SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2022

SEGMENT INFORMATION

SEGMENT INFORMATION

17.SEGMENT INFORMATION

We operate in the United States as a diversified natural resource company that generates operating and royalty income from the production and marketing of coal to major domestic and international utilities and industrial users as well as royalty income from oil & gas mineral interests.  We aggregate multiple operating segments into four reportable segments, Illinois Basin Coal Operations, Appalachia Coal Operations, Oil & Gas Royalties and Coal Royalties.  We also have an "all other" category referred to as Other, 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.  The two coal operations reportable segments include seven mining complexes operating in Illinois, Indiana, Kentucky, Maryland, Pennsylvania and West Virginia and a coal-loading terminal in Indiana on the Ohio River.  Our Oil & Gas Royalties reportable segment includes our oil & gas mineral interests which are located primarily in the Permian (Delaware and Midland), Anadarko (SCOOP/STACK) and Williston (Bakken) basins.  The operations within our Oil & Gas Royalties reportable segment primarily include receiving royalties and lease bonuses for our oil & gas mineral interests. Our Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties, which are either (a) leased to our mining complexes or (b) near our coal mining operations but not yet leased.

The Illinois Basin Coal Operations reportable segment includes operating mining complexes (a) the Gibson County Coal, LLC mining complex, (b) the Warrior Coal, LLC mining complex, (c) the River View Coal, LLC mining complex and (d) the Hamilton County Coal, LLC mining complex. The segment also includes our Mt. Vernon Transfer Terminal, LLC coal-loading terminal in Indiana which operates on the Ohio River, Mid-America Carbonates, LLC and other support services, and our non-operating Illinois Basin mining complexes.    

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

The 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 III (Note 10 – Investments) and Cavalier Minerals.

The Coal Royalties reportable segment includes coal mineral reserves and resources owned or leased by Alliance Resource Properties that are (a) leased to certain of our mining complexes in both the Illinois Basin Coal Operations and Appalachia Coal Operations reportable segments or (b) located near our operations and external mining operations.  Approximately two thirds of the coal sold by our Coal Operations' mines is leased from our Coal Royalties entities.

Other, Corporate and Elimination includes marketing and administrative activities, Matrix Design Group, LLC, its subsidiaries, and Alliance Design Group, LLC (collectively referred to as the "Matrix Group"), our investments in Francis, Infinitum and NGP ETP IV (see Note 10 – Investments), Wildcat Insurance, LLC, which assists the ARLP Partnership with its insurance requirements, AROP Funding and Alliance Finance (both discussed in Note 7 – Long-Term Debt), Pontiki Coal, LLC's workers' compensation and pneumoconiosis liabilities 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.

Reportable segment results are presented below.

	Coal Operations				Royalties				Other,
	Illinois								Corporate and
	Basin		Appalachia		Oil & Gas		Coal		Elimination		Consolidated
	(in thousands)
Three Months Ended September 30, 2022
Revenues - Outside	$	335,234	$	245,724	$	37,572	$	—	$	9,890	$	628,420
Revenues - Intercompany		—		—		—		16,708		(16,708)		—
Total revenues (1)		335,234		245,724		37,572		16,708		(6,818)		628,420
Segment Adjusted EBITDA Expense (2)		194,967		134,672		3,531		5,545		(8,609)		330,106
Segment Adjusted EBITDA (3)		120,760		102,012		35,783		11,163		1,792		271,510
Capital expenditures		39,529		17,780		—		40,033		1,962		99,304
Three Months Ended September 30, 2021
Revenues - Outside	$	231,093	$	154,944	$	21,191	$	—	$	8,211	$	415,439
Revenues - Intercompany		—		—		—		13,456		(13,456)		—
Total revenues (1)		231,093		154,944		21,191		13,456		(5,245)		415,439
Segment Adjusted EBITDA Expense (2)		149,666		92,312		2,639		4,258		(9,525)		239,350
Segment Adjusted EBITDA (3)		69,305		52,726		19,080		9,198		4,280		154,589
Capital expenditures		19,081		12,531		—		30		1,393		33,035
Nine Months Ended September 30, 2022
Revenues - Outside	$	923,427	$	646,705	$	105,112	$	—	$	30,540	$	1,705,784
Revenues - Intercompany		—		—		—		46,400		(46,400)		—
Total revenues (1)		923,427		646,705		105,112		46,400		(15,860)		1,705,784
Segment Adjusted EBITDA Expense (2)		567,253		335,756		9,766		15,762		(21,177)		907,360
Segment Adjusted EBITDA (3)		296,327		277,492		98,944		30,638		5,317		708,718
Total assets		731,441		428,000		689,874		325,498		329,569		2,504,381
Capital expenditures		111,419		58,616		—		40,033		11,218		221,286
Nine Months Ended September 30, 2021
Revenues - Outside	$	640,260	$	384,286	$	52,798	$	—	$	19,160	$	1,096,504
Revenues - Intercompany		—		—		—		36,410		(36,410)		—
Total revenues (1)		640,260		384,286		52,798		36,410		(17,250)		1,096,504
Segment Adjusted EBITDA Expense (2)		415,423		240,494		7,116		13,157		(24,619)		651,571
Segment Adjusted EBITDA (3)		197,601		125,873		46,405		23,253		7,370		400,502
Total assets		703,060		422,504		601,695		289,100		132,616		2,148,975
Capital expenditures		47,997		34,579		—		30		6,055		88,661

(1) Revenues included in the Other, Corporate and Elimination column are attributable to intercompany eliminations, which are primarily intercompany coal royalty eliminations, outside revenues at the Matrix Group and other outside miscellaneous sales and revenue activities.

(2) Segment Adjusted EBITDA Expense includes operating expenses, coal purchases and other income. Transportation expenses are excluded as transportation revenues are recognized in an amount equal to transportation expenses when title passes to the customer.  

The following is a reconciliation of consolidated Segment Adjusted EBITDA Expense to Operating expenses (excluding depreciation, depletion and amortization):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in thousands)
Segment Adjusted EBITDA Expense	$	330,106	$	239,350	$	907,360	$	651,571
Outside coal purchases		—		(6,065)		(151)		(6,179)
Other income (expense)		192		(84)		1,337		(2,632)
Operating expenses (excluding depreciation, depletion and amortization)	$	330,298	$	233,201	$	908,546	$	642,760

(3) Segment Adjusted EBITDA is defined as net income attributable to ARLP before net interest expense, income taxes, depreciation, depletion and amortization, and general and administrative expenses.  Management therefore is able to focus solely on the evaluation of segment operating profitability as it relates to our revenues and operating expenses, which are primarily controlled by our segments.  Consolidated Segment Adjusted EBITDA is reconciled to net income as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in thousands)
Consolidated Segment Adjusted EBITDA	$	271,510	$	154,589	$	708,718	$	400,502
General and administrative		(21,341)		(18,655)		(62,394)		(51,651)
Depreciation, depletion and amortization		(70,143)		(68,763)		(200,191)		(192,698)
Interest expense, net		(8,819)		(9,389)		(27,750)		(29,595)
Income tax expense		(6,600)		(234)		(55,646)		(227)
Net income attributable to ARLP	$	164,607	$	57,548	$	362,737	$	126,331
Noncontrolling interest		364		176		977		384
Net income	$	164,971	$	57,724	$	363,714	$	126,715