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.

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

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.

SOURCE Armstrong Energy, Inc.

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