22.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 two reportable segments: Illinois Basin and Appalachia and an “all other” category referred to as Other and Corporate. Our reportable segments correspond to major coal producing regions in the eastern U.S. Similar economic characteristics for the operating segments within each of these two reportable segments generally include coal quality, geology, coal marketing opportunities, mining and transportation methods and regulatory issues.

As a result of the ARLP Partnership acquiring the remaining equity interests in White Oak (the mining complex is now known as Hamilton Mine No. 1) (Note 3 – Acquisitions), the ARLP Partnership restructured its reportable segments to include Hamilton as part of the Illinois Basin segment due to the similarities in product, management, location, and operation with other mines included in the segment. This new organization reflects how the ARLP Partnership’s chief operating decision maker manages and allocates resources to the various operations. Prior periods have been recast to include White Oak in the Illinois Basin segment.

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 mine, Hopkins County Coal’s mining complex, which includes the Elk Creek mine, White County Coal’s Pattiki mining complex, Warrior’s mining complex, Sebree Mining’s mining complex, which includes the Onton mine, Steamport and certain Sebree Reserves, River View’s mining complex and the Hamilton mining complex. In April 2014, production began at the Gibson South mine. Illinois Basin reserves and other assets increased as a result of multiple acquisitions in 2014 and 2015 as discussed in Note 3 – Acquisitions. The Elk Creek mine is currently expected to cease production in early 2016. The Sebree Mining and Fies properties are held by the ARLP Partnership for future mine development. During the fourth quarter of 2015, the ARLP Partnership idled the Onton and Gibson North mines in response to market conditions and continued increases in coal inventories at the mines and customer locations.

The Appalachia reportable segment is comprised of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge mining complex and the MC Mining mining complex. The Mettiki mining complex includes Mettiki Coal (WV)’s Mountain View mine and Mettiki Coal’s preparation plant. During the fourth quarter of 2015, the ARLP Partnership surrendered the Penn Ridge leases as they were no longer a core part of its foreseeable development plans. See Note 4 – Long-Lived Asset Impairment for further discussion of this surrender. In June 2013, Alliance Resource Properties acquired reserves that extended the life of the Mettiki (WV) Mountain View mine. For information regarding the reserves acquired, see Note 3 – Acquisitions.

Other and Corporate includes marketing and administrative expenses, ASI and its subsidiary, Matrix Design and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD, Alliance Design (collectively, the Matrix Design entities and Alliance Design are referred to as the “Matrix Group”), ASI’s ownership of aircraft, the Mt. Vernon dock activities, coal brokerage activity, MAC (Note 3 – Acquisitions), certain activities of Alliance Resource Properties, the Pontiki mining complex, which sold most of its assets in May 2014, Wildcat Insurance, Alliance Minerals, and its affiliate, Cavalier Minerals (Note 11 – Variable Interest Entity), which holds an equity investment in AllDale Minerals (Note 13 – Equity Investments), and AROP Funding (Note 7 – Long-Term Debt).

Reportable segment results as of and for the years ended December 31, 2015, 2014 and 2013 are presented below.

	Illinois Basin		Appalachia			Other and Corporate		Elimination (1)		Consolidated
	(in thousands)

Year ended December 31, 2015

Total revenues (2)	$	1,636,217	$	596,299		$	180,622	$	(139,827)	$	2,273,311
Segment Adjusted EBITDA Expense (3)	949,271		400,681			153,720		(127,247)		1,376,425
Segment Adjusted EBITDA (4)(5)	617,148		183,908			25,767		(12,580)		814,243
Total assets (6)	1,694,044		517,972			270,891		(114,547)		2,368,360
Capital expenditures (7)	145,352		61,279			6,166		-		212,797

Year ended December 31, 2014 (recast)

Total revenues (2)	$	1,647,694	$		630,452	$	33,693	$	(11,515)	$	2,300,324
Segment Adjusted EBITDA Expense (3)	1,000,028		364,689			25,487		(8,396)		1,381,808
Segment Adjusted EBITDA (4)(5)	616,727		254,037			8,202		(3,119)		875,847
Total assets (6)	1,581,279		604,352			262,120		(158,996)		2,285,755
Capital expenditures (7)	243,167		56,840			11,462		-		311,469

Year ended December 31, 2013 (recast)

Total revenues (2)	$	1,631,283	$	493,689		$	97,910	$	(17,683)	$	2,205,199
Segment Adjusted EBITDA Expense (3)	953,798		375,923			86,864		(17,683)		1,398,902
Segment Adjusted EBITDA (4)(5)	632,175		105,123			11,916		-		749,214
Total assets (6)	1,394,592		594,466			138,696		(1,075)		2,126,679
Capital expenditures (7)	272,861		72,926			8,636		-		354,423

(1)

The elimination column represents the elimination of intercompany transactions and is primarily comprised of sales from the Matrix Group and MAC to the ARLP Partnership’s mining operations, coal sales and purchases between operations within different segments, sales of receivables to AROP Funding and insurance premiums paid to Wildcat Insurance (2015 and 2014 only).

(2)

Revenues included in Other and Corporate column are primarily attributable to the Matrix Group revenues, Mt. Vernon transloading revenues, administrative service revenues from affiliates, MAC revenues, Wildcat Insurance revenues, brokerage sales and Pontiki’s coal sales revenue (2013 only).

(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):

	Year Ended December 31,
	2015		2014		2013
	(in thousands)

Segment Adjusted EBITDA Expense	$	1,376,425	$	1,381,808	$	1,398,902
Outside coal purchases	(327)		(14)		(2,030		)
Other income	955		1,566		1,891

Operating expenses (excluding depreciation, depletion and amortization)	$	1,377,053	$	1,383,360	$	1,398,763

(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, acquisition gain, net 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 as follows:

	Year Ended December 31,
	2015		2014		2013
	(in thousands)

Consolidated Segment Adjusted EBITDA	$	814,243	$	875,847	$	749,214
General and administrative	(69,076)		(76,699)		(65,231		)
Depreciation, depletion and amortization	(333,713)		(274,566)		(264,911		)
Asset impairment charge	(100,130)		-		-
Interest expense, net	(29,693)		(31,913)		(26,081		)
Acquisition gain, net	22,548		-		-
Income tax expense	(21)		-		(1,397		)

Net income	$	304,158	$	492,669	$	391,594

(5)

Includes equity in income (loss) of affiliates for the years ended December 31, 2015, 2014 and 2013 of $(48.5) million, $(16.6) million and $(25.3) million, respectively, for the Illinois Basin segment and $(0.5) million, $(3) thousand and $0.9 million, respectively, for Other and Corporate.

(6)

Total assets at December 31, 2015, 2014 and 2013 include investments in affiliate of $64.5 million, $12.9 million and $1.7 million, respectively, within Other and Corporate. Total assets at December 31, 2014 and 2013 include investments in affiliate of $211.7 million and $128.7 million, respectively, for the Illinois Basin segment.

(7)

Capital expenditures shown above include funding to White Oak of $4.1 million and $25.3 million, for the years ended December 31, 2014 and 2013, respectively, for the acquisition and development of coal reserves from White Oak, which is described as Payments to affiliate for acquisition and development of coal reserves in our consolidated statements of cash flow. Capital expenditures shown above exclude the Hamilton Acquisition on July 31, 2015, the Patriot acquisition on February 3, 2015, the MAC acquisition on January 1, 2015 and purchase of coal supply agreements from Patriot on December 31, 2014 (Note 3 – Acquisitions).