SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2022

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 mineral reserves and resources owned or leased by Alliance Resource Properties, which are either (a) leased to our mining complexes or (b) near our coal mining operations but not yet leased.

The Illinois Basin Coal Operations reportable segment includes operating mining complexes (a) the Gibson County Coal, LLC mining complex, (b) the Warrior Coal, LLC mining complex, (c) the River View Coal, LLC mining complex and (d) the Hamilton County Coal, LLC mining complex. The segment also includes our Mt. Vernon Transfer Terminal, LLC coal-loading terminal in Indiana which operates on the Ohio River, Mid-America Carbonates, LLC and other support services, and our non-operating Illinois Basin mining complexes.

The Appalachia Coal Operations reportable segment includes operating mining complexes (a) the Mettiki mining complex, (b) the Tunnel Ridge, LLC mining complex 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.

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

The Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties that are (a) leased to certain of our mining complexes in both the Illinois Basin Coal Operations and

Appalachia Coal Operations reportable segments or (b) located near our operations and external mining operations. Approximately 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, its subsidiaries, and Alliance Design Group, LLC (collectively referred to as the "Matrix Group"), our investments in Francis, Infinitum and NGP ETP IV (see Note 9 – Investments), Wildcat Insurance, LLC, which assists the ARLP Partnership with its insurance requirements, AROP Funding and Alliance Finance (both discussed in Note 6 – Long-Term Debt), Pontiki Coal, LLC's workers' compensation and pneumoconiosis liabilities 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 June 30, 2022

Revenues - Outside	$	313,497	$	255,682	$	36,579	$	—	$	10,743	$	616,501
Revenues - Intercompany		—		—		—		14,525		(14,525)		—
Total revenues (1)		313,497		255,682		36,579		14,525		(3,782)		616,501

Segment Adjusted EBITDA Expense (2)		194,697		117,369		3,234		5,398		(4,624)		316,074
Segment Adjusted EBITDA (3)		97,352		124,377		34,609		9,127		839		266,304
Capital expenditures		35,343		22,491		—		—		4,995		62,829

Three Months Ended June 30, 2021

Revenues - Outside	$	218,233	$	120,723	$	17,587	$	—	$	5,900	$	362,443
Revenues - Intercompany		—		—		—		11,653		(11,653)		—
Total revenues (1)		218,233		120,723		17,587		11,653		(5,753)		362,443

Segment Adjusted EBITDA Expense (2)		140,176		74,456		2,419		4,871		(7,418)		214,504
Segment Adjusted EBITDA (3)		70,623		41,641		15,379		6,782		1,667		136,092
Capital expenditures		12,515		10,382		—		—		1,292		24,189

Six Months Ended June 30, 2022

Revenues - Outside	$	588,193	$	400,981	$	67,540	$	—	$	20,650	$	1,077,364
Revenues - Intercompany		—		—		—		29,692		(29,692)		—
Total revenues (1)		588,193		400,981		67,540		29,692		(9,042)		1,077,364

Segment Adjusted EBITDA Expense (2)		372,286		201,084		6,235		10,217		(12,568)		577,254
Segment Adjusted EBITDA (3)		175,567		175,480		63,161		19,475		3,525		437,208
Total assets		748,291		457,724		667,278		288,509		171,389		2,333,191
Capital expenditures		71,890		40,836		—		—		9,256		121,982

Six Months Ended June 30, 2021

Revenues - Outside	$	409,167	$	229,342	$	31,607	$	—	$	10,949	$	681,065
Revenues - Intercompany		—		—		—		22,954		(22,954)		—
Total revenues (1)		409,167		229,342		31,607		22,954		(12,005)		681,065

Segment Adjusted EBITDA Expense (2)		265,757		148,182		4,477		8,899		(15,094)		412,221
Segment Adjusted EBITDA (3)		128,296		73,147		27,325		14,055		3,090		245,913
Total assets		726,555		425,574		604,355		292,134		66,895		2,115,513
Capital expenditures		28,916		22,048		—		—		4,662		55,626

(1)	Revenues included in the Other, Corporate and Elimination column are attributable to intercompany eliminations, which are primarily intercompany coal royalty 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				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021

	(in thousands)
Segment Adjusted EBITDA Expense	$	316,074	$	214,504	$	577,254	$	412,221
Outside coal purchases		(151)		(114)		(151)		(114)
Other income (expense)		579		(1,351)		1,145		(2,548)
Operating expenses (excluding depreciation, depletion and amortization)	$	316,502	$	213,039	$	578,248	$	409,559

(3)

Segment Adjusted EBITDA is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, and general and administrative expenses. 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				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021

	(in thousands)
Consolidated Segment Adjusted EBITDA	$	266,304	$	136,092	$	437,208	$	245,913
General and administrative		(22,457)		(17,492)		(41,053)		(32,996)
Depreciation, depletion and amortization		(66,734)		(64,733)		(130,048)		(123,935)
Interest expense, net		(9,304)		(9,827)		(18,931)		(20,206)
Income tax (expense) benefit		(6,331)		(5)		(49,046)		7
Net income attributable to ARLP	$	161,478	$	44,035	$	198,130	$	68,783
Noncontrolling interest		323		130		613		208
Net income	$	161,801	$	44,165	$	198,743	$	68,991

- 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

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details