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PARTNERS' CAPITAL

12 Months Ended

Dec. 31, 2019

PARTNERS' CAPITAL

PARTNERS' CAPITAL

10.PARTNERS' CAPITAL

Distributions

We distribute 100% of our available cash that is not used for unit repurchases within 45 days after the end of each quarter to unitholders of record. Available cash is generally defined in the partnership agreement as all cash and cash equivalents on hand at the end of each quarter less reserves established by MGP in its reasonable discretion for future cash requirements. These reserves are retained to provide for the conduct of our business, the payment of debt principal and interest and to provide funds for future distributions.

Prior to the Exchange Transaction in July 2017 (See Note 1 – Organization and Presentation – Partnership Simplification), as quarterly distributions of available cash exceeded certain target distribution levels, MGP received incentive distributions based on specified increasing percentages of the available cash that exceeded the target distribution levels. MGP was entitled to receive 15% of the amount we distributed in excess of $0.1375 per unit, 25% of the amount we distributed in excess of $0.15625 per unit, and 50% of the amount we distributed in excess of $0.1875 per unit. During the year ended December 31, 2017, we paid to MGP incentive distributions of $37.6 million. Beginning with distributions paid in the third quarter of 2017, we no longer make distributions with respect to the IDRs. The following table summarizes the quarterly per unit distribution paid during the respective quarter:


		Year Ended December 31,
		2019			2018			2017
First Quarter		$	0.5300		$	0.5100		$	0.4375
Second Quarter		$	0.5350		$	0.5150		$	0.4375
Third Quarter		$	0.5400		$	0.5200		$	0.5000
Fourth Quarter		$	0.5400		$	0.5250		$	0.5050

On January 27, 2020, we declared a quarterly distribution of $0.40 per unit, totaling approximately $50.8 million, on all our common units outstanding, which was paid on February 14, 2020, to all unitholders of record on February 7, 2020.

Exchange Transaction

On July 28, 2017, as part of the Exchange Transaction discussed in Note 1 – Organization and Presentation – Partnership Simplification, MGP contributed to ARLP all of its IDRs and its 0.99% managing general partner interest in ARLP in exchange for 56,100,000 ARLP common units and a non-economic general partner interest in ARLP. In conjunction with this transaction and on the same economic basis as MGP, SGP also contributed to ARLP its 0.01% general partner interests in both ARLP and the Intermediate Partnership in exchange for 28,141 ARLP common units.

The Exchange Transaction constituted an exchange of equity interests between entities under common control and not a transfer of a business. Therefore, the exchange resulted in a reclassification, as of the date of the Exchange Transaction, of a $306.7 million deficit capital balance from the General Partners' interest line item to the Limited Partners - Common Unitholders line item in our consolidated balance sheets. The reclassification amounts represented the carrying value of the exchanged interests, which included the SGP's deficit balance associated with its prior special general partner interests in ARLP and the Intermediate Partnership, partially offset, by MGP's capital balance associated with its prior managing general partner interest in ARLP. The SGP deficit balance primarily resulted from contribution and assumption agreements associated with the formation of the ARLP Partnership in 1999.

Simplification Transactions

On May 31, 2018, as part of the Simplification Transactions discussed in Note 1 – Organization and Presentation, ARLP issued 1,322,388 ARLP common units to the Owners of SGP in exchange for causing SGP to contribute to ARLP all of SGP's limited partner interests in AHGP, which included AHGP's indirect ownership of a 1.0001% general partner interest in the Intermediate Partnership and a 0.001% managing member interest in Alliance Coal.

The Simplification Transactions are accounted for prospectively as an exchange of equity interests between entities under common control. Since ARLP and AHGP were under common control both before and after the Simplification Transactions, no fair value adjustment was made to the assets or liabilities of AHGP and its subsidiaries and no gain or loss was recognized on our consolidated financial statements.

Unit Repurchase Program

In May 2018, the Board of Directors approved the establishment of a unit repurchase program authorizing us to repurchase and retire up to $100 million of ARLP common units. The program has no time limit and we may repurchase units from time to time in the open market or in other privately negotiated transactions. The unit repurchase program authorization does not obligate us to repurchase any dollar amount or number of units. As of December 31, 2019, we had repurchased and retired 5,460,639 units at an average unit price of $17.12 for an aggregate purchase price of $93.5 million. Total units repurchased includes the repurchase and retirement of 35 units representing fractional units as part of the Simplification Transactions which are not part of the unit repurchase program.

Affiliated Entity Contributions

An affiliated entity controlled by Mr. Craft made capital contributions of $2.1 million and $1.0 million during the years ended December 31, 2018 and 2017, respectively, for the purpose of funding certain general and administrative expenses. On June 29, 2018, the members of this affiliated entity contributed 467,018 ARLP common units for similar purposes.

Other

The noncontrolling interest in our consolidated balance sheets represents Bluegrass Minerals' ownership interest in Cavalier Minerals. Our accumulated other comprehensive loss consists of unrecognized actuarial gains and losses as well as unrecognized prior service costs related to our pension and pneumoconiosis benefits. See Note 11 – Variable Interest Entities, Note 15 –Employee Benefit Plans and Note 19 – Accrued Workers' Compensation and Pneumoconiosis Benefits for further information.