SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2020

24.SEGMENT INFORMATION

We operate in the United States as a diversified natural resource company that generates income from the production and marketing of coal to major domestic and international utilities and industrial users as well as income from oil & gas mineral interests. We aggregate multiple operating segments into three reportable segments, Illinois Basin, Appalachia, and Minerals. We also have an "all other" category referred to as Other and Corporate. Our two coal reportable segments correspond to major coal producing regions in the eastern United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues. The two coal segments include seven mining complexes operating in Illinois, Indiana, Kentucky, Maryland, Pennsylvania and West Virginia and a coal loading terminal in Indiana on the Ohio River. The Minerals reportable segment aggregates our oil & gas mineral interests which are located primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK) and Williston (Bakken) basins. The operations within our Minerals reportable segment primarily include receiving royalties and lease bonuses for our oil & gas mineral interests.

The Illinois Basin reportable segment includes currently operating mining complexes (a) Gibson County Coal, LLC's ("Gibson") mining complex, which includes the Gibson South mine, (b) the Warrior Coal, LLC ("Warrior") mining complex, (c) the River View Coal, LLC ("River View") mining complex and (d) the Hamilton mining complex. The Illinois Basin reportable segment also includes our currently operating Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") coal loading terminal in Indiana on the Ohio River.

The Illinois Basin reportable segment also includes Mid-America Carbonates, LLC ("MAC") and other support services as well as non-operating mining complexes (a) Gibson North mine, which ceased production in the fourth quarter of 2019, (b) Webster County Coal, LLC's Dotiki mining complex, which ceased production in August 2019, (c) White County Coal, LLC's Pattiki mining complex, (d) the Hopkins County Coal, LLC mining complex, and (e) Sebree Mining, LLC's mining complex.

The Appalachia reportable segment includes currently operating mining complexes (a) the Mettiki mining complex, (b) the Tunnel Ridge mining complex and (c) the MC Mining, LLC ("MC Mining") mining complex. The Mettiki mining complex includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant. The Appalachia reportable segment also includes the Penn Ridge assets, which are primarily coal mineral interests.

The Minerals reportable segment includes oil & gas mineral interests held by AR Midland and AllDale I & II and includes Alliance Minerals' equity interests in both AllDale III (Note 13 – Investments) and Cavalier Minerals. AR Midland acquired its mineral interest in the Wing Acquisition (Note 3 – Acquisitions).

Other and Corporate includes marketing and administrative activities, Matrix Design Group, LLC and its subsidiaries ("Matrix Design"), Alliance Design Group, LLC ("Alliance Design") (collectively, Matrix Design and Alliance Design referred to as the "Matrix Group"), Alliance Coal's coal brokerage activity and Alliance Minerals' prior equity investment in Kodiak. In February 2019, Kodiak redeemed our equity investment (see Note 13 – Investments). In addition, Other and Corporate includes certain Alliance Resource Properties, LLC's land and coal mineral interest activities, Pontiki Coal, LLC's workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, which assists the ARLP Partnership with its insurance requirements, and AROP Funding and Alliance Finance (both discussed in Note 8 – Long-Term Debt).

In response to the impacts of the COVID-19 pandemic, we announced on March 30, 2020 a temporary cessation of coal production at our River View, Gibson, Hamilton and Warrior mining complexes in our Illinois Basin segment and on April 9, 2020 a temporary cessation of coal production at our MC Mining complex in our Appalachia segment. Underground production operations resumed in the second quarter of 2020 at each of our mining complexes. All of our seven mining complexes are now producing coal. However, several mines continue running at less than capacity due to a limited spot market in the United States and a seaborne market that continues to be sub-economic for United States production. Due to the ongoing and unforeseen impacts of the COVID-19 pandemic, on April 26, 2020, the employment of 116 employees of Gibson and 78 employees of the Hamilton mining complexes was terminated permanently. In addition to reduced production levels and employment adjustments, we took numerous actions in 2020 to optimize cash flows and preserve liquidity by reducing capital expenditures, working capital, costs and expenses, including adjusting our corporate support structure to better align to current operating levels.

Reportable segment results are presented below.


	Illinois						Other and		Elimination
	Basin		Appalachia		Minerals		Corporate		(1)		Consolidated

	(in thousands)
Year Ended December 31, 2020

Revenues - Outside	$	770,051	$	500,330	$	43,141	$	14,607	$	—	$	1,328,129
Revenues - Intercompany		—		—		—		10,517		(10,517)		—
Total revenues (2)		770,051		500,330		43,141		25,124		(10,517)		1,328,129

Segment Adjusted EBITDA Expense (3)		520,324		319,730		4,106		18,543		(1,454)		861,249
Segment Adjusted EBITDA (4)		236,911		172,288		39,773		6,580		(9,063)		446,489
Total assets		1,018,916		448,567		613,916		477,469		(392,852)		2,166,016
Capital expenditures		48,648		70,960		—		1,493		—		121,101

Year Ended December 31, 2019

Revenues - Outside	$	1,219,618	$	644,389	$	53,036	$	44,677	$	—	$	1,961,720
Revenues - Intercompany		16,690		—		—		12,173		(28,863)		—
Total revenues (2)		1,236,308		644,389		53,036		56,850		(28,863)		1,961,720

Segment Adjusted EBITDA Expense (3)		756,423		423,623		7,811		36,845		(19,806)		1,204,896
Segment Adjusted EBITDA (4)		385,200		215,950		46,997		32,911		(9,057)		672,001
Total assets		1,373,516		500,027		643,213		541,261		(471,323)		2,586,694
Capital expenditures (5)		189,270		111,739		—		4,849		—		305,858

Year Ended December 31, 2018

Revenues - Outside	$	1,289,898	$	643,898	$	—	$	69,061	$	—	$	2,002,857
Revenues - Intercompany		31,191		67		—		12,431		(43,689)		—
Total revenues (2)		1,321,089		643,965		—		81,492		(43,689)		2,002,857

Segment Adjusted EBITDA Expense (3)		796,370		398,243		—		52,321		(35,134)		1,211,800
Segment Adjusted EBITDA (4)		417,773		240,286		21,323		44,864		(8,555)		715,691
Total assets		1,380,912		440,518		161,312		589,010		(177,004)		2,394,748
Capital expenditures		166,468		64,037		—		2,975		—		233,480

(1)

The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group to our mining operations, coal sales and purchases between operations within different segments, sales of receivables to AROP Funding, financing between segments and insurance premiums paid to Wildcat Insurance.

(2)	Revenues included in the Other and Corporate column are primarily attributable to the outside and affiliate revenues at the Matrix Group and coal brokerage activities. In additions, Other and Corporate includes affiliate revenues for administrative and Wildcat Insurance services.

(3)	Segment Adjusted EBITDA Expense includes operating expenses, coal purchases and other income. Transportation expenses are excluded as transportation revenues are recognized in an amount equal to transportation expenses when title passes to the customer.

The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to Operating expenses (excluding depreciation, depletion and amortization):


	Year Ended December 31,
	2020		2019		2018

	(in thousands)
Segment Adjusted EBITDA Expense	$	861,249	$	1,204,896	$	1,211,800
Outside coal purchases		—		(23,357)		(1,466)
Other income (expense)		(1,593)		561		(2,621)
Operating expenses (excluding depreciation, depletion and amortization)	$	859,656	$	1,182,100	$	1,207,713

(4)

Segment Adjusted EBITDA is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expense, settlement gain, asset and goodwill impairments and acquisition gain. Management therefore is able to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments. Consolidated Segment Adjusted EBITDA is reconciled to net income (loss) as follows:


	Year Ended December 31,
	2020		2019		2018

	(in thousands)
Consolidated Segment Adjusted EBITDA	$	446,489	$	672,001	$	715,691
General and administrative		(59,806)		(72,997)		(68,298)
Depreciation, depletion and amortization		(313,387)		(309,075)		(280,225)
Settlement gain		—		—		80,000
Asset impairments		(24,977)		(15,190)		(40,483)
Goodwill impairment		(132,026)		—		—
Interest expense, net		(45,478)		(45,496)		(40,059)
Acquisition gain		—		177,043		—
Income tax (expense) benefit		(35)		211		(22)
Acquisition gain attributable to noncontrolling interest		—		(7,083)		—
Net income (loss) attributable to ARLP	$	(129,220)	$	399,414	$	366,604
Noncontrolling interest		169		7,512		866
Net income (loss)	$	(129,051)	$	406,926	$	367,470

(5)	Capital Expenditures shown exclude the AllDale Acquisition on January 3, 2019 and the Wing Acquisition on August 2, 2019 (Note 3 – Acquisitions).

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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