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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2021

16.SEGMENT INFORMATION

We operate in the United States as a diversified natural resource company that generates operating and royalty income from the production and marketing of coal to major domestic and international utilities and industrial users as well as royalty income from oil & gas mineral interests. We aggregate multiple operating segments into four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties. We also have an "all other" category referred to as Other, Corporate and Elimination.

Our two coal operations 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 operations reportable 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. Our Oil & Gas Royalties reportable segment includes 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 Oil & Gas Royalties reportable segment primarily include receiving royalties and lease bonuses for our oil & gas mineral interests. Our Coal Royalties reportable segment includes coal reserves controlled by Alliance Resource Properties, which are either (a) leased to certain of our coal mining entities or (b) unleased but near our coal mining operations.

Beginning in the first quarter of 2021, we began to strategically view and manage our coal royalty activities separately from our coal mining operations since acquiring and managing a variety of royalty producing assets have similar management attributes. As a result, we restructured our reportable segments to better reflect this strategic view in how we manage our business and allocate resources. Prior periods have been recast to include Alliance Resource Properties within our new Coal Royalties reportable segment with offsetting recast adjustments primarily to our coal operations reportable segments and to a lesser extent, our Other, Corporate and Elimination category. Eliminations reported in Other, Corporate and Elimination were also recast to reflect intercompany royalty revenues and offsetting intercompany royalty expense resulting from our new Coal Royalties reportable segment.

The Illinois Basin Coal Operations reportable segment includes currently operating mining complexes (a) the Gibson County Coal, LLC ("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 Coal Operations reportable segment also includes our currently operating Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") coal loading terminal in Indiana on the Ohio River. Our Coal Royalties reportable segment discussed below, controls other coal reserves near our Illinois Basin operations which have not yet been leased to our Illinois Basin mining entities.

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

The Appalachia Coal Operations reportable segment includes currently operating mining complexes (a) the Mettiki mining complex, (b) the Tunnel Ridge, LLC mining complex ("Tunnel Ridge") and (c) the MC Mining, LLC mining complex. The Mettiki mining complex includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant. Our Coal Royalties reportable segment discussed below, controls the Penn Ridge coal reserves near our Tunnel Ridge operations which have not yet been leased to Tunnel Ridge.

The Oil & Gas Royalties reportable segment includes oil & gas mineral interests held by AR Midland, LP and AllDale I & II and includes Alliance Minerals' equity interests in both AllDale III (Note 9 – Investment) and Cavalier Minerals.

The Coal Royalties reportable segment includes coal reserves controlled by Alliance Resource Properties, that are either (a) leased to certain of our mining complexes in both the Illinois Basin Coal Operations and Appalachia Coal Operations reportable segments or (b) near our coal mining operations but not yet leased to our coal mining entities. About two thirds of the coal sold by our Coal Operations' mines is leased from our Coal Royalties entities.

Other, Corporate and Elimination 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"), Pontiki Coal, LLC's workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"), which assists the ARLP Partnership with its insurance requirements, AROP Funding and Alliance Finance (both discussed in Note 7 – Long-Term Debt) and other miscellaneous activities. The eliminations included in Other, Corporate and Elimination primarily represent the intercompany coal royalty transactions described above between our Coal Royalties reportable segment and our coal operations' mines.

Reportable segment results are presented below.


	Coal Operations				Royalties				Other,
	Illinois								Corporate and
	Basin		Appalachia		Oil & Gas		Coal		Elimination		Consolidated

	(in thousands)
Three Months Ended September 30, 2021

Revenues - Outside	$	231,093	$	154,944	$	21,191	$	—	$	8,211	$	415,439
Revenues - Intercompany		—		—		—		13,456		(13,456)		—
Total revenues (1)		231,093		154,944		21,191		13,456		(5,245)		415,439

Segment Adjusted EBITDA Expense (2)		149,666		92,312		2,639		4,258		(9,525)		239,350
Segment Adjusted EBITDA (3)		69,305		52,726		19,080		9,198		4,280		154,589
Capital expenditures		19,081		12,531		—		30		1,393		33,035

Three Months Ended September 30, 2020

Revenues - Outside	$	210,319	$	132,310	$	9,721	$	42	$	3,259	$	355,651
Revenues - Intercompany		—		—		—		11,406		(11,406)		—
Total revenues (1)		210,319		132,310		9,721		11,448		(8,147)		355,651

Segment Adjusted EBITDA Expense (2)		131,014		86,701		849		5,161		(6,975)		216,750
Segment Adjusted EBITDA (3)		75,583		43,105		8,898		6,287		(1,172)		132,701
Capital expenditures		3,815		14,541		—		—		219		18,575

Nine Months Ended September 30, 2021

Revenues - Outside	$	640,260	$	384,286	$	52,798	$	—	$	19,160	$	1,096,504
Revenues - Intercompany		—		—		—		36,410		(36,410)		—
Total revenues (1)		640,260		384,286		52,798		36,410		(17,250)		1,096,504

Segment Adjusted EBITDA Expense (2)		415,423		240,494		7,116		13,157		(24,619)		651,571
Segment Adjusted EBITDA (3)		197,601		125,873		46,405		23,253		7,370		400,502
Total assets		703,060		422,504		601,695		289,100		132,616		2,148,975
Capital expenditures		47,997		34,579		—		30		6,055		88,661

Nine Months Ended September 30, 2020

Revenues - Outside	$	551,978	$	367,523	$	31,831	$	47	$	10,237	$	961,616
Revenues - Intercompany		—		—		—		29,555		(29,555)		—
Total revenues (1)		551,978		367,523		31,831		29,602		(19,318)		961,616

Segment Adjusted EBITDA Expense (2)		399,664		240,846		2,851		12,649		(17,021)		638,989
Segment Adjusted EBITDA (3)		141,583		120,686		29,534		16,953		(2,298)		306,458
Total assets		799,936		461,751		616,491		291,854		61,308		2,231,340
Capital expenditures		44,073		57,798		—		—		949		102,820

(1)	Revenues included in the Other, Corporate and Elimination column are attributable to intercompany eliminations, which are primarily the coal royalties intercompany eliminations, outside revenues at the Matrix Group and other outside miscellaneous sales and revenue activities.

(2)	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):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
Segment Adjusted EBITDA Expense	$	239,350	$	216,750	$	651,571	$	638,989
Outside coal purchases		(6,065)		—		(6,179)		—
Other expense		(84)		(723)		(2,632)		(1,456)
Operating expenses (excluding depreciation, depletion and amortization)	$	233,201	$	216,027	$	642,760	$	637,533

(3)

Segment Adjusted EBITDA is defined as net income (loss) attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and asset and goodwill impairments. 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 as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
Consolidated Segment Adjusted EBITDA	$	154,589	$	132,701	$	400,502	$	306,458
General and administrative		(18,655)		(13,871)		(51,651)		(41,131)
Depreciation, depletion and amortization		(68,763)		(80,182)		(192,698)		(237,662)
Asset impairments		—		—		—		(24,977)
Goodwill impairment		—		—		—		(132,026)
Interest expense, net		(9,389)		(11,156)		(29,595)		(34,799)
Income tax expense		(234)		(293)		(227)		(111)
Net income (loss) attributable to ARLP	$	57,548	$	27,199	$	126,331	$	(164,248)
Noncontrolling interest		176		36		384		97
Net income (loss)	$	57,724	$	27,235	$	126,715	$	(164,151)

- 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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