What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-05 · 147 added, 311 removed, 412 unchanged (53% of the section changed)

4 unchanged sentences

(In thousands, except unit data)

September 30,

CURRENT ASSETS:

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ARLP Partners' Capital:

Limited Partners - Common Unitholders 127,195,219 and 126,915,597 units outstanding, respectively

Limited Partners - Common Unitholders 127,195,219 units outstanding

Accumulated other comprehensive loss

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

SALES AND OPERATING REVENUES:

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Transportation expenses

Outside coal purchases

General and administrative

4 unchanged sentences

INCOME (LOSS) FROM OPERATIONS

Interest expense (net of interest capitalized for the three and nine months ended September 30, 2020 and 2019 of $ 199 , $ 298 , $ 1,265 and $ 790 , respectively)

Interest expense (net of interest capitalized for the three months ended March 31, 2021 and 2020 of $ 86 and $ 557 , respectively)

Interest income

Equity method investment income

Equity securities income

Acquisition gain

Other expense

INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAX EXPENSE

INCOME TAX BENEFIT

NET INCOME (LOSS)

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Three Months Ended

Nine Months Ended

September 30,

NET INCOME (LOSS)

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Pneumoconiosis benefits

Net actuarial loss

Amortization of net actuarial gain (1)

Amortization of net actuarial loss (gain) (1)

Total pneumoconiosis benefits adjustments

OTHER COMPREHENSIVE INCOME (LOSS)

OTHER COMPREHENSIVE INCOME

COMPREHENSIVE INCOME (LOSS)

7 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

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Distributions received from investments in excess of cumulative earnings

Payments for acquisitions of businesses, net of cash acquired

Cash received from redemption of equity securities

Net cash used in investing activities

2 unchanged sentences

Payments under securitization facility

Proceeds from equipment financings

Payments on equipment financings

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Payments under revolving credit facilities

Borrowings from line of credit

Payments on finance lease obligations

Payment of debt issuance costs

Payments for purchases of units under unit repurchase program

Payments for taxes related to net settlement of issuance of units in deferred compensation plans

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Cash paid for interest

Cash paid for income taxes

SUPPLEMENTAL NON-CASH ACTIVITY:

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Market value of common units issued under deferred compensation plans before tax withholding requirements

Fair value of liabilities assumed in acquisition of business

See notes to condensed consolidated financial statements.

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mean Alliance Resource Management GP, LLC, ARLP's general partner.

● References to "Mr.

mean Joseph W.

Craft III, the Chairman, President and Chief Executive Officer of MGP.

● References to "Intermediate Partnership"

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● References to "Alliance Minerals"

mean Alliance Minerals, LLC, the holding company for the oil and gas minerals interests of Alliance Resource Partners, L.P.

mean Alliance Minerals, LLC, the holding company for the oil and gas minerals interests of Alliance Resource Operating Partners, L.P.

● References to "Alliance Resource Properties"

mean Alliance Resource Properties, LLC (the land holding company for certain coal mineral interests of Alliance Resource Operating Partners, L.P.) including the subsidiaries of Alliance Resource Properties, LLC.

ARLP is a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol "ARLP."

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Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts and operations of the ARLP Partnership and present our financial position as of September 30, 2020 and December 31, 2019, the results of our operations and comprehensive income for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019.

The accompanying condensed consolidated financial statements include the accounts and operations of the ARLP Partnership and present our financial position as of March 31, 2021 and December 31, 2020 and the results of our operations, comprehensive income (loss) and cash flows for the three months ended March 31, 2021 and 2020.

All intercompany transactions and accounts have been eliminated.

These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and do not include all of the information normally included with financial statements prepared in accordance with generally accepted accounting principles ("GAAP") of the United States.

These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and do not include all the information normally included with financial statements prepared in accordance with generally accepted accounting principles ("GAAP") of the United States.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

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Actual results could differ from those estimates.

NEW ACCOUNTING STANDARDS

New Accounting Standards Issued and Adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement.

ASU 2018-13 amended the fair value measurement guidance by removing and modifying certain disclosure requirements, while also adding new disclosure requirements including the requirement to disclose the range and weighted average of significant unobservable inputs used to develop certain Level 3 measurements.

These changes are to be applied prospectively for only the most recent interim or annual period presented in the year of adoption.

We adopted ASU 2018-13 on January 1, 2020.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13").

ASU 2016-13 changes the impairment model for most financial assets and certain other instruments to require the use of a new forward-looking "expected loss"

model that generally will result in earlier recognition of allowances for losses.

The new standard requires disclosure of significantly more information related to these items.

We adopted ASU 2016-13 on January 1, 2020 and because we do not have a history of credit losses on our financial instruments and have no material expected losses, the adoption of ASU 2016-13 did not have any material impact on our condensed consolidated financial statements.

On August 2, 2019 (the "Wing Acquisition Date"), our subsidiary, AR Midland, LP ("AR Midland") acquired from Wing Resources LLC and Wing Resources II LLC (collectively, "Wing") approximately 9,000 net royalty acres in the Midland Basin, with exposure to more than 400,000 gross acres, for a cash purchase price of $ 144.9 million (the "Wing Acquisition").

The purchase price was funded with cash on hand and borrowings under the Revolving Credit Facility discussed in Note 9 – Long-Term Debt.

The Wing Acquisition enhances our ownership position in the Permian Basin, expands our exposure to industry leading operators and furthers our business strategy to grow our Minerals segment.

Concurrent with the Wing Acquisition, JC Resources LP, an entity owned by Joseph W.

Craft III, the Chairman, President and Chief Executive Officer of MGP ("Mr.

Craft"), acquired from Wing, in a separate transaction, mineral interests that we elected not to acquire.

Because the mineral interests acquired in the Wing Acquisition include royalty interests in both producing properties and unproved properties, we have determined that the acquisition should be accounted for as a business combination and the underlying assets should be recorded at fair value as of the Wing Acquisition Date on our condensed consolidated balance sheet.

During the nine months ended September 30, 2020, we recorded adjustments to our mineral interests in proved and unproved properties after receiving additional information regarding proved and unproved reserve quantities, production and projections as of the Wing Acquisition Date.

In addition, we increased our receivables by $ 0.3 million as a result of information received from operators concerning royalty payments owed to us from production that occurred prior to the Wing Acquisition Date.

The following table summarizes our final fair value allocation of assets acquired as of the Wing Acquisition Date incorporating measurement period adjustments made to the allocation:

As Previously

(in thousands)

Mineral interests in proved properties

Mineral interests in unproved properties

Net assets acquired

The fair value of the mineral interests was determined using a weighting of both income and market approaches.

Our income approach primarily comprised 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 weighted average cost of

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

Certain assumptions used in our valuation are not observable in active markets;

therefore, the fair value measurements represent Level 3 fair value measurements.

The carrying value of the receivables represents the fair value given the short-term nature of the receivables.

LONG-LIVED ASSET IMPAIRMENTS

During the nine months ended September 30, 2020, we recorded $ 25.0 million of non-cash asset impairment charges in our Illinois Basin segment due to sealing our idled Gibson North mine, resulting in its permanent closure, and a decrease in the fair value of certain mining equipment at our idled operations and greenfield coal reserves as a result of weakened coal market conditions.

During the nine months ended September 30, 2019, we recorded an asset impairment charge of $ 15.2 million in our Illinois Basin segment due to the cessation of coal production at our Dotiki mine, effective August 16, 2019, in an effort to focus on maximizing production at our lower-cost mines in the segment.

We adjusted the carrying value of Dotiki's assets from $ 35.9 million to its fair value of $ 25.8 million and accrued $ 5.1 million with respect to scheduled payments to WKY CoalPlay, LLC ("WKY CoalPlay") for leased coal reserves from which we may not receive future economic benefit.

See Note 10 – Variable Interest Entities for more information about WKY CoalPlay.

The fair values of the impaired assets were determined using a market approach, which represent Level 3 fair value measurements under the fair value hierarchy.

The fair value analysis used assumptions regarding the marketability of certain assets in the Illinois Basin.

With the uncertainty related to energy demand as a result of a) weak electricity demand and b) an oversupply and lack of storage for oil and natural gas during the quarter ended March 31, 2020 (the "First Quarter"), both due in part to the COVID-19 pandemic and other market and production factors impacting both our coal mining operations and our mineral interests activities, we performed recoverability tests during the First Quarter using undiscounted cash flows based on our estimate of both volume and prices from information available to us and determined we would be able to recover the costs of our assets, excluding the impaired assets discussed above.

Amid cost reduction efforts, increased customer commitments for coal, a modest recovery in commodity futures prices and increased clarity into production levels by operators of our oil & gas mineral interests, we determined impairment of our long-lived assets subsequent to the First Quarter was not necessary.

The cash flow estimates used in our impairment assessments, by their very nature, are dependent on conditions that could materially change in future periods based on new information.

If in future periods changes to these estimates were to materially reduce our expected cash flows, additional impairments could be necessary.

During the three months ended March 31, 2020, we recorded $ 23.5 million of non-cash asset impairment charges in our Illinois Basin Coal Operations segment due to sealing our idled Gibson North mine, resulting in its permanent closure, and a decrease in the fair value of certain mining equipment at our idled operations and greenfield coal reserves as a result of weakened coal market conditions.

During the same period, we also recorded an asset impairment charge of $ 1.5 million in our Coal Royalties segment due to a decrease in the fair value of greenfield coal reserves held by Alliance Resource Properties near our coal mining operations in the Illinois Basin.

See Note 16 – Segment Information for more information about our segments.

The fair values of the impaired assets were determined using a market approach, which represents Level 3 fair value measurements under the fair value hierarchy.

The fair value analysis used assumptions regarding the marketability of certain mining and reserve assets near our Illinois Basin coal mining operations.

GOODWILL IMPAIRMENT

At December 31, 2019, our consolidated balance sheet included $ 136.4 million of goodwill, of which $ 132.0 million was associated with the reporting unit representing our Hamilton County Coal, LLC ("Hamilton") mine, which is included in our Illinois Basin segment.

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, 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 First 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 an income approach utilizing a discounted cash flow model.

During the three months ended March 31, 2020, we considered whether an interim test of our consolidated goodwill of $ 136.4 million was necessary.

Our consolidated goodwill included $ 132.0 million recorded in our Illinois Basin Coal Operations segment in conjunction with our acquisition of the Hamilton County Coal, LLC ("Hamilton") mine on July 31, 2015.

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 our Hamilton mine 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 Hamilton comparing Hamilton's carrying amount to its fair value.

We estimated the fair value of Hamilton using an income approach utilizing a discounted cash flow model.

The assumptions used in the discounted cash flow model included estimated production, forward coal prices, operating expenses, capital expenditures and a weighted average cost of capital.

Our forecasts of future cash flows 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.

Key assumptions used in our valuation are not observable in active markets;

Key assumptions used in our valuation were not observable in active markets;

therefore, the fair value measurements represent Level 3 fair value measurements.

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.

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

Accordingly, we recognized an impairment charge of $ 132.0 million consisting of the total carrying amount of goodwill associated with Hamilton.

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

During the First Quarter, we also performed an interim test on ARLP's

remaining goodwill balances not associated with Hamilton and concluded no impairment was necessary for our other reporting units.

During the three months ended March 31, 2020, we also performed an interim test on ARLP's remaining goodwill balances not associated with Hamilton and concluded no impairment was necessary for our other reporting units.

CONTINGENCIES

Various lawsuits, claims and regulatory proceedings incidental to our business are pending against the ARLP Partnership.

We record an accrual for a potential loss related to these matters when, in management's opinion, such loss is probable and reasonably estimable.

We are party to litigation that has been initiated against certain of our subsidiaries in which the plaintiffs allege violations of the Fair Labor Standards Act and Kentucky Wage and Hour Act due to an alleged failure to compensate for time "donning"

and "doffing"

equipment and to account for certain bonuses in the calculation of overtime rates and pay.

The plaintiffs seek class or collective action certification.

Because the litigation of these matters is in the early stages, we cannot reasonably estimate a range of potential exposure at this time.

We believe the plaintiffs’ claims are without merit and our ultimate exposure, if any, will not be material to our results of operations or financial position and we intend to defend the litigation vigorously.

However, if our current belief that the claims are without merit is not upheld, it is reasonably possible that the ultimate resolution of these matters could result in a potential loss that may be material to our results of operations.

We also have various other lawsuits, claims and regulatory proceedings incidental to our business that are pending against the ARLP Partnership.

We record an accrual for a potential loss related to these matters when, in management's

opinion, such loss is probable and reasonably estimable.

Based on known facts and circumstances, we believe the ultimate outcome of these outstanding lawsuits, claims and regulatory proceedings will not have a material adverse effect on our financial condition, results of operations or liquidity.

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Inventories consist of the following:

September 30,

(in thousands)

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The following table summarizes our fair value measurements within the hierarchy not included elsewhere in these notes:

September 30, 2020

March 31, 2021

December 31, 2020

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Debt Issuance Costs

September 30,

(in thousands)

4 unchanged sentences

June 2020 equipment financing

Line of credit

Less current maturities

3 unchanged sentences

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.

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 not guaranteed or secured by the assets of the Intermediate Partnership's oil & gas minerals subsidiary, Alliance Minerals, or its direct and indirect subsidiaries (collectively the "Unrestricted 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 September 30, 2020.

At September 30, 2020, we had $ 21.8 million of letters of credit outstanding with $ 381.0 million available for borrowing under the Revolving Credit Facility.

The Eurodollar Rate, with applicable margin, under the Revolving Credit Facility was 2.97 % as of March 31, 2021.

On March 31, 2021, we had $ 21.8 million of letters of credit outstanding with $ 461.0 million available for borrowing under the Revolving Credit Facility.

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

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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 1.69 to 1.0, 8.22 to 1.0 and 0.69 to 1.0, respectively, for the trailing twelve months ended September 30, 2020.

We remain in compliance with the covenants of the Credit Agreement as of September 30, 2020.

The debt to cash flow ratio, cash flow to interest expense ratio and first lien debt to cash flow ratio were 1.43 to 1.0, 8.67 to 1.0 and 0.39 to 1.0, respectively, for the trailing twelve months ended March 31, 2021.

We remained in compliance with the covenants of the Credit Agreement as of March 31, 2021 and anticipate remaining in compliance with the covenants.

Senior Notes.

On April 24, 2017, the Intermediate Partnership and Alliance Resource Finance Corporation (as co-issuer), a wholly owned subsidiary of the Intermediate Partnership ("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 % .

Interest is payable semi-annually in arrears on each May 1 and November 1.

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.

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.

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.

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

In October 2019, we extended the term of the Securitization Facility to January 2021.

At September 30, 2020, we had a $ 72.2 million outstanding balance under the Securitization Facility.

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.

On March 31, 2021, we had a $ 38.1 million outstanding balance under the Securitization Facility.

May 2019 Equipment Financing .

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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.

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

November 2019 Equipment Financing.

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 customary terms and events of default and an implicit interest rate of 4.75 % that 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.

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

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.

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

June 2020 Equipment Financing.

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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.

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

Line of Credit.

On February 19, 2021, we entered into a line of credit arrangement with a related party for $ 5.0 million.

The line of credit has a maturity date of February 28, 2023, with an option to extend it for an additional six months and accrue interest at an annual rate of 3.50 % .

Interest is payable quarterly commencing March 31, 2021, and continuing each March 31, June 30, September 30 and December 31 thereafter through and including February 28, 2023.

The agreement contains customary terms and events of default and is guaranteed by ARLP.

We utilize the line of credit, as appropriate, for capital expenditures and investments.

As of March 31, 2021, we had drawn $ 1.8 million under this agreement.

VARIABLE INTEREST ENTITIES

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Alliance Minerals completed funding of this commitment in 2018.

Alliance Minerals' limited partner interest in AllDale III at September 30, 2020 was 13.9 %.

Alliance Minerals' limited partner interest in AllDale III is 13.9 %.

The AllDale III Partnership Agreement includes a 25 % profits interest for the general partner, subject to a return hurdle equal to the greater of 125 % of cumulative capital contributions and a 10 % internal rate of return, and following an 80/20 "catch-up"

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We record equity income or loss based on AllDale III's distribution structure.

See Note 11 – Investments for more information.

On November 17, 2014, SGP Land, LLC ("SGP Land"), an entity owned indirectly by the Chairman, President and CEO of MGP ("Mr.

Craft") and Kathleen S.

Craft, jointly, and two limited liability companies ("Craft Companies") owned by irrevocable trusts established by Mr.

Craft and his children, entered into a limited liability company agreement to form WKY CoalPlay.

WKY CoalPlay was formed, in part, to purchase and lease coal reserves.

WKY CoalPlay is managed by an individual who is an officer and director of Alliance Resource Holdings II, Inc.

and trustee of the irrevocable trusts owning one of the Craft Companies.

In December 2014 and February 2015, we entered into various coal reserve leases with WKY CoalPlay.

During the nine months ended September 30, 2020, we paid $ 10.8 million to WKY CoalPlay under these leases.

As discussed in Item 8.

Financial Statements and Supplementary Data—Note 20 – Related-Party Transactions in our Annual Report on Form 10-K for the year ended December 31, 2019, we have the option to acquire the coal reserves

leased from WKY CoalPlay at any time during a three-year period ending in December 2020, with respect to a portion of the reserves, and ending in February 2021 with respect to the remainder of the reserves.

In all cases, the options provide for a purchase price that would provide WKY CoalPlay a 7.0 % internal rate of return on its investment in the reserves taking into account payments previously made under the leases.

We have concluded that WKY CoalPlay is a VIE because of our ability to exercise options to acquire reserves under lease with WKY CoalPlay, which is not within the control of the equity holders and, if it occurs, could potentially limit the expected residual return to the owners of WKY CoalPlay.

Once the options expire in December 2020 and February 2021, WKY CoalPlay will cease to be a VIE.

We do not have any economic or governance rights related to WKY CoalPlay and our options that provide us with a variable interest in WKY CoalPlay's reserve assets do not give us any rights that constitute power to direct the primary activities that most significantly impact WKY CoalPlay's economic performance.

SGP Land has the sole ability to replace the manager of WKY CoalPlay at its discretion and therefore has power to direct the activities of WKY CoalPlay.

Consequently, we concluded that SGP Land is the primary beneficiary of WKY CoalPlay.

See Note 9 – Investment for more information.

As discussed in Note 8 – Variable Interest Entities, we account for our ownership interest in the income or loss of AllDale III as an equity method investment.

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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Ending balance

As discussed in Note 4 – Long-Lived Asset Impairments, there was uncertainty related to energy demand in the First Quarter as a result of a) weak electricity demand and b) an oversupply and lack of storage for oil and natural gas, both due in part to the COVID-19 pandemic and other market and production factors, which could have impacted our investment in AllDale III.

As a result, as part of our First Quarter impairment assessment, we compared the fair value of our investment to its carrying value and concluded that the fair value exceeded the carrying value and no impairment in our investment was necessary.

In our subsequent quarterly impairment assessments, amid a modest recovery in commodity futures prices and increased clarity into production levels by operators, we again compared the fair value of our investment to its carrying value and concluded no impairment was necessary.

To calculate the fair value of the investment we used an income approach utilizing a discounted cash flow model based on our estimate of both volume, prices and expenses from information available to us.

Key assumptions used in our valuation are not observable in active markets;

therefore, the fair value measurements represent Level 3 fair value measurements.

The cash flow estimates used in our assessments, by their very nature, are dependent on conditions that could materially change in future periods based on new information.

If in future periods changes to these estimates were to materially reduce our expected cash flows, an impairment of our investment could be necessary.

On July 19, 2017, Alliance Minerals purchased $ 100 million of Series A-1 Preferred Interests from Kodiak Gas Services, LLC ("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 interest for $ 135.0 million in cash resulting in an $ 11.5 million gain due to an early redemption premium.

The gain is included in the Equity securities income line item.

We no longer hold any ownership interests in Kodiak.

Prior to redemption, we accounted for our ownership interests in Kodiak as equity securities without readily determinable fair values.

PARTNERS' CAPITAL

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February 14, 2020

August 14, 2019

November 14, 2019

February 14, 2020

In response to the disruptions to the economy and the uncertainty surrounding the COVID-19 pandemic, the Board of Directors of ARLP's general partner began suspending cash distributions to unitholders with the First Quarter and has continued through the quarter ended December 31, 2020.

May 14, 2021 (1)

(1) On April 26, 2021, we declared this quarterly distribution payable on May 14, 2021 to all unitholders of record as of May 7, 2021.

Unit Repurchase Program

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The unit repurchase program authorization does not obligate us to repurchase any dollar amount or number of units.

No unit repurchases were made during the nine months ended September 30, 2020.

No unit repurchases were made during the three months ended March 31, 2021.

Since inception of the unit repurchase program, we have repurchased and retired 5,460,639 units at an average unit price of $ 17.12 for an aggregate purchase price of $ 93.5 million.

Total units repurchased include the repurchase and retirement of 35 units representing fractional units as part of the simplification transactions completed by the ARLP Partnership on May 31, 2018 which are not part of the unit repurchase program.

The remaining authorized amount for unit repurchases under this program is $ 6.5 million.

Change in Partners' Capital

The following tables present the quarterly change in Partners' Capital for the nine months ended September 30, 2020 and 2019:

The following tables present the quarterly change in Partners' Capital for the three months ended March 31, 2021 and 2020:

Limited Partner

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Balance at January 1, 2021

Comprehensive income (loss):

Net income (loss)

Actuarially determined long-term liability adjustments

Total comprehensive loss

Settlement of deferred compensation plans

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Distributions to Partners

Balance at March 31, 2020

Comprehensive income (loss):

Actuarially determined long-term liability adjustments

Total comprehensive loss

Common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Balance at June 30, 2020

Comprehensive income:

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Distributions from consolidated company to noncontrolling interest

Balance at September 30, 2020

Balance at March 31, 2021

Limited Partner

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Balance at January 1, 2020

Comprehensive income:

Comprehensive income (loss):

Net income (loss)

Actuarially determined long-term liability adjustments

Total comprehensive income

Total comprehensive loss

Settlement of deferred compensation plans

Purchase of units under unit repurchase program

Common unit-based compensation

3 unchanged sentences

Balance at March 31, 2020

Comprehensive income:

Actuarially determined long-term liability adjustments

Total comprehensive income

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Distributions to Partners

Balance at June 30, 2019

Comprehensive income:

Actuarially determined long-term liability adjustments

Total comprehensive income

Common unit-based compensation

Distributions on deferred common unit-based compensation

Distributions from consolidated company to noncontrolling interest

Distributions to Partners

Balance at September 30, 2019

REVENUE FROM CONTRACTS WITH CUSTOMERS

The following table illustrates the disaggregation of our revenues by type, including a reconciliation to our segment presentation as presented in Note 16 – Segment Information.

Coal Operations

(in thousands)

Three Months Ended September 30, 2020

Oil & gas royalties

Transportation revenues

Other revenues

Total revenues

Three Months Ended September 30, 2019

Oil & gas royalties

Transportation revenues

Other revenues

Total revenues

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Oil & gas royalties

Coal royalties

Transportation revenues

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Total revenues

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Oil & gas royalties

Coal royalties

Transportation revenues

1 unchanged sentence

Total revenues

The following table illustrates the amount of our transaction price for all current coal supply contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2020 and disaggregated by segment and contract duration.

The following table illustrates the amount of our transaction price for all current coal supply contracts allocated to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2021 and disaggregated by segment and contract duration.

(in thousands)

Illinois Basin coal revenues

Appalachia coal revenues

Illinois Basin Coal Operations coal revenues

Appalachia Coal Operations coal revenues

Total coal revenues (1)

(1) Coal revenues generally consists of consolidated revenues excluding our Minerals segment .

(1) Coal revenues generally consists of consolidated revenues excluding our Oil & Gas Royalties segment as well as intercompany revenues from our Coal Royalties segment .

EARNINGS PER LIMITED PARTNER UNIT

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Net losses attributable to ARLP are allocated to limited partners but not to participating securities.

Our participating securities are outstanding awards under

our Long-Term Incentive Plan ("LTIP") and phantom units in notional accounts under our Supplemental Executive Retirement Plan ("SERP") and the MGP Amended and Restated Deferred Compensation Plan for Directors ("Directors' Deferred Compensation Plan").

The following is a reconciliation of net income (loss) attributable to ARLP used for calculating basic and diluted earnings per unit and the weighted-average units used in computing EPU for the three and nine months ended September 30, 2020 and 2019:

Our participating securities are outstanding restricted unit awards under our Long-Term Incentive Plan ("LTIP") and phantom units in notional accounts under our Supplemental Executive Retirement Plan ("SERP") and the MGP Amended and Restated Deferred Compensation Plan for Directors ("Directors' Deferred Compensation Plan").

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per unit data)

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Diluted EPU excludes all potentially dilutive units calculated under the treasury stock method if their effect is anti-dilutive.

The combined total of LTIP, SERP and Directors' Deferred Compensation Plan units of 661 and 656 for the three and nine months ended September 30, 2020, respectively, and 1,133 and 1,216 for the three and nine months ended September 30, 2019, respectively, were considered anti-dilutive under the treasury stock method .

The combined total of LTIP, SERP and Directors' Deferred Compensation Plan units of 1,237 and 851 for the three months ended March 31, 2021 and 2020, respectively, were considered anti-dilutive under the treasury stock method .

WORKERS' COMPENSATION AND PNEUMOCONIOSIS

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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Interest accretion

Valuation loss (1)

Ending balance

(1) Our estimate of the liability for the present value of current workers′ compensation benefits is based on our actuarial calculations.

Our actuarial calculations are based on a blend of actuarial projection methods and numerous assumptions including claims development patterns, mortality, medical costs and interest rates.

We conducted a 2020 mid-year review of our actuarial assumptions which resulted in a valuation loss due to unfavorable changes in claims development and a decrease in the discount rate from 2.81 % to 2.05 % .

Our 2019 mid-year actuarial review resulted in a valuation loss due to unfavorable changes in claims development and a decrease in the discount rate from 3.89 % to 3.06 % .

We limit our exposure to traumatic injury claims by purchasing a high deductible insurance policy that starts paying benefits after deductibles for a claim have been met.

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Our workers' compensation liability above is presented on a gross basis and does not include our expected receivables on our insurance policy.

Our receivables for traumatic injury claims under this policy as of September 30, 2020 are $ 7.1 million and are included in Other long-term assets on our condensed consolidated balance sheet.

Our receivables for traumatic injury claims under this policy as of March 31, 2021 are $ 7.1 million and are included in Other long-term assets on our condensed consolidated balance sheet.

Certain of our mine operating entities are liable under state statutes and the Federal Coal Mine Health and Safety Act of 1969, as amended, to pay pneumoconiosis, or black lung, benefits to eligible employees and former employees and their dependents.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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(1) Interest cost and net amortization are included in the Other expense line item within our condensed consolidated statements of income.

COMPENSATION PLANS

COMMON UNIT-BASED COMPENSATION PLANS

Long-Term Incentive Plan

We maintain the LTIP for certain employees and officers of MGP and its affiliates who perform services for us.

The LTIP awards are grants of non-vested "phantom"

or notional units, also referred to as "restricted units", which upon satisfaction of time and performance-based vesting requirements, entitle the LTIP participant to receive ARLP common units.

Annual grant levels and vesting provisions for designated participants are recommended by the Chairman, President and Chief Executive Officer of MGP, subject to review and approval of the compensation committee of the MGP board of directors (the "Compensation Committee").

Vesting of all grants outstanding is subject to the satisfaction of certain financial tests.

If it is not probable the financial tests for a particular grant will be met, any previously expensed amounts for the grant are reversed and no future expense will be recognized for those grants.

Assuming the financial tests are met, grants issued to LTIP participants are expected to cliff vest on January 1st of the third year following issuance of the grants.

We expect to settle these grants by delivery of ARLP common units, except for the portion of the grants that will satisfy employee tax withholding obligations of LTIP participants.

We account for forfeitures of non-vested LTIP grants as they occur.

As provided under the distribution equivalent rights ("DERs") provisions of the LTIP and the terms of the LTIP awards, all non-vested grants include contingent rights to receive quarterly distributions in cash or, at the discretion of the Compensation Committee, phantom units in lieu of cash credited to a bookkeeping account with value equal to the cash distributions we make to unitholders during the vesting period.

A summary of non-vested LTIP grants as of and for the nine months ended September 30, 2020 is as follows:

As part of our LTIP, unit awards of non-vested "phantom"

or notional units, also referred to as "restricted units", may be granted which upon satisfaction of time and performance-based vesting requirements, entitle the LTIP participant to receive ARLP common units.

Certain awards may also contain a minimum-value guarantee payable in ARLP common units or cash.

Annual grant levels, vesting provisions and minimum-value guarantees of restricted units for designated participants are recommended by Mr.

Craft, subject to review and approval of the compensation committee of the MGP board of directors (the "Compensation Committee").

Vesting of all restricted units outstanding is subject to the satisfaction of certain financial tests.

If it is not probable the financial tests for a particular grant of restricted units will be met, any previously expensed amounts for that grant are reversed and no future expense will be recognized for that grant.

Assuming the financial tests are met, grants of restricted units issued to LTIP participants are generally expected to cliff vest on January 1st of the third year following issuance of the grants.

We expect to settle restricted unit grants by delivery of newly-issued ARLP common units, except for the portion of the grants that will satisfy employee tax withholding obligations of LTIP participants.

We account for forfeitures of non-vested LTIP restricted unit grants as they occur.

As provided under the distribution equivalent rights ("DERs") provisions of the LTIP and the terms of the LTIP restricted unit awards, all non-vested restricted units include contingent rights to receive quarterly distributions in cash or, at the discretion of the Compensation Committee, phantom units in lieu of cash credited to a bookkeeping account with value equal to the cash distributions we make to unitholders during the vesting period.

If it is not probable the financial tests for a particular grant of restricted units will be met, any previously paid DER amounts for that grant are reversed from Partners’ Capital and recorded as compensation expense and any future DERs, for that grant, if any, will be recognized as compensation expense when paid.

A summary of non-vested LTIP grants as of and for the three months ended March 31, 2021 is as follows:

Number of units

Weighted average grant date fair value per unit

Intrinsic value

(in thousands)

Non-vested grants at January 1, 2021

Non-vested grants at September 30, 2020 (2)

(1) During the nine months ended September 30, 2020, we issued 279,622 unrestricted common units to the LTIP participants.

The remaining vested units were settled in cash to satisfy tax withholding obligations of the LTIP participants.

(2) Represents total non-vested grants outstanding including 675,302 restricted units that were granted in 2019 (the "2019 Grants").

During the First Quarter, it was determined that the vesting requirements for the 2019 Grants were not probable of being satisfied.

LTIP expense was $ 1.6 million and $ 2.7 million for the three months ended September 30, 2020 and 2019, respectively, and $ 2.5 million and $ 7.9 million for the nine months ended September 30, 2020 and 2019, respectively.

LTIP expense for the nine months ended September 30, 2020 includes the reversal in the First Quarter of $ 4.8 million of cumulative previously recognized expense for the 2019 Grants, which were determined to be not probable of vesting, offset in part by related DERs for the 2019 Grants previously recorded to equity and then expensed.

The total obligation associated with the LTIP as of September 30, 2020 was $ 11.3 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

As of September 30, 2020, we had 1,439,790 restricted units that are expected to vest, with a weighted average grant date fair value of $ 13.33 per unit and an intrinsic value of $ 4.0 million at $ 2.77 per unit.

There was $ 7.9 million in total unrecognized compensation expense related to the non-vested LTIP grants that are expected to vest.

Non-vested grants at March 31, 2021

LTIP expense for grants of restricted units was $ 0.7 million and $( 0.7 ) million for the three months ended March 31, 2021 and 2020, respectively.

LTIP expense for grants of restricted units for the three months ended March 31, 2020 includes the reversal of $ 4.8 million of cumulative previously recognized expense for the 2019 Grants, which were

determined to be not probable of vesting, offset in part by related DERs for the 2019 Grants previously recorded to equity and then expensed.

The total obligation associated with LTIP grants of restricted units as of March 31, 2021 was $ 2.1 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

As of March 31, 2021, there was $ 5.1 million in total unrecognized compensation expense related to the non-vested LTIP restricted unit grants that are expected to vest.

That expense is expected to be recognized over a weighted-average period of 1.8 years.

After consideration of the January 1, 2020 vesting and subsequent issuance of 279,622 common units, approximately 1.0 million units remain available under the LTIP for issuance in the future.

This available issuance excludes all grants currently outstanding.

Adding back the 2019 Grants that are not probable to vest, approximately 1.7 million units remain available under the LTIP for issuance in the future.

On April 22, 2021, the Compensation Committee also authorized additional grants of 1,833,190 restricted units, of which 1,818,190 units were granted.

The new grants are subject to both a service and performance requirement and contain minimum-value guarantees.

Supplemental Executive Retirement Plan and Directors' Deferred Compensation Plan

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All grants of phantom units under the SERP and Directors' Deferred Compensation Plan vest immediately.

A summary of SERP and Directors' Deferred Compensation Plan activity as of and for the nine months ended September 30, 2020 is as follows:

Number of units

Weighted average grant date fair value per unit

Intrinsic value

(in thousands)

Phantom units outstanding as of January 1, 2020

Phantom units outstanding as of September 30, 2020

Total SERP and Directors' Deferred Compensation Plan expense was $ 0.1 million and $ 0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.4 million and $ 1.1 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, the total obligation associated with the SERP and Directors' Deferred Compensation Plan was $ 16.3 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

Total SERP and Directors' Deferred Compensation Plan expense was $ 0.04 million and $ 0.3 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there were 760,630 total phantom units outstanding under the SERP and Directors' Deferred Compensation Plan with a weighted average grant date fair value of $ 22.04 per unit and a total intrinsic value of $ 4.4 million.

As of March 31, 2021, the total obligation associated with the SERP and Directors' Deferred Compensation Plan was $ 16.8 million and is included in the partners' capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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(1) Net periodic benefit cost for the Pension Plan is included in the Other expense line item within our condensed consolidated statements of income.

During the nine months ended September 30, 2020, we made contribution payments of $ 1.7 million to the Pension Plan for the 2019 plan year.

We expect to defer additional contributions to the Pension Plan until December 2020 as permitted under the Coronavirus Aid Relief and Economic Security Act of 2020 enacted in response to the COVID-19 pandemic.

During the three months ended March 31, 2021, we made contribution payments totaling $ 3.3 million to the Pension Plan for the 2020 plan year.

As a result of certain pension plan contribution relief provided by the American Rescue Plan Act enacted in March 2021, we do not expect to make additional contributions to the Pension Plan during 2021 or 2022.

SEGMENT INFORMATION

We operate in the United States as a diversified natural resource company that generates income from the production and marketing of coal to major domestic and international utilities and industrial users as well as income from oil & gas mineral interests.

We aggregate multiple operating segments into three reportable segments, Illinois Basin, Appalachia, and Minerals.

We operate in the United States as a diversified natural resource company that generates operating and royalty income from the production and marketing of coal to major domestic and international utilities and industrial users as well as royalty income from oil & gas mineral interests.

We aggregate multiple operating segments into four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties.

We also have an "all other"

category referred to as Other and Corporate.

Our two coal reportable segments correspond to major coal producing regions in the eastern United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

The two coal segments include seven mining complexes operating in Illinois, Indiana, Kentucky, Maryland and West Virginia and a coal loading terminal in Indiana on the Ohio River.

The Minerals reportable segment aggregates our oil & gas mineral interests which are located primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK), and Williston (Bakken) basins.

We have no operations within our Minerals reportable segment other than receiving royalties and lease bonuses for our oil & gas mineral interests.

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

The Illinois Basin reportable segment also includes our currently operating Mt.

Our two coal operations reportable segments correspond to major coal producing regions in the eastern United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

The two coal operations reportable segments include seven mining complexes operating in Illinois, Indiana, Kentucky, Maryland, Pennsylvania and West Virginia and a coal loading terminal in Indiana on the Ohio River.

Our Oil & Gas Royalties reportable segment includes our oil & gas mineral interests which are located primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK), and Williston (Bakken) basins.

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

Our Coal Royalties reportable segment includes coal reserves controlled by Alliance Resource Properties, which are either (a) leased to certain of our coal mining entities or (b) unleased but near our coal mining operations.

Beginning in the first quarter of 2021, we began to strategically view and manage our coal royalty activities separately from our coal mining operations since acquiring and managing a variety of royalty producing assets have similar management attributes.

As a result, we restructured our reportable segments to better reflect this strategic view in how we manage our business and allocate resources.

Prior periods have been recast to include Alliance Resource Properties within our new Coal Royalties reportable segment with offsetting recast adjustments primarily to our coal operations reportable segments and to a lesser extent, our Other and Corporate category.

Our reported eliminations were recast also to reflect intercompany royalty revenues and offsetting intercompany royalty expense resulting from our new Coal Royalties reportable segment.

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

The Illinois Basin Coal Operations reportable segment also includes our currently operating Mt.

Vernon Transfer Terminal, LLC ("Mt.

Vernon") coal loading terminal in Indiana on the Ohio River.

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

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

Our Coal Royalties reportable segment discussed below, controls other coal reserves near our Illinois Basin operations which have not yet been leased to our Illinois Basin mining entities.

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

The Appalachia Coal Operations reportable segment includes currently operating mining complexes (a) the Mettiki mining complex, (b) the Tunnel Ridge, LLC mining complex and (c) the MC Mining, LLC ("MC Mining") mining complex.

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

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

The Minerals reportable segment includes oil & gas mineral interests held by AR Midland and AllDale I & II and includes Alliance Minerals' equity interests in both AllDale III (Note 11 – Investments) and Cavalier Minerals.

AR Midland acquired its mineral interest in the Wing Acquisition (Note 3 – Acquisition).

In February 2019, Kodiak redeemed our equity investment (see Note 11 – Investments).

In addition, Other and Corporate includes certain Alliance Resource Properties, LLC's land and coal mineral interest activities, Pontiki Coal, LLC's workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"), which assists the ARLP Partnership with its insurance requirements, and AROP Funding and Alliance Finance (both discussed in Note 9 – Long-Term Debt).

In response to the impacts of the COVID-19 pandemic, we announced on March 30, 2020 a temporary cessation of coal production at our River View, Gibson, Hamilton and Warrior mining complexes in our Illinois Basin segment and on April 9, 2020 a temporary cessation of coal production at our MC Mining complex in our Appalachia segment.

Underground production operations resumed in the second quarter at each of our mining complexes.

All of our seven mining complexes are now producing coal.

However, several mines continue running at less than capacity due to a limited spot market in the U.S.

and a seaborne market that continues to be sub-economic for U.S.

Due to the ongoing and unforeseen impacts of the COVID-19 pandemic, on April 15, 2020, 116 employees of the Gibson County mining complex and 78 employees of the Hamilton mining complex were notified that their employment would be terminated permanently on April 26, 2020.

In addition to reduced production levels and employment adjustments, we have also taken numerous actions to optimize cash flows and preserve liquidity by reducing capital expenditures, working capital, costs and expenses, including adjusting our corporate support structure to better align to current operating levels.

Our Coal Royalties reportable segment discussed below, controls the Penn Ridge coal reserves near our Tunnel Ridge operations which have not yet been leased to Tunnel Ridge.

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

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

About two thirds of the coal sold by our Coal Operations' mines is leased from our Coal Royalties entities.

Other and Corporate includes marketing and administrative activities, Matrix Design Group, LLC and its subsidiaries ("Matrix Design"), Alliance Design Group, LLC ("Alliance Design") (collectively, Matrix Design and Alliance Design referred to as the "Matrix Group"), Pontiki Coal, LLC's workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"), which assists the ARLP Partnership with its insurance requirements, and AROP Funding and Alliance Finance (both discussed in Note 7 – Long-Term Debt).

Reportable segment results are presented below.

Coal Operations

(in thousands)

Three Months Ended September 30, 2020

Revenues - Outside

Revenues - Intercompany

Total revenues (2)

Segment Adjusted EBITDA Expense (3)

Segment Adjusted EBITDA (4)

Capital expenditures

Three Months Ended September 30, 2019

Revenues - Outside

Revenues - Intercompany

Total revenues (2)

Segment Adjusted EBITDA Expense (3)

Segment Adjusted EBITDA (4)

Capital expenditures

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Revenues - Outside

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Capital expenditures

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Revenues - Outside

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Capital expenditures

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

(2) Revenues included in the Other and Corporate column are primarily attributable to the Matrix Group revenues, administrative service revenues from affiliates, Wildcat Insurance revenues and brokerage coal sales.

(1) The elimination column represents the elimination of intercompany transactions and is primarily comprised of coal royalties paid by certain of our coal operation entities to Alliance Resource Properties, sales from the Matrix Group to our mining operations, coal sales and purchases between operations within different segments, sales of receivables to AROP Funding, financing between segments and insurance premiums paid to Wildcat Insurance.

(2) Revenues included in the Other and Corporate column are primarily attributable to the outside and affiliate revenues at the Matrix Group and coal brokerage activities.

In addition, Other and Corporate includes affiliate revenues from administrative and Wildcat Insurance revenues services.

(3) Segment Adjusted EBITDA Expense includes operating expenses, coal purchases and other income.

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Segment Adjusted EBITDA Expense

Outside coal purchases

Other expense

Operating expenses (excluding depreciation, depletion and amortization)

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

Management therefore is able to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments.

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

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Interest expense, net

Acquisition gain

Income tax expense

Acquisition gain attributable to noncontrolling interest

Income tax benefit

Net income (loss) attributable to ARLP

1 unchanged sentence

Net income (loss)

(5) Capital Expenditures shown exclude the AllDale Acquisition which occurred in January 2019 and Wing Acquisition whic h occurred in August 2019 .

SUBSEQUENT EVENTS

Other than the events described in Notes 10 and 14, there were no subsequent events.

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-Q

Item 1. Financial Statements