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OFFON

ALLIANCE RESOURCE PARTNERS, L.P.

(ARLP)
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Alliance Resource Partners L P : LP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/06/2021 | 10:15am EDT

Significant relationships referenced in this management's discussion and analysis of financial condition and results of operations include the following:

References to "we," "us," "our" or "ARLP Partnership" mean the business and

? operations of Alliance Resource Partners, L.P., the parent company, as well as

its consolidated subsidiaries.

? References to "ARLP" mean Alliance Resource Partners, L.P., individually as the

parent company, and not on a consolidated basis.

? References to "MGP" mean Alliance Resource Management GP, LLC, ARLP's general

partner.

? References to "Mr. Craft" mean Joseph W. Craft III, the Chairman, President and

Chief Executive Officer of MGP.

References to "Intermediate Partnership" mean Alliance Resource Operating

? Partners, L.P., the intermediate partnership of Alliance Resource Partners,

L.P.

? References to "Alliance Coal" mean Alliance Coal, LLC, the holding company for

our coal mining operations.

? References to "Alliance Minerals" 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 of our coal mineral interests,

including the subsidiaries of Alliance Resource Properties, LLC.




Summary


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. We began coal mining operations in 1971 and, since then, have grown through acquisitions and internal development in strategic producing regions to become the second largest coal producer in the eastern United States. Our mining operations are located near many of the major eastern utility generating plants and on major coal hauling railroads in the eastern United States. Two of our mines are located on the banks of the Ohio River. As is customary in the coal industry, we have entered into long-term coal supply agreements with many of our customers. In addition to our mining operations, in 2007, Alliance Resource Properties began acquiring control of coal mineral interests and leasing the coal reserves to our mining operations. In 2014, we began acquiring oil & gas mineral interests in premier oil & gas producing regions across the United States.

We have four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties. We also have an "all other" category referred to as Other and Corporate. Our two coal operations reportable segments correspond to major coal producing regions in the eastern United States with similar economic characteristics including coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues. The two coal operations reportable segments include seven mining complexes operating in Illinois, Indiana, Kentucky, Maryland, Pennsylvania and West Virginia and a coal loading terminal in Indiana on the Ohio River. Our Oil & Gas Royalties reportable segment includes our oil & gas mineral interests which are located primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK), and Williston (Bakken) basins. Our ownership in these basins includes approximately 55,500 net royalty acres which provides us with diversified exposure to industry leading operators consistent with our general business strategy to grow our oil & gas mineral interest business. We market our oil & gas mineral interests for lease to operators in those regions and generate royalty income from the leasing and development of those mineral interests. Our Coal Royalties reportable segment includes coal reserves controlled by Alliance Resource Properties, which are either (a) leased to certain of our coal mining entities or (b) unleased but near our coal mining operations.

Beginning in the first quarter of 2021, we began to strategically view and manage our coal royalty activities separately from our coal operations since acquiring and managing a variety of royalty producing assets have similar management attributes. As a result, we restructured our reportable segments to better reflect this strategic view in how we manage our business and allocate resources. Prior periods have been recast to include Alliance Resource Properties within our new Coal Royalties reportable segment with offsetting recast adjustments primarily to our coal operations reportable segments and to a lesser extent, our Other and Corporate category. Our reported eliminations were recast also to reflect


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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. The Illinois

Basin Coal Operations reportable segment also includes our operating Mt. Vernon

Transfer Terminal, LLC ("Mt. Vernon") coal loading terminal in Indiana on the

Ohio River. Our Coal Royalties reportable segment controls other coal

reserves near our Illinois Basin operations, which have not yet been leased to

our Illinois Basin mining entities.

The Illinois Basin Coal Operations reportable segment also includes Mid-America Carbonates, LLC ("MAC") and other support services as well as non-operating mining complexes (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. The Mettiki mining complex includes Mettiki Coal

(WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant. Our

Coal Royalties reportable segment discussed below, controls the Penn Ridge coal

reserves near our Tunnel Ridge operations which have not yet been leased to

   Tunnel Ridge.



Oil & Gas Royalties reportable segment includes oil & gas mineral interests

held by AR Midland, LP ("AR Midland") and AllDale I & II and includes Alliance

? Minerals' equity interests in both AllDale Minerals III, LP ("AllDale III")

(Note 9 - Investment) and Cavalier Minerals. Please read "Item 1. Financial

Statements (Unaudited)-Note 9 - Investment" of this Quarterly Report on Form

10-Q for more information on AllDale III.

Coal Royalties reportable segment includes coal reserves held or controlled by

Alliance Resource Properties, consisting of (a) reserves leased to certain of

our mining complexes in both the Illinois Basin Coal Operations and Appalachia

? Coal Operations reportable segments and (b) reserves near our coal mining

operations but not yet leased to our coal mining entities. About two thirds of

the coal sold by our Coal Operations' mines is leased from our Coal Royalties

   entities.



Other and Corporate includes marketing and administrative activities, Matrix

Design Group, LLC and its subsidiaries ("Matrix Design"), Alliance Design

Group, LLC ("Alliance Design") (collectively, Matrix Design and Alliance Design

referred to as the "Matrix Group"), Pontiki Coal, LLC's workers' compensation

? and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"),

which assists the ARLP Partnership with its insurance requirements, and AROP

Funding and Alliance Finance (both discussed in Note 7 - Long-Term Debt).

Please read "Item 1. Financial Statements (Unaudited)-Note 7 - Long-Term Debt"

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.



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                                                          Three Months Ended June 30,
                                              2021         2020           2021              2020

                                                (in thousands)           (per ton / per BOE sold)

Coal - Tons sold                                7,846        5,186             N/A               N/A
Coal - Tons produced                            7,481        4,323             N/A               N/A
Coal - Coal sales                           $ 325,974    $ 236,286    $      41.55      $      45.56
Coal - Segment Adjusted EBITDA Expense
(1) (2)                                     $ 218,867    $ 190,179    $      27.90      $      36.67
Oil & Gas Royalties - BOE sold                    391          411             N/A               N/A

Oil & Gas Royalties - Royalties (3) $ 17,114 $ 7,786 $ 43.73 $ 18.92 Coal Royalties - Tons sold

                      4,707        3,441             N/A               N/A

Coal Royalties - Intercompany royalties $ 11,653 $ 6,778 $ 2.48 $ 1.97

For a definition of Segment Adjusted EBITDA Expense and related (1) 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."

Coal - Segment Adjusted EBITDA Expense is defined as consolidated Segment (2) 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. 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 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 $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.




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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 $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.



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.



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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
                                                  June 30,
                                              2021         2020        Increase (Decrease)

                                                       (in thousands)
Segment Adjusted EBITDA
Illinois Basin Coal Operations             $   70,623    $  22,667    $     47,956     211.6 %
Appalachia Coal Operations                     41,641       30,279          11,362      37.5 %
Oil & Gas Royalties                            15,379        6,881           8,498     123.5 %
Coal Royalties                                  6,782        3,757           3,025      80.5 %
Other and Corporate                             3,724          807           2,917       (1)
Elimination                                   (2,057)      (2,335)             278      11.9 %

Total Segment Adjusted EBITDA (2) $ 136,092 $ 62,056 $ 74,036 119.3 %


Coal - Tons sold
Illinois Basin Coal Operations                  5,425        3,350           2,075      61.9 %
Appalachia Coal Operations                      2,421        1,836             585      31.9 %
Total tons sold                                 7,846        5,186           2,660      51.3 %

Coal sales
Illinois Basin Coal Operations             $  210,157    $ 134,160    $     75,997      56.6 %
Appalachia Coal Operations                    115,817      102,126          13,691      13.4 %
Total coal sales                           $  325,974    $ 236,286    $     89,688      38.0 %

Other revenues
Illinois Basin Coal Operations             $      642    $     474    $        168      35.4 %
Appalachia Coal Operations                        282        2,380         (2,098)    (88.2) %
Oil & Gas Royalties                               473           61             412       (1)
Other and Corporate                             8,547        4,955           3,592      72.5 %
Elimination                                   (2,647)      (2,497)           (150)     (6.0) %
Total other revenues                       $    7,297    $   5,373    $      1,924      35.8 %

Segment Adjusted EBITDA Expense
Illinois Basin Coal Operations             $  140,176    $ 111,967    $     28,209      25.2 %
Appalachia Coal Operations                     74,456       74,227             229       0.3 %
Oil & Gas Royalties                             2,419        1,119           1,300     116.2 %
Coal Royalties                                  4,871        3,021           1,850      61.2 %
Other and Corporate                             4,825        4,147             678      16.3 %
Elimination (3)                              (12,243)      (6,940)         (5,303)    (76.4) %

Total Segment Adjusted EBITDA Expense $ 214,504 $ 187,541 $ 26,963 14.4 %

Oil & Gas Royalties
Volume - BOE (4)                                  391          411            (20)     (4.9) %
Oil & gas royalties                        $   17,114    $   7,786    $      9,328     119.8 %

Coal Royalties
Volume - Tons sold (5)                          4,707        3,441           1,266      36.8 %
Intercompany coal royalties                $   11,653    $   6,778    $      4,875      71.9 %

(1) Percentage change not meaningful.

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

    of non-GAAP "Segment Adjusted EBITDA" to GAAP "net income (loss)."


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(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


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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,
                                              2021         2020           2021              2020

                                                (in thousands)           (per ton / per BOE sold)
Coal - Tons sold                               14,674       12,437             N/A               N/A
Coal - Tons produced                           15,482       12,344             N/A               N/A
Coal - Coal sales                           $ 613,461    $ 550,923    $      41.81      $      44.30
Coal - Segment Adjusted EBITDA Expense
(1) (2)                                     $ 421,799    $ 430,898    $      28.74      $      34.65
Oil & Gas Royalties - BOE sold                    791          906             N/A               N/A

Oil & Gas Royalties - Royalties (3) $ 31,113 $ 22,025 $ 39.33 $ 24.31 Coal Royalties - Tons sold

                      9,228        8,439             N/A               N/A

Coal Royalties - Intercompany royalties $ 22,954 $ 18,149 $ 2.49 $ 2.15

For a definition of Segment Adjusted EBITDA Expense and related (1) 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."

Coal - Segment Adjusted EBITDA Expense is defined as consolidated Segment (2) 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. 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.




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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 $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 $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 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. Financial Statements (Unaudited)-Note 2 - Long-Lived Asset Impairments" of this Quarterly Report on Form 10-Q.

Goodwill impairment. 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. Financial Statements (Unaudited)-Note 3 - Goodwill Impairment " of this Quarterly Report on Form 10-Q.

Transportation revenues and expenses. 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.



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Segment Adjusted EBITDA. 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. 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:




                                               Six Months Ended
                                                  June 30,
                                              2021          2020        Increase (Decrease)

                                                       (in thousands)
Segment Adjusted EBITDA
Illinois Basin Coal Operations             $  128,296    $   66,000    $    62,296       94.4 %
Appalachia Coal Operations                     73,147        77,581        (4,434)      (5.7) %
Oil & Gas Royalties                            27,325        20,636          6,689       32.4 %
Coal Royalties                                 14,055        10,666          3,389       31.8 %
Other and Corporate                             7,205         3,544          3,661      103.3 %
Elimination                                   (4,115)       (4,670)            555       11.9 %

Total Segment Adjusted EBITDA (2) $ 245,913 $ 173,757 $ 72,156 41.5 %


Coal - Tons sold
Illinois Basin Coal Operations                 10,185         8,406          1,779       21.2 %
Appalachia Coal Operations                      4,489         4,031            458       11.4 %
Total tons sold                                14,674        12,437          2,237       18.0 %

Coal sales
Illinois Basin Coal Operations             $  392,798    $  333,258    $    59,540       17.9 %
Appalachia Coal Operations                    220,663       217,665          2,998        1.4 %
Total coal sales                           $  613,461    $  550,923    $    62,538       11.4 %

Other revenues
Illinois Basin Coal Operations             $    1,255    $    1,392    $     (137)      (9.8) %
Appalachia Coal Operations                        667        14,061       (13,394)     (95.3) %
Oil & Gas Royalties                               494            85            409        (1)
Coal Royalties                                      -             5            (5)    (100.0) %
Other and Corporate                            16,315        12,334          3,981       32.3 %
Elimination                                   (5,366)       (5,356)           (10)      (0.2) %
Total other revenues                       $   13,365    $   22,521    $   (9,156)     (40.7) %

Segment Adjusted EBITDA Expense
Illinois Basin Coal Operations             $  265,757    $  268,650    $   (2,893)      (1.1) %
Appalachia Coal Operations                    148,182       154,145        (5,963)      (3.9) %
Oil & Gas Royalties                             4,477         2,002          2,475      123.6 %
Coal Royalties                                  8,899         7,488          1,411       18.8 %
Other and Corporate                             9,111         8,789            322        3.7 %
Elimination (3)                              (24,205)      (18,835)        (5,370)     (28.5) %

Total Segment Adjusted EBITDA Expense $ 412,221 $ 422,239 $ (10,018) (2.4) %

Oil & Gas Royalties
Volume - BOE (4)                                  791           906          (115)     (12.7) %
Oil & gas royalties                        $   31,113    $   22,025    $     9,088       41.3 %

Coal Royalties
Volume - Tons sold (5)                          9,228         8,439            789        9.3 %
Intercompany coal royalties                $   22,954    $   18,149    $     4,805       26.5 %

(1) Percentage change not meaningful.


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For a definition of Segment Adjusted EBITDA and related reconciliation to (2) 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 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 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 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" to GAAP "net income (loss)" and reconciliation of non-GAAP "Segment Adjusted EBITDA Expense" to GAAP "Operating Expenses"

Segment Adjusted EBITDA (a non-GAAP financial measure) is defined as net income (loss) attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, general and administrative expenses and asset and goodwill impairments. Segment Adjusted EBITDA is a key component of consolidated EBITDA, which is used as a supplemental financial measure by management and by external users of our financial statements such as investors, commercial banks, research analysts and others. We believe that the presentation of EBITDA provides useful information to investors regarding our performance and results of operations because EBITDA, when used in conjunction with related GAAP financial measures, (i) provides additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provides investors with the financial analytical framework upon which we base financial, operational, compensation and planning decisions and (iii) presents a measurement that investors, rating agencies and debt holders have indicated is useful in assessing us and our results of operations.

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Segment Adjusted EBITDA is also used as a supplemental financial measure by our management for reasons similar to those stated in the previous explanation of EBITDA. In addition, the exclusion of corporate general and administrative expenses from consolidated Segment Adjusted EBITDA allows management to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments.

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




                                        Three Months Ended            Six Months Ended
                                            June 30,                     June 30,
                                        2021          2020          2021           2020

                                                         (in thousands)
Consolidated Segment Adjusted
EBITDA                               $  136,092    $   62,056    $   245,913    $   173,757
General and administrative             (17,492)      (13,822)       (32,996)       (27,260)
Depreciation, depletion and
amortization                           (64,733)      (83,559)      (123,935)      (157,480)
Asset impairments                             -             -              -       (24,977)
Goodwill impairment                           -             -              -      (132,026)
Interest expense, net                   (9,827)      (11,416)       (20,206)       (23,643)
Income tax (expense) benefit                (5)            77              7            182
Net income (loss) attributable to
ARLP                                 $   44,035    $ (46,664)    $    68,783    $ (191,447)
Noncontrolling interest                     130          (15)            208             61
Net income (loss)                    $   44,165    $ (46,679)    $    68,991    $ (191,386)



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.

Segment Adjusted EBITDA Expense is used as a supplemental financial measure by our management to assess the operating performance of our segments. Segment Adjusted EBITDA Expense is a key component of Segment Adjusted EBITDA in addition to coal sales, royalty revenues and other revenues. The exclusion of corporate general and administrative expenses from Segment Adjusted EBITDA Expense allows management to focus solely on the evaluation of segment operating performance as it primarily relates to our operating expenses.

The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to operating expense, the most comparable GAAP financial measure:




                                        Three Months Ended           Six Months Ended
                                            June 30,                    June 30,
                                        2021          2020          2021          2020

                                                        (in thousands)
Segment Adjusted EBITDA Expense      $  214,504    $  187,541    $  412,221    $  422,239
Outside coal purchases                    (114)             -         (114)             -
Other expense                           (1,351)         (377)       (2,548)         (733)
Operating expenses (excluding
depreciation, depletion and
amortization)                        $  213,039    $  187,164    $  409,559    $  421,506






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Liquidity and Capital Resources



Liquidity


We have historically satisfied our working capital requirements and funded our capital expenditures, investments and debt service obligations with cash generated from operations, cash provided by the issuance of debt or equity, borrowings under credit and securitization facilities and other financing transactions. We believe that existing cash balances, future cash flows from operations and investments, borrowings under credit facilities and cash provided from the issuance of debt or equity will be sufficient to meet our working capital requirements, capital expenditures and additional investments, debt payments, commitments and any distribution payments. Nevertheless, our ability to satisfy our working capital requirements, to fund planned capital expenditures, to service our debt obligations or to pay distributions will depend upon our future operating performance and access to and cost of financing sources, which will be affected by prevailing economic conditions generally, and in both the coal and oil & gas industries specifically, as well as other financial and business factors, some of which are beyond our control, including the COVID-19 pandemic. Based on our recent operating cash flow results, current cash position, anticipated future cash flows and sources of financing that we expect to have available, we anticipate remaining in compliance with the covenants of the Credit Agreement and expect to have sufficient liquidity to fund our operations and growth strategies. However, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future covenant compliance or liquidity may be adversely affected. Please read "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020.

In May 2018, the Board approved the establishment of a unit repurchase program authorizing us to repurchase up to $100 million of ARLP common units. The program has no time limit and we may repurchase units from time to time in the open market or in other privately negotiated transactions. 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. 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. Please read "Part II - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds" of this Quarterly Report on Form 10-Q for more information on unit repurchase program.



Cash Flows


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 $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 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


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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. The availability and cost of additional capital will depend upon prevailing market conditions, the market price of our common units and several other factors over which we have limited control, as well as our financial condition and results of operations.



Debt Obligations


Credit Facility. 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 $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 guaranteed by certain of our Intermediate Partnership's material direct and indirect subsidiaries (the "Restricted Subsidiaries") and is secured by substantially all the assets of the Restricted Subsidiaries. The Credit Agreement is also guaranteed by Alliance Minerals but the oil and gas minerals assets of Alliance Minerals and its direct and indirect subsidiaries (collectively with Alliance Minerals, the "Unrestricted Subsidiaries") are not collateral under the Credit Agreement. Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) the Base Rate at the greater of three benchmarks or (ii) a Eurodollar Rate, plus margins for (i) or (ii), as applicable, that fluctuate depending upon the ratio of Consolidated Debt to Consolidated Cash Flow (each as defined in the Credit Agreement). The Eurodollar Rate, with applicable margin, under the Revolving Credit Facility was 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. We utilize the Revolving Credit Facility, as appropriate, for working capital requirements, capital expenditures and investments, scheduled debt payments and distribution payments.

The Credit Agreement contains various restrictions affecting the Intermediate Partnership and its Restricted Subsidiaries including, among other things, restrictions on incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates, including transactions with Unrestricted Subsidiaries. In each case, these restrictions are subject to various exceptions. In addition, the payment of cash distributions is restricted if such payment would result in a fixed charge coverage ratio of less than 1.0 to 1.0 (as defined in the Credit Agreement) for the four most recently ended fiscal quarters. The Credit Agreement requires the Intermediate Partnership to maintain (a) a debt to cash flow ratio of not more than 2.5 to 1.0, (b) a cash flow to interest expense ratio of not less than 3.0 to 1.0 and (c) a first lien debt to cash flow ratio of not more than 1.5 to 1.0, in each case, during the four most recently ended fiscal quarters. The debt to cash flow ratio, cash flow to interest expense ratio and first lien debt to cash flow ratio were 1.08 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. On April 24, 2017, the Intermediate Partnership and Alliance Resource Finance Corporation (as co-issuer), a wholly owned subsidiary of the Intermediate Partnership ("Alliance Finance"), issued an aggregate principal amount of $400.0 million of senior unsecured notes due 2025 ("Senior Notes") in a private placement to qualified institutional buyers. The Senior Notes have a term of eight years, maturing on May 1, 2025 (the "Term") and accrue interest at an annual rate of 7.5%. Interest is payable semi-annually in arrears on each May 1 and November 1. The indenture governing the Senior Notes contains customary terms, events of default and covenants relating to, among other things, the incurrence of debt, the payment of distributions or similar restricted payments, undertaking transactions with affiliates and limitations on asset sales. The issuers of the Senior Notes may redeem all or a part of the notes at any time at redemption prices set forth in the indenture governing the Senior Notes.

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


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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. In January 2021, we extended the term of the Securitization Facility to January 2022 and reduced the borrowing availability under the facility to $60.0 million. The Securitization Facility was previously scheduled to mature in January 2021. On June 30, 2021, we had a $38.1 million outstanding balance under the Securitization Facility.

May 2019 Equipment Financing. On May 17, 2019, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $10.0 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "May 2019 Equipment Financing"). The May 2019 Equipment Financing contains customary terms and events of default and provides for thirty-six monthly payments with an implicit interest rate of 6.25%, maturing on May 1, 2022. Upon maturity, the equipment will revert to the Intermediate Partnership.

November 2019 Equipment Financing. On November 6, 2019, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $53.1 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "November 2019 Equipment Financing"). The November 2019 Equipment Financing contains customary terms and events of default and an implicit interest rate of 4.75%, providing for a four-year term with forty-seven monthly payments of $1.0 million and a balloon payment of $11.6 million upon maturity on November 6, 2023. Upon maturity, the equipment will revert to the Intermediate Partnership.

June 2020 Equipment Financing. On June 5, 2020, the Intermediate Partnership entered into an equipment financing arrangement accounted for as debt, wherein the Intermediate Partnership received $14.7 million in exchange for conveying its interest in certain equipment owned indirectly by the Intermediate Partnership and entering into a master lease agreement for that equipment (the "June 2020 Equipment Financing"). The June 2020 Equipment Financing contains customary terms and events of default and provides for forty-eight monthly payments with an implicit interest rate of 6.1%, maturing on June 5, 2024. Upon maturity, the equipment will revert to the Intermediate Partnership.

Line of Credit. On February 19, 2021, we entered into a line of credit arrangement with a related party for $5.0 million. The line of credit has a maturity date of February 28, 2023, with an option to extend it for an additional six months and accrue interest at an annual rate of 3.50%. Interest is payable quarterly commencing March 31, 2021, and continuing each March 31, June 30, September 30 and December 31 thereafter through and including February 28, 2023. The agreement contains customary terms and events of default and is guaranteed by ARLP. We utilize the line of credit, as appropriate, for capital expenditures and investments. As of June 30, 2021, we had drawn $1.8 million under this agreement.

Other. 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.



Related-Party Transactions


We have related-party transactions and activities with Mr. Craft, MGP, ARH II and their respective affiliates. These related-party transactions and activities relate principally to 1) coal mineral leases with The Joseph W. Craft III Foundation and The Kathleen S. Craft Foundation, 2) the use of aircraft, and 3) providing administrative services with respect to certain oil & gas mineral interests Mr. Craft acquired in 2019. We also have related-party transactions with (a) WKY CoalPlay, LLC ("WKY CoalPlay") regarding four mineral leases, (b) Bluegrass Minerals Management, LLC ("Bluegrass Minerals") through its noncontrolling ownership interest in our consolidated subsidiary, Cavalier Minerals and (c) with our equity interest in AllDale III. For more information regarding the Bluegrass Minerals and AllDale III, please read "Item 1. Financial Statements (Unaudited)-Note 8 - Variable Interest Entities" and "-Note 9 - Investment" of this Quarterly Report on Form 10-Q. We also have a line of credit with a related party as discussed in "Item 1. Financial Statements (Unaudited)-Note 7 - Long-Term Debt" of this Quarterly Report on Form 10-Q.

Please read our Annual Report on Form 10-K for the year ended December 31, 2020, "Item 8. Financial Statements and Supplementary Data-Note 21 - Related-Party Transactions" for additional information concerning related-party transactions.



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Other Information



Insurance


Effective October 1, 2020, we renewed our annual property and casualty insurance program. Our property insurance was procured from our wholly owned captive insurance company, Wildcat Insurance. Wildcat Insurance charged certain of our subsidiaries for the premiums on this program and in return purchased reinsurance for the program in the standard market. The maximum limit in the commercial property program is $100.0 million per occurrence, excluding a $1.5 million deductible for property damage, a 75- or 90-day waiting period for underground business interruption depending on the mining complex and an additional $10.0 million overall aggregate deductible. We have elected to retain a 10% participating interest in our commercial property insurance program. We can make no assurances that we will not experience significant insurance claims in the future that could have a material adverse effect on our business, financial condition, results of operations and ability to purchase property insurance in the future. Also, exposures exist for which no insurance may be available and for which we have not reserved. In addition, the insurance industry has been subject to efforts by environmental activists to restrict coverages available for fossil fuel companies.

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Financials (USD)
Sales 2021 1 522 M - -
Net income 2021 - - -
Net Debt 2021 - - -
P/E ratio 2021 -
Yield 2021 2,65%
Capitalization 1 437 M 1 437 M -
Capi. / Sales 2021 0,94x
Capi. / Sales 2022 1,00x
Nbr of Employees 2 902
Free-Float 68,4%
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Managers and Directors
Joseph W. Craft Chairman, President & Chief Executive Officer
Brian L. Cantrell Chief Financial Officer & Senior Vice President
Thomas M. Wynne Chief Operating Officer & Senior Vice President
John Harris Robinson Independent Director
Wilson Mack Torrence Independent Director