Segment Information

9 Months Ended

Sep. 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 priced 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 contracts, international coal put options, and U.S. On-Highway Diesel 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 in September 2014. Our calculation of Adjusted EBITDA does not include premiums paid for derivative financial instruments; either at contract inception, as these payments pertain to future settlement periods, or in the period of contract settlement, as the payment occurred in a preceding period.

Revenue

The following table presents revenue (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
		2015		2014		2015		2014
Owned and Operated Mines	$	265,657	$	285,983	$	733,735	$	827,680
Logistics and Related Activities		44,772		65,640		162,802		178,836
Corporate and Other		2,176		7,789		8,626		20,429
Eliminations of intersegment sales		(10,931)		(17,075)		(41,789)		(44,692)
Consolidated revenue	$	301,673	$	342,337	$	863,374	$	982,253

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

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2015		2014		2015		2014
United States		$	265,531	$	284,843	$	726,340	$	819,562
South Korea			29,252		48,945		114,734		127,370
Other			6,890		8,549		22,300		35,321
	Total revenue from external customers	$	301,673	$	342,337	$	863,374	$	982,253

We attribute revenue to individual countries based on the location of the physical delivery of the coal. All of our revenue for the nine months ended September 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 September 30,
			2015				2014
Adjusted EBITDA
Owned and Operated Mines					$	57,795			$	43,589
Logistics and Related Activities						(19,050)				1,394
Corporate and Other						512				1,040
	Subtotal reportable segments					39,257				46,023
Eliminations						(237)				(304)
Interest expense, net						(10,947)				(12,664)
Depreciation and depletion						(7,896)				(25,815)
Amortization						(928)				—
Accretion						(3,070)				(3,848)
Income tax benefit (expense)						2,205				(40,688)
Tax agreement benefit (1)						—				58,595
	Derivative financial instruments:
		Exclusion of fair value mark-to-market gains (losses) (2)	$	(10,235)			$	515
		Inclusion of cash amounts paid (received) (3)(4)		724				(5,007)
Total derivative financial instruments						(9,511)				(4,492)
Goodwill impairment						—				—
Gain on sale of Decker Mine interest						—				74,262
Net income (loss)					$	8,873			$	91,069

• Changes to related deferred taxes are included in income tax benefit (expense).
• Fair value mark-to-market (gains) losses reflected on the statement of operations.
• Cash gains and losses reflected within operating cash flows.
• Excludes $991 of premiums paid in prior periods for contracts settled during the three months ended September 30,2015.

		Nine Months Ended September 30,
		2015				2014
Adjusted EBITDA
Owned and Operated Mines				$	119,221			$	126,741
Logistics and Related Activities					(33,780)				4,465
Corporate and Other					4,994				593
Subtotal reportable segments					90,435				131,799
Eliminations					(1,349)				(1,503)
Interest expense, net					(36,137)				(64,286)
Depreciation and depletion					(51,742)				(81,944)
Amortization					(2,783)				—
Accretion					(9,960)				(12,066)
Income tax benefit (expense)					12,350				(30,709)
Tax agreement benefit (1)					—				58,595
Derivative financial instruments:
	Exclusion of fair value mark-to-market gains (losses) (2)	$	(17,781)			$	16,052
	Inclusion of cash amounts paid (received) (3)(4)(5)		1,618				(16,905)
Total derivative financial instruments					(16,164)				(852)
Goodwill impairment					(33,355)				—
Gain on sale of Decker Mine interest					—				74,262
Net income (loss)				$	(48,704)			$	73,295

Total Assets

The following table presents total assets (in thousands):

	September 30,		December 31,
		2015		2014
Owned and Operated Mines	$	1,594,188	$	1,704,267
Logistics and Related Activities		86,356		92,347
Corporate and Other		318,297		354,846
Eliminations		(157)		(307)
Consolidated assets	$	1,998,684	$	2,151,153

As of September 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 Property, plant and equipment, net, Other assets, and Accounts payable(in thousands):

	Nine Months Ended
	September 30,
		2015		2014
Owned and Operated Mines	$	32,640	$	17,534
Logistics and Related Activities		—		37,100
Corporate and Other		3,198		3,692
Consolidated	$	35,838	$	58,326