March 22, 2016 - 11:16 PM EDT
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Armstrong Energy, Inc. Announces Results for the Quarter and Year Ended December 31, 2015

ST. LOUIS
, March 23, 2016 /PRNewswire/ -- Armstrong Energy, Inc. ("
Armstrong
" or "we") today reported earnings for the year ended December 31, 2015.  The following table highlights the key financial metrics for the fourth quarter and year.












Quarter Ended
December 31,


Year Ended
December 31,




2015


2014


2015


2014




(in thousands, except per ton amounts)

Tons of Coal Sold


1,856



2,276



7,791



9,419



Revenue


$

82,220



$

105,745



$

360,900



$

441,833



Adjusted EBITDA (1)


$

15,689



$

13,439



$

68,483



$

61,760



Average Sales Price per Ton


$

44.30



$

46.46



$

46.32



$

46.91



Cost of Coal Sales per Ton (2)


$

34.52



$

39.08



$

36.31



$

38.46



Adjusted EBITDA(1) per ton


$

8.45



$

5.90



$

8.79



$

6.56













1   

Non-GAAP measure; please see definition and reconciliation below.

2   

Includes revenue-based production taxes and royalties; excludes depreciation, depletion, and amortization; asset retirement obligation expenses; and general and administrative costs.

Revenue from coal sales of $82.2 million and $360.9 million for the three and twelve months ended December 31, 2015, respectively, are 22.2% and 18.3% lower than the comparable periods of the prior year primarily attributable to the decrease in sales volume.  The volume variance experienced for the three and twelve months ended December 31, 2015 totaled $19.5 million and $76.3 million, respectively.  The volume decline is primarily driven by decreasing customer demand from the weak market conditions, low natural gas prices, and mild weather in the second half of the year.  In addition, we experienced an unfavorable price variance of $4.0 million and $4.6 million for the three and twelve months ended December 31, 2015, respectively, driven primarily by unfavorable transportation adjustments included as a component of the sales price in certain of our long-term supply agreements, as a result of declining diesel prices. 

Costs of coal sales of $64.1 million and $282.9 million for the three and twelve months ended December 31, 2015, respectively, are 28.0% and 21.9% lower than the comparable periods of the prior year due to both the decrease in volume and improved operating efficiency, primarily related to favorable repair and maintenance costs experienced at our underground mines, lower blasting costs incurred by our surface mines, lower fuel costs and better mining conditions.  The operating efficiencies in the current year were partially offset by adverse weather conditions that occurred in the first quarter of 2015.  On a per ton basis, cost of coal sales for the three and twelve months ended December 31, 2015 totaled $34.52 and $36.31, respectively, which represents a decline of $4.56 per ton and $2.15 per ton, respectively, as compared to the same periods of 2014.

General and administrative expenses were $3.3 million and $15.8 million for the three and twelve months ended December 31, 2015, respectively, which was $1.5 million and $3.8 million lower than the comparable periods of 2014. The decrease is due primarily to lower labor and benefits expense and non-income related taxes.

Adjusted EBITDA for the three and twelve months ended December 31, 2015 totaled $15.7 million and $68.5 million, respectively, which is a 16.7% and 10.9% increase over Adjusted EBITDA for the same periods of 2014 of $13.4 million and $61.8 million, respectively.  Positively impacting Adjusted EBITDA during 2015, as compared to the prior year, is the refund of previously paid

Kentucky
sales and use tax of $4.5 million during the second quarter of 2015 and lower general and administrative expenses during the year, exclusive of stock compensation expense. 

During the year ended December 31, 2015,

Armstrong
recognized asset impairment and restructuring charges of $138.7 million as a result of the continued adverse market conditions experienced during the current year. 

New Underground Mine

During the third quarter of 2015,

Armstrong
completed development of the Survant underground mine at our Parkway mine complex to extract coal from the
West Kentucky
#8 seam. The mine produced approximately 0.4 million clean tons of coal in 2015 through the operation of one continuous miner super section.  Total capitalized development costs associated with the new mine were approximately $25.2 million.

Liquidity

The principal indicators of our liquidity are our cash on hand and availability under our revolving credit facility. As of December 31, 2015, our available liquidity was $84.3 million, comprised of cash on hand of $67.6 million and $16.7 million available under our revolving credit facility.

We believe that existing cash balances, cash generated from operations and availability under our revolving credit facility will be sufficient to meet working capital requirements, anticipated capital expenditures and debt service requirements for 2016.

Short-term Outlook

There continues to be weakness in the

U.S.
thermal coal markets driven by low natural gas prices, increased government regulations, and mild weather during the second half of 2015.  In addition, utilities are experiencing historically high coal inventory stockpiles as their burn is down and have, therefore, been forced to defer contracted tonnages.  Due to the current economic environment,
Armstrong
has taken steps to rationalize its production to meet the current demand levels.  As a result,
Armstrong
anticipates forecasted production for 2016 to be lower than actual production during 2015. As of March 1, 2016,
Armstrong
has 5.6 million tons committed and priced for 2016.

As a result of the weak market conditions and depressed coal prices, we have undertaken steps to preserve our liquidity and manage operating costs, including reducing capital expenditures.  For 2016, capital spending is currently expected to be in the range of $8 million to $12 million, which will be primarily related to maintenance capital expenditures.

Conference Call

A conference call regarding

Armstrong's
2015 financial results will be held today at 11:00 a.m. Eastern time. To participate in the conference call, dial (866) 364-3821 and ask for the Armstrong Energy, Inc. conference call. A replay of the call will also be available in the "Investors" section of
Armstrong's
website at http://www.armstrongenergyinc.com.

About Armstrong Energy, Inc.

Armstrong
is a producer of low chlorine, high sulfur thermal coal from the Illinois Basin, with both surface and underground mines.
Armstrong
controls over 554 million tons of proven and probable coal reserves in
Western Kentucky
and currently operates six mines.
Armstrong
also owns and operates three coal processing plants and river dock coal handling and rail loadout facilities, which support its mining operations.

Financial Summary

Armstrong Energy, Inc. and Subsidiaries

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)






Quarter Ended
December 31,


Year Ended
December 31,


2015


2014


2015


2014

Revenue

$

82,220



$

105,745



$

360,900



$

441,833


Costs and Expenses:








Cost of coal sales, exclusive of items shown separately below

64,077



88,941



282,903



362,294


Production royalty to related party

1,845



1,956



7,879



8,269


Depreciation, depletion, and amortization

7,549



12,859



45,948



46,037


Asset retirement obligation expenses

937



531



3,277



2,099


Asset impairment and restructuring charges





138,679




General and administrative expenses

3,250



4,751



15,813



19,590


Operating income (loss)

4,562



(3,293)



(133,599)



3,544


Other income (expense):








Interest expense, net

(8,235)



(8,575)



(34,685)



(33,134)


Other, net

708



272



5,486



758


Loss before income taxes

(2,965)



(11,596)



(162,798)



(28,832)


Income taxes

970





657




Net loss

(1,995)



(11,596)



(162,141)



(28,832)


Income attributable to non-controlling interest








Net loss attributable to common stockholders

$

(1,995)



$

(11,596)



$

(162,141)



$

(28,832)










Armstrong Energy, Inc. and Subsidiaries

 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)






December 31, 2015


December 31, 2014

ASSETS




Current assets:




Cash and cash equivalents

$

67,617



$

59,518


Accounts receivable

14,270



21,799


Inventories

14,562



10,552


Prepaid and other assets

1,952



2,962


Total current assets

98,401



94,831


Property, plant, equipment, and mine development, net

261,398



408,740


Investments

3,525



3,372


Other non-current assets

23,916



24,769


Total assets

$

387,240



$

531,712


LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)




Current liabilities:




Accounts payable

$

22,555



$

27,593


Accrued and other liabilities

13,045



17,117


Current portion of capital lease obligations

1,943



2,426


Current maturities of long-term debt

8,402



4,929


Total current liabilities

45,945



52,065


Long-term debt, less current maturities

210,037



198,960


Long-term obligation to related party

128,809



110,713


Related party payables, net

16,413



18,172


Asset retirement obligations

13,990



17,379


Long-term portion of capital lease obligations

555



1,358


Other non-current liabilities

6,772



8,208


Total liabilities

422,521



406,855


Stockholders' equity/(deficit):




Common stock, $0.01 par value, 70,000,000 shares authorized, 21,853,224 and 21,936,844 shares issued and outstanding as of December 31, 2015 and 2014, respectively

218



219


Preferred stock, $0.01 par value, 1,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2015 and 2014, respectively




Additional paid-in-capital

238,695



238,549


Accumulated deficit

(272,334)



(110,193)


Accumulated other comprehensive loss

(1,883)



(3,741)


Armstrong Energy, Inc.'s equity/(deficit)

(35,304)



124,834


Non-controlling interest

23



23


Total stockholders' equity/(deficit)

(35,281)



124,857


Total liabilities and stockholders' equity/(deficit)

$

387,240



$

531,712






Armstrong Energy, Inc. and Subsidiaries

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)




Year Ended
December 31,


2015


2014

Cash Flows from Operating Activities:




Net loss

$

(162,141)



$

(28,832)


Adjustments to reconcile net loss to net cash provided by operating activities:




Non-cash stock compensation expense (income)

145



(74)


Income from equity affiliate

45,948



46,037


Loss on disposal of property, plant and equipment

1,538



1,197


Amortization of original issue discount

850



752


Amortization of debt issuance costs

3,277



2,099


Depreciation, depletion and amortization

137,678




Asset retirement obligation expenses

(153)



(150)


Asset impairment

(266)



80


Non-cash activity with related party, net

16,337



14,822


Non-cash interest on long-term obligations

(4)



(4)


Change in operating assets and liabilities:




Decrease in accounts receivable

7,529



2,855


(Increase) decrease in inventories

(4,010)



2,130


Decrease in prepaid and other assets

1,011



707


Increase in other non-current assets

(752)



(2,753)


(Decrease) increase in accounts payable and accrued and other liabilities

(10,865)



187


Increase in other non-current liabilities

121



2,092


Net cash provided by operating activities:

36,243



41,145


Cash Flows from Investing Activities:




Investment in property, plant, equipment, and mine development

(19,805)



(24,442)


Proceeds from disposal of fixed assets

880



5


Net cash used in investing activities

(18,925)



(24,437)


Cash Flows from Financing Activities:




Payments on capital lease obligations

(2,714)



(2,690)


Payments of long-term debt

(6,505)



(5,942)


Proceeds from sale-leaseback



986


Payment of financing costs and fees



(1,000)


Repurchase of employee stock relinquished for tax withholdings



(176)


Net cash used in financing activities

(9,219)



(8,822)


Net change in cash and cash equivalents

8,099



7,886


Cash and cash equivalents, at the beginning of the period

59,518



51,632


Cash and cash equivalents, at the end of the period

$

67,617



$

59,518






Adjusted EBITDA





The following table reconciles Adjusted EBITDA to net loss, the most directly comparable GAAP measure:






Quarter Ended
December 31,


Year Ended
December 31,


2015


2014


2015


2014


(in thousands)

Net loss

$

(1,995)



$

(11,596)



$

(162,141)



$

(28,832)


Depreciation, depletion, and amortization

7,549



12,859



45,948



46,037


Asset retirement obligation expenses

937



531



3,277



2,099


Non-cash production royalty to related party

1,845



1,956



7,879



8,269


Interest expense, net

8,235



8,575



34,685



33,134


Income taxes

(970)





(657)




Asset impairment and restructuring charges





138,679




Non-cash employee benefit expense

167



1,127



668



1,127


Non-cash stock compensation (income) expense

(79)



(13)



145



(74)


Adjusted EBITDA

$

15,689



$

13,439



$

68,483



$

61,760










Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, accounting principles generally accepted in

the United States
(GAAP). It is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of our liquidity.

We define "Adjusted EBITDA" as net income (loss) before deducting net interest expense, income taxes, depreciation, depletion and amortization, asset retirement obligation expenses, non-cash production royalty to related party, loss on settlement of interest rate swap, loss on deferment of equity offering, non-cash stock compensation expense (income), non-cash employee benefit expense, asset impairment and restructuring charges, non-cash charges related to non-recourse notes, gain on deconsolidation, and (gain) loss on extinguishment of debt. We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other issuers, because not all issuers and analysts calculate Adjusted EBITDA in the same manner. We present Adjusted EBITDA because we consider it an important supplemental measure of our performance and believe it is useful to an investor in evaluating our Company.

Various statements contained in this release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "potential," "plan," "goal" or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this release speak only as of the date of this release; we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. When considering any forward-looking statements, you should keep in mind the cautionary statements in our SEC filings, including the more detailed discussion of these factors and other factors that could affect our results included in "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2016.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/armstrong-energy-inc-announces-results-for-the-quarter-and-year-ended-december-31-2015-300239102.html

SOURCE Armstrong Energy, Inc.

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Source: Equities.com News (March 22, 2016 - 11:16 PM EDT)

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