What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-23 compared with 2020-02-20 · 246 added, 298 removed, 377 unchanged (59% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the historical financial statements and notes thereto included in Item 8.

Financial Statements and Supplementary Data where you can find more detailed information in "Note 1 – Organization and Presentation"

The following discussion of our financial condition and results of operations should be read in conjunction with the historical financial statements and notes thereto included in "Item 8.

Financial Statements and Supplementary Data"

where you can find more detailed information in "Note 1 – Organization and Presentation"

and "Note 2 – Summary of Significant Accounting Policies"

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We are 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 located in strategic producing regions across the United States.

We are currently the second-largest coal producer in the eastern United States with seven underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia, as well as a coal-loading terminal in Indiana.

We are currently the second-largest coal producer in the eastern United States with seven underground mining complexes in Illinois, Indiana, Kentucky, Maryland, Pennsylvania and West Virginia, as well as a coal-loading terminal in Indiana.

In addition, the mineral interests we own are in premier oil & gas producing regions of the United States, primarily in the Permian, Anadarko and Williston Basins.

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Please see "Item 1.

Business—Coal Operations – Detail"

Business—Coal Mining Operations"

for further discussion of our mines.

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The Btu content of our coal ranges from 11,400 to 13,200.

In 2020, approximately 98.4% of our medium- and high-sulfur coal was sold to utility plants with installed pollution control devices.

During 2020, approximately 94.2% of our tons sold were purchased by United States electric utilities and 3.3% were sold into the international markets through brokered transactions.

The balance of tons sold were to third-party resellers and industrial consumers.

Although many utility customers continue to favor a shorter-term contracting strategy, in 2019, approximately 78.5% of our sales tonnage was sold under long-term contracts.

Our long-term contracts contribute to our stability and profitability by providing greater predictability of sales volumes and sales prices.

In 2019, approximately 90.9% of our medium- and high-sulfur coal was sold to utility plants with installed pollution control devices.

On January 3, 2019, our subsidiary, Alliance Royalty, LLC completed the AllDale Acquisition and acquired all of the limited partner interests not owned by Cavalier Minerals in AllDale I and AllDale II and the general partner interests in AllDale I & II for $176.2 million.

On February 8, 2019, our equity investment of Series A-1 Preferred Interests in Kodiak was redeemed for $135.0 million cash.

On August 2, 2019, our subsidiary, AR Midland acquired certain mineral interests in the Wing Acquisition for $144.9 million.

As a result of the AllDale Acquisition, the Wing Acquisition, our previous AllDale investments held through Cavalier Minerals and our investment in AllDale III, we hold approximately 55,700 net royalty acres located primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK) and Williston (Bakken) Basins.

The AllDale and Wing Acquisitions provide us with diversified exposure to industry leading operators and are consistent with our general business strategy to grow our oil & gas mineral interest business.

For more information on these transactions, please read "Item 8.

Financial Statement and Supplemental Data—Note 3 – Acquisitions"

and "—Note 12 – Investments".

Although some utility customers continue to favor a shorter-term contracting strategy, in 2020 we began to see several domestic utilities in the market seeking significant coal supply commitments for multi-year terms.

Long-term sales contracts contribute to our stability and profitability by providing greater predictability of sales volumes and sales prices.

In 2020, approximately 93.0% of our sales tonnage was sold under long-term sales contracts.

As discussed in more detail in "Item 1A.

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our results of operations could be impacted by variability in coal sales prices in addition to prices for items that are used in coal production such as steel, electricity and other supplies, unforeseen geologic conditions or mining and processing equipment failures and unexpected maintenance problems, and by the availability or reliability of transportation for coal shipments.

Moreover, the mining regulatory environment in which we operate has grown increasingly stringent as a result of legislation and initiatives pursued during previous

administrations.

Moreover, the mining regulatory environment in which we operate has grown increasingly stringent as a result of legislation and initiatives pursued during previous administrations.

Additionally, our results of operations could be impacted by our ability to obtain and renew permits necessary for our operations, secure or acquire coal reserves, or find replacement buyers for coal under contracts with comparable terms to existing contracts.

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therefore, the success and timing of drilling and development of our oil & gas mineral interests depend on a number of factors outside our control.

Some of those factors include the Operators' capital costs for drilling, development and production activities, the Operators' ability to access capital, the Operators' selection of counterparties for the marketing and sale of production and oil & gas prices in general, among others, as outlined in "Item 1.

Business—Regulation of the Oil & Gas Industry".

The operations on the properties in which we hold oil & gas mineral interests are also subject to various governmental laws and regulations.

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The 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 Minerals segment includes our oil & gas mineral interests which are located in premier oil & gas basins in the United States.

As a result of the AllDale Acquisition, we now control the underlying oil & gas mineral interests held by AllDale I & II.

This control over the oil & gas mineral interests held by AllDale I & II reflects a strategic change in how we manage our business and how resources are allocated by our chief operating decision maker.

Due to this strategic change, we realigned our reportable segments in the first quarter of 2019 to include our oil & gas mineral interests within a new Minerals reportable segment.

The mineral interests acquired through the Wing Acquisition in August 2019 are also included within the Minerals reportable segment.

As a part of our realignment, we have also included our Mt.

Vernon Transfer Terminal, LLC ("Mt.

Vernon") and Mid-America Carbonates, LLC ("MAC") in the Illinois Basin reportable

segment rather than Other and Corporate to better reflect our Illinois Basin related activities.

Prior periods have been recast to include our oil & gas mineral interests in the Minerals segment, and Mt.

Vernon and MAC in the Illinois Basin segment.

● Illinois Basin reportable segment includes our operating mining complexes (a) Gibson County Coal's mining complex, which includes the Gibson North and Gibson South mines, (b) Warrior's mining complex, (c) River View's mining complex and (d) the Hamilton mining complex.

The Illinois Basin reportable segment also includes our operating Mt.

Vernon coal loading terminal in Indiana on the Ohio River.

The Gibson North mine was idled in the fourth quarter of 2019 in response to market conditions.

The Illinois Basin reportable segment also includes MAC and other support services as well as non-operating mining complexes (a) Webster County Coal's Dotiki mining complex, which ceased production in August 2019, (b) White County Coal, LLC's Pattiki mining complex, (c) the Hopkins County Coal mining complex, and (d) Sebree's mining complex.

● Appalachia reportable segment includes our operating mining complexes (a) the Mettiki mining complex, (b) the Tunnel Ridge mining complex and (c) the MC Mining mining complex.

The Minerals 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.

Our ownership in these basins includes approximately 55,500 net royalty acres, which provide us with diversified exposure to industry leading operators consistent with our strategy to grow our oil & gas mineral interest business.

The operations within our Minerals reportable segment primarily include receiving royalties and lease bonuses for our oil & gas mineral interests.

● Illinois Basin reportable segment includes currently operating mining complexes (a) Gibson County Coal's mining complex, which includes the Gibson South mine, (b) Warrior's mining complex, (c) River View's mining complex and (d) the Hamilton mining complex.

The Illinois Basin reportable segment also includes our Mt.

Vernon coal-loading terminal in Indiana which operates on the Ohio River.

The Illinois Basin reportable segment also includes 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's Dotiki mining complex, which ceased production in August 2019, (c) White County Coal, LLC's Pattiki mining complex, (d) the Hopkins County Coal mining complex, and (e) Sebree's mining complex.

The non-operating mining complexes are in various stages of reclamation.

● Appalachia reportable segment includes currently operating mining complexes (a) the Mettiki mining complex, (b) the Tunnel Ridge mining complex and (c) the MC Mining mining complex.

The Mettiki mining complex includes Mettiki Coal (WV)'s Mountain View mine and Mettiki Coal (MD)'s preparation plant.

The Tunnel Ridge mining complex mines reserves in both West Virginia and to a lesser extent, Pennsylvania.

The Appalachia reportable segment also includes Penn Ridge assets, which is primarily coal mineral interests.

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AR Midland acquired its mineral interests in the Wing Acquisition.

● Other and Corporate marketing and administrative activities include the Matrix Group, Alliance Coal's coal brokerage activity and Alliance Minerals' prior equity investment in Kodiak.

Please read "Item 8.

Financial Statements and Supplementary Data — Note 3 – Acquisitions"

— Note 13 – Investments"

of this Annual Report on Form 10-K for more information on the Wing Acquisition and AllDale III, respectively.

● Other and Corporate includes marketing and administrative activities, 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.

In addition, Other and Corporate includes certain Alliance Resource Properties' land and 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, LLC ("AROP Funding") and Alliance Resource Finance Corporation ("Alliance Finance").

In addition, Other and Corporate includes certain Alliance Resource Properties' 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, LLC ("AROP Funding") and Alliance Resource Finance Corporation ("Alliance Finance").

Please read "Item 8.

Financial Statements and Supplementary Data — Note 8 – Long-term Debt"

— Note 13 – Investments"

of this Annual Report on Form 10-K for more information on AROP Funding, Alliance Finance and Kodiak redemption, respectively.

Market Developments and Our Response for the year ended December 31, 2020

We began the year anticipating our results for the year ended December 31, 2020 would be negatively impacted by challenging coal market conditions primarily due to low natural gas prices, tepid coal demand and the overhang of coal supply.

During the first half of the year, mild weather conditions and deteriorating natural gas prices placed increased pressure on the performance of our coal operations.

Also, during the first half of the year, our Minerals segment results were impacted by natural gas prices remaining low and the collapse in oil prices following actions by the Organization of Petroleum Exporting Countries and Russia.

These downward pressures increased substantially during the first half of the year for both our coal operations and mineral interest activities due to the disruptions to global economies in response to the COVID-19 pandemic resulting in unprecedented demand destruction across all energy markets.

In response to these challenges, we halted production at all of our mining complexes in the Illinois Basin at the end of March and our MC Mining complex in East Kentucky in early April.

With an objective of reducing coal production to match existing contracted sales commitments for 2020, we curtailed production at these operations while continuing to meet customer obligations from coal inventories already produced.

Throughout the first half of 2020 we monitored coal inventories at each location and worked closely with customers to determine when it would be necessary to resume coal production.

Underground production operations resumed in the second quarter at each of our mining complexes and production has continued since that time.

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, but now showing signs of potential pricing improvements.

Also in response to these market conditions, we took numerous steps to optimize cash flows, reduce working capital requirements and strictly control capital expenditures and expenses.

In addition, the Board of Directors began suspending cash distributions to unitholders with the quarter ended March 31, 2020 and has continued that through the quarter ended December 31, 2020.

The Board of Directors intends to reassess its distribution policy at its meeting following the quarter ending March 31, 2021.

Future unitholder distributions will be subject to ongoing Board of Directors' review of a number of factors including business and market conditions, our future financial and operating performance outlook and other capital allocation priorities.

During the second half of the year we saw improved economic activity, increased coal demand and some recovering oil & gas production volumes and prices which positively impacted our performance compared to the first half of the year.

Higher commodity prices and lower well costs led oil & gas operators to begin bringing previously shut-in wells back online and slowly resume permitting, drilling and completion activity across the regions in which we hold mineral interests.

Impact of the COVID-19 Pandemic

During the year 2020, a variety of measures in the United States and abroad in response to the COVID-19 pandemic resulted in a reduction in the global demand for energy.

These measures included travel restrictions, gathering bans and stay-at-home orders.

All of our operations are classified as essential in the states in which we operate.

Therefore, to protect our employees during the COVID-19 pandemic, we implemented numerous health and safety protocols designed to contain and mitigate the risk of infection from COVID-19.

We continually evaluate the need for further safeguards as the pandemic continues.

As discussed above, we curtailed coal production during the year 2020 in response to global energy demand destruction caused by the COVID-19 pandemic, including the temporary cessation of production at various operations in both the Illinois Basin and Appalachian regions.

In light of the downturn in market conditions during the year 2020 and the ongoing uncertainty surrounding the COVID-19 pandemic, we took the following additional actions:

● To mitigate the reduced revenues from lower coal sales volumes and depressed commodity prices impacting our minerals segment, we took numerous efforts to optimize cash flows, reduce working capital requirements and strictly control capital expenditures, operating expenses and general and administrative expenses.

Our cost control initiatives during the year 2020 resulted in significant reductions in expenses in each of these categories compared to 2019.

The cost reductions are discussed in more detail below.

● On April 26, 2020, the employment of 116 employees of the Gibson County mining complex and 78 employees of the Hamilton mining complex was terminated permanently.

● As stated previously, the Board of Directors began suspending the cash distributions to unitholders with the quarter ended March 31, 2020 and has continued through the quarter ended December 31, 2020.

● In March 2020, we withdrew our initial 2020 operating and financial guidance provided on January 27, 2020, which did not reflect the impact of the COVID-19 pandemic.

● On March 9, 2020, we strengthened our liquidity by entering into a $537.75 million (reducing to $459.5 million on May 23, 2021) revolving credit facility with a termination date of March 9, 2024, replacing the $494.75 million revolving credit facility that was set to expire on May 23, 2021.

Please read "Item 8.

Financial Statements and Supplementary Data — Note 8 – Long-term Debt"

for more information on revolving credit facility.

● We also reduced our total debt by $185.5 million during 2020, further enhancing our liquidity.

We are continuing to monitor and may take further actions to minimize any adverse impact caused by the COVID-19 pandemic.

How We Evaluate Our Performance

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Segment Adjusted EBITDA.

We define Segment Adjusted EBITDA (a non-GAAP financial measure) as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expense, settlement gain, asset impairment 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.

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2020 Compared with 2019

We reported net income attributable to ARLP of $399.4 million for 2019 compared to $366.6 million for 2018.

The increase of $32.8 million was due to a $170.0 million non-cash net gain related to the AllDale Acquisition, reduced non-cash asset impairments, the addition of oil & gas royalty revenues and lower operating expenses benefiting 2019, partially offset by decreased coal sales revenues and increased depreciation in 2019.

In addition, 2018 benefited from an $80.0 million net gain on settlement of litigation.

Total revenues were $1.96 billion in 2019 compared to $2.00 billion for 2018, primarily due to lower coal sales revenues resulting from reduced coal sales volumes and prices, partially offset by the addition of oil & gas royalty revenues in 2019.

Total revenues decreased 32.3% to $1.33 billion for 2020 compared to $1.96 billion for 2019 primarily due to lower coal sales and transportation revenues resulting from weak market conditions and disruptions caused by the COVID-19 pandemic.

These lower revenues and a non-cash goodwill impairment charge of $132.0 million partially offset by lower operating expenses, resulted in a net loss attributable to ARLP of $129.2 million for 2020 compared to net income attributable to ARLP of $399.4 million for 2019, which included a net gain of $170.0 million related to the AllDale Acquisition in 2019.

Lower operating expenses and transportation expenses totaled $859.7 million and $21.1 million, respectively, for 2020 compared to $1.18 billion and $99.5 million, respectively, in 2019.

Year Ended December 31,

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(in thousands)

(per ton sold)

(per ton/BOE sold)

Tons produced

Oil & gas royalties

Coal - Segment Adjusted EBITDA Expense (1) (2)

(1) For a definition of Segment Adjusted EBITDA Expense and related reconciliation to its comparable GAAP financial measure, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA Expense"

to GAAP "Operating Expenses."

Oil & gas royalties (4)

(2) Coal - Segment Adjusted EBITDA Expense is defined as consolidated Segment Adjusted EBITDA Expense excluding our Minerals segment.

(3) Barrels of oil equivalent ("BOE") for natural gas volumes is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).

(4) Average sales price per BOE is defined as oil & gas royalties (excluding lease bonus revenue) divided by total BOE.

Coal sales decreased $530.2 million or 30.1% to $1.23 billion for 2020 from $1.76 billion for 2019.

The decrease in coal sales was attributable to a volume variance of $51.7 million resulting from reduced tons sold and a price variance of $30.7 million due to lower average coal sales prices.

Coal sales volumes declined 2.8% to 39.3 million tons due primarily to lower export sales, partially offset by increased coal sales to domestic customers.

Weak coal market conditions also impacted price realizations which declined 1.7% in 2019 to $44.86 per ton sold, compared to $45.64 per ton sold during 2018.

The decrease was attributable to a volume variance of $496.9 million resulting from decreased tons sold and a price variance of $33.3 million due to lower average coal sales prices.

Tons sold declined 28.2% to 28.2 million tons in 2020, due to reduced shipments to domestic utilities and international markets.

Coal sales price realizations declined 2.6% in 2020 to $43.68 per ton sold, compared to $44.86 per ton sold during 2019 resulting, in part, from the absence of high priced metallurgic coal volumes in the 2020 Year.

Coal production volumes fell to 27.0 million tons, a reduction of 32.5% compared to 2019, due to temporarily idling production at certain mines particularly in the Illinois Basin region, in response to weak market conditions during 2020.

Oil & gas royalties .

Our mineral interests contributed oil & gas royalties of $51.7 million in 2019.

Please read "Item 8.

Financial Statements and Supplementary Data—Note 3 – Acquisitions"

for more information on the AllDale and Wing Acquisitions.

Oil & gas royalty revenues decreased to $42.9 million in 2020 compared to $51.7 million for 2019.

The decrease was primarily due to lower average product prices, partially offset by higher volumes resulting from the Wing Acquisition in August 2019, and continued drilling and development of our mineral interests.

Coal - Segment Adjusted EBITDA Expense .

Segment Adjusted EBITDA Expense, excluding our Minerals segment, decreased 1.2% to $1.20 billion for 2019 from $1.21 billion for 2018 primarily due to reduced coal sales volumes offset in part by increased expenses per ton.

Segment Adjusted EBITDA Expense per ton, excluding our Minerals segment, increased to $30.47 per ton sold compared to $29.98 per ton sold in 2018 due to curtailed production at our Gibson South mine, reduced longwall shifts at our Hamilton mine and lower recoveries at our River View and Mettiki mines, offset in part by increased recoveries from our Tunnel Ridge and Warrior mines and fewer longwall move days at Tunnel Ridge in 2019.

In addition, other cost increases are discussed by category below:

Segment Adjusted EBITDA Expense, excluding our Minerals segment, decreased 28.4% to $857.1 million in 2020, primarily as a result of reduced tons sold.

Segment Adjusted EBITDA Expense per ton decreased slightly in 2020 to $30.38 per ton, compared to $30.47 per ton in 2019.

The decrease is attributed primarily to ongoing expense control initiatives at all operations, partially offset by the per ton cost impact of lower coal volumes resulting from production curtailment in response to market conditions.

Significant cost control initiatives included the closure of higher cost per ton production at our Dotiki and Gibson North mines.

Cost per ton in 2020 also benefited from improved recoveries at several mines in both regions offset in part by reduced unit shifts from the curtailment.

Our costs per ton were impacted by the following cost variances as discussed by category:

● Material and supplies expenses per ton produced decreased 8.6% to $10.01 per ton in 2020 from $10.95 per ton in 2019.

The decrease of $0.94 per ton produced resulted primarily from production mix benefits and improved recoveries previously mentioned, related decreases of $0.46 per ton for roof support, $0.32 per ton for contract labor used in the mining process and $0.14 per ton for certain ventilation expenses, partially offset by an increase of $0.15 per ton for power and fuel used in the mining process .

● Maintenance expenses per ton produced decreased 13.1% to $3.12 per ton in 2020 from $3.59 per ton in 2019.

The decrease of $0.47 per ton produced was primarily due to reduced maintenance requirements as a result of production mix benefits and improved recoveries previously mentioned.

● We had no sales of outside coal purchases in 2020 compared to $23.4 million in 2019.

Thus, costs per ton in 2020 benefited as our cost of outside coal purchases are generally higher on a per ton basis than our produced coal.

Segment Adjusted EBITDA Expense decreases above were partially offset by the following increases:

● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 8.7% to $10.75 per ton in 2020 from $9.89 per ton in 2019.

This increase of $0.58 per ton was primarily attributable to reduced sales and production volumes;

● Workers' compensation expenses per ton produced increased to $0.50 per ton in 2019 from $0.34 per ton in 2018.

The increase of $0.16 per ton produced resulted from the impact of lower discount rates and higher actuarial accrual adjustments due primarily to unfavorable changes in claims development;

● Maintenance expenses per ton produced increased 4.1% to $3.59 per ton in 2019 from $3.45 per ton in 2018.

The increase of $0.14 per ton produced was primarily due to reduced sales and production volumes at certain mines discussed above;

● Outside coal purchases increased $21.9 million in 2019 as a result of sales from purchased coal, which generally cost higher on a per ton basis than our produced coal.

Segment Adjusted EBITDA Expense increases above were partially offset by the following decrease:

● Production taxes, royalties and other selling expenses are primarily based on coal volumes and a percentage of coal sales prices.

These expenses decreased $0.67 per produced ton sold in 2019 compared to 2018 primarily due to a favorable state sales mix and lower excise tax rates in 2019 .

Depreciation, depletion and amortization .

Depreciation, depletion and amortization expense increased to $309.1 million for 2019 compared to $280.2 million for 2018 primarily as a result of depletion from production of our oil & gas royalty interests in 2019.

Settlement gain.

During 2018, we finalized an agreement with a customer and certain of its affiliates to settle litigation we initiated in 2015.

The agreement provided for a $93.0 million cash payment to us in 2018, future conditional coal supply commitments, continued export transloading capacity for our Appalachian mines and the acquisition of certain coal reserves near our Tunnel Ridge operation.

A settlement gain of $80.0 million was recorded in 2018 reflecting the cash payment received net of $13.0 million of combined legal fees paid and associated incentive compensation accruals.

Asset impairment .

We recognized a non-cash asset impairment charge of $15.2 million at our Dotiki mine in 2019 as we ceased operations to shift production to our lower cost mines.

In 2018, we recognized $40.5 million of non-cash impairment charges, comprised of a $34.3 million impairment related to the reduction of economic life at our Dotiki mine and a $6.2 million impairment due to a decrease in fair value of an option entitling us to lease certain coal reserves in Illinois.

Equity method investment income .

Equity method investment income decreased to $2.2 million in 2019 from $22.2 million in 2018 due to the elimination of this income from AllDale I & II for all of 2019 offset in part by the increase of income from our AllDale III investment.

The elimination of equity method investment income from AllDale I & II was due to the AllDale Acquisition and resulting consolidation of AllDale I & II on our consolidated statements of income beginning in January 2019.

Prior to 2019, our investments in AllDale I & II generated income in addition to AllDale III.

The increase of $0.86 per ton was primarily due to curtailed production, partially offset by an improved production mix and improved recoveries at certain mines all previously discussed.

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $0.62 per produced ton sold in 2020 compared to 2019 primarily as a result of a $0.60 per ton government-imposed increase in the federal black lung excise tax, effective January 1, 2020 and an unfavorable state production mix increasing severance taxes per ton, in addition to increased excise taxes per ton resulting from a greater mix of domestic vs.

export shipments in 2020 compared to 2019.

Other revenues .

Other revenues were principally comprised of Mt.

Vernon transloading revenues in our Illinois Basin segment, oil & gas lease bonuses in our Minerals segment and Matrix Design sales in Other & Corporate.

Other revenues also include contract buy-out revenues and other outside services which could occur in any of our segments.

Other revenues decreased to $31.8 million in 2020 from $48.0 million in 2019.

The decrease of $16.2 million was primarily due to reduced sales of mining technology products by our Matrix Design subsidiary and lower coal volumes shipped through our Mt.

Vernon transloading facility.

General and administrative.

General and administrative expenses for 2020 decreased to $59.8 million compared to $73.0 million in 2019.

The decrease of $13.2 million was primarily due to incentive compensation reductions and our expense reduction initiatives.

Asset impairments.

During 2020, we recorded $25.0 million of non-cash asset impairment charges due to sealing our idled Gibson North mine, resulting in its permanent closure, and a decrease in the fair value of certain mining equipment and greenfield coal reserves as a result of weakened coal market conditions.

During 2019, we recorded an asset impairment charge of $15.2 million due to the cessation of production at our Dotiki mine.

Please read "Item 8.

Financial Statements and Supplementary Data—Note 4 – Long-Lived Asset Impairments"

of this Annual Report on Form 10-K.

Goodwill impairment.

During 2020, we recorded a $132.0 million non-cash goodwill impairment charge associated with our Hamilton mine, primarily as the result of reduced expected production volumes due to weakened coal market conditions and low energy demand resulting in part from the COVID-19 pandemic.

Please read "Item 8.

Financial Statements and Supplementary Data— Note 5 – Goodwill Impairment "

of this Annual Report on Form 10-K.

Equity securities income .

Equity securities income decreased $12.9 million compared to 2019 as we did not recognize equity securities income in 2020 due to the redemption of our preferred interest in Kodiak in 2019.

Acquisition gain .

We were required to re-measure Cavalier Minerals' equity method investments in AllDale I & II to fair value as a result of the AllDale Acquisition.

The re-measurement resulted in a gain of $177.0 million in 2019.

Please read ""Item 8.

Financial Statements and Supplementary Data—Note 3 – Acquisitions"

for more information on the acquisition gain in connection with the AllDale Acquisition.

We recorded a non-cash acquisition gain of $177.0 million in 2019 associated with the AllDale Acquisition to reflect the fair value of the interests in AllDale I & II we already owned at the time of the acquisition.

Transportation revenues and expenses .

Transportation revenues and expenses were $21.1 million and $99.5 million for 2020 and 2019, respectively.

The decrease of $12.9 million was primarily attributable to decreased coal tonnage for which we arrange third-party transportation at certain mines resulting from reduced export shipments, offset in part by an increase in average third-party transportation rates in 2019 resulting from higher shipping costs for coal exported to international markets.

The decrease of $78.4 million was largely attributable to decreased coal tonnage for which we arrange third-party transportation at certain mines primarily reflecting reduced coal shipments to international markets and a decrease in average third-party transportation rates in 2020.

Transportation revenues are recognized in an amount equal to transportation expenses when title to the coal passes to the customer.

Net income attributable to noncontrolling interest .

Net income attributable to noncontrolling interest increased to $7.5 million in 2019 from $0.9 million in 2018 due to allocating $7.1 million of the AllDale Acquisition gain discussed above, to noncontrolling interest related to Bluegrass Minerals Management, LLC's ("Bluegrass Minerals") equity interest in Cavalier Minerals.

Net income attributable to noncontrolling interest decreased to $0.2 million in 2020 from $7.5 million in 2019 as a result of allocating $7.1 million of the acquisition gain discussed above to noncontrolling interest in 2019.

Segment Information .

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(1) Percentage change not meaningful.

(2) For a definition of Segment Adjusted EBITDA and related reconciliation to its comparable GAAP financial measure, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA"

to GAAP "net income."

(2) For a definition of Segment Adjusted EBITDA and related reconciliation to comparable GAAP financial measures, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA"

to GAAP "net income (loss)."

(3) BOE for natural gas is calculated on a 6:1 basis (6,000 cubic feet of natural gas to one barrel).

Illinois Basin – Segment Adjusted EBITDA decreased 38.5% to $236.9 million in 2020 from $385.2 million in 2019.

The decrease of $32.6 million was primarily attributable to lower coal sales volumes, partially offset by reduced operating expenses.

Tons sold in 2019 decreased 5.2% compared to 2018 resulting from lower export sales from several mines and

the cessation of production at our Dotiki mine in 2019 to focus on shifting production to our lower-cost mines, offset in part by additional production units at the River View mine.

Segment Adjusted EBITDA Expense decreased 5.0% to $756.4 million in 2019 from $796.4 million in 2018 due to reduced coal sales volumes.

Segment Adjusted EBITDA Expense per ton increased slightly to $26.56 per ton sold in 2019 due to certain cost increases described above under "–Coal - Segment Adjusted EBITDA Expense."

The decrease of $148.3 million was primarily attributable to lower coal sales, which decreased 33.1% to $755.2 million in 2020 from $1.13 billion in 2019, partially offset by reduced operating expenses.

The decrease of $373.4 million in coal

sales primarily reflects reduced tons sold, which decreased 32.9% compared to 2019 due to curtailed production across all of our mining operations in the region as a result of weak coal market conditions, particularly international markets, amid the COVID-19 pandemic.

Segment Adjusted EBITDA Expense decreased 31.2% to $520.3 million in 2020 from $756.4 million in 2019 primarily as a result of reduced tons sold.

Segment Adjusted EBITDA Expense per ton increased $0.66 per ton sold to $27.22 from $26.56 per ton sold in 2019, primarily due to reduced coal volumes and related increased fixed costs per ton offset in part by the closure of higher cost per ton operations, improved recoveries at certain mines in 2020 and reduced reclamation accruals at certain non-operating mines.

In addition, see certain cost per ton and production variances described above under "–Coal - Segment Adjusted EBITDA Expense."

Appalachia – Segment Adjusted EBITDA decreased 20.2% to $172.3 million for 2020 from $216.0 million in 2019.

The decrease of $24.3 million was primarily attributable to reduced coal sales prices and increased operating expenses, partially offset by higher coal sales volumes.

Coal sales, which decreased 1.1% to $628.4 million in 2019 from $635.5 million in 2018, resulted from lower coal sales prices of $58.14 per ton in 2019 compared to $61.32 per ton in 2018, partially offset by higher coal sales volumes.

A strong performance at our Tunnel Ridge longwall operation increased coal sales volumes by 4.3% to 10.8 million tons sold in 2019 compared to 10.4 million tons sold in 2018.

Segment Adjusted EBITDA Expense increased 6.4% to $423.6 million in 2019 from $398.2 million in 2018 due to increased sales volumes and higher expenses per ton.

Segment Adjusted EBITDA Expense per ton increased 2.0% to $39.19 per ton compared to $38.43 per ton sold in 2018 reflecting lower recoveries at our Mettiki mine as well as certain cost increases described above under "–Coal - Segment Adjusted EBITDA Expense,"

offset in part by increased recoveries and fewer longwall move days from our Tunnel Ridge mine in 2019.

Minerals - Segment Adjusted EBITDA increased to $47.0 million for 2019 from $21.3 million in 2018.

The increase of $25.7 million primarily resulted from the AllDale and Wing Acquisitions in 2019.

Prior to the acquisitions, income from our equity method investments in AllDale I & II were reflected as equity method investment income.

As a result of the AllDale Acquisition, we began consolidating AllDale I & II on our consolidated statements of income.

The decrease of $43.7 million was primarily attributable to lower coal sales, which decreased 24.1% to $477.1 million in 2020 from $628.4 million in 2019, partially offset by reduced operating expenses.

The decrease of $151.3 million in coal sales reflects lower tons sold and price realizations.

Sales volumes decreased 15.8% in 2020 compared to 2019 due to curtailed production in the region as a result of weak coal market conditions, particularly international markets, amid the COVID-19 pandemic.

Coal sales price per ton sold in 2020 decreased 9.8% compared to 2019 primarily due to reduced metallurgical tons sold and price realizations at our Mettiki mine.

Segment Adjusted EBITDA Expense decreased 24.5% to $319.7 million in 2020 from $423.6 million in 2019 due to reduced tons sold and decreased per ton costs.

Segment Adjusted EBITDA Expense per ton decreased $4.05 per ton sold to $35.14 compared to $39.19 per ton sold in 2019.

The lower per ton expense in 2020 resulted primarily from fewer longwall move days and improved recoveries at both our Tunnel Ridge and Mettiki mines, reduced roof support expenses per ton and the absence of higher cost purchased tons sold in 2020, partially offset by curtailed production in the region during 2020 increasing fixed costs per ton.

See also certain cost variances described above under "–Coal - Segment Adjusted EBITDA Expense."

Minerals – Segment Adjusted EBITDA decreased to $39.8 million for 2020 from $47.0 million in 2019 reflecting reduced average sales price per BOE due to reduced demand amid the COVID-19 pandemic, partially offset by increased production volumes from the additional mineral interests acquired in the Wing Acquisition in August 2019 and from continued drilling and development activities.

Other and Corporate – Segment Adjusted EBITDA decreased by $26.3 million to $6.6 million in 2020 compared to $32.9 million in 2019.

The decrease was primarily attributable to reduced coal brokerage activity and mining technology product sales from the Matrix Group.

The decrease was primarily attributable to lower equity securities income as a result of the redemption of our preferred interest in Kodiak in 2019, decreased coal brokerage activity and lower mining technology product sales from the Matrix Group.

2019 Compared with 2018

We reported net income attributable to ARLP of $366.6 million for 2018 compared to $303.6 million for 2017.

The increase of $63.0 million was due to record coal sales volumes, which rose to 40.4 million tons sold in 2018 compared to 37.8 million tons sold in 2017, an $80.0 million net gain on settlement of litigation and higher investment income in 2018 and a debt extinguishment loss of $8.1 million in 2017, offset in part by increased operating expenses, transportation expenses and depreciation, depletion and amortization and the impact of a $40.5 million non-cash asset impairment charge in 2018.

Increased coal sales volumes drove total revenues higher by 11.5% to $2.00 billion in 2018 compared to $1.80 billion in 2017 and drove operating expenses higher to $1.21 billion in 2018 compared to $1.09 billion in 2017.

EPU for 2018 reflects the impact of the Simplification Transactions eliminating general partner net income allocations to MGP beginning with the second quarter of 2018.

EPU for 2017 reflects the impact of the Exchange Transaction eliminating general partner net income allocations associated with the IDRs and a 0.99% general partner interest in ARLP, both of which were held by MGP prior to the Exchange Transaction.

MGP exchanged both its general partner interest and IDRs for a non-economic general partner interest and significant limited partner units beginning with distributions for the second quarter of 2017.

See "Item 1.

Business—Partnership Simplification"

for more information on the Exchange Transaction and Simplification Transactions.

For the time between the Exchange Transaction and the Simplification Transactions, MGP maintained a 1.0001% general partner interest in the Intermediate Partnership and a 0.001% managing member interest in Alliance Coal and thus was allocated income and loss in our calculation of EPU.

We reported EPU of $2.74 in 2018 compared to $2.80 in 2017.

On a pro forma basis, as if the Exchange Transaction and Simplification Transactions had taken place on January 1, 2017, basic and diluted net income of ARLP per limited partner unit ("Pro Forma EPU") in 2018 would have been $2.73 compared to $2.25 in 2017.

Please read "Item 8.

Financial Statements and Supplementary Data—Note 14 – Net Income of ARLP Per Limited Partner Unit"

for more information on the impact of

the Exchange Transaction and Simplification Transactions on EPU, including a table providing a reconciliation of Pro Forma EPU amounts to net income of ARLP.

Year Ended December 31,

(in thousands)

(per ton sold)

Tons produced

Coal - Segment Adjusted EBITDA Expense (1) (2)

to GAAP "Operating Expenses."

(2) Coal - Segment Adjusted EBITDA Expense is defined as consolidated Segment Adjusted EBITDA Expense excluding our Minerals segment.

Coal sales increased $133.7 million or 7.8% to $1.84 billion for 2018 from $1.71 billion for 2017.

The increase in coal sales was attributable to a volume variance of $117.5 million resulting from increased tons sold and a price variance of $16.2 million due to higher average coal sales prices.

For 2018, strong performances at River View and our Gibson Complex mines, which include the resumption of operations at Gibson North in 2018, drove total coal sales volumes up 6.9% to a record 40.4 million tons and production volumes higher by 7.1% to 40.3 million tons compared to 2017.

Coal - Segment Adjusted EBITDA Expense .

Segment Adjusted EBITDA Expense, excluding our Minerals segment, increased 11.0% to $1.21 billion for 2018 from $1.09 billion for 2017 primarily as a result of increased coal sales volumes.

On a per ton basis, Segment Adjusted EBITDA Expense increased 3.8% to $29.98 per ton sold from $28.88 per ton sold in 2017, due primarily to difficult mining conditions encountered at several mines and additional longwall move days at our Tunnel Ridge mine in 2018.

The most significant operating expense variances by category are discussed below:

● Labor and benefit expenses per ton produced, excluding workers' compensation, increased 1.6% to $9.31 per ton in 2018 from $9.16 per ton in 2017.

This increase of $0.15 per ton was primarily attributable to increased labor expenses at various mines;

● Material and supplies expenses per ton produced increased 13.1% to $11.04 per ton in 2018 from $9.76 per ton in 2017.

The increase of $1.28 per ton produced resulted primarily from increases of $0.47 per ton for roof support, $0.29 per ton for contract labor used in the mining process and $0.11 per ton for power and fuel used in the mining process.

Segment Adjusted EBITDA Expense per ton increases discussed above were partially offset by the following decrease:

● Production taxes, royalties and other selling expenses incurred as a percentage of coal sales prices and volumes decreased $0.12 per produced ton sold in 2018 compared to 2017 primarily as a result of a favorable state sales mix, increased sales into the export market and lower average coal sales prices in the Illinois Basin region partially offset by higher average coal sales prices in Appalachia.

General and administrative.

General and administrative expenses for 2018 increased to $68.3 million compared to $61.8 million in 2017.

The increase of $6.5 million was primarily due to higher incentive compensation expenses and other professional services.

Depreciation, depletion and amortization .

Depreciation, depletion and amortization expense increased to $280.2 million for 2018 compared to $269.0 million for 2017 primarily as a result of the previously discussed increase in coal sales volumes.

Settlement gain.

During 2018, we finalized an agreement with a customer and certain of its affiliates to settle litigation we initiated in 2015.

A settlement gain of $80.0 million was recorded in 2018 reflecting the cash payment received net of $13.0 million of combined legal fees paid and associated incentive compensation accruals.

Asset impairment .

We recognized $40.5 million of non-cash impairment charges in 2018, comprised of a $34.3 million impairment related to the reduction of the economic mine life at our Dotiki mine and a $6.2 million impairment as a result of a decrease in the fair value of an option entitling us to lease certain coal reserves in Illinois.

Equity method investment income .

Equity method investment income increased to $22.2 million in 2018 from $13.9 million in 2017 due to increased income from AllDale I, II and III, collectively referred to as the "AllDale Partnerships".

Equity securities income .

Equity securities income increased $9.3 million to $15.7 million in 2018 compared to $6.4 million in 2017 due to increased distributions of preferred interests from our Kodiak investment.

Debt extinguishment loss .

We recognized a debt extinguishment loss of $8.1 million in 2017 to reflect a make-whole payment incurred to repay our Series B Senior Notes in May 2017.

Transportation revenues and expenses .

Transportation revenues and expenses were $112.4 million and $41.7 million for 2018 and 2017, respectively.

The increase of $70.7 million was primarily attributable to increased tonnage for which we arrange third-party transportation at certain mines and an increase in average third-party transportation rates in 2018 both primarily due to increased export shipments.

Transportation revenues are recognized in an amount equal to transportation expenses when title to the coal passes to the customer.

Segment Information .

Our 2018 Segment Adjusted EBITDA increased 4.9% to $715.7 million from 2017 Segment Adjusted EBITDA of $682.0 million.

Segment Adjusted EBITDA, tons sold, coal sales, other revenues and Segment Adjusted EBITDA Expense by segment are as follows:

Year Ended December 31,

Increase (Decrease)

(in thousands)

Segment Adjusted EBITDA

Coal - Illinois Basin

Coal - Appalachia

Other and Corporate

Total Segment Adjusted EBITDA (1)

Coal - Illinois Basin

Coal - Appalachia

Other and Corporate

Total tons sold

Coal - Illinois Basin

Coal - Appalachia

Other and Corporate

Total coal sales

Other revenues

Coal - Illinois Basin

Coal - Appalachia

Other and Corporate

Total other revenues

Segment Adjusted EBITDA Expense

Coal - Illinois Basin

Coal - Appalachia

Other and Corporate

Total Segment Adjusted EBITDA Expense

(1) For a definition of Segment Adjusted EBITDA and related reconciliation to its comparable GAAP financial measure, please see below under "—Reconciliation of non-GAAP "Segment Adjusted EBITDA"

to GAAP "net income."

Illinois Basin – Segment Adjusted EBITDA increased 4.9% to $417.8 million in 2018 from $398.1 million in 2017.

The increase of $19.7 million was primarily attributable to higher coal sales, which increased 11.0% to $1.20 billion in 2018 from $1.08 billion in 2017, partially offset by increased operating expenses.

The increase of $118.9 million in coal sales reflects higher coal sales volumes of 30.1 million tons sold in 2018 compared to 27.0 million tons sold in 2017, partially offset by lower average coal sales prices in 2018.

The increase in coal sales volumes resulted from strong performances at our River View and Gibson Complex mines, which included the resumption of operations at Gibson North in 2018, due in part to increased export volumes.

Segment Adjusted EBITDA Expense increased 15.0% to $796.4 million in 2018 from $692.2 million in 2017 due to increased sales volumes and higher expenses per ton.

Segment Adjusted EBITDA Expense per ton increased $0.89 per ton sold to $26.50 from $25.61 per ton sold in 2017, primarily due to the

previously mentioned difficult mining conditions in addition to increased roof support and contract labor costs per ton at various mines and start-up costs associated with reopening the Gibson North mine in 2018.

Appalachia – Segment Adjusted EBITDA increased 2.6% to $240.3 million for 2018 from $234.1 million in 2017.

The increase of $6.2 million was primarily attributable to higher coal sales, which increased 3.1% to $635.5 million in 2018 from $616.3 million in 2017 partially offset by increased operating expenses.

The increase of $19.2 million in coal sales reflects higher average coal sales prices of $61.32 per ton in 2018 compared to $57.16 per ton in 2017 due to increased export sales of higher priced metallurgical coal at our Mettiki mine and improved prices at our MC Mining and Tunnel Ridge mines.

The price benefit was offset partially by lower coal sales volumes of 10.4 million tons sold in 2018 compared to 10.8 million tons in 2017 due to decreased volumes at our Tunnel Ridge and MC Mining mines.

Segment Adjusted EBITDA Expense increased 3.2% to $398.2 million in 2018 from $385.8 million in 2017 and Segment Adjusted EBITDA Expense per ton increased $2.65 per ton sold to $38.43 compared to $35.78 per ton sold in 2017.

The increase was primarily due to difficult mining conditions and additional longwall move days at our Tunnel Ridge mine and an increased sales mix of higher-cost Mettiki coal production in 2018 as well as certain cost increases described above under "–Operating expenses and outside coal purchases."

Minerals - Segment Adjusted EBITDA increased to $21.3 million for 2019 from $13.3 million in 2018.

The increase of $8.0 million resulted from higher equity income from the AllDale Partnerships in 2018.

Other and Corporate – Coal sales and Segment Adjusted EBITDA Expense decreased by $31.6 million and $23.5 million, respectively due to reduced coal brokerage activity.

For discussion and analysis of 2019 compared to 2018, please refer to "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations"

of our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 20, 2020 and is incorporated by reference herein.

Reconciliation of non-GAAP "Segment Adjusted EBITDA"

to GAAP "net income"

to GAAP "net income (loss)"

and reconciliation of non-GAAP "Segment Adjusted EBITDA Expense"

to GAAP "Operating Expenses"

Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, settlement gain, asset impairment, acquisition gain, debt extinguishment loss and general and administrative expenses.

Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, asset and goodwill impairments, acquisition gain and general and administrative expenses.

Segment Adjusted EBITDA is a key component of consolidated EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others.

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from consolidated Segment Adjusted EBITDA allows management 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.

The following is a reconciliation of consolidated Segment Adjusted EBITDA to net income, the most comparable GAAP financial measure:

The following is a reconciliation of consolidated Segment Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure:

Year Ended December 31,

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Depreciation, depletion and amortization

Settlement gain

Asset impairment

Asset impairments

Goodwill impairment

Interest expense, net

Acquisition gain

Debt extinguishment loss

Income tax (expense) benefit

Acquisition gain attributable to noncontrolling interest

Net income attributable to ARLP

Net income (loss) attributable to ARLP

Noncontrolling interest

Net income (loss)

Segment Adjusted EBITDA Expense (a non-GAAP financial measure) includes operating expenses, coal purchases and other income (expense).

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We believe that existing cash balances, future cash flows from operations and investments, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet our working capital requirements, capital expenditures and additional investments, debt payments, commitments and distribution payments.

Nevertheless, our ability to satisfy our working capital requirements, to fund planned capital expenditures, to service our debt obligations or to pay distributions will depend upon our future operating performance and access to and cost of financing sources, which will be affected by prevailing economic conditions generally, and in both the coal and oil & gas industries specifically, as well as other financial and business factors, some of which are beyond our control.

Based on our recent operating results, current cash position, current unitholder distributions, anticipated future cash flows and sources of financing that we expect to have available, we do not anticipate any constraints to our liquidity at this time.

However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected.

Based on our recent operating cash flow results, current cash position, anticipated future cash flows and sources of financing that we expect to have available, we anticipate remaining in compliance with the covenants of the Credit Agreement and expect to have sufficient liquidity to fund our operations and growth strategies.

However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future covenant compliance or liquidity may be adversely affected.

Please see "Item 1A.

Risk Factors."

On August 2, 2019, we closed on the Wing Acquisition using cash on hand and borrowings under our revolving credit facility for $144.9 million.

On January 3, 2019, we acquired all of the limited partner interests in AllDale I & II not owned by Cavalier Minerals and the general partner interests in AllDale I & II for $176.2 million, which was funded with cash on hand and borrowings under our revolving credit facility.

On July 19, 2017, we purchased $100 million of Series A-1 Preferred Interests from Kodiak, a privately held company providing large scale, high utilization gas compression assets to customers operating primarily in the Permian Basin.

This structured investment provided us with a quarterly cash or payment in kind return.

On February 8, 2019, Kodiak redeemed our preferred interests for $135.0 million cash.

For more information on these transactions, please read "Item 8.

Financial Statements and Supplementary Data—Note 3 – Acquisitions"

and "— Note 12 – Investments"

of this Annual Report on Form 10-K.

In responding to weak market conditions, lower commodity prices, and the lockdown initiated in the first quarter of 2020 to certain areas of the global economy due to the COVID-19 pandemic, the Partnership took numerous actions to optimize cash flows and preserve liquidity by reducing capital expenditures, working capital, costs and expenses, including adjusting its corporate support structure to better align with current operating levels.

We have also benefited from certain provisions of the Coronavirus Aid Relief and Economic Security Act of 2020 which modestly increased our short-term liquidity.

Additional actions to enhance our liquidity include our Board of Directors' decisions to suspend cash distributions beginning with the quarter ended March 31, 2020 and continuing through the quarter ended December 31, 2020.

We have also strengthened our liquidity by entering into a $537.75 million (reducing to $459.5 million on May 23, 2021) revolving credit facility with a termination date of March 9, 2024, replacing the $494.75 million revolving credit facility that was set to expire on May 23, 2021.

On June 5, 2020, we entered into a $14.7 million equipment financing arrangement which provides for forty-eight monthly payments with an implicit interest rate of 6.1%, maturing on June 5, 2024.

In addition, in January 2021, we extended the term of the Securitization Facility to January 2022 and reduced the borrowing availability under the facility to $60.0 million from $100 million.

We have further enhanced our liquidity by reducing our total debt by $185.5 million during the year ended December 31, 2020.

In May 2018, the Board of Directors approved the establishment of a unit repurchase program authorizing us to repurchase up to $100 million of ARLP common units.

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Since inception through December 31, 2020, we have purchased units for a total of $93.5 million under the program.

Please read "Part II - Item 5.

During the year ended December 31, 2020, we did not repurchase and retire any units.

Please read "Item 5.

Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities"

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In 2018, we began development of MC Mining's Excel Mine No.

5 and continued in 2019.

We currently anticipate deploying capital of approximately $15.0 million to $18.0 million in 2020 to complete the project.

We expect to fund the project in 2020 with cash from operations or borrowings under our credit facilities.

We anticipate the new mine will enable us to access an additional 15 million tons of coal reserves with an expected mine life of approximately 12 years assuming the current level of production at MC Mining's Excel Mine No.

4 continues at the new mine.

We expect the development plan for the new Excel Mine No.

5 will provide a seamless transition from the current MC Mining operation as its reserves deplete in 2020.

5 which continued through 2019 and into 2020.

In July 2020, the Excel Mine No.

5 began production.

We expect the Excel Mine No.

5 will enable us to access an additional 15 million tons of coal reserves with an expected mine life of approximately 12 years assuming production levels similar to MC Mining's former Excel Mine No.

Cash provided by operating activities was $400.6 million for 2020 compared to $514.9 million for 2019.

In the comparison, 2018 benefited from $93 million received for a one-time settlement related to litigation with a customer and

certain of its affiliates initiated in 2015.

In addition, decreases in cash provided by operating activities for 2019 resulted from lower net income in 2019 after excluding the 2019 non-cash acquisition gain and the non-cash impairments in both years.

Additional decreases in 2019 were due to unfavorable working capital changes related to inventories, accounts payable and payroll and related benefit accruals.

These decreases were partially offset by a favorable working capital change related to trade receivables.

The decrease in cash provided by operating activities was primarily due to a net loss in 2020 as compared to net income in 2019 adjusted for changes from certain non-cash items discussed above such as the acquisition gain and impairments.

The decrease in net income was partially offset by a favorable working capital changes primarily related to trade receivables and inventories.

Net cash used in investing activities was $125.1 million for 2020 compared to $488.1 million for 2019.

The increase in cash used in investing activities was primarily attributable to the AllDale Acquisition, the Wing Acquisition and increased capital expenditures for mine infrastructure and equipment at various mines.

This increase was partially offset by cash received from Kodiak for the redemption of our equity securities in 2019, and in comparison, greater cash was used for equity method investment contributions in AllDale III in 2018.

The decrease in cash used in investing activities was primarily attributable to the AllDale and Wing Acquisitions in 2019 and decreased capital expenditures for mine infrastructure and equipment at various mines in 2020.

The decreased net cash used compared to 2019 was partially offset by cash received from the redemption of our Kodiak equity securities in 2019.

Net cash used in financing activities was $256.4 million for 2020 compared to $234.4 million for 2019.

The increase in cash used in financing activities was primarily attributable to increases in overall net payments on the securitization and revolving credit facilities and increased payments on financing lease obligations.

These 2019 increases in cash used were partially offset by proceeds received for equipment financings and reduced payments for unit repurchases in 2019.

We have various commitments primarily related to long-term debt, including capital and operating leases, obligations for estimated future asset retirement obligations costs, workers' compensation and pneumoconiosis, capital projects and pension funding.

The increase in cash used in financing activities was primarily attributable to increase in payments on equipment financings and lower net proceeds from borrowings under the revolving credit facility.

These 2020 increases in cash used were partially offset by proceeds received for equipment financings and reduced distributions paid to unitholders in 2020.

Contractual Obligations

We have various commitments primarily related to long-term debt, including finance and operating leases, obligations for estimated future asset retirement obligations costs, workers' compensation and pneumoconiosis, capital projects and pension funding.

We expect to fund these commitments with existing cash balances, future cash flows from operations and investments as well as cash provided from borrowings of debt or issuance of equity.

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These arrangements include coal reserve leases, indemnifications, transportation obligations and financial instruments with off-balance sheet risk, such as bank letters of credit and surety bonds.

Liabilities related to these arrangements are not reflected in our consolidated balance sheets, and we do not expect these off-balance sheet arrangements to have any material adverse effects on our financial condition, results of operations or cash flows.

Liabilities related to these arrangements are not reflected in our consolidated

balance sheets, and we do not expect these off-balance sheet arrangements to have any material adverse effects on our financial condition, results of operations or cash flows.

We use a combination of surety bonds and letters of credit to secure our financial obligations for reclamation, workers' compensation and other obligations as follows as of December 31, 2020:

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Capital Expenditures

Capital expenditures increased to $305.9 million in 2019 compared to $233.5 million in 2018.

Capital expenditures decreased to $121.1 million in 2020 compared to $305.9 million in 2019.

See our discussion of "Cash Flows"

above concerning the increase in capital expenditures.

above concerning the decrease in capital expenditures.

We currently project average estimated annual maintenance capital expenditures over the next five years of approximately $4.90 per ton produced.

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Also, exposures exist for which no insurance may be available and for which we have not reserved.

In addition, environmental activists may try to hamper fossil fuel companies by other means including pressuring insurance and surety companies into restricting access to certain needed coverages.

In addition, the insurance industry has been subject to efforts by environmental activists to restrict coverages available for fossil-fuel companies.

Debt Obligations

Credit Facility.

On January 27, 2017, our Intermediate Partnership entered into a Fourth Amended and Restated Credit Agreement (the "Credit Agreement") with various financial institutions.

The Credit Agreement provides for a $494.75 million revolving credit facility, including a sublimit of $125 million for the issuance of letters of credit and a sublimit of $15.0 million for swingline borrowings (the "Revolving Credit Facility"), with a termination date of May 23, 2021.

On March 9, 2020, our Intermediate Partnership entered into a Fifth Amended and Restated Credit Agreement (the "Credit Agreement") with various financial institutions.

The Credit Agreement provides for a $537.75 million revolving credit facility, reducing to $459.5 million on May 23, 2021, including a sublimit of $125 million for the issuance of letters of credit and a sublimit of $15.0 million for swingline borrowings (the "Revolving Credit Facility"), with a termination date of March 9, 2024.

The Credit Facility replaced the $494.75 million revolving credit facility extended to the Intermediate Partnership under its Fourth Amended and Restated Credit Agreement, dated as of January 27, 2017, by various banks and other lenders that would have expired on May 23, 2021.

Concurrently with the entry into the Credit Agreement, we reorganized the entities holding our oil & gas interests such that Alliance Royalty, LLC became a direct wholly owned subsidiary of Alliance Minerals.

We incurred debt issuance costs in 2020 of $5.8 million in connection with the Credit Agreement.

These debt issuance costs are deferred and amortized as a component of interest expense over the term of the Revolving Credit Facility.

The Credit Agreement is guaranteed by all of the material direct and indirect subsidiaries of our Intermediate Partnership, and is secured by substantially all of the Intermediate Partnership's assets.

Borrowings under the Revolving Credit Facility bear interest, at the option of the Intermediate Partnership, at either (i) the Base Rate at the greater of three benchmarks or (ii) a Eurodollar Rate, plus margins for (i) or (ii), as applicable, that fluctuate depending upon the ratio of Consolidated Debt to Consolidated Cash Flow (each as defined in the Credit Agreement).

The Credit Agreement is guaranteed by certain of our Intermediate Partnership's material direct and indirect subsidiaries (the "Restricted Subsidiaries") and is secured by substantially all of the assets of the Restricted Subsidiaries.

The Credit Agreement is also guaranteed by Alliance Minerals but the oil and gas minerals assets of Alliance Minerals and its direct and indirect subsidiaries (collectively with Alliance Minerals, the "Unrestricted Subsidiaries") are not collateral under the Credit Agreement.

Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) the Base Rate at the greater of three benchmarks or (ii) a Eurodollar Rate, plus margins for (i) or (ii), as applicable, that fluctuate depending upon the ratio of Consolidated Debt to Consolidated Cash Flow (each as defined in the Credit Agreement).

The Eurodollar Rate, with applicable margin, under the Revolving Credit Facility was 3.01% as of December 31, 2020.

At December 31, 2020, we had $21.8 million of letters of credit outstanding with $428.5 million available for borrowing under the Revolving Credit Facility.

We currently incur an annual commitment fee of 0.35% on the undrawn portion of the Revolving Credit Facility.

We incur an annual commitment fee of 0.35% on the undrawn portion of the Revolving Credit Facility.

We utilize the Revolving Credit Facility, as appropriate, for working capital requirements, capital expenditures and investments, scheduled debt payments and distribution payments.

The Credit Agreement contains various restrictions affecting our Intermediate Partnership and its subsidiaries including, among other things, restrictions on incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates, in each case subject to various exceptions, and the payment of cash distributions by our Intermediate Partnership if such payment would result in a certain fixed charge coverage ratio (as defined in the Credit Agreement).

The Credit Agreement requires the Intermediate Partnership to maintain (a) a debt to cash flow ratio of not more than 2.5 to 1.0 and (b) a cash flow to interest expense ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters.

The debt to cash flow ratio and cash flow to interest expense ratio were 1.34 to 1.0 and 12.6 to 1.0, respectively, for the trailing twelve months ended December 31, 2019.

We remain in compliance with the covenants of the Credit Agreement as of December 31, 2019.

The Credit Agreement contains various restrictions affecting the Intermediate Partnership and its Restricted Subsidiaries including, among other things, restrictions on incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates, including transactions with Unrestricted Subsidiaries.

In each case, these restrictions are subject to various exceptions.

In addition, the payment of cash distributions is restricted if such payment would result in a fixed charge coverage ratio of less than 1.0 to 1.0 (as defined in the Credit Agreement) for the four most recently ended fiscal quarters.

The Credit Agreement requires the Intermediate Partnership to maintain (a) a debt to cash flow ratio of not more than 2.5 to 1.0, (b) a cash flow to interest expense ratio of not less than 3.0 to 1.0 and (c) a first lien debt to cash flow ratio of not more than 1.5 to 1.0, in each case, during the four most recently ended fiscal quarters.

The debt to cash flow ratio, cash flow to interest expense ratio and first lien debt to cash flow ratio were 1.53 to 1.0, 8.45 to 1.0 and 0.52 to 1.0, respectively, for the trailing twelve months ended December 31, 2020.

We remained in compliance with the covenants of the Credit Agreement as of December 31, 2020 and anticipate remaining in compliance with the covenants.

Net restricted assets, as defined by the Securities and Exchange Commission, refers to the amount of our consolidated subsidiaries’ net assets for which the ability to transfer funds to ARLP in the form of cash dividends, loans, advances, or transfers is restricted.

As a result of the restrictions contained in the Credit Agreement and our current compliance ratios, the amount of our net restricted assets at December 31, 2020, was $240.8 million.

Senior Notes.

On April 24, 2017, the Intermediate Partnership and Alliance Finance (as co-issuer), a wholly owned subsidiary of the Intermediate Partnership, issued an aggregate principal amount of $400.0 million of senior unsecured notes due 2025 ("Senior Notes") in a private placement to qualified institutional buyers.

On April 24, 2017, the Intermediate Partnership and Alliance Finance, issued an aggregate principal amount of $400.0 million of senior unsecured notes due 2025 ("Senior Notes") in a private placement to qualified institutional buyers.

The Senior Notes have a term of eight years, maturing on May 1, 2025 (the "Term") and accrue interest at an annual rate of 7.5%.

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The indenture governing the Senior Notes contains customary terms, events of default and covenants relating to, among other things, the incurrence of debt, the payment of distributions or similar restricted payments, undertaking transactions with affiliates and limitations on asset sales.

At any time prior to May 1, 2020, the issuers of the Senior Notes may redeem up to 35% of the aggregate principal amount of the Senior Notes with the net cash proceeds of one or more equity offerings at a redemption price equal to 107.5% of the principal amount redeemed, plus accrued and unpaid interest, if any, to the redemption date.

The issuers of the Senior Notes may also redeem all or a part of the notes at any time on or after May 1, 2020, at redemption prices set forth in the indenture governing the Senior Notes.

At any time prior to May 1, 2020, the issuers of the Senior Notes may redeem the Senior Notes at a redemption price equal to the principal amount of the Senior Notes plus a "make-whole"

premium, plus accrued and unpaid interest, if any, to the redemption date.

The net proceeds from issuance of the Senior Notes and cash on hand were used to repay previous debt obligations (including a make-whole payment of $8.1 million).

We incurred discount and debt issuance costs of $7.3 million in connection with issuance of the Senior Notes.

These costs are deferred and are currently being amortized as a component of interest expense over the Term.

The issuers of the Senior Notes may redeem all or a part of the notes at any time at redemption prices set forth in the indenture governing the Senior Notes.

Accounts Receivable Securitization.

On December 5, 2014, certain direct and indirect wholly owned subsidiaries of our Intermediate Partnership entered into a $100.0 million accounts receivable securitization facility ("Securitization Facility").

Under the Securitization Facility, certain subsidiaries sell trade receivables on an ongoing basis to our Intermediate Partnership, which then sells the trade receivables to AROP Funding, a wholly owned bankruptcy-remote special purpose subsidiary of our Intermediate Partnership, which in turn borrows on a revolving basis up to $100.0 million secured by the trade receivables.

Under the Securitization Facility, certain subsidiaries sell certain trade receivables on an ongoing basis to our Intermediate Partnership, which then sells the trade receivables to AROP Funding, a wholly owned bankruptcy-remote special purpose subsidiary of our Intermediate Partnership, which in turn borrows on a revolving basis up to $100.0 million secured by the trade receivables.

After the sale, Alliance Coal, as servicer of the assets, collects the receivables on behalf of AROP Funding.

The Securitization Facility bears interest based on a Eurodollar Rate.

In January 2019, we extended the term of the Securitization Facility to January 2020.

In October 2019, we extended the term from January 2020 to January 2021.

At December 31, 2019, we had $73.8 million outstanding under the Securitization Facility.

The agreement governing the Securitization Facility contains customary terms and conditions, including limitations with regards to certain customer credit ratings.

In January 2021, we extended the term of the Securitization Facility to January 2022 and reduced the borrowing availability under the facility to $60.0 million.

The Securitization Facility was previously scheduled to mature in January 2021.

At December 31, 2020, we had a $55.9 million outstanding balance under the Securitization Facility.

May 2019 Equipment Financing .

On May 17, 2019, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $10.0 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "May 2019 Equipment Financing").

The May 2019 Equipment Financing contains customary terms and events of default and provides for thirty-six monthly payments with an implicit interest rate of 6.25%, maturing on May 1, 2022.

The May 2019 Equipment Financing contains

customary terms and events of default and provides for thirty-six monthly payments with an implicit interest rate of 6.25%, maturing on May 1, 2022.

Upon maturity, the equipment will revert back to the Intermediate Partnership.

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On November 6, 2019, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $53.1 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "November 2019 Equipment Financing").

The November 2019 Equipment Financing contains an implicit interest rate of 4.75% and provides for a four year term with forty-seven monthly payments of $1.0 million and a balloon payment of $11.6 million upon maturity on November 6, 2023.

The November 2019 Equipment Financing contains customary terms and events of default and an implicit interest rate of 4.75%, providing for a four year term with forty-seven monthly payments of $1.0 million and a balloon payment of $11.6 million upon maturity on November 6, 2023.

At maturity, the equipment will revert back to the Intermediate Partnership.

The November 2019 Equipment Financing contains customary terms and events of default.

June 2020 Equipment Financing .

On June 5, 2020, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $14.7 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "June 2020 Equipment Financing").

The June 2020 Equipment Financing contains customary terms and events of default and provides for forty-eight monthly payments with an implicit interest rate of 6.1%, maturing on June 5, 2024.

Upon maturity, the equipment will revert back to the Intermediate Partnership.

We also have an agreement with a bank to provide additional letters of credit in an amount of $5.0 million to maintain surety bonds to secure certain asset retirement obligations and our obligations for workers' compensation benefits.

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The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

For the Wing Acquisition, we determined a preliminary fair value for the acquired mineral interests using a weighting of both income and market approaches.

For the Wing Acquisition, we determined a fair value for the acquired mineral interests using a weighting of both income and market approaches.

Our income approach primarily comprised of a discounted cash flow model.

The assumptions used in the discounted cash flow model included estimated production, projected cash flows, forward oil & gas prices and a risk-adjusted discount rate.

Our market approach consisted of the observation of recent acquisitions in the Permian Basin to determine a market price for similar mineral interests.

We consider our fair value measurements for the Wing Acquisition to be preliminary as we continue to obtain additional information from operators regarding reserve and production quantities and projections for the mineral interests we acquired.

Our market approach consisted of the observation of acquisitions in the Permian Basin to determine a market price for similar mineral interests.

For the AllDale Acquisition, in addition to valuing the acquired assets and liabilities, we were required to value our previously held equity method investments in AllDale I & II just prior to the acquisition and record a gain as the fair value was determined to be higher than the carrying value of our equity method investments.

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The only indefinite-lived intangible that the Partnership currently has is goodwill.

At December 31, 2019, the Partnership had $136.4 million in goodwill.

Goodwill is not amortized, but subject to annual reviews on November 30th for impairment at a reporting unit level.

Goodwill is not amortized, but subject to annual reviews on November 30th for impairment at the reporting unit level.

Goodwill is assessed for impairment more frequently if events or changes in circumstances indicate that it is more likely than not that goodwill is impaired.

The reporting unit or units used to evaluate and measure goodwill for impairment are determined primarily from the manner in which the business is managed or operated.

A reporting unit is an operating segment or a component that is one level below an operating segment.

We have assessed the reporting unit definitions and determined that at December 31, 2019, the Hamilton reporting unit and the MAC reporting unit are the appropriate reporting units for testing goodwill impairment related to the acquisition of these entities.

The Partnership computes the fair value of these reporting units primarily using the income approach (discounted cash flow analysis).

The Partnership computes the fair value of its reporting units primarily using the income approach (discounted cash flow analysis).

The computations require management to make significant estimates.

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Our estimate of the forward coal sales price curve and future sales volumes are critical assumptions used in our discounted cash flow analysis.

There were no impairments of goodwill during 2019 or 2018.

In future periods, it is reasonably possible that a variety of circumstances could result in an impairment of our goodwill.

A discounted cash flow analysis requires us to make various judgmental assumptions about sales, operating margins, capital expenditures, working capital and coal sales prices.

Assumptions about sales, operating margins, capital expenditures and coal sales prices are based on our budgets, business plans, economic projections, and anticipated future cash flows.

In determining the fair value of our reporting units, we were required to make significant judgments and estimates regarding the impact of anticipated economic factors on our business.

The forecast assumptions used in the period ended December 31, 2019 make certain assumptions about future pricing, volumes and expected maintenance capital expenditures.

In determining the fair value of our reporting units, we are required to make significant judgments and estimates regarding the impact of anticipated economic factors on our business.

The forecast assumptions used in our assessments make certain assumptions about future pricing, volumes and expected maintenance capital expenditures.

Assumptions are also made for a "normalized"

perpetual growth rate for periods beyond the long range financial forecast period.

Our estimates of fair value are sensitive to changes in all of these variables, certain of which relate to broader macroeconomic conditions outside our control.

At December 31, 2019, we had $136.4 million of goodwill, of which $132.0 million was associated with the reporting unit representing our Hamilton mine.

The goodwill associated with our Hamilton mine was recorded in conjunction with our acquisition of the Hamilton mine on July 31, 2015.

During the first quarter of 2020, we assessed certain events and changes in circumstances, including a) adverse industry and market developments, including the impact of the COVID-19 pandemic, b) our response to these developments, including temporarily ceasing production at several mines, including Hamilton and c) our actual performance during the quarter.

After consideration of these events and changes in circumstances, we performed an interim test of the goodwill associated with the Hamilton reporting unit comparing Hamilton's carrying amount to its fair value.

We estimated the fair value of the Hamilton reporting unit using a discounted cash flow model.

The assumptions used in the discounted cash flow model considered market conditions at the time of the assessment and our estimate of the mine's performance in future years based on the information available to us.

The fair value of the Hamilton reporting unit was determined to be below its carrying amount (including goodwill) by more than the recorded balance of goodwill associated with the reporting unit.

Accordingly, we recognized an impairment charge of $132.0 million consisting of the total carrying amount of goodwill allocated to the Hamilton reporting unit.

This impairment charge reduced our consolidated goodwill balance to $4.4 million.

During the first quarter of 2020 and as part of our annual impairment evaluation on November 30, 2020, we also performed tests on our goodwill balance associated with our MAC reporting unit using a discounted cash flow model and concluded no impairment was necessary.

There were no impairments of goodwill during 2019 or 2018.

Our estimates of fair value are sensitive to changes in variables, certain of which relate to broader macroeconomic conditions outside our control.

As a result, actual performance in the near and longer-term could be different from these expectations and assumptions.

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While we believe we have made reasonable estimates and assumptions to calculate the fair value of the reporting units and other intangible assets, it is possible a material change could occur.

See "Item 8.

Financial Statements and Supplementary Data—Note 5 – Goodwill Impairment."

Oil & Gas Reserve Values

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The process of estimating oil & gas reserves is very complex, requiring significant judgment in the evaluation of all available geological, geophysical, engineering and economic data.

After being estimated internally, our proved reserves estimates are compared to proved reserves that are prepared by independent experts in connection with our required year end reporting.

After being estimated internally, our proved reserves estimates are compared to proved reserves that are audited by independent experts in connection with our required year-end reporting.

The data may change substantially over time as a result of numerous factors, including the historical 12 month average price, additional development cost and activity, evolving production history and a continual reassessment of the viability of production under changing economic conditions.

As a result, material revisions to existing reserves estimates could occur from time to time.

As a result, material revisions to existing reserve estimates could occur from time to time.

Such changes could trigger an impairment of our oil & gas mineral interests and have an impact on our depreciation, depletion and amortization expense prospectively.

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for additional discussion.

We had accrued liabilities

for workers' compensation of $53.3 million and $49.5 million for these costs at December 31, 2019 and 2018, respectively.

We had accrued liabilities for workers' compensation of $54.7 million and $53.4 million for these costs at December 31, 2020 and 2019, respectively.

A one-percentage-point reduction in the discount rate would have increased operating expense by approximately $4.3 million at December 31, 2020.

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Under the service cost method used to estimate our pneumoconiosis benefits liability, actuarial gains or losses attributable to changes in actuarial assumptions, such as the discount rate, are amortized over the remaining service period of active miners.

The discount rate for workers' compensation and pneumoconiosis is derived by applying the FSTE Pension Discount Curve to the projected liability payout.

The discount rate for workers' compensation and pneumoconiosis is derived by applying the Financial Times Stock Exchange Pension Discount Curve to the projected liability payout.

Other assumptions, such as claim development patterns, mortality, disability incidence and medical costs, are based upon standard actuarial tables adjusted for our actual historical experiences whenever possible.

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The above factors are not all inclusive, and management must continually evaluate whether other factors are present that would indicate a long-lived asset may be impaired.

If there is an indication that the carrying amount of an asset may not be recovered, the asset is monitored by management where changes to significant assumptions are reviewed.

If there is an indication that the carrying amount of an asset may not be recovered, we compare our estimate of undiscounted future cash flows attributable to the asset to the carrying value of the asset.

Individual assets are grouped for impairment review purposes based on the lowest level for which there is identifiable cash flows that are largely independent of the cash flows of other groups of assets, generally on a by-mine basis.

The amount of impairment is measured by the difference between the carrying value and the fair value of the asset.

Assumptions about sales, operating margins, capital expenditures and sales prices are based on our budgets, business plans, economic projections, and anticipated future cash flows.

If the carrying value of an asset exceeds the future undiscounted cash flows expected from the asset, t he amount of impairment is measured by the difference between the carrying value and the fair value of the asset.

The fair value of impaired assets is typically determined based on various factors, including the present values of expected future cash flows using a risk adjusted discount rate, the marketability of coal properties and the estimated fair value of assets that could be sold or used at other operations.

We recorded asset impairments of $15.2 million in 2019 and $40.5 million in 2018 (see "Item 8.

We recorded asset impairments of $25.0 million, $15.2 million and $40.5 million in 2020, 2019 and 2018, respectively.

See "Item 8.

Financial Statements and Supplementary Data—Note 4 – Long-Lived Asset Impairments".

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for additional information.

The liability for asset retirement and closing procedures is sensitive to changes in cost estimates and estimated mine lives.

The liability for asset retirement and closing procedures is sensitive to changes in cost estimates, estimated mine lives and timing of post-mine reclamation activities.

As changes in estimates occur (such as mine plan revisions, changes in estimated costs or changes in timing of the performance of reclamation activities), the revisions to the obligation and asset are recognized at the appropriate credit-adjusted, risk-free interest rate.

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On at least an annual basis, we review our entire asset retirement obligation liability and make necessary adjustments for permit changes approved by state authorities, changes in the timing of reclamation activities, and revisions to cost estimates and productivity assumptions, to reflect current experience.

Adjustments to the liability associated with these assumptions resulted in a decrease of $0.7 million and an increase of $5.0 million for the year ended December 31, 2019 and 2018, respectively.

Adjustments to the liability associated with these assumptions resulted in a decrease of $11.9 million for the year ended December 31, 2020.

There were no material adjustments to the liability associated with these assumptions for the year ended December 31, 2019.

While the precise amount of these future costs cannot be determined with certainty, we have estimated the costs and timing of future asset retirement obligations escalated for inflation, then discounted and recorded at the present value of those estimates.

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If our assumptions differ from actual experiences, or if changes in the regulatory environment occur, our actual cash expenditures and costs that we incur could be materially different than currently estimated.

Universal Shelf

Shelf Registration Statement

In February 2018, we filed with the SEC a universal shelf registration statement allowing us to issue from time to time an indeterminate amount of debt or equity securities ("2018 Registration Statement").

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis