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 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.

The Illinois Basin reportable segment is comprised of multiple operating segments, including current operating mining complexes a) Webster County Coal's Dotiki mining complex, b) Gibson County Coal's mining complex, which includes the Gibson North (currently idled) and Gibson South mines c) Warrior's mining complex d) River View's mining complex and e) the Hamilton mining complex. In April 2014, production began at the Gibson South mine. The Gibson North mine has been idled since the fourth quarter of 2015 in response to market conditions.

The Illinois Basin reportable segment also includes White County Coal's Pattiki mining complex, Hopkins County Coal's mining complex, which includes the Elk Creek mine, the Pleasant View surface mineable reserves and the Fies underground project, Sebree's mining complex, which includes the Onton mine, Steamport and certain Sebree reserves, CR Services, CR Machine Shop, certain properties and equipment of Alliance Resource Properties, ARP Sebree, ARP Sebree South and UC Coal and its subsidiaries, UC Mining and UC Processing. The Pattiki mine ceased production in December 2016. The Elk Creek mine depleted its reserves in March 2016 and ceased production on April 1, 2016. The Sebree properties, the Pleasant View surface mineable reserves and the Fies underground project are held by the ARLP Partnership for future mine development. The Onton mine has been idled since the fourth quarter of 2015 in response to market conditions. UC Coal equipment assets acquired in 2015 continue to be deployed as needed at various Illinois Basin operating mines. Illinois Basin reserves and other assets increased as a result of multiple acquisitions in 2014 and 2015 as discussed in Note 3 – Acquisitions.

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 lease as those reserves were no longer a core part of its foreseeable development plans. See Note 4 – Long-Lived Asset Impairment for further discussion of this surrender.

Other and Corporate includes marketing and administrative activities, ASI and its subsidiaries included in 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, throughput receivables and prior workers' compensation and pneumoconiosis liabilities from Pontiki, which sold most of its assets in May 2014, Wildcat Insurance, Alliance Minerals, and its affiliate, Cavalier Minerals (Note 10 – Variable Interest Entities), which holds an equity investment in AllDale Minerals (Note 12 – Equity Investments), and AROP Funding (Note 7 – Long-Term Debt).

Reportable segment results as of and for the years ended December 31, 2016, 2015 and 2014 are presented below.


	Illinois				Other and		Elimination
	Basin		Appalachia		Corporate		(1)		Consolidated
	(in thousands)
Year Ended December 31, 2016

Revenues - Outside	$	1,275,543	$	541,108	$	114,372	$	—	$	1,931,023
Revenues - Intercompany		61,617		3,806		17,752		(83,175)		—
Total revenues (2)		1,337,160		544,914		132,124		(83,175)		1,931,023

Segment Adjusted EBITDA Expense (3)		775,851		346,505		89,594		(72,313)		1,139,637
Segment Adjusted EBITDA (4)		538,077		191,694		45,909		(10,862)		764,818
Total assets (6)		1,460,924		480,745		408,798		(152,780)		2,197,687
Capital expenditures		52,505		36,213		2,338		—		91,056

Year Ended December 31, 2015

Revenues - Outside	$	1,527,596	$	584,962	$	160,753	$	—	$	2,273,311
Revenues - Intercompany		108,621		11,337		19,869		(139,827)		—
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		269,047		(114,547)		2,366,516
Capital expenditures (7)		145,352		61,279		6,166		—		212,797

Year Ended December 31, 2014

Revenues - Outside	$	1,647,694	$	630,452	$	22,178	$	—	$	2,300,324
Revenues - Intercompany		—		—		11,515		(11,515)		—
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)		2,288,755
Capital expenditures (7)		243,167		56,840		11,462		—		311,469

(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.

(2)

Revenues included in the 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 and brokerage coal 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):


	Year Ended December 31,
	2016		2015		2014
	(in thousands)
Segment Adjusted EBITDA Expense	$	1,139,637	$	1,376,425	$	1,381,808
Outside coal purchases		(1,514)		(327)		(14)
Other income		725		955		1,566
Operating expenses (excluding depreciation, depletion and amortization)	$	1,138,848	$	1,377,053	$	1,383,360

(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, 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,
	2016		2015		2014
	(in thousands)

Consolidated Segment Adjusted EBITDA	$	764,818	$	814,243	$	875,847
General and administrative		(75,087)		(69,076)		(76,699)
Depreciation, depletion and amortization		(322,509)		(333,713)		(274,566)
Asset impairment		—		(100,130)		—
Interest expense, net		(30,655)		(29,693)		(31,913)
Acquisition gain, net		—		22,548		—
Income tax expense		(14)		(21)		—
Net income	$	336,553	$	304,158	$	492,669

(5)

Includes equity in loss of affiliates for the years ended December 31, 2015 and 2014 of $48.5 million and $16.6 million, respectively, for the Illinois Basin segment.

(6)

Total assets at December 31, 2016, 2015 and 2014 include investments in affiliates of $138.8 million, $64.5 million and $12.9 million, respectively, within Other and Corporate. Total assets at December 31, 2014 include investments in affiliate of $211.7 million for the Illinois Basin segment.

(7)

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, purchase of coal supply agreements from Patriot on December 31, 2014 (Note 3 – Acquisitions) and the payment for acquisition of customer contracts in 2016 (see consolidated statements of cash flows).