ALLIANCE RESOURCE PARTNERS LP - Quarter Report: 2016 March (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

 

OR

 

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________to_____________

 

 

 

ALLIANCE RESOURCE PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 

 

1717 South Boulder Avenue, Suite 400, Tulsa, Oklahoma 74119

(Address of principal executive offices and zip code)

 

(918) 295-7600

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes   [   ] No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  [X ] Yes   [   ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (check one)

 

Large Accelerated Filer [X]	Accelerated Filer [   ]		Non-Accelerated Filer [   ]		Smaller Reporting Company [   ]
			(Do not check if smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[   ] Yes   [X] No

 

As of May 10, 2016, 74,375,025 common units are outstanding.

 

Table of Contents

 

TABLE OF CONTENTS

 

PART I
FINANCIAL INFORMATION
		Page
ITEM 1.	Financial Statements (Unaudited)
	ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES
	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	1
	Condensed Consolidated Statements of Income for the three months ended March 31, 2016 and 2015	2
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015	3
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015	4
	Notes to Condensed Consolidated Financial Statements	5
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	31
ITEM 4.	Controls and Procedures	32
	Forward-Looking Statements	33
PART II
OTHER INFORMATION
ITEM 1.	Legal Proceedings	35
ITEM 1A.	Risk Factors	35
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
ITEM 3.	Defaults Upon Senior Securities	35
ITEM 4.	Mine Safety Disclosures	35
ITEM 5.	Other Information	35
ITEM 6.	Exhibits	36

 

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PART I

 

FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 

		March 31,					December 31,
ASSETS		2016					2015
CURRENT ASSETS:
Cash and cash equivalents			$	29,988				$	33,431
Trade receivables			119,662					122,875
Other receivables			848					696
Due from affiliates			322					190
Inventories, net			155,344					121,081
Advance royalties, net			6,770					6,820
Prepaid expenses and other assets			23,754					29,812
Total current assets			336,688					314,905
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost			3,065,155					3,044,260
Less accumulated depreciation, depletion and amortization			(1,309,334		)			(1,243,985		)
Total property, plant and equipment, net			1,755,821					1,800,275
OTHER ASSETS:
Advance royalties, net			32,666					21,295
Equity investments in affiliate			84,234					64,509
Goodwill			136,399					136,399
Other long-term assets			22,694					23,903
Total other assets			275,993					246,106
TOTAL ASSETS			$	2,368,502				$	2,361,286
LIABILITIES AND PARTNERS’ CAPITAL
CURRENT LIABILITIES:
Accounts payable			$	63,132				$	83,597
Due to affiliates			41					129
Accrued taxes other than income taxes			16,602					15,621
Accrued payroll and related expenses			33,459					37,031
Accrued interest			2,801					306
Workers’ compensation and pneumoconiosis benefits			8,843					8,688
Current capital lease obligations			20,148					19,764
Other current liabilities			19,534					18,929
Current maturities, long-term debt, net			240,436					238,086
Total current liabilities			404,996					422,151
LONG-TERM LIABILITIES:
Long-term debt, excluding current maturities, net			644,736					579,420
Pneumoconiosis benefits			61,079					60,077
Accrued pension benefit			38,781					39,031
Workers’ compensation			48,337					47,486
Asset retirement obligations			123,302					122,434
Long-term capital lease obligations			74,895					80,150
Other liabilities			21,684					21,174
Total long-term liabilities			1,012,814					949,772
Total liabilities			1,417,810					1,371,923
COMMITMENTS AND CONTINGENCIES
PARTNERS’ CAPITAL:
Alliance Resource Partners, L.P. (“ARLP”) Partners’ Capital:
Limited Partners - Common Unitholders 74,375,025 and 74,188,784 units outstanding, respectively			1,258,251					1,280,218
General Partners’ deficit			(276,509		)			(258,883		)
Accumulated other comprehensive loss			(34,429		)			(34,557		)
Total ARLP Partners’ Capital			947,313					986,778
Noncontrolling interest			3,379					2,585
Total Partners’ Capital			950,692					989,363
TOTAL LIABILITIES AND PARTNERS’ CAPITAL			$	2,368,502				$	2,361,286

 

See notes to condensed consolidated financial statements.

 

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except unit and per unit data)

(Unaudited)

 

		Three Months Ended March 31,
		2016					2015
SALES AND OPERATING REVENUES:
Coal sales			$	401,292				$	517,739
Transportation revenues			6,558					7,148
Other sales and operating revenues			4,979					35,529
Total revenues			412,829					560,416
EXPENSES:
Operating expenses (excluding depreciation, depletion and amortization)			253,303					334,362
Transportation expenses			6,558					7,148
Outside coal purchases			-					322
General and administrative			17,238					16,846
Depreciation, depletion and amortization			80,883					78,268
Total operating expenses			357,982					436,946
INCOME FROM OPERATIONS			54,847					123,470
Interest expense (net of interest capitalized for the three months ended March 31, 2016 and 2015 of $227 and $212, respectively)			(7,615		)			(7,968		)
Interest income			3					531
Equity in loss of affiliates, net			(27		)			(9,686		)
Other income			91					118
INCOME BEFORE INCOME TAXES			47,299					106,465
INCOME TAX BENEFIT			(9		)			(2		)
NET INCOME			47,308					106,467
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST			2					13
NET INCOME ATTRIBUTABLE TO ALLIANCE RESOURCE PARTNERS, L.P. (“NET INCOME OF ARLP”)			$	47,310				$	106,480
GENERAL PARTNERS’ INTEREST IN NET INCOME OF ARLP			$	19,722				$	36,883
LIMITED PARTNERS’ INTEREST IN NET INCOME OF ARLP			$	27,588				$	69,597
BASIC AND DILUTED NET INCOME OF ARLP PER LIMITED PARTNER UNIT (Note 9)			$	0.36				$	0.92
DISTRIBUTIONS PAID PER LIMITED PARTNER UNIT			$	0.675				$	0.65
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING – BASIC AND DILUTED			74,291,114					74,130,405

 

See notes to condensed consolidated financial statements.

 

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

		Three Months Ended March 31,
		2016					2015
NET INCOME			$	47,308				$	106,467
OTHER COMPREHENSIVE INCOME/(LOSS):
Defined benefit pension plan:
Amortization of net actuarial loss (1)			789					842
Total defined benefit pension plan adjustments			789					842
Pneumoconiosis benefits:
Amortization of net actuarial gain (1)			(661		)			(113		)
Total pneumoconiosis benefits adjustments			(661		)			(113		)
OTHER COMPREHENSIVE INCOME			128					729
COMPREHENSIVE INCOME			47,436					107,196
Less: Comprehensive loss attributable to noncontrolling interest			2					13
COMPREHENSIVE INCOME ATTRIBUTABLE TO ARLP			$	47,438				$	107,209

 

(1)          Amortization of net actuarial gain or loss is included in the computation of net periodic benefit cost (see Notes 10 and 12 for additional details).

 

See notes to condensed consolidated financial statements.

 

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

		Three Months Ended March 31,
		2016					2015
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES			$	80,594				$	161,622
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment:
Capital expenditures			(31,733		)			(50,330		)
Changes in accounts payable and accrued liabilities			(6,247		)			659
Proceeds from sale of property, plant and equipment			458					299
Purchases of equity investments in affiliates			(20,168		)			(18,804		)
Payments for acquisitions of businesses, net of cash acquired			-					(28,078		)
Other			416					1,807
Net cash used in investing activities			(57,274		)			(94,447		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under securitization facility			22,500					-
Payments under securitization facility			(13,900		)			-
Payments on term loan			(6,250		)			(6,250		)
Borrowings under revolving credit facility			105,000					95,000
Payments under revolving credit facility			(40,000		)			(65,000		)
Payments on capital lease obligations			(4,871		)			(343		)
Contributions to consolidated company from affiliate noncontrolling interest			796					333
Net settlement of employee withholding taxes on vesting of Long-Term Incentive Plan			(1,336		)			(2,719		)
Cash contributions by General Partners			47					95
Distributions paid to Partners			(88,749		)			(84,356		)
Other			-					(2,141		)
Net cash used in financing activities			(26,763		)			(65,381		)
NET CHANGE IN CASH AND CASH EQUIVALENTS			(3,443		)			1,794
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			33,431					24,601
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	29,988				$	26,395
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest			$	4,996				$	2,137
NON-CASH INVESTING AND FINANCING ACTIVITY:
Accounts payable for purchase of property, plant and equipment			$	6,387				$	16,313
Market value of common units issued under Long-Term Incentive and Directors Deferred Compensation Plans before minimum statutory tax withholding requirements			$	3,642				$	7,389
Acquisition of businesses:
Fair value of assets assumed			$	-				$	37,881
Contingent consideration			-					(5,746		)
Previously held equity-method investment			-					(1,609		)
Cash paid, net of cash acquired			-					(28,078		)
Fair value of liabilities assumed			$	-				$	2,448

 

See notes to condensed consolidated financial statements.

 

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ALLIANCE RESOURCE PARTNERS, L.P. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.         ORGANIZATION AND PRESENTATION

 

Significant Relationships Referenced in Notes to Condensed Consolidated Financial Statements

 

·     References to “we,” “us,” “our” or “ARLP Partnership” mean the business and operations of Alliance Resource Partners, L.P., the parent company, as well as its consolidated subsidiaries.

·     References to “ARLP” mean Alliance Resource Partners, L.P., individually as the parent company, and not on a consolidated basis.

·     References to “MGP” mean Alliance Resource Management GP, LLC, the managing general partner of Alliance Resource Partners, L.P., also referred to as our managing general partner.

·     References to “SGP” mean Alliance Resource GP, LLC, the special general partner of Alliance Resource Partners, L.P., also referred to as our special general partner.

·     References to “Intermediate Partnership” mean Alliance Resource Operating Partners, L.P., the intermediate partnership of Alliance Resource Partners, L.P.

·     References to “Alliance Resource Properties” mean Alliance Resource Properties, LLC, the land-holding company for the mining operations of Alliance Resource Operating Partners, L.P.

·     References to “Alliance Coal” mean Alliance Coal, LLC, the holding company for the mining operations of Alliance Resource Operating Partners, L.P., also referred to as our primary operating subsidiary.

·     References to “AHGP” mean Alliance Holdings GP, L.P., individually as the parent company, and not on a consolidated basis.

·     References to “AGP” mean Alliance GP, LLC, the general partner of Alliance Holdings GP, L.P.

 

Organization

 

ARLP is a Delaware limited partnership listed on the NASDAQ Global Select Market under the ticker symbol “ARLP.”  ARLP was formed in May 1999 to acquire, upon completion of ARLP’s initial public offering on August 19, 1999, certain coal production and marketing assets of Alliance Resource Holdings, Inc., a Delaware corporation (“ARH”), consisting of substantially all of ARH’s operating subsidiaries, but excluding ARH.  ARH is owned by Joseph W. Craft III, the President and Chief Executive Officer and a Director of our managing general partner, and Kathleen S. Craft.  SGP, a Delaware limited liability company, is owned by ARH and holds a 0.01% general partner interest in each of ARLP and the Intermediate Partnership.

 

We are managed by MGP, a Delaware limited liability company, which holds a 0.99% and a 1.0001% managing general partner interest in ARLP and the Intermediate Partnership, respectively, and a 0.001% managing member interest in Alliance Coal.  AHGP is a Delaware limited partnership that was formed to become the owner and controlling member of MGP.  AHGP completed its initial public offering on May 15, 2006.  AHGP owns directly and indirectly 100% of the members’ interest of MGP, the incentive distribution rights (“IDR”) in ARLP and 31,088,338 common units of ARLP. ARLP and its consolidated subsidiaries represent virtually all the net assets and operations of AHGP.

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements include the accounts and operations of the ARLP Partnership and present the consolidated financial position as of March 31, 2016 and December 31, 2015 and the results of operations, comprehensive income and cash flows for the three months ended March 31, 2016 and 2015 of ARLP, the Intermediate Partnership (a subsidiary of ARLP and a variable interest entity of which ARLP is the primary beneficiary), Alliance Coal (a variable interest

 

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entity of which the Intermediate Partnership is the primary beneficiary) and other directly and indirectly wholly- and majority-owned subsidiaries of the Intermediate Partnership and Alliance Coal.  The Intermediate Partnership, Alliance Coal and their wholly- and majority-owned subsidiaries represent virtually all the net assets of the ARLP Partnership.  MGP’s interests in both Alliance Coal and the Intermediate Partnership and SGP’s 0.01% interest in the Intermediate Partnership are reported as part of the overall two percent general partner interest in the ARLP Partnership.  MGP’s incentive distribution rights in ARLP are also reported with the general partner interest in ARLP.  All intercompany transactions and accounts have been eliminated.  See Note 7 – Variable Interest Entities for more information regarding ARLP’s consolidation of the Intermediate Partnership and Alliance Coal.  See Note 9 – Net Income of ARLP Per Limited Partner Unit for more information regarding MGP’s incentive distribution rights in ARLP.

 

These condensed consolidated financial statements and notes are unaudited. However, in the opinion of management, these financial statements reflect all normal recurring adjustments necessary for a fair presentation of the results for the periods presented.  Results for interim periods are not necessarily indicative of results to be expected for the full year ending December 31, 2016.

 

These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and do not include all of the information normally included with financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) of the United States.  These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015.

 

Use of Estimates

 

The preparation of the ARLP Partnership’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in our condensed consolidated financial statements.  Actual results could differ from those estimates.

 

Goodwill

 

Goodwill represents the excess of cost over the fair value of net assets of acquired businesses. Goodwill is not amortized, but instead is evaluated for impairment periodically.  We evaluate goodwill for impairment annually on November 30th, or more often if events or circumstances indicate that goodwill might be impaired.  The reporting unit or units used to evaluate and measure goodwill for impairment are determined primarily from the manner in which the business is managed or operated.  A reporting unit is an operating segment or a component that is one level below an operating segment.  There were no impairments of goodwill during the three month period ended March 31, 2016.  In future periods it is reasonably possible that a variety of circumstances could result in an impairment of our goodwill.

 

2.         NEW ACCOUNTING STANDARDS

 

New Accounting Standard Issued and Adopted

 

In April 2015, the Financial Accounting Standards Board (“FASB”)  issued Accounting Standards Update (“ASU”) 2015-03, Interest – Imputation of Interest (“ASU 2015-03”).  ASU 2015-03 changes the classification and presentation of debt issuance costs by requiring debt issuance costs to be reported as a direct deduction from the face amount of the debt liability rather than an asset.  Amortization of the costs is reported as interest expense.  The amendment does not affect the current guidance on the recognition and measurement of debt issuance costs.  ASU 2015-03 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2015 and is applied retrospectively to each period presented.  The adoption of ASU 2015-03 resulted in immaterial changes to our condensed consolidated financial statements.

 

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In February 2015, the FASB issued ASU 2015-02, Consolidation (“ASU 2015-02”).  ASU 2015-02 changes the requirements and analysis required when determining the reporting entity’s need to consolidate an entity, including modifying the evaluation of limited partnership variable interest status, presumption that a general partner should consolidate a limited partnership and the consolidation criterion applied by a reporting entity involved with variable interest entities.  ASU 2015-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015 and may be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption.  The adoption of ASU 2015-02 in January 2016 did not have a material impact on our condensed consolidated financial statements.

 

New Accounting Standards Issued and Not Yet Adopted

 

In March 2016, the FASB issued ASU 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”).  ASU 2016-09 simplifies the accounting for several aspects of share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted.  We are currently evaluating the effect of adopting ASU 2016-09.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 increases transparency and comparability among organizations by requiring lessees to record right-to-use assets and corresponding lease liabilities on the balance sheet and disclosing key information about lease arrangements.  The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of income recognition in the statement of income.  ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.    We are currently evaluating the effect of adopting ASU 2016-02.

 

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”).  ASU 2015-11 simplifies the subsequent measurement of inventory.  It replaces the current lower of cost or market test with the lower of cost or net realizable value test.  Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  The new standard will be applied prospectively and is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods, with early adoption permitted.  We are currently evaluating the effect of adopting ASU 2015-11, but do not expect it to have a material impact on our consolidated financial statements.

 

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).  ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures.  ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter with early adoption permitted.  We do not anticipate the adoption of ASU 2014-15 will have a material impact on our consolidated financial statements.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”).  ASU 2014-09 is a new revenue recognition standard that provides a five-step analysis of transactions to determine when and how revenue is recognized.  The core principle of the new standard is an entity should recognize revenue to depict the transfer of promised goods or services to customers in an

 

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amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The standard will be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption.  ASU 2014-09 was originally effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.  In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date (“ASU 2015-14”), which defers the effective date by one year while providing the option to early adopt the standard on the original effective date.  We have developed an assessment team to determine the effect of adopting ASU 2014-09.  We are still determining whether there will be any material impact on our revenue recognition; however, we believe changes with respect to disclosures on revenue from contracts will be reflected in our consolidated financial statements.  Our assessment team will continue working through the new guidance to finalize an evaluation later this year.

 

3.         CONTINGENCIES

 

Various lawsuits, claims and regulatory proceedings incidental to our business are pending against the ARLP Partnership.  We record accruals for potential losses related to these matters when, in management’s opinion, such losses are probable and reasonably estimable.  Based on known facts and circumstances, we believe the ultimate outcome of these outstanding lawsuits, claims and regulatory proceedings will not have a material adverse effect on our financial condition, results of operations or liquidity.  However, if the results of these matters were different from management’s current opinion and in amounts greater than our accruals, then they could have a material adverse effect.

 

4.         INVENTORIES

 

Inventories consist of the following:

 

		March 31, 2016					December 31, 2015
		(in thousands)
Coal			$	117,610				$	83,682
Supplies (net of reserve for obsolescence of $3,706 and $3,841, respectively)			37,734					37,399
Total inventory			$	155,344				$	121,081

 

During the three months ended March 31, 2016, we recorded a lower of cost or market adjustment of $12.3 million to our coal inventories as a result of lower coal sale prices and higher cost per ton due to lower production at the Hamilton County Coal, LLC (“Hamilton”) mining complex as a result of customer deferrals and challenging market conditions.

 

5.         FAIR VALUE MEASUREMENTS

 

The following table summarizes our recurring fair value measurements within the hierarchy:

 

		March 31, 2016									December 31, 2015
		Level 1			Level 2			Level 3			Level 1			Level 2			Level 3
		(in thousands)
Long-term debt		$	-		$	886,481		$	-		$	-		$	819,099		$	-
Contingent consideration		-			-			10,400			-			-			10,400
Total		$	-		$	886,481		$	10,400		$	-		$	819,099		$	10,400

 

The carrying amounts for cash equivalents, accounts receivable, accounts payable, due from affiliates and due to affiliates approximate fair value due to the short maturity of those instruments.

 

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The estimated fair value of our long-term debt, including current maturities, is based on interest rates that we believe are currently available to us in active markets for issuance of debt with similar terms and remaining maturities (See Note 6 – Long-Term Debt).  The fair value of debt, which is based upon these interest rates, is classified as a Level 2 measurement under the fair value hierarchy.

 

The estimated fair value of our contingent consideration arrangement is based on a probability-weighted discounted cash flow model.  The assumptions used in the model include a risk-adjusted discount rate, forward coal sales price curves, cost of debt and probabilities of meeting certain threshold prices.  The fair value measurement is based on significant inputs not observable in active markets and thus represents a Level 3 fair value measurement under the fair value hierarchy.

 

6.         LONG-TERM DEBT

 

Long-term debt consists of the following:

 

		Principal						Unamortized Debt Issuance Costs
		March 31, 2016			December 31, 2015			March 31, 2016			December 31, 2015
		(in thousands)
Revolving Credit facility		$	450,000		$	385,000		$	(1,376)		$	(1,675)
Series B senior notes		145,000			145,000			(152)			(169)
Term loan		200,000			206,250			-			-
Securitization facility		91,700			83,100			-			-
		886,700			819,350			(1,528)			(1,844)
Less current maturities		(241,700)			(239,350)			1,264			1,264
Total long-term debt		$	645,000		$	580,000		$	(264)		$	(580)

 

Our Intermediate Partnership has a $700.0 million revolving credit facility (“Revolving Credit Facility”), $145.0 million in Series B senior notes (“Series B Senior Notes”) and a $200.0 million term loan (“Term Loan” and collectively, with the Revolving Credit Facility and the Series B Senior Notes, the “ARLP Debt Arrangements”), which are guaranteed by all of the material direct and indirect subsidiaries of our Intermediate Partnership.  On October 16, 2015 the Revolving Credit Facility was amended to increase the baskets for permitted other unsecured debt and capital lease obligations and for annual sale-leaseback arrangements.  Our Intermediate Partnership also has a $100.0 million accounts receivable securitization facility (“Securitization Facility”).  At March 31, 2016, current maturities include the Securitization Facility and a portion of the Term Loan.

 

The ARLP Debt Arrangements contain various covenants affecting our Intermediate Partnership and its subsidiaries restricting, among other things, the amount of distributions by our Intermediate Partnership, incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates, in each case subject to various exceptions.  The ARLP Debt Arrangements also require the Intermediate Partnership to remain in control of a certain amount of mineable coal reserves relative to its annual production.  In addition, the ARLP Debt Arrangements require our Intermediate Partnership to maintain (a) debt to cash flow ratio of not more than 3.0 to 1.0 and (b) cash flow to interest expense ratio of not less than 3.0 to 1.0, in each case, during the four most recently ended fiscal quarters.  The debt to cash flow ratio and cash flow to interest expense ratio were 1.38 to 1.0 and 22.7 to 1.0, respectively, for the trailing twelve months ended March 31, 2016.  We were in compliance with the covenants of the ARLP Debt Arrangements as of March 31, 2016.  See Note 7 – Variable Interest Entities for further discussion of restrictions on the cash available for distribution and its impact on our consolidations.

 

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At March 31, 2016, we had borrowings of $450.0 million and $5.9 million of letters of credit outstanding with $244.1 million available for borrowing under the Revolving Credit Facility.  We utilize the Revolving Credit Facility, as appropriate, for working capital requirements, capital expenditures and investments in affiliates, scheduled debt payments and distribution payments.  We incur an annual commitment fee of 0.25% on the undrawn portion of the Revolving Credit Facility.

 

On December 5, 2014, certain direct and indirect wholly-owned subsidiaries of our Intermediate Partnership entered into the Securitization Facility providing additional liquidity and funding.  Under the Securitization Facility, certain subsidiaries sell trade receivables on an ongoing basis to our Intermediate Partnership, which then sells the trade receivables to AROP Funding, LLC (“AROP Funding”), a wholly-owned bankruptcy-remote special purpose subsidiary of our Intermediate Partnership, which in turn borrows on a revolving basis up to $100.0 million secured by the trade receivables.  After the sale, Alliance Coal, as servicer of the assets, collects the receivables on behalf of AROP Funding.  The Securitization Facility bears interest based on a Eurodollar Rate.  It was renewed in December 2015 and matures in December 2016.  On February 24, 2016 the facility was amended to include additional subsidiaries as sellers of trade receivables, thereby increasing availability under the facility.  At March 31, 2016, we had $91.7 million outstanding under the Securitization Facility.

 

On October 6, 2015, Cavalier Minerals JV, LLC (“Cavalier Minerals”) (See Note 7 – Variable Interest Entities) entered into a credit agreement (the “Cavalier Credit Agreement”) with Mineral Lending, LLC (“Mineral Lending”) for a $100.0 million line of credit (the “Cavalier Credit Facility”).  Mineral Lending is an entity owned by a) Alliance Resource Holdings II, Inc. (“ARH II,” the parent of ARH), b) an entity owned by an officer of ARH who is also a director of ARH II (“ARH Officer”) and c) foundations established by the President and Chief Executive Officer of MGP and Kathleen S. Craft.  There is no commitment fee under the facility.  Borrowings under the Cavalier Credit Facility bear interest at a one month LIBOR rate plus 6% with interest payable quarterly.  Repayment of the principal balance will begin following the first fiscal quarter after the earlier of the date on which the aggregate amount borrowed exceeds $90.0 million or December 31, 2017, in quarterly payments of an amount equal to the greater of $1.3 million initially, escalated to $2.5 million after two years, or fifty percent of Cavalier Minerals’ excess cash flow. The Cavalier Credit Facility matures September 30, 2024, at which time all amounts then outstanding are required to be repaid.  To secure availability of the facility, Cavalier Minerals pledged all of its partnership interests, owned or later acquired, in AllDale Minerals, L.P. (“AllDale I”) and AllDale Minerals II, L.P. (“AllDale II”) (collectively “AllDale Minerals”).  Cavalier Minerals may prepay the Cavalier Credit Facility at any time in whole or in part subject to terms and conditions described in the Cavalier Credit Agreement.  As of March 31, 2016, Cavalier Minerals had not drawn on the Cavalier Credit Facility.

 

7.                                    VARIABLE INTEREST ENTITIES

 

Cavalier Minerals

 

On November 10, 2014, our subsidiary, Alliance Minerals, and Bluegrass Minerals Management, LLC (“Bluegrass Minerals”) entered into a limited liability company agreement (the “Cavalier Agreement”) to create Cavalier Minerals, which was formed to indirectly acquire oil and gas mineral interests, initially through its 71.7% noncontrolling ownership interest in AllDale I and subsequently through its 72.8% noncontrolling ownership interest in AllDale II.  Alliance Minerals and Bluegrass Minerals initially committed funding of $48.0 million and $2.0 million, respectively, to Cavalier Minerals, and Cavalier Minerals committed funding of $49.0 million to AllDale I.  On October 6, 2015, Alliance Minerals and Bluegrass Minerals committed to fund an additional $96.0 million and $4.0 million, respectively, to Cavalier Minerals, and Cavalier Minerals committed to fund $100.0 million to AllDale II.  Alliance Minerals’ contributions through December 31, 2015 to Cavalier Minerals totaled $63.1 million.  During the three months ended March 31, 2016, Alliance Minerals contributed an additional $19.1 million bringing our total investment in Cavalier Minerals to $82.2 million at March 31, 2016.  Our remaining commitment to Cavalier Minerals at March 31, 2016 was $61.8 million.  Bluegrass

 

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Minerals, which is owned and controlled by the ARH Officer discussed in Note 6 – Long-Term Debt and is Cavalier Minerals’ managing member, contributed $3.4 million to Cavalier Minerals as of March 31, 2016 and has a remaining commitment of $2.6 million.  At Alliance Minerals’ election, Cavalier Minerals will meet its remaining funding commitment to AllDale Minerals through contributions from Alliance Minerals and Bluegrass Minerals or from borrowings under the Cavalier Credit Facility (see Note 6 – Long-Term Debt).  We expect to fund our remaining commitments utilizing existing cash balances, future cash flows from operations, borrowings under credit and securitization facilities and cash provided from the issuance of debt or equity, or by requiring Cavalier Minerals to draw on the Cavalier Credit Facility.

 

In accordance with the Cavalier Agreement, Bluegrass Minerals is entitled to receive an incentive distribution from Cavalier Minerals equal to 25% of all distributions (including in liquidation) after return of members’ capital reduced by certain distributions received by Bluegrass Minerals or its owner from AllDale Minerals Management, LLC (“AllDale Minerals Management”), the managing member of AllDale Minerals.  Alliance Minerals’ ownership interest in Cavalier Minerals at March 31, 2016 was 96%.  The remainder of the equity ownership is held by Bluegrass Minerals.  We have consolidated Cavalier Minerals’ financial results as we concluded that Cavalier Minerals is a variable interest entity (“VIE”) and we are the primary beneficiary because neither Bluegrass Minerals nor Alliance Minerals individually have both the power and the benefits related to Cavalier Minerals and we are most closely aligned with Cavalier Minerals through our substantial equity ownership.  Bluegrass Minerals equity ownership of Cavalier Minerals is accounted for as noncontrolling ownership interest in our condensed consolidated balance sheets.  In addition, earnings attributable to Bluegrass Minerals are recognized as noncontrolling interest in our condensed consolidated statements of income.

 

WKY CoalPlay

 

On November 17, 2014, SGP Land, LLC (“SGP Land”), a wholly-owned subsidiary of SGP, and two limited liability companies (“Craft Companies”) owned by irrevocable trusts established by the President and Chief Executive Officer of MGP entered into a limited liability company agreement to form WKY CoalPlay, LLC (“WKY CoalPlay”).  WKY CoalPlay was formed, in part, to purchase and lease coal reserves.  WKY CoalPlay is managed by the ARH Officer discussed in Note 6 – Long-Term Debt, who is also an employee of SGP Land and trustee of the irrevocable trusts owning the Craft Companies.  In December 2014 and February 2015, we entered into various coal reserve leases with WKY CoalPlay.  During the three months ended March 31, 2016, we paid $10.8 million of advanced royalties to WKY CoalPlay.  As of March 31, 2016, we had $21.5 million of advanced royalties outstanding under the leases, which is reflected in the Advance royalties, net line item in our condensed consolidated balance sheets.

 

We have concluded that WKY CoalPlay is a VIE because of our ability to exercise options to acquire reserves under lease with WKY CoalPlay, which is not within the control of the equity holders and, if it occurs, could potentially limit the expected residual return to the owners of WKY CoalPlay.  We do not have any economic or governance rights related to WKY CoalPlay and our options that provide us with a variable interest in WKY CoalPlay’s reserve assets do not give us any rights that constitute power to direct the primary activities that most significantly impact WKY CoalPlay’s economic performance.  SGP Land has the sole ability to replace the manager of WKY CoalPlay at its discretion and therefore has power to direct the activities of WKY CoalPlay.  Consequently, we concluded that SGP Land is the primary beneficiary of WKY CoalPlay.

 

Alliance Coal and the Intermediate Partnership

 

Alliance Coal is a limited liability company designed to operate as the operating subsidiary of the Intermediate Partnership and holds the interests in the mining operations and Alliance Service, Inc. (“ASI”).  The Intermediate Partnership is a limited liability partnership that holds the non-managing member interest in Alliance Coal, the sole member interests in Alliance Resource Properties, Alliance Minerals and other miscellaneous businesses.  Together Alliance Coal and the Intermediate Partnership

 

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and their subsidiaries represent virtually all the net assets of ARLP.  Both the Intermediate Partnership and Alliance Coal were designed to operate as the operating subsidiaries of ARLP and to distribute available cash to ARLP so that ARLP can distribute available cash to its partners. We considered MGP’s and ARLP’s ownership in the Intermediate Partnership and MGP’s and the Intermediate Partnership’s ownership in Alliance Coal separately for the purposes of determining whether the Intermediate Partnership and Alliance Coal are VIEs.

 

The Intermediate Partnership holds a 99.999% non-managing interest and MGP holds the 0.001% managing member interest in Alliance Coal.  To determine whether Alliance Coal is a VIE, we considered that since Alliance Coal is structured as the equivalent of a limited partnership with the non-managing member 1) not having the ability to remove its managing member and 2) not participating significantly in the operational decisions, Alliance Coal represents a VIE.

 

We determined that the Intermediate Partnership should consolidate Alliance Coal because it has a controlling financial interest in Alliance Coal.  We made this determination based on 1) the purpose and design of Alliance Coal which is to a) be the operating subsidiary of the Intermediate Partnership and b) distribute all of its cash to the Intermediate Partnership such that the Intermediate Partnership can pay its partners and debt obligations, 2) AHGP’s common control over both the Intermediate Partnership and MGP, as discussed in Note 1 – Organization and Presentation, to achieve the aforementioned purpose and design, 3) the Intermediate Partnership’s debt funding for Alliance Coal for capital expenditures, operations and other purposes as needed and related risks and collateral requirements in the debt arrangement and 4) making available the most meaningful information to investors.

 

ARLP holds a 98.9899% limited partnership interest in the Intermediate Partnership and MGP holds the 1.0001% managing partner interest in the Intermediate Partnership.  To determine whether the Intermediate Partnership is a VIE, we considered that since the Intermediate Partnership is structured as a limited partnership with the limited partner 1) not having the ability to remove its general partner and 2) not participating significantly in the operational decisions, the Intermediate Partnership represents a VIE.

 

We determined that ARLP should consolidate the Intermediate Partnership because it has a controlling financial interest in the Intermediate Partnership.  We made this determination based on 1) the purpose and design of the Intermediate Partnership which is to a) be the operating subsidiary to ARLP and b) distribute all of its available cash to ARLP to pay its partners, 2) AHGP’s common control over ARLP, MGP and the Intermediate Partnership, as discussed in Note 1 – Organization and Presentation, to achieve the aforementioned purpose and design, and 3) making available the most meaningful information to investors.

 

The effect of the partnership agreements of ARLP and the Intermediate Partnership and the operating agreement of Alliance Coal (collectively the “Agreements”) is that on a quarterly basis 100% of available cash from our operations must be distributed by ARLP to its partners (apart from nominal distributions from the Intermediate Partnership and Alliance Coal to MGP and SGP).  Available cash is determined as defined in the Agreements and represents all cash with the exception of cash reserves (i) for the proper conduct of the business including reserves for future capital expenditures and for anticipated credit needs of the Partnership Group, (ii) to comply with debt obligations or (iii) to provide funds for certain subsequent distributions.  Cash reserves may not be established for the purpose of funding subsequent distributions if the effect would be to prevent ARLP from making the minimum quarterly distributions plus any cumulative distribution arrearage.  MGP, as the managing member of Alliance Coal and the managing general partner of the Intermediate Partnership, is responsible for distributing this cash to ARLP so it can meet its distribution requirements.  As discussed in Note 6 – Long-Term Debt, the Intermediate Partnership’s debt covenants place additional restrictions on distributions to ARLP by limiting cash available for distribution from the Intermediate Partnership based on various debt covenants pertaining to the most recent preceding quarter.  MGP does not have the ability to amend the Agreements.

 

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8.                                                                                    EQUITY INVESTMENT

 

AllDale Minerals

 

On November 10, 2014, Cavalier Minerals (see Note 7 – Variable Interest Entities) made an initial contribution of $7.4 million in return for a limited partner interest in AllDale Minerals, which was created to purchase oil and gas mineral interests in various geographic locations within producing basins in the continental U.S.  As of December 31, 2015, Cavalier Minerals had contributed $65.9 million to AllDale Minerals.  During the three months ended March 31, 2016, Cavalier Minerals contributed an additional $20.2 million, bringing the total investment in AllDale Minerals to $86.1 million as of March 31, 2016.  We continually review all rights provided to Cavalier Minerals and us by various agreements and continue to conclude all such rights do not provide Cavalier Minerals or us the ability to unilaterally direct any of the activities of AllDale Minerals that most significantly impact its economic performance.  As such, we account for Cavalier Minerals’ ownership interest in the income or loss of AllDale Minerals as an equity investment in our condensed consolidated financial statements.  We record equity income or loss based on AllDale Minerals’ distribution structure.  For the three months ended March 31, 2016 and 2015, we have been allocated losses of $27,000 and $0.3 million, respectively, from AllDale Minerals.  AllDale Minerals distributed $0.4 million to Cavalier Minerals during the three months ended March 31, 2016.

 

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9.                                    NET INCOME OF ARLP PER LIMITED PARTNER UNIT

 

We utilize the two-class method in calculating basic and diluted earnings per unit (“EPU”).  Net income of ARLP is allocated to the general partners and limited partners in accordance with their respective partnership percentages, after giving effect to any special income or expense allocations, including incentive distributions to our managing general partner, the holder of the IDR pursuant to our partnership agreement, which are declared and paid following the end of each quarter. Under the quarterly IDR provisions of our partnership agreement, our managing general partner is entitled to receive 15% of the amount we distribute in excess of $0.1375 per unit, 25% of the amount we distribute in excess of $0.15625 per unit, and 50% of the amount we distribute in excess of $0.1875 per unit.  Our partnership agreement contractually limits our distributions to available cash; therefore, undistributed earnings of the ARLP Partnership are not allocated to the IDR holder.  In addition, outstanding awards under our Long-Term Incentive Plan (“LTIP”) and phantom units in notional accounts under our Supplemental Executive Retirement Plan (“SERP”) and the MGP Amended and Restated Deferred Compensation Plan for Directors (“Deferred Compensation Plan”) include rights to nonforfeitable distributions or distribution equivalents and are therefore considered participating securities.  As such, we allocate undistributed and distributed earnings to these outstanding awards in our calculation of EPU.  The following is a reconciliation of net income of ARLP used for calculating basic earnings per unit and the weighted-average units used in computing EPU for the three months ended March 31, 2016 and 2015:

 

 

		Three Months Ended March 31,
		2016					2015
		(in thousands, except per unit data)
Net income of ARLP			$	47,310				$	106,480
Adjustments:
Managing general partner’s priority distributions			(19,159		)			(35,463		)
General partners’ 2% equity ownership			(563		)			(1,420		)
Limited partners’ interest in net income of ARLP			27,588					69,597
Less:
Distributions to participating securities			(875		)			(849		)
Undistributed earnings attributable to participating securities			-					(335		)
Net income of ARLP available to limited partners			$	26,713				$	68,413
Weighted-average limited partner units outstanding – basic and diluted			74,291					74,130
Basic and diluted net income of ARLP per limited partner unit (1)			$	0.36				$	0.92

 

(1)   Diluted EPU gives effect to all dilutive potential common units outstanding during the period using the treasury stock method. Diluted EPU excludes all dilutive potential units calculated under the treasury stock method if their effect is anti-dilutive.  For the three months ended March 31, 2016 and 2015, the combined total of LTIP, SERP and Deferred Compensation Plan units of 439 and 807, respectively, were considered anti-dilutive under the treasury stock method.

 

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10.       WORKERS’ COMPENSATION AND PNEUMOCONIOSIS

 

The changes in the workers’ compensation liability, including current and long-term liability balances, for each of the periods presented were as follows:

 

		Three Months Ended March 31,
		2016					2015
		(in thousands)
Beginning balance			$	54,558				$	57,557
Accruals increase			3,237					2,667
Payments			(2,723		)			(2,514		)
Interest accretion			492					488
Ending balance			$	55,564				$	58,198

 

Certain of our mine operating entities are liable under state statutes and the Federal Coal Mine Health and Safety Act of 1969, as amended, to pay pneumoconiosis, or black lung, benefits to eligible employees and former employees and their dependents.  Components of the net periodic benefit cost for each of the periods presented are as follows:

 

		Three Months Ended March 31,
		2016					2015
		(in thousands)
Service cost			$	648				$	732
Interest cost			627					524
Amortization of net actuarial gain (1)			(661		)			(113		)
Net periodic benefit cost			$	614				$	1,143

 

(1)  Amortization of net actuarial gain is included in the Operating expenses (excluding depreciation, depletion and amortization) line item within our condensed consolidated statements of income.

 

11.       COMPENSATION PLANS

 

Long-Term Incentive Plan

 

We have the LTIP for certain employees and officers of MGP and its affiliates who perform services for us.  The LTIP awards are grants of non-vested “phantom” or notional units, which upon satisfaction of vesting requirements, entitle the LTIP participant to receive ARLP common units.  Annual grant levels and vesting provisions for designated participants are recommended by the President and Chief Executive Officer of MGP, subject to review and approval of the compensation committee of the MGP board of directors (the “Compensation Committee”).  On January 22, 2016, the Compensation Committee determined that the vesting requirements for the 2013 grants of 284,272 restricted units (which was net of 9,178 forfeitures) had been satisfied as of January 1, 2016.  As a result of this vesting, on February 11, 2016, we issued 176,319 unrestricted common units to the LTIP participants.  The remaining units were settled in cash to satisfy the individual statutory minimum tax obligations of the LTIP participants.  On January 22, 2016, the Compensation Committee authorized additional grants of 969,028 restricted units, of which 960,992 units were granted during the three months ended March 31, 2016 and will vest on January 1, 2019, subject to satisfaction of certain financial tests.  The fair value of these 2016 grants is equal to the intrinsic value at the date of grant, which was $12.38 per unit.  LTIP expense was $2.9 million and $2.6 million for the three months ended March 31, 2016 and 2015, respectively.  After consideration of the January 1, 2016 vesting and subsequent issuance of 176,319

 

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common units, approximately 2.8 million units remain available under the LTIP for issuance in the future, assuming all grants issued in 2014, 2015 and 2016 currently outstanding are settled with common units, without reduction for tax withholding, and no future forfeitures occur.

 

As of March 31, 2016, there was $20.8 million in total unrecognized compensation expense related to the non-vested LTIP grants that are expected to vest.  That expense is expected to be recognized over a weighted-average period of 2.1 years.  As of March 31, 2016, the intrinsic value of the non-vested LTIP grants was $18.8 million.  As of March 31, 2016, the total obligation associated with the LTIP was $15.3 million and is included in the partners’ capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

 

As provided under the distribution equivalent rights provisions of the LTIP and the terms of the LTIP awards, all non-vested grants include contingent rights to receive quarterly cash distributions in an amount or, in the case of the 2016 grants, in the discretion of the Compensation Committee, phantom units credited to a bookkeeping account with value, equal to the cash distributions we make to unitholders during the vesting period.

 

SERP and Directors Deferred Compensation Plan

 

We utilize the SERP to provide deferred compensation benefits for certain officers and key employees. All allocations made to participants under the SERP are made in the form of “phantom” ARLP units.  The SERP is administered by the Compensation Committee.

 

Our directors participate in the Deferred Compensation Plan. Pursuant to the Deferred Compensation Plan, for amounts deferred either automatically or at the election of the director, a notional account is established and credited with notional common units of ARLP, described in the Deferred Compensation Plan as “phantom” units.

 

For both the SERP and Deferred Compensation Plan, when quarterly cash distributions are made with respect to ARLP common units, an amount equal to such quarterly distribution is credited to each participant’s notional account as additional phantom units.  All grants of phantom units under the SERP and Deferred Compensation Plan vest immediately.

 

For the three months ended March 31, 2016 and 2015, SERP and Deferred Compensation Plan participant notional account balances were credited with a total of 25,661 and 6,376 phantom units, respectively, and the fair value of these phantom units was $11.46 per unit and $37.45 per unit, respectively, on a weighted-average basis.  Total SERP and Deferred Compensation Plan expense was $0.3 million for each of the three months ended March 31, 2016 and 2015.

 

As of March 31, 2016, there were 444,880 total phantom units outstanding under the SERP and Deferred Compensation Plan and the total intrinsic value of the SERP and Deferred Compensation Plan phantom units was $5.2 million.  As of March 31, 2016, the total obligation associated with the SERP and Deferred Compensation Plan was $13.8 million and is included in the partners’ capital Limited partners-common unitholders line item in our condensed consolidated balance sheets.

 

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12.       COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COSTS

 

Eligible employees at certain of our mining operations participate in a defined benefit plan (the “Pension Plan”) that we sponsor.  The benefit formula for the Pension Plan is a fixed dollar unit based on years of service.  Components of the net periodic benefit cost for each of the periods presented are as follows:

 

		Three Months Ended March 31,
		2016					2015
		(in thousands)
Service cost			$	598				$	618
Interest cost			1,132					1,074
Expected return on plan assets			(1,287		)			(1,401		)
Amortization of net loss (1)			789					842
Net periodic benefit cost			$	1,232				$	1,133

 

(1)   Amortization of net actuarial loss is included in the Operating expenses (excluding depreciation, depletion and amortization) line item within our condensed consolidated statements of income.

 

During the three months ended March 31, 2016, we made a contribution payment of $0.6 million to the Pension Plan for the 2015 plan year and $0.1 million to the Pension Plan for the 2016 plan year.  On April 15, 2016, we made a contribution payment of $0.6 million for the 2016 plan year.

 

13.       SEGMENT INFORMATION

 

We operate 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 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.

 

As a result of acquiring the remaining equity interests in White Oak Resources LLC (“White Oak”) and the assumption of operating control of the White Oak Mine No. 1 (now known as the Hamilton Mine No. 1) on July 31, 2015 (the “White Oak Acquisition”), we restructured our reportable segments to include Hamilton as part of our Illinois Basin segment due to the similarities in product, management, location, and operation with other mines included in the segment. This new organization reflects how our chief operating decision maker manages and allocates resources to our various operations. Prior periods have been recast to include transactions of our former White Oak segment in our Illinois Basin segment.

 

The Illinois Basin reportable segment is comprised of multiple operating segments, including Webster County Coal, LLC’s Dotiki mining complex, Gibson County Coal, LLC’s mining complex, which includes the Gibson North and Gibson South mines, Hopkins County Coal, LLC’s mining complex, which includes the Elk Creek mine and the Fies property, White County Coal, LLC’s Pattiki mining complex, Warrior Coal, LLC’s mining complex, Sebree Mining, LLC’s mining complex (“Sebree”), which includes the Onton mine, Steamport, LLC and certain Sebree reserves, River View Coal, LLC’s mining complex and the Hamilton mining complex.  The Sebree and Fies properties are held by us for future mine development.  The Elk Creek mine depleted its reserves in March 2016 and ceased production on April 1, 2016.  Our Onton and Gibson North mines have been idled since the fourth quarter of 2015 in response to market conditions and continued increases in coal inventories at our mines and customer locations.

 

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