FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2016

8. FAIR VALUE MEASUREMENTS

The following table summarizes the ARLP Partnership's fair value measurements within the hierarchy not included elsewhere in these notes:


	December 31, 2016						December 31, 2015
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(in thousands)
Measured on a recurring basis:
Contingent consideration	$	—	$	—	$	9,700	$	—	$	—	$	10,400

Additional disclosures:
Long-term debt		—		559,509		—		—		819,099		—
Total	$	—	$	559,509	$	9,700	$	—	$	819,099	$	10,400

See Note 2 – Summary of Significant Accounting Policies – Fair Value Measurements for more information regarding fair value hierarchy levels.

The carrying amounts for cash equivalents, accounts receivable, accounts payable, accrued and other liabilities, due from affiliates and due to affiliates approximate fair value due to the short maturity of those instruments.

The estimated fair value of the ARLP Partnership's long-term debt, including current maturities, is based on interest rates that we believe are currently available to the ARLP Partnership in active markets for issuance of debt with similar terms and remaining maturities (See Note 7 – Long-Term Debt). The fair value of debt, which is based upon these interest rates, is classified as a Level 2 measurement under the fair value hierarchy.

The estimated fair value of the ARLP Partnership's contingent consideration arrangement is based on a probability-weighted discounted cash flow model. The assumptions in the model include a risk-adjusted discount rate, forward coal sale price curves, cost of debt and probabilities of meeting certain contractual threshold coal sales prices (See Note 3 – Acquisitions). The decrease in fair value was primarily a result of changes in the market risk adjustment and risk-adjusted discount rate and is recorded in Operating expenses (excluding depreciation, depletion and amortization) in our consolidated income statement. The fair value measurement is based on significant inputs not observable in active markets and thus represents a Level 3 fair value measurement under the fair value hierarchy.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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