Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Information

13. 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 four reportable segments: Illinois Basin, Central Appalachia, Northern Appalachia and Other and Corporate. The first three reportable segments correspond to the three major coal producing regions in the eastern U.S. Factors similarly affecting financial performance of the operating segments within each of these three reportable segments include coal quality, coal seam height, mining and transportation methods and regulatory issues.

The Illinois Basin reportable segment is comprised of multiple operating segments, including Webster County Coal, LLC's Dotiki mining complex, Gibson County Coal, LLC's Gibson North mining complex, Hopkins County Coal, LLC's Elk Creek mining complex, White County Coal, LLC's Pattiki mining complex, Warrior Coal, LLC's mining complex, River View Coal, LLC's mining complex, the Sebree Mining, LLC ("Sebree") property, the Gibson County Coal (South), LLC ("Gibson South") property and certain properties of Alliance Resource Properties and its wholly-owned subsidiary, ARP Sebree, LLC. The ARLP Partnership recently received the permits necessary to begin mine construction at the Gibson South property, and on July 25, 2011, the ARLP Partnership's board of directors of its managing general partner approved development of the Gibson South mine, which is currently underway. The ARLP Partnership is in the process of permitting the Sebree property for future mine development.

The Central Appalachian reportable segment is comprised of two operating segments, Pontiki Coal, LLC's and MC Mining, LLC's mining complexes.

The Northern Appalachian reportable segment is comprised of multiple operating segments, including Mettiki Coal, LLC's mining complex, Mettiki Coal (WV) LLC's Mountain View mining complex, two small third-party mining operations (one of which ceased operations in July 2011), a mining complex currently under construction at Tunnel Ridge, LLC ("Tunnel Ridge") and the Penn Ridge Coal, LLC ("Penn Ridge") property. In May 2010, incidental production began from mine development activities at Tunnel Ridge; however, longwall production is not anticipated until early in the second quarter of 2012. The ARLP Partnership is in the process of permitting the Penn Ridge property for future mine development.

Other and Corporate includes the ARLP Partnership and AHGP's marketing and administrative expenses, Matrix Design Group, LLC ("Matrix Design"), Alliance Design Group, LLC ("Alliance Design") (collectively, Matrix Design and Alliance Design are referred to as the "Matrix Group"), the Mt. Vernon Transfer Terminal, LLC ("Mt. Vernon") dock activities, coal brokerage activity, WOR Properties, WOR Processing, the ARLP Partnership's equity investment in Mid-America Carbonates, LLC, ("MAC") and certain properties of Alliance Resource Properties. WOR Processing includes both the ARLP Partnership's surface operations at White Oak currently under construction and its equity investment in White Oak (Note 7). Reportable segment results as of and for the three and nine months ended September 30, 2011 and 2010 are presented below:

	Illinois Basin		Central Appalachia		Northern Appalachia		Other and Corporate			Elimination (1)			Consolidated
	(in thousands)
Reportable segment results for the three months ended September 30, 2011:
Total revenues (2)	$	342,237	$	49,478	$	76,808	$	22,606		$	(3,472	)	$	487,657
Segment Adjusted EBITDA Expense (3)		210,024		36,796		50,911		20,016			(3,472	)		314,275
Segment Adjusted EBITDA (4)		127,230		12,456		23,665		2,585			—			165,936
Capital expenditures		36,050		8,298		29,044		34,324	*		—			107,716	*
Reportable segment results for the three months ended September 30, 2010:
Total revenues (2)	$	304,292	$	41,499	$	57,248	$	12,610		$	(5,293	)	$	410,356
Segment Adjusted EBITDA Expense (3)		185,183		33,175		46,268		10,331			(5,293	)		269,664
Segment Adjusted EBITDA (4)		114,215		8,307		8,781		2,278			—			133,581
Capital expenditures		35,611		3,389		19,512		413			—			58,925
Reportable segment results as of and for the nine months ended September 30, 2011:
Total revenues (2)	$	983,038	$	154,704	$	200,004	$	43,073		$	(12,135	)	$	1,368,684
Segment Adjusted EBITDA Expense (3)		583,291		109,848		143,804		38,353			(12,135	)		863,161
Segment Adjusted EBITDA (4)		382,164		43,590		49,602		4,715			—			480,071
Total assets		787,790		89,516		400,372		405,034			(877	)		1,681,835
Capital expenditures		109,404		20,153		84,817		35,775	*		—			250,149	*
Reportable segment results as of and for the nine months ended September 30, 2010:
Total revenues (2)	$	895,878	$	122,189	$	156,223	$	33,818		$	(16,886	)	$	1,191,222
Segment Adjusted EBITDA Expense (3)		532,626		97,921		119,855		28,349			(16,886	)		761,865
Segment Adjusted EBITDA (4)		344,216		24,141		29,892		5,471			—			403,720
Total assets		753,987		84,505		299,812		45,673			(5,401	)		1,178,576
Capital expenditures		119,000		7,909		105,503		1,361			—			233,773

* Capital expenditures shown above for the three and nine months ended September 30, 2011, include the reserves acquired from White Oak for $33,841 (Note 7).

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

(2) Revenues included in the Other and Corporate column are primarily attributable to the 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):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Segment Adjusted EBITDA Expense	$	314,275		$	269,664		$	863,161		$	761,865
Outside coal purchases		(19,864	)		(5,736	)		(29,495	)		(12,122	)
Other income		360			460			1,340			614
Operating expenses (excluding depreciation, depletion and amortization)	$	294,771		$	264,388		$	835,006		$	750,357

(4) Segment Adjusted EBITDA is defined as net income (prior to the allocation of noncontrolling interest) before income taxes, net interest expense, 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 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 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Segment Adjusted EBITDA	$	165,936		$	133,581		$	480,071		$	403,720
General and administrative		(13,613	)		(16,327	)		(40,692	)		(39,353	)
Depreciation, depletion and amortization		(40,275	)		(37,587	)		(117,237	)		(109,560	)
Interest expense, net		(8,698	)		(7,586	)		(26,969	)		(22,519	)
Income tax (expense) benefit		317			(995	)		221			(1,586	)
Net income	$	103,667		$	71,086		$	295,394		$	230,702