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EX-95.1 - EXHIBIT 95.1 - Armstrong Energy, Inc.arms-033117exhibit951.htm
EX-32.2 - EXHIBIT 32.2 - Armstrong Energy, Inc.arms-033117exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - Armstrong Energy, Inc.arms-033117exhibit321.htm
EX-31.2 - EXHIBIT 31.2 - Armstrong Energy, Inc.arms-033117exhibit312.htm
EX-31.1 - EXHIBIT 31.1 - Armstrong Energy, Inc.arms-033117exhibit311.htm
EX-3.2 - EXHIBIT 3.2 - Armstrong Energy, Inc.arms033117exhibit32.htm
EX-3.1 - EXHIBIT 3.1 - Armstrong Energy, Inc.arms-033117exhibit31.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-191182
 
armstronglogosnew.jpg
Armstrong Energy, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
20-8015664
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
 
 
 
7733 Forsyth Boulevard, Suite 1625
St. Louis, Missouri
 
63105
(Address of principal executive offices)
 
(Zip code)
(314) 721 – 8202
(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.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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).    ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
¨
 
Accelerated filer
 
¨
Non-accelerated filer
 
ý  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
 
 
 
 
Emerging growth company
 
ý
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No
As of May 11, 2017, there were 21,883,224 shares of Armstrong Energy, Inc.’s Common Stock outstanding.
 



TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Armstrong Energy, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
 
March 31,
2017
 
December 31,
2016
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
51,838

 
$
57,505

Accounts receivable
11,623

 
13,059

Inventories
13,640

 
11,809

Prepaid and other assets
1,925

 
2,539

Total current assets
79,026

 
84,912

Property, plant, equipment, and mine development, net
227,339

 
233,766

Investments
2,794

 
2,794

Other non-current assets
12,966

 
12,683

Total assets
$
322,125

 
$
334,155

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
13,296

 
$
16,941

Accrued and other liabilities
19,692

 
11,837

Current portion of capital lease obligations
331

 
555

Current maturities of long-term debt
7,542

 
8,217

Total current liabilities
40,861

 
37,550

Long-term debt, less current maturities
198,116

 
199,040

Long-term obligation to related party
170,419

 
147,536

Related party payables, net

 
22,557

Asset retirement obligations
14,380

 
14,056

Other non-current liabilities
7,542

 
7,223

Total liabilities
431,318

 
427,962

Stockholders’ deficit:
 
 
 
Common stock, $0.01 par value, 70,000,000 shares authorized, 21,883,224 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively
219

 
219

Preferred stock, $0.01 par value, 1,000,000 shares authorized, zero shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively

 

Additional paid-in-capital
238,678

 
238,675

Accumulated deficit
(346,610
)
 
(331,164
)
Accumulated other comprehensive loss
(1,503
)
 
(1,560
)
Armstrong Energy, Inc.’s deficit
(109,216
)
 
(93,830
)
Non-controlling interest
23

 
23

Total stockholders’ deficit
(109,193
)
 
(93,807
)
Total liabilities and stockholders’ deficit
$
322,125

 
$
334,155

See accompanying notes to unaudited condensed consolidated financial statements.

1


Armstrong Energy, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
 
Three Months Ended
March 31,
 
2017
 
2016
Revenue
$
59,108

 
$
60,444

Costs and expenses:
 
 
 
Cost of coal sales, exclusive of items shown separately below
51,296

 
52,675

Production royalty to related party
1,860

 
1,629

Depreciation, depletion, and amortization
7,637

 
7,614

Asset retirement obligation expenses
329

 
329

General and administrative expenses
2,957

 
3,518

Operating loss
(4,971
)
 
(5,321
)
Other income (expense):
 
 
 
Interest expense, net
(9,194
)
 
(8,108
)
Other, net
(1,281
)
 
105

Loss before income taxes
(15,446
)
 
(13,324
)
Income taxes

 
(117
)
Net loss
(15,446
)
 
(13,441
)
Income attributable to non-controlling interest

 

Net loss attributable to common stockholders
$
(15,446
)
 
$
(13,441
)
See accompanying notes to unaudited condensed consolidated financial statements.

2


Armstrong Energy, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
 
Three Months Ended
March 31,
 
2017
 
2016
Net loss
$
(15,446
)
 
$
(13,441
)
Postretirement benefit plan and other employee benefit obligations, net of tax
57

 
77

Other comprehensive income
57

 
77

Comprehensive loss
(15,389
)
 
(13,364
)
Less: comprehensive income (loss) attributable to non-controlling interests

 

Comprehensive loss attributable to common stockholders
$
(15,389
)
 
$
(13,364
)
See accompanying notes to unaudited condensed consolidated financial statements.

3


Armstrong Energy, Inc. and Subsidiaries
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
Three Months Ended March 31, 2017
(Amounts in thousands)
 
Common Stock
 
Preferred Stock
 
Additional
Paid-in-
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Non-Controlling
Interest
 
Total
Stockholders’
Deficit
 
Number of
Shares
 
Amount
 
Number of
Shares
 
Amount
 
Balance at December 31, 2016
21,883

 
$
219

 

 
$

 
$
238,675

 
$
(331,164
)
 
$
(1,560
)
 
$
23

 
$
(93,807
)
Net loss

 

 

 

 

 
(15,446
)
 

 

 
(15,446
)
Stock based compensation

 

 

 

 
3

 

 

 

 
3

Postretirement benefit plan and other employee benefit obligations, net of tax of zero

 

 

 

 

 

 
57

 

 
57

Balance at March 31, 2017
21,883

 
$
219

 

 
$

 
$
238,678

 
$
(346,610
)
 
$
(1,503
)
 
$
23

 
$
(109,193
)
See accompanying notes to unaudited condensed consolidated financial statements.

4


Armstrong Energy, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 
Three Months Ended
March 31,
 
2017
 
2016
Cash Flows from Operating Activities:
 
 
 
Net loss
$
(15,446
)
 
$
(13,441
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
Non-cash stock compensation expense (income)
3

 
(28
)
Income from equity affiliate

 
(29
)
Amortization of original issue discount
261

 
231

Amortization of debt issuance costs
366

 
412

Depreciation, depletion and amortization
7,637

 
7,614

Asset retirement obligation expenses
329

 
329

Non-cash activity with related party, net
640

 
2,961

Non-cash interest on long-term obligations
5,875

 
5,879

Change in operating assets and liabilities:
 
 
 
Decrease in accounts receivable
1,435

 
1,733

Increase in inventories
(1,831
)
 
(870
)
Decrease in prepaid and other assets
300

 
845

Increase in other non-current assets
(287
)
 
(481
)
Decrease in accounts payable and accrued and other liabilities
(1,614
)
 
(7,639
)
Increase in other non-current liabilities
321

 
282

Net cash used in operating activities:
(2,011
)
 
(2,202
)
Cash Flows from Investing Activities:
 
 
 
Investment in property, plant, equipment, and mine development
(1,205
)
 
(947
)
Net cash used in investing activities
(1,205
)
 
(947
)
Cash Flows from Financing Activities:
 
 
 
Payments on capital lease obligations
(224
)
 
(676
)
Payments of long-term debt
(2,227
)
 
(1,690
)
Net cash used in financing activities
(2,451
)
 
(2,366
)
Net change in cash and cash equivalents
(5,667
)
 
(5,515
)
Cash and cash equivalents, at the beginning of the period
57,505

 
67,617

Cash and cash equivalents, at the end of the period
$
51,838

 
$
62,102

 
Three Months Ended
March 31,
 
2017
 
2016
Supplemental Cash Flow Information:
 
 
 
Non-Cash Transactions:
 
 
 
Non-cash portion of land and reserve sale/financing with related party
$
22,243

 
$



5


Armstrong Energy, Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

1. DESCRIPTION OF BUSINESS AND ENTITY STRUCTURE
Business
Armstrong Energy, Inc. and its subsidiaries and controlled entities (collectively, Armstrong or the Company) commenced business on September 19, 2006, for the purpose of owning and operating coal reserves (also referred to as mineral rights) and production assets. As of March 31, 2017, all subsidiaries are majority owned. The Company is a producer of low chlorine, high sulfur thermal coal from the Illinois Basin, operating both surface and underground mines. Armstrong, which is headquartered in St. Louis, Missouri, markets its coal primarily to electric utility companies as fuel for their steam-powered generators. As of March 31, 2017, the Company had approximately 627 employees, none of whom are under a collective bargaining arrangement.

Prior to September 1, 2016, the Company’s wholly-owned subsidiary, Elk Creek GP, LLC (ECGP), was the sole general partner of, and had an approximate 0.2% ownership in, Thoroughbred Resources, L.P. (Thoroughbred). The various limited partners of Thoroughbred are related parties, as the entity is majority owned by investment funds managed by Yorktown Partners LLC (Yorktown), which has a majority ownership in the Company. Effective September 1, 2016, Yorktown exercised its right under the Second Amended and Restated Agreement of Limited Partnership of Thoroughbred Resources, L.P. to remove ECGP as the general partner of Thoroughbred. The Company does not consolidate the financial results of Thoroughbred. See Note 6, "Related-Party Transactions," for further discussion.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial reporting and U.S. Securities and Exchange Commission (SEC) regulations. In the opinion of management, all adjustments consisting of normal, recurring accruals considered necessary for a fair presentation have been included. Balance sheet information presented herein as of December 31, 2016 has been derived from the Company’s audited consolidated balance sheet at that date. Results of operations for the three months ended March 31, 2017 are not necessarily indicative of results to be expected for the year ending December 31, 2017. Certain prior year amounts have been reclassified to conform with the 2017 presentation. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2017.
Newly Adopted Accounting Standards and Accounting Standards Not Yet Implemented
In March 2017, the Financial Accounting Standards Board (FASB) issued guidance that changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement. The new guidance requires the service cost component of net periodic benefit cost to be presented in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period with only the service cost component eligible for capitalization in assets. Other components of the net periodic benefit cost are to be stated separately from the line item(s) that includes the service cost and outside of operating income. These components are not eligible for capitalization in assets. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within that annual period, with early adoption permitted. The Company is currently assessing the impact that adopting this new standard will have on its consolidated financial statements.
In March 2016, the FASB issued guidance that simplifies several aspects of accounting for share- based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an  option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain  classifications on the statement of cash flows. The Company adopted all provisions of this new accounting standard in the first  quarter of 2017 and changed its forfeiture policy to recognizing the impact of forfeitures when they occur from estimating  expected forfeitures in determining stock-based compensation expense. There was no material impact to the Company's financial statements.
In February 2016, the FASB issued updated guidance regarding the accounting for leases. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier application permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or

6


entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the effect of this update on its consolidated financial statements.
In May 2014, the FASB issued a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The standard requires revenue to be recognized when promised goods or services are transferred to a customer in an amount that reflects the consideration expected in exchange for those goods or services. The standard permits the use of either the full retrospective or modified retrospective transition method. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted to the original effective date of December 15, 2016. The Company’s primary source of revenue is from the sale of coal through both short-term and long-term contracts, primarily with utilities, whereby revenue is currently recognized when risk of loss has passed to the customer. During 2016, the Company started its initial review of contracts with customers and does not currently anticipate any material change in the timing or method of recognizing revenue from our current practice.  As such, the Company does not believe this new standard will have a material impact on its results of operations, financial condition or cash flows.  The Company will adopt the new standard as of January 1, 2018, utilizing the modified retrospective method.

2. LIQUIDITY AND GOING CONCERN
The principal indicators of the Company’s liquidity are cash on hand and, prior to its termination, availability under its asset-based credit facility dated December 21, 2012 (the 2012 Credit Facility). As more fully described below in Note 7, “Long-Term Debt,” the Company terminated the 2012 Credit Facility effective November 14, 2016. The Company’s available liquidity as of March 31, 2017 was $51,838, which was comprised solely of cash on hand.
The Company has experienced recurring losses from operations, which has led to a substantial decline in cash flows from operating activities over the previous 18 months. The Company’s current operating plan indicates that it will continue to incur losses from operations and generate negative cash flows from operating activities in the near-term. In addition, the Company entered into a settlement agreement, effective March 29, 2017, with Thoroughbred whereby the Company agreed, among other things, to begin paying Thoroughbred all production royalties earned on or after January 1, 2017 in cash, as permitted by the existing lease terms. See Note 6, “Related-Party Transactions,” for more information with respect to the settlement agreement. The Company’s continuing operating losses, negative cash flow projections and other liquidity risks raise substantial doubt about whether the Company will meet its obligations as they become due over the next year. As a result of this, as well as the continued uncertainty around future coal fundamentals, the Company has concluded there exists substantial doubt regarding its ability to continue as a going concern.
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. The unaudited condensed consolidated financial statements for the three months ended March 31, 2017 do not include any adjustments that may result from uncertainty related to the Company's ability to continue as a going concern.  
Due to the Company’s current financial outlook, it has undertaken steps to preserve its liquidity and manage operating costs, including controlling capital expenditures. Beginning in 2015, the Company undertook steps to enhance its financial flexibility and reduce cash outflows in the near term, including a streamlining of its cost structure and anticipated reductions in production volumes and capital expenditures. In addition, the Company is actively negotiating a restructuring with advisers to certain holders of the Company's 11.75% Senior Secured Notes due 2019 (the Notes), who collectively beneficially own or manage in excess of 75% of the aggregate principal amount of the Notes.
The Company has engaged financial and legal advisers to assist in restructuring its capital structure and evaluating other potential alternatives to address the impending liquidity constraints. However, there can be no assurance that any restructuring will be possible on acceptable terms, if at all. It may be difficult to come to an agreement that is acceptable to all of the Company’s creditors. The Company’s failure to reach an agreement on the terms of a restructuring with its creditors would have a material adverse effect on the Company’s liquidity, financial condition and results of operations. In addition, if a successful restructuring with the holders of the Notes (the Holders) is not achieved, it may be necessary for the Company to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring, or the Company’s creditors could force it into an involuntary bankruptcy or liquidation.


3. INVENTORIES
Inventories consist of the following amounts:

7


 
March 31, 2017
 
December 31, 2016
Materials and supplies
$
8,634

 
$
8,610

Coal—raw and saleable
5,006

 
3,199

Total
$
13,640

 
$
11,809




4. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consist of the following amounts:
 
March 31, 2017
 
December 31, 2016
Payroll and related benefits
$
5,748

 
$
4,804

Taxes other than income taxes
3,571

 
3,566

Interest
6,854

 
979

Asset retirement obligations
119

 
133

Royalties
1,661

 
610

Other
1,739

 
1,745

Total
$
19,692

 
$
11,837


5. OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following amounts:
 
March 31, 2017
 
December 31, 2016
Escrows and deposits
$
5,211

 
$
5,216

Restricted surety and cash bonds
6,002

 
6,002

Advanced royalties
1,705

 
1,413

Intangible assets, net
48

 
52

Total
$
12,966

 
$
12,683


6. RELATED-PARTY TRANSACTIONS
Investments
Effective September 1, 2016, Yorktown exercised its right under the Second Amended and Restated Agreement of Limited Partnership of Thoroughbred Resources, LP to remove ECGP as the general partner of Thoroughbred. The Company received cash of $500 for its 0.2% general partner interest and recognized a pre-tax loss of $320 during the three months ended September 30, 2016. The Company continues to maintain a 0.9% interest in Thoroughbred through its subsidiary, Armstrong Energy Holdings, Inc., but, as a result of its removal as general partner, no longer has the ability to exercise significant influence over Thoroughbred. Therefore, effective September 1, 2016, the remaining interest being retained by the Company is being accounted for under the cost method.
Prior to September 1, 2016 when the Company’s investment in Thoroughbred was accounted for under the equity method, the Company recognized income from its equity interest of $29 for the three months ended March 31, 2016.
Sale of Coal Reserves
The Company has executed the sale of an undivided interest in certain land and mineral reserves in Ohio and Muhlenberg counties of Kentucky (the Jointly-Owned Property) to Thoroughbred, through a series of transactions beginning in February 2011. Subsequently, the Company entered into lease agreements with Thoroughbred pursuant to which Thoroughbred granted the Company leases to its undivided interests in the mining properties acquired and licenses to mine and sell coal from those properties in exchange for a production royalty. Due to the Company’s continuing involvement in the Jointly-Owned Property, these transactions have been accounted for as financing arrangements. A long-term obligation has been established that is being amortized over the anticipated life of the mineral reserves, at an annual rate of 7% of the estimated gross revenue generated from the sale of the coal originating from the leased mineral reserves. In addition, effective February 2011, the Company and

8


Thoroughbred entered into a Royalty Deferment and Option Agreement (the Royalty Agreement), whereby the Company has been granted an option to defer payment of any royalties earned by Thoroughbred on coal mined from these properties. Compensation for the aforementioned transactions has consisted of a combination of cash payments and the forgiveness of amounts owed by the Company, which primarily consisted of deferred royalties.
On June 1, 2016, the Company sold a 17.81% undivided interest in the Jointly-Owned Property to Thoroughbred in exchange for Thoroughbred forgiving amounts owed by the Company of $16,413. The amount forgiven consisted primarily of deferred production royalties. The newly acquired interest in the mineral reserves was leased and/or subleased by Thoroughbred to the Company in exchange for a production royalty. This transaction was accounted for as a financing arrangement and an additional long-term obligation to Thoroughbred of $16,413 was recognized on June 1, 2016.
The percentage interest in the Jointly-Owned Property sold to Thoroughbred in the above transaction was based on a fair value determined by a third-party specialist as of December 31, 2015. In addition, this transaction was approved by the conflicts committee of the board of directors of the Company, a committee including independent directors. As a result of the above, Thoroughbred’s undivided interest in the Jointly-Owned Property was increased to 79.19%.
Starting in December 2016, the Company received the first of multiple communications from Thoroughbred Holdings GP, LLC (Thoroughbred Holdings), the general partner of Thoroughbred, alleging certain claims associated with various transactions between the parties. Following a series of negotiations, Armstrong and certain of its affiliates, and Thoroughbred Holdings and certain of its affiliates, entered into a settlement agreement, which, among other things, transferred the remaining 20.81% interest in the Jointly-Owned Property to Thoroughbred. See “- Settlement Agreement” below for further discussion of the dispute and ultimate resolution with Thoroughbred Holdings.
As of March 31, 2017 and December 31, 2016, the outstanding long-term obligation to related party totaled $170,419 and $147,536, respectively. Interest expense recognized for the three months ended March 31, 2017 and 2016 associated with the long-term obligation to related party was $2,627 and $1,587, respectively. The effective interest rate of the long-term obligation to related party, which is adjusted based on significant mine plan changes and the completion of the periodic reserve transfers, was 6.3% as of March 31, 2017.
Settlement Agreement
On December 16, 2016, the Company received notification from legal counsel for Thoroughbred Holdings, the general partner of Thoroughbred, disputing the calculation of deferred royalties and valuation of the Jointly-Owned Property pursuant to the terms of the Royalty Agreement. In the December 16th correspondence, counsel for Thoroughbred Holdings asserted that certain third-party valuations prepared in order to ascertain the amount of the Jointly-Owned Property to be transferred from us to Thoroughbred pursuant to the Royalty Agreement to satisfy production royalties due to Thoroughbred were inaccurate for fiscal year 2016 and prior years. Therefore, according to Thoroughbred, its ownership in the Jointly-Owned Property would have reached 100% during or prior to fiscal year 2016.
The Company promptly notified Thoroughbred that it disputed these assertions and requested information supporting Thoroughbred’s arguments. Following the Company’s request, in a letter dated January 6, 2017, Thoroughbred Holding’s CEO advised the Company that Thoroughbred, based on its analysis, concluded that Armstrong’s valuation of the remaining Jointly-Owned Property was significantly overstated, and using its valuation methodology, Thoroughbred would have been entitled to 100% ownership of the Jointly-Owned Property during the first half of 2016. Therefore, according to Thoroughbred’s calculations, cash payment of production royalties was required for a portion of the royalties incurred during 2016 and thereafter. In addition, Thoroughbred questioned several of the inputs utilized in the valuation by the Company during prior years, therefore challenging the validity of the prior land and reserve transfers.
By subsequent letter dated February 15, 2017, Thoroughbred clarified that its valuation analysis ascertained that the fair market value of the entirety of the Jointly-Owned Property as of December 31, 2016 was not more than $35,000. In addition, Thoroughbred insisted that applying more conservative inputs to the valuations of prior periods resulted in the underpayment of production royalties by not less than $26,000 and potentially in excess of $40,000 through December 31, 2016. Thoroughbred’s counsel, by separate letter dated February 15, 2017, also took exception to the Company’s calculation of the amount of deferred royalties for the year ended December 31, 2016, the amount of certain offsets from these deferred royalties by amounts due from Thoroughbred to Armstrong pursuant to an Administrative Services Agreement, and the offset of certain production royalties that the Company overpaid to Thoroughbred on properties other than the Jointly-Owned Property. The Company subsequently notified Thoroughbred of its continued disagreement with their claims.

9


As of December 31, 2016, amounts owed to Thoroughbred totaled $11,701, primarily representing deferred royalties incurred during calendar year 2016. Consistent with the previous annual land and reserve transfers pursuant to the Royalty Agreement, the Company proposed to transfer a 10.95% undivided interest in the Jointly-Owned Property in satisfaction of the amounts owed, which had been ascertained based on a fair market value determination obtained by the Company from an independent third-party. As noted above, Thoroughbred objected to this amount, asserting that, based on its own valuation, 10.95% was substantially undervalued. Following a series of negotiations to resolve the dispute, the Company and Thoroughbred entered into a settlement agreement effective March 29, 2017 (the Settlement Agreement) in which the Company agreed to transfer, and Thoroughbred agreed to accept, an additional 9.86% undivided interest in Jointly-Owned Property for a total of 20.81%, bringing Thoroughbred’s interest in the Jointly-Owned Property to 100% as of January 1, 2017. The additional 9.86% undivided interest was expected to be earned by Thoroughbred during the first half of 2017 regardless of the settlement. Furthermore, as part of the Settlement Agreement, the Company and Thoroughbred agreed to mutual waivers and releases related to the Royalty Agreement, the payment of production royalties or any other sums due under the leases prior to January 1, 2017, and the Administrative Services Agreement. Thoroughbred also waived and released any prior claims against the Company for lost or wasted coal or mining practices and operational decisions made by the Company; any other demands, claims, or assertions set forth in the various communications from Thoroughbred Holdings and its legal counsel to the Company; and any other claims arising from the Company's administration of the leases prior to January 1, 2017. In addition, the Company agreed to begin paying Thoroughbred all production royalties earned on or after January 1, 2017 in cash pursuant to the existing lease terms, with royalties earned for January and February 2017 totaling $2,651 being paid on March 31, 2017. By letter dated April 18, 2017, certain of the Holders of the Notes expressed certain objections to entry into the Settlement Agreement.
As a result of the Settlement Agreement, the Company recognized a non-cash charge in the year ending December 31, 2016 totaling $10,542 related to the 9.86% increase in the Jointly-Owned Property transferred to resolve the aforementioned disputes. In addition, the Jointly-Owned Property that was the subject of the dispute has been leased and/or subleased by Thoroughbred to the Company in exchange for a production royalty effective January 1, 2017. As a result of the Company's continuing involvement in the land and mineral reserves transferred to Thoroughbred, this transaction was accounted for as a financing arrangement, and, therefore, resulted in an increase to the long-term obligation to Thoroughbred totaling $22,243 as of January 1, 2017.
Lease of Coal Reserves
In February 2011, Thoroughbred entered into a lease and sublease agreement with the Company relating to its Elk Creek reserves and granted the Company a license to mine coal on those properties. The terms of this agreement mirror those of the lease agreements associated with the Jointly-Owned Property between the Company and Thoroughbred. Total production royalties owed from mining of the Elk Creek reserves, where the Company’s Kronos underground mine resides, for the three months ended March 31, 2017 and 2016 totaled $1,860 and $1,629, respectively.
Administrative Services Agreements
Effective as of January 1, 2011, the Company entered into an Administrative Services Agreement with Thoroughbred and its then current general partner, ECGP, pursuant to which the Company agreed to provide Thoroughbred with general administrative and management services, including, but not limited to, human resources, information technology, financial and accounting services and legal services. The administrative service fee, which was adjusted annually, was approved by the conflicts committee of the board of directors. In connection with ECGP's removal as general partner of Thoroughbred, the Company and Thoroughbred agreed to terminate the Administrative Services Agreement effective December 31, 2016. As consideration for the use of the Company’s employees and services, and for certain shared fixed costs, Thoroughbred paid the Company $236 for the three months ended March 31, 2016.
Other
In 2007, the Company entered into an overriding royalty agreement with an executive employee to compensate him $0.05/ton of coal mined and sold from properties owned by certain subsidiaries of the Company. The agreement remains in effect for the later of 20 years from the date of the agreement or until all salable coal has been extracted. The royalty agreement transfers with the property regardless of ownership or lease status. The royalty is payable the month following the sale of coal mined from the specified properties. The Company accounts for this royalty arrangement as expense in the period in which the coal is sold. Expense recorded in the three months ended March 31, 2017 and 2016 was $49 and $51, respectively.

10



7. LONG-TERM DEBT
The Company’s total indebtedness consisted of the following:
Type
March 31, 2017
 
December 31, 2016
Notes
$
191,818

 
$
191,191

Other
13,840

 
16,066

 
205,658

 
207,257

Less: current maturities
7,542

 
8,217

Total long-term debt
$
198,116

 
$
199,040

Senior Secured Notes due 2019
On December 21, 2012, the Company completed a $200,000 offering of the 11.75% Notes. The Notes were issued at an original issue discount (OID) of 96.567%. The OID was recorded on the Company’s balance sheet as a component of long-term debt, and is being amortized to interest expense over the life of the Notes. As of March 31, 2017 and December 31, 2016, the unamortized OID was $3,360 and $3,622, respectively. Interest on the Notes is due semiannually on June 15 and December 15 of each year. In addition, the Company used the proceeds to pay fees and expenses of $8,358 related to the Notes offering, which are being amortized to interest expense over the life of the Notes. As of March 31, 2017 and December 31, 2016, the unamortized deferred financing costs were $4,822 and $5,187, respectively.
On February 2, 2017, the Company received notice from legal counsel representing certain of the Holders of the Notes regarding an alleged Event of Default. See Note 12, "Commitments and Contingencies," for further information regarding this claim.
2012 Credit Facility
Concurrently with the closing of the Notes offering on December 21, 2012, the Company entered into the 2012 Credit Facility. The 2012 Credit Facility, which was subsequently terminated in November 2016, provided for a five year, $50,000 revolving credit facility that would expire on December 21, 2017. Borrowings under the 2012 Credit Facility could not exceed a borrowing base, as defined within the 2012 Credit Facility agreement. In addition, the 2012 Credit Facility included a $10,000 letter of credit sub-facility and a $5,000 swingline loan sub-facility. The Company incurred $1,198 of deferred financing fees related to the 2012 Credit Facility that were capitalized and amortized to interest expense over the life of the facility.
The 2012 Credit Facility included customary covenants that, among other things, required the Company at any time when (i) undrawn availability was less than the greater of (a)$10,000 or (b) an amount equal to 20% of the borrowing base or (ii) an event of default had occurred and was continuing, to maintain a fixed charge coverage ratio, as defined, calculated as of the end of each calendar month for the twelve months then ended, greater than 1.0 to 1.0. During 2016, the Company's fixed charge coverage ratio was less than 1.0-to-1.0, which would have required the Company to maintain minimum availability greater than $10,000 if any amounts were drawn on the 2012 Credit Facility. Since its inception, the Company had not borrowed under the 2012 Credit Facility, and, therefore, was not subject to the requirements of the financial covenants included within the agreement. Due to the restrictions imposed as a result of not maintaining the minimum fixed charge coverage ratio, the Company made the decision to terminate the 2012 Credit Facility effective November 14, 2016. Pursuant to this termination, the Company recognized a loss of $403 during the three months ended December 31, 2016 to write-off the remaining unamortized deferred financing costs associated with the 2012 Credit Facility.
Other Debt
Other debt consists of miscellaneous debt obligations entered into to finance the acquisition of certain equipment and land. These obligations have various maturities of one to five years and bear interest at rates between 2.99% to 6.50%.

11



8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures the fair value of assets and liabilities using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1—observable inputs such as quoted prices in active markets; Level 2—inputs, other than quoted market prices in active markets, which are observable, either directly or indirectly; and Level 3—valuations derived from valuation techniques in which one or more significant inputs are unobservable. In addition, the Company may use various valuation techniques, including the market approach, using comparable market prices; the income approach, using the present value of future income or cash flow; and the cost approach, using the replacement cost of assets.
The Company’s financial instruments consist of cash equivalents, accounts receivable, cost method investment, long-term debt, and other long-term obligations. For cash equivalents, accounts receivable and other long-term obligations, the carrying amounts approximate fair value due to the short maturity and financial nature of the balances. The fair value of the cost method investment is not estimated, as it is impracticable to do so. The estimated fair market values of the Company’s Notes, which was determined using Level 2 inputs, and long-term obligation to related party, which was determined using Level 3 inputs, are as follows:
 
March 31, 2017
 
December 31, 2016
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
Notes(1)
$
111,260

 
$
191,818

 
$
126,000

 
$
191,191

Long-term obligation to related party
126,039

 
170,419

 
113,106

 
147,536

Total
$
237,299

 
$
362,237

 
$
239,106

 
$
338,727


(1)
The carrying value of the Notes is net of the unamortized OID and deferred financing costs as of March 31, 2017 and December 31, 2016, respectively.
The fair value of the Notes is based on quoted market prices, while the fair value of the long-term obligation to related party is based on estimated cash flows discounted to their present value.

9. INCOME TAXES
The Company has not recognized certain income tax benefits, as it does not believe it is more likely than not it will be able to realize its net deferred tax assets. The Company has, therefore, established a valuation allowance against its net deferred tax assets as of March 31, 2017 and December 31, 2016. Based on the anticipated reversals of its deferred tax assets and deferred tax liabilities, the Company has concluded a valuation allowance is necessary only for the excess of deferred tax assets over deferred tax liabilities.

10. EMPLOYEE BENEFIT PLANS
The Company provides certain health care benefits, including the reimbursement of a portion of out-of-pocket costs associated with insurance coverage, to qualifying salaried and hourly retirees and their dependents. Plan coverage for reimbursements will be provided to future hourly and salaried retirees in accordance with the plan document. The Company’s funding policy with respect to the plan is to fund the cost of all postretirement benefits as they are paid.
Net periodic postretirement benefit cost included the following components:
 
Three months ended March 31,
 
2017
 
2016
Service cost for benefits earned
$
229

 
$
229

Interest cost on accumulated postretirement benefit obligation
49

 
43

Amortization of prior service cost
24

 
24

Net periodic postretirement cost
$
302

 
$
296


11. ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2017 consisted of the following:

12


 
Postretirement
Benefit Plan
and Other
Employee
Benefit
Obligations
 
Accumulated
Other
Comprehensive
Loss
Balance as of December 31, 2016
$
(1,560
)
 
$
(1,560
)
Amounts reclassified from accumulated other comprehensive loss
57

 
57

Current period change

 

Balance as of March 31, 2017
$
(1,503
)
 
$
(1,503
)
The following is a summary of reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2017 and 2016:
Details about Accumulated Other
Comprehensive Income (Loss) Components
Affected Line  Item in the
Condensed  Consolidated Statement of Operations
 
Amounts Reclassified from
Accumulated Other
Comprehensive Loss
For the
Three Months Ended
March 31,
 
 
 
2017
 
2016
Amortization of prior service cost associated with postretirement benefit plan and other employee benefit obligations
Cost of coal sales
 
$
(102
)
 
$
(102
)
Amortization of net actuarial gain associated with other employee benefit obligations
Cost of coal sales
 
45

 
25

 
 
 
(57
)
 
(77
)
Income taxes
 
 

 

Total reclassifications
 
 
$
(57
)
 
$
(77
)

12. COMMITMENTS AND CONTINGENCIES
The Company is subject to various market, operational, financial, regulatory, and legislative risks. Numerous federal, state, and local governmental permits and approvals are required for mining operations. Federal and state regulations require regular monitoring of mines and other facilities to document compliance. Monetary penalties of $1,095 and $1,008 related to Mine Safety and Health Administration (MSHA) fines were accrued as of March 31, 2017 and December 31, 2016, respectively.
The Company is involved from time to time in various legal matters arising in the ordinary course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s consolidated cash flows, results of operations or financial condition. A summary of the significant legal matters is below.
Litigation
On July 20, 2016, the Company was notified by an Assistant U. S. Attorney for the Western District of Kentucky of an investigation into potential charges against Armstrong Coal Company, Inc., a wholly-owned subsidiary of the Company (Armstrong Coal Company), and one or more of its current and former employees arising from alleged inaccurate respirable dust sampling at certain of the Company's underground mines. In November 2016, seven current and former Armstrong Coal Company employees received individual target letters from the Assistant U.S. Attorney. In January 2014, MSHA issued a 104(d) citation to the Parkway underground mine related to inaccurate respirable dust sampling, which the Company has challenged. In addition, a Parkway underground mine employee was terminated. The impact of any charges against the Company or its current and former employees cannot be determined at this time, and the Company intends to vigorously defend any such charges should they be pursued.
Claim of Event of Default by Bondholders    
On December 30, 2016, Rhino Resource Partners Holdings, LLC (Rhino Holdings), an entity wholly-owned by Yorktown, together with Rhino Resource Partners LP (Rhino), Royal Energy Resources, Inc. (Royal), and Rhino GP LLC (Rhino GP) entered into a put and call option agreement whereby Rhino received a call option, and Rhino Holdings received a put option, on all of the outstanding Company stock currently held by Yorktown (the Option), the majority owner of the Company's outstanding common stock, under certain circumstances. The Option provides that Rhino can exercise the Option

13


after 60 days following entry of an agreement regarding the restructuring of the Notes, but in no event earlier than January 1, 2018 and no later than December 31, 2019. In exchange for Rhino Holdings granting Rhino the Option to purchase Yorktown’s holdings of Armstrong Energy stock, Rhino issued 5.0 million common units to Rhino Holdings upon the execution of the Option.
 
In connection with entry into the Option by the aforementioned parties, on February 2, 2017, the Company received notice from certain of the Holders of the Notes that the Holders believe entry into the Option by the third-parties constitutes a Change of Control, as defined in the Indenture governing the Notes, and that an Event of Default occurred, as defined in the Indenture, when the Company failed to offer to purchase the Notes within 30 days following the purported Change of Control.  This position was reiterated in a letter dated April 18, 2017. The Holders are not currently pursuing remedies under the Indenture related to the alleged Event of Default, but have reserved their rights to do so at a future time. In addition, certain of the Company's financing agreements include cross-default or cross-event of default provisions, which, if the aforementioned assertions were proven to be accurate, would result indirectly in an event of default under such financing arrangements.

The Company believes that neither a Change of Control nor an Event of Default as defined in the Indenture has occurred. To that end, the Company has advised the Holders that it disputes the allegations. No further action associated with these claims has been taken to date by the Company or the Holders.
Coal Sales Contracts
The Company has historically sold the majority of its coal under multi-year supply agreements of varying duration. These contracts typically have specific volume and pricing arrangements for each year of the agreement, which allows customers to secure a supply for their future needs and provides the Company with greater predictability of sales volume and sales prices. Quantities sold under some of these contracts may vary from year to year within certain limits at the option of the customer or the Company. The remaining terms of the Company’s long-term contracts range from one to four years. The Company, via contractual agreements, has committed volumes of sales in 2017 of approximately 5.3 million tons.

13. SUPPLEMENTAL GUARANTOR/NON-GUARANTOR FINANCIAL INFORMATION
In accordance with the indenture governing the Notes, certain wholly-owned subsidiaries of the Company (each, a Guarantor Subsidiary) have fully and unconditionally guaranteed the Notes, on a joint and several basis, subject to certain customary release provisions. Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented because management believes that such information is not material to the holders of the Notes. The following historical financial statement information is provided for the Guarantor Subsidiaries. The non-guarantor subsidiaries are considered to be “minor” as the term is defined in Rule 3-10 of Regulation S-X promulgated by the SEC, and the financial position, results of operations, and cash flows of the non-guarantor subsidiaries are, therefore, included in the condensed financial data of the Guarantor Subsidiaries.

14


Unaudited Supplemental Condensed Consolidating Balance Sheets
 
March 31, 2017
 
Parent /
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
51,838

 
$

 
$
51,838

Accounts receivable

 
11,623

 

 
11,623

Inventories

 
13,640

 

 
13,640

Prepaid and other assets
431

 
1,494

 

 
1,925

Total current assets
431

 
78,595

 

 
79,026

Property, plant, equipment, and mine development, net
9,865

 
217,474

 

 
227,339

Investments

 
2,794

 

 
2,794

Investments in subsidiaries
35,114

 

 
(35,114
)
 

Intercompany receivables
44,312

 
(44,312
)
 

 

Other non-current assets
180

 
12,786

 

 
12,966

Total assets
$
89,902

 
$
267,337

 
$
(35,114
)
 
$
322,125

LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable
$
136

 
$
13,160

 
$

 
$
13,296

Accrued and other liabilities
7,077

 
12,615

 

 
19,692

Current portion of capital lease obligations

 
331

 

 
331

Current maturities of long-term debt

 
7,542

 

 
7,542

Total current liabilities
7,213

 
33,648

 

 
40,861

Long-term debt, less current maturities
191,818

 
6,298

 

 
198,116

Long-term obligation to related party

 
170,419

 

 
170,419

Related party payables, net

 

 

 

Asset retirement obligations

 
14,380

 

 
14,380

Other non-current liabilities
87

 
7,455

 

 
7,542

Total liabilities
199,118

 
232,200

 

 
431,318

Stockholders’ equity/(deficit):
 
 
 
 
 
 
 
Armstrong Energy, Inc.’s equity/(deficit)
(109,216
)
 
35,114

 
(35,114
)
 
(109,216
)
Non-controlling interest

 
23

 

 
23

Total stockholders’ equity/(deficit)
(109,216
)
 
35,137

 
(35,114
)
 
(109,193
)
Total liabilities and stockholders’ equity/(deficit)
$
89,902

 
$
267,337

 
$
(35,114
)
 
$
322,125


15


Supplemental Condensed Consolidating Balance Sheets
 
December 31, 2016
 
Parent /
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
57,505

 
$

 
$
57,505

Accounts receivable

 
13,059

 

 
13,059

Inventories

 
11,809

 

 
11,809

Prepaid and other assets
849

 
1,690

 

 
2,539

Total current assets
849

 
84,063

 

 
84,912

Property, plant, equipment, and mine development, net
9,948

 
223,818

 

 
233,766

Investments

 
2,794

 

 
2,794

Investments in subsidiaries
42,092

 

 
(42,092
)
 

Intercompany receivables
45,643

 
(45,643
)
 

 

Other non-current assets
180

 
12,503

 

 
12,683

Total assets
$
98,712

 
$
277,535

 
$
(42,092
)
 
$
334,155

LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable
$
302

 
$
16,639

 
$

 
$
16,941

Accrued and other liabilities
1,578

 
10,259

 

 
11,837

Current portion of capital lease obligations

 
555

 

 
555

Current maturities of long-term debt

 
8,217

 

 
8,217

Total current liabilities
1,880

 
35,670

 

 
37,550

Long-term debt, less current maturities
191,191

 
7,849

 

 
199,040

Long-term obligation to related party

 
147,536

 

 
147,536

Related party payables, net
(628
)
 
23,185

 

 
22,557

Asset retirement obligations

 
14,056

 

 
14,056

Long-term portion of capital lease obligations

 

 

 

Other non-current liabilities
99

 
7,124

 

 
7,223

Total liabilities
192,542

 
235,420

 

 
427,962

Stockholders’ equity/(deficit):
 
 
 
 
 
 
 
Armstrong Energy, Inc.’s equity/(deficit)
(93,830
)
 
42,092

 
(42,092
)
 
(93,830
)
Non-controlling interest

 
23

 

 
23

Total stockholders’ equity/(deficit)
(93,830
)
 
42,115

 
(42,092
)
 
(93,807
)
Total liabilities and stockholders’ equity/(deficit)
$
98,712

 
$
277,535

 
$
(42,092
)
 
$
334,155


16


Unaudited Supplemental Condensed Consolidating Statements of Operations
 
Three Months Ended March 31, 2017
 
Parent /
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenue
$

 
$
59,108

 
$

 
$
59,108

Costs and expenses:
 
 
 
 
 
 
 
Operating costs and expenses

 
51,296

 

 
51,296

Production royalty to related party

 
1,860

 

 
1,860

Depreciation, depletion, and amortization
231

 
7,406

 

 
7,637

Asset retirement obligation expenses

 
329

 

 
329

General and administrative expenses
580

 
2,377

 

 
2,957

Operating loss
(811
)
 
(4,160
)
 

 
(4,971
)
Other income (expense):
 
 
 
 
 
 
 
Interest expense, net
(6,355
)
 
(2,839
)
 

 
(9,194
)
Other, net
(1,302
)
 
21

 

 
(1,281
)
Loss from investment in subsidiaries
(6,978
)
 

 
6,978

 

Loss before income taxes
(15,446
)
 
(6,978
)
 
6,978

 
(15,446
)
Income taxes

 

 

 

Net loss
(15,446
)
 
(6,978
)
 
6,978

 
(15,446
)
Income attributable to non-controlling interest

 

 

 

Net loss attributable to common stockholders
$
(15,446
)
 
$
(6,978
)
 
$
6,978

 
$
(15,446
)

 
Three Months Ended March 31, 2016
 
Parent /
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenue
$

 
$
60,444

 
$

 
$
60,444

Costs and expenses:
 
 
 
 
 
 
 
Operating costs and expenses

 
52,675

 

 
52,675

Production royalty to related party

 
1,629

 

 
1,629

Depreciation, depletion, and amortization
302

 
7,312

 

 
7,614

Asset retirement obligation expenses

 
329

 

 
329

General and administrative expenses
439

 
3,079

 

 
3,518

Operating loss
(741
)
 
(4,580
)
 

 
(5,321
)
Other income (expense):
 
 
 
 
 
 
 
Interest expense, net
(6,317
)
 
(1,791
)
 

 
(8,108
)
Other, net

 
105

 

 
105

Loss from investment in subsidiaries
(6,383
)
 

 
6,383

 

Loss before income taxes
(13,441
)
 
(6,266
)
 
6,383

 
(13,324
)
Income taxes

 
(117
)
 

 
(117
)
Net loss
(13,441
)
 
(6,383
)
 
6,383

 
(13,441
)
Income attributable to non-controlling interest

 

 

 

Net loss attributable to common stockholders
$
(13,441
)
 
$
(6,383
)
 
$
6,383

 
$
(13,441
)



17


Unaudited Supplemental Condensed Consolidating Statements of Comprehensive Income (Loss)
 
Three Months Ended March 31, 2017
 
Parent /
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net loss
$
(15,446
)
 
$
(6,978
)
 
$
6,978

 
$
(15,446
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Postretirement benefit plan and other employee benefit obligations, net of tax

 
57

 

 
57

Other comprehensive income

 
57

 

 
57

Comprehensive loss
(15,446
)
 
(6,921
)
 
6,978

 
(15,389
)
Less: comprehensive income (loss) attributable to non-controlling interest

 

 

 

Comprehensive loss attributable to common stockholders
$
(15,446
)
 
$
(6,921
)
 
$
6,978

 
$
(15,389
)
 
Three Months Ended March 31, 2016
 
Parent /
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net loss
$
(13,441
)
 
$
(6,383
)
 
$
6,383

 
$
(13,441
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Postretirement benefit plan and other employee benefit obligations, net of tax

 
77

 

 
77

Other comprehensive income

 
77

 

 
77

Comprehensive loss
(13,441
)
 
(6,306
)
 
6,383

 
(13,364
)
Less: comprehensive income (loss) attributable to non-controlling interest

 

 

 

Comprehensive loss attributable to common stockholders
$
(13,441
)
 
$
(6,306
)
 
$
6,383

 
$
(13,364
)













18



Unaudited Supplemental Condensed Consolidating Statements of Cash Flows
 
Three Months Ended March 31, 2017
 
Parent /
Issuer
 
Guarantor
Subsidiaries
 
Consolidated
Cash Flows from Operating Activities:
 
 
 
 
 
Net cash (used in) provided by operating activities:
$
(1,184
)
 
$
(827
)
 
$
(2,011
)
Cash Flows from Investing Activities:
 
 
 
 
 
Investment in property, plant, equipment, and mine development
(147
)
 
(1,058
)
 
(1,205
)
Net cash used in investing activities
(147
)
 
(1,058
)
 
(1,205
)
Cash Flows from Financing Activities:
 
 
 
 
 
Payment on capital lease obligations

 
(224
)
 
(224
)
Payment of long-term debt

 
(2,227
)
 
(2,227
)
Transactions with affiliates, net
1,331

 
(1,331
)
 

Net cash provided by (used in) financing activities
1,331

 
(3,782
)
 
(2,451
)
Net change in cash and cash equivalents

 
(5,667
)
 
(5,667
)
Cash and cash equivalents, at the beginning of the period

 
57,505

 
57,505

Cash and cash equivalents, at the end of the period
$

 
$
51,838

 
$
51,838

 
Three Months Ended March 31, 2016
 
Parent /
Issuer
 
Guarantor
Subsidiaries
 
Consolidated
Cash Flows from Operating Activities:
 
 
 
 
 
Net cash (used in) provided by operating activities:
$
(1,167
)
 
$
(1,035
)
 
$
(2,202
)
Cash Flows from Investing Activities:
 
 
 
 
 
Investment in property, plant, equipment, and mine development
(201
)
 
(746
)
 
(947
)
Proceeds from disposal of fixed assets

 

 

Net cash used in investing activities
(201
)
 
(746
)
 
(947
)
Cash Flows from Financing Activities:
 
 
 
 
 
Payment on capital lease obligations

 
(676
)
 
(676
)
Payment of long-term debt

 
(1,690
)
 
(1,690
)
Transactions with affiliates, net
1,368

 
(1,368
)
 

Net cash provided by (used in) financing activities
1,368

 
(3,734
)
 
(2,366
)
Net change in cash and cash equivalents

 
(5,515
)
 
(5,515
)
Cash and cash equivalents, at the beginning of the period

 
67,617

 
67,617

Cash and cash equivalents, at the end of the period
$

 
$
62,102

 
$
62,102


19



14. SUBSEQUENT EVENT
Effective June 1, 2016, the Company renewed a coal mining lease with Alcoa Fuels, Inc. (Alcoa) associated with certain mineral reserves located in Union and Webster Counties, Kentucky. The terms of the renewal stipulate a minimum annual rent payable with a specified amount of coal tonnage beginning on June 1, 2017. In addition, the lease allows for the early termination of the agreement by the Company upon payment of a termination fee, as defined in the lease agreement. By letter dated May 10, 2017, the Company notified Alcoa of its intent to cancel the coal mining lease effective May 31, 2017. As a result of the lease cancellation, the Company will relinquish control of approximately 120 million tons of mineral reserves. The Company did not incur any termination fees associated with the lease cancellation.

20


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the SEC) on March 31, 2017.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Various statements contained in this quarterly report, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). 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 quarterly report speak only as of the date of this quarterly report; 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. These risks, contingencies and uncertainties include, but are not limited to, the following:

our ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q;

liquidity constraints and our ability to service our outstanding indebtedness;

our ability to comply with the restrictions imposed by the indenture governing our notes and other financing arrangements;

market demand for coal and electricity;

geologic conditions, weather and other inherent risks of coal mining that are beyond our control;

competition within our industry and with producers of competing energy sources;

excess production and production capacity;

our ability to acquire or develop coal reserves in an economically feasible manner;

inaccuracies in our estimates of our coal reserves;

availability and price of mining and other industrial supplies, including steel-based supplies, diesel fuel, rubber tires and explosives;

the continued weakness in global economic conditions or in any industry in which our customers operate, or sustained uncertainty in financial markets, which may cause conditions we cannot predict;

coal users switching to other fuels in order to comply with various environmental standards related to coal combustion;

volatility in the capital and credit markets;

availability of skilled employees and other workforce factors;

our ability to collect payments from our customers;

21



defects in title or the loss of a leasehold interest;

railroad, barge, truck and other transportation performance costs;

our ability to secure new coal supply arrangements or to renew existing coal supply arrangements;

the deferral of contracted shipments of coal by our customers;

our ability to obtain or renew surety bonds on acceptable terms;

our ability to obtain and renew various permits, including permits authorizing the disposition of certain mining waste;

existing and future legislation and regulations affecting both our coal mining operations and our customers’ coal usage, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxide, nitrogen oxides, or toxic gases, such as hydrogen chloride, particulate matter or greenhouse gases;

the accuracy of our estimates of reclamation and other mine closure obligations;

our ability to attract and retain key management personnel; and

efforts to organize our workforce for representation under a collective bargaining agreement.
When considering these forward-looking statements, you should keep in mind the cautionary statements in this document and in our other SEC filings, including the more detailed discussion of these factors and other factors that could affect our results included in Item 1A, “Risk Factors,” in our Annual Report on Form 10-K filed with the SEC on March 31, 2017, as may be updated in subsequent filings with the SEC.
Overview
Armstrong Energy, Inc. (together with its subsidiaries, we, Armstrong, or the Company) is a producer of low chlorine, high sulfur thermal coal from the Illinois Basin, with both surface and underground mines. We market our coal primarily to proximate and investment-grade electric utility companies as fuel for their steam-powered generators. Based on 2016 production, we are the sixth largest producer in the Illinois Basin and the second largest in Western Kentucky. We were formed in 2006 to acquire and develop a large coal reserve holding. We commenced production in the second quarter of 2008 and currently operate five mines, including three surface and two underground. As of March 31, 2017, we controlled approximately 565 million tons of proven and probable coal reserves. We also own and operate three coal processing plants, which support our mining operations. From our reserves, we mine coal from multiple seams that, in combination with our coal processing facilities, enhance our ability to meet customer requirements for blends of coal with different characteristics. The locations of our coal reserves and operations, adjacent to the Green River, together with our river dock coal handling and rail loadout facilities, allow us to optimize coal blending and handling, and provide our customers with rail, barge and truck transportation options.
We market our coal primarily to large utilities with coal-fired, base-load, scrubbed power plants under multi-year coal supply agreements. Our multi-year coal supply agreements usually have specific volume and pricing arrangements for each year of the agreement. These agreements allow customers to secure a supply for their future needs and provide us with greater predictability of sales volume and sales prices. At March 31, 2017, we had coal supply agreements with terms ranging from one to four years. As of March 31, 2017, we are contractually committed to sell approximately 5.3 million tons of coal in 2017.
Going Concern
We have experienced recurring losses from operations, which has led to a substantial decline in cash flows from operating activities. Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities. In addition, we entered into a settlement agreement with our affiliate, Thoroughbred Resources, L.P. (Thoroughbred), effective March 29, 2017, whereby we agreed, among other things, to begin paying Thoroughbred all production royalties earned on or after January 1, 2017 in cash, as permitted by the existing lease terms (see " - Recent Developments" below for more information with respect to the settlement agreement). Our continuing operating losses, negative cash flow projections and other liquidity risks raise substantial doubt about whether we will meet our

22


obligations as they become due within one year from the filing of this Quarterly Report on Form 10-Q. As a result of this, as well as the continued uncertainty around future coal fundamentals, we have concluded there exists substantial doubt regarding our ability to continue as a going concern.
The accompanying unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. The unaudited condensed consolidated financial statements for the quarter ended March 31, 2017 do not include any adjustments that may result from uncertainty related to our ability to continue as a going concern.  
Due to our current financial outlook, we have undertaken steps to preserve our liquidity and manage operating costs, including controlling capital expenditures. Beginning in 2015, we undertook steps to enhance our financial flexibility and reduce cash outflows in the near term, including a streamlining of our cost structure and anticipated reductions in production volumes and capital expenditures. In addition, we are actively negotiating a restructuring with advisers to certain holders of our 11.75% Senior Secured Notes due 2019 (the Notes), who collectively beneficially own or manage in excess of 75% of the aggregate principal amount of the Notes.
We have engaged financial and legal advisers to assist us in restructuring our capital structure and evaluating other potential alternatives to address the impending liquidity constraints. However, there can be no assurance that any restructuring will be possible on acceptable terms, if at all. It may be difficult to come to an agreement that is acceptable to all of our creditors. Our failure to reach an agreement on the terms of a restructuring with our creditors would have a material adverse effect on our liquidity, financial condition and results of operations. In addition, if a successful restructuring with the holders of the Notes is not achieved, it may be necessary for us to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring, or our creditors could force us into an involuntary bankruptcy or liquidation.
Recent Developments
Claim of Event of Default by Bondholders    
On December 30, 2016, Rhino Resource Partners Holdings, LLC (Rhino Holdings), an entity wholly-owned by Yorktown, together with Rhino Resource Partners LP (Rhino), Royal Energy Resources, Inc. (Royal), and Rhino GP LLC (Rhino GP) entered into a put and call option agreement whereby Rhino received a call option, and Rhino Holdings received a put option, on all of the outstanding Armstrong stock currently held by Yorktown Partners LLC (Yorktown), the majority owner of our outstanding common stock, under certain circumstances (the Option). The Option provides that Rhino can exercise the Option after 60 days following entry of an agreement regarding the restructuring of the Notes, but in no event earlier than January 1, 2018 and no later than December 31, 2019. In exchange for Rhino Holdings granting Rhino the Option to purchase Yorktown’s holdings of Armstrong Energy stock, Rhino issued 5.0 million common units to Rhino Holdings upon the execution of the Option.
 In connection with entry into the Option by the aforementioned parties, on February 2, 2017, we received notice from certain of the holders of the Notes (the Holders) that the Holders believe entry into the Option by the third-parties constitutes a Change of Control, as defined in the Indenture governing the Notes, and that an Event of Default occurred, as defined in the Indenture, when we failed to offer to purchase the Notes within 30 days following the purported Change of Control.  This position was reiterated in a letter dated April 18, 2017. The Holders are not currently pursuing remedies under the Indenture related to the alleged Event of Default, but have reserved their rights to do so at a future time. In addition, certain of our financing agreements include cross-default or cross-event of default provisions, which, if the aforementioned assertions were proven to be accurate, would result indirectly in an event of default under such financing arrangements.
We believe that neither a Change of Control nor an Event of Default as defined in the Indenture has occurred. To that end, we have advised the Holders that we dispute the allegations. No further action associated with these claims has been taken to date by us or the Holders.
Settlement Agreement with Thoroughbred
On December 16, 2016, we received notification from legal counsel for Thoroughbred Holdings GP, LLC (Thoroughbred Holdings), the general partner of Thoroughbred, disputing the calculation of deferred royalties and valuation of certain jointly-owned land and mineral reserves in Ohio and Muhlenberg Counties, Kentucky (the Jointly-Owned Property) pursuant to the

23


terms of the Amended and Restated Royalty Deferment and Option Agreement (the Royalty Agreement). In the December 16th correspondence, counsel for Thoroughbred Holdings asserted that certain third-party valuations prepared in order to ascertain the amount of the Jointly-Owned Property to be transferred from us to Thoroughbred pursuant to the Royalty Agreement to satisfy production royalties due to Thoroughbred were inaccurate for fiscal year 2016 and prior years. Therefore, according to Thoroughbred, its ownership in the Jointly-Owned Property would have reached 100% during or prior to fiscal year 2016.
We promptly notified Thoroughbred that we disputed these assertions and requested information supporting Thoroughbred’s arguments. Following our request, in a letter dated January 6, 2017, Thoroughbred Holding’s CEO advised us that Thoroughbred, based on its analysis, concluded that our valuation of the remaining Jointly-Owned Property was significantly overstated, and using its valuation methodology, Thoroughbred would have been entitled to 100% ownership of the Jointly-Owned Property during the first half of 2016. Therefore, according to Thoroughbred’s calculations, cash payment of production royalties was required for a portion of the royalties incurred during 2016 and thereafter. In addition, Thoroughbred questioned several of the inputs utilized in the valuation by us during prior years, therefore challenging the validity of the prior land and reserve transfers.
By subsequent letter dated February 15, 2017, Thoroughbred clarified that its valuation analysis ascertained that the fair market value of the entirety of the Jointly-Owned Property as of December 31, 2016 was not more than $35 million. In addition, Thoroughbred insisted that applying more conservative inputs to the valuations of prior periods resulted in the underpayment of production royalties by not less than $26.0 million and potentially in excess of $40.0 million through December 31, 2016. Thoroughbred’s counsel, by separate letter dated February 15, 2017, also took exception to our calculation of the amount of deferred royalties for the year ended December 31, 2016, the amount of certain offsets from these deferred royalties by amounts due from Thoroughbred to us pursuant to an Administrative Services Agreement, and the offset of certain production royalties that we overpaid to Thoroughbred on properties other than the Jointly-Owned Property. We subsequently notified Thoroughbred of our continued disagreement with their claims.
As of December 31, 2016, amounts owed to Thoroughbred totaled $11.7 million, primarily representing deferred royalties incurred during calendar year 2016. Consistent with the previous annual land and reserve transfers pursuant to the Royalty Agreement, we proposed to transfer a 10.95% undivided interest in the Jointly-Owned Property in satisfaction of the amounts owed, which had been ascertained based on a fair market value determination obtained by us from an independent third-party. As noted above, Thoroughbred objected to this amount, asserting that, based on its own valuation, 10.95% was substantially undervalued. Following a series of negotiations to resolve the dispute, we and Thoroughbred entered into a settlement agreement effective March 29, 2017 (the Settlement Agreement) in which we agreed to transfer, and Thoroughbred agreed to accept, an additional 9.86% undivided interest in Jointly-Owned Property for a total of 20.81%, bringing Thoroughbred’s interest in the Jointly-Owned Property to 100% as of January 1, 2017. The additional 9.86% undivided interest was expected to be earned by Thoroughbred during the first half of 2017 regardless of the settlement. Furthermore, as part of the Settlement Agreement, we and Thoroughbred agreed to mutual waivers and releases related to the Royalty Agreement, the payment of production royalties or any other sums due under the leases prior to January 1, 2017, and the Administrative Services Agreement. Thoroughbred also waived and released any prior claims against us for lost or wasted coal or mining practices and operational decisions made by us; any other demands, claims, or assertions set forth in the various communications from Thoroughbred Holdings and its legal counsel to us; and any other claims arising from our administration of the leases prior to January 1, 2017. In addition, we agreed to begin paying Thoroughbred all production royalties earned on or after January 1, 2017 in cash pursuant to the existing lease terms, with royalties earned for January and February 2017 totaling $2.7 million being paid on March 31, 2017. By letter dated April 18, 2017, certain of the Holders of the Notes expressed certain objections to entry into the Settlement Agreement.
As a result of the Settlement Agreement, we recognized a non-cash charge in the year ending December 31, 2016 totaling $10.5 million related to the 9.86% increase in the Jointly-Owned Property transferred to resolve the aforementioned disputes. In addition, the Jointly-Owned Property that was the subject of the dispute has been leased and/or subleased by Thoroughbred to us in exchange for a production royalty effective January 1, 2017. As a result of our continuing involvement in the land and mineral reserves transferred to Thoroughbred, this transaction is accounted for as a financing arrangement, and, therefore, resulted in an increase to the long-term obligation to Thoroughbred totaling $22.2 million as of January 1, 2017.

Results of Operations
Non-GAAP Financial Information
Adjusted EBITDA, as presented in this Quarterly Report on Form 10-Q, is a supplemental measure of our performance that is not required by, or presented in accordance with, U.S. generally accepted accounting principles (U.S. GAAP). It is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income

24


(loss) or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as measures 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, costs incurred evaluating strategic alternatives, non-cash production royalty to related party, asset impairment and restructuring charges, non-cash charge on settlement with Thoroughbred, loss on settlement of interest rate swap, loss on deferment of equity offering, non-cash stock compensation expense (income), non-cash employee benefit expense, 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. We also include a quantitative reconciliation of Adjusted EBITDA to the most directly comparable U.S. GAAP financial performance measure, which is net income (loss), in the sections that follow.
Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016
Summary
 
Three Months Ended
March 31,
 
Change
 
2017
 
2016
 
Amount
 
Percentage
 
(In thousands, except per ton amounts)
Tons of coal sold
1,471

 
1,424

 
47

 
3.3
 %
Total revenue
$
59,108

 
$
60,444

 
$
(1,336
)
 
(2.2
)%
Average sales price per ton
$
40.18

 
$
42.44

 
$
(2.26
)
 
(5.3
)%
Cost of coal sales1
$
51,296

 
$
52,675

 
$
1,379

 
2.6
 %
Average cost of sales per ton1
$
34.87

 
$
36.99

 
$
2.12

 
5.7
 %
Net loss
$
(15,446
)
 
$
(13,441
)
 
$
(2,005
)
 
(14.9
)%
Adjusted EBITDA2
$
3,108

 
$
4,433

 
$
(1,325
)
 
(29.9
)%

1 
Includes revenue-based production taxes and royalties; excludes production royalty to related party, depreciation, depletion, and amortization, asset retirement obligation expenses, and general and administrative costs.
2 
Non-GAAP measure; please see definition above and reconciliation below.
Revenue
Our coal sales revenue for the three months ended March 31, 2017 decreased by $1.3 million, or 2.2%, to $59.1 million, as compared to $60.4 million for the three months ended months ended March 31, 2016. This decrease is attributable to a favorable volume variance of approximately $2.0 million year-over-year due to timing of shipments, and an unfavorable price variance of approximately $3.3 million due to the renewal of sales contracts at less favorable prices, as well as unfavorable transportation adjustments included as a component of the price of certain of our long-term coal supply agreements as a result of declining diesel prices in the current quarter, as compared to the three months ended months ended March 31, 2016.
Cost of Coal Sales
Cost of coal sales decreased 2.6% to $51.3 million in the three months ended March 31, 2017, from $52.7 million in the same period of 2016. On a per ton basis, our cost of coal sales decreased during the three months ended March 31, 2017, compared to the same period of 2016, from $36.99 per ton to $34.87 per ton. This decrease in per ton amount is primarily due to the closure of our Parkway underground mine in October 2016, which was a higher cost operation, and improved operating efficiency at our Kronos underground mine from increased production due to higher demand for higher quality coal, partially offset by higher overall costs at our surface operations from mining in higher ratio reserves.
Production Royalty to Related Party
Production royalty to related party increased $0.2 million, or 14.2%, to $1.9 million during the three months ended March 31, 2017, as compared to the same period of 2016. This amount relates to production royalties earned by our affiliate, Thoroughbred, from sales originating from our Kronos underground mine (where the mineral reserves are leased directly from Thoroughbred). The increase is primarily due to a related increase of sales volume experienced at our Kronos underground mine during the current quarter, partially offset by lower average sales prices in the current quarter, as compared to the same period of 2016, due to the renewal of sales contracts at less favorable prices. See Note 6, "Related Party Transactions," to our unaudited condensed consolidated financial statements for further discussion related to Thoroughbred.

25


Depreciation, Depletion and Amortization
Depreciation, depletion, and amortization of $7.6 million during the three months ended March 31, 2017, was consistent with the same period of 2016.
Asset Retirement Obligation Expenses
Asset retirement obligation expenses of $0.3 million in the three months ended March 31, 2017, was consistent with the same period of 2016.
General and Administrative Expenses
General and administrative (G&A) expenses were $3.0 million for the three months ended March 31, 2017, which was $0.6 million, or 15.9%, lower than the three months ended March 31, 2016. The decrease in the three months ended March 31, 2017, as compared to the same period of 2016, is due primarily to lower expenses for labor and benefits ($0.3 million), information technology related costs ($0.1 million), and insurance costs ($0.1 million).
Interest Expense, Net
Interest expense, net is derived from the following components:
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
11.75% Senior Secured Notes due 2019
$
5,875

 
$
5,875

Long-term obligation to related party
2,627

 
1,587

Other, net
839

 
847

Capitalized interest
(147
)
 
(201
)
Total
$
9,194

 
$
8,108

Interest expense, net was $9.2 million for the three months ended March 31, 2017, as compared to $8.1 million for the three months ended months ended March 31, 2016. The increase is principally attributable to higher related party interest expense due to a higher effective interest rate, and a higher average balance on the long-term obligation to related party.
Other, Net
Other, net for the three months ended March 31, 2017 was a charge of $1.3 million, as compared to income of $0.1 million for the three months ended March 31, 2016. The current year expense is primarily due to costs incurred associated with evaluating strategic alternatives.
Net Loss
Net loss for the three months ended March 31, 2017 was $15.4 million, as compared to net loss of $13.4 million for the same period of 2016. The increase in net loss of $2.0 million is due to an increase in interest expense and additional costs associated with evaluating strategic alternatives of $1.3 million in 2017, partially offset by lower G&A expenses during the three months ended March 31, 2017, as compared to the same period of 2016.

26


Adjusted EBITDA
The following table reconciles Adjusted EBITDA to net loss, the most directly comparable U.S. GAAP measure:
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Net loss
$
(15,446
)
 
$
(13,441
)
Depreciation, depletion, and amortization
7,637

 
7,614

Asset retirement obligation expenses
329

 
329

Non-cash production royalty to related party

 
1,629

Interest expense, net
9,194

 
8,108

Income taxes

 
117

Costs incurred evaluating strategic alternatives
1,303

 

Non-cash employee benefit expense
88

 
105

Non-cash stock compensation expense (income)
3

 
(28
)
Adjusted EBITDA
$
3,108

 
$
4,433

Our Adjusted EBITDA for the three months ended March 31, 2017 and 2016 was $3.1 million and $4.4 million, respectively. The decrease resulted primarily from the inclusion in Adjusted EBITDA of the cash portion of production royalties paid to Thoroughbred of $1.9 million, which began January 1, 2017, pursuant to existing lease terms and the Settlement Agreement, partially offset by a decline in G&A expenses in the current quarter, as compared to the same period of 2016.

Liquidity and Capital Resources
Liquidity
The principal indicator of our liquidity since the termination of our former asset-based credit facility in November 2016 is cash on-hand, which, as of March 31, 2017, was $51.8 million.
Our business is capital intensive and requires substantial capital expenditures for purchasing, upgrading and maintaining equipment used in mining our reserves, as well as complying with applicable environmental laws and regulations. Our principal liquidity requirements are to finance current operations; fund capital expenditures, including acquisitions from time to time; satisfy reclamation obligations; and service our debt. Historically, our primary sources of liquidity to meet these needs have been cash generated by our operations, and to a lesser extent, borrowings under our credit facilities and contributions from our equity holders.
We manage our exposure to changing commodity prices for our long-term coal contract portfolio through the use of multi-year coal supply agreements. We generally enter into fixed price, fixed volume supply contracts with terms greater than one year with customers with whom we have historically had limited collection issues. Our ability to satisfy debt service obligations, fund planned capital expenditures, and make acquisitions will depend upon our future operating performance, which will be affected by prevailing economic conditions in the coal industry and financial, business and other factors, some of which are beyond our control.
We have experienced recurring losses from operations, which has led to a substantial decline in cash flows from operating activities over the previous 18 months. Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities in the near-term. In addition, we entered into the Settlement Agreement, effective March 29, 2017, with Thoroughbred whereby we agreed, among other things, to begin paying Thoroughbred all production royalties earned on or after January 1, 2017 in cash. See Note 6, “Related Party Transactions,” to our unaudited condensed consolidated financial statements included in this report for more information with respect to the Settlement Agreement. Our continuing operating losses, negative cash flow projections and other liquidity risks raise substantial doubt about whether we will meet our obligations as they become due within one year after the date of this report. As a result of this, as well as the continued uncertainty around future coal fundamentals, we have concluded there exists substantial doubt regarding our ability to continue as a going concern.
The accompanying unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of

27


business. The unaudited condensed consolidated financial statements for the three months ended March 31, 2017 do not include any adjustments that may result from uncertainty related to our ability to continue as a going concern.  
Due to our current financial outlook, we continue to take steps to preserve our liquidity and manage operating costs, including controlling capital expenditures. Beginning in 2015, we undertook steps to enhance our financial flexibility and reduce cash outflows in the near term, including a streamlining of our cost structure and anticipated reductions in production volumes and capital expenditures. In addition, we are actively negotiating a restructuring with advisers to the Holders of the Notes, who collectively beneficially own or manage in excess of 75% of the aggregate principal amount of the Notes.
We have engaged financial and legal advisers to assist in restructuring our capital structure and evaluating other potential alternatives to address the impending liquidity constraints. However, there can be no assurance that any restructuring will be possible on acceptable terms, if at all. It may be difficult to come to an agreement that is acceptable to all of our creditors. Our failure to reach an agreement on the terms of a restructuring with our creditors would have a material adverse effect on our liquidity, financial condition and results of operations. In addition, if a successful restructuring with the Holders of the Notes is not achieved, it may be necessary for us to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring, or our creditors could force us into an involuntary bankruptcy or liquidation.
Cash Flows
The following table reflects cash flows for the applicable periods:
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Net cash used in:
 
 
 
Operating activities
$
(2,011
)
 
$
(2,202
)
Investing activities
$
(1,205
)
 
$
(947
)
Financing activities
$
(2,451
)
 
$
(2,366
)
Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016
Net cash used in operating activities was $2.0 million for the three months ended March 31, 2017, a decrease of $0.2 million from net cash used in operating activities of $2.2 million for the same period of 2016. Operating results were negatively impacted during the first three months of 2017 due to an increase in interest expense and incurring costs of $1.3 million associated with evaluating certain strategic alternatives. In addition, operating cash flows were negatively impacted in the current quarter from commencing the payment of production royalties in cash to Thoroughbred as of January 1, 2017. Positively impacting cash flows from operations was a decrease in accounts receivable of $1.4 million due to the timing of cash receipts. Cash flows from operations for the three months ended March 31, 2016 were positively impacted by an increase in the net related party liabilities of $3.0 million due to the deferment of amounts owed to our affiliate, Thoroughbred, including interest and royalties earned on leased reserves, and a decrease in accounts receivable due to the timing of cash receipts. Negatively impacting operating cash flows in the prior year quarter was a decrease in accounts payable and accrued and other liabilities due to the timing of payments.
Net cash used in investing activities increased $0.3 million to $1.2 million for the three months ended March 31, 2017, compared to $0.9 million for the same period of 2016. The current and prior year investments are primarily attributable to capital expenditures to maintain our existing fixed assets.
Net cash used in financing activities was $2.5 million for the three months ended March 31, 2017, as compared to net cash used in financing activities of $2.4 million for the three months ended March 31, 2016. The current and prior year activity relates primarily to scheduled capital lease and other long-term debt payments.
Contractual Obligations
Our contractual obligations have not changed materially from the disclosures in our Annual Report on Form 10-K filed with the SEC on March 31, 2017.

28


Capital Expenditures
Our mining operations require investments to expand, upgrade or enhance existing operations and to comply with environmental and safety regulations. In response to the challenging coal environment, we have sought to maintain a controlled, disciplined approach to capital spending in order to preserve liquidity. Our anticipated total capital expenditures for 2017 are estimated to be within a range of $12.0 million to $16.0 million. Management anticipates funding capital requirements with current cash balances and cash flows provided by operations. With respect to any significant development projects, we plan to defer them to time periods beyond 2017 and will continue to evaluate the timing associated with those projects based on changes in overall coal supply and demand.
Off-Balance Sheet Arrangements
In the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include guarantees and financial instruments with off-balance sheet risk, such as surety bonds. No liabilities related to these arrangements are reflected in our consolidated balance sheet.
Federal and state laws require us to secure certain long-term obligations such as mine closure and reclamation costs and other obligations. We typically secure these obligations by using surety bonds, an off-balance sheet instrument. The use of surety bonds is less expensive for us than the alternative of posting a 100% cash bond. To the extent that surety bonds become unavailable, we would seek to secure our reclamation obligations with letters of credit, cash deposits or other suitable forms of collateral.
As of March 31, 2017, we had approximately $33.2 million in surety bonds outstanding to secure the performance of our reclamation obligations, which were supported by approximately $6.0 million of cash posted as collateral.

Related-Party Transactions
In the normal course of business, we engage in certain related-party transactions with Thoroughbred, as well as other affiliated parties. These transactions generally include production and overriding royalties, administrative service agreements, reserve leases, and certain financing arrangements. For more information regarding our related party transactions, see Note 6, “Related-Party Transactions,” to our unaudited condensed consolidated financial statements included in this report and “Item 13—Certain Relationships and Related-Party Transactions, and Director Independence” in our Annual Report on Form 10-K filed with the SEC on March 31, 2017.

Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
The most significant areas requiring the use of management estimates and assumptions relate to units-of-production amortization calculations, asset retirement obligations, useful lives for depreciation of fixed assets, impairment of long-lived assets, and the accounting for the long-term obligation to related-party. For a full discussion of our accounting estimates and assumptions that we have identified as critical in the preparation of our condensed consolidated financial statements, refer to our Annual Report on Form 10-K filed with the SEC on March 31, 2017.

Recent Accounting Pronouncements

See Note 1, "Description of Business and Entity Structure," to our unaudited condensed consolidated financial statements included in this report for a discussion of newly adopted accounting standards and accounting standards not yet implemented.

Item 3. Quantitative and Qualitative Disclosures about Market Risk
We define market risk as the risk of economic loss as a consequence of the adverse movement of market rates and prices. We believe our principal market risks are commodity price risk and credit risk.

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Commodity Price Risk
We sell most of the coal we produce under multi-year coal supply agreements. Historically, we have principally managed the commodity price risks from our coal sales by entering into multi-year coal supply agreements of varying terms and durations, rather than through the use of derivative instruments.
Some of the products used in our mining activities, such as diesel fuel, explosives and steel products for roof support used in our underground mining, are subject to price volatility. Through our suppliers, we utilize forward purchases to manage a portion of our exposure related to diesel fuel volatility. A hypothetical increase of $0.10 per gallon for diesel fuel would have negatively impacted our results of operations by $0.1 million for the three months ended March 31, 2017. A hypothetical increase of 10% in steel prices would have negatively impacted our results of operations by $0.4 million for the three months ended March 31, 2017. A hypothetical increase of 10% in explosives prices would have negatively impacted our results of operations by $0.1 million for the three months ended March 31, 2017.
Credit Risk
Most of our coal sales are made to electric utilities. Therefore, our credit risk is primarily with domestic electric power generators. Our policy is to independently evaluate each customer’s creditworthiness prior to entering into a transaction with the customer and to constantly monitor outstanding accounts receivable against established credit limits. When deemed appropriate, we will take steps to reduce credit exposure to customers that do not meet our credit standards or whose credit has deteriorated. Credit losses are provided for in the financial statements and have historically been minimal.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and Chief Financial Officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2017. Based upon such review and evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the date of such evaluation to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the first quarter of 2017, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are involved from time to time in various lawsuits and claims arising in the ordinary course of business. Although the outcomes of these lawsuits and claims are uncertain, we do not believe any of them will have a material adverse effect on our business, financial condition or results of operations. See Note 12, "Commitments and Contingencies," to our unaudited condensed consolidated financial statements included in this report for a discussion of significant legal matters.

Item 1A. Risk Factors
There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K filed with the SEC on March 31, 2017.

Item 4. Mine Safety Disclosures
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item  104 of Regulation S-K is included in Exhibit 95.1 to this Quarterly Report on Form 10-Q.

Item 5. Other Information
(a) Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on May 9, 2017 (the Annual Meeting). The final results for the matters submitted to a vote of shareholders at the Annual Meeting of Shareholders are listed below. Broker non-votes are not shown because there is no public trading market for the Company’s Common Stock, and no brokers hold shares for any underlying beneficial owners of such shares.
Election of Directors: To elect each of the following to serve as a Class III Director of the Company to serve a three-year term expiring at the 2020 Annual Meeting of Shareholders or until the earlier of his death, resignation, or removal, or until his successor has been duly elected and qualified.
 
Name 
 
Votes For 
 
Votes Against 
 
Abstentions 
James C. Crain
 
21,771,952
 
 
111,272
David L. Harris
 
21,761,186
 
 
122,038
W. Howard Keenan
 
21,493,574
 
 
389,650

Proposal No. 1: To amend Section 3.2 of the Bylaws of Armstrong Energy, Inc. to read in its entirety as follows:
 
The Board of Directors shall consist of nine directors. The new directorship resulting from the adoption of this paragraph shall be allocated to Class II of the Board.

        
Votes For 
 
Votes Against 
 
Abstentions 
21,766,518
 
 
116,706

Proposal No. 2: To amend Section 3.4 of the Bylaws of Armstrong Energy, Inc. to read in its entirety as follows (the Section 3.4 Amendment):

Vacant and newly created directorships may be filled by either (i) a majority of the directors then in office, though less than a quorum, or (ii) the holders of a majority of the voting power of the capital stock of the Corporation outstanding and entitled to vote thereon.

        
Votes For 
 
Votes Against 
 
Abstentions 
21,731,831
 
 
151,393

Proposal No. 3: To amend Section 2.9 of the Bylaws of Armstrong Energy, Inc. read in its entirety as follows (the Section 2.9 Amendment):


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To bring stockholder nominations or other business before an annual meeting of stockholders, a stockholder shall provide the Corporation a notice, at any time prior to the commencement of the annual meeting of stockholders, identifying the stockholder presenting the nomination or other business and setting forth (i) the names of the nominees for director (if any) and (ii) the text of any other business proposed to be adopted by stockholders. No other information or notice need be provided in order for stockholders to transact business at an annual meeting of stockholders. This paragraph shall apply to nominations and business presented for stockholder action at the 2017 annual meeting of stockholders of the Corporation and at each annual meeting thereafter held. For the avoidance of doubt, no Bylaw provision in effect prior to the adoption of this paragraph shall apply to nominations or business presented at the 2017 annual meeting of stockholders or any annual meeting held thereafter.

        
Votes For 
 
Votes Against 
 
Abstentions 
21,731,831
 
 
151,393

Proposal No. 4: To amend Section 3.3 of the Bylaws of Armstrong Energy, Inc. to read in its entirety as follows: "Reserved."

            
Votes For 
 
Votes Against 
 
Abstentions 
21,731,831
 
 
151,393

Proposal No. 5: To elect Bryan R. Lawrence to fill the newly created directorship of Armstrong Energy, Inc. created by the adoption of Proposal No. 1.

            
Votes For 
 
Votes Against 
 
Abstentions 
21,448,121
 
10,766
 
424,337

Proposal No. 6: To appoint Joseph M. Stopper to fill the vacant directorship in Class I of the Board of Directors of Armstrong Energy, Inc.

            
Votes For 
 
Votes Against 
 
Abstentions 
21,448,121
 
 
435,103

Departure of Directors or Certain Officers; Election of Directors; Appointments of Certain Officers; Compensatory Arrangements of Certain Officers.
At the Annual Meeting of Shareholders held on May 9, 2017, the Company's shareholders voted to elect James C. Crain, David L. Harris, and W. Howard Keenan as Class III Directors, Bryan R. Lawrence as a Class II Director, and Joseph M. Stopper as a Class I Director. Biographical information concerning the newly elected directors is set forth below.
James C. Crain-Mr. Crain was appointed to our Board of Directors in 2011. Mr. Crain has been in the energy industry for more than 35 years, both as an attorney and as an executive officer. In July 2013, Mr. Crain retired as President of Marsh Operating Company (“Marsh”), an investments management company, a position he held since 1989. Mr. Crain currently serves as an adviser to Marsh and is a private investor. Mr. Crain also serves as a consultant for Yorktown Partners LLC (“Yorktown”), which serves as an investment manager to funds that own a majority of the Company’s common stock, where he advises certain oil and gas related portfolio companies in connection with their business activities. Before joining Marsh in 1984, Mr. Crain was a partner in the law firm of Jenkens & Gilchrist. Mr. Crain is a director of Enlink Midstream, LLC, a midstream natural gas company, and Approach Resources, Inc., an independent oil and natural gas company. Mr. Crain was also formerly a director of Crosstex Energy, Inc. and Crosstex Energy, GP, LLC, midstream natural gas companies, GeoMet, Inc., a natural gas exploration and production company, and Crusader Energy Group Inc., an oil and gas exploration and production company. The Board selected Mr. Crain to serve as a director because of his extensive legal, investment and transactional experience, as well as his public company board experience. Mr. Crain serves as the Chairman of the Nominating and Corporate Governance and Audit Committees and is a member of the Conflicts Committee. The board has determined that Mr. Crain qualifies as an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K, as promulgated by the SEC.

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David L. Harris - Mr. Harris currently serves on the Kentucky Retirement Systems Board of Trustees, where he serves as Investment Committee Chair. He also serves on the boards of directors of the Retirement Plan Advisory Group of ASSPA, the Lexington Christian Academy, and Isaiah House Ministries. Mr. Harris studied Agriculture Finance at the University of Illinois before beginning his financial services career as a commodity trader on the Chicago Exchanges. In 1985, he became Vice President of Integrated Resource, Inc., an investment banking firm in New York. He continued on to found MidSouth Capital Asset Management, LLC in 1989, serving as its chief executive officer until the company was acquired in 2000. Shortly thereafter he joined MCF Advisors as a Senior Partner I Shareholder. Mr. Harris currently serves as CEO and Shareholder of MCF Advisors. The Board selected Mr. Harris to serve as a director because of his extensive experience in the financial services industry. Mr. Harris has been appointed by the Board of Directors to serve as a member of the Audit, Nominating and Corporate Governance, and Compensation Committees.
W. Howard Keenan - Mr. Keenan has over 40 years of experience in the financial and energy businesses. Since 1997, he has been a Member of Yorktown, a private investment manager focused on the energy industry. From 1975 to 1997, he was in the Corporate Finance Department of Dillon, Read & Co. Inc. and active in the private equity and energy areas, including the founding of the first Yorktown Partners fund in 1991. Mr. Keenan holds a Bachelor of Arts degree cum laude from Harvard College and a Masters of Business Administration degree from Harvard University. Mr. Keenan has broad knowledge of the energy industry and significant experience with energy companies. Mr. Keenan also serves on the board of directors of Antero Resources Corporation and as the general partner of Antero Midstream Partners LP. In addition, he is serving or has served as a director of multiple Yorktown’s portfolio companies.
Bryan R. Lawrence -Mr. Lawrence founded Oakcliff Capital (“Oakcliff”), an investment partnership, in 2004. Mr. Lawrence is a Member of Yorktown. He is the co-founder of Girls Prep, the first all-girls charter school in New York, and the Chairman of Public Prep, which develops and manages Boys Prep and Girls Prep schools. Prior to starting Oakcliff, he was a Managing Director of Lazard Freres & Co. LLC. He holds a Bachelor's Degree from Yale University, a Master's Degree in history from Cambridge University and an Master’s in Business Administration from Harvard University. Mr. Lawrence served as a Director of Extraction Oil & Gas, LLC (also known as Extraction Oil & Gas, Inc.) since its inception in 2012. He is a board member of Convergent Power & Energy, LLC, Eos Energy Storage LLC, Indigo Haynesville LLC, Indigo Minerals LLC, North Shore Energy LLC, PRE Resources LLC, and Thoroughbred Holdings GP LLC. He also serves as a board member of Families for Excellent Schools and the Oakcliff Sailing Center, and is a member of the business advisory council of ProPublica.
Joseph M. Stopper - Since June 2015, Joseph M. Stopper has been employed as an Analyst for Yorktown. Since May 2013, Mr. Stopper has been employed by Oakcliff Partners LLC, a private investment manager, and since June 2015, has been co-employed by Yorktown and Oakcliff Partners LLC. Mr. Stopper holds a Bachelor of Arts degree from Yale University. Mr. Stopper is a member of the board of managers of Solaris Midstream Holdings, LLC, a Delaware limited liability company that is privately held.
As previously disclosed, effective April 14, 2017, Louis B. Susman was appointed to serve as a member of the Board of Directors until the 2018 Annual Meeting of Shareholders to fill the vacancy created by the retirement of Anson M. Beard, Jr. from the Board of Directors, effective as of the same date. In addition, Mr. Susman has been appointed by the Board of Directors to serve as Chairman of the Compensation Committee and serve as a member of the Nominating and Corporate Governance and Conflicts Committees.
(b) At the Company’s Annual Meeting, the shareholders approved certain amendments to the Company’s Bylaws that changed the manner in which shareholders may recommend nominees to the Board of Directors. Specifically, the shareholders voted to delete Section 3.3 of the Company’s Bylaws, which formerly provided that nominations for director could only made in connection with an annual meeting and, in the case of shareholder nominations, pursuant to proper advance written notice. Section 3.3 provided that, generally, shareholders were required to provide notice of director nominees not less than 60 days or more than 90 days prior to the anniversary date of the immediately preceding annual meeting of shareholders pursuant to a notice containing certain specified information.

At the Annual Meeting, the shareholders approved the Section 2.9 Amendment, which provides that shareholders may nominate an individual for director by providing notice at any time before the annual meeting. The notice is required to include only the name of the director nominee. The Section 2.9 Amendment, as approved, was in effect and applied to the nominations for director relating to the Annual Meeting.

The shareholders also approved the Section 3.4 Amendment at the Annual Meeting. Previously, Section 3.4 of the Bylaws provided that any vacancy in the Board of Directors could be filled only by a vote of the remaining directors, or pursuant to a statutory vote if no directors remained on the Board. The Section 3.4 Amendment now in effect states that vacant and newly created directorships can be filled by either a majority of the directors then in office or by the holders of a majority of the voting power of the capital stock of the Company outstanding and entitled to vote on the matter.

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Item 6. Exhibits
 
 
Incorporated by Reference
 
Filed or
Furnished
Herewith
Exhibit
Number
Description
 
Form
 
File Number
 
Exhibit
 
Filing
Date
 
 
 
 
 
 
 
 
 
 
 
 
 
3.1
Amended and Restated Bylaws of Armstrong Energy, Inc., effective as of May 9, 2017.
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
3.2
Amended and Restated Bylaws of Armstrong Energy, Inc., effective as of May 9, 2017, marked to show amendments.
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
10.1†
Second Amendment to Employment Agreement by and between Armstrong Energy, Inc. and Jeffrey F. Winnick, dated as of March 17, 2017.
 
10-K
 
333-191182
 
10.11
 
03/31/17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.2
Settlement Agreement and Release of Claims dated as of March 29, 2017 by and between Armstrong Energy, Inc., Armstrong Coal Company, Inc., Elk Creek GP, LLC, Thoroughfare Mining, LLC, Western Diamond LLC, and Western Land Company, LLC; and Thoroughbred Holdings GP, LLC, Thoroughbred Resources, L.P., Western Mineral Development, LLC, and Ceralvo Holdings, LLC.
 
10-K
 
333-191182
 
10.34
 
03/31/17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
32.1#
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
32.2#
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
95.1
Federal Mine Safety and Health Act Information.
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.INS
XBRL Instance Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.SCH
XBRL Taxonomy Extension Scheme Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
X
Indicates a management contract or compensatory plan or arrangement.
#
This certification is deemed not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.


34


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
ARMSTRONG ENERGY, INC.
 
 
 
 
Date: May 12, 2017
 
By:
 
/s/ Jeffrey F. Winnick
 
 
 
 
Jeffrey F. Winnick
 
 
 
 
Vice President and Chief Financial Officer
 
 
 
 
(On behalf of the registrant and as Principal  Financial Officer)


35