SCOTT DEPOT, W.Va., July 27 /PRNewswire-FirstCall/ -- International Coal Group, Inc. today reported second quarter 2006 revenues of $223.3 million, a 45% year-over-year increase. Increased revenues primarily resulted from favorable pricing and increased sales tons due to shipments from the former Anker operations acquired on November 18, 2005. EBITDA of $20.3 million was in line with the Company's previously published second quarter guidance, but below the $26.9 million reported for the second quarter of 2005.
As detailed in the Company's June 6 press release, second quarter performance was adversely affected by several unusual events and operating difficulties, including a fire at the Company's ICG Illinois mine complex, closure of the Company's Stony River deep mine, the bankruptcy of a key coal supplier for ICG's Vindex operation, an extended construction outage at the Sentinel Mine, and lingering effects of the Sago mine accident in January 2006.
The Company reported a net loss of $0.6 million, or essentially break-even on a fully diluted share basis, versus net income of $9.1 million, or $0.09 per share, for the comparable period in 2005. Net income included a one-time write-off of $1.4 million in deferred financing costs as a result of the renegotiation and expansion of the Company's credit facility.
"We are pleased that despite the unusual operating challenges in the first half of 2006 we achieved our guidance," said Ben Hatfield, president and chief executive officer. "We believe these issues are largely behind us and we are now focusing our efforts on improving results of operations over the balance of the year."
Six-Month Results
Revenues for the first six months of 2006 totaled $435.5 million, compared to $307.3 million for the comparable period in 2005. The Company reported EBITDA of $30.9 million in the first half of 2006, compared to $56.1 million in the same period a year ago. Net income for the first half was a loss of $6.8 million, or $(0.04) per fully diluted share, versus net income of $19.9 million, or $0.19 per fully diluted share, for the comparable six months in 2005.
Capital Resources, Reserves, Sales and Sales Commitments
At June 30, 2006, cash totaled $65.8 million and ICG had an additional $265.1 million of unused borrowing capacity. Total debt was $197.7 million, versus net worth of $661.4 million. Capital expenditures totaled $55.5 million during the second quarter of 2006, compared to $24.7 million in 2005.
ICG now controls approximately 1.1 billion tons of coal reserves located principally in Kentucky, West Virginia, Maryland, Illinois and Virginia. The Company also controls approximately 560 million tons of non-reserve coal deposits, which may become classified as reserves in the future as additional drilling and geotechnical work is completed.
ICG sold 4.9 million tons of coal during the second quarter of 2006, a 40% year-over-year increase. Production of 4.1 million tons increased 33% from last year's second quarter. Coal sales revenue increased 46% to $212.2 million for the three months ended June 30, 2006, compared to the same period in 2005, due to a $1.70 per ton increase in the average sales price and an increase in tons sold.
Price realization remained strong in the second quarter. ICG's overall average price per ton of coal rose to $43.60 during the second quarter of 2006, representing a 4% gain compared to the same period in 2005.
Second Quarter Highlights
In Millions
2nd Qtr 2nd Qtr 1st Qtr
2006 2005 2006
Tons sold 4.9 3.5 4.7
Coal Revenue $212.2 $145.6 $203.3
Coal Revenue per ton $43.60 $41.90 $43.27
Cash cost per ton sold $40.09 $34.52 $41.18
EBITDA $20.3 $26.9 $10.6
*See note b to attached financial data
As of June 30, 2006, consistent with the Company's market strategy, ICG had committed sales for approximately 93% of its planned shipments for 2006. For 2007, committed sales currently stand at approximately 55% to 60% of planned shipments.
Other Business Developments
ICG's reserve holdings were significantly expanded during the second quarter through the acquisition of two coal properties. As previously reported, in April 2006, the Company's Wolf Run subsidiary leased over 14 million tons of Clarion seam reserves that the Company expects to begin mining from its Sentinel Mine complex in the fourth quarter of this year. In early June 2006, Wolf Run acquired leased properties near its Vindex complex that contain approximately 28 million tons of metallurgical and steam quality coal reserves.
During June 2006, ICG completed the critical process of establishing debt financing to fund future growth. The financing included an offering of $175 million senior notes due 2014, which was closed on June 23, 2006. Simultaneous with the senior notes offering, ICG completed the renegotiation and expansion of its revolving credit facility to $325 million.
On July 10, 2006, ICG relocated its offices to its newly constructed corporate headquarters building in the community of Scott Depot, near Charleston, West Virginia. The facility is owned by ICG and contains over 50,000 square feet of space to serve as the offices for more than 90 ICG employees.
The coalbed methane (CBM) recovery project owned jointly by the Company's subsidiary, CoalQuest Development LLC, and CDX Gas began producing CBM gas on July 14, 2006 from the Hillman property. Gas is flowing from the first of four now-completed wells while drilling continues for 13 additional wells.
On July 19, 2006, J. Davitt McAteer, special advisor to West Virginia Governor Joe Manchin III, issued his preliminary report related to the Sago Mine accident that occurred on January 2, 2006. The McAteer report's conclusions as to the cause and nature of the explosion are generally consistent with the Company's initial findings issued on March 15, 2006, which identified lightning as the probable source of the ignition. As noted in the report, the investigation is ongoing and additional tests and analyses are being conducted. The Company will continue to cooperate with those efforts in a diligent search for answers that will help make coal mines safer in the future.
2006 Outlook
For the full year, the Company is reaffirming the following guidance provided in its June 6 news release:
- Coal production from ICG operations in 2006 is forecast at 18 million
tons, with projected sales of 22 million tons.
- Total revenues for 2006 are forecast at $980 million to $1.05 billion.
- 2006 EBITDA is expected to be $130 million to $150 million.
- Earnings for the full year are expected to be between $23 million and
$33 million or $0.15 to $0.21 per fully diluted share.
"We are encouraged by the improvement in operating performance we've seen over the course of the second quarter," said Hatfield. "Looking to the second half of 2006 and beyond, there are several positive operating developments that should help us continue that improvement trend. At our Flint Ridge complex, the Number Two Mine started producing coal in mid-June and has demonstrated a very consistent ramp-up in output. At the new Raven complex in Knott County, Kentucky, the preparation plant construction is on schedule for a late-August start-up and initial mine productivity is favorable to forecast. At our ICG Beckley complex, the slope and shaft development is also on pace for the targeted production start-up in early 2007. We believe that these events, along with the anticipated strengthening in coal prices with warm summer weather, should bode well for International Coal Group's future."
General Information
ICG is a leading producer of coal in Northern and Central Appalachia and the Illinois Basin. The Company has 11 active mining complexes, of which 10 are located in Northern and Central Appalachia and one in Central Illinois. ICG's mining operations and reserves are strategically located to serve utility, metallurgical and industrial customers throughout the Eastern United States.
Forward-Looking Statements
This press release contains certain statements that are forward-looking statements within the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements are subject to various risks and uncertainties, actual results may differ materially from those implied in the forward-looking statements. The following factors are among those that may cause actual results to differ materially from the forward-looking statements: market demand for coal, electricity and steel; availability of qualified workers; future economic or capital market conditions; weather conditions or catastrophic weather-related damage; ICG's production capabilities; the ongoing integration of Anker and CoalQuest into ICG's business; the consummation of financing, acquisition or disposition transactions and the effect thereof on ICG's business; ICG's plans and objectives for future operations and expansion or consolidation; ICG's relationships with, and other conditions affecting, ICG's customers; the availability and costs of key supplies or commodities such as diesel fuel, steel, explosives or tires; prices of fuels which compete with or impact coal usage, such as oil or natural gas; timing of reductions or increases in customer coal inventories; long-term coal supply arrangements; risks in coal mining; unexpected maintenance and equipment failure; environmental, safety and other laws and regulations, including those directly affecting ICG's coal mining and production, and those affecting our customers' coal usage; competition; railroad, barge, trucking and other transportation availability, performance and costs; employee benefits costs and labor relations issues; replacement of ICG's reserves; ICG's assumptions concerning economically recoverable coal reserve estimates; availability and costs of credit, surety bonds and letters of credit; title defects or loss of leasehold interests in ICG's properties which could result in unanticipated costs or inability to mine these properties; future legislation and changes in regulations or governmental policies or changes in interpretations thereof, including with respect to safety enhancements; the impairment of the value of goodwill; the ongoing investigation into the Sago Mine explosion; ICG's liquidity, results of operations and financial condition; the adequacy and sufficiency of ICG's internal controls and legal and administrative proceedings, settlements, investigations and claims. Forward-looking statements made by ICG in this press release or elsewhere speak only as of the date on which the Company makes it. New risks and uncertainties come up from time to time, and it is impossible for the Company to predict these events or how they may affect the Company or its anticipated results. ICG has no duty to, and does not intend to, update or revise the forward-looking statements in this news release after the date of issue, except as may be required by law.
INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2006 AND 2005
(dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Revenue:
Coal revenue $212,164 $145,566 $415,500 $289,763
Freight and handling 4,596 1,885 9,193 4,384
Other revenue 6,560 6,581 10,815 13,117
Total revenue 223,320 154,032 435,508 307,264
Costs and expenses:
Cost of operations 193,143 117,076 382,343 234,261
Freight and handling 4,596 1,885 9,193 4,384
Depreciation, depletion
and amortization 16,596 9,785 33,692 18,307
Selling, general and
administrative 7,971 9,006 17,964 13,941
(Gain) or loss on
sale of assets (158) 43 (929) 43
Total costs and expenses 222,148 137,795 442,263 270,936
Income (loss) from
operations 1,172 16,237 (6,755) 36,328
Interest and other
income (expense):
Interest expense, net (4,328) (3,534) (6,383) (6,610)
Other, net 2,520 883 3,926 1,451
Total interest and
other expense, net (1,808) (2,651) (2,457) (5,159)
Net income (loss) before
income taxes and
minority interest $(636) $13,586 $(9,212) $31,169
Income tax benefit
(expense) 234 (4,494) 2,509 (11,220)
Minority interest (199) -- (87) --
Net income (loss) $(601) $9,092 $(6,790) $19,949
Other Data:
EBITDA (a) $20,288 $26,905 $30,863 $56,086
Net income per share:
Basic and diluted $(0.00) $0.09 $(0.04) $0.19
Weighted average
shares - basic 151,992,579 106,725,504 151,936,375 106,669,880
Weighted average
shares - diluted 151,992,579 106,763,030 151,936,375 106,684,475
a) This press release includes a non-GAAP financial measure within the
meaning of applicable SEC rules and regulations. EBITDA is defined as
income from continuing operations before deducting net interest
expense, income taxes and depreciation, depletion and amortization,
and minority interests. EBITDA is not and should not be used as a
substitute for operating income, net income and cash flow as
determined in accordance with generally accepted accounting
principles. We present EBITDA because we consider it an important
supplemental measure of our performance and believe it is frequently
used by securities analysts, investors and other interested parties in
the evaluation of companies in our industry, substantially all of
which present EBITDA when reporting their results. We also use EBITDA
for the following purposes: Our executive compensation plan bases
incentive compensation payments on our EBITDA performance measured
against budgets and a peer group. Our credit facility uses EBITDA
(with additional adjustments) to measure our compliance with
covenants, such as interest coverage and debt incurrence. EBITDA is
also widely used by us and others in our industry to evaluate and
price potential acquisition candidates. EBITDA has limitations as an
analytical tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under GAAP. Some of
these limitations are that EBITDA does not reflect our cash
expenditures, or future requirements, for capital expenditures or
contractual commitments, changes in, or cash requirements for, our
working capital needs; the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on
our debts; although depreciation and amortization are non-cash
charges, the assets being depreciated and amortized will often have to
be replaced in the future, and EBITDA does not reflect any cash
requirements for such replacements; and other companies in our
industry may calculate EBITDA differently than we do, limiting its
usefulness as a comparative measure. A reconciliation of EBITDA to
GAAP net income appears at the end of this document.
INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2006 AND DECEMBER 31, 2005
(in thousands)
June 30, December 31,
2006 2005
Assets (Unaudited)
Current Assets
Cash and cash equivalents $65,792 $9,187
Accounts receivable 76,826 64,841
Inventories, net 34,487 20,667
Deferred income taxes 6,953 4,923
Prepaid expenses and other 13,432 21,509
Total current assets 197,490 121,127
Property, plant and equipment, net 639,393 571,484
Debt issuance costs, net 13,009 6,523
Advanced royalties 11,679 9,344
Goodwill 343,970 340,736
Other non-current assets, net 6,665 6,949
Total assets $1,212,206 $1,056,163
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $53,302 $52,230
Short-term debt 18,966 4,113
Current portion of long-term debt
and capital leases 1,182 1,646
Current portion of reclamation and
mine closure costs 4,697 4,697
Current portion of employee benefits 1,524 1,524
Accrued expenses and other 53,810 43,444
Total current liabilities 133,481 107,654
Long-term debt and capital leases 177,532 43,816
Reclamation and mine closure costs 80,747 79,655
Long-term employee benefits 36,730 33,297
Deferred income taxes 39,443 43,198
Below-market coal supply agreements 68,017 72,376
Other non-current liabilities 13,693 9,257
Total liabilities 549,643 389,253
Minority interest 1,126 1,038
Stockholders' equity
Common stock 1,527 1,523
Additional paid-in capital 631,264 628,275
Retained earnings 28,646 36,074
Total stockholders' equity 661,437 665,872
Total liabilities and
stockholders' equity $1,212,206 $1,056,163
INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(dollars in thousands)
Six Months Ended
June 30,
2006 2005
Cash flows from operating activities:
Net income (loss) $(6,790) $19,949
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation, depletion and amortization 33,692 18,307
Stock compensation 2,993 2,654
Minority interest 87 --
Write-off and amortization of finance costs
included in interest expense 2,253 548
(Gain) loss on sale of assets (929) 43
Deferred income taxes (5,385) 2,888
Receivables, trade (11,985) (7,279)
Inventories (14,858) (7,943)
Prepaid expenses 8,077 1,250
Other non-current assets (1,779) (3,495)
Accounts payable (62) 6,089
Accrued expenses 9,589 3,744
Accrued income tax -- (2,232)
Reclamation and mine closure costs 1,692 (791)
Other liabilities 2,174 1,338
Net cash from operating activities 18,769 35,070
Cash flows from investing activities:
Net proceeds from the sale of assets 3,248 --
Additions to property, plant and equipment
and mine development (85,286) (40,266)
Cash paid related to acquisitions, net (2,892) --
Net proceeds from sale-leaseback transaction 5,437 --
(Deposits) withdrawals of/from restricted cash 237 (2,034)
Net cash from investing activities (79,256) (42,300)
Cash flows from financing activities:
Repayments on short-term debt (7,422) (2,673)
Borrowings on long-term debt 70,000 --
Repayments on long-term debt (111,747) (1,252)
Proceeds from senior note offering 175,000 --
Deferred finance costs (8,739) (120)
Net cash from financing activities 117,092 (4,045)
Net change in cash and cash equivalents 56,605 (11,275)
Cash and cash equivalents, beginning of period 9,187 23,967
Cash and cash equivalents, end of period $65,792 $12,692
INTERNATIONAL COAL GROUP, INC.
Reconciliation of Net Income (Loss) to EBITDA
for the Three and Six Months Ended June 30, 2006 and 2005 (unaudited)
(dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Net income (loss) $ (601) $ 9,092 $ (6,790) $ 19,949
Depreciation,
depletion &
amortization 16,596 9,785 33,692 18,307
Interest expense, net 4,328 3,534 6,383 6,610
Income tax expense
(benefit) (234) 4,494 (2,509) 11,220
Minority interest 199 - 87 -
EBITDA $ 20,288 $ 26,905 $ 30,863 $ 56,086
b) "Cash cost per ton" is calculated as the sum of Total cost and expenses
(excluding Costs of non-coal producing operations, Freight and
handling, Depreciation, depletion and amortization and Other), divided
by Total Tons Sold. Although Cash cost per ton is not a measure of
performance calculated in accordance with GAAP, management believes
that it is useful to an investor in evaluating ICG because it is widely
used in the coal industry as a measure to evaluate a company's control
over its cash costs. Cash cost per ton should not be considered in
isolation or as a substitute for measures of performance in accordance
with GAAP. In addition, because Cash cost per ton is not calculated
identically by all companies, ICG's presentation may not be comparable
to other similarly titled measures of other companies. The table below
reconciles the GAAP measure of Total costs and expenses to Cash cost
per ton
2Q06 2Q05 1Q06
Total Cost and Expenses 222.1 137.8 220.1
Less: Costs of non-coal
producing operations (6.0) (6.2) (5.7)
Less: Freight and Handling (4.6) (1.9) (4.6)
Less: DD&A (16.6) (9.8) (17.1)
Less: Other 0.2 (0.0) 0.8
Net Cost 195.1 119.9 193.5
Tons Sold 4.9 3.5 4.7
Cost Per Ton Sold $ 40.09 $ 34.52 $ 41.18
