, the existing limited
liability companies and the successor limited liability companies to the
corporate entities comprising the Group became indirect subsidiaries of the
Partnership.

Coal Reserve Acquisition

Effective September 15, 1999, a subsidiary of the Partnership acquired
approximately 21 million saleable tons of coal reserves in Western Kentucky for
cash and assumed liabilities. These reserves are

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contiguous to existing reserves controlled by Webster County Coal, LLC, a
subsidiary of the Partnership.

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

RESULTS OF OPERATIONS

Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998

Coal sales. Coal sales for the three months ended June 30, 1999 (the
"1999 Quarter") declined 3.7% to $86.6 million from $89.9 million for the three
months ended June 30, 1998 (the "1998 Quarter"). The decrease of $3.3 million
primarily reflects lower brokerage volumes partially offset by higher sales
volumes from operating mines. See outside purchases below concerning the
decrease in coal export brokerage volumes.

Other sales and operating revenues. Other sales and operating revenues
declined 81.8% to $0.2 million for the 1999 Quarter from $1.1 million for the
1998 Quarter. The decrease of $0.9 million was primarily due to lower volumes at
Mt. Vernon Coal Transfer Company due to the dispute with Seminole. (See "Part I,
Item 1. Alliance Resource Group's Financial Statements - Note 2.")

Operating expenses. Operating expenses declined 2.7% to $60.2 million
for the 1999 Quarter from $61.9 million for the 1998 Quarter. The decrease of
$1.7 million is primarily attributable to improved productivity, which includes
the benefit from capital investments at Hopkins County Coal, LLC ("Hopkins
County") and the restructured operation in East Kentucky ("Excel/Partiki").

Outside purchases. Outside purchases declined 51.1% to $6.7 million for
the 1999 Quarter from $13.7 million for the 1998 Quarter. The decrease of $7.0
million was the result of lower coal export brokerage volumes. These declining
volumes are largely attributable to competition from low cost foreign
production. The brokerage business is not expected to be material in the future.
Because the coal brokerage operations generate lower margins than direct coal
sales, changes in the levels of brokerage activity have a greater impact on
revenues and outside purchases than on margins.

Income before income taxes. Income before income taxes was $7.1 million
for the 1999 Quarter compared with $1.0 million for the 1998 Quarter. The
increase of $6.1 million is primarily attributable to improved productivity,
which includes the benefits from capital investments at Hopkins County and the
restructured operation at Excel/Pontiki, partially offset by the losses incurred
at Mt. Vernon Coal Transfer Company due to the dispute with Seminole.

EBITDA (income from operations before net interest expense, income
taxes, depreciation, and depletion and amortization) was $16.6 million for the
1999 Quarter compared with $11.9 million for the 1998 Quarter. The $4.7 increase
is attributable to the same factors that contributed to the increase in income
before income taxes.

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information for evaluating the Partnership's ability to make the minimum
quarterly distribution. The Group'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 Group in different contexts (i.e.,
public reporting versus computation under financing agreements).

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Coal sales. Coal sales for the six months ended June 30, 1999 (the
"1999 Period") declined 4.3% to $169.4 million from $177.1 million for the six
months ended June 30, 1998 (the "1998 Period"). The decrease of $7.7 million is
primarily attributable to lower coal export brokerage volumes partially offset
by higher volumes from operating mines. See outside purchases below concerning
the decrease in coal export brokerage volumes.

Other sales and operating revenues. Other sales and operating revenues
declined 81.8% to $0.4 million for the 1999 Period from $2.2 million from the
1998 Period. The decrease of $1.8 million was primarily due to lower volumes at
Mt. Vernon Coal Transfer Company due to the dispute with Seminole. (See "Part 1.
Item 1. Alliance Resource Group's Financial Statements--Note 2.")

Operating expenses. Operating expenses declined 2.8% to $117.0 million
for the 1999 Period from $120.4 million for the 1998 Period. The decrease of
$3.4 million is primarily attributable to improved productivity, which includes
the benefits from capital investments at Hopkins County and the restructured
operation at Excel/Pontiki.

Outside purchases. Outside purchases declined 36.3% to $15.2 million
for the 1999 Period from $24.8 million for the 1998 Period. The decrease of $9.6
million was the result of lower coal export brokerage volumes. These declining
volumes are largely attributable to competition from low cost foreign
production. The brokerage business is not expected to be material in the future.
Because the coal brokerage operations generate lower margins than direct coal
sales, changes in the levels of brokerage activity have a greater impact on
revenues and outside purchases than on margins.

Income before income taxes. Income before income taxes was $11.4
million for the 1999 Period compared to $5.8 million for the 1998 Period. The
increase of $5.6 million was primarily attributable to improved productivity,
which includes the benefits from capital investments at Hopkins County and the
restructured operation at Excel/Pontiki, partially offset by the losses incurred
at Mt. Vernon Coal Transfer Company due to the dispute with Seminole.

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EBITDA (income from operations before net interest expense, income
taxes, depreciation and depletion and amortization) was $30.8 million for the
1999 Period compared with $26.6 million for the 1998 Period. The $4.2 increase
is attributable to the same factors that contributed to the increase in income
before income taxes.

EBITDA should not be considered as an alternative to net income, income
(loss) before income taxes, cash flows from operating activities or any other
measure of financial performance presented in accordance with generally accepted
accounting principles. 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 the
minimum quarterly distribution. The Group'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 Group in different
contexts (i.e., public reporting versus computation under financing agreements).

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash flows provided by operating activities was $18.4 million in the
1999 Period compared to $11.7 million in the 1998 Period. The increase in cash
flows provided by operating activities is principally attributable to the
increase in income before income taxes and lower levels of increases in accounts
receivable and coal inventory.

Net cash used in investing activities decreased to $13.5 million in the
1999 Period compared to $20.8 million in the 1998 Period. The decrease in net
cash used in investing activities is principally attributable to the purchase of
Hopkins County in the 1998 Period.

Capital Expenditures

Capital expenditures were comparable at $13.6 million for the 1999
Period and $12.7 million for the 1998 Period.

Notes Offering and Credit Facility

Concurrently with the closing of the IPO, the Special GP issued and the
Operating Partnership assumed the obligations under $180 million principal
amount of 8.31% senior notes due August 20, 2014. Alliance Resource GP, LLC (the
"Special GP") also entered into and the Operating 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 drawn $50 million under the term loan facility but has not drawn
any money under either the working capital facility or the revolving credit
facility. The senior notes contain various restrictive and affirmative
covenants, including restrictions on the incurrence of other debt. The credit
facility contains various restrictive covenants, including the amount of
distributions by the Operating Partnership and the incurrence of other debt. The
credit facility also contains various financial covenants.

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Impact of Year 2000 Issue

Year 2000 Issue. The year 2000 issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any software, hardware and equipment and embedded chip systems that are
date-sensitive may recognize a date using "--00" as the year 1900 rather than
the year 2000. The Partnership's failure or the failure of any other entity with
which the Partnership interacts to correct this problem could result in system
failures or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar business activities. Because substantially all hardware and
software was replaced following the separation from MAPCO Inc. in 1996, the
Partnership believes that most of its critical hardware and software are Year
2000 compliant. However, the Partnership may have embedded chip systems in
certain of its mining equipment and in older hardware or software in its mining
complexes which the Partnership is currently evaluating for Year 2000
compliance. The Partnership believes that with modification and replacement of
some of its existing software, hardware and equipment and embedded chip systems,
the year 2000 issue can be mitigated substantially. If these modifications and
replacements are not made or are not completed on a timely basis, the Year 2000
issue could have a material impact on the Partnership's operations.

Compliance Program. As part of the Partnership's compliance program, it
has performed an evaluation of its state of readiness. The Partnership's
evaluation included examination of its information technology systems and its
operating equipment. The Partnership's key information technology systems
consist of:

o financial systems applications;
o human resources and payroll systems applications;
o hardware and equipment; and
o third-party developed software.

The Partnership's key operating equipment consists of coal mining,
processing and loadout equipment. The Partnership is also evaluating major
equipment used in its mining operations. The Partnership's evaluation also
included the evaluation of the exposure of third parties material to its
operations. The Partnership has not hired independent contractors to verify its
assessment and estimates related to the year 2000 issue.

State of Readiness. The Partnership has completed an assessment of all
material information technology systems that would be affected by the year 2000
issue if not modified and has initiated a program to modify or replace portions
of its software and hardware so that its computer systems will function properly
in the year 2000 and thereafter. The Partnership is in the process of assessing
its operating equipment which contains embedded chip systems to determine the
extent that it is at risk for year 2000 problems. The remediation of operating
equipment depends primarily on the manufacturers of that equipment for
modifications. The Partnership expects this remediation, testing and
implementation to be completed by the third quarter of 1999. The Partnership is
also in the process of assessing the extent to which its customers and suppliers
of products and services will be affected by year 2000 issues. The Partnership
has initiated formal communications with all of its significant customers and
equipment vendors and other suppliers. The responses to date from these third
parties to the Partnership's inquiries indicate that these third parties expect,
at this time, to be compliant by the year 2000 based on their progress to date.
The Partnership has received written assurances from substantially all of its
significant customers and third party service providers. These assurances
include specific letters to the Partnership

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responding to its Y2K inquiries. In addition, the Partnership has verified the
Y2K readiness of much of its specific mining equipment, software, and hardware
through vendor published product bulletins. These assurances provide comfort
that its third party vendors are aware of and are addressing their Y2K issues,
but they cannot guarantee the Partnership that they will not encounter Y2K
problems that could negatively impact its business. The Partnership is not aware
of any contract provisions or agreements that would limit its legal remedies due
to Y2K non-compliance of any of its products or services. The Partnership has
not obtained timetables of expected completion dates or modification, testing
and implementation from all these third parties. The Partnership does not
control its customers, suppliers and vendors. Furthermore, the Partnership
cannot be assured that its customers, suppliers or vendors will not experience
material business disruptions that could affect it as a result of the year 2000
problem. The Partnership plans to complete communications with these third
parties as to their year 2000 readiness in the third quarter of 1999.

Costs to Address Year 2000 Compliance. Although many of the
Partnership's critical financial and production application systems, hardware
and software are year 2000 compliant, some systems and equipment remain to be
converted. The Partnership does not expect the cost in connection with these
modifications and replacements to be material. The Partnership currently
estimates that the cost of these modifications will not exceed $500,000. The
Partnership expects to fund the costs through cash from operations or
borrowings.

Risk of Non-Compliance and Contingency Plans. The Partnership believes
that it is difficult to fully assess the risks of the year 2000 issue due to
numerous uncertainties surrounding the issue. The Partnership believes that the
primary risks are external to it and relate to the year 2000 readiness of
customers, suppliers, transportation suppliers such as railroads, barge lines,
terminal operators, ocean vessel brokers, and others. In a worst case scenario,
the Partnership's utility customers may not purchase coal if their generators
fail to operate, the Partnership may not be able to access its bank accounts or
make or receive payments and its transportation providers may not be able to
make timely coal shipments to customers. The Partnership's mines and processing
plants are highly mechanized and employ equipment that incorporates embedded
chip systems. The failure of these embedded chip systems in critical equipment
due to the year 2000 problem could cause significant coal mining and processing
disruptions.

The Partnership has not established contingency plans in case of
failure of its information technology systems since the Partnership expects to
have its material systems in place by the third quarter of 1999. Some of these
systems may be interrelated with systems outside of the Partnership's control
and the Partnership cannot be assured that all implementations will be
successful. Accordingly, contingency plans will be developed to respond to any
failures as they occur. In connection with the Partnership's assessment of its
operating equipment and third party readiness, the Partnership will evaluate the
necessity of contingency plans based on the level of uncertainty regarding
compliance in the third quarter of 1999. In the event the Partnership's
intermediaries or vendors or the manufactures of its operating equipment do not
expect to be year 2000 compliant, the Partnership's contingency plan will
include replacing the non-compliant intermediaries or vendors or operating
equipment. Based on information available at this time, the Partnership cannot
conclude that its failure or the failure of third parties to achieve year 2000
compliance will not adversely affect the Partnership. The Partnership's
inability or the inability of third parties to adequately address the year 2000
issues on a timely basis could result in a material financial risk including
loss of revenue, substantial unanticipated costs and service interruptions.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for

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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. The Group has not determined the impact on its
June 30, 1999 financial statements that may result from adoption of SFAS 133,
which was revised during June 1999 to be implemented no later than January 1,
2001.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Almost all of the Group's transactions were, and almost all of the
Partnership's transactions are, denominated in U. S. dollars, and as a result,
it does not have material exposure to currency exchange-rate risks.

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

As explained in "--Liquidity and Capital Resources -- Notes Offering
and Credit Facility" above, the Operating 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.

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:

o the Partnership's dependence on the terms of significant
customer contracts and the terms of those 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 or
adverse changes in work rules or unexpected cash payments
associated with post-mine reclamation, workers' compensation
claims or 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, in the electric utility industry, or in 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

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required by applicable securities laws, the Partnership does not intend to
update these forward-looking statements. For additional discussion of these
risks, uncertainties and assumptions, see the Partnership's Registration
Statement on Form S-1, as amended (Registration No. 333-78845).

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

No material litigation has been filed against the Group during the
three months ended June 30, 1999, and there have been no material changes in
legal proceedings previously disclosed. See "Alliance Resource Group--Notes to
Combined Financial Statements--Note 2. Contingencies--General Litigation."

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None. However, on May 20, 1999, the Partnership filed the Registration
Statement relating to the IPO. On August 12, 1999, the Partnership's
Registration Statement was declared effective, and the IPO closed on August 20,
1999. The Partnership sold 7,750,000 Common Units in the IPO. The public
offering price was $19.00 per Common Unit, and the underwriting discount was
$1.21 per Common Unit. The proceeds from the offering to the Partnership, after
deducting the underwriting discount but before deducting expenses associated
with the offering, were approximately $137.9 million. Concurrently with the
closing of the IPO, the Partnership also issued 1,232,780 Common Units and
6,422,531 Subordinated Units to the Special GP.

The Partnership used the $137.9 million from the IPO, together with the
gross proceeds of the private placement of the senior notes, of $180.0 million,
and the $50.0 million of term loan borrowings under the senior credit facility
(i) to pay approximately $7.3 million in fees and expenses incurred in
connection with the IPO and the related transactions, (ii) to purchase $50.0
million of U.S. Treasury Notes which were assigned as collateral to secure the
term loan borrowings under the senior credit facility, and (iii) to make a
distribution of $64.8 million to the Special GP. The Partnership retained
approximately $37.2 million available to fund future capital expenditures and
for working capital and other general corporate purposes. The balance of the
proceeds, approximately $214.5 million, were retained by the Special GP and
distributed to ARH, of which ARH used $123.5 million to repay substantially all
of its debt.

As of September 23, all of the $37.2 million retained by the
Partnership was used to replenish working capital.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

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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 September 24,
1999.

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

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22
EXHIBIT INDEX

Exhibit No. Description
- ----------- -----------

27.1 -- Financial Data Schedule.