What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-06 · 108 added, 107 removed, 353 unchanged (38% of the section changed)

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We also have an "all other"

category referred to as Other and Corporate.

category referred to as Other, Corporate and Elimination.

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

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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.

Eliminations reported in Other, Corporate

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

● 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.

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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 (a) the Gibson North mine, which ceased production in 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.

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

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

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

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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).

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

The eliminations included in Other, Corporate and Elimination primarily represent the intercompany coal royalty transactions described above between our Coal Royalties reportable segment and our coal operations' mines.

Please read "Item 1.

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

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,

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

We reported net income attributable to ARLP of $57.5 million for the three months ended September 30, 2021 ("2021 Quarter") compared to $27.2 million for the three months ended September 30, 2020 ("2020 Quarter").

The increase of $30.3 million was primarily due to higher revenues, partially offset by increased total operating expenses.

Total revenues in the 2021 Quarter increased by 16.8% to $415.4 million compared to $355.7 million in the 2020 Quarter as a result of higher coal sales volumes and significantly higher oil & gas prices.

In general, results from coal operations and oil & gas royalties for the 2021 Quarter were significantly improved compared to the 2020 Quarter, which was negatively impacted by the COVID-19 pandemic.

Three Months Ended September 30,

(in thousands)

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The increase was attributable to a volume variance of $34.5 million resulting from increased tons sold, partially offset by a price variance of $8.0 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.

Improved coal demand primarily in the export markets during the 2021 Quarter drove coal sales volumes higher by 10.3% to 8.5 million tons sold compared to 7.7 million tons sold in the 2020 Quarter, which was adversely impacted by the pandemic.

Coal sales price realizations decreased by 2.2% in the 2021 Quarter to $42.65 per ton sold, compared to $43.59 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 increased 10.7% to $245.9 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:

On a per ton basis, Segment Adjusted EBITDA Expense for our coal operations increased slightly in the 2021 Quarter to $28.95 per ton sold, compared to $28.84 per ton in the 2020 Quarter, primarily due to certain cost increases, which are discussed below by category:

● Material and supplies expenses per ton produced increased 8.4% to $10.38 per ton in the 2021 Quarter from $9.58 per ton in the 2020 Quarter.

The increase of $0.80 per ton produced primarily reflects increases of $0.78 per ton for roof support, $0.33 per ton for contract labor used in the mining process and $0.24 per ton for power and fuel used in the mining process, partially offset by a decrease of $0.43 per ton in longwall subsidence expense.

● Outside coal purchases increased $6.1 million in the 2021 Quarter as a result of sales from purchased coal, which generally costs higher on a per ton basis than our produced coal.

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

● Labor and benefit expenses per ton produced, excluding workers' compensation, decreased 11.5% to $9.19 per ton in the 2021 Quarter from $10.39 per ton in the 2020 Quarter.

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.

The decrease of $1.20 per ton was primarily due to a) increased volumes which in turn lowered certain fixed costs per ton, b) reduced benefit accruals and c) favorable medical adjustments.

● Workers' compensation expenses per ton produced decreased to $(0.07) per ton in the 2021 Quarter from $0.45 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 $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 $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.

The decrease of $0.52 per ton produced resulted primarily from refunds received in the 2021 Quarter on assessments paid to the state of Kentucky in prior years.

Oil & gas royalties.

Oil & gas royalty revenues increased to $20.1 million in the 2021 Quarter compared to $9.7 million for the 2020 Quarter.

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

The increase of $10.4 million was primarily due to significantly higher sales price realizations per BOE discussed above.

Other revenues .

Other revenues were principally comprised of Matrix Design sales and other miscellaneous sales and revenue activities.

Other revenues increased to $11.0 million in the 2021 Quarter from $4.0 million in the 2020 Quarter.

The increase of $7.0 million was primarily due to increased sales of mining technology products by our Matrix Design subsidiary and other smaller variances in the 2021 Quarter.

Depreciation, depletion and amortization.

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Transportation revenues and expenses were $22.0 million and $6.2 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.

The increase of $15.8 million was primarily attributable to increased average third-party transportation rates in the 2021 Quarter and increased coal shipments to international markets for which we arrange third-party transportation.

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

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Our 2021 Quarter Segment Adjusted EBITDA increased $21.9 million to $154.6 million from the 2020 Quarter Segment Adjusted EBITDA of $132.7 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:

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

Three Months Ended

September 30,

Increase (Decrease)

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Coal Royalties

Other and Corporate

Other, Corporate and Elimination (2)

Total Segment Adjusted EBITDA (3)

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Oil & Gas Royalties

Other and Corporate

Coal Royalties

Other, Corporate and Elimination

Total other revenues

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Coal Royalties

Other and Corporate

Elimination (3)

Other, Corporate and Elimination (2)

Total Segment Adjusted EBITDA Expense

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(1) Percentage change not meaningful.

(2) Other, Corporate and Elimination includes the elimination of intercompany coal royalty revenues and expenses between our Coal Royalties Segment and our Coal Operations Segments in addition to the expenses for the other miscellaneous activities included in this category.

(3) 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.

Illinois Basin Coal Operations – Segment Adjusted EBITDA decreased to $69.3 million in the 2021 Quarter from $75.6 million in the 2020 Quarter.

The decrease of $6.3 million was primarily attributable to lower coal sales price realizations and higher expenses per ton, partially offset by increased coal sales volumes.

Coal sales increased 5.5% to $217.6 million in the 2021 Quarter from $206.4 million in the 2020 Quarter resulting from higher sales volumes, which increased 10.2% due to improved coal demand primarily in the export markets.

Coal sales price per ton sold in the 2021 Quarter decreased by 4.3% compared to the 2020 Quarter reflecting the expiration of higher-priced sales contracts and a greater mix of lower-priced export sales volumes.

Segment Adjusted EBITDA Expense increased 14.2% to $149.7 million in the 2021 Quarter from $131.0 million in the 2020 Quarter primarily as a result of increased sales volumes and higher expenses per ton.

Segment Adjusted EBITDA Expense per ton increased $0.93 per ton sold to $26.03 from $25.10 per ton sold in the 2020 Quarter primarily as a result of increased roof support and maintenance expenses as well as higher labor costs per ton across the region.

These increases were partially offset by reduced benefit accruals and workers compensation refunds received in the 2021 Quarter.

Appalachia Coal Operations – Segment Adjusted EBITDA increased 22.3% to $52.7 million for the 2021 Quarter from $43.1 million in the 2020 Quarter.

The increase of $9.6 million was primarily attributable to higher coal sales, which increased 11.8% to $144.6 million in the 2021 Quarter from $129.4 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.

The increase in coal sales reflects higher tons sold, which rose 10.5% 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.

Segment Adjusted EBITDA Expense increased 6.5% to $92.3 million in the 2021 Quarter from $86.7 million in the 2020 Quarter due to increased sales volumes, partially offset by lower expenses per ton.

Segment Adjusted EBITDA Expense per ton decreased $1.28 per ton sold to $33.64 compared to $34.92 per ton sold in the 2020 Quarter, as a result of increased volumes and reduced longwall subsidence expense in the 2021 Quarter and a longwall move in the 2020 Quarter at our Tunnel Ridge mine, the production benefits from MC Mining’s transition of mining operations to a new reserve area in the second half of 2020 and the benefits of ongoing expense control and efficiency initiatives.

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

Oil & Gas Royalties – Segment Adjusted EBITDA increased to $19.1 million for the 2021 Quarter from $8.9 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.

The increase of $10.2 million was primarily due to significantly higher sales price realizations per BOE in the 2021 Quarter compared to the 2020 Quarter, which more than offset lower volumes and higher Segment Adjusted EBITDA Expense.

Coal Royalties – Segment Adjusted EBITDA increased 46.3% to $9.2 million for the 2021 Quarter from $6.3 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,

The increase of $2.9 million was a result of increased royalty tons sold and higher average royalty rates per ton.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

We reported net income attributable to ARLP of $126.3 million for the nine months ended September 30, 2021 ("2021 Period") compared to a net loss attributable to ARLP of $164.2 million for the nine months ended September 30, 2020 ("2020 Period").

The increase of $290.5 million resulted from higher revenues and lower depreciation in the 2021 Period and $157.0 million of non-cash impairment charges in the 2020 Period.

Increased coal sales volumes and oil & gas prices in the 2021 Period drove total revenues higher by 14.0% to $1.10 billion, compared to $961.6 million for the 2020 Period.

In general, results from coal operations and oil & gas royalties 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.

Nine Months Ended September 30,

(in thousands)

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Coal sales increased $89.0 million or 10.0% to $975.7 million for the 2021 Period from $886.7 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.

The increase was attributable to a volume variance of $133.4 million resulting from increased tons sold partially offset by a negative price variance of $44.4 million due to lower average coal sales prices.

Tons sold increased 15.0% to 23.2 million tons in the 2021 Period due to improved coal demand and increased export shipments.

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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 for our coal operations was comparable to the 2020 Period as increased expenses resulting from higher sales volumes in the 2021 Period were primarily offset by reduced per ton costs in the 2021 Period.

Segment Adjusted EBITDA Expense per ton decreased 11.1% in the 2021 Period to $28.82 per ton, compared to $32.43 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:

The decrease was attributed primarily to increased volumes lowering fixed costs per ton, 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 15.4% to $9.32 per ton in the 2021 Period from $11.02 per ton in the 2020 Period.

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● Workers' compensation expenses per ton produced decreased to $0.18 per ton in the 2021 Period from $0.63 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.

The decrease of $0.45 per ton produced resulted from refunds received in the 2021 Period on assessments paid to the state of Kentucky in prior years and 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 6.5% to $9.85 per ton in the 2021 Period from $10.53 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.

The decrease of $0.68 per ton produced primarily reflects decreases of $0.47 per ton for outside expenses used in the mining processes, $0.25 per ton for environmental and reclamation expenses other than longwall subsidence and $0.19 per ton for power and fuel used in the mining process, partially offset by an increase of $0.51 per ton for roof support.

● Maintenance expenses per ton produced decreased 17.0% to $2.68 per ton in the 2021 Period from $3.23 per ton in the 2020 Period.

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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 were principally comprised of Matrix Design sales and other miscellaneous sales and revenue activities.

Other revenues decreased to $24.4 million in the 2021 Period from $26.5 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.

The decrease of $2.1 million was primarily due to a customer buy-out of certain coal contracts at our Tunnel Ridge mine during the 2020 Period, partially offset by increased sales of mining technology products by our Matrix Design subsidiary in the 2021 Period.

Depreciation, depletion and amortization.

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Transportation revenues and expenses were $45.2 million and $16.7 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.

The increase of $28.5 million was primarily attributable to increased average third-party transportation rates in the 2021 Period and increased coal shipments to international markets for which we arrange third-party transportation.

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

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Our 2021 Period Segment Adjusted EBITDA increased $94.0 million, or 30.7%, to $400.5 million from the 2020 Period Segment Adjusted EBITDA of $306.5 million.

Six Months Ended

Nine Months Ended

September 30,

Increase (Decrease)

5 unchanged sentences

Coal Royalties

Other and Corporate

Other, Corporate and Elimination (2)

Total Segment Adjusted EBITDA (3)

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Coal Royalties

Other and Corporate

Other, Corporate and Elimination

Total other revenues

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Coal Royalties

Other and Corporate

Elimination (3)

Other, Corporate and Elimination (2)

Total Segment Adjusted EBITDA Expense

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(1) Percentage change not meaningful.

(3) 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).

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The increase of $70.8 million in coal sales primarily reflects increased sales volumes, which rose 17.0% 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.

Increased expenses resulting from higher coal sales volumes, partially offset by ongoing cost control and efficiency initiatives, contributed to higher Segment Adjusted EBITDA Expense of $415.4 million in the 2021 Period compared to $399.7 million in the 2020 Period.

Segment Adjusted EBITDA Expense per ton decreased 11.1% to $26.07 from $29.33 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 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.

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

Appalachia Coal Operations – Segment Adjusted EBITDA increased 4.3% to $125.9 million for the 2021 Period from $120.7 million in the 2020 Period.

The increase of $5.2 million was primarily attributable to higher coal sales, partially offset by a customer buy-out of certain coal contracts at our Tunnel Ridge mine during the 2020 Period.

Coal sales increased 5.2% to $365.3 million in the 2021 Period compared to $347.1 million in the 2020 Period as a result of increased sales volumes, partially offset by lower price realizations.

Tons sold increased 11.0% 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.

Coal sales price per ton sold in the 2021 Period decreased 5.2% compared to the 2020 Period primarily due to the expiration of higher priced contract shipments.

Segment Adjusted EBITDA Expense decreased slightly in the 2021 Period compared to the 2020 Period due to decreased per ton costs, partially offset by increased coal sales volumes.

Segment Adjusted EBITDA Expense per ton decreased 10.1% to $33.25 compared to $36.97 per ton sold in the 2020 Period, as a result of increased sales volumes lowering fixed costs per ton, the full-year production benefit from MC Mining’s transition of mining operations to a new reserve area in the second half of 2020, 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."

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Coal Royalties – Segment Adjusted EBITDA increased 37.2% to $23.3 million for the 2021 Period from $17.0 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.

The increase of $6.3 million was a result of increased royalty tons sold and higher average royalty rates per ton received from our mining subsidiaries.

Reconciliation of non-GAAP "Segment Adjusted EBITDA"

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Interest expense, net

Income tax (expense) benefit

Income tax expense

Net income (loss) attributable to ARLP

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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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 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.

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

During the nine months ended September 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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Cash provided by operating activities was $311.0 million for the 2021 Period compared to $291.8 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.

The increase in cash provided by operating activities was primarily due to an increase in net income adjusted for non-cash items and a favorable working capital change related to accounts payable, partially offset by unfavorable working capital changes related to trade receivables and inventories compared to the 2020 Period.

Net cash used in investing activities was $80.4 million for the 2021 Period compared to $108.9 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.

The decrease in cash used in investing activities was primarily attributable to the decrease in capital expenditures and an increase in accounts payable and certain other accruals related to mine infrastructure, equipment and mining operations at various mines during the 2021 Period.

Net cash used in financing activities was $181.5 million for the 2021 Period compared to $185.2 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.

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

Payment of quarterly distributions resumed in the 2021 Period with $0.20 per unit in total being paid for the first two quarters of the 2021 Period.

Please read "Item 1.

Financial Statements (Unaudited)—Note 10 – Partners' Capital"

of this Quarterly Report on Form 10-Q regarding the subsequent quarterly distribution to be paid for the 2021 Quarter.

Capital Expenditures

Capital expenditures decreased to $88.7 million in the 2021 Period from $102.8 million in the 2020 Period.

See our discussion of "Cash Flows"

The decrease is primarily related to the transition to a new reserve area at MC Mining in the 2020 Period and continued expense

control and efficiency initiatives across all our operations.

Also see our discussion of "Cash Flows"

above concerning the decrease in capital expenditures.

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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 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.

Management anticipates funding remaining 2021 capital requirements with our cash and cash equivalents ($104.6 million as of September 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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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 2.71% 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.

The Eurodollar Rate, with applicable margin, under the Revolving Credit Facility was 2.68% as of September 30, 2021.

On September 30, 2021, we had $23.3 million of letters of credit outstanding with $436.2 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 1.08 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.

The debt to cash flow ratio, cash flow to interest expense ratio and first lien debt to cash flow ratio were 0.95 to 1.0, 11.60 to 1.0 and 0.10 to 1.0, respectively, for the trailing twelve months ended September 30, 2021.

We remained in compliance with the covenants of the Credit Agreement as of September 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.

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.

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

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

On September 30, 2021, we had no outstanding balance under the Securitization Facility.

May 2019 Equipment Financing .

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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.

As of September 30, 2021, we had drawn $3.2 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 June 30, 2021, we had $5.0 million in letters of credit outstanding under this agreement.

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

Related-Party Transactions

We have related-party transactions and activities with Mr.

Craft, MGP, ARH II and their respective affiliates.

Craft, MGP and their respective affiliates.

These related-party transactions and activities relate principally to 1) coal mineral leases with The Joseph W.

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— Note 9 – Investment"

of this Quarterly Report on Form 10-Q.

Quarterly Report on Form 10-Q.

We also have a line of credit with a related party as discussed in "Item 1.

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Other Information

Effective October 1, 2020, we renewed our annual property and casualty insurance program.

Effective October 1, 2021, we extended our existing annual property and casualty insurance program until December 1, 2021 at which time we plan to renew the program.

Our property insurance was procured from our wholly owned captive insurance company, Wildcat Insurance.

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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