SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2013

SEGMENT INFORMATION

SEGMENT INFORMATION

21. SEGMENT INFORMATION

The ARLP Partnership operates in the eastern U.S. as a producer and marketer of coal to major utilities and industrial users.  We aggregate multiple operating segments into five reportable segments: the Illinois Basin, Central Appalachia, Northern Appalachia, White Oak and Other and Corporate.  The first three reportable segments correspond to the three major coal producing regions in the eastern U.S.  Similar economic characteristics for the operating segments within each of these three reportable segments include coal quality, coal seam height, mining and transportation methods and regulatory issues.  The White Oak reportable segment includes the ARLP Partnership’s activities associated with the White Oak longwall Mine No. 1 development project more fully described below.

The Illinois Basin reportable segment is comprised of multiple operating segments, including Webster County Coal’s Dotiki mining complex, Gibson County Coal’s mining complex, which includes the Gibson North mine and Gibson South project, Hopkins County Coal’s Elk Creek mining complex, White County Coal’s Pattiki mining complex, Warrior’s mining complex, Sebree Mining’s mining complex, which includes the Onton mine, and River View’s mining complex.  The development of the Gibson South mine is currently underway.  For information regarding the acquisition of the Onton mine, which was added to the Illinois Basin segment in April 2012, please see Note 3.

The Central Appalachian reportable segment is comprised of two operating segments, the MC Mining and Pontiki mining complexes.  The Pontiki mining complex ceased operations in November 2013.  For more information regarding the Pontiki mining complex, please see Note 4.

The Northern Appalachian reportable segment is comprised of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge mining complex and the Penn Ridge property.  The Mettiki mining complex includes Mettiki Coal (WV)’s Mountain View mine, Mettiki Coal’s preparation plant and a small third-party mining operation which has been idled since July 2013.  In May 2012, longwall production began at the Tunnel Ridge mine.  The ARLP Partnership is in the process of permitting the Penn Ridge property for future mine development.

The White Oak reportable segment is comprised of two operating segments, WOR Processing and WOR Properties.  WOR Processing includes both the surface operations at White Oak and the equity investment in White Oak.  WOR Properties owns coal reserves acquired from White Oak with a lease-back arrangement (Note 12).

Other and Corporate includes the ARLP Partnership and AHGP’s marketing and administrative expenses, ASI and its subsidiary, Matrix Design, Alliance Design (collectively, Matrix Design and Alliance Design are referred to as the “Matrix Group”) and ASI’s ownership of aircraft (Note 18), the Mt. Vernon dock activities, coal brokerage activity, the ARLP Partnership’s equity investment in MAC and certain activities of Alliance Resource Properties.

Reportable segment results as of and for the years ended December 31, 2013, 2012 and 2011 are presented below:

	Illinois	Central	Northern				Other and	Elimination
	Basin	Appalachia	Appalachia	White Oak			Corporate	(1)	Consolidated
	(in thousands)
Reportable segment results as of and for the year ended December 31, 2013 were as follows:
Total revenues (2)	$  1,629,089	$   169,520	$   377,640	$	2,194		$    39,847	$    (13,091)	$  2,205,199
Segment Adjusted EBITDA Expense (3)	951,686	125,323	292,627	2,112			40,245	(13,091)	1,398,902
Segment Adjusted EBITDA (4)(5)	657,404	43,973	72,594	(25,229)			472	-	749,214
Total assets (6)	1,077,231	72,196	525,586	317,361			135,380	(1,075)	2,126,679
Capital expenditures (7)	232,676	10,380	63,510	40,185			7,672	-	354,423
Reportable segment results as of and for the year ended December 31, 2012 were as follows:
Total revenues (2)	$  1,499,976	$   157,311	$   335,099	$	-		$    58,072	$     (16,528)	$  2,033,930
Segment Adjusted EBITDA Expense (3)	894,769	131,148	277,736	(1,347		)	53,005	(16,528)	1,338,783
Segment Adjusted EBITDA (4) (5)	593,054	25,712	47,933	(13,987		)	5,751	-	658,463
Total assets (6)	1,042,719	87,068	537,042	226,714			66,396	(1,099)	1,958,840
Capital expenditures (7)	219,029	33,817	109,039	85,671			11,676	-	459,232
Reportable segment results as of and for the year ended December 31, 2011 were as follows:
Total revenues (2)	$  1,313,148	$   206,323	$   274,233	$	-		$    64,667	$     (15,168)	$  1,843,203
Segment Adjusted EBITDA Expense (3)	786,116	151,101	203,317	155			59,526	(15,168)	1,185,047
Segment Adjusted EBITDA (4) (5)	505,113	53,729	62,395	(4,407		)	5,983	-	622,813
Total assets (6)	787,923	96,099	452,407	89,690			309,213	(855)	1,734,477
Capital expenditures (7)	153,118	28,477	137,040	51,198			2,887	-	372,720

(1) The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from Matrix Group to the ARLP Partnership’s mining operations.

(2) Revenues included in the Other and Corporate column are primarily attributable to Matrix Group revenues, Mt. Vernon transloading revenues and brokerage sales.

(3) Segment Adjusted EBITDA Expense includes operating expenses, outside coal purchases and other income. Transportation expenses are excluded as these expenses are passed through to the ARLP Partnership’s customers and consequently it does not realize any gain or loss on transportation revenues. We review Segment Adjusted EBITDA Expense per ton for cost trends.

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

	Year Ended December 31,
	2013		2012		2011
Segment Adjusted EBITDA Expense	$	1,398,902	$	1,338,783	$	1,185,047
Outside coal purchases	(2,030)		(38,607)		(54,280)
Other income	1,891		3,115		983
Operating expenses (excluding depreciation, depletion and amortization)	$	1,398,763	$	1,303,291	$	1,131,750

(4) Segment Adjusted EBITDA is defined as net income (prior to the allocation of noncontrolling interest) before net interest expense, income taxes, depreciation, depletion and amortization, asset impairment charge and general and administrative expenses.  Management therefore is able to focus solely on the evaluation of segment operating profitability as it relates to the ARLP Partnership’s revenues and operating expenses, which are primarily controlled by our segments.

Consolidated Segment Adjusted EBITDA is reconciled to net income below (in thousands):

	Year Ended December 31,
	2013		2012		2011
Consolidated Segment Adjusted EBITDA	$	749,214	$	658,463	$	622,813
General and administrative	(65,231)		(62,713)		(54,991)
Depreciation, depletion and amortization	(264,911)		(218,122)		(160,335)
Asset impairment charge	-		(19,031)		-
Interest expense, net	(26,081)		(28,453)		(21,574)
Income tax (expense) benefit	(1,397)		1,082		430
Net income	$	391,594	$	331,226	$	386,343

(5) Includes equity in income (loss) of affiliates for the year ended December 31, 2013, 2012 and 2011 of $(25.3) million, $(15.3) million and $(4.3) million, respectively, included in the White Oak segment and $0.9 million, $0.7 million and $0.8 million, respectively, included in the Other and Corporate segment.

(6) Total assets at December 31, 2013, 2012 and 2011 includes investments in affiliate of $128.7 million, $86.8 million and $38.5 million, respectively, included in the White Oak segment and $1.7 million, $1.7 million and $1.6 million, respectively, included in the Other and Corporate segment.

(7) Capital expenditures shown above for the years ended December 31, 2013, 2012 and 2011 includes $25.3 million, $34.6 million and $50.8 million, respectively, for acquisition and development of coal reserves in our consolidated statements of cash flow.  Capital expenditures shown above excludes the Green River acquisition in April 2012 (Note 3).