What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-06 compared with 2021-05-07 · 205 added, 80 removed, 255 unchanged (53% of the section changed)

16 unchanged sentences

● References to "Alliance Coal"

mean Alliance Coal, LLC, the holding company for the coal mining operations of Alliance Resource Operating Partners, L.P.

mean Alliance Coal, LLC, the holding company for our coal mining operations.

● References to "Alliance Minerals"

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

mean Alliance Minerals, LLC, the holding company for our oil and gas minerals interests.

● 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.

mean Alliance Resource Properties, LLC, the land holding company for certain of our coal mineral interests, including the subsidiaries of Alliance Resource Properties, LLC.

We are a diversified natural resource company operating in the United States 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.

16 unchanged sentences

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.

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.

● 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 County Coal, LLC ("Hamilton") mining complex.

17 unchanged sentences

of this Quarterly Report on Form 10-Q for more information on AROP Funding.

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

We reported net income attributable to ARLP of $24.7 million for the three months ended March 31, 2021 ("2021 Quarter") compared to a net loss attributable to ARLP of $144.8 million for the three months ended March 31, 2020 ("2020 Quarter").

The increase of $169.5 million was primarily due to non-cash asset and goodwill impairment charges of $157.0 million recorded in the 2020 Quarter and reduced operating expenses, partially offset by lower revenues.

Total revenues decreased to $318.6 million in the 2021 Quarter compared to $350.8 million for the 2020 Quarter due to reduced coal sales volumes and price realizations as well as lower contract buy-out revenues, partially offset by higher transportation revenues due to increased coal sales into the export markets.

Weather-related transportation disruptions and an unplanned customer plant outage impacted anticipated coal shipments during the 2021 Quarter, contributing to a 9.2% reduction in total revenues compared to the 2020 Quarter.

Lower coal volumes and ongoing efficiency initiatives at our mining operations contributed to lower operating expenses of $196.5 million for the 2021 Quarter, compared to $234.3 million for the 2020 Quarter, largely offsetting lower total revenues.

In general, the results from the 2021 Quarter benefited as compared to

the 2020 Quarter, from significantly reduced disruptions to global energy demand created by the COVID-19 pandemic that negatively impacted our results for the 2020 Quarter.

Three Months Ended March 31,

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

We reported net income attributable to ARLP of $44.0 million for the three months ended June 30, 2021 ("2021 Quarter") compared to a net loss attributable to ARLP of $46.7 million for the three months ended June 30, 2020 ("2020 Quarter").

The increase of $90.7 million was primarily due to higher revenues, partially offset by increased operating expenses.

Increased coal sales volumes and oil & gas prices drove total revenues higher in the 2021 Quarter by 42.0% to $362.4 million, compared to $255.2 million for the 2020 Quarter.

In general, the results from the 2021 Quarter benefited as compared to the 2020 Quarter, from significantly reduced disruptions to global energy demand created by the COVID-19 pandemic that negatively impacted our results for the 2020 Quarter.

Three Months Ended June 30,

(in thousands)

(per ton/BOE sold)

(per ton / per BOE sold)

Coal - Tons sold

10 unchanged sentences

(3) Average sales price per BOE is defined as oil & gas royalty revenues excluding lease bonus revenue divided by total BOE sold.

Coal sales decreased $27.1 million or 8.6% to $287.5 million for the 2021 Quarter from $314.6 million for the 2020 Quarter.

The decrease was attributable to a volume variance of $18.3 million resulting from decreased tons sold and a price variance of $8.8 million due to lower average coal sales prices.

Tons sold declined to 6.8 million tons in the 2021 Quarter compared to 7.3 million tons in the 2020 Quarter primarily reflecting weather-related transportation disruptions, and an unplanned customer plant outage offset in part by increased export volumes.

Coal sales price realizations also fell by 3.0% in the 2021 Quarter to $42.10 per ton sold, compared to $43.39 per ton sold during the 2020 Quarter due to the expiration of higher priced contract shipments.

Coal sales increased $89.7 million or 38.0% to $326.0 million for the 2021 Quarter from $236.3 million for the 2020 Quarter.

The increase was attributable to a volume variance of $121.2 million resulting from increased tons sold, partially offset by a price variance of $31.5 million due to lower average coal sales prices.

Improved domestic and international coal demand during the 2021 Quarter drove coal sales volumes higher by 51.3% to 7.8 million tons sold compared to 5.2 million tons sold in the 2020 Quarter, which was adversely impacted by the pandemic.

Contributing to the increase for the 2021 Quarter was the shipment of tons delayed in the three months ended March 31, 2021 due to weather-related transportation disruptions and an unplanned customer outage.

Coal sales price realizations decreased by 8.8% in the 2021 Quarter to $41.55 per ton sold, compared to $45.56 per ton sold during the 2020 Quarter, due to the expiration of higher priced contract shipments.

Production volumes increased by 73.1% in the 2021 Quarter, reflecting the temporary idling of production at certain mines during the 2020 Quarter in response to weak market conditions resulting from the pandemic.

Coal - Segment Adjusted EBITDA Expense .

Segment Adjusted EBITDA Expense for our coal operations decreased 15.7% to $202.9 million, as a result of reduced tons sold and lower expense per ton.

On a per ton basis, Segment Adjusted EBITDA Expense for our coal operations decreased 10.5% in the 2021 Quarter to $29.72 per ton sold, compared to $33.20 per ton in the 2020 Quarter, primarily due to ongoing expense control and efficiency initiatives at all of our mining operations and improved recoveries at our Hamilton, Warrior, Tunnel Ridge and MC Mining operations.

Segment Adjusted EBITDA Expense for our coal operations increased 15.1% to $218.9 million, as a result of higher coal sales volumes.

On a per ton basis, Segment Adjusted EBITDA Expense for our coal operations decreased 23.9% in the 2021 Quarter to $27.90 per ton sold, compared to $36.67 per ton in the 2020 Quarter, primarily due to increased volumes, lower inventory charges, improved recoveries at several mines and the benefit of ongoing expense control and efficiency initiatives at all of our mining operations.

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

● Labor and benefit expenses per ton produced, excluding workers' compensation, decreased 24.2% to $9.35 per ton in the 2021 Quarter from $12.33 per ton in the 2020 Quarter.

The decrease of $1.44 per ton was primarily due to decreased labor expenses at various mines resulting from ongoing expense controls, efficiency initiatives and improved recoveries at certain mines mentioned above.

The decrease of $2.98 per ton was primarily due to increased volumes at our Illinois Basin mines where production was temporarily idled in the 2020 Quarter in response to weak market conditions resulting from the pandemic.

● Workers' compensation expenses per ton produced decreased to $0.24 per ton in the 2021 Quarter from $1.33 per ton in the 2020 Quarter.

The decrease of $1.09 per ton produced resulted from favorable mid-year workers' compensation accrual adjustments in the 2021 Quarter, primarily due to an increase in the discount rate, compared to the 2020 Quarter, which had a valuation loss due to unfavorable changes in claims development and a decrease in the discount rate.

● Material and supplies expenses per ton produced decreased 19.3% to $9.17 per ton in the 2021 Quarter from $11.36 per ton in the 2020 Quarter.

The decrease of $0.99 per ton produced resulted primarily from related decreases of $0.57 per ton for outside expenses used in the mining processes, $0.19 per ton for environmental and reclamation expenses other than longwall subsidence, $0.18 per ton for certain ventilation expenses, $0.17 per ton for power and fuel used in the mining process and $0.14 per ton for safety related materials and supplies, partially offset by an increase of $0.60 per ton in longwall subsidence expense primarily at our Tunnel Ridge operation .

The decrease of $2.19 per ton produced reflects decreases of $1.06 per ton for outside expenses used in the mining processes, $0.91 per ton for power and fuel used in the mining process, $0.61 per ton for environmental and reclamation expenses other than longwall subsidence and $0.27 per ton in longwall subsidence expense primarily at our Tunnel Ridge operation, partially offset by increases of $1.02 per ton for roof support and $0.25 per ton for contract labor used in the mining process.

● Maintenance expenses per ton produced decreased 18.6% to $2.59 per ton in the 2021 Quarter from $3.18 per ton in the 2020 Quarter.

The decrease of $1.09 per ton produced was primarily due to reduced maintenance expenses at our longwall mining operations and improved recoveries previously mentioned.

Segment Adjusted EBITDA Expense decreases per ton above were partially offset by the following increase:

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes increased $0.23 per produced ton sold in the 2021 Quarter compared to the 2020 Quarter primarily as a result of increased production in states with higher severance taxes per ton.

The decrease of $0.59 per ton produced was primarily due to increased production and improved recoveries previously mentioned.

● Production taxes and royalty expenses per ton incurred as a percentage of coal sales prices and volumes decreased $0.56 per produced ton sold in the 2021 Quarter compared to the 2020 Quarter primarily as a result of lower coal sales prices and a favorable state tons sold mix decreasing severance taxes per ton, in addition to decreased excise taxes per ton resulting from a greater mix of export shipments.

Oil & gas royalties.

Oil & gas royalty revenues increased to $17.1 million in the 2021 Quarter compared to $7.8 million for the 2020 Quarter.

The increase of $9.3 million was primarily due to significantly higher sales price realizations per BOE.

Depreciation, depletion and amortization.

Depreciation, depletion and amortization expense decreased to $64.7 million for the 2021 Quarter compared to $83.6 million for the 2020 Quarter primarily as a result of increased mine life estimates for certain mines and reduced depreciation associated with coal inventory changes.

Transportation revenues and expenses .

Transportation revenues and expenses were $12.1 million and $5.8 million for the 2021 and 2020 Quarters, respectively.

The increase of $6.3 million was primarily attributable to increased average third-party transportation rates in the 2021 Quarter and increased coal tonnage for which we arrange third-party transportation at certain mines primarily due to increased coal shipments to international markets.

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

Segment Adjusted EBITDA.

Our 2021 Quarter Segment Adjusted EBITDA increased $74.0 million to $136.1 million from the 2020 Quarter Segment Adjusted EBITDA of $62.1 million.

Segment Adjusted EBITDA, tons sold, coal sales, other revenues, oil & gas royalties, BOE volume, coal royalties, coal royalties tons sold and Segment Adjusted EBITDA Expense by segment are as follows:

Three Months Ended

Increase (Decrease)

(in thousands)

Segment Adjusted EBITDA

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other and Corporate

Total Segment Adjusted EBITDA (2)

Coal - Tons sold

Illinois Basin Coal Operations

Appalachia Coal Operations

Total tons sold

Illinois Basin Coal Operations

Appalachia Coal Operations

Total coal sales

Other revenues

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Other and Corporate

Total other revenues

Segment Adjusted EBITDA Expense

Illinois Basin Coal Operations

Appalachia Coal Operations

Oil & Gas Royalties

Coal Royalties

Other and Corporate

Elimination (3)

Total Segment Adjusted EBITDA Expense

Oil & Gas Royalties

Volume - BOE (4)

Oil & gas royalties

Coal Royalties

Volume - Tons sold (5)

Intercompany coal royalties

(1) Percentage change not meaningful.

(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) Primarily includes the elimination of intercompany coal royalty revenues and expenses between our Coal Royalties Segment and our Coal Operations Segments.

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

(5) Represents tons sold by our Coal Operations Segments associated with coal reserves leased from our Coal Royalties Segment.

Illinois Basin Coal Operations – Segment Adjusted EBITDA increased to $70.6 million in the 2021 Quarter from $22.7 million in the 2020 Quarter.

The increase of $47.9 million was primarily attributable to higher coal sales, which increased 56.6% to $210.2 million in the 2021 Quarter from $134.2 million in the 2020 Quarter, partially offset by increased operating expenses.

The increase of $76.0 million in coal sales primarily reflects increased sales volumes, which rose 61.9% compared to the 2020 Quarter due to improved coal demand and increased export volumes reflecting the continued economic recovery from the COVID-19 pandemic.

Segment Adjusted EBITDA Expense increased 25.2% to $140.2 million in the 2021 Quarter from $112.0 million in the 2020 Quarter primarily as a result of increased sales volumes.

Segment Adjusted EBITDA Expense per ton decreased $7.58 per ton sold to $25.84 from $33.42 per ton sold in the 2020 Quarter primarily as a result of increased volumes at all of our Illinois Basin mines reflecting the temporary idling and scaling back of Illinois Basin operations in the 2020 Quarter in response to weak market conditions resulting from the pandemic offset in part by increased longwall move days at our Hamilton mine.

Lower inventory charges, the impact of ongoing expense control and efficiency initiatives at all of our mining operations in the region and improved recoveries at our Hamilton mine also contributed to the expense decrease.

In addition, see certain cost variances described above under "–Coal - Segment Adjusted EBITDA Expense"

and particularly related to expense decreases associated with workers compensation expense.

Appalachia Coal Operations – Segment Adjusted EBITDA increased 37.5% to $41.6 million for the 2021 Quarter from $30.3 million in the 2020 Quarter.

The increase of $11.3 million was primarily attributable to higher coal sales, which increased 13.4% to $115.8 million in the 2021 Quarter from $102.1 million in the 2020 Quarter.

The increase in coal sales reflects higher tons sold, partially offset by lower price realizations.

Tons sold increased 31.9% in the 2021 Quarter compared to the 2020 Quarter due to increased sales volumes at our Tunnel Ridge and MC Mining operations resulting from improved market conditions.

Coal sales price per ton sold in the 2021 Quarter decreased 14.0% compared to the 2020 Quarter primarily due to the expiration of higher priced contract shipments at our Tunnel Ridge and MC Mining mines and reduced export shipments of higher priced metallurgical coal from our Mettiki mine.

Segment Adjusted EBITDA Expense remained comparable to the 2020 Quarter as reduced per ton costs in the 2021 Quarter offset increased expenses resulting from higher sales volumes in the 2021 Quarter.

Segment Adjusted EBITDA Expense per ton decreased $9.68 per ton sold to $30.75 compared to $40.43 per ton sold in the 2020 Quarter, as a result of increased sales volumes, favorable inventory charges, ongoing expense control and efficiency initiatives and improved recoveries across the region, partially offset by reduced longwall shifts at our Mettiki mine, and increased longwall move days and certain operational transition issues with new longwall equipment both at our Tunnel Ridge mine in the 2021 Quarter.

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

and particularly related to expense per ton decreases associated with selling expenses.

Oil & Gas Royalties – Segment Adjusted EBITDA increased to $15.4 million for the 2021 Quarter from $6.9 million in the 2020 Quarter.

The increase of $8.5 million was primarily due to significantly higher sales price realizations per BOE, which more than offset lower BOE volumes.

Coal Royalties – Segment Adjusted EBITDA increased 80.5% to $6.8 million for the 2021 Quarter from $3.8 million in the 2020 Quarter.

The increase of $3.0 million was a result of increased royalty tons sold and higher average royalty rates per ton received from our mining subsidiaries, partially offset by increased selling expenses.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

We reported net income attributable to ARLP of $68.8 million for the six months ended June 30, 2021 ("2021 Period") compared to a net loss attributable to ARLP of $191.4 million for the six months ended June 30, 2020 ("2020 Period").

The increase of $260.2 million resulted from higher revenues, reduced operating expenses, lower depreciation and $157.0 million of non-cash impairment charges in the 2020 Period.

Coal sales volumes increased 18.0% compared to the 2020 Period driving total revenues higher by 12.4%.

Ongoing cost control and efficiency initiatives at our mining operations, offset in part by expense increases resulting from higher coal sales volumes, contributed to lower operating expenses of $409.6 million for the 2021 Period, compared to $421.5 million for the 2020 Period.

In general, results for

the 2021 Period were significantly improved compared to the 2020 Period, which was impacted by reduced global energy demand and weak commodity prices as a result of lockdown measures imposed in response to the COVID-19 pandemic.

Six Months Ended June 30,

(in thousands)

(per ton / per BOE sold)

Coal - Tons sold

Coal - Tons produced

Coal - Coal sales

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

Oil & Gas Royalties - BOE sold

Oil & Gas Royalties – Royalties (3)

Coal Royalties - Tons sold

Coal Royalties - Intercompany royalties

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

to GAAP "Operating Expenses."

(2) Coal - Segment Adjusted EBITDA Expense is defined as consolidated Segment Adjusted EBITDA Expense excluding expenses of our Oil & Gas Royalties segment and is adjusted for intercompany transactions with our Coal Royalties segment.

(3) Average sales price per BOE is defined as oil & gas royalty revenues excluding lease bonus revenue divided by total BOE sold.

Coal sales increased $62.6 million or 11.4% to $613.5 million for the 2021 Period from $550.9 million for the 2020 Period.

The increase was attributable to a volume variance of $99.1 million resulting from increased tons sold partially offset by a price variance of $36.5 million due to lower average coal sales prices.

Tons sold increased 18.0% to 14.7 million tons in the 2021 Period due to improved coal demand and increased export shipments.

Primarily due to the expiration of higher priced contract shipments, coal sales price realizations declined 5.6% in the 2021 Period to $41.81 per ton sold, compared to $44.30 per ton sold during the 2020 Period.

Production volumes increased by 25.4% in the 2021 Period, reflecting the temporary idling and scaling back of production at certain mines during the 2020 Period in response to weak market conditions resulting from the pandemic.

Coal - Segment Adjusted EBITDA Expense .

Segment Adjusted EBITDA Expense for our coal operations decreased 2.1% to $421.8 million, primarily as a result of reduced costs per ton, partially offset by increased expenses associated with higher coal sales volumes.

Segment Adjusted EBITDA Expense per ton decreased 17.1% in the 2021 Period to $28.74 per ton, compared to $34.65 per ton in the 2020 Period.

The decrease was attributed primarily to increased volumes, lower inventory charges, improved recoveries at several mines and the impact of ongoing expense control and efficiency initiatives at all of our mining operations in addition to other cost decreases which are discussed below by category:

● Labor and benefit expenses per ton produced, excluding workers' compensation, decreased 17.5% to $9.39 per ton in the 2021 Period from $11.38 per ton in the 2020 Period.

The decrease of $1.99 per ton was primarily due to increased volumes at our Illinois Basin mines where production was temporarily idled in the 2020 Period in response to weak market conditions resulting from the pandemic.

● Workers' compensation expenses per ton produced decreased to $0.32 per ton in the 2021 Period from $0.74 per ton in the 2020 Period.

The decrease of $0.42 per ton produced resulted from favorable mid-year workers' compensation accrual adjustments in the 2021 Period, primarily due to an increase in the discount rate, compared to the 2020 Period, which had a valuation loss due to unfavorable changes in claims development and a decrease in the discount rate.

● Material and supplies expenses per ton produced decreased 13.7% to $9.57 per ton in the 2021 Period from $11.09 per ton in the 2020 Period.

The decrease of $1.52 per ton produced reflects decreases of $0.73 per ton for outside expenses used in the mining processes, $0.43 per ton for power and fuel used in the mining process and $0.35 per ton for environmental and reclamation expenses other than longwall subsidence, partially offset by an increase of $0.38 per ton for roof support.

● Maintenance expenses per ton produced decreased 26.1% to $2.57 per ton in the 2021 Period from $3.48 per ton in the 2020 Period.

The decrease of $0.91 per ton produced was primarily due to increased production and improved recoveries previously mentioned.

Oil & gas royalties.

Oil & gas royalty revenues increased to $31.1 million in the 2021 Period compared to $22.0 million for the 2020 Period.

The increase of $9.1 million was primarily due to significantly higher sales price realizations per BOE.

Other revenues .

Other revenues were principally comprised of Mt.

Vernon transloading revenues in our Illinois Basin Coal Operations segment, Matrix Design sales in Other & Corporate as well as revenues not specific to any particular segment such as contract buy-out revenues and other outside services.

Other revenues decreased to $6.1 million in the 2021 Quarter from $17.1 million in the 2020 Quarter.

The decrease of $11.0 million was primarily due to a customer buy-out of certain coal contracts at our Tunnel Ridge mine during the 2020 Quarter.

Other revenues decreased to $13.4 million in the 2021 Period from $22.5 million in the 2020 Period.

The decrease of $9.1 million was primarily due to a customer buy-out of certain coal contracts at our Tunnel Ridge mine during the 2020 Period.

Depreciation, depletion and amortization.

Depreciation, depletion and amortization expense decreased to $59.2 million for the 2021 Quarter compared to $73.9 million for the 2020 Quarter primarily as a result of reduced sales volumes and increased mine life estimates for certain mines.

Depreciation, depletion and amortization expense decreased to $123.9 million for the 2021 Period compared to $157.5 million for the 2020 Period primarily as a result of increased mine life estimates for certain mines and reduced depreciation associated with a) coal inventory changes, b) certain mines closed prior to 2021 and c) lower BOE volumes.

Asset impairment.

During the 2020 Quarter, 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 the 2020 Period, 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.

Please read "Item 1.

2 unchanged sentences

Goodwill impairment.

During the 2020 Quarter, 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.

During the 2020 Period, 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 1.

2 unchanged sentences

Transportation revenues and expenses .

Transportation revenues and expenses were $11.1 million and $4.7 million for the 2021 and 2020 Quarters, respectively.

The increase of $6.4 million was primarily attributable to increased average third-party transportation rates in the 2021 Quarter and increased coal tonnage for which we arrange third-party transportation at certain mines primarily due to increased coal shipments to international markets.

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

Transportation revenues and expenses were $23.1 million and $10.5 million for the 2021 and 2020 Periods, respectively.

The increase of $12.6 million was primarily attributable to increased average third-party transportation rates in the 2021 Period and increased coal tonnage for which we arrange third-party transportation at certain mines primarily due to increased coal shipments to international markets.

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

Segment Adjusted EBITDA.

Our 2021 Quarter Segment Adjusted EBITDA decreased $1.9 million, or 1.7%, to $109.8 million from the 2020 Quarter Segment Adjusted EBITDA of $111.7 million.

Our 2021 Period Segment Adjusted EBITDA increased $72.1 million, or 41.5%, to $245.9 million from the 2020 Period Segment Adjusted EBITDA of $173.8 million.

Three Months Ended

Six Months Ended

Increase (Decrease)

41 unchanged sentences

(5) Represents tons sold by our Coal Operations Segments associated with coal reserves leased from our Coal Royalties Segment.

Illinois Basin Coal Operations – Segment Adjusted EBITDA increased 33.1% to $57.7 million in the 2021 Quarter from $43.3 million in the 2020 Quarter.

The increase of $14.4 million was primarily attributable to reduced operating expenses, partially offset by lower coal sales, which decreased 8.3% to $182.6 million in the 2021 Quarter from $199.1 million in the 2020 Quarter.

The decrease of $16.5 million in coal sales primarily reflects reduced tons sold, which decreased 5.9% compared to the 2020 Quarter due to reduced domestic sales partially offset by increased export volumes.

Segment Adjusted EBITDA Expense decreased 19.9% to $125.6 million in the 2021 Quarter from $156.7 million in the 2020 Quarter primarily as a result of reduced tons sold and decreased per ton costs.

Segment Adjusted EBITDA Expense per ton decreased $4.61 per ton sold to $26.38 from $30.99 per ton sold in the 2020 Quarter primarily as a result of ongoing expense control and efficiency initiatives in the region and improved recoveries at our Hamilton and Warrior operations.

Illinois Basin Coal Operations – Segment Adjusted EBITDA increased 94.4% to $128.3 million in the 2021 Period from $66.0 million in the 2020 Period.

The increase of $62.3 million was primarily attributable to higher coal sales, which increased 17.9% to $392.8 million in the 2021 Period from $333.3 million in the 2020 Period.

The increase of $59.5 million in coal sales primarily reflects increased sales volumes, which rose 21.2% compared to the 2020 Period due to improved coal demand and increased export volumes reflecting the continued economic recovery from the COVID-19 pandemic.

Ongoing cost control and efficiency initiatives, offset in part by expense increases resulting from higher coal sales volumes, contributed to slightly lower Segment Adjusted EBITDA Expense in the 2021 Period compared to the 2020 Period.

Segment Adjusted EBITDA Expense per ton decreased 18.4% to $26.09 from $31.96 per ton sold in the 2020 Period primarily as a result of increased volumes where production was temporarily idled and scaled back in the 2020 Period in response to weak market conditions resulting from the pandemic.

Lower inventory charges and the impact of ongoing expense control and efficiency initiatives at all of our mining operations in the region also contributed to the decrease.

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

Appalachia Coal Operations – Segment Adjusted EBITDA decreased 33.4% to $31.5 million for the 2021 Quarter from $47.3 million in the 2020 Quarter.

The decrease of $15.8 million was primarily attributable to lower contract buy-out revenues at Tunnel Ridge as discussed above and lower coal sales, which decreased 9.3% to $104.8 million in the 2021 Quarter from $115.5 million in the 2020 Quarter, partially offset by reduced operating expenses.

The decrease of $10.7 million in coal sales reflects lower tons sold and price realizations.

Tons sold decreased 5.8% in the 2021 Quarter compared to the 2020 Quarter due to reduced sales volumes at our Tunnel Ridge mine as a result of an unplanned customer plant outage and weather-related delays.

Coal sales price per ton sold in the 2021 Quarter decreased 3.7% compared to the 2020 Quarter primarily due to the expiration of higher priced contract shipments.

Segment Adjusted EBITDA Expense decreased 7.7% to $73.7 million in the 2021 Quarter from $79.9 million in the 2020 Quarter due to reduced tons sold and decreased per ton costs.

Segment Adjusted EBITDA Expense per ton decreased $0.76 per ton sold to $35.65 compared to $36.41 per ton sold in the 2020 Quarter, as a result of ongoing expense control and efficiency initiatives as well as improved recoveries at our Tunnel Ridge and MC Mining operations.

Appalachia Coal Operations – Segment Adjusted EBITDA decreased 5.7% to $73.1 million for the 2021 Period from $77.6 million in the 2020 Period.

The decrease of $4.5 million was primarily attributable to lower contract buy-out revenues at Tunnel Ridge as discussed above, partially offset by reduced operating expenses and higher coal sales.

Coal sales increased slightly to $220.7 million in the 2021 Period compared to $217.7 million in the 2020 Period as a result of increased sales volumes, partially offset by lower price realizations.

Tons sold increased 11.4% in the 2021 Period compared to the 2020 Period due to increased sales volumes at our Tunnel Ridge and MC Mining operations resulting from improved market conditions.

Coal sales price per ton sold in the 2021 Period decreased 9.0% compared to the 2020 Period primarily due to the expiration of higher priced contract shipments and reduced export shipments of higher priced metallurgical coal from our Mettiki mine.

Segment Adjusted EBITDA Expense decreased to $148.2 million in the 2021 Period from $154.1 million in the 2020 Period due to decreased per ton costs, partially offset by increased volumes.

Segment Adjusted EBITDA Expense per ton decreased $5.23 per ton sold to $33.01 compared to $38.24 per ton sold in the 2020 Period, as a result of increased sales volumes, ongoing expense control and efficiency initiatives and improved recoveries across the region.

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

Oil & Gas Royalties – Segment Adjusted EBITDA decreased to $11.9 million for the 2021 Quarter from $13.8 million in the 2020 Quarter.

The decrease of $1.9 million was primarily due to reduced volumes, which decreased 19.2% compared to the 2020 Quarter, partially offset by higher sales price realizations per BOE.

Coal Royalties – Segment Adjusted EBITDA increased 5.3% to $7.3 million for the 2021 Quarter from $6.9 million in the 2020 Quarter.

The increase of $0.4 million was a result of higher average intercompany royalty rates per ton received from our mining operations and reduced selling expenses, partially offset by reduced coal sales volumes by our mining operations from reserves owned or controlled by our Coal Royalties Segment entities.

Oil & Gas Royalties – Segment Adjusted EBITDA increased 32.4% to $27.3 million for the 2021 Period from $20.6 million in the 2020 Period.

The increase of $6.7 million was primarily due to significantly higher sales price realizations per BOE, which more than offset lower volumes.

Coal Royalties – Segment Adjusted EBITDA increased 31.8% to $14.1 million for the 2021 Period from $10.7 million in the 2020 Period.

The increase of $3.4 million was a result of increased royalty tons sold and higher average royalty rates per ton received from our mining subsidiaries, partially offset by increased selling expenses.

Reconciliation of non-GAAP "Segment Adjusted EBITDA"

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Three Months Ended

Six Months Ended

(in thousands)

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Interest expense, net

Income tax benefit

Income tax (expense) benefit

Net income (loss) attributable to ARLP

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Net income (loss)

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

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

Transportation expenses are excluded as these expenses are passed through to our customers and, consequently, we do not realize any gain or loss on transportation revenues.

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Three Months Ended

Six Months Ended

(in thousands)

Segment Adjusted EBITDA Expense

Outside coal purchases

Other expense

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

Since inception through March 31, 2021, we have purchased units for a total of $93.5 million under the program.

During the three months ended March 31, 2021, we did not repurchase and retire any units.

Since inception through June 30, 2021, we have purchased units for a total of $93.5 million under the program.

During the six months ended June 30, 2021, we did not repurchase and retire any units.

The timing of any future unit repurchases and the ultimate number of units to be purchased will depend on a number of factors, including business and market conditions, our future financial performance, and other capital priorities.

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of this Quarterly Report on Form 10-Q for more information on unit repurchase program.

Cash provided by operating activities was $54.6 million for the 2021 Quarter compared to $78.7 million for the 2020 Quarter.

The decrease in cash provided by operating activities was primarily due to unfavorable working capital changes related to trade receivables and accrued taxes other than income taxes which was partially offset by a favorable working capital change related to accounts payable.

Net cash used in investing activities was $22.7 million for the 2021 Quarter compared to $51.3 million for the 2020 Quarter.

The decrease in cash used in investing activities was primarily attributable to the decrease in capital expenditures for mine infrastructure and equipment at various mines during the 2021 Quarter.

Net cash used in financing activities was $53.0 million for the 2021 Quarter compared to $34.2 million for the 2020 Quarter.

The increase in cash used in financing activities was primarily attributable to lower net proceeds from borrowings under the revolving credit facility, partially offset by the cash benefit of suspending quarterly distributions to unitholders, which were first suspended in May 2020 related to the 2020 Quarter.

Quarterly distributions to unitholders will resume for the 2021 Quarter in May 2021.

Cash provided by operating activities was $158.2 million for the 2021 Period compared to $170.2 million for the 2020 Period.

The decrease in cash provided by operating activities was primarily due to an unfavorable working capital change related to trade receivables partially offset by a favorable working capital change related to accounts payable.

Net cash used in investing activities was $50.2 million for the 2021 Period compared to $87.5 million for the 2020 Period.

The decrease in cash used in investing activities was primarily attributable to the decrease in capital expenditures for mine infrastructure and equipment at various mines during the 2021 Period.

Net cash used in financing activities was $125.8 million for the 2021 Period compared to $84.1 million for the 2020 Period.

The increase in cash used in financing activities was primarily attributable to increased payments and reduced borrowings on the revolving credit facility, partially offset by lower cash distributions paid to unitholders compared to the 2020 Period.

A quarterly cash distribution of $0.40 per unit was paid in February 2020, after which payment of distributions to unitholders was temporarily suspended.

Payment of distributions resumed in the 2021 Period with a cash distribution of $0.10 per unit paid in May for the quarter ended March 31, 2021.

The quarterly distribution for the 2021 Quarter will be paid in August, 2021.

Capital Expenditures

Capital expenditures decreased to $31.4 million in the 2021 Quarter from $50.4 million in the 2020 Quarter.

Capital expenditures decreased to $55.6 million in the 2021 Period from $84.2 million in the 2020 Period.

See our discussion of "Cash Flows"

above concerning the decrease in capital expenditures.

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

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

Our anticipated total capital expenditures, including maintenance capital expenditures, for 2021 are estimated in a range of $125.0 million to $130.0 million.

Management anticipates funding remaining 2021 capital requirements with our March 31, 2021 cash and cash equivalents of $34.4 million, cash flows from

operations and investments, borrowings under revolving credit and securitization facilities and cash provided from the issuance of debt or equity.

Management anticipates funding

remaining 2021 capital requirements with our cash and cash equivalents ($37.7 million as of June 30, 2021), cash flows from operations and investments, borrowings under revolving credit and securitization facilities and cash provided from the issuance of debt or equity.

We will continue to have significant capital requirements over the long term, which may require us to incur debt or seek additional equity capital.

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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 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 provides for a $459.5 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 March 9, 2024.

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 2.97% as of March 31, 2021.

At 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.

The Eurodollar Rate, with applicable margin, under the Revolving Credit Facility was 2.71% as of June 30, 2021.

On June 30, 2021, we had $21.8 million of letters of credit outstanding with $437.7 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 1.43 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.

The debt to cash flow ratio, cash flow to interest expense ratio and first lien debt to cash flow ratio were 1.08 to 1.0, 10.66 to 1.0 and 0.20 to 1.0, respectively, for the trailing twelve months ended June 30, 2021.

We remained in compliance with the covenants of the Credit Agreement as of June 30, 2021 and anticipate remaining in compliance with the covenants.

Senior Notes.

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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, LLC ("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

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.

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

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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.

On June 30, 2021, we had a $38.1 million outstanding balance under the Securitization Facility.

May 2019 Equipment Financing .

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

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

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

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

As of June 30, 2021, we had drawn $1.8 million under this agreement.

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.

On March 31, 2021, we had $5.0 million in letters of credit outstanding under this agreement.

On June 30, 2021, we had $5.0 million in letters of credit outstanding under this agreement.

Related-Party Transactions

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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-Q

Item 2. Management’s Discussion and Analysis