Segment Information

The Company’s reportable business segments are based on two distinct lines of business, metallurgical and thermal, and may include a number of mine complexes. The Company manages its coal sales by market, not by individual mining complex. Geology, coal transportation routes to customers, and regulatory environments also have a significant impact on the Company’s marketing and operations management. Mining operations are evaluated based on Adjusted EBITDAR, per-ton cash operating costs (defined as including all mining costs except depreciation, depletion, amortization, accretion on asset retirement obligations, and pass-through transportation expenses), and on other non-financial measures, such as safety and environmental performance. Adjusted EBITDAR is not a measure of financial performance in accordance with generally accepted accounting principles, and items excluded from Adjusted EBITDAR are significant in understanding and assessing our financial condition. Therefore, Adjusted EBITDAR should not be considered in isolation, nor as an alternative to net income, income from operations, cash flows from operations or as a measure of our profitability, liquidity or performance under generally accepted accounting principles. The Company uses Adjusted EBITDAR to measure the operating performance of its segments and allocate resources to the segments. Furthermore, analogous measures are used by industry analysts and investors to evaluate the Company’s operating performance. Investors should be aware that the Company’s presentation of Adjusted EBITDAR may not be comparable to similarly titled measures used by other companies. The Company reports its results of operations primarily through the following reportable segments: Powder River Basin (PRB) segment containing the Company’s primary thermal operations in Wyoming; the Metallurgical (MET) segment, containing the Company’s metallurgical operations in West Virginia, Kentucky, and Virginia, and the Other Thermal segment containing the Company’s supplementary thermal operations in Colorado, Illinois, and West Virginia. Periods presented in this note have been recast for comparability.

On September 14, 2017, the Company closed on its’ definitive agreement to sell Lone Mountain Processing LLC, an operating mine complex within the Company’s metallurgical coal segment. Through this transaction the Company divested all active operations in the states of Kentucky and Virginia. For further information on the divestiture, please see Note 4 to the Condensed Consolidated Financial Statements, “Divestitures.”

Operating segment results for the Successor period, the three and nine months ended September 30, 2017, and the Predecessor period, the three and nine months ended September 30, 2016, are presented below. The Company measures its segments based on “adjusted earnings before interest, taxes, depreciation, depletion, amortization, accretion on asset retirements obligations, and reorganization items, net (Adjusted EBITDAR).” Adjusted EBITDAR does not reflect mine closure or impairment costs, since those are not reflected in the operating income reviewed by management. See Note 6, “Asset Impairment and Mine Closure Costs” to the Condensed Consolidated Financial Statements for discussion of these costs. The Corporate, Other and Eliminations grouping includes these charges, as well as the change in fair value of coal derivatives and coal trading activities, net; corporate overhead; land management activities; other support functions; and the elimination of intercompany transactions.



	PRB		MET		Other Thermal		Corporate, Other and Eliminations			Consolidated
Successor Periods	(in thousands)
Three Months Ended September 30, 2017
Revenues	$	275,999	$	238,946	$	93,859	$	4,734		$	613,538
Adjusted EBITDAR	48,768		53,346		21,217		(19,061		)	104,270
Depreciation, depletion and amortization	9,577		18,479		3,465		393			31,914
Accretion on asset retirement obligation	5,040		511		540		1,489			7,580
Capital expenditures	2,047		4,597		4,013		2,924			13,581

Nine Months Ended September 30, 2017
Revenues	$	780,006	$	692,178	$	287,404	$	4,791		$	1,764,379
Adjusted EBITDAR	128,562		184,208		75,369		(68,003		)	320,136
Depreciation, depletion and amortization	27,661		55,629		9,950		1,296			94,536
Accretion on asset retirement obligation	15,120		1,568		1,621		4,517			22,826
Capital expenditures	2,997		16,032		6,653		4,821			30,503

Predecessor Periods
Three Months Ended September 30, 2016
Revenues	$	295,891	$	152,986	$	96,889	$	4,539		$	550,305
Adjusted EBITDAR	78,880		9,092		28,704		(27,343		)	89,333
Depreciation, depletion and amortization	37,246		18,636		12,513		1,028			69,423
Accretion on asset retirement obligation	5,647		588		663		1,067			7,965
Capital expenditures	113		6,966		1,001		216			8,296

Nine Months Ended September 30, 2016
Revenues	$	726,747	$	437,069	$	213,052	$	21,841		$	1,398,709
Adjusted EBITDAR	113,185		11,851		31,448		(69,181		)	87,303
Depreciation, depletion and amortization	100,151		55,311		32,310		3,809			191,581
Accretion on asset retirement obligation	16,940		1,765		1,988		3,628			24,321
Capital expenditures	612		17,296		3,895		60,631			82,434

A reconciliation of adjusted EBITDAR to consolidated income (loss) before income taxes follows:



	Successor			Predecessor			Successor			Predecessor
	Three Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,			Nine Months Ended September 30,
	2017			2016			2017			2016
(In thousands)
Adjusted EBITDAR	$	104,270		$	89,333		$	320,136		$	87,303
Depreciation, depletion and amortization	(31,914		)	(69,423		)	(94,536		)	(191,581		)
Accretion on asset retirement obligations	(7,580		)	(7,965		)	(22,826		)	(24,321		)
Amortization of sales contracts, net	(13,861		)	(104		)	(42,903		)	728
Asset impairment and mine closure costs	—			(46		)	—			(129,267		)
Gain on sale of Lone Mountain Processing, Inc.	21,574			—			21,574			—
Interest expense, net	(5,252		)	(45,582		)	(19,311		)	(133,235		)
Net loss resulting from early retirement of debt and debt restructuring	(486		)	—			(2,547		)	(2,213		)
Reorganization items, net	(43		)	(20,904		)	(2,892		)	(46,050		)
Income (loss) before income taxes	$	66,708		$	(54,691	)	$	156,695		$	(438,636	)