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 EBITDA, 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 EBITDA is not a measure of financial performance in accordance with generally accepted accounting principles, and items excluded from Adjusted EBITDA are significant in understanding and assessing the Company’s financial condition. Therefore, Adjusted EBITDA 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 EBITDA 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 EBITDA 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, 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.

Operating segment results for the three and nine months ended September 30, 2018 and 2017, are presented below. The Company measures its segments based on “adjusted earnings before interest, taxes, depreciation, depletion, amortization, accretion on asset retirements obligations, and nonoperating expenses (Adjusted EBITDA).” Adjusted EBITDA does not reflect mine closure or impairment costs, since those are not reflected in the operating income reviewed by management. 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
	(in thousands)
Three Months Ended September 30, 2018
Revenues	$	261,927	$	236,328	$	130,663	$	4,262		$	633,180
Adjusted EBITDA	48,646		81,250		25,200		(30,202		)	124,894
Depreciation, depletion and amortization	9,114		18,106		3,924		631			31,775
Accretion on asset retirement obligation	4,885		469		565		1,073			6,992
Total assets	374,092		561,989		127,904		933,637			1,997,622
Capital expenditures	3,458		17,827		3,332		1,076			25,693

Three Months Ended September 30, 2017
Revenues	$	276,000	$	238,946	$	93,859	$	4,733		$	613,538
Adjusted EBITDA	48,768		53,346		21,217		(18,240		)	105,091
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
Total assets	419,162		538,637		130,729		934,005			2,022,533
Capital expenditures	2,047		4,597		4,013		2,924			13,581

Nine Months Ended September 30, 2018
Revenues	$	737,233	$	733,707	$	321,997	$	7,887		$	1,800,824
Adjusted EBITDA	102,639		251,649		52,710		(91,806		)	315,192
Depreciation, depletion and amortization	25,841		53,109		11,459		1,618			92,027
Accretion on asset retirement obligation	14,656		1,406		1,696		3,219			20,977
Total assets	374,092		561,989		127,904		933,637			1,997,622
Capital expenditures	7,221		35,555		7,097		5,869			55,742

Nine Months Ended September 30, 2017
Revenues	$	780,007	$	692,178	$	287,404	$	4,790		$	1,764,379
Adjusted EBITDA	128,562		184,208		75,369		(66,229		)	321,910
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
Total assets	419,162		538,637		130,729		934,005			2,022,533
Capital expenditures	2,997		16,032		6,653		4,821			30,503

A reconciliation of net income to adjusted EBITDA follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In thousands)
Net income	$	123,192		$	68,351		$	226,483		$	157,179
Benefit from income taxes	(45,215		)	(1,643		)	(49,125		)	(484		)
Interest expense, net	3,378			5,252			10,998			19,311
Depreciation, depletion and amortization	31,775			31,914			92,027			94,536
Accretion on asset retirement obligations	6,992			7,580			20,977			22,826
Amortization of sales contracts, net	3,241			13,861			9,540			42,903
Gain on sale of Lone Mountain Processing, Inc.	—			(21,574		)	—			(21,574		)
Net loss resulting from early retirement of debt and debt restructuring	—			486			485			2,547
Non-service related pension and postretirement benefit costs	971			821			2,206			1,774
Reorganization items, net	560			43			1,601			2,892
Adjusted EBITDA	$	124,894		$	105,091		$	315,192		$	321,910