2014

Armstrong Energy, Inc. Announces Results For the Three Months ended March 31, 2014 - Record quarterly revenue of $110.9 million on 2.4 million tons sold

- Record quarterly Adjusted EBITDA of $15.7 million for 2014 - 15.7% increase from 2013

- Available liquidity totaled $76.8 million at March 31, 2014

ST. LOUIS, May 15, 2014 /PRNewswire/ -- Armstrong Energy, Inc. ("Armstrong") today reported coal sales revenue of $110.9 million for the three months ended March 31, 2014, an increase of 9.5% compared to $101.2 million for the three months ended March 31, 2013. Coal sales increased 0.1 million tons to 2.4 million tons in the first quarter of 2014, as compared to the first quarter of 2013. Average sales price per ton for the three months ended March 31, 2014 was $47.04 per ton, as compared to $45.73 for the same period of the prior year. Operating income and Adjusted EBITDA, as defined below for the three months ended March 31, 2014 was $2.8 million and $15.7 million, respectively, as compared to an operating income and Adjusted EBITDA in 2013 of $1.9 million and $13.6 million, respectively.












For the Three months ended

 March 31,




2014



2013


Tons of Coal Sold



2,357




2,213


Revenue


$

110,866



$

101,222


Adjusted EBITDA (1)


$

15,746



$

13,605


Average Sales Price per Ton


$

47.04



$

45.73


Cost of Coal Sales per Ton (2)


$

38.24



$

37.06




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.


Our coal sales revenue for the three months ended March 31, 2014 increased by $9.6 million, or 9.5%, to $110.9 million, as compared to the three months ended March 31, 2013. This increase is attributable to a favorable volume variance of approximately $6.6 million due to the increase of 0.1 million tons sold in the current year and a favorable price variance of $3.0 million year-over-year due to favorable customer mix and higher year-over-year contract prices.   The completion of the Lewis Creek underground mine in July 2013 led to additional capacity experienced in the current year.

Cost of coal sales increased 9.9% to $90.1 million in the three months ended March 31, 2014, from $82.0 million in the same period of 2013. On a per ton basis, our cost of coal sales increased during the three months ended March 31, 2014, compared to the same period of 2013, from $37.06 per ton to $38.24 per ton.  This increase is due to lower productivity at the Parkway underground mine driven by poor geological conditions as well as production inefficiencies encountered at the Lewis Creek underground mine subsequent to the completion of the development of the mine, partially offset by favorable mining conditions at our Midway and Lewis Creek surface mines in the current year.

Production royalties to a related party decreased $0.1 million to $2.0 million for the three months ended March 31, 2014, as compared to $2.1 million in the same period of 2013.  The decrease relates to production royalties earned by our affiliate, Thoroughbred Resources, L.P. ( formerly Armstrong Resource Partners, L.P.) being lower as a result of a slight decrease in production at the Kronos underground mine in the current year, as compared to 2013.

Interest expense, net was $8.2 million for the three months ended March 31, 2014, as compared to $8.6 million for the three months ended March 31, 2013. The decrease is principally attributable to a decrease in the effective interest rate used to calculate interest on the long-term obligation to related party, partially offset by the increase in the principal balance of the long-term obligation to related party from the closing of the reserve transfer to Thoroughbred in April 2013, which increased the principal balance on the obligation by $4.9 million.

Liquidity

The principal indicators of our liquidity are our cash on hand and availability under our revolving credit facility. As of March 31, 2014, our available liquidity was $76.8 million, comprised of cash on hand of $53.1 million and $23.7 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.

Short-term Outlook

Our anticipated coal sales for 2014 are between 9.8 million and 9.9 million tons. As of March 31, 2014, Armstrong has 9.8 million tons priced and committed for 2014 at an average price of $46.81.

Capital expenditures in 2014 for equipment and land acquisitions are currently expected to be in a range of $18-$19 million with an additional $18-$19 million for mine development.

Conference Call

A conference call regarding Armstrong's first quarter 2014 financial results will be held today at 11:00am eastern time. To participate in the conference call, dial (877) 870-4263 and ask for the Armstrong Energy, Inc. conference call. A replay of the call will also be available under the Investors section of Armstrong's website at http://www.armstrongenergyinc.com.

About Armstrong Energy, Inc.

Armstrong is a diversified producer of low chlorine, high sulfur thermal coal from the Illinois Basin, with both surface and underground mines. Armstrong controls approximately 571 million tons of proven and probable coal reserves in Western Kentucky and currently operates seven 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


UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)



Three Months Ended

March 31,


2014

2013

Revenue

$ 110,866

$101,222

Costs and Expenses:



Cost of coal sales, exclusive of items shown separately below

90,119

82,024

Production royalty to related party

2,024

2,050

Depreciation, depletion, and amortization

10,207

8,796

Asset retirement obligation expenses

508

573

General and administrative costs

5,246

5,833




Operating income

2,762

1,946

Other income (expense):



Interest expense, net

(8,244)

(8,553)

Other, net

182

111




Loss before income taxes

(5,300)

(6,496)

Income taxes




Net loss

(5,300)

(6,496)

Income attributable to non-controlling interests




Net loss attributable to common stockholders

$    (5,300)

$   (6,496)




 

 

Armstrong Energy, Inc. and Subsidiaries


CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



March 31, 2014

December 31,

2013


(Unaudited)


ASSETS



Current assets:



Cash and cash equivalents

$   53,108

$  51,632

Accounts receivable

30,748

24,654

Inventories

14,293

12,683

Prepaid and other assets

3,777

3,669

Deferred income taxes

615

605




Total current assets

102,541

93,243

Property, plant, equipment, and mine development, net

418,177

424,365

Investments

3,230

3,224

Intangible assets, net

138

144

Other non-current assets

24,774

22,577




Total assets

$ 548,860

$ 543,553




LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



Accounts payable

$   33,234

$  27,972

Accrued liabilities and other

20,039

16,234

Current portion of capital lease obligations

2,071

2,497

Current maturities of long-term debt

3,269

4,498




Total current liabilities

58,613

51,201

Long-term debt, less current maturities

197,692

198,186

Long-term obligation to related party

105,780

106,283

Related party payables, net

11,739

7,780

Asset retirement obligations

17,652

17,230

Long-term portion of capital lease obligations

1,754

2,222

Deferred income taxes

615

605

Other non-current liabilities

3,370

3,103




Total liabilities

397,215

386,610

Stockholders' equity:



Common stock, $0.01 par value, 70,000,000 shares authorized, 21,925,976 and 21,933,710 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively

219

219

Preferred stock, $0.01 par value, 1,000,000 shares authorized, zero shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively

Additional paid-in-capital

238,775

238,799

Accumulated deficit

(86,661)

(81,361)

Accumulated other comprehensive loss

(711)

(737)




Armstrong Energy, Inc.'s equity

151,622

156,920

Non-controlling interest

23

23




Total stockholders' equity

151,645

156,943




Total liabilities and stockholders' equity

$ 548,860

$ 543,553




 

 

Armstrong Energy, Inc. and Subsidiaries


UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)



Three Months Ended

March 31,


2014

2013

Cash Flows from Operating Activities:



Net loss

$   (5,300)

$   (6,496)

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



Non-cash stock compensation expense

63

219

Income from equity affiliate

(6)

(8)

Gain on settlement of asset retirement obligation

(90)

Amortization of original issue discount

181

159

Amortization of debt issuance costs

309

273

Depreciation, depletion and amortization

10,207

8,796

Asset retirement obligation expenses

508

573

Non-cash activity with related party, net

3,456

2,373

Interest on long-term obligations

5,882

5,799

Change in operating assets and liabilities:



Increase in accounts receivable

(6,094)

(4,262)

Increase in inventories

(1,610)

(2,440)

(Increase) decrease in prepaid and other assets

(107)

372

(Increase) decrease in other non-current assets

(2,506)

938

Increase in accounts payable and accrued liabilities

3,205

9,649

Increase in other non-current liabilities

292

869




Net cash provided by operating activities:

8,480

16,724

Cash Flows from Investing Activities:



Investment in property, plant, equipment, and mine development

(3,148)

(13,230)




Net cash used in investing activities

(3,148)

(13,230)

Cash Flows from Financing Activities:



Payment on capital lease obligations

(893)

(1,071)

Payment of long-term debt

(2,876)

(1,354)

Payment of financing costs and fees

(29 )

Repurchase of employee stock relinquished for tax withholdings

(87)




Net cash used in financing activities

(3,856)

(2,454)




Net change in cash and cash equivalents

1,476

1,040

Cash, at the beginning of the period

51,632

60,132




Cash, at the end of the period

$ 53,108

$ 61,172







Three Months Ended

March 31,


2014

2013

Supplemental cash flow information:



Non-Cash Transactions:



Assets acquired with long-term debt

$       971

$        —

 

Adjusted EBITDA

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


Three Months Ended
March 31,


2014


2013


(In thousands)

Net loss

$     (5,300)


$   (6,496)

Income tax provision


Depreciation, depletion, and amortization

10,715


9,369

Non-cash production royalty to related party

2,024


2,050

Interest expense, net

8,244


8,553

Non-cash stock compensation expense

63


219

Gain on settlement of asset retirement obligation


(90)

   Adjusted EBITDA

$    15,746


$  13,605





 

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 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, non-cash production royalty for related party, loss on settlement of interest rate swap, loss on deferment of equity offering, gain on settlement of asset retirement obligations, non-cash stock compensation expense, non-cash charges related to nonrecourse 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 25, 2014.

SOURCE Armstrong Energy, Inc.



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