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Armstrong posts loss in Q4'16 as bankruptcy threat looms

Though many of the coal giants taken down by a wave of sector bankruptcies have emerged or are near emergence in the wake of an improved market, at least one more producer may face a court restructuring.

Armstrong Energy Inc. reported in a securities filing March 31 that there is "substantial doubt" about the company's ability to continue as a going concern. The company said this was a result of recurring losses from operations, an accumulated deficit and the anticipation of limited liquidity to meet debt obligations through March 2018.

The company noted that it has engaged financial and legal advisers to assist in restructuring capital and evaluating potential alternatives to address its liquidity constraints. If the company is unable to complete an agreement with the holders of its 11.75% senior secured notes due 2019, the company warned it may file a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. The company said its creditors also could force it into an involuntary bankruptcy or liquidation.

Armstrong lost its asset-based revolving credit facility, which was terminated effective Nov. 14, 2016.

The company reported a nearly $20.7 million net loss in the fourth quarter of 2016. Armstrong reported long-term debt of approximately $207.3 million.

"Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities," the company reported.

According to its earnings report, the coal producer's loss increased compared to the fourth quarter of 2015, when it posted a $2 million loss. Over the full year of 2016, losses decreased to $58.8 million compared to 2015's net loss of $162.1 million.

Armstrong also reported a noncash charge with Thoroughbred Holdings related to a settlement over a property valuation regarding jointly owned land and mineral reserves in Muhlenberg and Ohio counties in Kentucky.

The coal producer reported adjusted EBITDA of nearly $12 million in the fourth quarter of 2016 compared to $15.7 million in the fourth quarter of 2015. The full year adjusted EBITDA dropped by more than half, from $68.5 million in 2015 to $33.2 million in 2016.

Armstrong sold 1.6 million tons of coal in the recent quarter compared to 1.9 million tons in the same period of 2015. In full year totals, sales dropped from 7.8 million tons in 2015 to just under 6 million tons in 2016. Armstrong said it had 5.3 million tons committed and priced for 2017.

Its reported revenue for the recent quarter was $67.8 million compared to $82.2 million in the fourth quarter of 2015. In full-year totals, revenue dropped from $360.9 million in 2015 to $253.9 million in 2016.

Kenneth Allen, the company's executive vice president and COO, announced March 29 his intention to retire effective June 1, though he will continue as a consultant for the company. Allen announced his resignation from the company's board of directors earlier this year.