2014

Armstrong Energy, Inc. Announces Results For the year ended December 31, 2013 -- Record revenue of $415.3 million on a record 9.3 million tons sold

-- Adjusted EBITDA of $58.2 million for 2013 - 14.4% increase from 2012

-- Available liquidity totaled $70.9 million at December 31, 2013

ST. LOUIS, March 25, 2014 /PRNewswire/ -- Armstrong Energy, Inc. ("Armstrong") today reported coal sales revenue of $415.3 million for the year ended December 31, 2013, an increase of 8.7% compared to $382.1 million for the year ended December 31, 2012. Coal sales increased 0.7 million tons to 9.3 million tons in 2013, as compared to 2012. Average sales price per ton for the year ended December 31, 2013 was $44.82 per ton, as compared to $44.84 for the same period of the prior year. Operating income and Adjusted EBITDA, as defined below for 2013 was $9.9 million and $58.2 million, respectively, as compared to an operating income and Adjusted EBITDA in 2012 of $6.6 million and $50.9 million, respectively.











For the Year ended

 December 31,



2013



2012

Tons of Coal Sold



9,266




8,521

Revenue


$

415,282



$

382,109

Adjusted EBITDA


$

58,156



$

50,854

Average Sales Price per Ton


$

44.82



$

44.84

Cost of Coal Sales per Ton


$

32.70



$

33.16

Revenue and tons sold exceeded prior year amounts primarily due to additional production at two underground mines that reached full production levels in the latter half of 2012 and the first half of 2013. The slight per ton decrease in revenue is due to customer mix and certain new contracts entered into in 2013 being at lower average per ton prices from a year-over-year decline in market pricing.  This was partially offset by annual price increases on our multi-year coal supply agreements. 

Cost of coal sales increased 7.2% to $303.0 million in the year ended December 31, 2013, from $282.6 million in 2012. This increase was primarily attributable to the sale of 0.7 million additional tons in the current year, as compared to 2012. On a per ton basis, our cost of coal sales decreased during the year ended December 31, 2013, compared to 2012, from $33.16 per ton to $32.70 per ton. The lower cost of coal sales per ton is due primarily to efficiencies gained in the current year at our underground mines.

Production royalties to related parties are amounts earned by Armstrong's affiliate, Armstrong Resource Partners, L.P., related to coal reserves Armstrong leases from it. The increase of $2.1 million in comparable periods is due to increased production from those leased reserves.

Interest expense increased $16.4 million over the comparable periods as a result of greater borrowings and at a higher interest rate in the current year due to the issuance in December 2012 of $200.0 million aggregate principal amount of the 11.75% Senior Secured Notes due in 2019. The proceeds were used to retire existing debt.

Liquidity

The principal indicators of our liquidity are our cash on hand and availability under our revolving credit facility. As of December 31, 2013, our available liquidity was $70.9 million, comprised of cash on hand of $51.6 million and $19.3 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 production for 2014 is between 9.6 million and 9.8 million tons. As of March 1, 2014, Armstrong has 9.6 million tons priced and committed for 2014 at an average price of $46.79.

Capital expenditures in 2014 for equipment and land acquisitions are currently expected to be in a range of $19-$23 million with an additional $13-$17 million for mine development.

Conference Call

A conference call regarding Armstrong's 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
(formerly Armstrong Land Company, LLC and Subsidiaries)


CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)






Year Ended December 31,


2013

2012

2011

Revenue

$ 415,282

$ 382,109

$ 299,270

Costs and expenses:




Cost of coal sales, exclusive of items shown separately below

302,966

282,569

221,597

Production royalty to related party

7,811

5,695

578

Depreciation, depletion, and amortization

38,219

33,066

27,661

Asset retirement obligation expenses

2,472

3,977

4,005

General and administrative expenses

21,169

21,434

13,725

Selling and other related expenses

32,733

28,720

23,769





Operating income

9,912

6,648

7,935

Other income (expense):




Interest expense, net

(35,563)

(19,200)

(10,694)

Other income (expense), net

579

(1,534)

(178)

Gain on deconsolidation

311

(Loss) gain on extinguishment of debt

(3,953)

6,954





(Loss) income before income taxes

(25,072)

(18,039)

4,328

Income taxes

(856)





Net (loss) income

(25,072)

(18,039)

3,472

Less: income attributable to non-controlling interest

7,448





Net loss attributable to common stockholders

$ (25,072)

$ (18,039)

$   (3,976)





Armstrong Energy, Inc. and Subsidiaries
(formerly Armstrong Land Company, LLC and Subsidiaries)


CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)





December 31,


2013

2012

ASSETS



Current assets:



Cash and cash equivalents

$  51,632

$  60,132

Accounts receivable

24,654

24,138

Inventories

12,683

9,461

Prepaid and other assets

3,669

3,722

Deferred income taxes

605

984




Total current assets

93,243

98,437

Property, plant, equipment, and mine development, net

424,365

431,225

Investments

3,224

3,323

Intangible assets, net

144

573

Other non-current assets

22,577

26,751




Total assets

$ 543,553

$ 560,309




LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



Accounts payable

$  27,972

$  26,902

Accrued and other liabilities

16,234

14,484

Current portion of capital lease obligations

2,497

4,243

Current maturities of long-term debt

4,498

3,935




Total current liabilities

51,201

49,564

Long-term debt, less current maturities

198,186

199,961

Long-term obligation to related party

106,283

98,388

Related party payables, net

7,780

4,886

Asset retirement obligations

17,230

17,962

Long-term portion of capital lease obligations

2,222

5,474

Deferred income taxes

605

984

Other non-current liabilities

3,103

428




Total liabilities

386,610

377,647

Stockholders' equity:



Common stock, $0.01 par value, 70,000,000 shares authorized,

  21,933,710  shares and 21,870,765 shares issued and outstanding

  as of December 31, 2013 and 2012, respectively

219

219

Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares

  issued and outstanding as of December 31, 2013 and 2012, respectively

Additional paid-in-capital

238,799

238,713

Accumulated deficit

(81,361)

(56,289)

Accumulated other comprehensive loss

(737)




Armstrong Energy, Inc.'s equity

156,920

182,643

Non-controlling interest

23

19




Total stockholders' equity

156,943

182,662




Total liabilities and stockholders' equity

$ 543,553

$ 560,309




Armstrong Energy, Inc. and Subsidiaries
(formerly Armstrong Land Company, LLC and Subsidiaries)


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)




Year Ended December 31,


2013

2012

2011

Operating activities




Net (loss) income

$ (25,072)

$ (18,039)

$   3,472

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:




Non-cash stock compensation expense

418

697

1,383

Non-cash charge related to non-recourse notes

217

Depreciation, depletion, and amortization

38,219

33,066

27,661

Amortization of debt issuance costs

1,153

1,208

668

Amortization of original issue discount

665

18

Asset retirement obligations

2,472

3,977

4,005

Gain on settlement of asset retirement obligations

(205)

(234)

(Income) loss from equity affiliate

(31)

(15)

8

(Gain) loss on sale of property, plant, and equipment

(16)

(38)

123

Loss (gain) on extinguishment of debt

3,953

(6,954)

Gain on deconsolidation

(311)

Non-cash activity with related party, net

10,789

6,527

2,320

Interest on long-term obligations

288

215

1,762

Change in working capital accounts:




Increase in accounts receivable

(516 )

(1,632)

(8,579)

(Increase) decrease in inventories

(3,221)

1,948

1,602

Decrease (increase) in prepaid and other assets

53

(190)

(2,444)

Decrease in other non-current assets

3,048

8,001

1,907

Increase (decrease) in accounts payable and accrued and other liabilities

3,252

(8,379)

21,379

Increase (decrease) in other non-current liabilities

1,648

(314)

(45)





Net cash provided by operating activities

32,944

30,769

48,174

Investing activities




Cash decrease due to deconsolidation

(155)

Investment in property, plant, equipment, and mine development

(32,836)

(46,464)

(73,627)

Investment in affiliates

(130)

(2,470)

Issuance of note receivable – related party

(17,500)

Payment of note receivable – related party

17,500

Proceeds from sale of fixed assets

255

70

425





Net cash used in investing activities

(32,581)

(46,524)

(75,827)

Financing activities




Payment on capital lease obligations

(4,547)

(4,338)

(4,115)

Payments of long-term debt

(3,959)

(169,872)

(118,170)

Proceeds from long-term debt

211,634

140,000

Proceeds from financing obligation with ARP

20,000

Payment of financing costs and fees

(29)

(11,117)

(4,798)

Proceeds from repayment of non-recourse notes

1,083

Proceeds from the acquisition of non-controlling interest

132

Proceeds from the issuance of Series A convertible preferred stock

30,000

Repurchase of employee stock relinquished for tax withholdings

(332)

Non-controlling interest contributions

4

5,000





Net cash (used in) provided by financing activities

(8,863)

56,307

39,132





Net (decrease) increase in cash and cash equivalents

(8,500)

40,552

11,479

Cash and cash equivalents, at beginning of year

60,132

19,580

8,101





Cash and cash equivalents, at end of year

$ 51,632

$ 60,132

$ 19,580








Year Ended December 31,


2013

2012

2011

Supplemental cash flow information:




Cash paid for interest

$ 24,045

$   7,404

$ 17,172

Cash paid for income taxes

1,030

Non-cash transactions:




Assets acquired with long-term debt

2,082

2,407

18,927

Land and reserve sale/financing with related party

4,886

5,700

64,491

Adjusted EBITDA

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














Year ended December 31,



2013



2012

Net loss


$

(25,072)



$

(18,039)

Income tax provision






Depreciation, depletion and amortization



40,691




37,043

Non-cash production royalty to related party



6,761




5,695

Interest expense, net



35,563




19,200

Non-cash stock compensation expense



418




697

Loss on settlement of interest rate swap






1,409

Loss on deferment of equity offering






1,130

Gain on settlement of asset retirement obligation



(205)




(234)

Loss on extinguishment of debt






3,953

Adjusted EBITDA


$

58,156



$

50,854









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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