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 two reportable segments, Illinois Basin and Appalachia, and we have 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 our 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 currently operating mining complexes (a) Webster County Coal, LLC's Dotiki mining complex, (b) Gibson County Coal, LLC's mining complex, which includes the Gibson North (currently idled) and Gibson South mines, (c) Warrior Coal, LLC's mining complex, (d) River View Coal, LLC's mining complex and (e) Hamilton County Coal, LLC's mining complex. 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, LLC's Pattiki mining complex ("Pattiki"), Hopkins County Coal, LLC's mining complex, which includes the Elk Creek mine, the Pleasant View surface mineable reserves and the Fies underground project, Sebree Mining, LLC's mining complex, which includes the Onton mine, Steamport, LLC and certain reserves, CR Services, LLC, CR Machine Shop, LLC, certain properties and equipment of Alliance Resource Properties, ARP Sebree, LLC, ARP Sebree South, LLC and UC Coal, LLC and its subsidiaries, UC Mining, LLC and UC Processing, LLC (collectively "UC Coal"). 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 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.

The Appalachia reportable segment is comprised of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge, LLC mining complex and the MC Mining, LLC mining complex. The Mettiki mining complex includes Mettiki Coal (WV), LLC's Mountain View mine and Mettiki Coal, LLC's preparation plant.

Other and Corporate includes the ARLP Partnership and AHGP's marketing and administrative expenses, Alliance Service, Inc. ("ASI") and its subsidiary, Matrix Design Group, LLC and its subsidiaries Matrix Design International, LLC and Matrix Design Africa (PTY) LTD ("Matrix Design"), Alliance Design Group, LLC ("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 Transfer Terminal, LLC ("Mt. Vernon") dock activities, Alliance Coal's coal brokerage activity, Mid-America Carbonates, LLC ("MAC"), certain of Alliance Resource Properties' land and mineral interest activities, Pontiki Coal, LLC's throughput receivables and prior workers' compensation and pneumoconiosis liabilities, Wildcat Insurance, LLC ("Wildcat Insurance"), Alliance Minerals, and its affiliate, Cavalier Minerals (Note 8 – Variable Interest Entities), both of which hold equity investments in various AllDale Partnerships (Note 9 – Investments), AROP Funding and the ARLP Partnership's new subsidiary formed March 30, 2017, Alliance Finance (both discussed in Note 6 – Long-Term Debt). On July 19, 2017, Alliance Minerals purchased $100 million of Series A-1 Preferred Interests from Kodiak (Note 9 – Investments).

Reportable segment results as of and for the three and nine months ended September 30, 2017 and 2016 are presented below.


	Illinois				Other and		Elimination
	Basin		Appalachia		Corporate		(1)		Consolidated
	(in thousands)
Three Months Ended September 30, 2017

Revenues - Outside	$	266,931	$	152,865	$	33,291	$	—	$	453,087
Revenues - Intercompany		18,446		1,390		3,977		(23,813)		—
Total revenues (2)		285,377		154,255		37,268		(23,813)		453,087

Segment Adjusted EBITDA Expense (3)		192,465		97,316		26,421		(21,591)		294,611
Segment Adjusted EBITDA (4)		86,377		55,465		17,445		(2,222)		157,065
Capital expenditures		26,328		11,126		484		—		37,938

Three Months Ended September 30, 2016

Revenues - Outside	$	360,221	$	154,852	$	36,893	$	—	$	551,966
Revenues - Intercompany		18,267		—		4,826		(23,093)		—
Total revenues (2)		378,488		154,852		41,719		(23,093)		551,966

Segment Adjusted EBITDA Expense (3)		227,526		94,201		26,664		(20,279)		328,112
Segment Adjusted EBITDA (4)		145,424		58,497		16,160		(2,814)		217,267
Capital expenditures		10,893		10,306		466		—		21,665

Nine Months Ended September 30, 2017

Revenues - Outside	$	763,765	$	458,815	$	90,131	$	—	$	1,312,711
Revenues - Intercompany		46,740		1,390		11,985		(60,115)		—
Total revenues (2)		810,505		460,205		102,116		(60,115)		1,312,711

Segment Adjusted EBITDA Expense (3)		504,201		276,252		67,382		(53,451)		794,384
Segment Adjusted EBITDA (4)		285,928		179,396		47,948		(6,664)		506,608
Total assets		1,406,831		468,580		458,421		(123,073)		2,210,759
Capital expenditures		66,444		37,167		1,844		—		105,455

Nine Months Ended September 30, 2016

Revenues - Outside	$	921,796	$	407,406	$	74,530	$	—	$	1,403,732
Revenues - Intercompany		40,448		3,806		13,723		(57,977)		—
Total revenues (2)		962,244		411,212		88,253		(57,977)		1,403,732

Segment Adjusted EBITDA Expense (3)		567,214		261,933		63,575		(49,336)		843,386
Segment Adjusted EBITDA (4)		381,042		143,699		25,555		(8,641)		541,655
Total assets		1,541,513		480,920		374,810		(148,438)		2,248,805
Capital expenditures		41,264		27,317		1,686		—		70,267

(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, MAC revenues, Wildcat Insurance revenues and brokerage coal sales.

(3)

Segment Adjusted EBITDA Expense includes operating expenses, 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. Results presented for Segment Adjusted EBITDA Expense for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to Depreciation, depletion and amortization rather than Operating expenses (excluding depreciation, depletion and amortization).

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,
	2017		2016		2017		2016
	(in thousands)
Segment Adjusted EBITDA Expense	$	294,611	$	328,112	$	794,384	$	843,386
Outside coal purchases		—		(1,514)		—		(1,514)
Other income		774		293		2,461		545
Operating expenses (excluding depreciation, depletion and amortization)	$	295,385	$	326,891	$	796,845	$	842,417

(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, general and administrative expenses and debt extinguishment loss. 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. Results presented for Segment Adjusted EBITDA for the three and nine months ended September 30, 2016 have been recast to reflect a reclassification of depreciation and depletion capitalized into coal inventory as adjustments to Depreciation, depletion and amortization rather than Operating expenses (excluding depreciation, depletion and amortization). Consolidated Segment Adjusted EBITDA is reconciled to net income as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Consolidated Segment Adjusted EBITDA	$	157,065	$	217,267	$	506,608	$	541,655
General and administrative		(15,389)		(18,987)		(47,160)		(55,175)
Depreciation, depletion and amortization		(69,962)		(101,432)		(194,109)		(245,736)
Interest expense, net		(10,767)		(7,998)		(28,817)		(23,375)
Debt extinguishment loss		—		—		(8,148)		—
Income tax (expense) benefit		(4)		(6)		3		(4)
Net income	$	60,943	$	88,844	$	228,377	$	217,365