Document

10-Q 1 a3311910-q.htm 10-Q Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-Q

__________________________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2019



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

For the transition period from to

Commission file number: 001-14901

__________________________________________________

CONSOL Coal Resources LP

(Exact name of registrant as specified in its charter)



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

1000 CONSOL Energy Drive, Suite 100

Canonsburg, PA 15317-6506

(724) 416-8300

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

__________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

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

Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller Reporting Company x Emerging Growth Company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units representing limited partner interests	CCR	New York Stock Exchange

CONSOL Coal Resources LP had 16,021,699 common units, 11,611,067 subordinated units and a 1.7% general partner interest outstanding at April 25, 2019.

TABLE OF CONTENTS



		Page
	Part I. Financial Information

Item 1.	Financial Statements
	Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018	4
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019 and 2018	5
	Consolidated Balance Sheets at March 31, 2019 and December 31, 2018	6
	Consolidated Statement of Partners’ Capital for the three months ended March 31, 2019 and 2018	7
	Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018	8
	Notes to the Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 4.	Controls and Procedures	30

	Part II. Other Information

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 4.	Mine Safety Disclosures	31

Item 6.	Exhibits	31

	Signatures	33

Significant Relationships and Other Terms Referenced in this Quarterly Report


•	“CONSOL Coal Resources LP,” the “Partnership,” “we,” “our,” “us” and similar terms refer to CONSOL Coal Resources LP, a Delaware limited partnership, and its subsidiaries, with common units listed for trading on the New York Stock Exchange under the ticker “CCR”;

•

“Affiliated Company Credit Agreement” refers to an agreement entered into on November 28, 2017 among the Partnership and certain of its subsidiaries (collectively, the “Credit Parties”), CONSOL Energy, as lender and administrative agent, and PNC Bank, National Association, as collateral agent (“PNC”), as amended by Amendment No. 1 to Affiliated Company Credit Agreement, dated March 28, 2019. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275 million to be provided by CONSOL Energy, as lender;


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


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


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


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


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


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


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


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


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


•	“Partnership Agreement” refers to the Third Amended and Restated Partnership Agreement dated as of November 28, 2017;


•	“Pennsylvania Mining Complex” refers to the Bailey, Enlow Fork, and Harvey coal mines, coal reserves and related assets and operations, located primarily in southwestern Pennsylvania. The Pennsylvania Mining Complex is owned 75% by our sponsor and its subsidiaries and 25% by CONSOL Thermal Holdings;


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


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


•	“sponsor” or “our sponsor” refers to CONSOL Energy; and


•	“subordinated units” refer to limited partner interests in CONSOL Coal Resources LP having the rights and obligations specified with respect to subordinated units in the Partnership Agreement. All 11,611,067 of our outstanding subordinated units are held by CONSOL Energy.

PART I : FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOL COAL RESOURCES LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except unit data)

(unaudited)



	Three Months Ended March 31,
	2019		2018
Coal Revenue	$	83,126	$	87,752
Freight Revenue	1,665		4,472
Other Income	1,316		2,277
Total Revenue and Other Income	86,107		94,501

Operating and Other Costs ¹	52,094		52,287
Depreciation, Depletion and Amortization	11,217		10,814
Freight Expense	1,665		4,472
Selling, General and Administrative Expenses ²	4,560		3,020
Interest Expense, Net ³	1,351		1,951
Total Costs	70,887		72,544
Net Income	$	15,220	$	21,957

Less: General Partner Interest in Net Income	257		372
Limited Partner Interest in Net Income	$	14,963	$	21,585

Net Income per Limited Partner Unit - Basic	$	0.54	$	0.79
Net Income per Limited Partner Unit - Diluted	$	0.54	$	0.78

Limited Partner Units Outstanding - Basic	27,589,172		27,482,544
Limited Partner Units Outstanding - Diluted	27,645,697		27,567,690

Cash Distributions Declared per Unit ⁴
Common Unit	$	0.5125	$	0.5125
Subordinated Unit	$	0.5125	$	0.5125

¹Related Party of $763 and $685 for the three months ended March 31, 2019 and March 31, 2018, respectively.

²Related Party of $3,056 and $1,645 for the three months ended March 31, 2019 and March 31, 2018, respectively.

³Related party of $1,351 and $1,951 for the three months ended March 31, 2019 and March 31, 2018, respectively.

⁴Represents the cash distributions declared related to the period presented. See Note 16 - Subsequent Events.

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

CONSOL COAL RESOURCES LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(unaudited)



	Three Months Ended March 31,
	2019			2018
Net Income	$	15,220		$	21,957

Recognized Net Actuarial Gain	(3		)	(2		)
Other Comprehensive Loss	(3		)	(2		)

Comprehensive Income	$	15,217		$	21,955

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

CONSOL COAL RESOURCES LP

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



	(unaudited)
	March 31, 2019		December 31, 2018
ASSETS
Current Assets:
Cash	$	405	$	1,003
Trade Receivables	26,968		21,871
Other Receivables	2,564		1,068
Inventories	12,645		11,066
Prepaid Expenses	4,620		5,096
Total Current Assets	47,202		40,104
Property, Plant and Equipment:
Property, Plant and Equipment	955,884		946,298
Less—Accumulated Depreciation, Depletion and Amortization	537,727		526,747
Total Property, Plant and Equipment—Net	418,157		419,551
Other Assets:
Right of Use Asset—Operating Leases	19,190		—
Other Assets	14,190		14,908
Total Other Assets	33,380		14,908
TOTAL ASSETS	$	498,739	$	474,563



LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities:
Accounts Payable	$	26,535		$	24,834
Accounts Payable—Related Party	6,002			3,831
Other Accrued Liabilities	42,276			35,419
Total Current Liabilities	74,813			64,084
Long-Term Debt:
Affiliated Company Credit Agreement—Related Party	161,500			163,000
Finance Lease Obligations	4,093			5,067
Total Long-Term Debt	165,593			168,067
Other Liabilities:
Pneumoconiosis Benefits	4,477			4,260
Workers’ Compensation	3,094			3,119
Asset Retirement Obligations	9,973			9,775
Operating Lease Liability	15,191			—
Other	529			518
Total Other Liabilities	33,264			17,672
TOTAL LIABILITIES	273,670			249,823
Partners’ Capital:
Common Units (16,021,699 Units Outstanding at March 31, 2019; 15,911,211 Units Outstanding at December 31, 2018)	212,104			212,122
Subordinated Units (11,611,067 Units Outstanding at March 31, 2019 and December 31, 2018)	(11,085		)	(11,421		)
General Partner Interest	12,133			12,119
Accumulated Other Comprehensive Income	11,917			11,920
Total Partners’ Capital	225,069			224,740
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	498,739		$	474,563

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

CONSOL COAL RESOURCES LP

CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

(Dollars in thousands)



	Limited Partners
	Common			Subordinated			General Partner			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2018	$	212,122		$	(11,421	)	$	12,119		$	11,920		$	224,740
(unaudited)
Net Income	8,676			6,287			257			—			15,220
Unitholder Distributions	(8,211		)	(5,951		)	(243		)	—			(14,405		)
Unit-Based Compensation	397			—			—			—			397
Units Withheld for Taxes	(880		)	—			—			—			(880		)
Actuarially Determined Long-Term Liability Adjustments	—			—			—			(3		)	(3		)
Balance at March 31, 2019	$	212,104		$	(11,085	)	$	12,133		$	11,917		$	225,069



	Limited Partners
	Common			Subordinated			General Partner			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2017	$	205,974		$	(15,225	)	$	11,964		$	10,443		$	213,156
(unaudited)
Net Income	12,477			9,108			372			—			21,957
Unitholder Distributions	(8,153		)	(5,951		)	(242		)	—			(14,346		)
Unit-Based Compensation	359			—			—			—			359
Units Withheld for Taxes	(899		)	—			—			—			(899		)
Actuarially Determined Long-Term Liability Adjustments	—			—			—			(2		)	(2		)
Balance at March 31, 2018	$	209,758		$	(12,068	)	$	12,094		$	10,441		$	220,225

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

CONSOL COAL RESOURCES LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)



	Three Months Ended March 31,
	2019			2018
Cash Flows from Operating Activities:
Net Income	$	15,220		$	21,957
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization	11,217			10,814
Gain on Sale of Assets	(5		)	(76		)
Unit-Based Compensation	397			359
Changes in Operating Assets:
Accounts and Notes Receivable	(6,588		)	1,240
Inventories	(1,579		)	(1,818		)
Prepaid Expenses	476			224
Changes in Other Assets	718			791
Changes in Operating Liabilities:
Accounts Payable	185			(1,931		)
Accounts Payable—Related Party	2,171			(2,136		)
Other Operating Liabilities	2,811			(575		)
Changes in Other Liabilities	195			415
Net Cash Provided by Operating Activities	25,218			29,264
Cash Flows from Investing Activities:
Capital Expenditures	(8,093		)	(4,929		)
Proceeds from Sales of Assets	—			75
Net Cash Used in Investing Activities	(8,093		)	(4,854		)
Cash Flows from Financing Activities:
Payments on Finance Leases	(938		)	(367		)
Net Payments on Related Party Long-Term Notes	(1,500		)	(9,583		)
Payments for Unitholder Distributions	(14,405		)	(14,346		)
Units Withheld for Taxes	(880		)	(899		)
Net Cash Used in Financing Activities	(17,723		)	(25,195		)
Net Decrease in Cash	(598		)	(785		)
Cash at Beginning of Period	1,003			1,533
Cash at End of Period	$	405		$	748

Non-Cash Investing and Financing Activities:
Finance Lease	$	—		$	5,658

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

CONSOL COAL RESOURCES LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per unit amounts)

NOTE 1—BASIS OF PRESENTATION:

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

For the three months ended March 31, 2019 and 2018, the unaudited Consolidated Financial Statements include the accounts of CONSOL Operating and CONSOL Thermal Holdings, wholly owned and controlled subsidiaries.

The Partnership is a master limited partnership formed on March 16, 2015 to manage and further develop all of our sponsor's active coal operations in Pennsylvania. As of March 31, 2019, the Partnership's assets are comprised of a 25% undivided interest in, and operational control over, the Pennsylvania Mining Complex. The Partnership's common units trade on the New York Stock Exchange under the ticker symbol “CCR.”

Recent Accounting Pronouncements:

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15 - Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in update 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements of capitalizing implementation cost incurred to develop or obtain internal-use software. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Partnership’s financial statements.

In August 2018, the FASB issued ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. These changes will be effective for fiscal years ending after December 15, 2020, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Partnership's financial statements.

In August 2018, the FASB issued ASU 2018-13 - Fair Value Measurement (Topic 820) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements on fair value measurements including the consideration of costs and benefits. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Partnership's financial statements.

In June 2018, the FASB issued ASU 2018-07 - Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this update seek to simplify accounting for nonemployee share-based payments by clarifying and improving the areas of the overall measurement objective, measurement date, and awards with performance conditions. This update was adopted during the three months ended March 31, 2019 and did not have a material impact on the Partnership's financial statements.

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this, the amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The amendments in this ASU will be applied using a modified-retrospective approach and, for public entities, are effective for fiscal years beginning after December 15, 2019 and interim periods within

those annual periods. Management does not expect this update to have a material impact on the Partnership's financial statements.

NOTE 2—REVENUE:

The following table disaggregates our revenue by major source for the three months ended March 31, 2019 and March 31, 2018:



	Three Months Ended March 31, 2019		Three Months Ended March 31, 2018
Coal Revenue	$	83,126	$	87,752
Freight Revenue	1,665		4,472
Total Revenue from Contracts with Customers	$	84,791	$	92,224

Our revenue is recognized when title passes to the customer. We have determined that each ton of coal represents a separate and distinct performance obligation. Our coal supply contracts and other sales and operating revenue contracts vary in length from short-term to long-term contracts and do not typically have significant financing components.

The estimated transaction price from each of our contracts is based on the total amount of consideration to which we expect to be entitled under the contract. Included in the transaction price for certain coal supply contracts is the impact of variable consideration, including quality price adjustments, handling services, per ton price fluctuations based on certain coal sales price indices and anticipated payments in lieu of shipments. The estimated transaction price for each contract is allocated to our performance obligations based on relative standalone selling prices determined at contract inception.

Coal Revenue

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

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

While we do, from time to time, experience costs of obtaining coal customer contracts with amortization periods greater than one year, those costs have been immaterial to our net income. As of and for the three months ended March 31, 2019 and March 31, 2018, we do not have any capitalized costs to obtain customer contracts on our balance sheet nor have we recognized any amortization of previously existing capitalized costs of obtaining customer contracts. Further, the Partnership has not recognized any revenue in the current period from performance obligations satisfied (or partially satisfied) in previous periods.

Freight Revenue

Some of our coal contracts require that we sell our coal at locations other than our central preparation plant. The cost to transport our coal to the ultimate sales point is passed through to our customers and we recognize the freight revenue equal to the transportation cost when title of the coal passes to the customer.

Contract Balances

Contract assets are recorded as trade receivables and reported separately in the Partnership's unaudited Consolidated Balance Sheets from other contract assets as title passes to the customer and the Partnership's right to consideration becomes unconditional. Payments for coal shipments are typically due within two to four weeks of the invoice date. The Partnership typically does not have material contract assets that are stated separately from trade receivables as the Partnership's performance obligations are satisfied as control of the goods or services passes to the customer, thereby granting the Partnership an unconditional right to receive consideration. Contract liabilities relate to consideration received in advance of

the satisfaction of the Partnership's performance obligations. Contract liabilities are recognized as revenue at the point in time when control of the good or service passes to the customer.

NOTE 3—NET INCOME PER LIMITED PARTNER AND GENERAL PARTNER INTEREST:

The Partnership allocates net income among our general partner and limited partners using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, we allocate our net income to our limited partners and our general partner in accordance with the terms of our Partnership Agreement. We also allocate any earnings in excess of distributions to our limited partners and our general partner in accordance with the terms of our Partnership Agreement. We allocate any distributions in excess of earnings for the period to our general partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the incentive distribution rights, as set forth in the Partnership Agreement.

Diluted net income per limited partner unit reflects the potential dilution that could occur if securities or agreements to issue common units, such as awards under the long-term incentive plan, were exercised, settled or converted into common units. When it is determined that potential common units resulting from an award subject to performance or market conditions should be included in the diluted net income per limited partner unit calculation, the impact is reflected by applying the treasury stock method.

The following table illustrates the Partnership’s calculation of net income per unit for common units and subordinated units (in thousands, except for per unit information):



	Three Months Ended March 31,
	2019		2018
Net Income	$	15,220	$	21,957
Less: General Partner Interest in Net Income	257		372
Net Income Allocable to Limited Partner Units	$	14,963	$	21,585

Limited Partner Interest in Net Income - Common Units	$	8,676	$	12,477
Limited Partner Interest in Net Income - Subordinated Units	6,287		9,108
Limited Partner Interest in Net Income - Basic & Diluted	$	14,963	$	21,585

Weighted Average Limited Partner Units Outstanding - Basic
Common Units	15,978,105		15,871,477
Subordinated Units	11,611,067		11,611,067
Total	27,589,172		27,482,544

Weighted Average Limited Partner Units Outstanding - Diluted
Common Units	16,034,630		15,956,623
Subordinated Units	11,611,067		11,611,067
Total	27,645,697		27,567,690

Net Income Per Limited Partner Unit - Basic
Common Units	$	0.54	$	0.79
Subordinated Units	$	0.54	$	0.78
Net Income Per Limited Partner Unit - Basic	$	0.54	$	0.79

Net Income Per Limited Partner Unit - Diluted
Common Units	$	0.54	$	0.78
Subordinated Units	$	0.54	$	0.78
Net Income Per Limited Partner Unit - Diluted	$	0.54	$	0.78

There were zero phantom units excluded from the computation of the diluted earnings per unit, because their effect would be anti-dilutive for the three months ended March 31, 2019. There were 129,850 phantom units excluded from the computation of the diluted earnings per unit, because their effect would be anti-dilutive for the three months ended March 31, 2018.

NOTE 4—INVENTORIES:



	March 31, 2019		December 31, 2018
Coal	$	2,213	$	1,160
Supplies	10,432		9,906
Total Inventories	$	12,645	$	11,066

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

NOTE 5—PROPERTY, PLANT AND EQUIPMENT:



	March 31, 2019		December 31, 2018
Coal and Other Plant and Equipment	$	643,363	$	636,105
Coal Properties and Surface Lands	122,679		122,679
Airshafts	104,596		102,275
Mine Development	81,538		81,538
Advance Mining Royalties	3,708		3,701
Total Property, Plant and Equipment	955,884		946,298
Less: Accumulated Depreciation, Depletion and Amortization	537,727		526,747
Total Property, Plant and Equipment, Net	$	418,157	$	419,551

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

As of March 31, 2019 and December 31, 2018, property, plant and equipment includes gross assets under finance lease of $11,894 and $11,919, respectively. Accumulated amortization for finance leases was $4,460 and $3,529 at March 31, 2019 and December 31, 2018, respectively. Amortization expense for assets under finance leases approximated $967 and $327 for the three months ended March 31, 2019 and March 31, 2018, respectively, and is included in Depreciation, Depletion and Amortization in the accompanying unaudited Consolidated Statements of Operations.

NOTE 6—LEASES:

On January 1, 2019, the Partnership adopted Accounting Standards Codification (“ASC”) Topic 842 using the transition option, “Comparatives Under 840 Option,” established by ASU 2018-11, Leases (Topic 842), Targeted Improvements. As allowed under this guidance, the Partnership elected not to recast the comparative periods presented when transitioning to ASC 842. As most of the Partnership's leases do not provide an implicit rate, CONSOL Coal Resources has taken a portfolio approach of applying its incremental borrowing rate based on the information available at the adoption date to calculate the present value of lease payments over the lease term. The Partnership has elected the package of practical expedients permitted under the transition guidance within the standard, which allows the Partnership (1) to not reassess whether any expired or existing contracts are or contain leases, (2) to not reassess the lease classification for any expired or existing leases, and (3) to not reassess initial direct costs for any existing leases. The Partnership has also elected the practical expedient to not evaluate land easements that existed or expired before its adoption of Topic 842 and the practical expedient to not separate lease and non-lease components; that is, to account lease and non-lease components in a contract as a single lease component for all

classes of underlying assets. Further, the Partnership made an accounting policy election to keep leases with an initial term of twelve months or less off the balance sheet. CONSOL Coal Resources will recognize those lease payments in the unaudited Consolidated Statements of Operations over the lease term. For the three months ended March 31, 2019, these short term lease expenses were not material to the Partnership's financial statements.

Based on the Partnership's lease portfolio, the standard had a material impact on the Partnership’s unaudited Consolidated Balance Sheet, but did not have a significant impact on the Partnership’s consolidated net earnings and cash flows. The most significant impact was the recognition of Right of Use (“ROU”) assets and lease liabilities for operating leases, while the accounting for finance leases remained substantially unchanged. The Partnership's bank covenants were not affected by this update. The Partnership recorded operating lease ROU assets and operating lease liabilities of $20 million as of January 1, 2019, primarily related to mining equipment, based on the present value of the future lease payments on the date of adoption.

The Partnership determines if an arrangement is an operating or finance lease at inception of the applicable lease. For leases where the Partnership is the lessee, ROU assets represent the Partnership’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Partnership’s leases do not provide an implicit interest rate, the Partnership uses its incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. The ROU asset also consists of any prepaid lease payments, lease incentives received, and costs which will be incurred in exiting a lease. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Partnership will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition.

The Partnership has operating leases for mining or other equipment used in operations and office space. Many leases include one or more options to renew, some of which include options to extend the leases, and some leases include options to terminate or buy out the leases within a set period of time. In certain of the Partnership’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for inflation and/or changes in other indexes. Many of our operating lease payments for mining equipment contain a variable component which is calculated based upon production metrics such as feet of advance or raw tonnage mined. While most of our leases contain clauses regarding the general condition of the equipment upon lease termination, they do not contain residual value guarantees.

For the three months ended March 31, 2019, the components of operating lease expense were as follows:



Fixed Operating Lease Expense	$	1,642
Variable Operating Lease Expense	763
Total Operating Lease Expense	$	2,405

Supplemental cash flow information related to the Partnership’s operating leases for the three months ended March 31, 2019 was as follows:



Cash Paid for Amounts Included in the Measurement of Operating Lease Liabilities	$	936
ROU Assets Obtained in Exchange for Operating Lease Obligations	$	—

The following table presents the lease balances within the unaudited Consolidated Balance Sheet, weighted average lease term, and weighted average discount rates related to the Partnership’s operating leases as of March 31, 2019:



Lease Assets and Liabilities	Classification	Amount
Assets:
Operating Lease ROU Assets	Other Assets	$	19,190

Liabilities:
Current:
Operating Lease Liabilities	Other Accrued Liabilities	$	4,791
Long-Term:
Operating Lease Liabilities	Operating Lease Liabilities	15,191
Total Operating Lease Liabilities		$	19,982

Weighted Average Remaining Lease Term (in Years)		4.53
Weighted Average Discount Rate		6.68		%

The Partnership also enters into finance leases for mining equipment and automobiles. Assets arising from finance leases are included in Property, Plant and Equipment, Net and the liabilities are included in Other Accrued Liabilities and Long-Term Debt in the Partnership's unaudited Consolidated Balance Sheet.

For the three months ended March 31, 2019, the components of finance lease expense were as follows:



Amortization of Right of Use Assets	$	967
Interest Expense	$	109

The following table presents the weighted average lease term and weighted average discount rates related to the Partnership’s finance leases as of March 31, 2019:



Weighted Average Remaining Lease Term (in Years)	1.95
Weighted Average Discount Rate	5.25	%

The following table presents the future maturities of the Partnership’s operating and finance lease liabilities, together with the present value of the net minimum lease payments, at March 31, 2019:



	Finance Leases		Operating Leases
Remainder of 2019	$	2,794	$	4,719
2020	4,181		5,686
2021	1,055		5,483
2022	15		3,029
2023	11		1,314
Thereafter	—		3,003
Total minimum lease payments	$	8,056	$	23,234
Less amount representing interest	413		3,252
Present value of minimum lease payments	$	7,643	$	19,982

As of March 31, 2019, the Partnership had no additional significant operating or finance leases that had not yet commenced.

NOTE 7—OTHER ACCRUED LIABILITIES:



	March 31, 2019		December 31, 2018
Subsidence Liability	$	22,264	$	20,883
Accrued Payroll and Benefits	3,389		2,693
Accrued Interest (Related Party)	1,796		1,767
Accrued Other Taxes	750		1,071
Other	2,544		2,440
Current Portion of Long-Term Liabilities:
Operating Lease Liability	4,791		—
Finance Leases	3,550		3,503
Workers’ Compensation	1,697		1,554
Asset Retirement Obligations	1,202		1,202
Pneumoconiosis Benefits	159		165
Long-Term Disability	134		141
Total Other Accrued Liabilities	$	42,276	$	35,419

NOTE 8—AFFILIATED COMPANY CREDIT AGREEMENT:



	March 31, 2019		December 31, 2018
Affiliated Company Credit Agreement (3.75% interest rate at March 31, 2019 and December 31, 2018)	$	161,500	$	163,000

Affiliated Company Credit Agreement

On November 28, 2017, the Partnership and the other Credit Parties entered into the Affiliated Company Credit Agreement by and among the Credit Parties, CONSOL Energy, as lender and administrative agent, and PNC. On March 28, 2019, the Affiliated Company Credit Agreement was amended to extend the maturity date from February 27, 2023 to December 28, 2024. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275,000 to be provided by CONSOL Energy, as lender. In connection with the Partnership’s entry into the Affiliated Company Credit Agreement, the Partnership made an initial draw of $200,583, the net proceeds of which were used to repay the amounts outstanding under the Partnership's prior credit facility. Additional drawings under the Affiliated Company Credit Agreement are available for general partnership purposes. The obligations under the Affiliated Company Credit Agreement are guaranteed by the Partnership’s subsidiaries and secured by substantially all of the assets of the Partnership and its subsidiaries pursuant to the security agreement and various mortgages.

Interest on outstanding obligations under our Affiliated Company Credit Agreement accrues at a fixed rate ranging from 3.75% to 4.75%, depending on the total net leverage ratio. The unused portion of our Affiliated Company Credit Agreement is subject to a commitment fee of 0.50% per annum.

The Partnership had available capacity under the Affiliated Company Credit Agreement of $113,500 and $112,000 as of March 31, 2019 and December 31, 2018, respectively. Interest on outstanding borrowings under the Affiliated Company Credit Agreement was accrued at a rate of 3.75% as of March 31, 2019 and December 31, 2018. The Affiliated Company Credit Agreement contains certain covenants and conditions that, among other things, limit the Partnership’s ability to: (i) incur or guarantee additional debt; (ii) make cash distributions (subject to certain limited exceptions); provided that we will be able to make cash distributions of available cash to partners so long as no event of default is continuing or would result therefrom; (iii) incur certain liens or permit them to exist; (iv) make particular investments and loans; provided that we will be able to increase our ownership percentage of our undivided interest in the Pennsylvania Mining Complex and make investments in the Pennsylvania Mining Complex in accordance with our ratable ownership; (v) enter into certain types of transactions with affiliates; (vi) merge or consolidate with another company; and (vii) transfer, sell or otherwise dispose of assets. The Partnership is also subject to covenants that require the Partnership to maintain certain financial ratios.

For example, the Partnership is obligated to maintain at the end of each fiscal quarter (a) maximum first lien gross leverage ratio of 2.75 to 1.00 and (b) a maximum total net leverage ratio of 3.25 to 1.00, each of which will be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter. At March 31, 2019, the Partnership was in compliance with its debt covenants with the first lien gross leverage ratio at 1.46 to 1.00 and the total net leverage ratio at 1.45 to 1.00.

NOTE 9—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

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



	CWP					Workers’ Compensation
	Three Months Ended March 31,					Three Months Ended March 31,
	2019		2018			2019			2018
Service Cost	$	200	$	372		$	349		$	366
Interest Cost	49		36			41			35
Amortization of Actuarial (Gain) Loss	6		(5		)	(12		)	(1		)
State Administrative Fees and Insurance Bond Premiums	—		—			51			7
Net Periodic Benefit Cost	$	255	$	403		$	429		$	407

NOTE 10—FAIR VALUE OF FINANCIAL INSTRUMENTS:

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

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

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

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

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

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

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

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

The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:



	March 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Affiliated Company Credit Agreement - Related Party	$	161,500	$	161,500	$	163,000	$	163,000

The Partnership’s debt obligations are valued through reference to the applicable underlying benchmark rate and, as a result, constitute Level 2 fair value measurements.

NOTE 11—COMMITMENTS AND CONTINGENT LIABILITIES:

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

At March 31, 2019, the Partnership was contractually obligated to CONSOL Energy for financial guarantees and letters of credit to certain third parties which were issued by CONSOL Energy on behalf of the Partnership. The maximum potential total of future payments that we could be required to make under these instruments is $89,333. The instruments are comprised of $301 of letters of credit expiring within one year, $79,846 of environmental surety bonds expiring within the next three years, and $9,186 of employee-related and other surety bonds expiring within the next three years. Employee-related financial guarantees have primarily been provided to support various state workers’ compensation and federal black lung self-insurance programs. Environmental financial guarantees have primarily been provided to support various performance bonds related to reclamation and other environmental issues. Other guarantees have been extended to support insurance policies, legal matters, full and timely payments of mining equipment leases, and various other items necessary in the normal course of business. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credit are recorded as liabilities on the financial statements. The Partnership’s management believes that these guarantees will expire without being funded, and therefore the commitments will not have a material adverse effect on the financial condition of the Partnership.

NOTE 12—RECEIVABLES FINANCING AGREEMENT

On November 30, 2017, (i) CONSOL Marine Terminals LLC, as an originator of receivables, (ii) CPCC, as an originator of receivables and as initial servicer of the receivables for itself and the other originators (collectively, the “Originators”), each a wholly owned subsidiary of CONSOL Energy, and (iii) CONSOL Funding LLC (the “SPV”), as buyer, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”). Concurrently, (i) CONSOL Thermal Holdings, as sub-originator, and (ii) CPCC, as buyer and as initial servicer of the receivables for itself and CONSOL Thermal Holdings, entered into a Sub-Originator Agreement (the “Sub-Originator PSA”). In addition, on that date, the SPV entered into a Receivables Financing Agreement (the “Receivables Financing Agreement”) by and among (i) the SPV, as borrower, (ii) CPCC, as initial servicer, (iii) PNC, as administrative agent, LC Bank and lender, and (iv) the additional persons from time to time party thereto as lenders. Together, the Purchase and Sale Agreement, the Sub-Originator PSA and the Receivables Financing Agreement establish the primary terms and conditions of an accounts receivable securitization program (the “Securitization”). On August 30, 2018, the Securitization was amended, among other things, to extend the scheduled termination date to August 30, 2021.

Pursuant to the Securitization, (i) CONSOL Thermal Holdings will sell current and future trade receivables to CPCC and (ii) the Originators will sell and/or contribute current and future trade receivables (including receivables sold to CPCC by CONSOL Thermal Holdings) to the SPV and the SPV will, in turn, pledge its interests in the receivables to PNC, which will either make loans or issue letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the Securitization may not exceed $100,000. Loans under the Securitization will accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the Securitization

also will accrue a program fee and participation fee, respectively, ranging from 2.00% to 2.50% per annum, depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments. The SPV’s assets and credit are not available to satisfy the debts and obligations owed to the creditors of CONSOL Energy, CONSOL Thermal Holdings or any of the Originators. CONSOL Thermal Holdings, the Originators and CPCC as servicer are independently liable for their own customary representations, warranties, covenants and indemnities. In addition, CONSOL Energy has guaranteed the performance of the obligations of CONSOL Thermal Holdings, the Originators and CPCC as servicer, and will guarantee the obligations of any additional originators or successor servicer that may become party to the Securitization. However, neither CONSOL Energy nor its affiliates will guarantee collectability of receivables or the creditworthiness of obligors thereunder.

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

As of March 31, 2019, the Partnership, through CONSOL Thermal Holdings, sold $26,968 of trade receivables to CPCC. The Partnership has not derecognized the receivables due to its continued involvement in the collections efforts.

NOTE 13—RELATED PARTY:

Omnibus Agreement

The Partnership is a party to the Omnibus Agreement, dated September 30, 2016, as amended on November 28, 2017, with our sponsor and certain of its subsidiaries. Under the Omnibus Agreement, we are obligated to make certain payments to, and reimburse, CONSOL Energy for the provision of certain services in connection with our operations.

Charges for services from CONSOL Energy under the Omnibus Agreement include the following:



	Three Months Ended March 31,
	2019		2018
Operating and Other Costs	$	763	$	685
Selling, General and Administrative Expenses	3,056		1,645
Total Services from CONSOL Energy	$	3,819	$	2,330

At March 31, 2019 and December 31, 2018, the Partnership had a net payable to CONSOL Energy in the amount of $6,002 and $3,831, respectively. This payable includes reimbursements for business expenses, executive fees, stock-based compensation and other items under the Omnibus Agreement.

Affiliated Company Credit Agreement

As described in Note 8, the Partnership is also a party to the Affiliated Company Credit Agreement with CONSOL Energy.

For the three months ended March 31, 2019, $1,796 of interest was incurred under the Affiliated Company Credit Agreement, of which $1,351 is included in Interest Expense, Net in the unaudited Consolidated Statements of Operations, and $445 was capitalized and included in Property, Plant and Equipment in the unaudited Consolidated Balance Sheets. For the three months ended March 31, 2018, $2,134 of interest was incurred under the Affiliated Company Credit Agreement, of which $1,951 is included in Interest Expense, Net in the unaudited Consolidated Statements of Operations, and $183 was capitalized and included in Property, Plant and Equipment in the unaudited Consolidated Balance Sheets. Interest is calculated based upon a fixed rate, determined quarterly, depending on the total net leverage ratio. For the three months ended March 31, 2019 and March 31, 2018, the average interest rate was 3.75% and 4.25%, respectively. See Note 8 - Affiliated Company Credit Agreement for more information.

Repurchase Program

Coal Resources LP's outstanding common units in the open market. CONSOL Energy's Board of Directors approved changing the termination date of the program from June 30, 2019 to June 30, 2020. Also, in accordance with CONSOL Energy’s credit facility covenants, as of March 31, 2019, CONSOL Energy's limit was raised to a total of $50 million to be used for the purchase of CONSOL Coal Resources LP's outstanding common units in the open market.

NOTE 14—LONG-TERM INCENTIVE PLAN:

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

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

The general partner has granted equity-based phantom units that vest over a period of a recipient’s continued service with the Partnership. The phantom units will be paid in common units or an amount of cash equal to the fair market value of a unit based on the vesting date. The awards may accelerate upon a change in control of the Partnership. Compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting term. The Partnership recognized compensation expense of $397 and $360 for the three months ended March 31, 2019 and March 31, 2018, respectively, which is included in Selling, General and Administrative Expense in the unaudited Consolidated Statements of Operations. As of March 31, 2019, there is $1,208 of unearned compensation that will vest over a weighted average period of 0.84 years. The total fair value of phantom units vested during the three months ended March 31, 2019 and March 31, 2018 was $2,905 and $2,419, respectively. The following represents the nonvested phantom units and their corresponding weighted average grant date fair value:



	Number of Units		Weighted Average Grant Date Fair Value per Unit
Nonvested at December 31, 2018	223,676		$	15.67
Granted	17,190		$	17.45
Vested	(158,491	)	$	13.40
Forfeited	(109	)	$	18.95
Nonvested at March 31, 2019	82,266		$	18.64

NOTE 15—FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND FINANCE SUBSIDIARY OF POSSIBLE FUTURE PUBLIC DEBT:

The Partnership filed a Registration Statement on Form S-3 (333-215962) with the SEC on March 10, 2017, which was declared effective by the SEC on March 14, 2017, to register the offer and sale of various securities, including debt securities. The registration statement registers guarantees of debt securities by CONSOL Operating and CONSOL Thermal Holdings (“Subsidiary Guarantors”). The Subsidiary Guarantors are 100% owned by the Partnership and any guarantees by the Subsidiary Guarantors will be full and unconditional and joint and several. In addition, the registration statement also includes CONSOL Coal Finance, which was formed for the sole purpose of co-issuing future debt securities with the Partnership. CONSOL Coal Finance is wholly owned by the Partnership, has no assets or any liabilities and its activities will be limited to co-issuing debt securities and engaging in other activities incidental thereto. The Partnership does not have any other subsidiaries other than the Subsidiary Guarantors and CONSOL Coal Finance. In addition, the Partnership has no assets or operations independent of the Subsidiary Guarantors, and there are no significant restrictions upon the ability of the Subsidiary Guarantors to distribute funds to the Partnership by dividend or loan other than under the Affiliated Company Credit Agreement described in these notes. In the event that more than one of the Subsidiary Guarantors guarantee public debt securities of the Partnership in the future, those guarantees will be full and unconditional and will constitute the joint and several obligations of

the Subsidiary Guarantors. None of the assets of the Partnership, the Subsidiary Guarantors or CONSOL Coal Finance represent restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act of 1933, as amended.

NOTE 16—SUBSEQUENT EVENTS:

On April 25, 2019, the Board of Directors of our general partner declared a cash distribution of $0.5125 per unit for the quarter ended March 31, 2019 to the limited partner unitholders and the holder of the general partner interest. The cash distribution will be paid on May 15, 2019 to the unitholders of record at the close of business on May 7, 2019.

In May 2019, CONSOL Energy Inc.'s Board of Directors approved an expansion of the stock, unit and debt repurchase program. The program previously allowed CONSOL Energy to use up to $25 million of the program to purchase CONSOL Coal Resources LP's outstanding common units in the open market. CONSOL Energy's Board of Directors approved changing the termination date of the program from June 30, 2019 to June 30, 2020. Also, in accordance with CONSOL Energy’s credit facility covenants, as of March 31, 2019, CONSOL Energy's limit was raised to a total of $50 million to be used for the purchase of CONSOL Coal Resources LP's outstanding common units in the open market.

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

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

Overview

We are a master limited partnership formed in 2015 to manage and further develop all of our sponsor's active coal operations in Pennsylvania. Our primary strategy for growing our business and increasing distributions to our unitholders is to increase operating efficiencies to maximize realizations and make acquisitions that increase our distributable cash flow. At March 31, 2019, the Partnership’s assets include a 25% undivided interest in, and operational control over, CONSOL Energy’s Pennsylvania Mining Complex, which consists of three underground mines and related infrastructure that produce high-Btu coal that is sold primarily to electric utilities in the eastern United States. We believe that our ability to efficiently produce and deliver large volumes of high-quality coal at competitive prices, the strategic location of our mines, and the industry experience of our management team position us as a leading producer of high-Btu thermal coal in the Northern Appalachian Basin and the eastern United States.

How We Evaluate Our Operations

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

Cost of coal sold, cash cost of coal sold, average cash margin per ton, adjusted EBITDA and distributable cash flow normalize the volatility contained within comparable GAAP measures by adjusting certain non-operating or non-cash transactions. Each of these non-GAAP metrics are used as supplemental financial measures by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:

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

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

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

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

• the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.

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

Reconciliation of Non-GAAP Financial Measures

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

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



	Three Months Ended March 31,
	2019			2018
Total Costs	$	70,887		$	72,544
Freight Expense	(1,665		)	(4,472		)
Selling, General and Administrative Expenses	(4,560		)	(3,020		)
Interest Expense, Net	(1,351		)	(1,951		)
Other Costs (Non-Production)	(2,264		)	(4,026		)
Depreciation, Depletion and Amortization (Non-Production)	(577		)	(540		)
Cost of Coal Sold	$	60,470		$	58,535
Depreciation, Depletion and Amortization (Production)	(10,640		)	(10,274		)
Cash Cost of Coal Sold	$	49,830		$	48,261

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

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



	Three Months Ended March 31,
	2019			2018
Total Coal Revenue	$	83,126		$	87,752
Operating and Other Costs	52,094			52,287
Less: Other Costs (Non-Production)	(2,264		)	(4,026		)
Cash Cost of Coal Sold	49,830			48,261
Add: Depreciation, Depletion and Amortization	11,217			10,814
Less: Depreciation, Depletion and Amortization (Non-Production)	(577		)	(540		)
Cost of Coal Sold	$	60,470		$	58,535
Total Tons Sold	1,683			1,656
Average Revenue Per Ton Sold	$	49.38		$	52.98
Average Cash Cost Per Ton Sold	29.71			29.21
Add: Depreciation, Depletion and Amortization Costs Per Ton Sold	6.21			6.13
Average Cost Per Ton Sold	$	35.92		$	35.34
Average Margin Per Ton Sold	13.46			17.64
Add: Total Depreciation, Depletion and Amortization Costs Per Ton Sold	6.21			6.13
Average Cash Margin Per Ton Sold	$	19.67		$	23.77

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

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

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



	Three Months Ended March 31,
	2019		2018
Net Income	$	15,220	$	21,957
Plus:
Interest Expense, Net	1,351		1,951
Depreciation, Depletion and Amortization	11,217		10,814
Unit-Based Compensation	397		359
Adjusted EBITDA	$	28,185	$	35,081
Less:
Cash Interest	1,875		828
Estimated Maintenance Capital Expenditures	8,981		8,963
Distributable Cash Flow	$	17,329	$	25,290

Net Cash Provided by Operating Activities	$	25,218	$	29,264
Plus:
Interest Expense, Net	1,351		1,951
Other, Including Working Capital	1,616		3,866
Adjusted EBITDA	$	28,185	$	35,081
Less:
Cash Interest	1,875		828
Estimated Maintenance Capital Expenditures	8,981		8,963
Distributable Cash Flow	$	17,329	$	25,290
Minimum Quarterly Distributions	$	14,405	$	14,346
Distribution Coverage Ratio	1.2		1.8

Results of Operations

Three Months Ended March 31, 2019 Compared with the Three Months Ended March 31, 2018

Total net income was $15,220 for the three months ended March 31, 2019 compared to $21,957 for the three months ended March 31, 2018. Our results of operations for each of these periods are presented in the table below. Variances are discussed following the table.



	For the Three Months Ended
	March 31,
	2019		2018		Variance
	(in thousands)
Revenue:
Coal Revenue	$	83,126	$	87,752	$	(4,626	)
Freight Revenue	1,665		4,472		(2,807		)
Other Income	1,316		2,277		(961		)
Total Revenue and Other Income	86,107		94,501		(8,394		)
Cost of Coal Sold:
Operating Costs	49,830		48,261		1,569
Depreciation, Depletion and Amortization	10,640		10,274		366
Total Cost of Coal Sold	60,470		58,535		1,935
Other Costs:
Other Costs	2,264		4,026		(1,762		)
Depreciation, Depletion and Amortization	577		540		37
Total Other Costs	2,841		4,566		(1,725		)
Freight Expense	1,665		4,472		(2,807		)
Selling, General and Administrative Expenses	4,560		3,020		1,540
Interest Expense	1,351		1,951		(600		)
Total Costs	70,887		72,544		(1,657		)
Net Income	$	15,220	$	21,957	$	(6,737	)
Adjusted EBITDA	$	28,185	$	35,081	$	(6,896	)
Distributable Cash Flow	$	17,329	$	25,290	$	(7,961	)
Distribution Coverage Ratio	1.2		1.8		(0.6		)

Coal Production

The table below presents total tons produced from the Pennsylvania Mining Complex on our 25% undivided interest basis for the periods indicated:



	Three Months Ended March 31,
Mine	2019	2018	Variance
Bailey	737	953	(216	)
Enlow Fork	707	504	203
Harvey	268	218	50
Total	1,712	1,675	37

Coal production was 1,712 tons for the three months ended March 31, 2019 compared to 1,675 tons for the three months ended March 31, 2018. The Partnership’s coal production increased slightly due to increased production at the Enlow Fork mine, as geological conditions improved compared to the same period in 2018, and at the Harvey mine. This was partially offset by reduced production at the Bailey mine, resulting from a longwall move and other operational delays.

Coal Operations

Coal revenue and cost components on a per unit basis for the three months ended March 31, 2019 and 2018 are detailed in the table below. Our operations also include various costs such as selling, general and administrative, freight and other costs not included in our unit cost analysis because these costs are not directly associated with coal production.



	Three Months Ended March 31,
	2019		2018		Variance
Total Tons Sold (in thousands)	1,683		1,656		27
Average Revenue Per Ton Sold	$	49.38	$	52.98	$	(3.60	)

Average Cash Cost Per Ton Sold	$	29.71	$	29.21	$	0.50
Depreciation, Depletion and Amortization Per Ton Sold (Non-Cash Cost)	6.21		6.13		0.08
Total Costs Per Ton Sold	$	35.92	$	35.34	$	0.58
Average Margin Per Ton Sold	$	13.46	$	17.64	$	(4.18	)
Add: Depreciation, Depletion and Amortization Costs Per Ton Sold	6.21		6.13		0.08
Average Cash Margin Per Ton Sold (1)	$	19.67	$	23.77	$	(4.10	)

(1) Average cash margin per ton is an operating ratio derived from non-GAAP measures. See “How We Evaluate Our Operations – Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Revenue and Other Income

Coal revenue was $83,126 for the three months ended March 31, 2019 compared to $87,752 for the three months ended March 31, 2018. The $4,626 decrease was primarily attributable to a $3.60 lower average sales price per ton sold in the 2019 period, mainly driven by lower domestic netback pricing compared to the year-ago quarter.

Freight revenue is the amount billed to customers for transportation costs incurred. This revenue is based on the weight of coal shipped, negotiated freight rates and method of transportation, primarily rail, used by the customers for which we contractually provide transportation services. Freight revenue is completely offset in freight expense. Freight revenue and freight expense were both $1,665 for the three months ended March 31, 2019 compared to $4,472 for the three months ended March 31, 2018. The $2,807 decrease was due to decreased shipments to customers where we were contractually obligated to provide transportation services.

Other income is comprised of income generated by the Partnership not in the ordinary course of business. Other income remained materially consistent in the period-to-period comparison.

Cost of Coal Sold

Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both volumes and carrying values of coal inventory. The cost of coal sold includes items such as direct operating costs, royalties and production taxes, direct administration expenses, and depreciation, depletion, and amortization costs on production assets. Total cost of coal sold was $60,470 for the three months ended March 31, 2019, or $1,935 higher than the $58,535 for the three months ended March 31, 2018. Total costs per ton sold were $35.92 per ton for the three months ended March 31, 2019 compared to $35.34 for the three months ended March 31, 2018. The increase in the total cost of coal sold was primarily driven by

increased project expenses and gas well plugging activities, partially offset by reduced lease/rental expense as two longwall shields' operating leases were refinanced as finance leases in the first quarter of 2018. Since the fourth quarter of 2017, the Partnership has seen modest inflation in the cost of supplies that contain steel and other commodities for which prices are strengthening, as well as in the cost of contract labor. The Partnership has been successful in managing these inflationary pressures and keeping its overall cost increase to a minimum through productivity gains and automation.

Total Other Costs

Total other costs are comprised of various costs that are not allocated to each individual mine and therefore are not included in unit costs. Total other costs decreased $1,725 for the three months ended March 31, 2019 compared to the three months ended March 31, 2018. The decrease was primarily attributable to a decrease in current quarter costs related to externally purchased coal to blend and resell, and demurrage charges incurred in the year-ago quarter.

Selling, General, and Administrative Expense

Selling, general, and administrative expenses were $4,560 for the three months ended March 31, 2019 compared to $3,020 for the three months ended March 31, 2018. The $1,540 increase in the period-to-period comparison was primarily related to accelerated non-cash amortization recorded in the current period for retiree-eligible employees who received awards under CONSOL Energy's Performance Incentive Plan.

Interest Expense

Interest expense, which primarily relates to obligations under our Affiliated Company Credit Agreement, remained materially consistent in the period-to-period comparison.

Adjusted EBITDA

Adjusted EBITDA was $28,185 for the three months ended March 31, 2019 compared to $35,081 for the three months ended March 31, 2018. The $6,896 decrease was primarily a result of a $4.10 decrease in the average cash margin per ton sold, or $6,900. This was offset by a slight increase in sales tons and changes in various non-production related costs, as described above.

Distributable Cash Flow

Distributable cash flow was $17,329 for the three months ended March 31, 2019 compared to $25,290 for the three months ended March 31, 2018. The $7,961 decrease was primarily attributable to a $6,896 decrease in Adjusted EBITDA, as discussed above. The decrease in distributable cash flow was also due to a $1,047 increase in cash interest paid. Although interest expense remained materially consistent in the period-to-period comparison, the debt restructuring in November 2017 resulted in only one month of interest being paid during the three months ended March 31, 2018 compared to a full quarter of interest paid during the three months ended March 31, 2019.

Capital Resources and Liquidity

Liquidity and Financing Arrangements

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

We expect to generate adequate cash flow from operations in 2019, through continued demand from the export and domestic thermal markets and consistent cost control measures. We started construction on the coarse refuse disposal area project in 2017, which is expected to continue through 2021. Our total 2019 capital needs, including the coarse refuse disposal area project, are expected to be between $34,000 to $38,000, which is increased from 2018 levels due to additional expected maintenance capital expenditures related to airshaft construction projects, as well as additional belt system related expenditures.

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

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

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

Affiliated Company Credit Agreement

On November 28, 2017, the Partnership and the other Credit Parties entered into the Affiliated Company Credit Agreement by and among the Credit Parties, CONSOL Energy, as lender and administrative agent, and PNC, as collateral agent. On March 28, 2019, the Affiliated Company Credit Agreement was amended to extend the maturity date from February 27, 2023 to December 28, 2024. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275,000 to be provided by CONSOL Energy, as lender. In connection with the Partnership’s entry into the Affiliated Company Credit Agreement, the Partnership made an initial draw of $200,583, the net proceeds of which were used to repay the amounts outstanding under the Partnership's prior credit facility. Additional drawings under the Affiliated Company Credit Agreement are available for general partnership purposes. The obligations under the Affiliated Company Credit Agreement are guaranteed by the Partnership’s subsidiaries and secured by substantially all of the assets of the Partnership and its subsidiaries pursuant to the security agreement and various mortgages.

Interest on outstanding obligations under our Affiliated Company Credit Agreement accrues at a fixed rate ranging from 3.75% to 4.75% depending on the total net leverage ratio. The unused portion of our Affiliated Company Credit Agreement is subject to a commitment fee of 0.50% per annum.

As of March 31, 2019, the Partnership had $161,500 of borrowings outstanding under the Affiliated Company Credit Agreement, leaving $113,500 of unused capacity. Interest on outstanding borrowings under the Affiliated Company Credit Agreement at March 31, 2019 was accrued at a rate of 3.75%.

The Affiliated Company Credit Agreement contains certain covenants and conditions that, among other things, limit the Partnership’s ability to: (i) incur or guarantee additional debt; (ii) make cash distributions (subject to certain limited exceptions); provided that we will be able to make cash distributions of available cash to partners so long as no event of default

is continuing or would result therefrom; (iii) incur certain liens or permit them to exist; (iv) make particular investments and loans; provided that we will be able to increase our ownership percentage of our undivided interest in the Pennsylvania Mining Complex and make investments in the Pennsylvania Mining Complex in accordance with our ratable ownership; (v) enter into certain types of transactions with affiliates; (vi) merge or consolidate with another company; and (vii) transfer, sell or otherwise dispose of assets. The Partnership is also subject to covenants that require the Partnership to maintain certain financial ratios. For example, the Partnership is obligated to maintain at the end of each fiscal quarter (a) maximum first lien gross leverage ratio of 2.75 to 1.00 and (b) a maximum total net leverage ratio of 3.25 to 1.00, each of which will be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter. At March 31, 2019, the Partnership was in compliance with its debt covenants with the first lien gross leverage ratio at 1.46 to 1.00 and the total net leverage ratio at 1.45 to 1.00.

Receivables Financing Agreement

On November 30, 2017, (i) CONSOL Marine Terminals LLC, as an originator of receivables, (ii) CPCC, as an originator of receivables and as initial servicer of the receivables for itself and the other originators (collectively, the “Originators”), each a wholly owned subsidiary of CONSOL Energy, and (iii) CONSOL Funding LLC (the “SPV”), as buyer, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”). Concurrently, (i) CONSOL Thermal Holdings, as sub-originator, and (ii) CPCC, as buyer and as initial servicer of the receivables for itself and CONSOL Thermal Holdings, entered into a Sub-Originator Agreement (the “Sub-Originator PSA”). In addition, on that date, the SPV entered into a Receivables Financing Agreement (the “Receivables Financing Agreement”) by and among (i) the SPV, as borrower, (ii) CPCC, as initial servicer, (iii) PNC, as administrative agent, LC Bank and lender, and (iv) the additional persons from time to time party thereto as lenders. Together, the Purchase and Sale Agreement, the Sub- Originator PSA and the Receivables Financing Agreement establish the primary terms and conditions of an accounts receivable securitization program (the “Securitization”). On August 30, 2018, the Securitization was amended, among other things, to extend the scheduled termination date to August 30, 2021.

Loans under the Securitization will accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the Securitization also will accrue a program fee and a letter of credit participation fee, respectively, ranging from 2.00% to 2.50% per annum, depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments equal to 0.60% per annum.

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

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

As of March 31, 2019, the Partnership, through CONSOL Thermal Holdings, had sold $26,968 of trade receivables to CPCC. The Partnership has not derecognized the receivables due to its continued involvement in the collection efforts.

Cash Flows



	Three Months Ended March 31,
	2019			2018			Variance
	(in thousands)
Cash flows provided by operating activities	$	25,218		$	29,264		$	(4,046	)
Cash used in investing activities	$	(8,093	)	$	(4,854	)	$	(3,239	)
Cash used in financing activities	$	(17,723	)	$	(25,195	)	$	7,472

Three Months Ended March 31, 2019 Compared with the Three Months Ended March 31, 2018:

Cash flows provided by operating activities decreased $4,046 in the three months ended March 31, 2019 compared to the three months ended March 31, 2018, primarily due to a decrease in net income and a change in working capital.

Cash used in investing activities increased $3,239 in the three months ended March 31, 2019 compared to the three months ended March 31, 2018, primarily as a result of increased capital expenditures of $3,164, primarily due to an increase in airshaft construction projects and additional belt system related expenditures.



	Three Months Ended March 31,
	2019		2018		Variance
	(in thousands)
Building and Infrastructure	$	3,692	$	1,600	$	2,092
Equipment Purchases and Rebuilds	1,761		1,123		638
Refuse Storage Area	1,670		1,999		(329		)
Other	970		207		763
Total Capital Expenditures	$	8,093	$	4,929	$	3,164

Cash flows used in financing activities decreased $7,472 in the three months ended March 31, 2019 compared to the three months ended March 31, 2018. The decrease in cash used in financing activities was primarily due to an $8,083 decrease in net payments made under the Affiliated Company Credit Agreement due to a decrease in distributable cash flow.

Off-Balance Sheet Arrangements

We do not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources which are not disclosed in the Notes to the unaudited Consolidated Financial Statements in this Form 10-Q.

FORWARD-LOOKING STATEMENTS

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

difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:


•	changes in coal prices or the costs of mining or transporting coal;


•	uncertainty in estimating economically recoverable coal reserves and replacement of reserves;


•	our ability to develop our existing coal reserves, acquire additional reserves and successfully execute our mining plans;


•	defects in title or loss of any leasehold interests with respect to our properties;


•	changes in general economic conditions, both domestically and globally;


•	competitive conditions within the coal industry;


•	changes in the consumption patterns of coal-fired power plants and steelmakers and other factors affecting the demand for coal by coal-fired power plants and steelmakers;


•	the availability and price of coal to the consumer compared to the price of alternative and competing fuels;


•	competition from the same and alternative energy sources;


•	energy efficiency and technology trends;


•	our ability to successfully implement our business plan;


•	the price and availability of debt and equity financing;


•	operating hazards and other risks incidental to coal mining;


•	major equipment failures and difficulties in obtaining equipment, parts and raw materials;


•	availability, reliability and costs of transporting coal;


•	adverse or abnormal geologic conditions, which may be unforeseen;


•	natural disasters, weather-related delays, casualty losses and other matters beyond our control;


•	operating in a single geographic area;


•	interest rates and interest rate hedging transactions;


•	our reliance on a few major customers;


•	labor availability, relations and other workforce factors;


•	defaults by CONSOL Energy under our operating agreement, employee services agreement and Affiliated Company Credit Agreement;


•	restrictions in our Affiliated Company Credit Agreement that may adversely affect our business;


•	changes in our tax status;


•	delays in the receipt of, failure to receive or revocation of necessary governmental permits;


•	the effect of existing and future laws and government regulations, including the enforcement and interpretation of environmental laws thereof;


•	the effect of new or expanded greenhouse gas regulations;


•	the effects of litigation;


•	adverse effect of cybersecurity threats;


•	failure to maintain effective internal controls over financial reporting;


•	recent action and the possibility of future action on trade by U.S. and foreign governments;


•	conflicts of interest that may cause our general partner or CONSOL Energy to favor their own interest to our detriment;


•	the requirement that we distribute all of our available cash; and


•	other factors discussed in our 2018 Annual Report on Form 10-K under “Risk Factors,” as updated by any subsequent Quarterly Reports on Forms 10-Q, which are on file at the SEC.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the management of the Partnership’s general partner, including the Chief Executive Officer and the Chief Financial Officer of the general partner, an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), was conducted as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer of the Partnership’s general partner have concluded that the Partnership’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Partnership implemented an enterprise resource planning (“ERP”) system, which is expected to improve the efficiency of certain financial and related transactional processes. During the first quarter of fiscal year 2019, the Partnership completed the implementation of certain processes, and revised and updated the related controls. These changes did not materially affect the Partnership's internal control over financial reporting. As the Partnership implements the remaining functionality under this ERP system over the next year, it will continue to assess the impact on its internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to paragraph one within Part 1, Item 1. Financial Statements, “Note 11. Commitments and Contingent Liabilities,” which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this quarterly report, you should carefully consider the factors discussed in “Part I - Item 1A. Risk Factors” of our 2018 Form 10-K, as updated by any subsequent Form 10-Qs. These described risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

None.

ITEM 4. MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

ITEM 6. EXHIBITS



Exhibits	Description	Method of Filing

10.1	Amendment No. 1, dated as of March 28, 2019, to Affiliated Company Credit Agreement, dated November 28, 2017, by and among CONSOL Coal Resources LP, certain of its affiliates party thereto, CONSOL Energy Inc. and PNC Bank, National Association	Filed as Exhibit 10.1 to Form 8-K (#001-37456) filed on April 3, 2019

31.1	Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith

95	Mine Safety and Health Administration Safety Data.	Filed herewith

101	Interactive Data File (Form 10-Q for the quarterly period ended March 31, 2019, furnished in XBRL).	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 8, 2019



	CONSOL Coal Resources LP

	By:		CONSOL Coal Resources GP LLC, its general partner
	By:		/s/ JAMES A. BROCK
			James A. Brock
			Chief Executive Officer, Chairman of the Board and Director (Duly Authorized Officer and Principal Executive Officer)

	By:		CONSOL Coal Resources GP LLC, its general partner
	By:		/s/ DAVID M. KHANI
			David M. Khani
			Chief Financial Officer and Director (Duly Authorized Officer and Principal Financial Officer)

	By:		CONSOL Coal Resources GP LLC, its general partner
	By:		/s/ JOHN M. ROTHKA
			John M. Rothka
			Chief Accounting Officer (Duly Authorized Officer and Principal Accounting Officer)