Segment Information

6 Months Ended

Jun. 30, 2015

Segment Information

Segment Information

18. Segment Information

We have reportable segments of Owned and Operated Mines, Logistics and Related Activities, and Corporate and Other.

Our Owned and Operated Mines segment is characterized by the predominant focus on thermal coal production where the sale occurs at the mine site and where title and risk of loss generally pass to the customer at that point. This segment includes our Antelope Mine, Cordero Rojo Mine, and Spring Creek Mine. Sales in this segment are primarily to domestic electric utilities, although a portion is made to our Logistics and Related Activities segment. Sales between reportable segments are based on prevailing market prices for arm’s length transactions. Our mines utilize surface mining extraction processes and are all located in the PRB. The gains and losses resulting from our domestic coal futures contracts and WTI derivative financial instruments are reported within this segment.

Our Logistics and Related Activities segment is characterized by the services we provide to our international and certain of our domestic customers where we deliver coal to the customer at a terminal or the customer’s plant or other delivery point, remote from our mine site. Services provided include the purchase of coal from third parties or from our Owned and Operated Mines segment, at market prices, as well as the contracting and coordination of the transportation and other handling services from third-party operators, which are typically rail and terminal companies. Title and risk of loss are retained by the Logistics and Related Activities segment through the transportation and delivery process. Title and risk of loss pass to the customer in accordance with the contract and typically occur at a vessel loading terminal, a vessel unloading terminal or an end use facility. Risk associated with rail and terminal take-or-pay agreements is also borne by the Logistics and Related Activities segment. The gains and losses resulting from our international coal forward derivative financial instruments are reported within this segment. Port access contract rights and related amortization are also included in this segment.

Our Corporate and Other segment includes results relating to broker activity, our previous share of the Decker Mine operations (which was sold in September 2014), and unallocated corporate costs and assets. All corporate costs, except Board of Directors related expenses, are allocated to the segments based upon their relative percentage of certain financial metrics.

Eliminations represent the purchase and sale of coal between reportable segments and the associated elimination of intercompany profit or loss in inventory.

Our chief operating decision maker uses Adjusted EBITDA as the primary measure of segment reporting performance. EBITDA represents income (loss) from continuing operations, or net income (loss), as applicable, before: (1) interest income (expense) net, (2) income tax provision, (3) depreciation and depletion, and (4) amortization. Adjusted EBITDA represents EBITDA as further adjusted for accretion, which represents non-cash increases in asset retirement obligation liabilities resulting from the passage of time, and specifically identified items that management believes do not directly reflect our core operations. For the periods presented herein, the specifically identified items are:  (1) adjustments to exclude the updates to the tax agreement liability, including tax impacts of the IPO and Secondary Offeringand the termination of the Tax Receivable Agreement in August 2014, (2) adjustments for derivative financial instruments, excluding fair value mark-to-market gains or losses and including cash amounts received or paid, (3) adjustments to exclude non-cash goodwill impairment charges, and (4) adjustments to exclude the gain from the sale of our 50% non-operating interest in the Decker Mine.

Revenue

The following table presents revenue (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
		2015		2014		2015		2014
Owned and Operated Mines	$	206,279	$	272,099	$	468,078	$	541,698
Logistics and Related Activities		48,591		54,683		118,031		113,196
Corporate and Other		1,219		8,267		6,450		12,639
Eliminations of intersegment sales		(11,941)		(14,198)		(30,858)		(27,617)
Consolidated revenue	$	244,148	$	320,850	$	561,701	$	639,916

The following table presents revenue from external customers by geographic region (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
United States		$	202,675	$	267,489	$	460,809	$	534,718
South Korea			35,470		27,482		85,481		78,425
Other			6,003		25,879		15,411		26,773
	Total revenue from external customers	$	244,148	$	320,850	$	561,701	$	639,916

We attribute revenue to individual countries based on the location of the physical delivery of the coal. All of our revenue for the six months ended June 30,2015 and 2014originated in the U.S.

Adjusted EBITDA

The following table reconcilessegment Adjusted EBITDA to net income (loss) (in thousands):

			Three Months Ended June 30,
			2015				2014
Adjusted EBITDA
Owned and Operated Mines					$	17,130			$	41,956
Logistics and Related Activities						(6,392)				2,699
Corporate and Other						362				1,420
	Subtotal reportable segments					11,100				46,075
Eliminations						(456)				(848)
Interest expense, net						(12,571)				(13,752)
Depreciation and depletion						(19,310)				(29,200)
Amortization						(928)				—
Accretion						(3,348)				(4,088)
Income tax benefit (expense)						9,866				3,489
Tax agreement (expense) benefit (1)						—				—
	Derivative financial instruments:
		Exclusion of fair value mark-to-market gains (losses) (2)	$	(2,761)			$	2,803
		Inclusion of cash amounts (received) paid (3) (4) (5)		(1,135)				(6,628)
Total derivative financial instruments						(3,896)				(3,825)
Goodwill impairment						(33,355)				—
Net income (loss)					$	(52,897)			$	(2,148)

• Changes to related deferred taxes are included in income tax expense.
• Fair value mark-to-market (gains) losses reflected on the statement of operations.
• Cash gains and losses reflected within operating cash flows.
• Excludes premiums paid in prior periods for contracts settled during the period $ 992 $ —
• Excludes premiums paid at contract inception during the period $ 5,813 $ —

		Six Months Ended June 30,
		2015				2014
Adjusted EBITDA
Owned and Operated Mines				$	61,426			$	83,152
Logistics and Related Activities					(14,730)				3,070
Corporate and Other					4,481				(448)
Subtotal reportable segments					51,177				85,774
Eliminations					(1,112)				(1,199)
Interest expense, net					(25,190)				(51,622)
Depreciation and depletion					(43,846)				(56,128)
Amortization					(1,855)				—
Accretion					(6,890)				(8,217)
Income tax benefit (expense)					10,146				9,979
Tax agreement (expense) benefit (1)					—				—
Derivative financial instruments:
	Exclusion of fair value mark-to-market gains (losses) (2)	$	(7,546)			$	15,537
	Inclusion of cash amounts received (3)(4) (5)		894				(11,898)
Total derivative financial instruments					(6,652)				3,640
Goodwill impairment					(33,355)				—
Net income (loss)				$	(57,577)			$	(17,774)

• Changes to related deferred taxes are included in income tax expense.
• Fair value mark-to-market (gains) losses reflected on the statement of operations.
• Cash gains and losses reflected within operating cash flows.
• Excludes premiums paid in prior periods for contracts settled during the period $ 2,976 $ —

Total Assets

The following table presents total assets (in thousands):

	June 30,		December 31,
		2015		2014
Owned and Operated Mines	$	1,631,506	$	1,704,267
Logistics and Related Activities		87,627		92,347
Corporate and Other		274,437		363,611
Eliminations		(47)		(307)
Consolidated assets	$	1,993,523	$	2,159,918

As of June 30,2015 and December 31, 2014, all of our long-lived assets were located in the U.S.

Capital Expenditures

The following table presents purchases of property, plant and equipment, investment in development projects, port access contract rights, capital expenditures included in accounts payable, and assets acquired under capital leases(in thousands):

	Six Months Ended
	June 30,
		2015		2014
Owned and Operated Mines	$	22,327	$	8,930
Logistics and Related Activities		—		—
Corporate and Other		2,185		1,840
Consolidated	$	24,512	$	10,770