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As filed with the Securities and Exchange Commission on June 27, 2005
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM S-4
UNDER THE SECURITIES ACT OF 1933
INTERNATIONAL COAL GROUP, INC.
Delaware | 1222 | 20-2641185 | ||
(State or other jurisdiction of Incorporation) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
2000 Ashland Drive
Ashland, Kentucky 41101
(606) 920-7400
(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)
William D. Campbell
Vice President, Treasurer and Secretary
International Coal Group, Inc.
2000 Ashland Drive
Ashland, Kentucky 41101
(606) 920-7400
(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent For Service)
With copies to:
Randi L. Strudler, Esq.
Jones Day
222 East 41st Street
New York, New York 10017
(212) 326-3939
Approximate date of commencement of proposed sale of the securities to the public:As soon as practicable after this Registration Statement becomes effective and upon completion of the reorganization described in the enclosed prospectus.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.o
CALCULATION OF REGISTRATION FEE
Amount to be | Proposed maximum | Proposed Maximum | Amount of | |||||||||||||||||||
Title of each class of securities to be registered | registered (1) | offering price per unit (2) | aggregate offering price | registration fee | ||||||||||||||||||
Common Stock, par value $0.01 per share | 106,605,999 | $ | 1.55 | $ | 165,239,300.00 | $ | 19,450.00 | |||||||||||||||
(1) | Represents the number of common shares to be issued in connection with the reorganization of ICG, Inc. |
(2) | Pursuant to Rule 457(f) under the Securities Act of 1933, as amended, the registration fee is based on the book value of ICG, Inc. common shares computed as of March 31, 2005. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, JUNE 27, 2005
International Coal Group, Inc.
2000 Ashland Drive
Ashland, Kentucky 41101
, 2005
Dear ICG Shareholder:
International Coal Group has agreed to acquire Anker Coal Group, Inc. and CoalQuest Development LLC.
The transactions will be carried out through a holding company reorganization. In the reorganization, (1) the existing International Coal Group, Inc. changed its name to “ICG, Inc.,” and (2) a new company will become the holding company for ICG, Anker and CoalQuest and adopt the name “International Coal Group, Inc.” Shareholders who acquired shares of “old International Coal Group” when it was organized in 2004 will receive shares of the new holding company in a one-for-one tax-free exchange. The directors and officers of old International Coal Group will become the directors and officers of the new holding company.
The reorganization is being completed to facilitate the acquisitions of Anker and CoalQuest, on a tax-deferred basis. The acquisitions are complete, subject only to the issuance of shares of new International Coal Group being registered under the federal securities laws and other customary conditions, such as the absence of material litigation. As a result of the registration, all International Coal Group common shares held by former ICG shareholders will be freely tradable, other than shares beneficially owned by directors, officers and other affiliates. The new holding company also plans to sell common shares to the public in a registered public offering, although there is no assurance that the public offering will be completed.
Further shareholder approvals are not required to complete the reorganization or the acquisitions. Stock certificates which previously represented old International Coal Group common shares will represent shares of new International Coal Group after the transactions. As a consequence, shareholders need not do anything at this time. After the reorganization is effected, shareholders owning registered shares may have any legends removed unless they are held by directors, officers or other affiliates.
The attached prospectus provides you with detailed information about ICG, International Coal Group, the reorganization and the acquisitions. The attached prospectus also contains a copy of the public offering preliminary prospectus for additional information about these matters. Please carefully review the entire prospectus, including the matters discussed under “Risk Factors” beginning on page 7 of the attached prospectus and page 13 of the attached public offering preliminary prospectus.
Wilbur L. Ross, Jr. | ||
Chairman of the Board |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be offered pursuant to this prospectus or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
This prospectus is dated , 2005, and is first being mailed to shareholders on or about , 2005.
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REFERENCES TO ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information about International Coal Group from other documents that are not included in or delivered with this prospectus. More information is available without charge to security holders upon written or oral request. Request should be made to International Coal Group at the following address or telephone number:
International Coal Group, Inc.
2000 Ashland Drive
Ashland, Kentucky 41101
(606) 920-7400
Attention: William D. Campbell
See “Where You Can Find More Information” on page 35.
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EX-23.2: CONSENT OF DELOITTE & TOUCHE, LLP | ||||||||
EX-23.3: CONSENT OF MARSHALL MILLER & ASSOCIATES, INC. | ||||||||
EX-24.1: POWER OF ATTORNEY |
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EXPLANATORY NOTE
The registration statement of which this prospectus is a part contains (1) the prospectus relating to the reorganization and (2) the preliminary prospectus contained in the Registration Statement on Form S-1 (Registration No. 333-124393) relating to the business of International Coal Group, Inc. (on a pro forma basis after giving effect to the reorganization and the acquisitions of Anker Coal Group, Inc. and CoalQuest Development LLC) and a public offering.
In this prospectus, we sometimes refer to: | as: | |
Acquisitions of each of Anker and CoalQuest | Anker and CoalQuest acquisitions | |
Anker Coal Group, Inc. and its consolidated subsidiaries | Anker | |
Proven and probable coal reserves, consisting of the part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination | coal reserves | |
Inferred and indicated reserves, consisting of coal bearing bodies that have been sufficiently sampled and analyzed, but do not qualify as a commercially viable coal reserve as prescribed by SEC rules until a final comprehensive SEC prescribed evaluation is performed | coal resources | |
CoalQuest Development LLC | CoalQuest | |
Horizon NR, LLC (the entity holding the operating subsidiaries of Horizon Natural Resources Company) and its consolidated subsidiaries | Horizon | |
ICG, Inc. | ICG | |
International Coal Group, Inc. | International Coal Group, we, our, us and similar terms | |
Preliminary prospectus of International Coal Group, dated as of June 15, 2005, attached as Annex A relating to International Coal Group’s proposed public offering of its common stock contained in its registration statement on Form S-1 (Registration No. 333-124393) | public offering preliminary prospectus | |
WL Ross & Co. LLC | WLR |
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QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION AND ACQUISITIONS
Q: | Who are ICG and International Coal Group? | |
A: | ICG, Inc. is the current name of the entity formerly known as International Coal Group, Inc. when it acquired certain assets of Horizon Natural Resources Company in September 2004. In anticipation of the acquisitions of Anker and CoalQuest, International Coal Group, Inc. (now called ICG, Inc.) formed ICG Holdco, Inc. to act as the holding company for Anker, CoalQuest and itself. The name of ICG Holdco was changed to International Coal Group, Inc. After the reorganization, International Coal Group will own ICG and all former ICG shareholders will become International Coal Group shareholders. | |
Q: | What is the purpose of the reorganization? | |
A: | The reorganization is being completed to facilitate the acquisitions of Anker and CoalQuest on a tax-deferred basis. The reorganization will be on a tax-free basis for ICG shareholders. After the reorganization, former ICG shareholders, as well as former Anker and CoalQuest shareholders, will become shareholders of the new parent holding company, International Coal Group. | |
Q: | What will I receive in the reorganization? | |
A: | ICG shareholders will receive one International Coal Group common share for each ICG common share owned immediately prior to the reorganization. Existing stock certificates representing ICG common shares will represent International Coal Group common shares following the reorganization. You need not send your stock certificates to us. | |
Q: | How does the reorganization relate to the public offering? | |
A: | Neither the reorganization nor the acquisitions are conditioned on the public offering. However, the value of the shares to be issued in the Anker and CoalQuest acquisitions will be based on the public offering price if such offering is consummated prior to March 2006. See “The Reorganization” for more information on the calculation of the number of shares to be issued in connection with the acquisitions. If the public offering occurs, we expect that the shares sold in that offering, together with the shares being issued in this reorganization, will be listed on the New York Stock Exchange under the symbol “ICO.” If we do not consummate the public offering, the shares you receive in this offering will not be listed on a national securities exchange. However, unless you are an affiliate of International Coal Group, your International Coal Group common shares will not be subject to any restrictions on transfer under the federal securities laws. | |
Q: | What are the tax consequences of the reorganization? | |
A: | The reorganization and exchange of shares are intended to qualify as transactions in which no gain or loss is recognized by ICG shareholders for U.S. federal income tax purposes. In general, you will not be subject to U.S. federal income tax solely as a result of the receipt of shares of International Coal Group in exchange for your ICG common shares if you are a citizen or resident of the United States. However, you should consult your own tax advisor as to your particular U.S. federal, state, local and other tax consequences. | |
Q: | What shareholder or other approvals are needed to approve the reorganization? | |
A: | ICG has received irrevocable proxies from holders of a majority of all issued and outstanding common shares authorizing ICG to vote those shares in favor of the reorganization. No further board or shareholder action is required for the reorganization to be completed and, therefore, we are not soliciting your vote. Additionally, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, or HSR, has been terminated, and all other conditions to the closing of the acquisitions and reorganization, have occurred, other than the absence of material litigation and similar technical conditions such as the delivery of required closing documents. |
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Q: | What do I need to do now? | |
A: | No further action by any shareholder is required to effect the reorganization. You do not need to send in your stock certificates. Your current ICG stock certificates will represent shares in International Coal Group following the reorganization. | |
Q: | When do you expect the reorganization to be completed? | |
A: | We expect to complete the reorganization on or about the same time that we complete the Anker and CoalQuest acquisitions. We intend to complete the reorganization and the acquisitions as soon as possible after the effectiveness of the registration statement of which this prospectus forms a part. | |
Q: | What rights do I have if I oppose the reorganization? | |
A: | Any holder of ICG common stock who otherwise complies with the requirements and procedures of Section 262 of the Delaware General Corporation Law, or DGCL, is entitled to exercise rights of appraisal, which generally entitle shareholders to receive a cash payment equal to the judicially determined fair value of the ICG common stock in connection with the reorganization. A detailed description of the appraisal rights and procedures available to ICG shareholders is included in “The Reorganization — Appraisal Rights.” | |
Q: | What is the purpose of this document? | |
A: | This prospectus is part of a registration statement that registers the shares of International Coal Group that you will receive in connection with the reorganization under the federal securities laws. If you are not an affiliate of International Coal Group, the common shares you receive in the reorganization will not be subject to any transfer restrictions under the federal securities laws. | |
Q: | Will my ownership interest be diluted? | |
A: | Not by the reorganization—in the reorganization, shares are being converted on a one-to-one basis. However, the issuance of shares in the acquisitions and the proposed public offering will result in increasing the number of International Coal Group common shares outstanding. This will have the effect of proportionately decreasing the percentage share ownership held by the existing ICG common shareholders who do not also have ownership interests in Anker and CoalQuest. As of May 31, 2005, there were 106,605,999 ICG common shares outstanding. The maximum number of ICG shares to be issued in connection with the Anker and CoalQuest acquisitions is 30,950,129, subject to possible adjustments. As the following chart illustrates, the higher the offering price per share of International Coal Group common stock in the proposed public offering, fewer International Coal Group common shares will be issued in connection with the Anker and CoalQuest acquisitions. See “Business — Our history — The Anker and CoalQuest acquisitions” on page 80 of the public offering preliminary prospectus for more information on acquisition adjustments. |
International Coal Group common stock offering price | $ | 8.885 | $ | 10.00 | $ | 11.00 | $ | 12.00 | $ | 13.00 | $ | 14.00 | $ | 15.00 | |||||||||||||||||||||||
ICG common shares issued in Anker and CoalQuest acquisitions: | |||||||||||||||||||||||||||||||||||||
Without adjustments | 30,950,129 | 27,500,000 | 25,000,000 | 22,916,667 | 21,153,846 | 19,642,857 | 18,333,333 | ||||||||||||||||||||||||||||||
With adjustments | 29,824,670 | 26,500,000 | 24,090,000 | 22,083,333 | 20,384,615 | 18,928,571 | 17,666,667 | ||||||||||||||||||||||||||||||
Furthermore, the shares issued in the proposed public offering will dilute existing shareholders proportionately.
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Q: | Who can help answer my questions about the reorganization? | |
A: | If you would like additional copies of this document, or if you would like to ask any additional questions about the reorganization and the acquisitions, you should contact: |
International Coal Group, Inc.
2000 Ashland Drive
Ashland, Kentucky 41101
(606) 920-7400
Attention: William D. Campbell
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SUMMARY
This summary highlights selected information from this document. It does not contain all of the information that is important to you. We urge you to carefully read the entire document and the other documents to which we refer in order to fully understand the reorganization and the related transactions. See “Where You Can Find More Information” beginning on page 35. Each item in this summary refers to the page of this document on which that subject is discussed in more detail.
OVERVIEW
ICG was formed by WLR and other investors in May 2004 to acquire and operate competitive coal mining facilities. As of September 30, 2004, ICG acquired certain key assets of Horizon through a bankruptcy auction. These assets are high quality reserves strategically located in Appalachia and the Illinois Basin, are union free, have limited reclamation liabilities and are substantially free of other legacy liabilities. Due to ICG’s initial capitalization, it was able to complete the acquisition without incurring a significant level of indebtedness. Consistent with the WLR investor group’s strategy to consolidate profitable coal assets, ICG intends to acquire Anker and CoalQuest to further diversify its reserves.
The reorganization
ICG is proposing to undergo a corporate reorganization to facilitate the combination of Anker and CoalQuest with ICG. In the corporate reorganization, ICG shareholders will receive one International Coal Group common share for each ICG common share owned immediately prior to the reorganization.
The Anker and CoalQuest acquisitions
On March 31, 2005, ICG entered into an agreement to acquire Anker for the lesser of (1) 19,498,581 International Coal Group common shares and (2) the number of International Coal Group common shares equal to 173,250,000 divided by the price per share at which International Coal Group’s stock is offered in the public offering, subject to certain possible adjustments as described on page 80 of the public offering preliminary prospectus.
On March 31, 2005, International Coal Group also entered into an agreement to acquire CoalQuest, for the lesser of (1) 11,451,548 International Coal Group common shares and (2) the number of common shares equal to 101,750,000 divided by the price per share at which International Coal Group’s common stock is offered in the public offering.
The former Anker and CoalQuest shareholders will be granted certain piggyback registration rights with respect to the International Coal Group common shares issued to them. For additional information on registration rights, see “Description of capital stock — Registration rights” beginning on page 126 of the public offering preliminary prospectus.
INFORMATION ABOUT THE COMPANIES (Page 8)
ICG, Inc.
ICG is a leading producer of coal in Central Appalachia, with mining complexes located in Kentucky and West Virginia. ICG has a complementary mining complex located in the Illinois Basin. ICG acquired its current properties in 2004 from Horizon through a bankruptcy auction.
ICG’s principal executive offices are located at 2000 Ashland Drive, Ashland, Kentucky 41101 and its telephone number is (606) 920-7400.
International Coal Group, Inc.
International Coal Group was formed in March 2005 to be ICG’s new top-tier parent holding company following the reorganization. International Coal Group has no operations and no significant assets. Following the completion of the reorganization and acquisitions, International Coal Group will own, through ICG, all of the ICG
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business as well as Anker and CoalQuest. For a description of International Coal Group’s business after giving effect to the reorganization and acquisitions, see “Business” beginning on page 78 of the public offering preliminary prospectus.
International Coal Group’s principal executive offices are located at 2000 Ashland Drive, Ashland, Kentucky 41101 and its telephone number is (606) 920-7400.
Anker Coal Group and CoalQuest
Anker produces coal from mining complexes in West Virginia, Virginia, Maryland and Pennsylvania. It leases a majority of its coal reserves from CoalQuest. CoalQuest has no other material operations other than its leasing activity.
INTERNATIONAL COAL GROUP MANAGEMENT FOLLOWING COMPLETION OF THE REORGANIZATION AND ACQUISITIONS (Page 20)
The Board of Directors and executive officers of International Coal Group will be the same as the current Board of Directors and executive officers of ICG.
APPRAISAL RIGHTS (Page 22)
Under Section 262 of the Delaware General Corporation Law, record holders of ICG common shares are entitled to appraisal rights in connection with the reorganization. Failure to follow the procedures required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of appraisal rights. If an ICG shareholder withdraws his or her demand for appraisal or has his or her appraisal rights terminated, that holder of ICG common shares will only be entitled to receive the reorganization consideration consisting of one International Coal Group common share for one ICG common share.
ACCOUNTING TREATMENT (Page 23)
For accounting purposes, our reorganization will be accounted for as a transfer of assets and exchange of shares between entities under common control. As such, the transaction will be accounted for in a manner similar to a pooling-of-interests. Accordingly, the financial position and results of operations of ICG will be included in our consolidated financial statements on a historical cost basis.
EFFECTIVE TIME OF REORGANIZATION (Page 24)
The Anker merger and ICG reorganization will become effective upon the filing of certificates of merger with the Secretary of State of the State of Delaware or at such later time as may be agreed upon by ICG and Anker and as specified in the certificates of merger. The filing of the certificates of merger will occur as soon as practicable after the effectiveness of the registration statement of which this prospectus forms a part.
CONDITIONS TO COMPLETION OF THE REORGANIZATION (Page 26)
Substantially all of the conditions to the completion of the reorganization have been satisfied, other than the absence of material litigation and certain formal conditions such as the delivery of closing documents. The acquisitions and reorganization are not conditioned upon the completion of International Coal Group’s public offering and, in fact, are expected to be completed prior to the completion of such offering.
TERMINATION OF THE ANKER BUSINESS COMBINATION AGREEMENT (Page 26)
The Anker business combination agreement may be terminated by either party upon the happening of specified events, including by mutual consent and if the mergers have not occurred by April 2006.
COMPARISON OF SHAREHOLDERS’ RIGHTS (Page 28)
The rights of ICG shareholders will not change as a result of the reorganization, but will change upon the closing of a public offering. If a public offering is consummated, certain of the provisions of International Coal Group’s certificate of incorporation that are the same as the ICG certificate of incorporation will terminate and
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certain new provisions will become effective. In general, the provisions being terminated provide special governance rights to the ICG shareholders who sponsored ICG’s formation last year.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF ICG
See “Selected historical consolidated financial data of ICG” on page 49 of the public offering preliminary prospectus.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF INTERNATIONAL COAL GROUP, INC.
International Coal Group was formed to facilitate the combination of Anker and CoalQuest with ICG and is currently a wholly owned subsidiary of ICG. If International Coal Group had existed and owned ICG prior to completion of the reorganization and acquisitions, International Coal Group believes that its consolidated financial statements would have been substantially identical to those of ICG and its predecessors for the years ended December 31, 2004, 2003 and 2002. See “Selected consolidated financial data of ICG” on page 49 of the public offering preliminary prospectus.
UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL DATA
See “Unaudited consolidated pro forma financial data” on page 41 of the public offering preliminary prospectus.
COMPARATIVE PER SHARE DATA
ICG currently owns all of the outstanding International Coal Group common shares and, therefore, there is no public market for International Coal Group’s common shares. ICG common shares are currently reported on the Pink Sheets Electronic Quotation Service. No comparative per share data is presented because such information would not be meaningful to investors. For information regarding the high and low quotes for the ICG common shares since November 15, 2004, see “Price range of ICG, Inc. common stock” on page 36 of the public offering preliminary prospectus.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
See “Special note regarding forward-looking statements” on page 35 of the public offering preliminary prospectus.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ICG
See “Management’s discussion and analysis of financial condition and results of operations,” beginning on page 52 of the public offering preliminary prospectus.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INTERNATIONAL COAL GROUP, INC.
International Coal Group was formed for the purpose of facilitating the acquisitions of Anker and CoalQuest and is currently a wholly owned subsidiary of ICG. If International Coal Group had existed and owned ICG prior to completion of the reorganization and acquisitions, International Coal Group believes that its consolidated financial statements would have been substantially identical to those of ICG and its predecessors for the years ended December 31, 2004, 2003 and 2002. Please refer to “Management’s discussion and analysis of financial condition and results of operations” beginning on page 52 in the public offering preliminary prospectus for additional information.
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RISK FACTORS
You should carefully consider the risks described below and in the public offering preliminary prospectus before deciding whether or not to exercise your appraisal rights. If you do not exercise your appraisal rights, you will be choosing to invest in the common stock of International Coal Group. Investing in our common stock involves a high degree of risk. If any of the following risks (including those described in the public offering preliminary prospectus) develop into actual events, our business, financial condition or results of operations could be materially adversely affected, the trading price of your shares of our common stock could decline and you may lose all or part of your investment.
RISK FACTORS RELATING TO OUR REORGANIZATION
Failure to obtain a listing on the New York Stock Exchange may result in there being no active market for the International Coal Group common shares issued in the reorganization.
In connection with the public offering, we will apply for listing our common shares, including those to be issued in the reorganization, on the New York Stock Exchange. We cannot assure you that the public offering will be completed or that these shares will be approved for listing on the New York Stock Exchange. International Coal Group’s common shares may not be listed on the New York Stock Exchange if they fail to meet any listing criterion. If we are unable to list common shares on the New York Stock Exchange, there will be no established trading market for International Coal Group’s shares, and it is likely that no active trading market would develop for these shares. If no market develops for the International Coal Group common shares, there could be an adverse effect on the trading prices for the common shares.
There is no assurance as to the value you can receive by exercising dissenter’s rights.
Under Section 262 of the DGCL record holders of ICG common shares are entitled to appraisal rights in connection with the reorganization. If an ICG shareholder exercises his or her demand for appraisal and follows the procedures specified in Section 262 of the DGCL, summarized in “The Reorganization — Appraisal Rights,” he or she will have the right to receive cash payment of the fair value of his or her common shares. The express procedures of Section 262 must be followed and, if they are not, shareholders may lose their right to appraisal. The “fair value” cash payment for the ICG shares would potentially be determined in judicial proceedings, the result of which cannot be predicted. There can be no assurance that shareholders exercising appraisal rights will receive consideration equal to or greater than the value of International Coal Group common shares to be owned by such shareholders following consummation of the reorganization.
OTHER RISK FACTORS
For a description of the risks relating to the coal industry business, the Anker and CoalQuest acquisitions and International Coal Group’s common stock, see “Risk factors” in the public offering preliminary prospectus beginning on page 13.
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INFORMATION ABOUT THE COMPANIES
BUSINESS – INTERNATIONAL COAL GROUP
International Coal Group was formed in March 2005 to be ICG’s new top-tier parent holding company following the reorganization. International Coal Group has no operations and no significant assets. International Coal Group is a wholly owned subsidiary of ICG. Following the completion of the reorganization and acquisitions, International Coal Group will essentially be the same entity as ICG had ICG not undergone the reorganization. For a description of International Coal Group’s business after giving effect to the reorganization and acquisitions, see “Business” beginning on page 78 of the public offering preliminary prospectus.
BUSINESS – ICG
Overview
ICG, Inc. is a leading producer of coal in Central Appalachia, with a broad range of mid-to-high Btu, low sulfur steam. ICG’s Central Appalachian mining complexes, which include four of its mining complexes, are located in West Virginia and Kentucky. ICG also has a complementary mining complex of mid-to-high sulfur steam coal, strategically located in the Illinois Basin. ICG markets its coal to a diverse customer base of largely investment grade electric utilities, as well as domestic industrial customers. The high quality of International Coal Group’s coal, and the availability of multiple transportation options, including rail, truck and barge, throughout the Appalachian region, enable ICG to participate in both the domestic and international coal markets. Due to the decline in Appalachian coal production in recent years, these markets are currently characterized by strong demand with limited supply response and elevated spot and contract prices.
ICG was formed by WLR and other investors in May 2004 to acquire and operate competitive coal mining facilities. As of September 30, 2004, ICG acquired certain key assets of Horizon through a bankruptcy auction. These assets are high-quality reserves, are union free, have limited reclamation liabilities, and are substantially free of other legacy liabilities. Due to ICG’s initial capitalization, ICG was able to complete the acquisition without incurring a significant level of indebtedness. Consistent with the WLR investor group’s strategy to consolidate profitable coal assets ICG intends to consummate the Anker and CoalQuest acquisitions to further diversify ICG’s reserves.
As of January 1, 2005, ICG owned or controlled approximately 510 million tons of steam coal reserves. Based on expected 2005 production rates, ICG’s Central Appalachian reserves could support existing production levels for approximately 16 years. Further, ICG owns or controls approximately 564 million tons of coal resources.
For the year ended December 31, 2004, ICG sold 14.0 million tons of coal, all of which was steam coal. ICG’s steam coal sales volume in 2004 consisted of mid-to-high quality, high Btu (greater than 12,000 Btu/lb.), low sulfur (1.5% or less) coal, which typically sells at a premium to lower quality, lower Btu, higher sulfur steam coal. ICG’s three largest customers for the three months ended March 31, 2005 were Georgia Power Company, Carolina Power & Light Company and Duke Power and ICG derived approximately 63% of its coal revenues from sales to its five largest customers.
ICG’S HISTORY
The Horizon acquisition
On February 28, 2002, Horizon (at that time operating as AEI Resources Holdings, Inc.) filed a voluntary petition for Chapter 11 and its plan of reorganization became effective on May 8, 2002. However, Horizon’s profit margins and cash flows were negatively impacted in fiscal year 2002 by, among other things, the falling price of coal and continued increases in certain operating expenses. Due to capital and permit constraints, Horizon had to mine in areas which produced coal but at greatly reduced profit margins thus severely reducing cash flow.
As a result of its continuing financial and operational difficulties, Horizon filed a second voluntary petition for relief under Chapter 11 on November 13, 2002. Horizon obtained a debtor-in-possession financing facility of up to $350.0 million and was effective in rationalizing its operations, selling noncore assets, paying down outstanding
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borrowings and generating substantial operating profit. With stabilized operations and a significantly improved coal market, Horizon filed a joint plan of reorganization and a joint plan of liquidation under Chapter 11.
The Horizon assets were sold to ICG through a bankruptcy auction on August 17, 2004. Presented as a combined $290.0 million cash bid with A.T. Massey, ICG, Inc. agreed to pay $285.0 million in cash plus the assumption of up to $5.0 million in cure costs to acquire the assets plus ICG also contributed a credit bid of second lien Horizon bonds, and A.T. Massey agreed to pay $5.0 million in cash to acquire a separate group of assets associated with two Horizon subsidiaries. The credit bid included the cancellation of $482.0 million of certain Horizon bonds in return for which those Horizon bondholders received the right to participate in a rights offering to purchase ICG common stock. Shares issued in connection with the rights offering are included in ICG’s outstanding stock. The former bondholders of Horizon that purchased shares of ICG common stock in the rights offering were creditors of Horizon and received the shares in reliance on Section 1145 of the U.S. Bankruptcy Code, which in general provides for the limited exemption from the registration requirements of the Securities Act for securities issued in exchange for a claim against the debtor in bankruptcy. Since ICG’s formation, some trading of ICG, Inc.’s common stock has occurred. See “Price range of ICG, Inc. common stock” on page 36 of the public offering preliminary prospectus. ICG has not previously been a reporting company under the Securities Exchange Act of 1934.
In addition, Lexington Coal Company, LLC, a newly formed entity, was organized by the founding ICG shareholders to assume certain reclamation liabilities and assets not otherwise being purchased by A.T. Massey or ICG. In order to provide support to Lexington Coal in consideration for assuming these liabilities, ICG agreed to provide a $10.0 million letter of credit to support reclamation obligations and to pay a 0.75% royalty on the gross sales receipts for coal mined and sold from the assets ICG acquired from Horizon until the completion by Lexington Coal of all reclamation liabilities acquired from Horizon. Other than this support and a limited commonality of ownership of ICG and Lexington Coal Company, there is no relationship between the entities.
The bankruptcy court confirmed the sale on September 16, 2004 as part of the completion of the Horizon bankruptcy proceedings. At closing, ICG increased the purchase price by $6.25 million, primarily to satisfy increased administrative expenses, and the sale was completed as of September 30, 2004.
The acquisition was financed through equity investments and borrowings under ICG’s senior secured credit facility, which ICG entered into at the closing of the Horizon acquisition. See “Description of indebtedness” on page 123 of the public offering preliminary prospectus for a discussion of ICG’s senior credit facility.
COAL RESERVES
“Reserves” are defined by SEC Industry Guide 7 as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. “Proven (Measured) Reserves” are defined by SEC Industry Guide 7 as reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (2) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. “Probable reserves” are defined by SEC Industry Guide 7 as reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
ICG estimates that there are approximately 183 million tons of coal reserves that can be developed by its existing operations which will allow ICG to maintain current production levels for an extended period of time. ICG Natural Resources, LLC owns and leases all of ICG’s reserves that are not currently assigned to or associated with one of its mining operations. These reserves contain approximately 327 million tons of mid-to-high Btu, low and high sulfur coal located in Kentucky, West Virginia and Illinois. ICG’s multi-region base and flexible product line allows ICG to adjust to changing market conditions and sustain high sales volume by supplying a wide range of customers.
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ICG’s total coal reserves could support current production levels for more than 43 years. The following table provides the “quality” (average Btu content, sulfur content and ash content per pound) of its coal reserves as of January 1, 2005:
Recoverable | ||||||||||||||||||||||||||||||||||||
Reserves | Total tons in millions | Quality characteristics | ||||||||||||||||||||||||||||||||||
Proven and | of tons | (as received) | ||||||||||||||||||||||||||||||||||
Probable as | ||||||||||||||||||||||||||||||||||||
of 1/1/2005 | Reserve | heat | ||||||||||||||||||||||||||||||||||
(in millions | life | content | Sulfur | |||||||||||||||||||||||||||||||||
Mining companies | State | of tons)(1) | Owned | Leased | (years) | (Btu/lb) | (%) | Ash(%) | Steam | |||||||||||||||||||||||||||
Central Appalachia: | ||||||||||||||||||||||||||||||||||||
ICG — Knott County | KY | 6.73 | 5.81 | 0.92 | 5.29 | 12,700 | 1.3 | % | 8.4 | % | 6.73 | |||||||||||||||||||||||||
ICG — Hazard | KY | 71.38 | 0.23 | 71.15 | 11.9 | 12,000 | 1.6 | % | 11.2 | % | 71.38 | |||||||||||||||||||||||||
ICG — East Kentucky | KY | 2.62 | 0.00 | 2.62 | 2.0 | 12,400 | 1.2 | % | 12.2 | % | 2.62 | |||||||||||||||||||||||||
ICG — Eastern | WV | 23.69 | 7.27 | 16.42 | 7.4 | 12,300 | 1.1 | % | 12.2 | % | 23.69 | |||||||||||||||||||||||||
ICG — Natural Resources(2) | WV | 44.90 | 2.20 | 42.70 | NA | 12,000 | 0.8 | % | 12.2 | % | 44.90 | |||||||||||||||||||||||||
ICG — Natural Resources(3) | KY | 5.9 | 4.4 | 1.5 | NA | 12,000 | 1.1 | % | 12.0 | % | 4.40 | |||||||||||||||||||||||||
Central Appalachia Total | 155.22 | 19.91 | 135.31 | 153.72 | ||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||
ICG Illinois | IL | 29.63 | 11.38 | 18.25 | 12.9 | 10,500 | 3.2 | % | 9.5 | % | 29.63 | |||||||||||||||||||||||||
ICG Natural Resources | 325.21 | 305.10 | 20.1 | NA | 11,000 | 3.0 | % | 9.0 | % | 326.71 | ||||||||||||||||||||||||||
Other Total | 354.84 | 316.48 | 38.35 | 356.34 | ||||||||||||||||||||||||||||||||
Total Reserves | 510.06 | 336.39 | 173.66 | 510.06 |
(1) | Recoverable reserves represent the amount of coal reserves that can actually be recovered taking into account all mining and preparation losses involved in producing a saleable product using existing methods under current law. The reserve numbers set forth in this table exclude reserves for which ICG has leased its mining rights to third parties. Reserve information reflects a moisture factor of approximately 6.0%. This moisture factor represents the average moisture present on ICG’s delivered coal. | |
(2) | ICG — Natural Resources (Jenny’s Creek) | |
(3) | ICG — Natural Resources (Mount Sterling) |
ICG’s reserve estimate is based on geological data assembled and analyzed by its staff of geologists and engineers. Reserve estimates are periodically updated to reflect past coal production, new drilling information and other geologic or mining data. Acquisitions or sales of coal properties will also change the reserve base. Changes in mining methods may increase or decrease the recovery basis for a coal seam as will plant processing efficiency tests. ICG maintains reserve information in secure computerized databases, as well as in hard copy. The ability to update and/or modify the reserve base is restricted to a few individuals and the modifications are documented.
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Actual reserves may vary substantially from the estimates. Estimated minimum recoverable reserves are comprised of coal that is considered to be merchantable and economically recoverable by using mining practices and techniques prevalent in the coal industry at the time of the reserve study, based upon then-current prevailing market prices for coal. ICG uses the mining method that it believes will be most profitable with respect to particular reserves. ICG believes the volume of its current reserves exceeds the volume of its contractual delivery requirements. Although the reserves shown in the table above include a variety of qualities of coal, ICG presently blends coal of different qualities to meet contract specifications. See “Risk factors—Risks relating to our business” beginning on page 13 of the public offering preliminary prospectus.
Periodically, ICG retains outside experts to independently verify its coal reserve base. The most recent review was completed during the first quarter of 2005 and covered all of ICG’s reserves. The results verified ICG’s reserve estimates, with very minor adjustments, and included an in-depth review of ICG’s procedures and controls. As of January 1, 2005, Marshall Miller & Associates, Inc. confirmed ICG’s reserve base of 510 million tons on a consolidated basis.
ICG currently owns approximately 66% of its coal reserves, with the remainder of its coal reserves subject to leases from third-party landowners. Generally, these leases convey mining rights to the coal producer in exchange for a percentage of gross sales in the form of a royalty payment to the lessor, subject to minimum payments. Leases generally last for the economic life of the reserves. The average royalties paid by ICG for coal reserves from its producing properties was $1.35 per ton in 2004, representing approximately 3.9% of its coal sales revenue in 2004. Consistent with industry practice, ICG conducts only limited investigations of title to its coal properties prior to leasing. Title to lands and reserves of the lessors or grantors and the boundaries of its leased priorities are not completely verified until ICG prepares to mine those reserves.
COAL RESOURCES
Coal resources are coal-bearing bodies that have been sufficiently sampled and analyzed in trenches, outcrops, drilling, and underground workings to assume continuity between sample points, and therefore warrants further exploration stage work. However, this coal does not qualify as a commercially viable coal reserve as prescribed by SEC standards until a final comprehensive evaluation based on unit cost per ton, recoverability, and other material factors concludes legal and economic feasibility. Resources may be classified as such by either limited property control or geologic limitations, or both.
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The following table provides the “quality” (average Btu content, sulfur content and ash content per pound) of ICG coal resources as of January 1, 2005:
Quality characteristics | ||||||||||||||||||||||||
Recoverable | (as received) | |||||||||||||||||||||||
resources as | ||||||||||||||||||||||||
of 1/1/2005 | Heat | |||||||||||||||||||||||
(in millions | content | Sulfur | Ash | |||||||||||||||||||||
Mining companies | State | of tons) | (Btu/lb) | (%) | (%) | Steam | ||||||||||||||||||
Central Appalachia: | ||||||||||||||||||||||||
ICG - Knott County | KY | 0.00 | 12,700 | 1.3 | % | 8.49 | % | 0.00 | ||||||||||||||||
ICG - Hazard | KY | 3.00 | 12,000 | 1.6 | % | 11.29 | % | 3.00 | ||||||||||||||||
ICG - East Kentucky | KY | 0.00 | 12,400 | 1.2 | % | 12.29 | % | 0.00 | ||||||||||||||||
ICG - Eastern | WV | 0.02 | 12,300 | 1.1 | % | 12.29 | % | 0.02 | ||||||||||||||||
ICG - Natural Resources(1) | WV | 0.22 | 12,000 | 0.8 | % | 12.29 | % | 0.22 | ||||||||||||||||
ICG - Natural Resources(2) | KY | 0.01 | 12,000 | 1.1 | % | 12.09 | % | 0.01 | ||||||||||||||||
Central Appalachia Total | 3.25 | 3.25 | ||||||||||||||||||||||
Other | ||||||||||||||||||||||||
ICG Illinois | IL | 38.47 | 10,500 | 3.2 | % | 9.59 | % | 38.47 | ||||||||||||||||
ICG Natural Resources | 522.52 | 11,000 | 3.0 | % | 9.0 | % | 522.52 | |||||||||||||||||
Other Total | 560.99 | 560.99 | ||||||||||||||||||||||
Total Resources | 564.24 | 564.24 |
(1) | ICG – Natural Resources (Jenny’s Creek) | |
(2) | ICG – Natural Resources (Mount Sterling) |
OPERATIONS
As of December 31, 2004, ICG operated a total of eight surface and five underground coal mines located in Kentucky, West Virginia and Illinois. Historically, approximately 70% of ICG’s production has come from surface mines, and the remaining production has come from its underground mines. These mining facilities include three preparations plants, each of which receive, blend, process and ship coal that is produced from one or more of ICG’s 13 active mines. ICG’s underground mines generally consist of one or more single or dual continuous miner sections which are made up of the continuous miner, shuttle cars, roof bolters and various ancillary equipment. ICG’s surface mines are a combination of mountain top removal, dragline, truck/loader equipment fleets along with large production tractors. Most of ICG’s preparation plants are modern heavy media plants that generally have both coarse and fine coal cleaning circuits. ICG currently leases most of the equipment utilized in its mining operations. ICG employs preventive maintenance and rebuild programs to ensure that its equipment is modern and well maintained. The mobile equipment utilized at ICG’s mining operation is scheduled to be replaced on an on-going basis with new, more efficient units during the next five years. Each year ICG endeavors to replace the oldest units, thereby maintaining productivity while minimizing capital expenditures. The following table provides summary information regarding ICG’s principal mining complexes as of December 31, 2004.
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Number and | ||||||||||||||||||||||||||||||||
type of mines | ||||||||||||||||||||||||||||||||
Tons | ||||||||||||||||||||||||||||||||
Preparation | Under- | Mining | produced | |||||||||||||||||||||||||||||
Mining complex | Location | plant(s) | ground | Surface | Total | method(1) | Transportation | in 2004 | ||||||||||||||||||||||||
ICG - Eastern, LLC | Cowen, WV | 1 | 0 | 1 | 1 | MTR-DL-TSL | Rail | 2,712.1 | ||||||||||||||||||||||||
ICG - Hazard, LLC | Hazard, KY | 1 | (2) | 0 | 6 | 6 | R&P-CM, HW | Rail | 3,978.0 | |||||||||||||||||||||||
ICG - Knott County, LLC | Kite, KY | 1 | 4 | 0 | 4 | MTR-TSL, CM | Rail | 1,386.6 | ||||||||||||||||||||||||
ICG - East Kentucky, LLC | Pike Co., KY | 0 | 0 | 1 | 1 | MTR-TSL | Rail | 1,576.3 | ||||||||||||||||||||||||
ICG - Illinois, LLC | Williamsville, IL | 1 | 1 | 0 | 1 | R&P-CM | Truck | 2,117.6 |
(1) | R&P = Room and Pillar; MTR = Mountain Top Removal; DL = Dragline; HW = Highwall; CM = Continuous Miner; TSL = Truck and Shovel/Loader | |
(2) | Expected to begin operation in second half of 2005 |
The following provides a description of the operating characteristics of the principal mines and reserves of each of ICG’s mining operations.
MINING OPERATIONS
Central Appalachia mining operations
ICG’s Central Appalachian mining facilities are strategically located across West Virginia and Kentucky and are used to produce and ship coal to its customers located primarily in the eastern half of the United States. ICG believes that the quality and experience of its workforce in Central Appalachia are among the highest in the coal mining industry. All of ICG’s Central Appalachia mining operations are union free.
ICG’s mines in Central Appalachia produced 9.7 million tons of coal in 2004. The coal produced in 2004 was, on average, 12,174 Btu/lb, 1.1% sulfur and 12.5% ash by content. This year ICG estimates that its mines in Central Appalachia region will produce approximately 10.3 million tons. This high Btu, low sulfur coal is very marketable to major utility customers throughout the eastern United States. Shipments to electric utilities, accounted for approximately 73% of the coal shipped by these mines in 2004, compared to 75% of shipments in 2003. Within each mining complex, mines have been developed at strategic locations in proximity to ICG’s preparation plants and rail shipping facilities. The mines located in Central Appalachia ship the majority of their coal by the Norfolk Southern and CSX rail lines, although production may also be delivered by truck or barge, depending on the customer. ICG Natural Resources, LLC owns two idle river docks along the Kanawha River from which ICG could ship coal to its customers.
As of March 31, 2005, these mines had 943 employees.
ICG Eastern, LLC
ICG Eastern, LLC operates the Birch River surface mine, located 60 miles east of Charleston, near Cowen in Webster County, West Virginia. Birch River started operations in 1990 under Shell Mining Company, was purchased by Zeigler Coal Holding Company, or “Zeigler,” in 1992, and was subsequently acquired by AEI Resources, Inc. from Zeigler in 1998.
Birch River is extracting coal from five distinct coalbeds: (i) Freeport; (ii) Upper Kittanning; (iii) Middle Kittanning; (iv) Upper Clarion and (v) Lower Clarion. Coal mined from this operation has an average sulfur content
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of 1.1%, an average ash content of 12.2% and an average Btu content of 12,300. ICG estimates that Birch River controls 23.7 million tons of coal reserves.
Approximately 69% of the coal reserves are leased, while approximately 31% are owned in fee. Most of the leased reserves are held by four lessors. The leases are retained by annual minimum payments and by tonnage-based royalty payments. All leases can be renewed until all mineable and merchantable coal has been exhausted.
Overburden is removed by a dragline, shovel, front-end loaders, end dumps and bulldozers. Approximately one-third of the coal can be marketed run-of-mine, while the other two-thirds is washed at Birch River’s preparation plant. Coal is transported by conveyor belt from the preparation plant to Birch River’s rail loadout, which is served by CSX. The loadout is a batch weigh system capable of loading unit trains in less than four hours.
The preparation plant is rated at 800 raw tons per hour. The preparation plant is comprised of heavy media vessels, heavy media cyclones, and spirals. The plant, overland conveyor system, and rail loadout are in excellent condition.
ICG Hazard, LLC
ICG Hazard, LLC is currently operating six surface mines, a unit train loadout (Kentucky River Loading) and other support facilities in eastern Kentucky, near Hazard. The coal reserves and operations were acquired in late-1997 and 1998 by AEI Resources.
ICG Hazard’s six surface mines include: (i) County Line; (ii) Flint Ridge; (iii) Vicco; (iv) Rowdy Gap; (v) Tip Top; and (vi) Thunder Ridge. The coal from these mines is being extracted from the Hazard 11, Hazard 10, Hazard 9, Hazard 8, Hazard 7 and Hazard 5A seams, and has an average sulfur content of 1.2%, an average ash content of 12% and an average Btu content of 12,000. Nearly all of the coal is marketed run-of-mine. ICG estimates that ICG Hazard controls 71.4 million tons of coal reserves, plus 3.0 million tons of coal that is classified as resources. Most of the property has been adequately explored, but additional core drilling will be conducted within specified locations to better define the reserve base.
Approximately 99.7% of ICG Hazard’s reserves are leased, while 0.3% are owned in fee. Most of the leased reserves are held by seven lessors. In several cases, ICG Hazard has multiple leases with each lessor. The leases are retained by annual minimum payments and by tonnage-based royalty payments. Most leases can be renewed until all mineable and merchantable coal has been exhausted.
Overburden is removed by front-end loaders, end dumps, bulldozers and blast casting. Coal is transported from the mines to the Kentucky River Loading rail loadout by on-highway trucks. The loadout is served by CSX, and is a batch weigh system capable of loading 120-car trains in less than three hours. Most of the coal is transported by rail, but some coal is direct shipped to the customer by truck from the mine pits.
An existing preparation plant structure is being extensively upgraded. It will process coal from ICG Hazard’s new Flint Ridge underground mine complex. Flint Ridge will be a room and pillar mine, producing coal from the Hazard 8 coalbed. It will utilize continuous miners and shuttle cars. Both the plant and the underground mine are scheduled to begin operation in July 2005.
ICG Knott County, LLC
ICG Knott County, LLC operates four underground mines, the Supreme Energy preparation plant and rail loadout and other facilities necessary to support the mining operations in eastern Kentucky, near Kite. ICG Knott County was acquired by AEI Resources, Inc. from Zeigler in 1998.
ICG Knott County is producing coal from the Hazard 4 and the Elkhorn 3 coalbeds. Three mines are operating in the Hazard 4 coalbed: Calvary, Clean Energy and Elk Hollow. The Classic mine is operating in the Elkhorn 3 coalbed. The coal produced from the four mines has an average sulfur content of 1.3%, an average ash content of 9% and an average Btu content of 12,700. ICG estimates these properties contain 6.7 million tons of coal reserves.
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Most of the property has been extensively explored, but additional core drilling will be conducted within specified locations to better define the reserve base.
Approximately 86% of ICG Knott County’s reserves are owned in fee, while approximately 14% are leased. The leases are retained by annual minimum payments and by tonnage-based royalty payments. The leases can be renewed until all mineable and merchantable coal has been exhausted.
ICG Knott County’s four underground mines are room and pillar operations, utilizing continuous miners and shuttle cars. Nearly all of the run-of-mine coal is processed at the Supreme Energy preparation plant; some of the Hazard 4 run-of-mine coal is blended with the washed coal.
Nearly all of ICG Knott County’s coal is transported by rail. The loadout is a batch weigh system that is served by CSX.
ICG East Kentucky, LLC
ICG East Kentucky, LLC is a surface mining operation located in Pike County, Kentucky, near Phelps. ICG East Kentucky currently operates the Blackberry surface mine and the Phelps Loadout. ICG East Kentucky was acquired by AEI Resources in the second quarter of 1999.
Blackberry is an area surface mine that produces coal from three separate coalbeds: (i) Taylor; (ii) Fireclay; and (iii) Lower Fireclay. All of the coal is sold run-of-mine, with an average sulfur content of 1.2%, an average ash content of 12% and an average Btu content of 12,400.
ICG estimates that the Blackberry mine controls 2.6 million tons of coal reserves; no additional exploration is required.
After Blackberry is depleted, ICG East Kentucky will begin mining the Mount Sterling property, which contains an additional 5.9 million tons of coal reserves. Mount Sterling is located in Martin and Pike Counties, Kentucky near the Tug Fork River. Although Mount Sterling is expected to be mined by ICG East Kentucky, the property is held by ICG Natural Resources, LLC. The leases are retained by annual minimum payments and by tonnage-based royalty payments. The leases can be renewed until all mineable and merchantable coal has been exhausted.
Overburden at the Blackberry mine is removed by front end loaders, end dumps, bull dozers and blast casting. Coal from the pits is transported by truck to the Phelps Loadout, which is a batch weigh system.
Illinois Basin mining operations
ICG Illinois, LLC operates one large underground coal mine, the Viper mine, in central Illinois. Viper commenced mining operations in 1982 as a union free operation for Shell Oil Company. Viper was acquired by Ziegler in 1992 and subsequently acquired by AEI Resources in 1998.
The Viper Mine is working the Illinois No. 5 Seam, also referred to as the Springfield Seam, with all raw coal production washed at Viper’s preparation plant. Coal mined from this operation has an average sulfur content of 3.2%, an average ash content of 9.5% and an average Btu content of 10,500. ICG estimates that Viper controls approximately 29.6 million tons of coal reserves, plus an additional 38.5 million resource tons. Viper has an ongoing exploration program to accurately assess floor and roof conditions within the immediate mine plan.
Approximately two-thirds of the coal reserves are leased, while one-third is owned in fee. The leases are retained by annual minimum payments and by tonnage-based royalty payments. The leases can be renewed until all mineable and merchantable coal has been exhausted.
The Viper mine is a room and pillar operation, utilizing continuous miners and shuttle cars. Management believes that ICG Illinois is one of the lowest cost and highest productivity mines in the Illinois Basin. All of the
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raw coal is processed at Viper’s preparation plant. The clean coal is transported to the customers by highway trucks. A major rail line is located a short distance from the plant, giving Viper the option of constructing a rail loadout.
ICG Illinois ships by independent trucking companies to utility and industrial customers located in North Central Illinois. Shipments to electric utilities account for approximately 71% of coal sales. Currently 1.7 million tons (80%) of ICG Illinois’ 2005 production is under contract. The City of Springfield Water, Light and Power purchases nearly 50% of Viper’s production and the contract does not expire until 2020.
The preparation plant is rated at 800 raw tons per hour. It is comprised of heavy media vessels, heavy media cyclones and spirals.
The underground equipment, infrastructure and preparation plant are well maintained. The underground equipment will be replaced or rebuilt over the next five years.
OTHER OPERATIONS
Coal sales
In addition to the coal ICG mines, from time to time ICG also opportunistically secures coal purchase agreements with other coal producers to take advantage of differences in market prices.
ICG ADDCAR Systems, LLC
In ICG’s highwall mining business, ICG operates or leases six systems using its patented ADDCAR highwall mining system and intends to build additional ADDCAR systems as required. The ADDCAR highwall mining system is an innovative and efficient mining system. The system is often deployed at reserves that cannot be economically mined by other methods.
In a typical ADDCAR highwall mining system, there is a launch vehicle, continuous miner, conveyor cars, a stacker conveyor, electric generator, water tanker for cooling and dust suppression and a wheel loader with forklift attachment.
A five person crew operates the entire ADDCAR highwall mining system with control of the continuous miner being performed remotely by one person from the climate-controlled cab located at the rear of the launch vehicle. ICG’s system utilizes a navigational package to provide horizontal guidance, which helps to control rib width and thus roof stability. Also, the system provides vertical guidance for control out of seam dilutions. The ADDCAR highwall mining system is also equipped with high quality video monitors to provide the operator with visual displays of the mining process from inside each entry being mined.
The mining cycle begins by aligning the ADDCAR highwall mining system onto the desired heading and starting the entry. As the remotely controlled continuous miner penetrates the coal seam, ADDCAR conveyor cars are added behind it, forming a continuous cascading conveyor train. This continues until the entry is at the planned full depths of up to 1,200 to 1,500 feet. After retraction, the launch vehicle is moved to the next entry, leaving a support pillar of coal between entries. This process recovers as much as 65% of the reserves while keeping all personnel outside the coal seam in a safe working environment. A wide range of seam heights can be mined with high production in seams as low as 3.5 feet and as high as 15 feet in a single pass. If the seam height is greater than 15 feet, then multi lifts can be mined to create an unlimited entry height. The navigational features on the ADDCAR highwall mining system allow for multi lift mining while ensuring that the designed pillar width is maintained.
During the mining cycle, in addition to the tractive effort provided by the crawler drive of the continuous miner the ADDCAR highwall mining system bolsters the cutting capability of the machine through an additional pumping force provided by hydraulic cylinders which transmit thrust to the back of the miner through blocks mounted on the side of the conveyor cars. This additional energy allows the continuous miner to achieve maximum cutting and loading rates as it moves forward into the seam.
ICG currently has the exclusive North American distribution rights for the ADDCAR highwall mining system.
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CUSTOMERS AND COAL CONTRACTS
Customers
ICG’s primary customers are investment grade electric utility companies primarily in the eastern half of the United States. The majority of ICG’s customers purchase coal for terms of one year or longer, but ICG also supplies coal on a spot basis for some of its customers. ICG’s three largest customers for the three months ended March 31, 2005, were Georgia Power Company, Carolina Power & Light Company and Duke Power and ICG derived approximately 63% of ICG’s coal revenues from sales to its five largest customers.
Long-term coal supply agreements
As is customary in the coal industry, ICG enters into long-term supply contracts (exceeding one year in duration) with many of its customers when market conditions are appropriate. These contracts allow customers to secure a supply for their future needs and provides ICG with greater predictability of sales volume and sales price. For the three months ended March 31, 2005, approximately 67% of ICG’s revenues were derived from long-term supply contracts. ICG sells the remainder of ICG’s coal through short-term contracts and on the spot market. ICG has also entered into certain brokered transactions to purchase certain amounts of coal to meet ICG’s sales commitments. The purchase coal contracts expire at the end of 2006 and provide ICG a minimum of approximately 4.6 million tons of coal through the remaining lives of the contracts.
As a result of the Horizon bankruptcy process, ICG was able to renegotiate certain contracts at significantly higher prices that reflected the current pricing environment and not purchase unfavorable contracts. As the net costs associated with producing coal have risen, such as higher energy, transportation and steel prices, the price adjustments within several of ICG’s long-term contracts have not caught up to the new coal prices. This has resulted in certain counterparties to these contracts benefiting from below market prices for ICG’s coal.
The terms of ICG’s coal supply agreements result from competitive bidding and extensive negotiations with customers. Consequently, the terms of these contracts vary significantly by customer, including price adjustment features, price reopener terms, coal quality requirements, quantity parameters, permitted sources of supply, future regulatory changes, extension options, force majeure provisions and termination and assignment provisions.
Some of ICG’s long-term contracts provide for a pre-determined adjustment to the stipulated base price at times specified in the agreement or at other periodic intervals to account for changes due to inflation or deflation. In addition, most of ICG’s contracts contain provisions to adjust the base price due to new statutes, ordinances or regulations that impact ICG’s costs related to performance of the agreement. Also, some of ICG’s contracts contain provisions that allow for the recovery of costs impacted by modifications or changes in the interpretations or application of any applicable government statutes.
Price reopener provisions are present in most of ICG’s long-term contracts. These price reopener provisions may automatically set a new price based on prevailing market price or, in some instances, require the parties to agree on a new price, sometimes between a specified range of prices. In a limited number of agreements, failure of the parties to agree on a price under a price reopener provision can lead to termination of the contract. Under some of ICG’s contracts, ICG has the right to match lower prices offered to ICG’s customers by other suppliers. These price reopener provisions have enabled ICG to negotiate higher selling prices in several contracts over the last several months.
Quality and volumes for the coal are stipulated in coal supply agreements, and in some instances buyers have the option to vary annual or monthly volumes. Most of ICG’s coal supply agreements contain provisions requiring ICG to deliver coal within certain ranges for specific coal characteristics such as heat content, sulfur, ash, hardness and ash fusion temperature. Failure to meet these specifications can result in economic penalties, suspension or cancellation of shipments or termination of the contracts. Assuming steady or increasing coal prices over the near-term, ICG expect to renew many of ICG’s expiring sales contracts at significantly higher prices.
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Transportation/logistics
ICG ships coal to its customers by rail, truck or barge. ICG typically pays the transportation costs for its coal to be delivered to the barge or rail loadout facility, where the coal is then loaded for final delivery. Once the coal is loaded in the barge or railcar, ICG’s customer is typically responsible for the freight costs to the ultimate destination. Transportation costs vary greatly based on the customer’s proximity to the mine and ICG’s proximity to the loadout facilities. ICG uses a variety of independent companies for its transportation needs and typically enter into multiple non-contract agreements with trucking companies throughout the year.
In 2004, approximately 94% of ICG’s coal from ICG’s Central Appalachian operations was delivered to its customers by rail on either the Norfolk Southern or CSX rail lines, with the remaining 6% delivered by truck. For ICG’s Illinois Basin operations, 100% of ICG’s coal was delivered by truck to customers, generally within an 80 mile radius of ICG’s Illinois mine.
ICG believes it enjoys good relationships with rail carriers and barge companies due, in part, to its modern coal-loading facilities and the experience of its transportation and distribution employees.
SUPPLIERS
ICG has historically spent more than $150 million per year to procure goods and services in support of its business activities, excluding capital expenditures. Principal commodities include maintenance and repair parts and services, electricity, fuel, roof control and support items, explosives, tires, conveyance structure, ventilation supplies and lubricants. ICG uses suppliers for a significant portion of ICG’s equipment rebuilds and repairs both on- and off-site, as well as construction and reclamation activities.
Each of ICG’s regional mining operations has developed its own supplier base consistent with local needs. ICG has a centralized sourcing group for major supplier contract negotiation and administration, for the negotiation and purchase of major capital goods and to support the business units. The supplier base has been relatively stable for many years, but there has been some consolidation. ICG is not dependent on any one supplier in any region. ICG promotes competition between suppliers and seek to develop relationships with those suppliers whose focus is on lowering its costs. ICG seeks suppliers who identify and concentrate on implementing continuous improvement opportunities within their area of expertise.
COMPETITION
The coal industry is intensely competitive. ICG’s main competitors are Massey Energy Company and Alpha Natural Resources. As we develop additional reserves and expand our operations into Central and Northern West Virginia, we will face additional competition from Northern Appalachia coal producers, including Consol Energy and Foundation Coal Holdings. The most important factors on which ICG competes are coal price at the mine, coal quality and characteristics, transportation costs and the reliability of supply. Demand for coal and the prices that ICG will be able to obtain for its coal are closely linked to coal consumption patterns of the domestic electric generation industry which has accounted for approximately 92% of domestic coal consumption in recent years. These coal consumption patterns are influenced by factors beyond ICG’s control, including the demand for electricity which is significantly dependent upon economic activity and summer and winter temperatures in the United States, government regulation, technological developments and the location, availability, quality and price of competing sources of coal, alternative fuels such as natural gas, oil and nuclear and alternative energy sources such as hydroelectric power.
EMPLOYEES
As of March 31, 2005, ICG had 1,388 employees of which 20% were salaried and 80% were hourly. ICG believes its relationship with its employees is good. All of ICG’s workforce is union free.
LEGAL PROCEEDINGS
From time to time, ICG is involved in legal proceedings arising in the ordinary course of business. ICG believes it has recorded adequate reserves for these liabilities and that there is no individual case or group of related cases pending that is likely to have a material adverse effect on ICG’s financial condition, results of operations or
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cash flows. With respect to any claims relating to Horizon which arose prior to November 12, 2002, such claims are subject to an automatic stay of the U.S. Bankruptcy Code. In limited circumstances, the Bankruptcy Court has lifted the stay but only to the extent of insurance coverage relating to Horizon. In any event, ICG believes all or substantially all of the claims will be resolved in accordance with Horizon’s plan of reorganization.
EQUIPMENT AND CAPITAL EXPENDITURES
As of December 31, 2004, ICG’s leased equipment was, on average, 8.5 years old. ICG believes that a significant portion of its equipment needs to be upgraded in the near-term. Accordingly, ICG expects to retire much of its current equipment and invest approximately $176 million in new equipment and for mining development operations in the next two years. ICG believes ICG’s capital investment plan will provide it with a cost-effective fleet of equipment and enable it to improve ICG production efficiencies. As we take advantage of planned expansion opportunities from 2007 through 2009, we expect to spend approximately $204 million in capital expenditures, which may require external financing.
While ICG currently operates its mines with a high percentage of leased equipment due primarily to Horizon’s preference for leasing, ICG will be purchasing equipment in the future. Current equipment is leased primarily from Caterpillar Finance, GE Capital and other leasing companies. ICG’s operating leases typically have a term of three to five years, with ICG having the right to purchase the equipment at the end of the lease at fair market value.
RECLAMATION
Reclamation expenses are a significant part of any coal mining operation. Prior to commencing mining operations, a company is required to apply for numerous ICG permits in the state where the mining is to occur. Before a state will approve and issue these permits, it typically requires the mine operator to present a reclamation plan which meets regulatory criteria and to secure a surety bond to guarantee performance of reclamation in an amount determined under state law. These bonding companies, in turn, require that ICG backstop the surety bonds with cash and/or letters of credit. While bonds are issued against reclamation liability for a particular permit at a particular site, collateral posted in support of the bond is not allocated to a specific bond, but instead is part of a collateral pool supporting all bonds issued by that particular insurer. Bonds are released in phases as reclamation is completed in a particular area.
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MANAGEMENT
The Board of Directors and executive officers of ICG and International Coal Group are identical. For a description of the Board of Directors and executive officers of International Coal Group, see “Management” beginning on page 111 of the public offering preliminary prospectus.
THE REORGANIZATION
The reorganization is being completed to facilitate the acquisitions of Anker and CoalQuest, on a tax-deferred basis. The reorganization will be tax-free for ICG shareholders. The following discussion contains material information pertaining to the reorganization. This discussion is subject, and qualified in its entirety by reference, to the Anker business combination agreement filed as an exhibit to the registration statement relating to the public offering, which contains the material provisions relating to the reorganization. International Coal Group encourages you to read and review the Anker business combination agreement as well as the discussion in this prospectus. The business combination agreement relating to the CoalQuest acquisition is unrelated to the reorganization.
GENERAL
The next section of this document, “The Business Combination Agreement,” has additional and more detailed information regarding the legal documents that govern the reorganization, including information about the conditions to completion of the reorganization and the provisions for terminating or amending the Anker business combination agreement.
BACKGROUND AND REASONS OF THE REORGANIZATION
ICG was formed by WLR and other investors in May 2004 to acquire and operate competitive coal mining facilities. Through the acquisition of certain key assets from the bankruptcy estate of Horizon, ICG was able to acquire high quality reserves located in Appalachia and the Illinois Basin that are union free, have limited reclamation liabilities and are substantially free of other legacy liabilities. Consistent with the WLR investor group’s strategy to consolidate profitable coal assets, ICG began discussions in December 2004 with Anker and CoalQuest regarding possible strategic transactions.
Throughout these discussions, representatives of Anker and CoalQuest made it clear to ICG that the Anker and CoalQuest acquisitions must be accomplished on a tax-deferred basis so that the shareholders of Anker and the members of CoalQuest would not, as a general rule, recognize immediate taxable gain on the exchange of their Anker or CoalQuest equity for ICG equity. In order to accomplish this objective, the parties’ advisors determined that the Anker and CoalQuest acquisitions should be structured as elements of a “Section 351” transaction in which the equity of Anker, CoalQuest and ICG was contributed (by merger or otherwise) to a new holding company in exchange for holding company stock. International Coal Group was created to serve as the holding company in the Section 351 transaction.
Since ICG, Inc. shares were held by more than 100 shareholders, ICG, Inc. determined that the only practical way to accomplish the “contribution” of ICG’s equity to International Coal Group was by merging ICG, Inc. into a subsidiary, which had been formed as a subsidiary of ICG, Inc. As a result of this merger, which we refer to as the reorganization, each ICG common share will be exchanged for one International Coal Group common share on a tax-free basis. The mechanics of the reorganization were included in the Anker business combination agreement, which was approved by the Board of Directors of ICG and executed by all parties on March 31, 2005.
APPROVALS OF THE REORGANIZATION
At a meeting on March 31, 2005, the ICG board of directors, based on a recommendation of a special directorate committee of the board, unanimously approved the Anker business combination agreement and the CoalQuest business combination agreement and the transactions contemplated by each agreement, including the reorganization.
The reorganization is subject to the approval of the holders of a majority of all issued and outstanding ICG common shares. The holders of a majority of the outstanding ICG common shares as of the record date of March
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31, 2005 have delivered irrevocable proxies authorizing ICG to vote their shares in favor of the adoption of the Anker business combination agreement and the transactions contemplated by it, including the reorganization. Directors, officers and/or their affiliates granted proxies with respect to 28.6% of the outstanding shares. The Anker business combination will be approved by written consent of the shareholders pursuant to the proxies granted by the majority of shareholders. ICG will not hold a meeting of shareholders. No other action on the part of any shareholder of ICG is required for the reorganization to be completed and, therefore, we are not soliciting your vote.
The HSR Act and the rules and regulations thereunder provide that certain merger transactions, including the Anker and CoalQuest acquisitions, may not be consummated until required information and materials have been furnished to the Department of Justice and the Federal Trade Commission, and certain waiting periods have expired or been terminated. ICG filed with the FTC and the DOJ notification and report forms under the HSR Act on April 16, and April 15 and April 29, 2005. On April 19, 2005, ICG was notified that it received early termination of the applicable waiting period under the HSR Act.
PROCEDURES FOR EXCHANGE OF SHARES
You do not need to send your ICG stock certificates to us. Your current ICG common stock certificates will represent shares of International Coal Group following the reorganization.
DIVIDEND POLICY
See “Dividend policy” on page 37 of the public offering preliminary prospectus.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material United States federal income tax consequences to certain United States Holders (as defined below) of ICG common shares as a result of the reorganization. This summary does not deal with holders of ICG common shares who do not hold their ICG common shares as capital assets or who are subject to special treatment under United States federal income tax laws. For example, the summary does not address tax consequences to:
• | non-United States persons; | |
• | holders who may be subject to special tax treatment, such as dealers in securities or currencies, financial institutions, tax-exempt entities, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings or insurance companies; | |
• | holders who acquired their ICG common shares pursuant to the exercise of employee stock options or warrants or otherwise as compensation; | |
• | persons holding ICG common shares as part of a hedge, constructive sale, integrated or conversion transaction or a straddle; | |
• | holders of outstanding warrants or options to acquire ICG common shares; or | |
• | holders whose “functional currency” is not the United States dollar. |
The summary also does not address alternative minimum tax consequences or estate or gift tax consequences, if any, or any state, local or foreign tax consequences. If a partnership holds ICG common shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding ICG common shares, you should consult your tax advisor.
“United States Holder” means a beneficial owner of ICG common shares that is for United States federal income tax purposes:
• | a citizen or resident of the United States; | |
• | a corporation, or a partnership or other entity that is treated as a corporation, created or organized under the laws of the United States or any political subdivision of the United States; | |
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• | an estate the income of which is subject to United States federal income taxation regardless of its source; or | |
• | a trust if (1) it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
The summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions as of the date hereof. Any of these authorities may be changed, possibly retroactively, so as to result in United States federal income tax consequences different from those discussed below.
This summary is for general information only and is not tax advice. There can be no assurance that the Internal Revenue Service (“IRS”) or the courts will agree with the statements and conclusions in the summary. Accordingly, all holders of Equity Interests are urged to consult their own tax advisors concerning the specific United States federal income tax consequences to them of the transaction and any consequences arising under any other tax laws, including the laws of any state, local, foreign or other taxing jurisdiction.
The reorganization is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code and/or as transfers of property described in Section 351(a) of the Code to International Coal Group by holders of ICG common shares. It is a condition to the obligation of ICG to consummate the reorganization that ICG receive an opinion of its counsel that (1) the reorganization will be treated either (i) as a reorganization within the meaning of Section 368(a) of the Code, to which ICG and International Coal Group are parties within the meaning of Section 368(b) of the Code, or (ii) as transfers of property to International Coal Group by the ICG common shareholders as transferors, described in Section 351(a) of the Code, and (2) the stockholders of ICG (other than stockholders that may be subject to special rules) will not recognize gain or loss on the exchange of their ICG common shares solely for International Coal Group common shares.
ICG has received such an opinion of its counsel, based upon, and subject to, certain assumptions, limitations and qualifications, including certain representations made by the management of ICG and International Coal Group, among others, and the assumption that all such representations are and will remain true and complete as of the time of each and every one of the reorganization, the Anker acquisition, the CoalQuest acquisition and the proposed public offering. If any such representations or assumptions are inconsistent with the facts, the U.S. federal income tax consequences of the transaction, as set forth in the opinion and as described below, could be adversely affected.
Assuming that the reorganization qualifies as a reorganization described in Section 368(a) of the Code and/or as transfers of property to International Coal Group by the ICG common shareholders, as transferors, described in Section 351(a) of the Code, you will not recognize gain or loss on the exchange of your ICG common shares solely for International Coal Group common stock pursuant to the reorganization. Your tax basis in the International Coal Group common shares received in exchange for your ICG common shares will be the same as your basis in the ICG common shares exchanged for the International Coal Group common shares Your holding period for the International Coal Group common shares received in exchange for your ICG common shares will include the period for which you held the ICG common shares exchanged for the International Coal Group common shares.
APPRAISAL RIGHTS
Under Section 262 of the DGCL, record holders of shares of ICG common shares are entitled to appraisal rights in connection with the reorganization. The following summary of the provisions of Section 262 of the DGCL is not a complete statement of the provisions of that section and is qualified in its entirety by reference to the full text of Section 262 of the DGCL, a copy of which is attached to this document as Annex B and is incorporated into this summary by reference. Failure to comply with the procedures set forth in Section 262 of the DGCL in a timely and proper manner, will result in the loss of appraisal rights.
ICG shareholders wishing to exercise the right to dissent from the reorganization and seek an appraisal of their shares must:
• | NOT have voted in favor of the Anker business combination agreement or have voted AGAINST the Anker business combination agreement or ABSTAINED if voting by proxy; |
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• | file written notice with ICG of an intention to exercise rights of appraisal of its shares within 20 days of the date of mailing of a notice of the written consent approving the Anker business combination agreement; and | |
• | follow the procedures set forth in Section 262. |
An ICG shareholder who elects to exercise appraisal rights under Section 262 should mail or deliver a written demand to: Corporate Secretary, International Coal Group, Inc., 2000 Ashland Drive, Ashland, Kentucky 41101.
The fair value of ICG common shares will be determined by the Delaware Court of Chancery. The appraised value of the shares will not include any value arising from the reorganization. The ICG common shares with respect to which holders have perfected their appraisal rights in accordance with Section 262 and have not effectively withdrawn or lost their appraisal rights are referred to in this document as the “dissenting shares.”
Within ten days after the effective date of the reorganization, International Coal Group must mail a notice to all shareholders who filed a written notice of their intention to exercise appraisal rights in compliance with Section 262 notifying those shareholders of the effective date of the reorganization. Within 120 days after the effective date of the reorganization, holders of the dissenting shares may file a petition in the Delaware Court of Chancery for the appraisal of their shares, although they may, within 60 days after the effective date, withdraw their demand for appraisal. Within 120 days after the effective date of the reorganization, the holders of dissenting shares may also, upon written request, receive from International Coal Group a statement setting forth the aggregate number of shares with respect to which demands for appraisal have been received.
Appraisal rights are available only to the record holders of shares. If you wish to exercise appraisal rights but have a beneficial interest in shares held of record by or in the name of another person, such as a broker, bank or nominee, you should act promptly to cause the record holder to follow the procedures set forth in Section 262 to perfect your appraisal rights.
Dissenting shares lose their status as dissenting shares if:
• | the reorganization is abandoned; | |
• | the dissenting shareholder fails to make a timely written demand for appraisal; | |
• | neither International Coal Group, as the case may be, nor the shareholder files a complaint or petition in the Delaware Court of Chancery demanding a determination of the value of the stock within 120 days after the effective date of the reorganization; or | |
• | the shareholder delivers to International Coal Group, within 60 days of the effective date of the reorganization, or thereafter with the approval of International Coal Group, a written withdrawal of the shareholder’s demand for appraisal of the dissenting shares, although no appraisal proceeding in the Delaware Court of Chancery may be dismissed as to any shareholder without the approval of the court. |
Failure to follow the procedures required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of appraisal rights. If an ICG shareholder withdraws his or her demand for appraisal or has his or her appraisal rights terminated as described above, that shareholder will only be entitled to receive the consideration for those shares pursuant to the terms of the Anker business combination agreement.
ACCOUNTING TREATMENT
For accounting purposes, our reorganization will be accounted for as a transfer of assets and exchange of shares between entities under common control. As such, the transaction will be accounted for in a manner similar to a pooling-of-interests. Accordingly, the financial position and results of operations of ICG will be included in our consolidated financial statements on a historical cost basis.
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THE BUSINESS COMBINATION AGREEMENT
The following describes certain aspects of the reorganization, including material provisions of the Anker business combination agreement as such agreement relates to the reorganization. This description of the Anker business combination agreement is subject to, and qualified in its entirety by reference to, the Anker business combination agreement, which has been filed as an exhibit to the registration statement relating to the public offering. We urge you to read the Anker business combination agreement carefully and in its entirety. We expect the CoalQuest acquisition to occur concurrently with the Anker acquisition.
OVERVIEW
On March 31, 2005, ICG entered into a business combination agreement with Anker, International Coal Group, ICG Merger Sub, Inc., an indirect wholly owned subsidiary of ICG, and Anker Merger Sub, Inc., an indirect wholly owned subsidiary of ICG.
The Anker business combination agreement contains the operative provisions with regard to both the Anker merger and our corporate reorganization. The following description describes the relevant provisions of the Anker business combination agreement to the extent they apply to the reorganization.
EFFECTIVE TIME OF THE REORGANIZATION
The ICG reorganization and the Anker acquisition will become effective upon the filing of certificates of merger with the Secretary of State of the State of Delaware or at such later time as may be agreed upon by ICG and Anker and as specified in the certificates of merger. The filing of the certificates of merger will occur as soon as practicable after the conditions to completion of the mergers have been satisfied or waived.
CONSIDERATION TO BE RECEIVED IN THE REORGANIZATION
The ICG shareholders will receive one International Coal Group common share for each ICG common share.
REPRESENTATIONS AND WARRANTIES
The Anker business combination agreement contains customary representations and warranties of ICG and Anker relating to, among other things:
• | corporate organization and similar corporate matters; | |
• | capitalization; | |
• | authorization, execution, delivery, performance and enforceability of, and required consents, approvals, orders and authorizations of governmental entities relating to, the Anker business combination agreement and related matters; | |
• | compliance with applicable laws; | |
• | legal proceedings; | |
• | title, ownership and use of personal, including intellectual property, and real property; | |
• | certain material contracts; | |
• | operational and non-operational permits and licenses with governmental authorities; | |
• | matters relating to labor relations and employee benefits; | |
• | payment of brokerage and finders fees or commissions; | |
• | environmental matters; | |
• | financial statements and absence of material liabilities since December 31, 2004; | |
• | insurance; |
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• | affiliate transactions; | |
• | filing of tax returns, payment of taxes and other tax matters; and | |
• | indebtedness and distributions. | |
CONDUCT OF BUSINESS PENDING THE MERGERS
Under the Anker business combination agreement, each of ICG and Anker has agreed that, from the date of the Anker business combination agreement until the completion of the mergers, each party will, and will cause each of their respective subsidiaries to, conduct its businesses in the ordinary course consistent with past practice and use its reasonable best efforts to preserve intact its business organizations and relationships with third parties and keep available the services of its present officers and employees. In addition, each of ICG and Anker has agreed that, subject to certain exceptions, without the other party’s consent it will not and will not permit any of its respective subsidiaries to:
• | adopt or propose any change in its certificate of incorporation, bylaws or other constituent documents; | |
• | merge or consolidate with any other person or acquire a material amount of assets from any other person; | |
• | sell, lease, license or otherwise dispose of any assets or property with a value in excess of $25,000 except (i) pursuant to existing contracts or commitments or (ii) otherwise in the ordinary course consistent with past practice; | |
• | pay or undertake to pay any increase in salaries or other compensation of, or to pay any bonuses to, any director or officer, or, except in the ordinary course of business consistent with past practice, any employee, or enter into any employment, severance or similar agreement with any director, officer or employee; | |
• | adopt or increase any benefits under any profit sharing, bonus or deferred compensation, savings, insurance, pension, retirement or other employee plan for or with any of its employees; | |
• | incur, assume or guarantee any indebtedness, except for indebtedness incurred, assumed or guaranteed in the ordinary course of business consistent (with respect to amount and other terms) with past practice; | |
• | cancel any material debt or claim owed to it or its subsidiaries or waive any right of material value owned by it or its subsidiaries; | |
• | repurchase, redeem or otherwise acquire directly or indirectly, any of the outstanding common shares of it or other securities of, or other ownership interests in, it or its subsidiaries; | |
• | make any change in accounting methods or practices, except as required by law or generally accepted accounting principles; | |
• | issue or sell any additional shares or other equity interests or make any other changes in its capital structure, except (i) grants or issuances of options or stock pursuant to agreements in effect on the date of the agreement or (ii) pursuant to the exercise of options or stock-based awards of that party or its subsidiaries, in each case, outstanding as of the date of the agreement or issued thereafter in compliance with the agreement; | |
• | write off as uncollectible any notes or accounts receivable, except write-offs in the ordinary course of business charged to applicable reserves, none of which individually or in the aggregate is material, or alter customary time periods for collection of accounts receivable or payments of accounts payable; | |
• | permit to be incurred any lien (other than a permitted lien) on any of its real property or real property interests or, except in the ordinary course of business consistent with past practice, on any of its personal property; | |
• | make any loan, advance or capital contributions to or investment in any person other than a wholly owned subsidiary in an aggregate amount in excess of $25,000; |
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• | enter into any warranty, guaranty or other similar undertaking with respect to a contractual performance extended by that |
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party or any of its subsidiaries other than in the ordinary course of business consistent with past practice; | ||
• | modify, terminate or enter into any contracts or commitments with respect to which the aggregate amount that could reasonably be expected to be paid or received thereunder exceeds $25,000 individually or $100,000 in the aggregate, except contracts and commitments (for capital expenditures or otherwise) in the ordinary course of business and not knowingly inconsistent with that party’s business and operating plan and budget as in effect on the date hereof; | |
• | take any action that could reasonably be expected to have a material adverse effect on that party; | |
• | modify or amend any lease or cause or permit any lien to exist on any real property owned, leased or occupied by it that is not a permitted lien; or | |
• | agree or commit to do any of the foregoing. |
REASONABLE BEST EFFORTS; OTHER AGREEMENTS
Each of ICG, International Coal Group and Anker has agreed to use its reasonable best efforts to:
• | take all actions necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by the Anker business combination agreement; | |
• | obtain any consents, approvals or waivers under any contracts of those parties; and | |
• | take actions or make filings to obtain, and cooperate with the other party to obtain, the consent, approval or waiver of any governmental authority required to consummate the transactions contemplated by the Anker business combination agreement. |
International Coal Group has agreed to enter into registration rights agreements with existing ICG shareholders who currently have registration rights under agreements with ICG, with the new rights being granted pursuant to substantially similar agreements with International Coal Group covering the International Coal Group common stock issued to those shareholders in exchange for their ICG common stock.
CONDITIONS TO COMPLETION OF THE REORGANIZATION AND ACQUISITION
Each party’s obligation to effect the reorganization and acquisition was subject to the satisfaction of various conditions, all of which have been satisfied with the exception of the following:
• | no order, injunction or decree preventing the completion of the mergers being in effect, and no laws having been enacted or promulgated by any governmental authority having the effect of prohibiting the mergers or making them illegal; and | |
• | delivery of certificates of merger and other customary closing documents. | |
In addition, each party’s obligation to effect the reorganization is subject to the effectiveness of the International Coal Group registration statement of which this prospectus is a part having been declared effective.
TERMINATION
The Anker business combination agreement may be terminated at any time before the completion of the mergers:
• | By mutual written consent of ICG and Anker; | |
• | By Anker or ICG after April 15, 2006, if the mergers have not been completed by that date, as long as the party terminating the agreement is not in default under the agreement; | |
• | As long as the terminating party is not otherwise in default or breach of the agreement, and has not failed or refused to close without justification, by ICG or Anker, without prejudice to other rights and remedies that |
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the terminating party may have, if any other party (i) has materially failed to perform its covenants or agreements required to be performed on or prior to the completion of the mergers or (ii) has materially breached any of its representations or warranties in the agreement; except that the defaulting party will have 20 business days following written notice from a non-defaulting party to cure any breach, if it is curable; | ||
• | By ICG or Anker, if (A) any competent governmental authority has issued an order that has become final and nonappealable or (B) any law is in effect, in either case restricting, restraining or altering in a material manner or enjoining or otherwise prohibiting or making illegal the effectuation of the transactions contemplated by the agreement; or | |
• | By ICG or Anker, if the CoalQuest business combination agreement is terminated. |
EXPENSES
All costs and expenses incurred by ICG, Anker and CoalQuest in connection with the Anker business combination agreement will be paid by the party incurring those costs or expenses.
INDEMNIFICATION AND INSURANCE
The Anker business combination agreement provides that for six years from the effective date of the Anker and ICG mergers, International Coal Group will indemnify and hold harmless all past and present directors and officers of Anker, ICG and their respective subsidiaries, to the same extent those persons are indemnified as of the date of the agreement by Anker, ICG or their subsidiaries, as the case may be, pursuant to their certificates of incorporation, bylaws or other constituent documents, as in existence on the date of the Anker business combination agreement, for acts or omissions occurring at or prior to the completion of the mergers. International Coal Group will cause Anker and ICG to provide, for an aggregate period of not less than six years from the completion of the mergers, each current director and officer of Anker, ICG and their subsidiaries, as the case may be, an insurance and indemnification policy that provides coverage for events occurring prior to the completion of the mergers that is no less favorable than the existing policy or policies or, if substantially equivalent insurance coverage is unavailable, the best available coverage; except that neither Anker nor ICG will not be required to pay a premium for the required insurance in excess of 400% of the premium paid by it currently.
AMENDMENTS AND WAIVERS
Any provision of the Anker business combination agreement may be amended or waived by the parties to the agreement, except that, in the case of either ICG or Anker, the amendment or waiver must have been approved by the special committee of the Board of Directors of that party.
GOVERNING LAW
The Anker business combination agreement is governed by and will be construed in accordance with the laws of the State of Delaware.
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DESCRIPTION OF INTERNATIONAL COAL GROUP CAPITAL STOCK
For a description of International Coal Group capital stock, see “Description of capital stock” beginning on page 125 of the public offering preliminary prospectus.
COMPARISON OF SHAREHOLDERS’ RIGHTS
The rights of the shareholders in ICG will remain virtually unchanged as a result of the reorganization. The certificate of incorporation of International Coal Group contains certain provisions that will apply only until a public offering is consummated. Upon a public offering, different provisions become operative. The certificate of incorporation defines a public offering as “any firm commitment, underwritten public offering.” The provisions currently applicable to ICG shareholders are identical to the current provisions contained in the International Coal Group certificate of incorporation. As such, the following table compares the relative rights of International Coal Group shareholders before and after a public offering.
The following summary does not purport to be a complete statement of the rights of holders of ICG shareholders and International Coal Group shareholders. You should also refer to the DGCL and the certificates of incorporation and bylaws of ICG and International Coal Group.
Pre-Public Offering | Post-Public Offering | ||||||||||
Article/ | |||||||||||
Section | Article/ | ||||||||||
Nos. | Summary Comparison | Section Nos. | Summary Comparison | ||||||||
Authorized Capital Stock | |||||||||||
Art. IV Sec.. 1- | 2.0 billion shares authorized; 1.8 billion of common stock; 200 million of preferred stock | Art. IV, Sec. 1 | 2.2 billion shares authorized; 2.0 billion of common stock; 200 million of preferred stock | ||||||||
Preemptive Rights | |||||||||||
Art IV, Sec. 4 | Grants preemptive rights to founding shareholders | No comparable provision | |||||||||
Transfer Restriction | |||||||||||
Art IV, Sec. 5 | Creates restrictions on transfer based on the number of record holders of common stock | No comparable provision | |||||||||
Drag-Along Rights | |||||||||||
Art. IV Sec. 6 | Grants drag-along rights to Shareholders holding no less than 2/3 of the stock to force other Shareholders to sell shares in a transaction | No comparable provision | |||||||||
Super Majority Voting Provisions | |||||||||||
Art, VI, Sec. 1 | • Grants veto right to WLR and a Majority in Interest with regard to certain corporate actions | • No comparable provision | |||||||||
Art. VI Sec. 2 | • Grants veto right to the Board and the Founding Shareholders with regard to certain corporate actions | • No comparable provision | |||||||||
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Pre-Public Offering | Post-Public Offering | ||||||||||
Article/ | |||||||||||
Section | Article/ | ||||||||||
Nos. | Summary Comparison | Section Nos. | Summary Comparison | ||||||||
Art. VI Sec. 3 | • Grants veto right to the Board, a Majority in Interest and WLR with respect to certain corporate actions | • No comparable provision | |||||||||
Amendment to Bylaws | |||||||||||
No comparable provision | Art. V | Provides that the Board may amend bylaws. Holders of at least 80% of voting stock may also amend the bylaws | |||||||||
Classified Board | |||||||||||
No comparable provision | Art. VII, Sec. 1 | Provides for the creation of a classified Board consisting of three classes of directors divided as equally as possible with the first class to come up for election at the annual meeting in 2006, the second in 2007 and the third in 2008 | |||||||||
Shareholder Director Nominations | |||||||||||
No comparable provision | Art. VII, Sec. 2 | Requires advance notice to the Company of director nominations by shareholders | |||||||||
Removal of Directors | |||||||||||
No comparable provision | Art. VI, Sec. 3 | Provides for removal of directors for cause | |||||||||
Certain Amendments | |||||||||||
No comparable provision | Art. VII, Sec. 4 | Provides that 80% of voting stock must approve any amendment to Article VII | |||||||||
Amendment to Charter | |||||||||||
Art. IX | Allows amendments to charter only with consent of WLR and a Majority in Interest plus the affirmative vote of a majority of capital stock | Art. XII | International Coal Group has the right to amend the Charter | ||||||||
Information Rights | |||||||||||
Art. XI, Sec. 1 | Grants information rights to shareholders | No comparable provision | |||||||||
Confidentiality | |||||||||||
Art. XI, Sec. 2 | Provides confidentiality agreement between founding shareholders and ICG | No comparable provision | |||||||||
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COMPARATIVE MARKET PRICES AND DIVIDENDS
ICG currently owns all of the outstanding International Coal Group common shares and, therefore, there is no public market for International Coal Group’s common shares. The ICG common shares are currently reported on the Pink Sheets Electronic Quotation Service. No comparative market price data is presented because such information would not be meaningful. For information regarding the high and low quotes ICG common shares since November 15, 2004, see “Price range of ICG, Inc. common stock” on page 36 of the public offering preliminary prospectus.
For a description of International Coal Group’s dividend policy, see “Dividend policy” on page 37 of the public offering preliminary prospectus.
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PRINCIPAL SHAREHOLDERS
The following table and accompanying footnotes show information regarding the beneficial ownership of ICG common stock before and after the reorganization and the Anker and CoalQuest acquisitions by:
• | each person who is known by ICG to own beneficially more than 5% its common shares; |
• | each member of ICG board of directors and each of ICG’s named executive officers; and |
• | all members of ICG’s board of directors and ICG’s executive officers as a group. |
ICG has determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. ICG believes that each shareholder named in the table has sole voting and dispositive power for the shares shown as beneficially owned by each such shareholder.
The number of ICG common shares and percentages of beneficial ownership before the reorganization set forth below are based on 106,605,999 shares of ICG common stock issued and outstanding as of May 31, 2005. The number of International Coal Group common shares and percentages of beneficial ownership after the reorganization are based on a one-to-one exchange ratio for shares of ICG and International Coal Group and includes 30,950,129 International Coal Group common shares to be issued to holders of Anker shares and CoalQuest membership interests, the maximum number of shares to be issued.
International Coal Group Shares | ||||||||||||||||
Beneficially Owned After the | ||||||||||||||||
ICG Shares Beneficially Owned | Reorganization and the Anker and | |||||||||||||||
Prior to the Reorganization | CoalQuest Acquisitions | |||||||||||||||
Name and Address of Beneficial Owner | Number | Percent | Number | Percent | ||||||||||||
Värde Partners, Inc1 Värde Management, Inc. Värde Management International, Inc. Attn: Kathy Ricke 8500 Normandale Lake Boulevard Suite 1570 Minneapolis, MN 55347 | 9,868,755 | 9.26 | % | 9,868,755 | 7.17 | % | ||||||||||
Contrarian Funds LLC Attn: Michael J. Restifo 411 West Putnam Avenue, Suite 225 Greenwich, CT 06830 | 10,822,865 | 10.15 | % | 10,822,865 | 7.87 | % | ||||||||||
WLR Recovery Fund II, L.P Attn: Wendy Teramoto 101 East 52nd Street, 19th Floor New York, NY 10022 | 9,804,172 | 2 | 9.20 | % | 24,095,883 | 3 | 17.52 | % | ||||||||
Shepherd International Coal Holdings Inc. Attn: Colin M. Lancaster 3600 S. Lake Drive St. Francis, WI 53235 | 7,670,349 | 7.20 | % | 7,670,349 | 5.58 | % |
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International Coal Group Shares | ||||||||||||||||
Beneficially Owned After the | ||||||||||||||||
ICG Shares Beneficially Owned | Reorganization and the Anker and | |||||||||||||||
Prior to the Reorganization | CoalQuest Acquisitions | |||||||||||||||
Name and Address of Beneficial Owner | Number | Percent | Number | Percent | ||||||||||||
Stark Trading Attn: Colin M. Lancaster 3600 S. Lake Drive St. Francis, WI 53235 | 7,670,350 | 7.20 | % | 7,670,350 | 5.58 | % | ||||||||||
Third Point LLC Attn: Lloyd Blumberg 360 Madison Ave, 24th Floor New York, NY 10017 | 10,001,045 | 9.38 | % | 10,001,045 | 7.27 | % | ||||||||||
Wholesale Realtors Supply Attn: Gabriel Elias 509 Spring Avenue Elkins Park, PA 19027 | – | – | 7,425,345 | 4 | 5.40 | % | ||||||||||
Wilbur L. Ross, Jr. | 9,804,172 | 2 | 9.20 | % | 24,095,883 | 3 | 17.52 | % | ||||||||
Bennett K. Hatfield5 | 354,763 | * | 354,763 | * | ||||||||||||
William D. Campbell5 | 56,250 | * | 56,250 | * | ||||||||||||
Philip Michael Hardesty5 | 50,000 | * | 50,000 | * | ||||||||||||
Oren Eugene Kitts5 | 62,500 | * | 62,500 | * | ||||||||||||
Samuel R. Kitts5 | 62,500 | * | 62,500 | * | ||||||||||||
Roger L. Nicholson5 | 62,500 | * | 62,500 | * | ||||||||||||
William Scott Perkins5 | 62,500 | * | 62,500 | * | ||||||||||||
Jon R. Bauer6 | 10,822,865 | 6 | 10.15 | % | 10,822,865 | 6 | 7.87 | % | ||||||||
George R. Desko7 | – | – | 2,862,887 | 2.08 | % | |||||||||||
Marcia L. Page | 9,868,755 | 1 | 9.26 | % | 9,868,755 | 1 | 7.17 | % | ||||||||
All directors and executive officers as a group (14 persons) | 31,206,805 | 29.08 | % | 48,361,402 | 34.98 | % |
* | Less than 1% | |
1 | Represents 1,631,063 common shares held of record by The Värde Fund, L.P., 1,901,728 shares held by The Värde Fund V, L.P., 886,859 shares held by The Värde Fund VI, L.P., 1,450,510 shares held by The Värde Fund VI-A, L.P., 162,041 shares held by The Värde Fund VII, L.P., 80,766 shares held by The Värde Fund VII-A, L.P., 2,160,456 shares held by The Värde Fund (Cayman) Limited, 893,378 shares held by Värde Investment Partners, L.P., 179,162 shares held by SPhinX Distressed Fund SPC, and 522,792 shares held by Zurich Institutional Benchmarks Master Fund Limited. All the above shares are controlled by Värde Partners, Inc., Värde Management, Inc. or Värde Management International, Inc., all of which are controlled by Marcia L. Page, Gregory S. McMillan and George C. Hicks. Ms. Page and Messrs. McMillan and Hicks are (i) the principals, directors and managing partners of Värde Partners, Inc., and (ii) the principals, directors and vice presidents of Värde Management Inc. and Värde Management International, Inc. To the extent Ms. Page is deemed to beneficially own these shares as a result of her position as a principal director or managing partner or vice president of Värde Partners, Inc., Värde Management, Inc. or Värde Management International, Inc., Ms. Page disclaims beneficial ownership of these shares. | |
2 | Represents 9,804,172 common shares held of record by WLR Recovery Fund II, L.P. WL Ross & Co. LLC manages WLR Recovery Fund, II, L.P. Mr. Ross serves as a principal of WL Ross & Co. LLC, which manages WLR Recovery Fund II, L.P. To the extent Mr. Ross is deemed to beneficially own these shares as a result of his position as a principal of WL Ross & Co. LLC, Mr. Ross disclaims beneficial ownership of these shares. |
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3 | Represents 9,804,172 common shares held by WLR Recovery Fund II, L.P., 8,450,276 shares to be received as merger consideration for Anker common shares owned by WLR Recovery Fund, L.P. and WLR Recovery Fund II, L.P. and 5,841,435 shares to be received as merger consideration for membership interests in CoalQuest owned by WLR CoalQuest Holding Corp, which is wholly owned by WLR Recovery Fund II, L.P. WL Ross & Co. LLC manages WLR Recovery Fund II, L.P. and WLR Recovery Fund, L.P. Mr. Ross serves as a principal of WL Ross & Co. LLC, which manages WLR Recovery Fund II, L.P. To the extent Mr. Ross is deemed to beneficially own these shares as a result of his position as a principal of WL Ross & Co. LLC, Mr. Ross disclaims beneficial ownership of these shares. | |
4 | Represents 4,678,119 common shares to be received as merger consideration for shares held in Anker and 2,747,226 common shares to be received as merger consideration for membership interests in CoalQuest. | |
5 | Represents options to purchase shares of our common stock which are currently exercisable and all restricted shares granted to management. See “Management—Employee Benefit Plans” on page 117 of the public offering preliminary prospectus for information regarding vesting of the shares of restricted stock. | |
6 | Represents 10,822,865 common shares held of record by investment management clients of Contrarian Capital Management LLC. Mr. Bauer serves as the Managing Member of Contrarian Capital Management LLC. To the extent Mr. Bauer is deemed to beneficially own these shares as a result of his position as the Managing Member of Contrarian Capital Management LLC, Mr. Bauer disclaims beneficial ownership of these shares. | |
7 | Represents merger consideration for membership interests in CoalQuest owned by George and Janet Desko. |
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CERTAIN RELATIONSHIP AND RELATED PARTY TRANSACTIONS
For a description of certain related party transactions, see “Certain relationships and related party transactions” on page 122 of the public offering preliminary prospectus.
LEGAL MATTERS
The validity of common shares being registered in connection with the reorganization has been passed upon by Jones Day, New York, New York.
EXPERTS
The combined financial statements of Horizon NR, LLC and certain subsidiaries (“Combined Companies”) as of September 30, 2004 and December 31, 2003, and for the period January 1, 2004 to September 30, 2004, the year ended December 31, 2003, the period May 10, 2002 to December 31, 2002, and for the period January 1, 2002 to May 9, 2002, included in this registration statement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing in this registration statement (which report on the combined financial statements expresses an unqualified opinion on the financial statements and includes explanatory paragraphs referring to (1) fresh start reporting as of May 9, 2002, (2) allocations of certain assets and expense items applicable to Horizon and subsidiaries, (3) the bankruptcy filing of the Combined Companies and the fact the combined financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Combined Companies be unable to continue as a going concern, and (4) referring to the restatement of the financial statement schedule) and are so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of ICG, Inc. and subsidiaries as of December 31, 2004 and for period May 13, 2004 to December 31, 2004, included in this prospectus and the related financial statement schedule included in the registration statement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing in this registration statement (which reports express an unqualified opinion on the financial statements and financial statement schedule and include an explanatory paragraph referring to the restatement of the financial statement schedule) and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Anker Coal Group, Inc. and subsidiaries as of December 31, 2004 and for the year ended December 31, 2004, included in this registration statement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing in this registration statement, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The financial statements of CoalQuest Development LLC as of December 31, 2004 and for the year ended December 31, 2004, included in this registration statement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing in this registration statement, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
EXPERTS—COAL RESERVES
The estimates of ICG’s and International Coal Group’s proven and probable coal reserves referred to in this registration statement, to the extent described in this registration statement, have been prepared by ICG and International Coal Group and reviewed by Marshall Miller & Associates, Inc.
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WHERE YOU CAN FIND MORE INFORMATION
International Coal Group has filed with the Securities and Exchange Commission a registration statement on Form S-4 under the Securities Act with respect to the issuance of shares of its common stock being offered by this prospectus. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement, including the information in the public offering preliminary prospectus. For further information with respect to International Coal Group and the shares of its common stock, reference is made to the registration statement. International Coal Group is not currently subjected to the informational requirements of the Exchange Act. As a result of the offering of the International Coal Group common shares, International Coal Group will become subject to the informational requirements of the Exchange Act, and, in accordance therewith, will file reports and other information with the Securities and Exchange Commission. The registration statement, such reports and other information can be inspected and copied at the Public Reference Room of the Securities and Exchange Commission located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be obtained from the Public Reference Room of the Securities and Exchange Commission at prescribed rates. You can call the Securities and Exchange Commission at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. These materials may also be accessed electronically by means of the Securities and Exchange Commission’s home page on the Internet (http://www.sec.gov).
With respect to other procedures regarding stockholder relations, upon consummation of the public offering of the International Coal Group common shares, International Coal Group intends to send its stockholders annual reports containing audited financial statements and make available quarterly reports containing unaudited financial statements for the first three quarters of each fiscal year. The annual report will contain a report on financial condition and results of operations, audited financial statements and such other information as is required under applicable Securities and Exchange Commission rules and regulations. In addition, after International Coal Group has completed the public offering of its common shares, it will file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission within the time prescribed by the applicable rules and regulations of the Securities and Exchange Commission. International Coal Group intends to make such filings available on its website once the offering is completed. Information relating to quarterly and annual earnings, declaration of dividends and reports of material events will be communicated to shareholders as appropriate.
International Coal Group is currently obligated under its charter to deliver certain annual and quarterly financial information to each shareholder. International Coal Group’s obligation to deliver the foregoing information to shareholders will cease upon the consummation of the public offering.
FINANCIAL STATEMENTS
The following audited and unaudited financial statements of (i) ICG, Inc. (and its predecessors Horizon NR, LLC and AEI Resources Holding, Inc.), (ii) Anker Coal Group, Inc. and (iii) CoalQuest Development LLC are contained in the public offering preliminary prospectus beginning on page F-1:
ICG, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations for three months ended March 31, 2005 (unaudited)
Condensed Consolidated Statement of Stockholders’ Equity for three months ended March 31, 2005 (unaudited)
Condensed Consolidated Statements of Cash Flows for three months ended March 31,2005 (unaudited)
Notes to Unaudited Condensed Consolidated Financial Statements as of March 31, 2005 and for three months ended March 31, 2005
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheet as of December 31, 2004
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Consolidated Statement of Operations for the period May 13, 2004 to December 31, 2004
Consolidated Statement of Stockholders’ Equity for the period May 13, 2004 to December 31, 2004
Consolidated Statements of Cash Flows for the period May 13, 2004 to December 31, 2004
Notes to Audited Consolidated Financial Statements as of December 31, 2004 and for the period May 13, 2004 to December 31, 2004
HORIZON NR, LLC AND CERTAIN SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
Combined Balance Sheets as of September 30, 2004 and December 31, 2003
Combined Statements of Operations for the period January 1, 2004 to September 30, 2004, the year ended December 31, 2003, the period May 10, 2002 to December 31, 2002 (reorganized companies) and the period January 1, 2002 to May 9, 2002 (predecessor companies)
Combined Statements of Members’ Deficit for the period January 1, 2004 to September 30, 2004, the year ended December 31, 2003, the period May 10, 2002 to December 31, 2002 (reorganized companies) and the period January 1, 2002 to May 9, 2002 (predecessor companies)
Combined Statements of Cash Flows for the period January 1, 2004 to September 30, 2004, the year ended December 31, 2003, the period May 10, 2002 to December 31, 2002 (reorganized companies) and the period January 1, 2002 to May 9, 2002 (predecessor companies)
Notes to Combined Financial Statements as of September 30, 2004, for the period January 1, 2004 to September 30, 2004, year ended December 31, 2003, the period May 10, 2002 to December 31, 2002 (reorganized companies) and the period January 1, 2002 to May 9, 2002 (predecessor companies)
ANKER COAL GROUP, INC.
Independent Auditors’ Report
Consolidated Balance Sheets as of March 31, 2005 (unaudited) and December 31, 2004
Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004 (unaudited) and for the year ended December 31, 2004
Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2005 (unaudited) and for the year ended December 31, 2004
Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004 (unaudited) and for the year ended December 31, 2004
Notes to Consolidated Financial Statements for the three months ended March 31, 2005 and 2004 (unaudited) and for the year ended December 31, 2004
COALQUEST DEVELOPMENT LLC
Independent Auditors’ Report
Balance Sheets as of March 31, 2005 (unaudited) and December 31, 2004
Statements of Income for the three months ended March 31, 2005 and 2004 (unaudited) and for the year ended December 31, 2004
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Statements of Members’ Equity for the three months ended March 31, 2005 (unaudited) and for the year ended December 31, 2004
Statements of Cash Flows for the three months ended March 31, 2005 and 2004 (unaudited) and for the year ended December 31, 2004
Notes to Financial Statements for the three months ended March 31, 2005 and 2004 (unaudited) and for the year ended December 31, 2004
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. |
Per Share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discounts and commissions | $ | $ | ||||||
Proceeds, before expenses, to us | $ | $ | ||||||
UBS Investment Bank | Lehman Brothers |
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4 | stronger industrial demand following a recovery in the U.S. manufacturing sector, evidenced by the preliminary estimate of 3.5% real gross domestic product growth in the first quarter of 2005, as reported by the Bureau of Economic Analysis; |
4 | relatively low customer stockpiles, estimated by the U.S. Energy Information Administration, or EIA, to be approximately 99 million tons at the end of February 2005, down 8% from the same period in the prior year; |
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4 | declining coal production in Central Appalachia, including a decline of 11% in Central Appalachian coal production volume from 2000 to 2004, primarily a result of the depletion of economically attractive reserves, permitting issues that delay mine development and increasing costs of production; |
4 | capacity constraints of U.S. nuclear-powered electricity generators, which operated at an average utilization rate of 88.4% in 2003, up from 70.5% in 1993, as estimated by the EIA; |
4 | high current and forward prices for natural gas and oil, the primary alternative fuels for electricity generation, with spot prices as of June 2, 2005 for natural gas and heating oil at $6.66 per million Btu and $1.54 per gallon, respectively, as reported by Bloomberg L.P.; and |
4 | increased international demand for U.S. coal for steelmaking, driven by global economic growth, high ocean freight rates and the weak U.S. dollar. |
Note: (1) | Represents coal which meets the specifications (minimum 12,000 Btu/lb, maximum 1.00% sulfur) for Central Appalachian steam coal traded on the New York Mercantile Exchange. |
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Common stock we are offering | shares | |
Common stock to be outstanding after this offering | shares | |
Use of proceeds after expenses | We estimate that the net proceeds from this offering, after expenses, will be approximately $ , or approximately $ if the underwriters exercise their over-allotment option in full, assuming a public offering price of $ per share. As of March 31, 2005 (pro forma for the Anker and CoalQuest acquisitions), our total debt was $216.7 million. We expect to retire all of this debt, excluding $7.1 million of capitalized leases and other debt obligations, with the net proceeds of this offering and to use the remaining net proceeds for general corporate purposes. See “Use of proceeds.” | |
Over-allotment option | We have granted the underwriters an option to purchase up to additional shares of our common stock to cover over-allotments. | |
Proposed New York Stock Exchange symbol | ICO |
4 | the shares of our common stock issuable upon exercise of options we plan to grant prior to the effectiveness of the registration statement of which this prospectus is a part; and |
4 | the shares of our common stock expected to be available for future grant under the equity incentive plan we plan to adopt prior to the effectiveness of the registration statement of which this prospectus is a part. |
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AEI | ||||||||||||||||||||||||||||||||||||||||||
RESOURCES | ||||||||||||||||||||||||||||||||||||||||||
Predecessor | HORIZON | |||||||||||||||||||||||||||||||||||||||||
to | HORIZON | Predecessor | ||||||||||||||||||||||||||||||||||||||||
Horizon | Predecessor to ICG, Inc. | ICG, Inc. | to ICG, Inc. | ICG, Inc. | ICG, Inc. | |||||||||||||||||||||||||||||||||||||
Period from | Period from | Period | Period | Pro forma | ||||||||||||||||||||||||||||||||||||||
January 1, | May 10, | January 1, | May 13, | Three months | Three months | Pro forma year | three months | |||||||||||||||||||||||||||||||||||
2002 | 2002 to | Year ended | 2004 to | 2004 to | ended | ended | ended | ended | ||||||||||||||||||||||||||||||||||
to May 9, | December 31, | December 31, | September 30, | December 31, | March 31, | March 31, | December 31, | March 31, | ||||||||||||||||||||||||||||||||||
2002 | 2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2004(3) | 2005(3) | ||||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||||||||
Statement of operations data: | ||||||||||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||||||
Coal sales revenues | $ | 136,040 | $ | 264,235 | $ | 441,291 | $ | 346,981 | $ | 130,463 | $ | 110,013 | $ | 144,197 | $ | 624,120 | $ | 186,339 | ||||||||||||||||||||||||
Freight and handling revenues | 2,947 | 6,032 | 8,008 | 3,700 | 880 | 1,811 | 2,499 | 15,996 | 5,653 | |||||||||||||||||||||||||||||||||
Other revenues | 21,183 | 27,397 | 31,771 | 22,702 | 4,766 | 6,452 | 6,536 | 33,696 | 8,684 | |||||||||||||||||||||||||||||||||
Total revenues | 160,170 | 297,664 | 481,070 | 373,383 | 136,109 | 118,276 | 153,232 | 673,812 | 200,676 | |||||||||||||||||||||||||||||||||
Cost and expenses: | ||||||||||||||||||||||||||||||||||||||||||
Freight and handling costs | 2,947 | 6,032 | 8,008 | 3,700 | 880 | 1,811 | 2,499 | 15,996 | 5,653 | |||||||||||||||||||||||||||||||||
Cost of coal sales and other revenues (exclusive of depreciation, depletion and amortization shown separately below) | 114,767 | 251,361 | 400,652 | 306,429 | 113,707 | 98,002 | 117,184 | 564,723 | 157,690 | |||||||||||||||||||||||||||||||||
Depreciation, depletion and amortization | 32,316 | 40,033 | 52,254 | 27,547 | 7,943 | 9,502 | 8,522 | 46,054 | 11,656 | |||||||||||||||||||||||||||||||||
Selling, general and administrative (exclusive of depreciation, depletion and amortization shown separately above) | 9,677 | 16,695 | 23,350 | 8,477 | 4,194 | 2,454 | 4,935 | 17,257 | 6,045 | |||||||||||||||||||||||||||||||||
(Gain)/loss on sale of assets | (93 | ) | (39 | ) | (4,320 | ) | (226 | ) | (10 | ) | (185 | ) | — | (236 | ) | (58 | ) | |||||||||||||||||||||||||
Writedowns and other items | 8,323 | 729,953 | 9,100 | 10,018 | — | — | — | 10,018 | — | |||||||||||||||||||||||||||||||||
Total costs and expenses | 167,937 | 1,044,035 | 489,044 | 355,945 | 126,714 | 111,584 | 133,140 | 653,812 | 180,986 | |||||||||||||||||||||||||||||||||
Income (loss) from operations | (7,767 | ) | (746,371 | ) | (7,974 | ) | 17,438 | 9,395 | 6,692 | 20,092 | 20,000 | 19,690 | ||||||||||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||||||||||||
Interest expense | (36,666 | ) | (80,405 | ) | (145,892 | ) | (114,211 | ) | (3,453 | ) | (37,217 | ) | (3,145 | ) | (16,293 | ) | (3,946 | ) | ||||||||||||||||||||||||
Reorganization items | 1,567,689 | (143,663 | ) | (52,784 | ) | 727 | 21,375 | — | 727 | |||||||||||||||||||||||||||||||||
Other, net | 499 | 1,256 | 187 | 1,581 | 898 | 4 | 636 | 8,329 | 2,134 | |||||||||||||||||||||||||||||||||
Total interest and other income (expense) | 1,531,522 | (222,812 | ) | (198,489 | ) | (111,903 | ) | (2,555 | ) | (15,838 | ) | (2,509 | ) | (7,237 | ) | (1,812 | ) | |||||||||||||||||||||||||
Income (loss) before income taxes | 1,523,755 | (969,183 | ) | (206,463 | ) | (94,465 | ) | 6,840 | (9,146 | ) | 17,583 | 12,763 | 17,878 | |||||||||||||||||||||||||||||
Income tax expense | — | — | — | — | (2,591 | ) | — | (6,726 | ) | (4,835 | ) | (6,839 | ) | |||||||||||||||||||||||||||||
Net income (loss) | $ | 1,523,755 | $ | (969,183 | ) | $ | (206,463 | ) | $ | (94,465 | ) | $ | 4,249 | $ | (9,146 | ) | $ | 10,857 | $ | 7,928 | $ | 11,039 | ||||||||||||||||||||
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AEI | |||||||||||||||||||||||||||||||||||||||||
RESOURCES | |||||||||||||||||||||||||||||||||||||||||
Predecessor | HORIZON | ||||||||||||||||||||||||||||||||||||||||
to | HORIZON | Predecessor | |||||||||||||||||||||||||||||||||||||||
Horizon | Predecessor to ICG, Inc. | ICG, Inc. | to ICG, Inc. | ICG, Inc. | ICG, Inc. | ||||||||||||||||||||||||||||||||||||
Period from | Period from | Period | Period | Pro forma | |||||||||||||||||||||||||||||||||||||
January 1, | May 10, | January 1, | May 13, | Three months | Three months | Pro forma year | three months | ||||||||||||||||||||||||||||||||||
2002 | 2002 to | Year ended | 2004 to | 2004 to | ended | ended | ended | ended | |||||||||||||||||||||||||||||||||
to May 9, | December 31, | December 31, | September 30, | December 31, | March 31, | March 31, | December 31, | March 31, | |||||||||||||||||||||||||||||||||
2002 | 2002 | 2003 | 2004 | 2004 | 2004 | 2005 | 2004(3) | 2005(3) | |||||||||||||||||||||||||||||||||
(in thousands, except per share and per ton data) | |||||||||||||||||||||||||||||||||||||||||
Earnings (loss) per share(1): | |||||||||||||||||||||||||||||||||||||||||
Basic | — | — | — | — | 0.04 | — | 0.10 | 0.06 | 0.08 | ||||||||||||||||||||||||||||||||
Diluted | — | — | — | — | 0.04 | — | 0.10 | 0.06 | 0.08 | ||||||||||||||||||||||||||||||||
Average common shares outstanding(1): | |||||||||||||||||||||||||||||||||||||||||
Basic | — | — | — | — | 106,605,999 | — | 106,605,999 | 137,556,128 | 137,556,128 | ||||||||||||||||||||||||||||||||
Diluted | — | — | — | — | 106,605,999 | — | 106,605,999 | 137,556,128 | 137,556,128 | ||||||||||||||||||||||||||||||||
Balance sheet data (at period end): | |||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 87,278 | $ | 114 | $ | 859 | $ | — | $ | 23,967 | $ | 567 | $ | 24,974 | $ | $ | 35,032 | ||||||||||||||||||||||||
Total assets | 1,521,318 | 484,212 | 407,064 | 370,298 | 459,975 | 414,373 | 480,349 | 875,059 | |||||||||||||||||||||||||||||||||
Long-term debt and capital leases | 933,106 | 1,157 | 315 | 29 | 173,446 | 130 | 172,915 | 209,372 | |||||||||||||||||||||||||||||||||
Total liabilities | 1,286,318 | 1,222,218 | 1,351,393 | 1,409,092 | 305,575 | 1,367,847 | 315,092 | 418,552 | |||||||||||||||||||||||||||||||||
Total stockholders’ equity (members deficit) | $ | 235,000 | $ | (738,006 | ) | $ | (944,329 | ) | $ | (1,038,794 | ) | $ | 154,400 | $ | 235,000 | $ | 165,257 | $ | $ | 456,507 | |||||||||||||||||||||
Total liabilities and stockholders’ equity (members deficit) | $ | 1,521,318 | $ | 484,212 | $ | 407,064 | $ | 370,298 | $ | 459,975 | $ | 414,373 | $ | 480,349 | $ | $ | 875,059 | ||||||||||||||||||||||||
Other financial data (unaudited): | |||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA(2) | $ | 33,371 | $ | 24,871 | $ | 53,567 | $ | 56,584 | $ | 18,236 | $ | 16,198 | $ | 29,250 | $ | 84,401 | (4) | $ | 33,480 | ||||||||||||||||||||||
Net cash provided by (used in) | |||||||||||||||||||||||||||||||||||||||||
Operating activities | $ | (298,196 | ) | $ | 76,372 | $ | 17,753 | $ | 34,057 | $ | 30,209 | $ | 17,025 | $ | 21,837 | $ | — | $ | — | ||||||||||||||||||||||
Investing activities | $ | (10,841 | ) | $ | (12,799 | ) | $ | (1,549 | ) | $ | (2,535 | ) | $ | (329,166 | ) | $ | (1,720 | ) | $ | (18,519 | ) | $ | — | $ | — | ||||||||||||||||
Financing activities | $ | 259,011 | $ | (78,025 | ) | $ | (15,459 | ) | $ | (32,381 | ) | $ | 322,924 | $ | (15,597 | ) | $ | (2,311 | ) | $ | — | $ | — | ||||||||||||||||||
Capital expenditures | $ | 10,963 | $ | 13,435 | $ | 16,937 | $ | 6,624 | $ | 5,583 | $ | 1,890 | $ | 18,519 | $ | — | $ | — | |||||||||||||||||||||||
Operating data (unaudited): | |||||||||||||||||||||||||||||||||||||||||
Tons sold | 5,416 | 11,124 | 16,655 | 10,421 | 3,582 | 3,478 | 3,554 | 18,400 | 4,999 | ||||||||||||||||||||||||||||||||
Tons produced | 4,231 | 7,139 | 12,041 | 8,812 | 2,959 | 2,984 | 3,015 | 14,591 | 3,761 | ||||||||||||||||||||||||||||||||
Average coal sales realization (per ton) | $ | 25.12 | $ | 23.75 | $ | 26.50 | $ | 33.30 | $ | 36.42 | $ | 31.63 | $ | 40.57 | $ | 33.92 | $ | 37.26 |
(1) | Earnings per share data and average shares outstanding are not presented for the period from January 1, 2002 to May 9, 2002, period from May 10, 2002 to December 31, 2002, year ended December 31, 2003, the period from January 1, 2004 to September 30, 2004 and the three months ended March 31, 2004 because they were prepared on a “carve-out” basis. |
(2) | Adjusted EBITDA represents net income (but excluding reorganization items and writedowns and other items) before deducting net interest expense, income taxes and depreciation, depletion and amortization. We present Adjusted EBITDA and pro forma Adjusted EBITDA because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, substantially all of which present Adjusted EBITDA when reporting their results. |
We also use Adjusted 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 agreement uses Adjusted EBITDA (with additional adjustments) to measure our compliance with covenants, such as interest coverage and debt incurrence. Adjusted EBITDA is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. |
Adjusted EBITDA and pro forma Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: |
4 | Adjusted EBITDA and pro forma Adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; | |
4 | Adjusted EBITDA and pro forma Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; | |
4 | Adjusted EBITDA and pro forma Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; |
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4 | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA and pro forma Adjusted EBITDA do not reflect any cash requirements for such replacements; and | |
4 | Other companies in our industry may calculate Adjusted EBITDA and pro forma Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures | |
4 | Adjusted EBITDA and pro forma Adjusted EBITDA are a measure of our performance that are not required by, or presented in accordance with, GAAP and we also believe each is a useful indicator of our ability to meet debt service and capital expenditure requirements. Adjusted EBITDA and pro forma Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity. |
The following table reconciles (i) net income, which we believe to be the closest GAAP performance measure, to EBITDA and (ii) EBITDA to Adjusted EBITDA. |
AEI | ||||||||||||||||||||||||||||||||
Resources | Horizon | |||||||||||||||||||||||||||||||
(Predecessor | Horizon | Predecessor to | ||||||||||||||||||||||||||||||
to Horizon) | (Predecessor to ICG, Inc.) | ICG, Inc. | ICG, Inc. | ICG, Inc. | ||||||||||||||||||||||||||||
Period from | Period from | Period from | Three | Three | ||||||||||||||||||||||||||||
Period from | May 10, | January 1, | May 13, | months | months | |||||||||||||||||||||||||||
January 1, | 2002 to | Year ended | 2004 to | 2004 to | ended | ended | ||||||||||||||||||||||||||
2002 to | December 31, | December 31, | September 30, | December 31, | March 31, | March 31, | ||||||||||||||||||||||||||
May 9, 2002 | 2002 | 2003 | 2004 | 2004 | 2004(3) | 2005(3) | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Net income (loss) | $ | 1,523,755 | $ | (969,183 | ) | $ | (206,463 | ) | $ | (94,465 | ) | $ | 4,249 | $ | (9,146 | ) | $ | 10,857 | ||||||||||||||
Interest expense | 36,666 | 80,405 | 145,892 | 114,211 | 3,453 | 37,217 | 3,145 | |||||||||||||||||||||||||
Income tax expense | — | — | — | — | 2,591 | — | 6,726 | |||||||||||||||||||||||||
Depreciation, depletion and amortization expense | 32,316 | 40,033 | 52,254 | 27,547 | 7,943 | 9,502 | 8,522 | |||||||||||||||||||||||||
EBITDA | $ | 1,592,737 | $ | (848,745 | ) | $ | (8,317 | ) | $ | 47,293 | $ | 18,236 | $ | 37,573 | $ | 29,250 | ||||||||||||||||
Reorganization items(a) | (1,567,689 | ) | 143,663 | 52,784 | (727 | ) | — | (21,375 | ) | — | ||||||||||||||||||||||
Writedowns and other items(a) | 8,323 | 729,953 | 9,100 | 10,018 | — | — | — | |||||||||||||||||||||||||
Total EBITDA adjustments | (1,559,366 | ) | 873,616 | 61,884 | 9,291 | — | (21,375 | ) | — | |||||||||||||||||||||||
Adjusted EBITDA | $ | 33,371 | $ | 24,871 | $ | 53,567 | $ | 56,584 | $ | 18,236 | $ | 16,198 | $ | 29,250 |
(a) | See Notes 14-15 to Horizon’s audited combined financial statements included elsewhere in this prospectus. |
(3) | The summary unaudited pro forma data of ICG, Inc. and its subsidiaries as of and for the year ended December 31, 2004 and the three months ended March 31, 2005 have been prepared to give pro forma effect to our corporate reorganization, the acquisition of Horizon, Anker and CoalQuest, as if each had occurred on January 1, 2004, in the case of unaudited statements of operations data, and on March 31, 2005, in the case of unaudited pro forma balance sheet data. |
(4) | The following table reconciles (i) pro forma net income, which we believe to be the closest GAAP performance measure, to pro forma EBITDA and (ii) pro forma EBITDA to pro forma Adjusted EBITDA. |
Pro forma three | ||||||||
Pro forma year ended | months ended | |||||||
December 31, 2004 | March 31, 2005 | |||||||
(in thousands) | ||||||||
Net income | $ | 7,928 | $ | 11,039 | ||||
Interest expense | 16,293 | 3,946 | ||||||
Income tax expense | 4,835 | 6,839 | ||||||
Depreciation, depletion and amortization expense | 46,054 | 11,656 | ||||||
Pro forma EBITDA | 75,110 | 33,480 | ||||||
Reorganization items | (727 | ) | — | |||||
Writedowns and other items | 10,018 | — | ||||||
Total pro forma EBITDA adjustments | 9,291 | — | ||||||
Pro forma Adjusted EBITDA | $ | 84,401 | $ | 33,480 |
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4 | the supply of and demand for domestic and foreign coal; |
4 | the demand for electricity; |
4 | domestic and foreign demand for steel and the continued financial viability of the domestic and/or foreign steel industry; |
4 | the proximity to, capacity of and cost of transportation facilities; |
4 | domestic and foreign governmental regulations and taxes; |
4 | air emission standards for coal-fired power plants; |
4 | regulatory, administrative and judicial decisions; |
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4 | the price and availability of alternative fuels, including the effects of technological developments; and |
4 | the effect of worldwide energy conservation measures. |
4 | the unavailability of qualified labor; |
4 | our inability to acquire, maintain or renew necessary permits or mining or surface rights in a timely manner, if at all; |
4 | unfavorable geologic conditions, such as the thickness of the coal deposits and the amount of rock embedded in or overlying the coal deposit; |
4 | failure of reserve estimates to prove correct; |
4 | changes in governmental regulation of the coal industry, including the imposition of additional taxes, fees or actions to suspend or revoke our permits or changes in the manner of enforcement of existing regulations; |
4 | mining and processing equipment failures and unexpected maintenance problems; |
4 | adverse weather and natural disasters, such as heavy rains and flooding; |
4 | increased water entering mining areas and increased or accidental mine water discharges; |
4 | increased or unexpected reclamation costs; |
4 | interruptions due to transportation delays; |
4 | the unavailability of required equipment of the type and size needed to meet production expectations; and |
4 | unexpected mine safety accidents, including fires and explosions from methane. |
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4 | geological and mining conditions which may not be fully identified by available exploration data or which may differ from experience in current operations; |
4 | historical production from the area compared with production from other similar producing areas; and |
4 | the assumed effects of regulation and taxes by governmental agencies and assumptions concerning coal prices, operating costs, mining technology improvements, severance and excise tax, development costs and reclamation costs. |
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4 | uncertainties in assessing the value, strengths, and potential profitability of, and identifying the extent of all weaknesses, risks, contingent and other liabilities (including environmental or mine safety liabilities) of, acquisition candidates; |
4 | the potential loss of key customers, management and employees of an acquired business; |
4 | the ability to achieve identified operating and financial synergies anticipated to result from an acquisition; |
4 | problems that could arise from the integration of the acquired business; and |
4 | unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying our rationale for pursuing the acquisition. |
4 | the loss of key employees or customers; |
4 | the challenge of maintaining the quality of customer service; |
4 | the need to coordinate geographically diverse operations; |
4 | retooling and reprogramming of equipment and information technology systems; and |
4 | the resulting diversion of management’s attention from our day-to-day business and the need to hire and integrate additional management personnel to manage our expanded operations. |
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4 | lack of availability, higher expense or unfavorable market terms of new bonds; |
4 | restrictions on availability of collateral for current and future third-party surety bond issuers under the terms of our credit facility; and |
4 | the exercise by third-party surety bond issuers of their right to refuse to renew the surety. |
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4 | incur additional debt; |
4 | pay dividends on, redeem or repurchase capital stock; |
4 | allow our subsidiaries to issue new stock to any person other than us or any of our other subsidiaries; |
4 | make investments; |
4 | make acquisitions; |
4 | incur or permit to exist liens; |
4 | enter into transactions with affiliates; |
4 | guarantee the debt of other entities, including joint ventures; |
4 | merge or consolidate or otherwise combine with another company; and |
4 | transfer or sell a material amount of our assets outside the ordinary course of business. |
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4 | limitations on land use; |
4 | employee health and safety; |
4 | mandated benefits for retired coal miners; |
4 | mine permitting and licensing requirements; |
4 | reclamation and restoration of mining properties after mining is completed; |
4 | air quality standards; |
4 | water pollution; |
4 | protection of human health, plantlife and wildlife; |
4 | the discharge of materials into the environment; |
4 | surface subsidence from underground mining; and |
4 | the effects of mining on groundwater quality and availability. |
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4 | actual or anticipated fluctuations in our operating results or future prospects; |
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4 | the public’s reaction to our press releases, our other public announcements and our filings with the SEC; |
4 | strategic actions by us or our competitors, such as acquisitions or restructurings; |
4 | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; |
4 | changes in accounting standards, policies, guidance, interpretations or principles; |
4 | conditions of the coal industry as a result of changes in financial markets or general economic conditions, including those resulting from war, incidents of terrorism and responses to such events; |
4 | sales of common stock by us or members of our management team; and |
4 | changes in stock market analyst recommendations or earnings estimates regarding our common stock, other comparable companies or the coal industry generally. |
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4 | market demand for coal, electricity and steel; |
4 | availability of qualified workers; |
4 | future economic or capital market conditions; |
4 | weather conditions or catastrophic weather-related damage; |
4 | our production capabilities; |
4 | our consummation of the corporate reorganization and the Anker and CoalQuest acquisitions and the integration of these businesses; |
4 | the consummation of financing, acquisition or disposition transactions and the effect thereof on our business; |
4 | our plans and objectives for future operations and expansion or consolidation; |
4 | our relationships with, and other conditions affecting, our customers; |
4 | timing of reductions or increases in customer coal inventories; |
4 | long-term coal supply arrangements; |
4 | risks in coal mining; |
4 | unexpected maintenance and equipment failure; |
4 | environmental laws and regulations, including those directly affecting our coal mining and production, and those affecting our customers’ coal usage; |
4 | competition; |
4 | railroad, barge, trucking and other transportation performance and costs; |
4 | employee benefits costs and labor relations issues; |
4 | our assumptions concerning economically recoverable coal reserve estimates; |
4 | regulatory and court decisions; |
4 | future legislation and changes in regulations or governmental policies or changes in interpretations thereof; |
4 | the impairment of the value of our goodwill; and |
4 | our liquidity, results of operations and financial condition. |
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Stock Price | Average | |||||||||||
Daily | ||||||||||||
High | Low | Volume(1) | ||||||||||
November 15, 2004 through December 31, 2004(2) | $ | 14.50 | $ | 7.63 | 673,493 | |||||||
January 1, 2005 through March 31, 2005 | $ | 15.00 | $ | 12.13 | 224,952 | |||||||
April 1, 2005 through May 31, 2005 | $ | 15.00 | $ | 12.60 | 94,266 |
(1) | Does not include days on which there were no quotes for the shares of the ICG, Inc. common stock. |
(2) | Quotes for the shares of ICG, Inc. common stock were not reported prior to November 15, 2004. |
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4 | for ICG, Inc. on an actual basis; |
4 | for ICG on a pro forma basis to give effect to the Anker and CoalQuest acquisitions; and |
4 | for ICG on a pro forma, as adjusted basis, to give effect to the Anker and CoalQuest acquisitions and the sale by us of approximately shares of our common stock in this offering at an assumed public offering price of $ , the last sale price of our common stock on , 2005, as quoted on the Pink Sheets Electronic Quotation Service, after deducting underwriting discounts and estimated offering expenses and the application of the estimated net proceeds as described under “Use of proceeds.” |
As of March 31, 2005 (unaudited) | ||||||||||||||
Pro forma, as | ||||||||||||||
adjusted for | ||||||||||||||
Actual | Pro forma | the offering | ||||||||||||
(in thousands) | ||||||||||||||
Cash and cash equivalents | $ | 24,974 | $ | 35,032 | $ | |||||||||
Long-term debt, including current portion: | ||||||||||||||
Term loan facility(1) | 174,563 | 209,563 | ||||||||||||
Other long-term debt, including capital leases | 2,593 | 7,090 | ||||||||||||
Total debt | $ | 177,156 | $ | 216,653 | $ | |||||||||
Stockholders’ equity: | ||||||||||||||
Common stock, par value $0.0001 per share, 1,800,000,000 shares authorized, 106,605,999 shares issued and outstanding, actual and shares issued and outstanding, as adjusted for the offering and the Anker and CoalQuest acquisitions(2) | 11 | 1,376 | ||||||||||||
Preferred stock, par value $0.0001 per share, 200,000,000 shares authorized, no shares issued and outstanding(2) | — | — | ||||||||||||
Paid-in-capital | 150,140 | 440,025 | ||||||||||||
Retained earnings | 15,106 | 15,106 | ||||||||||||
Total stockholders’ equity | 165,257 | 456,507 | ||||||||||||
Total capitalization | $ | 342,413 | $ | 673,160 | $ | |||||||||
(1) | Our current credit facility provides for a $110.0 million revolving credit facility, of which up to $60.0 million may be used for letters of credit. As of March 31, 2005, $49.9 million of letters of credit were outstanding. |
(2) | Represents stock of our predecessor, ICG, Inc. The par value of our common stock is $0.01 per share and the par value of our preferred stock is $0.01 per share. |
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Assumed public offering price per share | $ | |||||||
Pro forma net tangible book value per share as of March 31, 2005 | $ | |||||||
Increase in pro forma net tangible book value per share attributable to this offering | ||||||||
Net tangible book value per share after this offering | ||||||||
Dilution per share to new investors | $ | |||||||
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Shares purchased or | |||||||||||||||||||||
issuable upon the | |||||||||||||||||||||
exercise of currently | |||||||||||||||||||||
outstanding options | Total consideration | Average | |||||||||||||||||||
price per | |||||||||||||||||||||
Number | Percent | Amount | Percent | share | |||||||||||||||||
Existing stockholders, directors, officers and affiliated parties | |||||||||||||||||||||
Former Anker stockholders and CoalQuest members | |||||||||||||||||||||
New investors | |||||||||||||||||||||
Total |
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4 | our corporate reorganization, involving the exchange of ICG common stock for existing shares of ICG, Inc. common stock at a 1-for-1 exchange ratio; |
4 | our acquisition of the Horizon assets (including the preliminary application of purchase accounting) (for purposes of the December 31, 2004 unaudited pro forma statement of operations data only); |
4 | borrowings under our credit facilities, in part, to finance the Horizon asset acquisition and the Anker and CoalQuest acquisitions; |
4 | the Anker and CoalQuest acquisitions; and |
4 | this offering. |
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ICG, Inc. | Anker | CoalQuest | ||||||||||||||||||||||||||||||||
ICG, Inc. | Anker | CoalQuest | reorganization | acquisition | acquisition | Offering | ||||||||||||||||||||||||||||
historical | historical | historical | adjustments | adjustments | adjustments | adjustments | Pro forma | |||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 24,974 | $ | 2,342 | $ | 1,862 | $ | 5,854 | (1) | $ | — | $ | — | $ | $ | 35,032 | ||||||||||||||||||
Trade accounts receivable | 50,560 | 11,686 | 1,393 | — | — | — | 63,639 | |||||||||||||||||||||||||||
Inventories | 16,816 | 3,935 | — | — | — | — | 20,751 | |||||||||||||||||||||||||||
Deferred income taxes | 2,173 | — | — | — | — | — | 2,173 | |||||||||||||||||||||||||||
Prepaid insurance | 4,826 | — | 34 | — | — | — | 4,860 | |||||||||||||||||||||||||||
Prepaid expenses and other | 5,588 | 1,606 | — | — | — | — | 7,194 | |||||||||||||||||||||||||||
Total current assets | 104,937 | 19,569 | 3,289 | 5,854 | — | — | 133,649 | |||||||||||||||||||||||||||
Property, plant and equipment, at cost including coal reserves, mine development and contract costs | 183,838 | 143,855 | 19,000 | — | 23,183 | (2) | 55,091 | (2) | 424,967 | |||||||||||||||||||||||||
Less accumulated depreciation, depletion and amortization | (16,705 | ) | (82,601 | ) | (97 | ) | — | — | — | (99,403 | ) | |||||||||||||||||||||||
Net property, plant and equipment | 167,133 | 61,254 | 18,903 | — | 23,183 | 55,091 | 325,564 | |||||||||||||||||||||||||||
Debt issuance costs, net | 7,594 | — | — | — | — | 7,594 | ||||||||||||||||||||||||||||
Advance royalties | 4,986 | 3,232 | — | — | — | — | 8,218 | |||||||||||||||||||||||||||
Goodwill | 183,946 | — | — | 5,000 | (1) | 148,317 | (2) | 42,952 | (2) | 380,215 | ||||||||||||||||||||||||
Deferred tax asset non-current | 5,997 | — | — | — | — | — | 5,997 | |||||||||||||||||||||||||||
Other non-current assets | 5,756 | 8,066 | — | — | — | — | 13,822 | |||||||||||||||||||||||||||
Total assets | $ | 480,349 | $ | 92,121 | $ | 22,192 | $ | 10,854 | $ | 171,500 | $ | 98,043 | $ | $ | 875,059 | |||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT) | ||||||||||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||||||||
Trade accounts payable | $ | 27,766 | $ | 14,603 | $ | 516 | $ | — | $ | — | $ | — | $ | $ | 42,885 | |||||||||||||||||||
Current portion of long-term debt and capital leases | 4,241 | 18,572 | — | (15,532 | )(1) | — | — | 7,281 | ||||||||||||||||||||||||||
Current portion of reclamation and mine closure costs | 2,682 | 2,049 | — | — | — | — | 4,731 | |||||||||||||||||||||||||||
Accrued income tax | 5,166 | — | — | — | — | — | 5,166 | |||||||||||||||||||||||||||
Accrued expenses and other | 35,658 | 7,982 | 680 | — | — | — | 44,320 | |||||||||||||||||||||||||||
Total current liabilities | 75,513 | 43,206 | 1,196 | (15,532 | ) | — | — | 104,383 | ||||||||||||||||||||||||||
Non-current liabilities, less current portion | ||||||||||||||||||||||||||||||||||
Long-term debt and capital leases | 172,915 | 10,071 | 16,250 | 26,386(1 | ) | — | (16,250 | )(3) | 209,372 | |||||||||||||||||||||||||
Reclamation and mine closure costs | 40,480 | 23,669 | — | — | — | — | 64,149 | |||||||||||||||||||||||||||
Long-term employee benefits | 18,924 | 4,658 | — | — | — | — | 23,582 | |||||||||||||||||||||||||||
Other non-current liabilities | 7,260 | 8,767 | 1,039 | — | — | — | 17,066 | |||||||||||||||||||||||||||
Total non-current liabilities | 239,579 | 47,165 | 17,289 | 26,386 | — | (16,250 | ) | 314,169 | ||||||||||||||||||||||||||
Total liabilities | $ | 315,092 | $ | 90,371 | $ | 18,485 | $ | 10,854 | $ | — | $ | (16,250 | ) | $ | $ | 418,552 | ||||||||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||||||||||||||||||||||||||||
Preferred stock-par value $0.0001, 200,000,000 shares authorized, none issued | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Common stock-par value $0.0001, 1,800,000,000 shares authorized, 106,605,999 issued and outstanding (137,556,128 issued and outstanding at a par value of $0.01 on a pro forma basis) | 11 | — | — | 1,055 | (4) | 195 | (4) | 115 | (4) | 1,376 | ||||||||||||||||||||||||
Paid-in Capital | 150,140 | 145,588 | 3,250 | (1,055 | )(4) | 27,467 | (2,4) | 114,635 | (2,3,4) | 440,025 | ||||||||||||||||||||||||
Comprehensive income | — | — | ||||||||||||||||||||||||||||||||
Retained earnings (deficit) | 15,106 | (143,838 | ) | 457 | — | 143,838 | (2) | (457 | )(2) | 15,106 | ||||||||||||||||||||||||
Total stockholders’ equity (members’ deficit) | 165,257 | 1,750 | 3,707 | — | 171,500 | 114,293 | 456,507 | |||||||||||||||||||||||||||
Total liabilities and stockholders’ equity (members’ deficit) | $ | 480,349 | $ | 92,121 | $ | 22,192 | $ | 10,854 | $ | 171,500 | $ | 98,043 | $ | $ | 875,059 | |||||||||||||||||||
(1) | Reflects an increase of $35.0 million to ICG’s term loan to pay off Anker’s existing debt of $24.1 million (not including equipment leases of $4.5 million) and to record the related acquisition costs of $5.0 million. |
(2) | Reflects the issuance of 30,950,129 additional common shares, the maximum number of shares issuable, for the acquisitions of Anker ($173.25 million) and CoalQuest ($101.75 million) for a total of $275.0 million. |
(3) | Reflects the conversion of CoalQuest’s notes payable ($16.3 million) to equity upon consummation of the Anker and CoalQuest acquisitions. |
(4) | Reflects the change in par value from $0.0001 per share to $0.01 per share upon the effective date of this offering. |
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ICG, Inc. | Anker | CoalQuest | |||||||||||||||||||||||||||||||||
ICG, Inc. | Anker | CoalQuest | reorganization | acquisition | acquisition | Offering | |||||||||||||||||||||||||||||
historical | historical | historical | adjustments | adjustments | adjustments | adjustments | Pro forma | ||||||||||||||||||||||||||||
(in thousands, except share and per share data) | |||||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||
Coal sales revenues | $ | 144,197 | $ | 42,142 | $ | — | $ | — | $ | — | $ | — | $ | $ | 186,339 | ||||||||||||||||||||
Freight and handling revenues | 2,499 | 3,154 | 5,653 | ||||||||||||||||||||||||||||||||
Other revenues | 6,536 | 2,148 | — | — | — | — | 8,684 | ||||||||||||||||||||||||||||
Total revenues | 153,232 | 47,444 | — | — | — | — | 200,676 | ||||||||||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||
Freight and handling costs | 2,499 | 3,154 | — | — | — | — | 5,653 | ||||||||||||||||||||||||||||
Cost of coal sales and other revenues (exclusive of depreciation, depletion and amortization shown separately below) | 117,184 | 40,818 | 119 | (431 | )(1) | — | 157,690 | ||||||||||||||||||||||||||||
Depreciation, depletion and amortization | 8,522 | 2,942 | 18 | — | 97 | (2) | 77 | (2) | 11,656 | ||||||||||||||||||||||||||
Selling, general and administrative (exclusive of depreciation, depletion and amortization shown separately above) | 4,935 | 1,110 | — | — | — | 6,045 | |||||||||||||||||||||||||||||
Gain on sale of assets | — | (58 | ) | — | — | — | — | (58 | ) | ||||||||||||||||||||||||||
Total costs and expenses | 133,140 | 47,966 | 137 | — | (334 | ) | 77 | 180,986 | |||||||||||||||||||||||||||
Income (loss) from operations | 20,092 | (522 | ) | (137 | ) | — | 334 | (77 | ) | 19,690 | |||||||||||||||||||||||||
Interest and other income (expense): | |||||||||||||||||||||||||||||||||||
Interest expense | (3,145 | ) | (615 | ) | (144 | ) | (42 | )(3) | — | — | (3,946 | ) | |||||||||||||||||||||||
Reorganization items | |||||||||||||||||||||||||||||||||||
Other, net | 636 | 1,490 | 439 | — | — | (431 | )(1) | 2,134 | |||||||||||||||||||||||||||
Total interest and other income (expense) | (2,509 | ) | 875 | 295 | (42 | ) | — | (431 | ) | (1,812 | ) | ||||||||||||||||||||||||
Income (loss) before income taxes | 17,583 | 353 | 158 | (42 | ) | 334 | (508 | ) | 17,878 | ||||||||||||||||||||||||||
Income tax (expense) benefit | (6,726 | ) | — | — | 16 | (4) | (263 | )(4) | 134 | (4) | (6,839 | ) | |||||||||||||||||||||||
Net income (loss) | $ | 10,857 | $ | 353 | $ | 158 | $ | (26 | ) | $ | 71 | $ | (374 | ) | $ | $ | 11,039 | ||||||||||||||||||
Basic earnings per share: | |||||||||||||||||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 10,857 | $ | 11,039 | |||||||||||||||||||||||||||||||
Average shares of common stock outstanding | 106,605,999 | 137,556,128 | (5) | ||||||||||||||||||||||||||||||||
Basic earnings per share | $ | 0.10 | $ | 0.08 | (5) | ||||||||||||||||||||||||||||||
Diluted earnings per share: | |||||||||||||||||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 10,857 | $ | 11,039 | |||||||||||||||||||||||||||||||
Average shares of common stock outstanding | 106,605,999 | 137,556,128 | (5) | ||||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 0.10 | $ | 0.08 | (5) | ||||||||||||||||||||||||||||||
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Historical interest expense | |||||||||||||||||
Description | |||||||||||||||||
ICG, Inc. | Anker | CoalQuest | Total | ||||||||||||||
(in thousands) | |||||||||||||||||
Revolver letter of credit fees | $ | 336 | $ | — | $ | — | $ | 336 | |||||||||
Revolver unutilized portion | 74 | — | — | 74 | |||||||||||||
Term note | 2,324 | — | — | 2,324 | |||||||||||||
Amortization of finance costs | 271 | — | — | 271 | |||||||||||||
Annual administration fee | 25 | — | — | 25 | |||||||||||||
Interest rate cap | (90 | ) | — | — | (90 | ) | |||||||||||
Revolver base rate interest | — | — | — | — | |||||||||||||
Anker related party term loan | — | 236 | — | 236 | |||||||||||||
Anker related party revolving line of credit | — | 89 | — | 89 | |||||||||||||
Anker senior notes | — | 199 | — | 199 | |||||||||||||
Miscellaneous other (capital lease, black lung, etc.) | 205 | 91 | 144 | 440 | |||||||||||||
Total historical interest expense | $ | 3,145 | $ | 615 | $ | 144 | $ | 3,904 | |||||||||
Pro forma interest expense | |||||||||||||||||
Description | ICG, Inc. | Anker | CoalQuest | Total | |||||||||||||
(in thousands) | |||||||||||||||||
Revolver letter of credit fees(a) | $ | 336 | $ | — | $ | — | $ | 336 | |||||||||
Revolver unutilized portion(b) | 294 | — | — | 294 | |||||||||||||
Term note(c) | 2,814 | — | — | 2,814 | |||||||||||||
Amortization of finance costs(d) | 271 | — | — | 271 | |||||||||||||
Annual administration fee(e) | 25 | — | — | 25 | |||||||||||||
Interest rate cap(f) | (90 | ) | — | — | (90 | ) | |||||||||||
Miscellaneous other (capital lease, black lung, etc.) | 205 | 91 | — | 296 | |||||||||||||
Total pro forma interest expense | $ | 3,855 | $ | 91 | $ | — | $ | 3,946 | |||||||||
Less: historical interest expense | $ | 3,145 | $ | 615 | $ | 144 | $ | 3,904 | |||||||||
Pro forma interest expense adjustment | $ | (710 | ) | $ | 524 | $ | 144 | $ | (42 | ) | |||||||
(a) | Reflects pro forma interest expense at the fixed rate of 2.7% on $49.9 million estimated letters of credit outstanding under the revolving letter of credit facility. | |
(b) | Reflects pro forma interest expense at the fixed rate of 0.5% on an estimated unutilized balance of $235.1 million on the revolving facility. | |
(c) | Reflects pro forma interest expense at the actual March 31, 2005 rate of 5.36% on the $210 million term note. The term note utilizes LIBOR rate and is adjusted quarterly. | |
(d) | Reflects amortization of finance costs of $8.1 million at a nominal rate of 8.118% for 72 months. | |
(e) | Reflects the quarterly administration fee of $25 thousand per quarter to the administration agent. | |
(f) | Reflects the estimated reduction in interest expense as a result of our two year Interest Rate Cap agreement of $88 million at a maximum rate of 4.5% per year. |
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Per share offering price of ICG common stock | $8.885 | $10.00 | $11.00 | $12.00 | $13.00 | $14.00 | $15.00 | ||||||||||||||||||||||
Aggregate shares of ICG common stock to be issued to holders of Anker and CoalQuest: Without adjustments | 30,950,129 | 27,500,000 | 25,000,000 | 22,916,667 | 21,153,846 | 19,642,857 | 18,333,333 | ||||||||||||||||||||||
Basic and diluted earnings per share | $0.080 | $0.082 | $0.084 | $0.085 | $0.086 | $0.087 | $0.088 | ||||||||||||||||||||||
With adjustments | 29,824,670 | 26,500,000 | 24,090,909 | 22,083,333 | 20,384,615 | 18,928,571 | 17,666,667 | ||||||||||||||||||||||
Basic and diluted earnings per share | $0.081 | $0.083 | $0.084 | $0.086 | $0.087 | $0.088 | $0.089 | ||||||||||||||||||||||
45
Table of Contents
Horizon | Anker | CoalQuest | ||||||||||||||||||||||||||||||||||||
ICG, Inc. | Horizon | Anker | CoalQuest | acquisition | acquisition | acquisition | Offering | |||||||||||||||||||||||||||||||
historical | historical | historical | historical | adjustments | adjustments | adjustments | adjustments | Pro forma(1) | ||||||||||||||||||||||||||||||
(in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||
Coal sales revenues | $ | 130,463 | $ | 346,981 | $ | 146,676 | $ | — | $ | — | $ | — | $ | — | $ | $ | 624,120 | |||||||||||||||||||||
Freight and handling revenues | 880 | 3,700 | 11,416 | 15,996 | ||||||||||||||||||||||||||||||||||
Other revenues | 4,766 | 22,702 | 6,228 | — | — | — | — | 33,696 | ||||||||||||||||||||||||||||||
Total revenues | 136,109 | 373,383 | 164,320 | — | — | — | — | 673,812 | ||||||||||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||||||||
Freight and handling costs | 880 | 3,700 | 11,416 | — | — | — | — | 15,996 | ||||||||||||||||||||||||||||||
Cost of coal sales and other revenues | 113,707 | 306,429 | 145,985 | 371 | (1,769 | )(2) | — | 564,723 | ||||||||||||||||||||||||||||||
Depreciation, depletion and amortization | 7,943 | 27,547 | 9,754 | 79 | — | 400(3 | ) | 331(3 | ) | 46,054 | ||||||||||||||||||||||||||||
Selling, general and administrative | 4,194 | 8,477 | 4,586 | — | — | — | 17,257 | |||||||||||||||||||||||||||||||
Gain on sale of assets | (10 | ) | (226 | ) | — | — | — | — | — | (236 | ) | |||||||||||||||||||||||||||
Writedowns and other items | — | 10,018 | — | — | — | — | — | 10,018 | ||||||||||||||||||||||||||||||
Total costs and expenses | 126,714 | 355,945 | 171,741 | 450 | — | (1,369 | ) | 331 | 653,812 | |||||||||||||||||||||||||||||
Income (loss) from operations | 9,395 | 17,438 | (7,421 | ) | (450 | ) | — | 1,369 | (331 | ) | 20,000 | |||||||||||||||||||||||||||
Interest and other income (expense): | ||||||||||||||||||||||||||||||||||||||
Interest expense | (3,453 | ) | (114,211 | ) | (1,485 | ) | (535 | ) | 103,391(4 | ) | — | — | (16,293 | ) | ||||||||||||||||||||||||
Reorganization items | — | 727 | — | 727 | ||||||||||||||||||||||||||||||||||
Other, net | 898 | 1,581 | 5,709 | 1,910 | — | — | (1,769 | )(2) | 8,329 | |||||||||||||||||||||||||||||
Total interest and other income (expense) | (2,555 | ) | (111,903 | ) | 4,224 | 1,375 | 103,391 | — | (1,769 | ) | (7,237 | ) | ||||||||||||||||||||||||||
Income (loss) before income taxes | 6,840 | (94,465 | ) | (3,197 | ) | 925 | 103,391 | 1,369 | (2,100 | ) | 12,763 | |||||||||||||||||||||||||||
Income tax (expense) benefit | (2,591 | ) | — | — | — | (3,381 | )(5) | 692(5 | ) | 445(5 | ) | (4,835 | ) | |||||||||||||||||||||||||
Net income (loss) | $ | 4,249 | $ | (94,465 | ) | $ | (3,197 | ) | $ | 925 | $ | 100,010 | $ | 2,061 | $ | (1,655 | ) | $ | $ | 7,928 | ||||||||||||||||||
Basic earnings per share: | ||||||||||||||||||||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 4,249 | $ | 7,928 | ||||||||||||||||||||||||||||||||||
Average shares of common stock outstanding | 106,605,999 | 137,556,128(6 | ) | |||||||||||||||||||||||||||||||||||
Basic earning per share | $ | 0.04 | $ | 0.06(6 | ) | |||||||||||||||||||||||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 4,249 | $ | 7,928 | ||||||||||||||||||||||||||||||||||
Average shares of common stock outstanding | 106,605,999 | 137,556,128(6 | ) | |||||||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 0.04 | $ | 0.06(6 | ) | |||||||||||||||||||||||||||||||||
46
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Historical interest expense | |||||||||||||||||||||
Description | ICG, Inc. | Horizon | Anker | CoalQuest | Total | ||||||||||||||||
(in thousands) | |||||||||||||||||||||
Amortization of financing fee | — | $ | 1,437 | — | — | $ | 1,437 | ||||||||||||||
DIP facility | — | 11,115 | — | — | 11,115 | ||||||||||||||||
Term loan | — | 42,757 | — | — | 42,757 | ||||||||||||||||
Wells Fargo loan | — | 57,200 | — | — | 57,200 | ||||||||||||||||
Funded letter of credit fees | $ | 130 | — | — | — | 130 | |||||||||||||||
Revolver letter of credit fees | 248 | — | — | — | 248 | ||||||||||||||||
Revolver unutilized portion | 64 | — | — | — | 64 | ||||||||||||||||
Term note | 2,463 | — | — | — | 2,463 | ||||||||||||||||
Amortization of finance costs | 266 | — | — | — | 266 | ||||||||||||||||
Annual administration fee | 25 | — | — | — | 25 | ||||||||||||||||
Interest rate cap | 21 | — | — | — | 21 | ||||||||||||||||
Revolver base rate interest | 25 | — | — | — | 25 | ||||||||||||||||
Anker related party term loan | — | — | $ | 293 | — | 293 | |||||||||||||||
Anker related party revolving line of credit | — | — | 110 | — | 110 | ||||||||||||||||
Anker senior notes | — | — | 752 | — | 752 | ||||||||||||||||
Miscellaneous other (capital lease, black lung, etc.) | 211 | 1,702 | 330 | $ | 535 | 2,778 | |||||||||||||||
Total historical interest expense | $ | 3,453 | $ | 114,211 | $ | 1,485 | $ | 535 | $ | 119,684 | |||||||||||
Pro forma interest expense | |||||||||||||||||||||
Description | ICG, Inc. | Horizon | Anker | CoalQuest | Total | ||||||||||||||||
(in thousands) | |||||||||||||||||||||
Revolver letter of credit fees(a) | $ | 1,469 | — | — | — | $ | 1,469 | ||||||||||||||
Revolver unutilized portion(b) | 1,153 | — | — | — | 1,153 | ||||||||||||||||
Term note(c) | 10,479 | — | — | — | 10,479 | ||||||||||||||||
Amortization of finance costs(d) | 1,097 | — | — | — | 1,097 | ||||||||||||||||
Annual administration fee(e) | 100 | — | — | — | 100 | ||||||||||||||||
Interest rate cap(f) | 82 | — | — | — | 82 | ||||||||||||||||
Miscellaneous other (capital lease, black lung, etc.) | 211 | 1,702 | — | — | 1,913 | ||||||||||||||||
Total pro forma interest expense | $ | 14,591 | $ | 1,702 | $ | — | $ | — | $ | 16,293 | |||||||||||
Less: historical interest expense | $ | 3,453 | $ | 114,211 | $ | 1,485 | $ | 535 | $ | 119,684 | |||||||||||
Pro forma interest expense adjustment | $ | (11,138 | ) | $ | 112,509 | $ | 1,485 | $ | 535 | 103,391 | |||||||||||
(a) | Reflects pro forma interest expense at the fixed rate of 2.7% on $54.4 million estimated letters of credit outstanding under the revolving letter of credit facility. | |
(b) | Reflects pro forma interest expense at the fixed rate of 0.5% on an estimated unutilized balance of $230.6 million on the revolving facility. | |
(c) | Reflects pro forma interest expense at the actual December 31, 2004 rate of 4.99% on the $210 million term note. The term utilizes LIBOR rate and is adjusted quarterly. | |
(d) | Reflects amortization of finance costs of $8.1 million at a nominal rate of 8.118% for 72 months. | |
(e) | Reflects the quarterly administration fee of $25 thousand per quarter to the administrative agent. | |
(f) | Reflects the estimated expense incurred as a result of our two year Interest Rate Cap agreement of $88 million at a maximum rate of 4.5% per year. |
47
Table of Contents
Per share offering price of ICG common stock | $8.885 | $10.00 | $11.00 | $12.00 | $13.00 | $14.00 | $15.00 | ||||||||||||||||||||||
Aggregate shares of ICG common stock to be issued to holders of Anker and CoalQuest: Without adjustments | 30,950,129 | 27,500,000 | 25,000,000 | 22,916,667 | 21,153,846 | 19,642,857 | 18,333,333 | ||||||||||||||||||||||
Basic and diluted earnings per share | $0.058 | $0.059 | $0.060 | $0.061 | $0.062 | $0.063 | $0.063 | ||||||||||||||||||||||
With adjustments | 29,824,670 | 26,500,000 | 24,090,909 | 22,083,333 | 20,384,615 | 18,928,571 | 17,666,667 | ||||||||||||||||||||||
Basic and diluted earnings per share | $0.058 | $0.060 | $0.061 | $0.062 | $0.062 | $0.063 | $0.064 | ||||||||||||||||||||||
48
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49
Table of Contents
HORIZON | ||||||||||||||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||||||||||
AEI RESOURCES | HORIZON | to ICG, | ||||||||||||||||||||||||||||||||||||||||
Predecessor to Horizon | Predecessor to ICG, Inc. | ICG, Inc. | Inc. | ICG, Inc. | ||||||||||||||||||||||||||||||||||||||
Period from | Period from | Period | Period | Three | Three | |||||||||||||||||||||||||||||||||||||
January 1, | May 10, | January 1, | May 13, | months | months | |||||||||||||||||||||||||||||||||||||
Year ended | Year ended | 2002 to | 2002 to | Year ended | 2004 to | 2004 to | ended | ended | ||||||||||||||||||||||||||||||||||
December 31, | December 31, | May 9, | December 31, | December 31, | September 30, | December 31, | March 31, | March 31, | ||||||||||||||||||||||||||||||||||
2000* | 2001* | 2002 | 2002 | 2003 | 2004 | 2004 | 2004 | 2005 | ||||||||||||||||||||||||||||||||||
(in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||||||
Coal sales revenues | $ | 486,848 | $ | 500,829 | $ | 136,040 | $ | 264,235 | $ | 441,291 | $ | 346,981 | $ | 130,463 | $ | 110,013 | $ | 144,197 | ||||||||||||||||||||||||
Freight and handling revenues | 11,050 | 14,728 | 2,947 | 6,032 | 8,008 | 3,700 | 880 | 1,811 | 2,499 | |||||||||||||||||||||||||||||||||
Other revenues | 23,491 | 34,835 | 21,183 | 27,397 | 31,771 | 22,702 | 4,766 | 6,452 | 6,536 | |||||||||||||||||||||||||||||||||
Total revenues | 521,389 | 550,392 | 160,170 | 297,664 | 481,070 | 373,383 | 136,109 | 118,276 | 153,232 | |||||||||||||||||||||||||||||||||
Cost and expenses: | ||||||||||||||||||||||||||||||||||||||||||
Freight and handling costs | 11,050 | 14,728 | 2,947 | 6,032 | 8,008 | 3,700 | 880 | 1,811 | 2,499 | |||||||||||||||||||||||||||||||||
Cost of coal sales and other revenues (exclusive of depreciation, depletion and amortization shown separately below) | 409,536 | 379,333 | 114,767 | 251,361 | 400,652 | 306,429 | 113,707 | 98,002 | 117,184 | |||||||||||||||||||||||||||||||||
Depreciation, depletion and amortization | 94,183 | 92,602 | 32,316 | 40,033 | 52,254 | 27,547 | 7,943 | 9,502 | 8,522 | |||||||||||||||||||||||||||||||||
Selling, general and administrative (exclusive of depreciation, depletion and amortization shown separately above) | 20,364 | 19,324 | 9,677 | 16,695 | 23,350 | 8,477 | 4,194 | 2,454 | 4,935 | |||||||||||||||||||||||||||||||||
(Gain)/loss on sale of assets | (594 | ) | 189 | (93 | ) | (39 | ) | (4,320 | ) | (226 | ) | (10 | ) | (185 | ) | — | ||||||||||||||||||||||||||
Writedowns and special items | 12,306 | 20,218 | 8,323 | 729,953 | 9,100 | 10,018 | — | — | — | |||||||||||||||||||||||||||||||||
Total costs and expenses | 546,845 | 526,394 | 167,937 | 1,044,035 | 489,044 | 355,945 | 126,714 | 111,584 | 133,140 | |||||||||||||||||||||||||||||||||
Income (loss) from operations | (25,456 | ) | 23,998 | (7,767 | ) | (746,371 | ) | (7,974 | ) | 17,438 | 9,395 | 6,692 | 20,092 | |||||||||||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||||||||||||||||||||
Interest expense | (116,319 | ) | (138,655 | ) | (36,666 | ) | (80,405 | ) | (145,892 | ) | (114,211 | ) | (3,453 | ) | (37,217 | ) | (3,145 | ) | ||||||||||||||||||||||||
Reorganization items | (429,751 | ) | (22,839 | ) | 1,567,689 | (143,663 | ) | (52,784 | ) | 727 | 21,375 | — | ||||||||||||||||||||||||||||||
Other, net | (1,523 | ) | (2,941 | ) | 499 | 1,256 | 187 | 1,581 | 898 | �� | 4 | 636 | ||||||||||||||||||||||||||||||
Total interest and other income (expense) | (547,593 | ) | (164,435 | ) | 1,531,522 | (222,812 | ) | (198,489 | ) | (111,903 | ) | (2,555 | ) | (15,838 | ) | (2,509 | ) | |||||||||||||||||||||||||
Income (loss) before income taxes | (573,049 | ) | (140,437 | ) | 1,523,755 | (969,183 | ) | (206,463 | ) | (94,465 | ) | 6,840 | (9,146 | ) | 17,583 | |||||||||||||||||||||||||||
Income tax expense (benefit) | 48,290 | (4,155 | ) | — | — | — | — | (2,591 | ) | — | (6,726 | ) | ||||||||||||||||||||||||||||||
Net income (loss) | $ | (524,759 | ) | $ | (144,592 | ) | $ | 1,523,755 | $ | (969,183 | ) | $ | (206,463 | ) | $ | (94,465 | ) | $ | 4,249 | $ | (9,146 | ) | $ | 10,857 | ||||||||||||||||||
Earnings (loss) per share(1): | ||||||||||||||||||||||||||||||||||||||||||
Basic | — | — | — | — | — | — | 0.04 | — | 0.11 | |||||||||||||||||||||||||||||||||
Diluted | — | — | — | — | — | — | 0.04 | — | 0.11 | |||||||||||||||||||||||||||||||||
Average common shares outstanding(1): | ||||||||||||||||||||||||||||||||||||||||||
Basic | — | — | — | — | — | — | 106,605,999 | — | 106,605,999 | |||||||||||||||||||||||||||||||||
Diluted | — | — | — | — | — | — | 106,605,999 | — | 106,605,999 | |||||||||||||||||||||||||||||||||
Balance sheet data (at period end): | ||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 55,513 | $ | 64,592 | $ | 87,278 | $ | 114 | $ | 859 | $ | — | $ | 23,967 | $ | 567 | $ | 24,974 | ||||||||||||||||||||||||
Total assets | 881,847 | 859,084 | 1,521,318 | 484,212 | 407,064 | 370,298 | 459,975 | 414,373 | 480,349 | |||||||||||||||||||||||||||||||||
Long-term debt and capital leases | 14 | — | 933,106 | 1,157 | 315 | 29 | 173,446 | 130 | 172,915 | |||||||||||||||||||||||||||||||||
Total liabilities | 1,451,796 | 1,581,346 | 1,286,318 | 1,222,218 | 1,351,393 | 1,409,092 | 305,575 | 1,367,847 | 315,092 | |||||||||||||||||||||||||||||||||
Total stockholders’ equity (members deficit) | $ | (569,949 | ) | $ | (722,262 | ) | $ | 235,000 | $ | (738,006 | ) | $ | (944,329 | ) | $ | (1,038,794 | ) | $ | 154,400 | $ | 235,000 | $ | 165,257 | |||||||||||||||||||
Total liabilities and stockholders’ equity (members deficit) | $ | 881,847 | $ | 859,084 | $ | 1,521,318 | $ | 484,212 | $ | 407,064 | $ | 370,298 | $ | 459,975 | $ | 414,373 | $ | 480,349 | ||||||||||||||||||||||||
Statement of cash flows data: | ||||||||||||||||||||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||||||||||||||||||||
Operating activities | $ | — | $ | 106,060 | $ | (298,196 | ) | $ | 76,372 | $ | 17,753 | $ | 34,057 | $ | 30,209 | $ | 17,025 | $ | 21,837 | |||||||||||||||||||||||
Investing activities | $ | — | $ | (88,434 | ) | $ | (10,841 | ) | $ | (12,799 | ) | $ | (1,549 | ) | $ | (2,535 | ) | $ | (329,166 | ) | $ | (1,720 | ) | $ | (18,519 | ) | ||||||||||||||||
Financing activities | $ | — | $ | (8,547 | ) | $ | 259,011 | $ | (78,025 | ) | $ | (15,459 | ) | $ | (32,381 | ) | $ | 322,924 | $ | (15,597 | ) | $ | (2,311 | ) | ||||||||||||||||||
Capital expenditures | $ | 24,143 | $ | 34,254 | $ | 10,963 | $ | 13,435 | $ | 16,937 | $ | 6,624 | $ | 5,583 | $ | 1,890 | $ | 18,519 |
* | The selected historical financial data of AEI Resources for the year ended December 31, 2000 and the year ended December 31, 2001 is not derived from audited financial statements. |
(1) | Earnings per share data and average shares outstanding are not presented for the period from January 1, 2002 to May 9, 2002, the period from May 10, 2002 to December 31, 2002, the year ended December 31, 2003 and the period from January 1, 2004 to September 30, 2004 because they were prepared on a carve-out basis. The financial statements prepared for predecessor periods are carve-out financial statements reflecting the operations and financial condition of the Horizon assets acquired by ICG as of September 30, 2004 (collectively, the “combined companies”). The predecessor financial statements were prepared from the separate accounts and records maintained by the combined companies. In addition, certain assets and expense items represent allocations from Horizon. The accounts allocated include vendor advances, reclamation deposits and selling, general and administrative expenses. |
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Anker | CoalQuest | ||||||||||||||||||
Year ended | Three months | Year ended | Three months | ||||||||||||||||
December 31, | ended | December 31, | ended | ||||||||||||||||
2004 | March 31, 2005 | 2004 | March 31, 2005 | ||||||||||||||||
Statement of operations data: | |||||||||||||||||||
Net income (loss) | $ | (3,196,973 | ) | $ | 353,169 | $ | 925,553 | $ | 158,134 | ||||||||||
Balance sheet data (at period end): | |||||||||||||||||||
Cash and cash equivalents | $ | 1,165,559 | $ | 2,342,409 | $ | 1,818,833 | $ | 1,862,469 | |||||||||||
Total assets | 83,370,701 | 92,122,446 | 21,993,658 | 22,192,429 | |||||||||||||||
Total liabilities | 81,973,367 | 90,371,943 | 18,370,242 | 18,485,884 | |||||||||||||||
Total stockholders’ equity (members’ deficit) | $ | 1,397,334 | $ | 1,750,503 | $ | 3,623,416 | $ | 3,706,545 | |||||||||||
Total liabilities and stockholders’ equity/members’ deficit | $ | 83,370,701 | $ | 92,122,446 | $ | 21,993,658 | $ | 22,192,429 | |||||||||||
Statement of cash flows data: | |||||||||||||||||||
Net cash provided by (used in) | |||||||||||||||||||
Operating activities | $ | 10,149,401 | $ | 6,626,316 | $ | 1,318,103 | $ | 118,591 | |||||||||||
Investing activities | $ | (26,298,582 | ) | $ | (9,544,590 | ) | $ | — | $ | — | |||||||||
Financing activities | $ | 14,137,990 | $ | 4,095,124 | $ | — | $ | (75,005 | ) | ||||||||||
Capital expenditures | $ | 27,238,311 | $ | 10,052,090 | $ | — | $ | — |
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4 | Discount rate. SFAS No. 143 requires that asset retirement obligations be recorded at fair value. In accordance with the provisions of SFAS No. 143, we utilize discounted cash flow techniques to estimate the fair value of our obligations. We base our discount rate on the rates of treasury bonds with maturities similar to expected mine lives, adjusted for our credit standing. |
4 | Third-party margin. SFAS No. 143 requires the measurement of an obligation to be based upon the amount a third-party would demand to assume the obligation. Because we plan to perform a significant amount of the reclamation activities with internal resources, a third-party margin was added to the estimated costs of these activities. This margin was estimated based upon our historical experience with contractors performing certain types of reclamation activities. The inclusion of this margin will result in a recorded obligation that is greater than our estimates of our cost to perform the reclamation activities. If our cost estimates are accurate, the excess of the recorded obligation over the cost incurred to perform the work will be recorded as a gain at the time that reclamation work is completed. |
4 | geological conditions; |
4 | historical production from the area compared with production from other producing areas; |
4 | the assumed effects of regulations and taxes by governmental agencies; |
4 | assumptions governing future demand and prices; and |
4 | assumptions regarding future operating costs. |
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Horizon | ICG, Inc. | |||||||||||||||
Three months ended | ||||||||||||||||
March 31, | Increase | |||||||||||||||
(decrease) | ||||||||||||||||
2004 | 2005 | ($ or tons) | % change | |||||||||||||
(in thousands, except percentages and per ton data) | ||||||||||||||||
Coal revenues | $ | 110,013 | $ | 144,197 | $ | 34,184 | 31% | |||||||||
Freight and handling revenues | 1,811 | 2,499 | 688 | 38% | ||||||||||||
Other revenues | 6,452 | 6,536 | 84 | 1% | ||||||||||||
Total revenues | $ | 118,276 | $ | 153,232 | $ | 34,956 | 30% | |||||||||
Tons sold | 3,478 | 3,554 | 76 | 2% | ||||||||||||
Coal revenues per ton | $ | 31.63 | $ | 40.57 | $ | 8.94 | 28% |
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Horizon | ICG, Inc. | |||||||||||||||
Three months ended | ||||||||||||||||
March 31, | Increase | |||||||||||||||
(decrease) | ||||||||||||||||
2004 | 2005 | ($ or tons) | % change | |||||||||||||
(in thousands, except percentages and per ton data) | ||||||||||||||||
Cost of coal sales and other revenues (exclusive of depreciation, depletion and amortization) | $ | 98,002 | $ | 117,184 | $ | 19,182 | 20% | |||||||||
Cost of coal sales and other revenues as % of revenues | 83 | % | 76 | % | ||||||||||||
Freight and handling costs | 1,811 | 2,499 | 688 | 38% | ||||||||||||
Freight and handling costs as % of revenues | 2 | % | 2 | % | ||||||||||||
Depreciation, depletion and amortization | 9,502 | 8,522 | (980 | ) | (10% | ) | ||||||||||
Depreciation, depletion and amortization as % of revenues | 8 | % | 6 | % | ||||||||||||
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization) | 2,454 | 4,935 | 2,481 | 101% | ||||||||||||
Selling, general and administrative expenses as % of revenues | 2 | % | 3 | % | ||||||||||||
Gain on sale of assets | (185 | ) | — | 185 | * | |||||||||||
Total costs and expenses | $ | 111,584 | $ | 133,140 | 21,556 | |||||||||||
Total costs and expenses as % of revenues | 94 | % | 87 | % | ||||||||||||
Cost of coal sales per ton sold | $ | 32.08 | $ | 37.46 | $ | 5.38 | 17% |
* | Not meaningful. |
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Horizon | ICG, Inc. | ||||||||||||||||
Three months ended | |||||||||||||||||
December 31, | Increase | ||||||||||||||||
(decrease) | |||||||||||||||||
2003 | 2004 | ($ or tons) | % change | ||||||||||||||
(in thousands, except percentages and per ton data) | |||||||||||||||||
Coal revenues | $ | 111,428 | $ | 130,463 | $ | 19,305 | 17% | ||||||||||
Freight and handling revenues | 1,221 | 880 | (341 | ) | (28% | ) | |||||||||||
Other revenues | 6,398 | 4,766 | (1,632 | ) | (26% | ) | |||||||||||
Total revenues | $ | 119,047 | $ | 136,109 | $ | 17,062 | 14% | ||||||||||
Tons sold | 3,855 | 3,582 | (273 | ) | (7% | ) | |||||||||||
Coal sales realization per ton sold | $ | 28.90 | $ | 36.42 | $ | 7.52 | 26% |
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Horizon | ICG, Inc. | ||||||||||||||||
Three months ended | |||||||||||||||||
December 31, | Increase | ||||||||||||||||
(decrease) | |||||||||||||||||
2003 | 2004 | ($ or tons) | % change | ||||||||||||||
(in thousands, except percentages and per ton data) | |||||||||||||||||
Cost of coal sales and other revenues (exclusive of depreciation, depletion and amortization) | $ | 100,267 | $ | 113,707 | $ | 13,440 | 13% | ||||||||||
Cost of coal sales and other revenues as % of revenues | 84 | % | 84 | % | |||||||||||||
Freight and handling costs | $ | 1,221 | $ | 880 | $ | (341 | ) | (28% | ) | ||||||||
Freight and handling costs as % of revenues | 1 | % | 1 | % | |||||||||||||
Depreciation, depletion and amortization | $ | 13,230 | $ | 7,943 | $ | (5,287 | ) | (40% | ) | ||||||||
Depreciation, depletion and amortization as % of revenues | 11 | % | 6 | % | |||||||||||||
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization) | $ | 4,873 | $ | 4,194 | $ | (679 | ) | (14% | ) | ||||||||
Selling, general and administrative expenses as % of revenues | 4 | % | 3 | % | |||||||||||||
Gain on sale of assets | $ | (2,260 | ) | $ | (10 | ) | $ | 2,250 | (100% | ) | |||||||
Writedowns and other items | $ | 203 | $ | — | $ | (203 | ) | (100% | ) | ||||||||
Total costs and expenses | $ | 117,534 | $ | 126,714 | $ | 9,180 | 8% | ||||||||||
Total costs and expenses as % of revenues | 99 | % | 93 | % | |||||||||||||
Cost of coal sales per ton sold | $ | 30.49 | $ | 35.38 | $ | 4.89 | 16% |
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Nine months ended | |||||||||||||||||
September 30, | Increase | ||||||||||||||||
(decrease) | |||||||||||||||||
2003 | 2004 | ($ or tons) | % change | ||||||||||||||
(in thousands, except percentages and per ton data) | |||||||||||||||||
Coal revenues | $ | 329,863 | $ | 346,981 | $ | 17,118 | 5% | ||||||||||
Freight and handling revenues | 6,786 | 3,700 | (3,086 | ) | (45% | ) | |||||||||||
Other revenues | 25,373 | 22,702 | (2,671 | ) | (11% | ) | |||||||||||
Total revenues | $ | 362,022 | $ | 373,383 | $ | 11,361 | 3% | ||||||||||
Tons sold | 12,801 | 10,421 | (2,380 | ) | (19% | ) | |||||||||||
Coal sales realization per ton sold | $ | 25.77 | $ | 33.30 | $ | 7.53 | 29% |
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Nine months ended | |||||||||||||||||
September 30, | |||||||||||||||||
Increase | |||||||||||||||||
2003 | 2004 | (decrease) | % change | ||||||||||||||
(in thousands, except percentages and per ton data) | |||||||||||||||||
Cost of coal sales and other revenues (exclusive of depreciation, depletion and amortization) | $ | 300,386 | $ | 306,429 | $ | 6,043 | 2% | ||||||||||
Cost of coal sales and other revenues as % of revenues | 83 | % | 82 | % | |||||||||||||
Freight and handling costs | $ | 6,786 | $ | 3,700 | $ | (3,086 | ) | (45% | ) | ||||||||
Freight and handling costs as % of revenues | 2 | % | 1 | % | |||||||||||||
Depreciation, depletion and amortization | $ | 39,023 | $ | 27,547 | $ | (11,476 | ) | (29% | ) | ||||||||
Depreciation, depletion and amortization as % of revenues | 11 | % | 7 | % | |||||||||||||
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization) | $ | 18,478 | $ | 8,477 | $ | (10,001 | ) | (54% | ) | ||||||||
Selling, general and administrative expenses as % of revenues | 5 | % | 2 | % | |||||||||||||
Gain on sale of assets | $ | (2,060 | ) | $ | (226 | ) | $ | 1,834 | (89% | ) | |||||||
Writedowns and other items | $ | 8,897 | $ | 10,018 | $ | 1,121 | 13% | ||||||||||
Total costs and expenses | $ | 371,510 | $ | 355,945 | $ | (15,565 | ) | (4% | ) | ||||||||
Total costs and expenses as % of revenues | 103 | % | 95 | % | |||||||||||||
Cost of coal sales per ton sold | $ | 29.02 | $ | 34.16 | $ | 5.14 | 18% |
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Year ended | |||||||||||||||||
December 31, | Increase | ||||||||||||||||
(decrease) | |||||||||||||||||
2002(1) | 2003 | ($ or tons) | % change | ||||||||||||||
(in thousands, except percentages | |||||||||||||||||
and per ton data) | |||||||||||||||||
Coal revenues | $ | 400,275 | $ | 441,291 | $ | 41,016 | 10% | ||||||||||
Freight and handling revenues | 8,979 | 8,008 | (971 | ) | (11% | ) | |||||||||||
Other revenues | 48,580 | 31,771 | (16,809 | ) | (35% | ) | |||||||||||
Total revenues | $ | 457,834 | $ | 481,070 | $ | 23,236 | 5% | ||||||||||
Tons sold | 16,540 | 16,655 | 115 | 1% | |||||||||||||
Coal sales realization per ton sold | $ | 24.20 | $ | 26.50 | $ | 2.30 | 10% |
(1) | Represents the combination of amounts for the period January 1, 2002 to May 9, 2002 with the amounts for the period May 10, 2002 to December 31, 2002. |
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Year ended | |||||||||||||||||
December 31, | |||||||||||||||||
Increase | |||||||||||||||||
2002 | 2003 | (decrease) | % change | ||||||||||||||
(in thousands, except percentages and per ton data) | |||||||||||||||||
Cost of coal sales and other revenues (exclusive of depreciation, depletion and amortization) | $ | 366,128 | $ | 400,652 | $ | 34,524 | 9% | ||||||||||
Cost of coal sales and other revenues as % of revenues | 80 | % | 83 | % | |||||||||||||
Freight and handling costs | $ | 8,979 | $ | 8,008 | $ | (971 | ) | (11% | ) | ||||||||
Freight and handling costs as % of revenues | 2 | % | 2 | % | |||||||||||||
Depreciation, depletion and amortization | $ | 72,350 | $ | 52,254 | $ | (20,096 | ) | (28% | ) | ||||||||
Depreciation, depletion and amortization as % of revenues | 16 | % | 11 | % | |||||||||||||
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization) | $ | 26,372 | $ | 23,350 | $ | (3,022 | ) | (11% | ) | ||||||||
Selling, general and administrative expenses as % of revenues | 6 | % | 5 | % | |||||||||||||
Gain on sale of assets | $ | (132 | ) | $ | (4,320 | ) | $ | (4,188 | ) | * | |||||||
Writedowns and other items | $ | 738,275 | $ | 9,100 | $ | (729,175 | ) | (99% | ) | ||||||||
Total costs and expenses | $ | 1,211,972 | $ | 489,044 | $ | (722,928 | ) | (60% | ) | ||||||||
Total costs and expenses as % of revenues | 265 | % | 102 | % | |||||||||||||
Cost of coal sales per ton sold | $ | 73.28 | $ | 29.36 | $ | (43.92 | ) | (60% | ) |
* | Not meaningful |
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As of | |||||
December 31, 2004 | |||||
(in thousands) | |||||
Term loan due 2010 | $ | 175,000 | (1) | ||
Revolving credit facility | — | ||||
Capital lease obligations | 681 | ||||
Other | 3,787 | ||||
Total long-term debt | $ | 179,468 | |||
Less current portion | (6,022 | ) | |||
Long-term debt, net of current portion | $ | 173,446 | |||
(1) | We are required to use 50% of the net proceeds of this offering to repay amounts outstanding under the term loan. |
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Payments due by period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
1 year | 1-3 years | 3-5 years | 5 years | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Long-term debt obligations | $ | 7,417 | $ | 5,739 | $ | 5,253 | $ | 199,523 | $ | 217,932 | ||||||||||
Capital leases obligations | 513 | 168 | — | — | 681 | |||||||||||||||
Operating leases | 13,506 | 12,058 | — | — | 25,564 | |||||||||||||||
Coal purchase obligation | 114,620 | 134,389 | 57,644 | 25,186 | 331,839 | |||||||||||||||
Advisory Services agreement(1) | 2,000 | 4,000 | 4,000 | 3,500 | 13,500 | |||||||||||||||
Minimum royalties | 8,567 | 15,688 | 14,016 | 30,158 | 68,429 | |||||||||||||||
Total(2) | $ | 146,623 | $ | 172,042 | $ | 80,913 | $ | 258,367 | $ | 657,945 | ||||||||||
(1) | See “Certain relationships and related party transactions.” |
(2) | Our contractual obligations exclude interest amounts due for the years shown above because it is at a variable rate. We are also a party to an employment agreement with each of our President and Chief Executive Officer and our Senior Vice President and General Counsel. See “Management— Employment agreements” regarding the terms and conditions of this employment agreement. |
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End use | Tons (millions) | % of total | ||||||
Electric Power | 1,015 | 91.9 | % | |||||
Other Industrial Plants | 61 | 5.6 | % | |||||
Coke Plants | 24 | 2.1 | % | |||||
Residential & Commercial | 4 | 0.4 | % | |||||
Total | 1,104 | 100.0 | % |
% of total | ||||
electricity | ||||
Electricity generation source | generation | |||
Coal | 50 | % | ||
Nuclear | 20 | % | ||
Natural Gas | 18 | % | ||
Hydro | 7 | % | ||
Petroleum | 3 | % | ||
Other | 2 | % | ||
Total | 100 | % |
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1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||||||||
(tons in millions | ||||||||||||||||||||||||||||
Area: | ||||||||||||||||||||||||||||
Appalachian | 460.4 | 425.6 | 419.4 | 431.2 | 396.2 | 376.0 | 390.7 | |||||||||||||||||||||
Interior (includes | ||||||||||||||||||||||||||||
Illinois Basin) | 168.4 | 162.5 | 143.5 | 146.9 | 146.6 | 146.0 | 147.5 | |||||||||||||||||||||
Western | 488.8 | 512.3 | 510.7 | 547.9 | 550.4 | 548.7 | 573.3 | |||||||||||||||||||||
Total | 1,117.6 | 1,100.4 | 1,073.6 | 1,126.0 | 1,093.2 | 1,070.7 | 1,111.4 | |||||||||||||||||||||
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4 | burning lower sulfur coal, either exclusively or mixed with higher sulfur coal; |
4 | installing pollution control devices such as scrubbers, which reduce the emissions from high sulfur coal; |
4 | reducing electricity generating levels; or |
4 | purchasing or trading emission credits to allow them to comply with the sulfur dioxide emission compliance requirements. |
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4 | stronger industrial demand following a recovery in the U.S. manufacturing sector; |
4 | relatively low customer stockpiles; |
4 | production difficulties and reserve degradation experienced by some U.S. coal producers; |
4 | capacity constraints of U.S. nuclear-powered electricity generators; |
4 | high current and forward prices for natural gas and oil; |
4 | transportation disruptions including constrained rail line capacity and increased costs faced by the trucking industry; and |
4 | increased international demand for U.S. coal for electricity generation and steelmaking, driven by global economic growth, high ocean freight rates and the weak U.S. dollar. |
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Quality characteristics | |||||||||||||||||||||||||||||||||
(as received) | |||||||||||||||||||||||||||||||||
Recoverable | |||||||||||||||||||||||||||||||||
reserves proven | Total tons | ||||||||||||||||||||||||||||||||
and probable | (in millions | Tons by market | |||||||||||||||||||||||||||||||
as of 1/1/2005 | of tons) | Reserve | Heat | classification | |||||||||||||||||||||||||||||
(in millions | life | content | Sulfur | Ash | |||||||||||||||||||||||||||||
Mining companies | State | of tons)(1) | Owned | Leased | (years) | (Btu/lb) | (%) | (%) | Steam | Metallurgical(4)(5) | |||||||||||||||||||||||
Northern Appalachia: | |||||||||||||||||||||||||||||||||
Vindex Energy Corporation | MD | 10.64 | 0.00 | 10.64 | 14.2 | 11,500- 13,000 | 1.2%- 2.0% | 7.0%- 19.0% | 7.98 | 2.66 | |||||||||||||||||||||||
Patriot Mining Company | WV, PA | 1.05 | 0.71 | 0.34 | 1.4 | 11,700 | 2.1% | 16.2% | 1.05 | 0.00 | |||||||||||||||||||||||
Spruce Fork Division | WV | 48.57 | 46.70 | 1.88 | 19.4 | 13,000 | 1.2% | 9.0% | 1.30 | 47.27 | |||||||||||||||||||||||
Philippi Development Division | WV | 40.97 | 32.34 | 8.63 | 20.5 | 13,100 | 1.4% | 8.3% | 0.00 | 40.97 | |||||||||||||||||||||||
Harrison Division | WV | 17.51 | 0.23 | 17.28 | 9.7 | 12,500 | 3.2% | 12.5% | 17.51 | 0.00 | |||||||||||||||||||||||
Mount Storm Division | WV, MD | 6.01 | 0.47 | 5.54 | 10.0 | 13,200 | 1.0% | 9.0% | 0.00 | 6.01 | |||||||||||||||||||||||
Sycamore Group, LLC | WV | 1.21 | 0.17 | 1.04 | 2.4 | 12,500 | 3.2% | 12.0% | 1.21 | 0.00 | |||||||||||||||||||||||
CoalQuest Development LLC | WV | 194.30 | 194.30 | 0.00 | 21.6 | 13,000 | 1.3% | 9.8% | 32.70 | 161.60 | |||||||||||||||||||||||
Northern Appalachia Total | 320.27 | 274.92 | 45.35 | 61.75 | 258.52 | ||||||||||||||||||||||||||||
Central Appalachia: | |||||||||||||||||||||||||||||||||
ICG - Knott Country | KY | 6.73 | 5.81 | 0.92 | 5.2 | 12,700 | 1.3% | 8.4% | 6.73 | 0.00 | |||||||||||||||||||||||
ICG - Hazard | KY | 71.38 | 0.23 | 71.15 | 11.9 | 12,000 | 1.6% | 11.2% | 71.38 | 0.00 | |||||||||||||||||||||||
ICG - East Kentucky | KY | 2.62 | 0.00 | 2.62 | 2.0 | 12,400 | 1.2% | 12.2% | 2.62 | 0.00 | |||||||||||||||||||||||
ICG - Eastern | WV | 23.69 | 7.27 | 16.42 | 7.4 | 12,300 | 1.1% | 12.2% | 23.69 | 0.00 | |||||||||||||||||||||||
ICG - Natural Resources(2) | WV | 44.90 | 2.20 | 42.70 | NA | 12,000 | 0.8% | 12.2% | 44.90 | 0.00 | |||||||||||||||||||||||
ICG - Natural Resources(3) | KY | 5.9 | 4.4 | 1.5 | NA | 12,000 | 1.1% | 12.0% | 4.40 | 0.00 | |||||||||||||||||||||||
Beckley-Smokeless Division(4) | WV | 28.97 | 1.28 | 27.70 | 29.0 | 13,800 | 0.7% | 4.8% | 0.00 | 28.97 | |||||||||||||||||||||||
Anker Virginia Mining Company | VA | 27.50 | 0.00 | 27.50 | 27.5 | 14,000 | 0.6% | 4.0% | 0.00 | 27.50 | |||||||||||||||||||||||
Central Appalachia Total | 211.69 | 21.19 | 190.51 | 153.72 | 56.47 | ||||||||||||||||||||||||||||
Other: | |||||||||||||||||||||||||||||||||
ICG - Illinois | IL | 29.63 | 11.38 | 18.25 | 12.9 | 10,500 | 3.2% | 9.5% | 29.63 | 0.00 | |||||||||||||||||||||||
ICG - Natural Resources | 325.21 | 305.10 | 20.1 | NA | 11,000 | 3.0% | 9.0% | 326.71 | 0.00 | ||||||||||||||||||||||||
Other Total | 354.84 | 316.48 | 38.35 | 356.34 | 0.00 | ||||||||||||||||||||||||||||
Total Reserves | 886.81 | 612.51 | 274.3 | 571.81 | 314.99 | ||||||||||||||||||||||||||||
(1) | Recoverable reserves represent the amount of coal reserves that can actually be recovered taking into account all mining and preparation losses involved in producing a saleable product using existing methods under current law. The reserve numbers set forth in this table exclude reserves for which we have leased our mining rights to third parties. Reserve information reflects a moisture factor of approximately 6.0%. This moisture factor represents the average moisture present on our delivered coal. |
(2) | ICG - Natural Resources (Jenny’s Creek) |
(3) | ICG - Natural Resources (Mount Sterling) |
(4) | Beckley Smokeless and Anker Virginia meet historical metallurgical coal quality specifications. |
(5) | Currently, ICG reports selling coal with ash and sulfur contents as high as 10% and 1.5%, respectively into the current metallurgical market from the Vindex Energy, Spruce Fork, and Phillipi Divisions. Similarly, all production Mount Storm and portions of Hillman could be sold on this metallurgical market when production begins. |
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Quality characteristics | |||||||||||||||||||||||||||||
(as received) | |||||||||||||||||||||||||||||
Recoverable | Tons by market | ||||||||||||||||||||||||||||
resources | Resource | Heat | classification | ||||||||||||||||||||||||||
as of 1/1/2005 | life | content | Sulfur | Ash | |||||||||||||||||||||||||
Mining company | State | (in millions of tons)(1) | (years) | (Btu/lb) | (%) | (%) | Steam | Metallurgical(4) | |||||||||||||||||||||
Northern Appalachia: | |||||||||||||||||||||||||||||
Patriot Mining Company | WV, PA | 1.89 | 2.5 | 1.89 | 0.00 | ||||||||||||||||||||||||
Spruce Fork Division | WV | 2.42 | 1.0 | 13,000 | 1.2 | % | 9.0 | % | 2.42 | 0.00 | |||||||||||||||||||
Philippi Development Division | WV | 2.40 | 1.2 | 13,100 | 1.4 | % | 8.3 | % | 2.40 | 0.00 | |||||||||||||||||||
Harrison Division | WV | 1.28 | 0.7 | 12,500 | 3.2 | % | 12.5 | % | 1.28 | 0.00 | |||||||||||||||||||
CoalQuest Development LLC | WV | 37.04 | 4.1 | 37.04 | 0.00 | ||||||||||||||||||||||||
Upshur Property | WV | 92.96 | 46.5 | 8,000 | 2.0 | % | 43.0 | % | 92.96 | 0.00 | |||||||||||||||||||
Northern Appalachia Total | 137.99 | 137.99 | 0.00 | ||||||||||||||||||||||||||
Central Appalachia: | |||||||||||||||||||||||||||||
ICG – Knott County | KY | 0.00 | 12,700 | 1.3 | % | 8.4 | % | 0.00 | 0.00 | ||||||||||||||||||||
ICG – Hazard | KY | 3.00 | 12,000 | 1.6 | % | 11.2 | % | 3.00 | 0.00 | ||||||||||||||||||||
ICG – East Kentucky | KY | 0.00 | 12,400 | 1.2 | % | 12.2 | % | 0.00 | 0.00 | ||||||||||||||||||||
ICG – Eastern | WV | 0.02 | 12,300 | 1.1 | % | 12.2 | % | 0.02 | 0.00 | ||||||||||||||||||||
ICG – Natural Resources(2) | WV | 0.22 | 12,000 | 0.8 | % | 12.2 | % | 0.22 | 0.00 | ||||||||||||||||||||
ICG – Natural Resources(3) | KY | 0.01 | 12,000 | 1.1 | % | 12.0 | % | 0.01 | 0.00 | ||||||||||||||||||||
Beckley – Smokeless Division(4) | WV | 1.88 | 1.9 | 13,800 | 0.7 | % | 4.8 | % | 0.00 | 1.88 | |||||||||||||||||||
Anker Virginia Mining Company | VA | 2.57 | 5.1 | 13,500 | 0.6 | % | 7.4 | % | 2.57 | 0.00 | |||||||||||||||||||
Central Appalachia Total | 7.70 | 5.82 | 1.88 | ||||||||||||||||||||||||||
Other: | |||||||||||||||||||||||||||||
ICG – Illinois | IL | 38.47 | 10,500 | 3.2 | % | 9.5 | % | 38.47 | 0.00 | ||||||||||||||||||||
ICG – Natural Resources | 522.52 | 11,000 | 3.0 | % | 9.0 | % | 522.52 | 0.00 | |||||||||||||||||||||
Other Total | 560.99 | 560.99 | 0.00 | ||||||||||||||||||||||||||
Total Resources | 706.68 | 704.80 | 1.88 | ||||||||||||||||||||||||||
(1) | Currently, ICG reports selling coal with ash and sulfur contents as high as 10% and 1.5%, respectively into the current metallurgical market from the Vindex Energy, Spruce Fork, and Philippi Divisions. Similarly, all of Mount Storm and portions of Hillman can be sold on this metallurgical market. |
(2) | ICG – Natural Resources (Jenny’s Creek) |
(3) | ICG – Natural Resources (Mount Sterling) |
(4) | Beckley Smokeless and Anker Virginia meet historical metallurgical coal quality specifications. |
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Number and | |||||||||||||||||||||||||||||
type of mines | |||||||||||||||||||||||||||||
Tons | |||||||||||||||||||||||||||||
Preparation | Under- | Mining | produced | ||||||||||||||||||||||||||
Mining complex | Location | plant(s) | ground | Surface | Total | method(a) | Transportation | in 2004 | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
ICG Eastern, LLC | Cowen, WV | 1 | 0 | 1 | 1 | MTR-DL-TSL | Rail | 2,712.1 | |||||||||||||||||||||
ICG Hazard, LLC | Hazard, KY | 1 | (1) | 0 | 6 | 6 | R&P-CM, HW | Rail | 3,978.0 | ||||||||||||||||||||
ICG Knott County, LLC | Kite, KY | 1 | 4 | 0 | 4 | MTR-TSL CM | Rail | 1,386.6 | |||||||||||||||||||||
ICG East Kentucky, LLC | Pike Co., KY | 0 | 0 | 1 | 1 | MTR-TSL | Rail | 1,576.3 | |||||||||||||||||||||
ICG Illinois, LLC | Williamsville, IL | 1 | 1 | 0 | 1 | R&P-CM | Truck | 2,117.6 | |||||||||||||||||||||
Vindex Energy Corporation | Garrett Co., MD | 1 | 0 | 2 | 2 | CRM & CTR | Truck, Rail(2) | 170.7 | |||||||||||||||||||||
Patriot Mining Company | Monongalia Co., WV | 0 | 0 | 3 | 3 | CTR | Barge, Rail | 921.3 | (3) | ||||||||||||||||||||
Spruce Fork Division | Upshur Co., WV | 1 | 2 | 0 | 2 | R&P | Rail | 1,213.9 | |||||||||||||||||||||
Philippi Development Division | Barbour Co., WV | 1 | (4) | 1 | 0 | 1 | R&P | Rail | 255.4 | ||||||||||||||||||||
Beckley-Smokeless Division | Raleigh Co., WV | 1 | 0 | 0 | 0 | R&P | Rail | 0.0 | (2) | ||||||||||||||||||||
Sycamore Group | Harrison Co., WV | 0 | 2 | 0 | 2 | R&P | Truck | 259.3 | (5)(6) | ||||||||||||||||||||
CoalQuest Development LLC | Taylor Co., WV | 0 | 0 | 0 | 0 | R&P & LW | Rail | 0.0 | (7) | ||||||||||||||||||||
Juliana Complex | Webster Co., WV | 1 | 0 | 0 | 0 | R&P & CTR | Rail | 0.0 |
(a) | CRM = Cross Ridge Mining; CTR = Contour Mining; R&P = Room and Pillar; LW = Longwall; MTR = Mountain Top Removal; DL = Dragline; HW = Highwall; CM = Continuous Miner; TSL = Truck and Shovel/ Loader |
(1) | Expected to begin operation in second half of 2005 | |
(2) | Utilizing third-party loadout | |
(3) | Including waste-fuel | |
(4) | Currently utilizing one circuit | |
(5) | Mine permitted but undeveloped | |
(6) | Represents Anker’s 50% share in The Sycamore Group LLC joint venture plus the Sycamore No. 2 mine, expected to begin production in 2005 | |
(7) | Undeveloped, permit in progress |
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Name | Age | Position(s) | ||
Wilbur L. Ross, Jr. | 67 | Non-Executive Chairman and Director | ||
Bennett K. Hatfield | 48 | President, Chief Executive Officer and Director | ||
William D. Campbell | 57 | Vice President, Treasurer and Secretary | ||
Roger L. Nicholson | 44 | Senior Vice President and General Counsel | ||
Samuel R. Kitts | 43 | Senior Vice President, West Virginia and Maryland Operations | ||
William Scott Perkins | 49 | Senior Vice President, Kentucky and Illinois Operations | ||
Phillip Michael Hardesty | 42 | Senior Vice President, Sales and Marketing | ||
Oren Eugene Kitts | 50 | Senior Vice President, Mining Services | ||
Jon R. Bauer | 48 | Director | ||
Cynthia B. Bezik | 52 | Director | ||
William J. Catacosinos | 75 | Director | ||
Marcia L. Page | 44 | Director | ||
Wendy L. Teramoto | 31 | Director |
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Annual compensation | ||||||||||||||||||||
Other annual | All other | |||||||||||||||||||
Salary | Bonus | compensation(1) | compensation | |||||||||||||||||
Name and principal position | Year | ($) | ($) | ($) | ($) | |||||||||||||||
Bennett K. Hatfield, President and Chief Executive Officer(2) | 2004 | — | — | — | — | (3) | ||||||||||||||
George R. Desko, Chief Executive Officer(4) | 2004 | 450,000 | — | — | — | |||||||||||||||
Coy K. Lane, Senior Vice President of Operations(5) | 2004 | 300,000 | — | — | — | |||||||||||||||
William D. Campbell, Vice President and Treasurer(6) | 2004 | 265,000 | — | — | — | (3) | ||||||||||||||
William Scott Perkins, President— ICG Eastern(7) | 2004 | 200,000 | — | — | — | (3) | ||||||||||||||
James Ketron, Vice President and General Counsel(8) | 2004 | 190,000 | — | — | — | |||||||||||||||
Roger L. Nicholson, Senior Vice President and General Counsel(9) | 2004 | — | — | — | — | (3) | ||||||||||||||
Samuel R. Kitts, Senior Vice President, West Virginia and Maryland Operations(10) | 2004 | — | — | — | — | (3) |
(1) | Other annual compensation for fiscal 2005 has not been disclosed when the total value is less than the lesser of 10% of individual’s annual salary or $50,000. |
(2) | Mr. Hatfield became our President and Chief Executive Officer in March 2005. For 2005, Mr. Hatfield will receive an annual salary of $500,000, and is entitled to certain other perquisites. For other information about his compensation, see “—Employment agreements” below. |
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(3) | Executives are entitled to the use of a company-owned vehicle. |
(4) | Mr. Desko was ICG, Inc.’s Interim President and Chief Executive Officer from October 2004 until March 2005. |
(5) | Mr. Lane was ICG, Inc.’s Senior Vice President of Operations until January 2005. |
(6) | Mr. Campbell also became our Secretary in April 2005. |
(7) | Mr. Perkins was ICG, Inc.’s Vice President, ICG Eastern until January 2005, when he became our Senior Vice President, Kentucky and Illinois. |
(8) | Mr. Ketron was ICG, Inc.’s Vice President and General Counsel until February 2005. |
(9) | Mr. Nicholson became our Senior Vice President and General Counsel in April 2005. For 2005, Mr. Nicholson will receive an annual salary of $260,000 and certain other perquisites, see “— Employment agreements” below. |
(10) | Mr. Kitts became our Senior Vice President, West Virginia and Maryland Operations in April 2005. For 2005, Mr. Kitts will receive an annual salary of $250,000. |
Number of | ||||||||||||
Securities | ||||||||||||
Underlying | Restricted | Exercise Price | ||||||||||
Name | Options Granted(1) | Stock(1) | per Share | |||||||||
William D. Campbell | 45,000 | 45,000 | (2) | |||||||||
Phillip Michael Hardesty | 40,000 | 40,000 | (2) | |||||||||
Bennett K. Hatfield | 319,052 | 275,000 | $ | 10.97 | ||||||||
Oren Eugene Kitts | 50,000 | 50,000 | (2) | |||||||||
Samuel R. Kitts | 50,000 | 50,000 | (2) | |||||||||
Roger L. Nicholson | 50,000 | 50,000 | ||||||||||
William Scott Perkins | 50,000 | 50,000 | (2) |
(1) | All option and restricted share grants will be grants 25% vested upon grant, with the remaining vesting ratably over three years. |
(2) | To be priced at the price of the shares of common stock sold in this offering. |
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4 | each person who is known by us to own beneficially more than 5% of our common stock; |
4 | each member of our board of directors and each of our named executive officers; and |
4 | all members of our board of directors and our executive officers as a group. |
Shares beneficially | ||||||||||||||||||||||||
owned after the offering | ||||||||||||||||||||||||
Assuming | Assuming | |||||||||||||||||||||||
Shares beneficially | the underwriters’ | the underwriters’ | ||||||||||||||||||||||
owned | option is | option is | ||||||||||||||||||||||
prior to the offering | not exercised | exercised in full | ||||||||||||||||||||||
Name and address of | ||||||||||||||||||||||||
beneficial owner | Number | Percent | Number | Percent | Number | Percent | ||||||||||||||||||
Värde Coal Inc. | 9,868,755 | 9.26% | ||||||||||||||||||||||
Attn: Kathy Ricke 8500 Normandale Lake Boulevard Suite 1570 Minneapolis, MN 55347 | ||||||||||||||||||||||||
Contrarian Capital Management LLC | 10,822,865 | 10.15% | ||||||||||||||||||||||
Attn: Michael J. Restifo 411 West Putnam Avenue Suite 225 Greenwich, CT 06830 | ||||||||||||||||||||||||
WLR Recovery Fund II, L.P. | 9,804,172 | 9.20% | ||||||||||||||||||||||
Attn: Wendy Teramoto 101 East 52ndStreet 19thFloor New York, NY 10022 | ||||||||||||||||||||||||
Shepherd International Coal Holdings Inc. | 7,670,349 | 7.20% | ||||||||||||||||||||||
Attn: Colin M. Lancaster 3600 S. Lake Drive St. Francis, WI 53235 |
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Shares beneficially | ||||||||||||||||||||||||
owned after the offering | ||||||||||||||||||||||||
Assuming | Assuming | |||||||||||||||||||||||
Shares beneficially | the underwriters’ | the underwriters’ | ||||||||||||||||||||||
owned | option is | option is | ||||||||||||||||||||||
prior to the offering | not exercised | exercised in full | ||||||||||||||||||||||
Name and address of | ||||||||||||||||||||||||
beneficial owner | Number | Percent | Number | Percent | Number | Percent | ||||||||||||||||||
Stark Trading | 7,670,350 | 7.20% | ||||||||||||||||||||||
Attn: Colin M. Lancaster 3600 S. Lake Drive St. Francis, WI 53235 | ||||||||||||||||||||||||
Third Point LLC | 10,001,045 | 9.38% | ||||||||||||||||||||||
Attn: Lloyd Blumberg 360 Madison Ave 24thFloor New York, NY 10017 | ||||||||||||||||||||||||
Wilbur L. Ross, Jr.(1) | 9,804,172 | 9.20% | ||||||||||||||||||||||
Bennett K. Hatfield(2) | 68,750 | * | ||||||||||||||||||||||
William D. Campbell(2) | 22,500 | * | ||||||||||||||||||||||
Phillip Michael Hardesty(2) | 20,000 | * | ||||||||||||||||||||||
Oren Eugene Kitts(2) | 25,000 | * | ||||||||||||||||||||||
Samuel R. Kitts(2) | 25,000 | * | ||||||||||||||||||||||
Roger L. Nicholson(2) | 25,000 | * | ||||||||||||||||||||||
William Scott Perkins(2) | 25,000 | * | ||||||||||||||||||||||
Jon R. Bauer(3) | 10,822,865 | 10.15% | ||||||||||||||||||||||
George R. Desko | — | — | ||||||||||||||||||||||
Marcia L. Page(4) | 9,868,755 | 9.26% | ||||||||||||||||||||||
All directors and executive officers as a group (13 persons)(1)(2)(3)(4) | 30,972,361 | 29.1% |
* | Less than 1%. |
(1) | Represents 9,804,172 shares of common stock held of record by WLR Recovery Fund II L.P. Mr. Ross serves as a principal of WL Ross & Co. LLC, which manages WLR Recovery Fund II L.P. To the extent Mr. Ross is deemed to beneficially own these shares as a result of his position as a principal of WL Ross & Co. LLC, Mr. Ross disclaims beneficial ownership of these shares. |
(2) | Represents restricted shares and options to purchase shares of our common stock which are currently exercisable. |
(3) | Represents 10,822,865 shares of common stock held of record by investment management clients of Contrarian Capital Management LLC. Mr. Bauer serves as the Managing Member of Contrarian Capital Management LLC. To the extent Mr. Bauer is deemed to beneficially own these shares as a result of his position as the Managing Member of Contrarian Capital Management LLC, Mr. Bauer disclaims beneficial ownership of these shares. |
(4) | Represents 9,868,755 shares of common stock held of record by Värde Coal Inc. All of these shares are controlled by Värde Partners, Inc., Värde Management, Inc. or Värde Management International, Inc., which are controlled by Ms. Page, Gregory S. McMillan and George G. Hicks. Ms. Page and Messrs. McMillan and Hicks are (i) the principals, directors and managing partners of Värde Partners, Inc. and (ii) the principals, directors and vice president of Värde Management, Inc. and Värde Management International, Inc. To the extent Ms. Page is deemed to beneficially own these shares as a result of her position as a principal director or managing partner or vice president of Värde Partners, Inc. Värde Management Inc. or Värde Management International, Inc., Ms. Page disclaims beneficial ownership of these shares. |
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4 | a maximum leverage ratio, set at 2.75 to 1.00 from the closing date of the credit facility through December 31, 2005 and decreasing to 2.50 to 1.00 for the 2006 fiscal year, and 2.25 to 1.00 from January 1, 2007 through the final maturity date of the credit facility; |
4 | a minimum interest coverage ratio set at 4.00 to 1.00 for each of the four consecutive quarters then last ended; |
4 | a minimum fixed charge coverage ratio, set at 1.00 to 1.00 from the closing date of the credit facility through March 31, 2005, and adjusted as follows: 0.75 to 1.00 from April 1, 2005 through September 30, 2005, 0.90 to 1.00 from October 1, 2005 through December 31, 2005, 1.00 to 1.00 for the 2006 fiscal year and 1.25 to 1.00 from January 1, 2007 through the final maturity date of the credit facility; and |
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4 | a limit on capital expenditures from the closing date of the credit facility through December 31, 2005 of $100.0 million, for the 2006 fiscal year of $70.0 million, for the 2007 fiscal year of $70.0 million, for the 2008 fiscal year of $60.0 million, for the 2009 fiscal year of $60.0 million and from January 1, 2010 through the final maturity date of the credit facility of $60.0 million. |
4 | the consent by our lenders under the credit facility to the consummation of the Anker and CoalQuest acquisitions and to the corporate reorganization of ICG and certain of its subsidiaries; |
4 | increase the amount of our term loan facility by an additional $35.0 million bringing the total outstanding amount of this term loan facility to $210.0 million; |
4 | increase the sublimit of our revolving credit facility that is available for the issuance of letters of credit from $60.0 million to $75.0 million; |
4 | permit us to make certain restricted payments, including dividends, upon the completion of this offering in an amount to be determined; |
4 | modify the minimum fixed charge coverage ratio; |
4 | modify the limit on capital expenditures; and |
4 | allow us to increase the amount of our revolving credit facility at a later date up to a maximum amount to be negotiated, subject to lender approval at the time of the requested increase. |
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4 | prior to such time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
4 | upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding specified shares; or |
4 | at or subsequent to such time, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock that is not owned by the interested stockholder. |
4 | any merger or consolidation involving the corporation and the interested stockholder; |
4 | any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more of the assets of the corporation to or with the interested stockholder; |
4 | subject to certain exceptions, any transaction which results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
4 | any transaction involving the corporation which has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or |
4 | the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
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4 | the owner of 15% or more of the outstanding voting stock of the corporation; |
4 | an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to the relevant date; and |
4 | the affiliates and associates of the above. |
4 | be a stockholder of record at the time of the giving of the notice for the meeting; |
4 | be entitled to vote at the meeting; and |
4 | have given timely written notice of the business to our secretary. |
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4 | a description in reasonable detail of the business proposed to be brought before the meeting and the reasons for conducting such business at the meeting; |
4 | the name and address of the stockholder proposing such business and of the beneficial owner, if any, on whose behalf the proposal is made; |
4 | the class and series and number of shares that are owned of record and beneficially by the stockholder proposing the business and by the beneficial owner, if any, on whose behalf the proposal is made; |
4 | a description of all arrangements or understandings among the stockholder, the beneficial owner on whose behalf the proposal is made, if any, and any other person or persons (including their names) in connection with the proposal of such business by the stockholders and any material interest of the stockholder in such business; |
4 | whether such stockholder or beneficial owner intends to deliver a proxy statement and forms of proxy to holders of at least the percentage of shares of our voting stock required to approve such proposal; and |
4 | a representation that the stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. |
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4 | the name and address of the stockholder giving the notice and of the beneficial owner, if any, on whose behalf the nomination is made; |
4 | a representation that the stockholder giving the notice is a holder of record of shares of our voting stock entitled to vote at such annual meeting and intends to appear in person or by proxy at the annual meeting to nominate the person or persons specified in the notice; |
4 | the class and series and number of shares of stock owned beneficially and of record by the stockholder giving the notice and by the beneficial owner, if any, on whose behalf the nomination in made; |
4 | a description of all arrangements or understandings between or among any of: |
4 | the stockholder giving the notice; | |
4 | the beneficial owner on whose behalf the notice is given; | |
4 | each nominee; and | |
4 | any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder giving the notice; |
4 | the name, age, business address, residence address and occupation of the nominee proposed by the stockholder; |
4 | such other information regarding each nominee proposed by the stockholder giving the notice as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee been nominated, or intended to be nominated, by our board; |
4 | the signed consent of each nominee to serve as a director on our board if so elected; and |
4 | whether such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of at least the percentage of shares of our voting stock required to elect such nominee or nominees. In addition, a stockholder must also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters relating to nomination of candidates for directors. |
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4 | 1% of the then-outstanding shares of common stock or approximately shares assuming no exercise by the underwriters of their option to purchase additional shares; and |
4 | the average weekly reported volume of trading in the common stock on The New York Stock Exchange during the four calendar weeks preceding the date on which notice of sale is filed, subject to restrictions. |
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4 | shares of common stock will be immediately eligible for sale in the public market without restriction; |
4 | shares of common stock will be eligible for sale in the public market under Rule 144 or Rule 701, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, subject to the volume, manner of sale and other limitations under those rules; and |
4 | the remaining shares of common stock will become eligible under Rule 144 for sale in the public market from time to time after the effective date of the registration statement of which this prospectus is a part upon expiration of their respective holding periods. |
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4 | an individual citizen or resident of the United States; |
4 | a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
4 | an estate the income of which is subject to United States federal income taxation regardless of its source; or |
4 | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
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4 | the gain is effectively connected with a trade or business of the non-U.S. holder in the United States, and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder; |
4 | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or |
4 | we are or have been a “United States real property holding corporation” for United States federal income tax purposes. |
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Underwriters | Number of shares | ||||
UBS Securities LLC | |||||
Lehman Brothers Inc. | |||||
Total | |||||
4 | receipt and acceptance of our common stock by the underwriters; and |
4 | the underwriters’ right to reject orders in whole or in part. |
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Paid by us | Total | |||||||||||||||
No exercise | Full exercise | No exercise | Full exercise | |||||||||||||
Per share | $ | $ | $ | $ | ||||||||||||
Total | $ | $ | $ | $ |
4 | stabilizing transactions; |
4 | short sales; |
4 | purchases to cover positions created by short sales; |
4 | imposition of penalty bids; and |
4 | syndicate covering transactions. |
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4 | the information set forth in this prospectus and otherwise available to the representatives; |
4 | our history and prospects and the history of, and the prospects for, the industry in which we compete; |
4 | our past and present financial performance and an assessment of our management; |
4 | our prospects for future earnings and the present state of our development; |
4 | the general condition of the securities markets at the time of this offering; |
4 | the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies; and |
4 | other factors deemed relevant by the underwriters and us. |
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Page | ||||
ICG, Inc. and Subsidiaries | ||||
Interim Condensed Consolidated Financial Statements (unaudited) | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
Consolidated Financial Statements | ||||
F-13 | ||||
F-14 | ||||
F-15 | ||||
F-16 | ||||
F-17 | ||||
F-18 | ||||
Horizon NR, LLC and Certain Subsidiaries | ||||
F-36 | ||||
F-38 | ||||
F-39 | ||||
F-40 | ||||
F-41 | ||||
F-42 |
F-1
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Page | ||||
Anker Coal Group, Inc. | ||||
F-72 | ||||
F-73 | ||||
F-74 | ||||
F-75 | ||||
F-76 | ||||
F-77 | ||||
CoalQuest Development, LLC | ||||
F-86 | ||||
F-87 | ||||
F-88 | ||||
F-89 | ||||
F-90 | ||||
F-91 |
F-2
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March 31, | ||||||
2005 | ||||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | 24,974 | ||||
Trade accounts receivable | 50,560 | |||||
Inventories | 16,816 | |||||
Deferred income taxes | 2,173 | |||||
Prepaid insurance | 4,826 | |||||
Prepaid expenses and other | 5,588 | |||||
Total current assets | 104,937 | |||||
PROPERTY, PLANT AND EQUIPMENT, net | 167,133 | |||||
DEBT ISSUANCE COSTS, net | 7,594 | |||||
ADVANCE ROYALTIES | 4,986 | |||||
GOODWILL | 183,946 | |||||
DEFERRED INCOME TAXES, NON-CURRENT | 5,997 | |||||
OTHER NON-CURRENT ASSETS | 5,756 | |||||
Total assets | $ | 480,349 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Trade accounts payable | $ | 27,766 | ||||
Current portion of long-term debt and capital leases | 4,241 | |||||
Current portion of reclamation and mine closure costs | 2,682 | |||||
Accrued income tax | 5,166 | |||||
Accrued expenses and other | 35,658 | |||||
Total current liabilities | 75,513 | |||||
NON-CURRENT LIABILITIES, Less current portion | ||||||
Long-term debt and capital leases | 172,915 | |||||
Reclamation and mine closure costs | 40,480 | |||||
Long-term employee benefits | 18,924 | |||||
Other non-current liabilities | 7,260 | |||||
Total non-current liabilities | 239,579 | |||||
Total liabilities | 315,092 | |||||
COMMITMENTS AND CONTINGENCIES | ||||||
STOCKHOLDERS’ EQUITY: | ||||||
Preferred stock-par value $0.0001, 200,000,000 shares authorized, none issued | — | |||||
Common stock-par value $0.0001, 1,800,000,000 shares authorized, 106,605,999 issued and outstanding | 11 | |||||
Additional Paid-In Capital | 150,140 | |||||
Retained Earnings | 15,106 | |||||
Total stockholders’ equity | 165,257 | |||||
Total liabilities and stockholders’ equity | $ | 480,349 | ||||
F-3
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Three months ended | |||||||||||
March 31, | |||||||||||
Horizon | |||||||||||
Companies | |||||||||||
2005 | 2004 | ||||||||||
REVENUES | |||||||||||
Coal sales revenues | $ | 144,197 | $ | 110,013 | |||||||
Freight and handling revenues | 2,499 | 1,811 | |||||||||
Other revenues | 6,536 | 6,452 | |||||||||
Total revenues | 153,232 | 118,276 | |||||||||
COSTS AND EXPENSES: | |||||||||||
Freight and handling costs | 2,499 | 1,811 | |||||||||
Cost of coal sales and other revenues (exclusive of items shown separately below) | 117,184 | 98,002 | |||||||||
Depreciation, depletion and amortization | 8,522 | 9,502 | |||||||||
Selling, general and administrative (exclusive of depreciation and amortization shown separately above) | 4,935 | 2,454 | |||||||||
Gain on sale of assets | — | (185 | ) | ||||||||
Total costs and expenses | 133,140 | 111,584 | |||||||||
Income from operations | 20,092 | 6,692 | |||||||||
INTEREST AND OTHER INCOME (EXPENSE): | |||||||||||
Interest expense | (3,145 | ) | (37,217 | ) | |||||||
Reorganization items | — | 21,375 | |||||||||
Other, net | 636 | 4 | |||||||||
Total interest and other income (expense) | (2,509 | ) | (15,838 | ) | |||||||
Income (loss ) before income tax expense | 17,583 | (9,146 | ) | ||||||||
INCOME TAX EXPENSE | (6,726 | ) | — | ||||||||
Net income (loss) | $ | 10,857 | $ | (9,146 | ) | ||||||
Earnings per share: | |||||||||||
Basic | $ | 0.102 | — | ||||||||
Diluted | $ | 0.102 | — | ||||||||
Average common shares outstanding: | |||||||||||
Basic | 106,605,999 | — | |||||||||
Diluted | 106,605,999 | — |
F-4
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For the Period January 1, 2005 to March 31, 2005 | |||||||||||||||||
Additional | |||||||||||||||||
Common | paid-in | Retained | |||||||||||||||
stock | capital | earnings | Total | ||||||||||||||
Balance — December 31, 2004 | $ | 11 | $ | 150,140 | $ | 4,249 | $ | 154,400 | |||||||||
Net income for the period | — | — | 10,857 | 10,857 | |||||||||||||
Balance — March 31, 2005 | $ | 11 | $ | 150,140 | $ | 15,106 | $ | 165,257 | |||||||||
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Horizon | |||||||||||
Companies | |||||||||||
Period from | Period from | ||||||||||
January 1, 2005 to | January 1, 2004 to | ||||||||||
March 31, 2005 | March 31, 2004 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income (loss) | $ | 10,857 | $ | (9,146 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
Depreciation, depletion and amortization | 8,522 | 9,502 | |||||||||
Amortization of finance costs included in interest expense | 271 | 971 | |||||||||
(Gain) on sale of assets | — | (185 | ) | ||||||||
Deferred income taxes | 1,759 | — | |||||||||
Writeoff of net payables to other Horizon subsidiaries | — | (563 | ) | ||||||||
Changes in assets and liabilities: | |||||||||||
(Increase) decrease in: | |||||||||||
Receivables | (10,143 | ) | (9,371 | ) | |||||||
Inventories | (2,873 | ) | (2,687 | ) | |||||||
Prepaid expenses | 2,625 | (1,417 | ) | ||||||||
Other assets | (1,010 | ) | (251 | ) | |||||||
Increase (decrease) in: | |||||||||||
Accounts payable | 6,516 | (4,859 | ) | ||||||||
Accrued expenses | 1,804 | 36,382 | |||||||||
Accrued income tax | 2,935 | — | |||||||||
Reclamation and mine closure costs | (136 | ) | (1,502 | ) | |||||||
Other liabilities | 710 | 151 | |||||||||
Total adjustments | 10,980 | 26,171 | |||||||||
Net cash provided by operating activities | 21,837 | 17,025 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Proceeds from the sale of assets | — | 170 | |||||||||
Additions to property, plant and equipment and mine development | (18,519 | ) | (1,890 | ) | |||||||
Net cash (used in) investing activities | (18,519 | ) | (1,720 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Repayments on long-term debt | (2,066 | ) | (3,630 | ) | |||||||
Net borrowings (repayments) on revolving line of credit | — | (11,757 | ) | ||||||||
Repayments on capital leases | (245 | ) | (210 | ) | |||||||
Net cash (used in) financing activities | (2,311 | ) | (15,597 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | 1,007 | (292 | ) | ||||||||
Cash and cash equivalents, beginning of period | 23,967 | 859 | |||||||||
Cash and cash equivalents, end of period | $ | 24,974 | $ | 567 | |||||||
Supplemental information: | |||||||||||
Cash paid for interest | $ | 2,778 | $ | 2,860 | |||||||
F-6
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1. | BASIS OF PRESENTATION |
2. | INVENTORIES |
Coal | $ | 7,211 | ||
Parts and supplies, net of reserve for obsolescence of $132 | 9,605 | |||
$ | 16,816 | |||
3. | PROPERTY, PLANT AND EQUIPMENT |
Land and land improvements | $ | 16,928 | ||
Mining and other equipment and related facilities | 86,396 | |||
Mine development and contract costs | 17,245 | |||
Coal reserves | 53,031 | |||
Mine development in process | 298 | |||
Construction work in process | 9,700 | |||
183,598 | ||||
Less-accumulated depreciation, depletion and amortization | (16,465 | ) | ||
Net property, plant and equipment | $ | 167,133 | ||
F-7
Table of Contents
4. | ACCRUED EXPENSES AND OTHER |
Payroll, bonus and vacation expense | $ | 17,577 | ||
Sales and use tax | 194 | |||
Severance tax | 1,842 | |||
Federal reclamation tax | 861 | |||
Excise/black lung tax | 388 | |||
Personal property tax | 4,519 | |||
Franchise tax | 166 | |||
Other | 10,111 | |||
Total | $ | 35,658 | ||
5. | INCOME TAXES |
Current: | |||||
Federal | $ | 4,251 | |||
State | 716 | ||||
4,967 | |||||
Deferred | 1,759 | ||||
Total | $ | 6,726 | |||
F-8
Table of Contents
6. | EMPLOYEE BENEFITS |
Postretirement benefits | $ | 8,356 | |||
Black lung benefits | 10,568 | ||||
Total | 18,924 | ||||
Less—current portion | — | ||||
Long-term portion | $ | 18,924 | |||
March 31, 2005 | March 31, 2004 | |||||||
Service cost | $ | 225,832 | $ | 265,898 | ||||
Interest cost | 116,930 | 229,396 | ||||||
Benefit cost | $ | 342,762 | $ | 495,294 | ||||
March 31, 2005 | March 31, 2004 | |||||||
Service cost | $ | 421,649 | $ | 350,133 | ||||
Interest cost | 155,785 | 65,637 | ||||||
Benefit cost | $ | 577,434 | $ | 415,770 | ||||
7. | COMMITMENTS AND CONTINGENCIES |
F-9
Table of Contents
Operating | Capital | |||||||||||
Royalties | leases | leases | ||||||||||
Year ended December 31, | ||||||||||||
2005 (April 1 to December 31, 2005) | $ | 7,349 | $ | 9,789 | $ | 285 | ||||||
2006 | 7,349 | 9,030 | 170 | |||||||||
2007 | 6,340 | 3,085 | — | |||||||||
2008 | 6,190 | 6 | — | |||||||||
2009 | 6,196 | 2 | — | |||||||||
Thereafter | 34,345 | — | — | |||||||||
Total minimum lease payments | 455 | |||||||||||
Less—amount representing interest | 20 | |||||||||||
Present value of minimum lease payments | 435 | |||||||||||
Less—current portion | 333 | |||||||||||
Total | $ | 102 | ||||||||||
F-10
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F-11
Table of Contents
8. | SUBSEQUENT EVENT |
F-12
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F-13
Table of Contents
December 31, 2004 | ||||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | 23,967 | ||||
Trade accounts receivable | 40,417 | |||||
Inventories, net | 13,943 | |||||
Deferred income taxes | 2,188 | |||||
Prepaid insurance | 7,142 | |||||
Prepaid expenses and other | 5,899 | |||||
Total current assets | 93,556 | |||||
PROPERTY, PLANT AND EQUIPMENT, net | 157,136 | |||||
DEBT ISSUANCE COSTS, Net | 7,865 | |||||
ADVANCE ROYALTIES | 5,424 | |||||
GOODWILL | 183,946 | |||||
DEFERRED INCOME TAXES, NON-CURRENT | 7,741 | |||||
OTHER NON-CURRENT ASSETS | 4,307 | |||||
Total assets | $ | 459,975 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Trade accounts payable | $ | 21,250 | ||||
Current portion of long-term debt and capital leases | 6,022 | |||||
Current portion of reclamation and mine closure costs | 2,682 | |||||
Accrued income tax | 2,232 | |||||
Accrued expenses and other | 33,854 | |||||
Total current liabilities | 66,040 | |||||
NON-CURRENT LIABILITIES, less current portion | ||||||
Long-term debt and capital leases | 173,446 | |||||
Reclamation and mine closure costs | 40,616 | |||||
Long-term employee benefits | 18,007 | |||||
Other non-current liabilities | 7,466 | |||||
Total non-current liabilities | 239,535 | |||||
Total liabilities | 305,575 | |||||
COMMITMENTS AND CONTINGENCIES | ||||||
STOCKHOLDERS’ EQUITY: | ||||||
Preferred stock-par value $0.0001, 200,000,000 shares authorized, none issued | — | |||||
Common stock-par value $0.0001, 1,800,000,000 shares authorized, 106,605,999 issued and outstanding | 11 | |||||
Paid-in capital | 150,140 | |||||
Retained earnings | 4,249 | |||||
Total stockholders’ equity | 154,400 | |||||
Total liabilities and stockholders’ equity | $ | 459,975 | ||||
F-14
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Period from | |||||||
May 13, 2004 to | |||||||
December 31, 2004 | |||||||
REVENUES | |||||||
Coal sales revenues | $ | 130,463 | |||||
Freight and handling revenues | 880 | ||||||
Other revenues | 4,766 | ||||||
Total revenues | 136,109 | ||||||
COSTS AND EXPENSES: | |||||||
Freight and handling costs | 880 | ||||||
Cost of coal sales and other revenues | 113,707 | ||||||
(exclusive of items shown separately below) | |||||||
Depreciation, depletion and amortization | 7,943 | ||||||
Selling, general and administrative | 4,194 | ||||||
(exclusive of depreciation and amortization shown separately above) | |||||||
Gain on sale of assets | (10 | ) | |||||
Total costs and expenses | 126,714 | ||||||
Income from operations | 9,395 | ||||||
INTEREST AND OTHER INCOME (EXPENSE): | |||||||
Interest expense | (3,453 | ) | |||||
Other, net | 898 | ||||||
Total interest and other income (expense) | (2,555 | ) | |||||
Income before income tax expense | 6,840 | ||||||
INCOME TAX EXPENSE | (2,591 | ) | |||||
Net income | $ | 4,249 | |||||
Earnings per share: | |||||||
Basic | 0.04 | ||||||
Diluted | 0.04 | ||||||
Average common shares outstanding: | |||||||
Basic | 106,605,999 | ||||||
Diluted | 106,605,999 |
F-15
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For the Period May 13, 2004 to | |||||||||||||||||
December 31, 2004 | |||||||||||||||||
Additional | |||||||||||||||||
Common | Paid-in | Retained | |||||||||||||||
Stock | Capital | Earnings | Total | ||||||||||||||
Capital Contribution | $ | 11 | $ | 150,140 | $ | 150,151 | |||||||||||
Net income for the period | — | — | $ | 4,249 | 4,249 | ||||||||||||
Balance—December 31, 2004 | $ | 11 | $ | 150,140 | $ | 4,249 | $ | 154,400 | |||||||||
F-16
Table of Contents
Period from | |||||||
May 13, 2004 to | |||||||
December 31, 2004 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 4,249 | |||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation, depletion and amortization | 7,943 | ||||||
Amortization of finance costs included in interest expense | 266 | ||||||
(Gain) on sale of assets | (10 | ) | |||||
Deferred income taxes | 359 | ||||||
Changes in Assets and Liabilities: | |||||||
(Increase) decrease in: | |||||||
Receivables | 19,713 | ||||||
Inventories | 6,140 | ||||||
Prepaid expenses | (2,030 | ) | |||||
Other assets | (1,308 | ) | |||||
Deferred finance costs | (53 | ) | |||||
Increase (decrease) in: | |||||||
Accounts payable | (3,815 | ) | |||||
Accrued expenses | (1,527 | ) | |||||
Reclamation and mine closure costs | (591 | ) | |||||
Other liabilities | 873 | ||||||
Total adjustments | 25,960 | ||||||
Net cash provided by operating activities | 30,209 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Proceeds from the sale of assets | 10 | ||||||
Additions to property, plant and equipment and mine development | (5,583 | ) | |||||
Acquisition of Horizon Natural Resources | (323,593 | ) | |||||
Net cash (used in) investing activities | (329,166 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Capital contribution | 150,151 | ||||||
Repayments on long-term debt | (2,969 | ) | |||||
Repayments on capital leases | (235 | ) | |||||
Long-term borrowings | 175,977 | ||||||
Net cash provided by financing activities | 322,924 | ||||||
Net increase in cash and cash equivalents, and cash and cash equivalents, end of period | $ | 23,967 | |||||
Supplemental information: | |||||||
Cash paid for interest | $ | 536 | |||||
Supplemental disclosure of non-cash items: | |||||||
Acquisition of Horizon Natural Resources included in accrued expenses | $ | 2,191 | |||||
F-17
Table of Contents
1. | ORGANIZATION |
F-18
Table of Contents
At September 30, | |||||
2004 | |||||
Accounts receivable | $ | 60,130 | |||
Inventory | 20,083 | ||||
Prepaids and other | 6,508 | ||||
Property, plant, and equipment | 159,496 | ||||
Advance royalties | 4,314 | ||||
Debt issuance costs | 8,078 | ||||
Other assets | 12,256 | ||||
Goodwill | 183,896 | ||||
Accounts payable | (25,065 | ) | |||
Accrued expenses | (35,422 | ) | |||
Employee benefits | (17,127 | ) | |||
Accrued reclamation | (43,889 | ) | |||
Other long-term liabilities | (7,474 | ) | |||
Net assets acquired | $ | 325,784 | |||
Funded by: | |||||
Capital contribution | $ | 150,151 | |||
Long-term debt | 175,633 | ||||
Total | $ | 325,784 | |||
Horizon | ||||||||||||
ICG, Inc. | Predecessor to ICG, Inc. | |||||||||||
Three months | Nine months | Twelve months | ||||||||||
ended | ended | ended | ||||||||||
December 31, | September 30, | December 31, | ||||||||||
2004 | 2004 | 2003 | ||||||||||
Revenues | $ | 136,109 | $ | 373,383 | $ | 481,070 | ||||||
Net Income (Loss) | $ | 4,249 | $ | 16,792 | $ | (61,911 | ) | |||||
Basic and diluted earnings per share | $ | 0.04 |
F-19
Table of Contents
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL |
F-20
Table of Contents
Years | ||||
Buildings | 10 to 45 | |||
Mining and other equipment and related facilities | 1 to 20 | |||
Land improvements | 15 | |||
Transportation equipment | 2 to 7 | |||
Furniture and fixtures | 3 to 10 |
F-21
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F-22
Table of Contents
F-23
Table of Contents
Coal | $ | 4,443 | ||
Parts and supplies, net of a reserve for obsolescence of $74 | 9,500 | |||
Total | $ | 13,943 | ||
F-24
Table of Contents
Land and land improvements | $ | 16,798 | ||
Mining and other equipment and related facilities | 72,590 | |||
Mine development and contract costs | 16,012 | |||
Coal reserves | 53,031 | |||
Mine development in process | 1,373 | |||
Construction work in process | 5,275 | |||
165,079 | ||||
Less-accumulated depreciation, depletion and amortization | (7,943 | ) | ||
Net property, plant and equipment | $ | 157,136 | ||
Payroll, bonus and vacation expense | $ | 16,163 | ||
Sales and use tax | 143 | |||
Severance tax | 1,355 | |||
Federal reclamation tax | 918 | |||
Excise/black lung tax | 344 | |||
Personal property tax | 5,080 | |||
Franchise tax | 58 | |||
Other | 9,793 | |||
Total | $ | 33,854 | ||
Term Notes | $ | 175,000 | |||
Capital leases (Note 10) | 681 | ||||
Insurance financing and other | 3,787 | ||||
Total | 179,468 | ||||
Less—current portion | 6,022 | ||||
Long-term debt and capital leases | $ | 173,446 | |||
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Year ending December 31: | ||||
2005 | $ | 1,750 | ||
2006 | 1,750 | |||
2007 | 1,750 | |||
2008 | 1,750 | |||
2009 | 1,750 | |||
Thereafter | 166,250 | |||
Total | $ | 175,000 | ||
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7. | ASSET RETIREMENT OBLIGATION |
May 13, 2004 to | ||||
December 31, 2004 | ||||
Liabilities assumed in the acquisition | $ | 43,889 | ||
Expenditures | (1,349 | ) | ||
Accretion | 758 | |||
Balance | $ | 43,298 | ||
December 31, 2004 | ||||
Current portion of reclamation and mine closure costs | $ | 2,682 | ||
Non-current reclamation and mine closure costs | 40,616 | |||
Total | $ | 43,298 | ||
8. | INCOME TAXES |
May 13, 2004 to | |||||
December 31, 2004 | |||||
Current: | |||||
Federal | $ | 1,901 | |||
State | 331 | ||||
2,232 | |||||
Deferred | 359 | ||||
Total | $ | 2,591 | |||
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May 13, 2004 to | ||||
December 31, 2004 | ||||
Federal provision computed at statutory rate | $ | 2,394 | ||
State income tax provision (net of federal tax benefits and apportionment factors) computed at statutory rate | 219 | |||
Other | (22 | ) | ||
Total | $ | 2,591 | ||
Deferred Tax Assets: | ||||||
Accrued employee benefits | $ | 6,932 | ||||
Accrued reclamation and closure | 16,670 | |||||
Other | 3,720 | |||||
27,322 | ||||||
Deferred Tax Liabilities: | ||||||
Property, coal reserves and mine development costs | 16,514 | |||||
Other | 879 | |||||
17,393 | ||||||
Net deferred tax asset | $ | 9,929 | ||||
Classified in balance sheet: | ||||||
Deferred income taxes—current | $ | 2,188 | ||||
Deferred income taxes—non-current | 7,741 | |||||
Total | $ | 9,929 | ||||
9. | EMPLOYEE BENEFITS |
Postretirement benefits | $ | 8,013 | |||
Black lung benefits | 9,994 | ||||
Total | 18,007 | ||||
Less— current portion | — | ||||
Long-term portion | $ | 18,007 | |||
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Other Postretirement | |||||
Benefits | |||||
December 31, 2004 | |||||
Changes in Benefit Obligations: | |||||
Benefit obligations assumed in the acquisition | $ | 7,683 | |||
Service costs | 219 | ||||
Interest cost | 111 | ||||
Actuarial loss | 121 | ||||
Benefit obligation at end of period | $ | 8,134 | |||
Fair value of plan assets at end of period | $ | — | |||
Funded Status of the Plan: | |||||
Accumulated obligations less plan assets | $ | (8,134 | ) | ||
Unrecognized actuarial loss | 121 | ||||
Net liability recognized | $ | (8,013 | ) | ||
Discount rate | 5.75% |
May 13, 2004 to | |||||
December 31, 2004 | |||||
Net periodic benefit cost: | |||||
Service cost | $ | 219 | |||
Interest cost | 111 | ||||
Benefit cost | $ | 330 | |||
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1-Percentage- | 1-Percentage- | |||||||
Point | Point | |||||||
Increase | Decrease | |||||||
Effect on total of service and interest cost components | $ | 174 | $ | (156 | ) | |||
Effect on postretirement benefit obligation | 987 | (889 | ) |
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F-31
Table of Contents
Operating | Capital | |||||||||||
Royalties | Leases | Leases | ||||||||||
Year ended December 31, | ||||||||||||
2005 | $ | 7,348 | $ | 13,506 | $ | 540 | ||||||
2006 | 7,348 | 9,004 | 172 | |||||||||
2007 | 6,339 | 3,059 | — | |||||||||
2008 | 6,189 | 2 | ||||||||||
2009 | 6,195 | — | ||||||||||
Thereafter | 29,345 | — | ||||||||||
Total minimum lease payments | 712 | |||||||||||
Less—amount representing interest | 31 | |||||||||||
Present value of minimum lease payments (Note 6) | 681 | |||||||||||
Less—current portion | 485 | |||||||||||
Total | $ | 196 | ||||||||||
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F-33
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December 31, | May 13, 2004 to | |||||||
2004 | December 31, | |||||||
Total | 2004 | |||||||
Receivable | Total | |||||||
Balance | Revenues | |||||||
Customer A | $ | 2,563 | $ | 17,720 | ||||
Customer B | 6,581 | 19,151 | ||||||
Customer C | 5,751 | 19,759 |
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F-35
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F-36
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F-37
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Reorganized Companies | ||||||||||
September 30, | December 31, | |||||||||
2004 | 2003 | |||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | — | $ | 859 | ||||||
Trade accounts receivable (net of allowance for doubtful accounts of $5,441 and $7,798, respectively) | 46,117 | 35,658 | ||||||||
Inventories, net | 17,721 | 13,479 | ||||||||
Deferred income taxes | 5,931 | 6,020 | ||||||||
Prepaid insurance | 4,668 | 6,707 | ||||||||
Prepaid expenses and other | 4,399 | 10,333 | ||||||||
Total current assets | 78,836 | 73,056 | ||||||||
PROPERTY, PLANT AND EQUIPMENT, net | 276,157 | 318,552 | ||||||||
DEBT ISSUANCE COSTS, Net | 1,437 | |||||||||
ADVANCE ROYALTIES | 10,501 | 9,976 | ||||||||
OTHER NON-CURRENT ASSETS | 4,804 | 4,043 | ||||||||
Total assets | $ | 370,298 | $ | 407,064 | ||||||
LIABILITIES AND MEMBERS’ DEFICIT | ||||||||||
LIABILITIES NOT SUBJECT TO COMPROMISE: | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Trade accounts payable | $ | 29,975 | $ | 36,670 | ||||||
Current portion of long-term debt and capital leases | 30,603 | 62,698 | ||||||||
Current portion of reclamation and mine closure costs | 1,206 | 1,206 | ||||||||
Accrued expenses and other | 27,977 | 27,872 | ||||||||
Total current liabilities | 89,761 | 128,446 | ||||||||
NON-CURRENT LIABILITIES, Less current portion | ||||||||||
Long-term debt and capital leases | 29 | 315 | ||||||||
Reclamation and mine closure costs | 22,436 | 27,443 | ||||||||
Deferred income taxes | 5,931 | 6,020 | ||||||||
Other non-current liabilities | 18,326 | 18,422 | ||||||||
Total non-current liabilities | 46,722 | 52,200 | ||||||||
Total liabilities not subject to compromise | 136,483 | 180,646 | ||||||||
LIABILITIES SUBJECT TO COMPROMISE | 1,272,609 | 1,170,747 | ||||||||
Total liabilities | 1,409,092 | 1,351,393 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
MEMBERS’ DEFICIT: | ||||||||||
Paid-In Capital | 234,800 | 234,800 | ||||||||
Members’ investment (52,802 units authorized) | 200 | 200 | ||||||||
Accumulated other comprehensive loss | (3,683 | ) | (3,683 | ) | ||||||
Accumulated deficit | (1,270,111 | ) | (1,175,646 | ) | ||||||
Total members’ deficit | (1,038,794 | ) | (944,329 | ) | ||||||
Total liabilities and members’ deficit | $ | 370,298 | $ | 407,064 | ||||||
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Reorganized | Predecessor | |||||||||||||||||
Companies | Companies | |||||||||||||||||
Period from | Period from | Period from | ||||||||||||||||
January 1, 2004 to | Year Ended | May 10, 2002 to | January 1, 2002 to | |||||||||||||||
September 30, 2004 | December 31, 2003 | December 31, 2002 | May 9, 2002 | |||||||||||||||
REVENUES (including amounts to related parties of $3,061 in the Predecessor period) | ||||||||||||||||||
Coal Sales revenues | $ | 346,981 | $ | 441,291 | $ | 264,235 | $ | 136,040 | ||||||||||
Freight and handling revenues | 3,700 | 8,008 | 6,032 | 2,947 | ||||||||||||||
Other revenues | 22,702 | 31,771 | 27,397 | 21,183 | ||||||||||||||
Total revenues | 373,383 | 481,070 | 297,664 | 160,170 | ||||||||||||||
COSTS AND EXPENSES: | ||||||||||||||||||
Freight and handling costs | 3,700 | 8,008 | 6,032 | 2,947 | ||||||||||||||
Cost of coal sales and other revenues (including amounts to related parties of $9,116 in the Predecessor period) (exclusive of items shown separately below) | 306,429 | 400,652 | 251,361 | 114,767 | ||||||||||||||
Depreciation, depletion and amortization | 27,547 | 52,254 | 40,033 | 32,316 | ||||||||||||||
Selling, general and administrative (including amounts to related parties of $3 in the Predecessor period) (exclusive of depreciation and amortization shown separately above) | 8,477 | 23,350 | 16,695 | 9,677 | ||||||||||||||
Gain on sale of assets | (226 | ) | (4,320 | ) | (39 | ) | (93 | ) | ||||||||||
Writedowns and special items | 10,018 | 9,100 | 729,953 | 8,323 | ||||||||||||||
Total costs and expenses | 355,945 | 489,044 | 1,044,035 | 167,937 | ||||||||||||||
Income (Loss) from operations | 17,438 | (7,974 | ) | (746,371 | ) | (7,767 | ) | |||||||||||
INTEREST AND OTHER INCOME (EXPENSE): | ||||||||||||||||||
Interest expense | (114,211 | ) | (145,892 | ) | (80,405 | ) | (36,666 | ) | ||||||||||
Reorganization items | 727 | (52,784 | ) | (143,663 | ) | 1,567,689 | ||||||||||||
Other, net (including amounts to related parties of $93 in the Predecessor period) | 1,581 | 187 | 1,256 | 499 | ||||||||||||||
Total interest and other income (expense) | (111,903 | ) | (198,489 | ) | (222,812 | ) | 1,531,522 | |||||||||||
NET INCOME (LOSS) | $ | (94,465 | ) | $ | (206,463 | ) | $ | (969,183 | ) | $ | 1,523,755 | |||||||
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Accumulated | |||||||||||||||||||||
Additional | Other | ||||||||||||||||||||
Members’ | Paid-in | Comprehensive | Accumulated | ||||||||||||||||||
Investment | Capital | Loss | Deficit | Total | |||||||||||||||||
PREDECESSOR COMPANIES: | |||||||||||||||||||||
Balance—January 1, 2002 | $ | 53 | $ | 163,913 | $ | (7,720 | ) | $(878,508 | ) | $ | (722,262 | ) | |||||||||
January 1, 2002 to May 9, 2002, net income | — | — | — | 1,523,755 | 1,523,755 | ||||||||||||||||
Fresh-start accounting adjustments | (53 | ) | 71,087 | 7,720 | (645,247 | ) | (566,493 | ) | |||||||||||||
Balance—May 9, 2002 after fresh start adjustments | — | 235,000 | — | — | 235,000 | ||||||||||||||||
REORGANIZED COMPANIES: | |||||||||||||||||||||
Balance-May 10, 2002 | 200 | 234,800 | — | — | 235,000 | ||||||||||||||||
May 10, 2002 to December 31, 2002, net loss | — | — | — | (969,183 | ) | (969,183 | ) | ||||||||||||||
Minimum Pension Liability Adjustment | (3,824 | ) | (3,824 | ) | |||||||||||||||||
BALANCE—December 31, 2002 | 200 | 234,800 | (3,824 | ) | (969,183 | ) | (738,007 | ) | |||||||||||||
January 1, 2003 to December 31, 2003, net loss | — | — | — | (206,463 | ) | (206,463 | ) | ||||||||||||||
Minimum pension liability adjustment | — | — | 141 | — | 141 | ||||||||||||||||
Balance- December 31, 2003 | 200 | 234,800 | (3,683 | ) | (1,175,646 | ) | (944,329 | ) | |||||||||||||
January 1, 2004 to September 30, 2004, net loss | — | — | — | (94,465 | ) | (94,465 | ) | ||||||||||||||
BALANCE—September 30, 2004 | $ | 200 | $ | 234,800 | $ | (3,683 | ) | $(1,270,111 | ) | $ | (1,038,794 | ) | |||||||||
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Reorganized Companies | Predecessor Companies | ||||||||||||||||||
Period from | For the | Period from | |||||||||||||||||
January 1, 2004 | year ended | May 10, 2002 to | Period from | ||||||||||||||||
to September 30, | December 31, | December 31, | January 1, 2002 to | ||||||||||||||||
2004 | 2003 | 2002 | May 9, 2002 | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||
Net income (loss) | $ | (94,465 | ) | $ | (206,463 | ) | $ | (969,183 | ) | $ | 1,523,755 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||||
Depreciation, depletion and amortization | 27,547 | 52,254 | 40,033 | 32,316 | |||||||||||||||
Depreciation — Allocation from Affiliates | 127 | 4,118 | 4,930 | 5,723 | |||||||||||||||
Amortization of finance costs included in interest expense | 1,437 | 3,698 | 5,644 | 5,676 | |||||||||||||||
Gain on sale of assets | (226 | ) | (4,320 | ) | (39 | ) | (93 | ) | |||||||||||
Gain on lease buyout | 7,736 | ||||||||||||||||||
Fresh start revaluation | (645,824 | ) | |||||||||||||||||
Fresh start adjustments | (801,495 | ) | |||||||||||||||||
Gain on debt extinguishment | (161,584 | ) | |||||||||||||||||
Writedowns and special items | 10,018 | 9,100 | 729,953 | 8,323 | |||||||||||||||
Provision for doubtful accounts | 247 | 1,656 | 1,535 | 6,594 | |||||||||||||||
Writeoff of net payables to other Horizon subsidiaries | (1,272 | ) | (5,432 | ) | 188,282 | (264,621 | ) | ||||||||||||
Changes in Assets and Liabilities: | |||||||||||||||||||
(Increase) decrease in: | |||||||||||||||||||
Receivables | (10,706 | ) | 18,616 | (11,419 | ) | 1,050 | |||||||||||||
Inventories | (4,242 | ) | (273 | ) | 2,806 | (37,197 | ) | ||||||||||||
Prepaid expenses | 7,971 | 19,374 | 64,809 | (17,032 | ) | ||||||||||||||
Other assets | (1,287 | ) | (2,313 | ) | 2,811 | 10,666 | |||||||||||||
Increase (decrease) in: | |||||||||||||||||||
Accounts payable | 9,754 | (4,912 | ) | 24,703 | (12,782 | ) | |||||||||||||
Accrued expenses | 85,520 | 150,144 | 32,388 | 87,079 | |||||||||||||||
Reclamation and mine closure costs | (4,007 | ) | (11,942 | ) | (31,957 | ) | (23,060 | ) | |||||||||||
Other liabilities | (95 | ) | (5,552 | ) | (8,924 | ) | (15,690 | ) | |||||||||||
Total adjustments | 128,522 | 224,216 | 1,045,555 | (1,821,951 | ) | ||||||||||||||
Net cash provided by (used in) operating activities | 34,057 | 17,753 | 76,372 | (298,196 | ) | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||||
Proceeds from the sale of assets | 4,089 | 15,388 | 636 | 122 | |||||||||||||||
Additions to property, plant and equipment and mine development | (6,624 | ) | (16,937 | ) | (13,435 | ) | (10,963 | ) | |||||||||||
Net cash used in investing activities | (2,535 | ) | (1,549 | ) | (12,799 | ) | (10,841 | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||
Repayments on long-term debt | (4,698 | ) | (13,729 | ) | (183,162 | ) | (304,449 | ) | |||||||||||
Borrowings on long-term debt | 50,003 | 574,700 | |||||||||||||||||
Net borrowings/(repayments) on debtor-in-possession financing | (27,080 | ) | (737 | ) | 56,027 | ||||||||||||||
Financing costs | (11,238 | ) | |||||||||||||||||
Repayments on capital leases | (603 | ) | (993 | ) | (893 | ) | (2 | ) | |||||||||||
Net cash provided by (used in) financing activities | (32,381 | ) | (15,459 | ) | (78,025 | ) | 259,011 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (859 | ) | 745 | (14,452 | ) | (50,026 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 859 | 114 | 14,566 | 64,592 | |||||||||||||||
Cash and cash equivalents, end of period | $ | 0 | $ | 859 | $ | 114 | $ | 14,566 | |||||||||||
F-41
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1. | ORGANIZATION AND BASIS OF PRESENTATION |
F-42
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Horizon Amounts | ||||||||
Account | September 30, 2004 | December 31, 2003 | ||||||
Vendor Advances | $ | 169 | $ | 691 | ||||
Reclamation Deposits | 52,706 | 54,743 |
Amounts allocated to | ||||||||||||
Combined Companies | ||||||||||||
September 30, 2004 | December 31, 2003 | Basis of Allocation | ||||||||||
Vendor Advances | $ | 93 | $ | 373 | Coal Production Tons | |||||||
Reclamation Deposits | — | 1,343 | Premiums Paid |
Horizon Amounts | ||||||||||||||||
January 1, 2004- | January 1, 2003- | May 10, 2002- | January 1, 2002- | |||||||||||||
September 30, 2004 | December 31, 2003 | December 31, 2002 | May 9, 2002 | |||||||||||||
Selling, general, and administrative expenses | $ | 17,100 | $ | 25,000 | $ | 12,541 | $ | 20,285 |
Amounts allocated to | |||||||||||||||||||
Combined Companies | |||||||||||||||||||
January 1, 2004- | January 1, 2003- | May 10, 2002- | January 1, 2002- | ||||||||||||||||
September 30, 2004 | December 31, 2003 | December 31, 2002 | May 9, 2002 | Basis of Allocation | |||||||||||||||
Selling, general, and administrative expenses | $ | 9,081 | $ | 9,860 | $ | 4,974 | $ | 8,305 | Estimated Hours Worked |
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2. | LIQUIDITY AND BANKRUPTCY PROCEEDINGS |
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September 30, | December 31, | |||||||
2004 | 2003 | |||||||
Long-term debt | $ | 915,304 | $ | 915,304 | ||||
Accrued postretirement medical benefits | 59,578 | 56,633 | ||||||
Accounts payable and accrued expenses | 22,652 | 23,872 | ||||||
Accrued interest | 275,075 | 174,938 | ||||||
$ | 1,272,609 | $ | 1,170,747 | |||||
3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL |
F-45
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Years | |||
Buildings | 10 to 45 | ||
Mining and other equipment and related facilities | 1 to 20 | ||
Land improvements | 15 | ||
Transportation equipment | 2 to 7 | ||
Furniture and fixtures | 3 to 10 |
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F-47
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F-48
Table of Contents
Reorganized Companies | ||||||||
January 1, 2004 to | Year ended | |||||||
September 30, 2004 | December 31, 2003 | |||||||
Cash paid for interest | $ | 9,268 | $ | 7,797 | ||||
Income taxes paid (refunded) | (69 | ) | 38 |
Reorganized Companies | Predecessor Companies | |||||||
May 10, 2002 to | January 1, 2002 to | |||||||
December 31, 2002 | May 9, 2002 | |||||||
Cash paid for interest | $ | 20,405 | $ | 150,502 | ||||
Income taxes paid (refunded) | 45 | 106 |
4. | FRESH-START ACCOUNTING |
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Post-petition liabilities | $ | 1,281,218 | ||
Liabilities subject to compromise | 436,255 | |||
Total post-petition liabilities and allowed claims | 1,717,473 | |||
Reorganization value | 1,521,320 | |||
Excess of liabilities over reorganization value | $ | 196,153 | ||
Accrued | ||||||||||||
Debt | Interest | Total | ||||||||||
10.5% Senior Notes | $ | 200,000 | $ | 48,177 | $ | 248,177 | ||||||
11.5% Senior Subordinated Notes | 150,000 | 38,078 | 188,078 | |||||||||
Liabilities Subject to Compromise | $ | 350,000 | $ | 86,255 | $ | 436,255 | ||||||
Liabilities subject to compromise | $ | 436,255 | ||
Unamortized financing costs associated with retired debt | (39,671 | ) | ||
396,584 | ||||
New equity | 235,000 | |||
Gain on debt extinguishment | $ | 161,584 | ||
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Gain on fresh-start revaluation | $ | 645,824 | ||
Gain on debt extinguishment | 161,584 | |||
Write-off amounts payable to other subsidiaries of Horizon | 779,789 | |||
Professional fees incurred during bankruptcy proceedings | (19,508 | ) | ||
Reorganization items | $ | 1,567,689 | ||
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Balance Sheet at May 9, 2002 (Unaudited) | ||||||||||||||||||
Fresh Start | ||||||||||||||||||
AEI | Horizon | |||||||||||||||||
Predecessor | Debt | Predecessor | ||||||||||||||||
Companies | Restructuring | Adjustments | Companies | |||||||||||||||
ASSETS | ||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||
Cash and cash equivalents | $ | 14,566 | $ | — | $ | — | $ | 14,566 | ||||||||||
Restricted cash | 72,712 | — | — | 72,712 | ||||||||||||||
Accounts receivable—net | 47,697 | — | — | 47,697 | ||||||||||||||
Inventories | 53,109 | — | (29,020 | ) | 24,089 | |||||||||||||
Deferred income taxes | 25,270 | — | 17,241 | 42,511 | ||||||||||||||
Prepaid expenses and other | 12,949 | — | (171 | ) | 12,778 | |||||||||||||
Total current assets | 226,303 | — | (11,950 | ) | 214,353 | |||||||||||||
PROPERTY, PLANT, AND EQUIPMENT, INCLUDING COAL RESERVES, MINE DEVELOPMENT AND CONTRACT COSTS—net | 427,433 | — | (34,187 | ) | 393,246 | |||||||||||||
GOODWILL | — | — | 697,063 | 697,063 | ||||||||||||||
NET RECEIVABLE FROM OTHER HORIZON SUBSIDIARIES | 191,360 | — | — | 191,360 | ||||||||||||||
DEBT ISSUANCE COSTS—net | 50,450 | (39,671 | ) | — | 10,779 | |||||||||||||
OTHER NON-CURRENT ASSETS | 14,519 | — | — | 14,519 | ||||||||||||||
Total assets | $ | 910,065 | $ | (39,671 | ) | $ | 650,926 | $ | 1,521,320 | |||||||||
LIABILITIES AND MEMBERS’ EQUITY (DEFICIT) | ||||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||
Accounts payable | $ | 16,876 | $ | — | $ | — | $ | 16,876 | ||||||||||
Current portion of long-term debt and capital leases | 875,565 | (755,933 | ) | 119,632 | ||||||||||||||
Accrued expenses and other | 194,414 | (157,250 | ) | 4,553 | 41,717 | |||||||||||||
Total current liabilities | 1,086,855 | (913,183 | ) | 4,553 | 178,225 | |||||||||||||
NON-CURRENT LIABILITIES, less current portion | ||||||||||||||||||
Long-term debt and capital leases | 19,923 | 913,183 | — | 933,106 | ||||||||||||||
Employee benefits | 57,035 | — | — | 57,035 | ||||||||||||||
Reclamation and mine closure costs | 64,703 | — | (22,157 | ) | 42,546 | |||||||||||||
Deferred non-current liabilities | 25,270 | — | 17,241 | 42,511 | ||||||||||||||
Other non-current liabilities | 27,432 | — | 5,465 | 32,897 | ||||||||||||||
Liabilities subject to compromise | 436,255 | (436,255 | ) | |||||||||||||||
Total liabilities | 1,717,473 | (436,255 | ) | 5,102 | 1,286,320 | |||||||||||||
MEMBERS’ EQUITY | ||||||||||||||||||
Accumulated earnings (deficit) | (963,655 | ) | 161,584 | 802,071 | — | |||||||||||||
Other members’ equity (deficit) | 156,247 | 235,000 | (156,247 | ) | 235,000 | |||||||||||||
Total liabilities and members’ equity (deficit) | $ | 910,065 | $ | (39,671 | ) | $ | 650,926 | $ | 1,521,320 | |||||||||
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4 | $1,453 write-up of stockpile inventory to market. | |
4 | Reclassification to development costs of deferred overburden ($29,229), where it will be amortized based on the units-of-production method. | |
4 | Adjustment to decrease parts and supplies ($1,244) to estimated market value. |
4 | The property, plant and equipment were valued at net book value, which approximates the fair market value. | |
4 | Coal reserves were decreased $65,178 to reflect an independent valuation assessment. The interests were valued on a discounted royalty approach, which considered the current net royalty value of both leased and owned interest. The relevant royalty revenue streams were projected into the future based on budgeted production and discounted back to generate the coal reserve value. | |
4 | Development cost was increased $29,229 to reflect the reclassification of deferred overburden (see inventory section above). | |
4 | Contract costs were decreased $30,105 to reflect the current market value of existing sales contracts. | |
4 | Asset retirement costs of $31,867 were recorded to reflect adoption of SFAS No. 143 (Note 3). |
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5. | INVENTORIES |
September 30, | December 31, | |||||||
2004 | 2003 | |||||||
Coal | $ | 8,717 | $ | 5,478 | ||||
Parts and supplies, net of allowance of $2,797 and $2,803 | 9,004 | 8,001 | ||||||
$ | 17,721 | $ | 13,479 | |||||
6. | PROPERTY, PLANT AND EQUIPMENT |
September 30, | December 31, | |||||||
2004 | 2003 | |||||||
Land and land improvements | $ | 17,084 | $ | 17,420 | ||||
Mining and other equipment and related facilities | 137,720 | 144,601 | ||||||
Mine development and contract costs | 50,151 | 44,907 | ||||||
Coal reserves | 186,420 | 202,240 | ||||||
Mine development in process | 2,081 | 4,139 | ||||||
Construction work in process | 2,243 | 2,116 | ||||||
395,699 | 415,423 | |||||||
Less-accumulated depreciation, depletion and amortization | (119,542 | ) | (96,871 | ) | ||||
Net property, plant and equipment | $ | 276,157 | $ | 318,552 | ||||
7. | ACCRUED EXPENSES AND OTHER |
September 30, | December 31, | |||||||
2004 | 2003 | |||||||
Payroll, bonus and vacation expense | $ | 15,247 | $ | 13,742 | ||||
Non-income taxes | 7,065 | 7,369 | ||||||
Deferred revenues | — | 747 | ||||||
Other | 5,665 | 6,014 | ||||||
$ | 27,977 | $ | 27,872 | |||||
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September 30, | December 31, | ||||||||
2004 | 2003 | ||||||||
DIP Facility | $ | 30,016 | $ | 57,096 | |||||
Senior Secured Term Notes | 465,000 | 465,000 | |||||||
Senior Secured Notes | 450,000 | 450,000 | |||||||
Capital leases (Note 12) | 859 | 1,463 | |||||||
Other | 61 | 4,758 | |||||||
Total | 945,936 | 978,317 | |||||||
Less—long-term debt subject to compromise | 915,304 | 915,304 | |||||||
Less—current portion of long-term debt and capital leases not subject to compromise | 30,603 | 62,698 | |||||||
Long-term debt and capital leases | $ | 29 | $ | 315 | |||||
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September 30, | December 31, | |||||||||
2004 | 2003 | |||||||||
Letters of Credit: | ||||||||||
Insurance/Workers’ compensation/Reclamation bonds | $ | 159,851 | $ | 155,238 | ||||||
Coal reserves/Royalties | — | 450 | ||||||||
Total | $ | 159,851 | $ | 155,688 | ||||||
4 | Incur additional indebtedness, pay dividends and make other restricted payments and investments; |
4 | Acquire or dispose of assets; |
4 | Engage in transactions with affiliates; |
4 | Merge, consolidate, or transfer substantially all of its assets. |
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Reorganized Companies | ||||||||
January 1, 2004 to | ||||||||
September 30, 2004 | ||||||||
Beginning Balance | 1/1/2004 | 28,649 | ||||||
Expenditures | 1/1/2004-9/30/2004 | (9,092 | ) | |||||
Accretion | 1/1/2004-9/30/2004 | 3,399 | ||||||
Allocation from other Horizon Subsidiaries | 1/1/2004-9/30/2004 | 686 | ||||||
Ending Balance | $ | 23,642 | ||||||
Reorganized Companies | ||||||||||||||||
Year Ended | May 10, 2002 to | |||||||||||||||
December 31, 2003 | December 31, 2002 | |||||||||||||||
Beginning Balance | 1/1/2003 | $ | 35,765 | 5/9/2002 | $ | 90,973 | ||||||||||
SFAS No. 143 adoption | (48,071 | ) | ||||||||||||||
Liability for new mining locations | 1/1/2003-12/31/2003 | 228 | ||||||||||||||
Expenditures | 1/1/2003-12/31/2003 | (9,478 | ) | 5/10/2002-12/31/2002 | (11,033 | ) | ||||||||||
Accretion | 1/1/2003-12/31/2003 | 4,986 | 5/10/2002-12/31/2002 | 3,232 | ||||||||||||
Allocation (to)/from other Horizon Subsidiaries | 1/1/2003-12/31/2003 | (2,852 | ) | 5/10/2002-12/31/2002 | 664 | |||||||||||
Ending Balance | $ | 28,649 | $ | 35,765 | ||||||||||||
F-57
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September 30, | December 31, | |||||||
2004 | 2003 | |||||||
Current portion of reclamation and mine closure costs | $ | 1,206 | $ | 1,206 | ||||
Non-current reclamation and mine closure costs | 22,436 | 27,443 | ||||||
$ | 23,642 | $ | 28,649 | |||||
Reorganized Companies | ||||||||
January 1, 2004 to | January 1, 2003 to | |||||||
September 30, 2004 | December 31, 2003 | |||||||
Federal provision (benefit) computed at statutory rate | $ | (33,063 | ) | $ | (72,263 | ) | ||
State income tax provision (benefit) (net of federal tax benefits and apportionment factors) computed at statutory rate | (4,043 | ) | (8,837 | ) | ||||
Valuation allowance | 37,608 | 85,741 | ||||||
Nondeductible items | 285 | (3,592 | ) | |||||
Other | (787 | ) | (1,049 | ) | ||||
$ | — | $ | — | |||||
Reorganized | Predecessor | |||||||
Companies | Companies | |||||||
May 10, 2002 to | January 1, 2002 to | |||||||
December 31, 2002 | May 9, 2002 | |||||||
Federal provision (benefit) computed at statutory rate | $ | (339,214 | ) | $ | 533,314 | |||
State income tax provision (benefit) (net of federal tax benefits and apportionment factors) computed at statutory rate | (41,481 | ) | 65,217 | |||||
Valuation allowance | 49,930 | (2,881 | ) | |||||
Excess of purchase price over net assets acquired | 524,533 | (524,533 | ) | |||||
Gain on extinguishment of debt | (79,053 | ) | ||||||
Nondeductible items | (191,862 | ) | 9,297 | |||||
Other | (1,906 | ) | (1,361 | ) | ||||
$ | — | $ | — | |||||
F-58
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September 30, | December 31, | |||||||||
2004 | 2003 | |||||||||
Deferred Tax Assets: | ||||||||||
Accrued employee benefits | $ | 23,361 | $ | 30,677 | ||||||
Accrued reclamation and closure | 9,270 | 11,194 | ||||||||
Reserve for losses | 10,534 | 11,437 | ||||||||
Net operating loss carryforwards | 160,855 | 135,317 | ||||||||
Other | 6,241 | 6,972 | ||||||||
210,261 | 195,597 | |||||||||
Valuation allowance | (145,628 | ) | (116,436 | ) | ||||||
64,633 | 79,161 | |||||||||
Deferred Tax Liabilities: | ||||||||||
Property, coal reserves and mine development costs | 64,538 | 78,943 | ||||||||
Other | 95 | 218 | ||||||||
64,633 | 79,161 | |||||||||
Net deferred tax liability | $ | — | $ | — | ||||||
Classified in balance sheet: | ||||||||||
Other current assets | $ | 5,931 | $ | 6,020 | ||||||
Non-current liabilities | $ | 5,931 | $ | 6,020 |
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September 30, | December 31, | ||||||||
2004 | 2003 | ||||||||
Postretirement benefits | $ | 11,083 | $ | 10,104 | |||||
Workers’ compensation benefits | 10,315 | 9,666 | |||||||
Black lung benefits | 21,540 | 20,618 | |||||||
Pension benefits | 16,640 | 16,245 | |||||||
Total | $ | 59,578 | 56,633 | ||||||
Less—current portion | — | ||||||||
Less—liabilities subject to compromise (Note 2) | 59,578 | 56,633 | |||||||
Long-term portion | $ | — | $ | — | |||||
F-60
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F-61
Table of Contents
Pension | ||||||
Benefits | ||||||
December 31, | ||||||
2003 | ||||||
Changes in Benefit Obligations: | ||||||
Benefit obligations at beginning of period | $ | 92,594 | ||||
Service costs | 2,999 | |||||
Interest cost | 6,098 | |||||
Actuarial loss | 4,708 | |||||
Benefits paid | (18,511 | ) | ||||
Benefit obligation at end of period | $ | 87,888 | ||||
Change in Plan Assets: | ||||||
Fair value of plan assets at beginning of period | $ | 49,693 | ||||
Actual return on plan assets | 7,537 | |||||
Employer contributions | 3,272 | |||||
Benefits paid | (18,511 | ) | ||||
Fair value of plan assets at end of period | $ | 41,991 | ||||
Funded Status of the Plan: | ||||||
Accumulated obligations less plan assets | $ | (45,897 | ) | |||
Unrecognized actuarial loss | 15,247 | |||||
Unrecognized prior service cost | (508 | ) | ||||
Additional minimum pension liability | (10,660 | ) | ||||
Net liability recognized | $ | (41,818 | ) | |||
Weighted Average Assumptions: | ||||||
Discount rate | 6.25 | % | ||||
Expected return on plan assets | 8.50 | % | ||||
Rate of compensation increase | 4.00 | % |
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Other | ||||||
Postretirement | ||||||
Benefits | ||||||
December 31, | ||||||
2003 | ||||||
Changes in Benefit Obligations: | ||||||
Benefit obligations at beginning of period | $ | 501,061 | ||||
Service costs | 6,251 | |||||
Interest cost | 42,278 | |||||
Actuarial loss | 79,142 | |||||
Benefits paid | (33,975 | ) | ||||
Benefit obligation at end of period | $ | 594,757 | ||||
Change in Plan Assets: | ||||||
Fair value of plan assets at beginning of period | $ | — | ||||
Actual return on plan assets | — | |||||
Employer contributions | 33,975 | |||||
Benefits paid | (33,975 | ) | ||||
Fair value of plan assets at end of period | $ | — | ||||
Funded Status of the Plan: | ||||||
Accumulated obligations less plan assets | $ | (594,757 | ) | |||
Unrecognized actuarial loss | 142,494 | |||||
Unrecognized prior service cost | — | |||||
Additional minimum pension liability | — | |||||
Net liability recognized | $ | (452,263 | ) | |||
Weighted Average Assumptions: | ||||||
Discount rate | 6.50 | % | ||||
Expected return on plan assets | N/A | |||||
Rate of compensation increase | N/A |
Other | ||||||||
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
December 31, | December 31, | |||||||
2003 | 2003 | |||||||
Accrued benefit cost included in liabilities subject to compromise | $ | (16,245 | ) | $ | (10,104 | ) | ||
Intangible assets | 5 | — | ||||||
Accumulated other comprehensive income | 3,683 | — | ||||||
Net amount recognized | $ | (12,557 | ) | $ | (10,104 | ) | ||
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Pension Benefits | ||||||||||||||
Reorganized | Predecessor | |||||||||||||
Companies | Companies | |||||||||||||
January 1, 2003 | May 10, 2002 to | January 1, 2002 | ||||||||||||
December 31, 2003 | December 31, 2002 | to May 9, 2002 | ||||||||||||
Net periodic benefit cost: | ||||||||||||||
Service cost | $ | 2,999 | $ | 2,145 | $ | 1,173 | ||||||||
Interest cost | 6,098 | 4,213 | 2,303 | |||||||||||
Settlement charge | 2,184 | 3,821 | 0 | |||||||||||
Expected return on assets | (5,468 | ) | (4,812 | ) | (2,631 | ) | ||||||||
Amortization of: | ||||||||||||||
Prior service cost | (72 | ) | (47 | ) | (26 | ) | ||||||||
Actuarial loss | 21 | 222 | 122 | |||||||||||
Benefit cost | $ | 5,762 | $ | 5,542 | $ | 941 | ||||||||
Other Postretirement Benefits | |||||||||||||
Reorganized | Predecessor | ||||||||||||
Companies | Companies | ||||||||||||
January 1, 2003 | May 10, 2002 to | January 1, 2002 | |||||||||||
December 31, 2003 | December 31, 2002 | to May 9, 2002 | |||||||||||
Net periodic benefit cost: | |||||||||||||
Service cost | $ | 6,251 | $ | 4,253 | $ | 1,758 | |||||||
Interest cost | 42,278 | 20,132 | 11,004 | ||||||||||
Amortization of—Actuarial (gain) loss | 897 | (566 | ) | (310 | ) | ||||||||
Benefit cost | $ | 49,426 | $ | 23,819 | $ | 12,452 | |||||||
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1-Percentage- | 1-Percentage- | |||||||
Point | Point | |||||||
Increase | Decrease | |||||||
Effect on total of service and interest cost components | $ | 6,300 | $ | (5,200 | ) | |||
Effect on postretirement benefit obligation | 81,300 | (67,300 | ) |
Asset Category | 2003 | ||||
Mutual funds | 49 | % | |||
Cash Equivalents | 51 | ||||
Total | 100 | % | |||
F-65
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F-66
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F-67
Table of Contents
2004 | 2003 | |||||||||||||||
September 30, | January 1, 2004 to | December 31, | January 1, 2003 to | |||||||||||||
2004 | September 30, | 2003 | December 31, | |||||||||||||
Total | 2004 | Total | 2003 | |||||||||||||
Receivable | Total | Receivable | Total | |||||||||||||
Balance | Revenues | Balance | Revenues | |||||||||||||
Customer A | $ | 4,105 | $ | 44,788 | $ | 1,342 | $ | 119,817 | ||||||||
Customer B | 8,187 | 58,712 | 224 | 89,459 | ||||||||||||
Customer C | 11,499 | 36,244 | 3,233 | 42,317 |
2002 | |||||||||||||||||
May 10, 2002 to | January 1, 2002 to | ||||||||||||||||
December 31, | May 9, | ||||||||||||||||
2002 | 2002 | ||||||||||||||||
Total | Total | ||||||||||||||||
Revenues | Revenues | ||||||||||||||||
Customer A | $ | 58,566 | $ | 34,209 | |||||||||||||
Customer B | 48,033 | 24,584 | |||||||||||||||
Customer C | 18,235 | 5,543 |
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Reorganized Companies | |||||||||||||
January 1, 2004 to | Year Ended | May 10, 2002 to | |||||||||||
September 30, 2004 | December 31, 2003 | December 31, 2002 | |||||||||||
Goodwill impairment | $ | — | $ | — | $ | 697,063 | |||||||
Sale of mineral rights, equipment and impairment of operating assets | 10,018 | 6,416 | 32,890 | ||||||||||
Inventory writedown and other | — | 2,684 | — | ||||||||||
Total | $ | 10,018 | $ | 9,100 | $ | 729,953 | |||||||
Predecessor | |||||||||||||
Companies | |||||||||||||
January 1, 2002 to | |||||||||||||
May 9, 2002 | |||||||||||||
Impairment of operating assets | $ | 8,323 | |||||||||||
Total | $ | 8,323 | |||||||||||
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Reorganized Companies | |||||||||||||
January 1, 2004 to | Year Ended | May 10, 2002 to | |||||||||||
September 30, 2004 | December 31, 2003 | December 31, 2002 | |||||||||||
Bankruptcy related reorganization expenses, including professional services fees and labor costs | $ | (12,471 | ) | $ | (23,064 | ) | $ | (4,075 | ) | ||||
Write-offs of payables to/ receivables from other Horizon subsidiaries | 13,198 | (29,720 | ) | (139,588 | ) | ||||||||
Total | $ | 727 | $ | (52,784 | ) | $ | (143,663 | ) | |||||
Predecessor Companies | |||||
January 1, 2002 to | |||||
May 9, 2002 | |||||
Gain on Fresh Start Valuation | $ | 645,824 | |||
Gain on Debt Extinguishment | 161,584 | ||||
Bankruptcy related reorganization expenses, including professional services fees and labor costs | (19,508 | ) | |||
Write-offs of payables to/ receivables from other Horizon subsidiaries | 779,789 | ||||
Total | $ | 1,567,689 | |||
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January 1, 2002 | |||||
through | |||||
May 9, 2002 | |||||
Revenues, costs and expenses: | |||||
Coal sales | $ | 2,537 | |||
Equipment rental and repair income | 524 | ||||
Administrative and miscellaneous income | 93 | ||||
Trucking expense | 885 | ||||
Repair, maintenance & other mining costs | 6,818 | ||||
Equipment rental cost | 1,413 | ||||
Administrative and miscellaneous expense | 3 |
F-71
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F-72
Table of Contents
March 31, | December 31, | ||||||||||
2005 | 2004 | ||||||||||
(unaudited) | |||||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | 2,342,409 | $ | 1,165,559 | |||||||
Accounts receivable — trade, net of allowance of $1,194,985 at March 31, 2005 and December 31, 2004 | 9,161,820 | 9,050,468 | |||||||||
Accounts receivable — other | 2,524,670 | 2,311,255 | |||||||||
Coal and supply inventory | 3,935,230 | 4,026,612 | |||||||||
Prepaid expenses and other | 1,606,275 | 1,457,087 | |||||||||
Total current assets | 19,570,404 | 18,010,981 | |||||||||
PROPERTY, PLANT AND EQUIPMENT, net | 61,253,613 | 54,122,751 | |||||||||
NOTES RECEIVABLE, net of allowance of $795,797 at December 31, 2004 | 500,000 | ||||||||||
ADVANCE ROYALTIES | 3,232,406 | 3,439,379 | |||||||||
OTHER NON-CURRENT ASSETS: | |||||||||||
Bonds and deposits | 2,982,172 | 2,583,082 | |||||||||
Investment in joint venture | 832,488 | 434,322 | |||||||||
Other | 4,251,363 | 4,280,186 | |||||||||
Total other non-current assets | 8,066,023 | 7,297,590 | |||||||||
TOTAL | $ | 92,122,446 | $ | 83,370,701 | |||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Accounts payable | $ | 14,601,742 | $ | 10,281,124 | |||||||
Accrued expenses | 7,982,784 | 8,253,453 | |||||||||
Reclamation — current portion | 2,049,000 | 105,413 | |||||||||
Current portion of long-term debt | 18,572,521 | 14,848,690 | |||||||||
Total current liabilities | 43,206,047 | 33,488,680 | |||||||||
LONG-TERM DEBT | 10,071,046 | 9,699,753 | |||||||||
OTHER NON-CURRENT LIABILITIES: | |||||||||||
Reclamation | 23,668,829 | 25,168,633 | |||||||||
Deferred gain on sale-leaseback | 8,767,033 | 8,832,792 | |||||||||
Other | 4,658,988 | 4,783,509 | |||||||||
Total other non-current liabilities | 37,094,850 | 38,784,934 | |||||||||
Total liabilities | 90,371,943 | 81,973,367 | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||
STOCKHOLDERS’ DEFICIT: | |||||||||||
Common stock, no par value, 1,000,000 shares authorized and issued | — | ||||||||||
Paid-in capital | 145,588,00 | 145,588,000 | |||||||||
Accumulated deficit | (143,837,497 | ) | (144,190,666 | ) | |||||||
Total stockholders’ deficit | 1,750,503 | 1,397,334 | |||||||||
Total liabilities and stockholders’ equity | $ | 92,122,446 | $ | 83,370,701 | |||||||
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Table of Contents
Three months ended March 31, | For the year ended | |||||||||||||
December 31, | ||||||||||||||
2005 | 2004 | 2004 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||
REVENUES: | ||||||||||||||
Coal revenue | $ | 42,141,633 | $ | 34,527,179 | $ | 146,675,714 | ||||||||
Freight and handling | 3,153,779 | 2,835,518 | 11,415,952 | |||||||||||
Waste and blended fuel revenue | 2,148,363 | 1,539,223 | 6,228,786 | |||||||||||
Total revenues | 47,443,775 | 38,901,920 | 164,320,452 | |||||||||||
COSTS AND EXPENSES: | ||||||||||||||
Cost of coal sold | 40,818,495 | 35,220,737 | 145,985,163 | |||||||||||
Freight and handling costs | 3,153,779 | 2,835,518 | 11,415,952 | |||||||||||
Depreciation, depletion and amortization | 2,941,898 | 2,237,300 | 9,754,467 | |||||||||||
Selling, general and administrative | 1,109,524 | 777,158 | 4,585,793 | |||||||||||
Total costs and expenses | 48,023,696 | 41,070,713 | 171,741,375 | |||||||||||
OPERATING LOSS | (579,921 | ) | (2,168,793 | ) | (7,420,923 | ) | ||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||
Interest income | 52,486 | 50,697 | 181,164 | |||||||||||
Interest expense | (614,873 | ) | (348,049 | ) | (1,485,481 | ) | ||||||||
Other, net | 1,495,477 | 1,091,589 | 5,528,267 | |||||||||||
Total other income (expense) | 933,090 | 794,237 | 4,223,950 | |||||||||||
Net income (loss) | $ | 353,169 | $ | (1,374,556 | ) | $ | (3,196,973 | ) | ||||||
F-74
Table of Contents
For the three months ended March 31, 2005 | |||||||||||||
(unaudited) and for the year ended December 31, 2004 | |||||||||||||
Accumulated | |||||||||||||
Paid-in capital | deficit | Total | |||||||||||
Balances at December 31, 2003, as previously reported | $ | 145,588,000 | $ | (141,925,000 | ) | $ | 3,663,000 | ||||||
Prior period adjustment — see Note 13 | — | 931,307 | 931,307 | ||||||||||
As adjusted | 145,588,000 | (140,993,693 | ) | 4,594,307 | |||||||||
Net loss | — | (3,196,973 | ) | (3,196,973 | ) | ||||||||
Balances at December 31, 2004 | 145,588,000 | (144,190,666 | ) | 1,397,334 | |||||||||
Net income — March 31, 2005 (unaudited) | — | 353,169 | 353,169 | ||||||||||
Balances at March 31, 2005 (unaudited) | $ | 145,588,000 | $ | (143,837,497 | ) | $ | 1,750,503 | ||||||
F-75
Table of Contents
Three months ended March 31, | For the year ended | |||||||||||||||
December 31, | ||||||||||||||||
2005 | 2004 | 2004 | ||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net income (loss) | $ | 353,169 | $ | (1,374,556 | ) | $ | (3,196,973 | ) | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
Depreciation, depletion and amortization | 2,941,898 | 2,237,300 | 9,754,467 | |||||||||||||
Loss on sales of property, plant and equipment | 7,752 | 105,805 | ||||||||||||||
Equity in loss (income) of joint venture | (398,166 | ) | 123,906 | 26,929 | ||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Accounts receivable— trade | (111,352 | ) | 2,867 | (1,608,549 | ) | |||||||||||
Accounts receivable— other | (213,415 | ) | (645,356 | ) | (1,299,892 | ) | ||||||||||
Coal and supply inventory | 91,382 | 596,844 | (2,023,272 | ) | ||||||||||||
Other current assets and other assets | (555,375 | ) | 575,904 | (568,336 | ) | |||||||||||
Advance royalties | 206,973 | (352,212 | ) | (1,616,922 | ) | |||||||||||
Accounts payable | 4,320,618 | 1,049,672 | 5,339,644 | |||||||||||||
Accrued expenses | (270,669 | ) | 980,074 | 2,086,921 | ||||||||||||
Other current and non-current liabilities | 253,501 | (108,668 | ) | 3,149,579 | ||||||||||||
Net cash provided by operating activities | 6,626,316 | 3,085,775 | 10,149,401 | |||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Expenditures for purchases of property, plant and equipment | (10,052,090 | ) | (4,623,431 | ) | (27,238,311 | ) | ||||||||||
Proceeds from sales of property, plant and equipment | 7,500 | 151,750 | ||||||||||||||
Proceeds from notes receivable | 500,000 | 787,979 | ||||||||||||||
Net cash used in investing activities | (9,544,590 | ) | (4,623,431 | ) | (26,298,582 | ) | ||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Principal payments on debt | (1,691,461 | ) | (432,033 | ) | (4,840,717 | ) | ||||||||||
Proceeds from debt | 5,786,585 | 3,967,210 | 18,978,707 | |||||||||||||
Net cash provided by financing activities | 4,095,124 | 3,535,177 | 14,137,990 | |||||||||||||
Net increase (decrease) in cash and cash equivalents | 1,176,850 | 1,997,521 | (2,011,191 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 1,165,559 | 3,176,750 | 3,176,750 | |||||||||||||
Cash and cash equivalents, end of period | $ | 2,342,409 | $ | 5,174,271 | $ | 1,165,559 | ||||||||||
Cash paid during the period for interest | $ | 343,157 | $ | 348,049 | $ | 703,417 | ||||||||||
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1. | DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
Coal | $3,537,673 | $ | 3,673,080 | |||||
Parts and supplies, net of allowances of $26,015 and $142,996 | 397,557 | 353,532 | ||||||
$3,935,230 | $ | 4,026,612 | ||||||
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Years | ||
Buildings and improvements | 10 to 30 | |
Machinery and equipment | 3 to 15 | |
Vehicles | 3 to 5 | |
Furniture and fixtures | 3 to 10 |
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2. | PROPERTY, PLANT AND EQUIPMENT |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
Land | $ | 4,122,242 | $ | 4,127,202 | ||||
Buildings and improvements | 20,913,551 | 19,233,942 | ||||||
Mine development | 40,862,113 | 37,623,860 | ||||||
Machinery and equipment | 59,439,836 | 56,830,387 | ||||||
Vehicles | 579,096 | 579,096 | ||||||
Furniture and fixtures | 3,451,851 | 3,451,851 | ||||||
Construction in progress | 4,918,179 | 2,631,545 | ||||||
Mineral rights | 9,567,906 | 9,567,906 | ||||||
Total property, plant and equipment | 143,854,774 | 134,045,789 | ||||||
Less accumulated depreciation, depletion and amortization | 82,601,161 | 79,923,038 | ||||||
Property, plant and equipment, net | $ | 61,253,613 | $ | 54,122,751 | ||||
3. | LONG-TERM DEBT |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
Senior notes, interest at 10% | $ | 7,000,000 | $ | 7,000,000 | ||||
Note payable, interest at 8% | 1,263,723 | 1,592,622 | ||||||
Related party note payable, interest at 8% | 11,382,705 | 7,580,834 | ||||||
Related party revolving credit line, interest at 8% | 4,500,000 | 4,500,000 | ||||||
Equipment notes (fixed rates ranging from 4% to 7.643%) | 4,497,139 | 3,874,987 | ||||||
Total | 28,643,567 | 24,548,443 | ||||||
Less: current portion | 18,572,521 | 14,848,690 | ||||||
Total long-term debt | $ | 10,071,046 | $ | 9,699,753 | ||||
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Year Ending December 31 | ||||
2005 | $ | 14,848,690 | ||
2006 | 1,034,428 | |||
2007 | 596,862 | |||
2008 | 981,121 | |||
2009 | 1,822,478 | |||
Thereafter | 5,264,864 | |||
Total | $ | 24,548,443 | ||
4. | DEFERRED GAIN ON SALE-LEASEBACK |
5. | OTHER INCOME, net |
Three months ended | ||||||||||||
March 31, | ||||||||||||
Year ended | ||||||||||||
2005 | 2004 | December 31, 2004 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Ash revenue | $ | 446,402 | $ | 410,147 | $ | 1,637,798 | ||||||
Commissions revenue | 172,990 | 186,058 | 1,434,934 | |||||||||
Miscellaneous revenue | 253,584 | 440,801 | 1,703,069 | |||||||||
Equity in earnings (loss) of joint venture | 398,166 | (123,906 | ) | (26,929 | ) | |||||||
Royalty revenue | 224,335 | 178,489 | 779,395 | |||||||||
Total | $ | 1,495,477 | $ | 1,091,589 | $ | 5,528,267 | ||||||
6. | LEASES |
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Total | ||||
2005 | $ | 1,218,620 | ||
2006 | 1,176,476 | |||
2007 | 824,583 | |||
2008 | 818,567 | |||
2009 | 813,534 | |||
Thereafter | 813,118 | |||
Total | $ | 5,664,898 | ||
7. | INCOME TAXES |
Three months ended | ||||||||||||
Year ended | ||||||||||||
March 31, | March 31, | December 31, | ||||||||||
2005 | 2004 | 2004 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
Current | $ | 652,231 | $ | $ | ||||||||
Deferred | (494,008 | ) | (550,749 | ) | (1,038,328 | ) | ||||||
Valuation allowance | (158,223 | ) | 550,749 | 1,038,328 | ||||||||
Total | $ | $ | $ | |||||||||
December 31, | ||||
2004 | ||||
Federal provision (benefit) computed at statutory rate | $ | (1,118,941 | ) | |
State income tax provision (benefit) (net of federal tax benefits and apportionment factors) computed at statutory rate | (159,849 | ) | ||
Valuation allowance | 1,038,328 | |||
Restructuring charges | 141,456 | |||
Other | 99,006 | |||
$ | — | |||
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December 31, | ||||||
2004 | ||||||
Deferred Tax Assets: | ||||||
Accrued employee benefits | $ | 2,347,632 | ||||
Accrued reclamation and closure | 9,725,829 | |||||
Deferred income | 3,365,676 | |||||
Other | 451,984 | |||||
15,891,121 | ||||||
Valuation allowance | (2,622,294 | ) | ||||
13,268,827 | ||||||
Deferred Tax Liabilities: | ||||||
Property, coal reserves and mine development costs | 13,268,827 | |||||
Other | — | |||||
13,268,827 | ||||||
Net deferred tax asset/liability | $ | |||||
Classified in balance sheet: | ||||||
Other current assets | $ | 241,052 | ||||
Non-current liabilities | $ | 241,052 |
8. | BENEFIT PLAN |
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9. | RELATED PARTY |
As of and for the | As of and for the | |||||||
three months | year ended | |||||||
ended | December 31, | |||||||
March 31, 2005 | 2004 | |||||||
(unaudited) | ||||||||
Advance royalties | $ | 1,038,960 | $ | 1,038,960 | ||||
Accounts payable | 93,391 | 70,345 | ||||||
Accrued expenses | 1,336,522 | 1,168,384 | ||||||
Royalty expense | 431,410 | 1,769,324 |
10. | COMMITMENTS AND CONTINGENCIES |
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11. | MAJOR CUSTOMERS |
Three months ended | ||||||||||||||||
March 31, 2005 | Year ended December 31, 2004 | |||||||||||||||
Total | Total | |||||||||||||||
Receivable | Total | Receivable | Total | |||||||||||||
Balance | Revenues | Balance | Revenues | |||||||||||||
(unaudited) | ||||||||||||||||
Customer A | $ | 3,893,613 | $ | 9,032,608 | $ | 3,253,195 | $ | 31,377,653 | ||||||||
Customer B | 2,010,176 | 6,247,687 | 488,537 | 25,146,998 | ||||||||||||
Customer C | 1,100,626 | 5,664,750 | 3,037,820 | 24,324,298 | ||||||||||||
Customer D | 59,834 | 5,379,887 | 563,485 | 17,734,949 |
12. | BUSINESS COMBINATION AGREEMENT |
13. | PRIOR PERIOD ADJUSTMENT |
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March 31, | December 31, | |||||||||
2005 | 2004 | |||||||||
(unaudited) | ||||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | 1,862,469 | $ | 1,818,883 | ||||||
Royalties receivable | 1,392,631 | 1,238,729 | ||||||||
Prepaid expense | 34,719 | 15,150 | ||||||||
Total current assets | 3,289,819 | 3,072,762 | ||||||||
Coal reserves, net | 18,902,610 | 18,920,896 | ||||||||
TOTAL | $ | 22,192,429 | $ | 21,993,658 | ||||||
LIABILITIES AND MEMBERS’ EQUITY | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Accounts payable and accrued expenses | $ | 517,441 | $ | 546,082 | ||||||
Interest payable | 679,483 | 535,200 | ||||||||
Total current liabilities | 1,196,924 | 1,081,282 | ||||||||
NOTES PAYABLE | 16,250,000 | 16,250,000 | ||||||||
DEFERRED ROYALTY INCOME | 1,038,960 | 1,038,960 | ||||||||
Total liabilities | 18,485,884 | 18,370,242 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
MEMBERS’ EQUITY: | ||||||||||
Paid-in capital | 3,250,000 | 3,250,000 | ||||||||
Retained earnings | 456,545 | 373,416 | ||||||||
Total members’ equity | 3,706,545 | 3,623,416 | ||||||||
Total liabilities and members’ equity | $ | 22,192,429 | $ | 21,993,658 | ||||||
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Three months ended | ||||||||||||||
March 31, | For the year ended | |||||||||||||
December 31, | ||||||||||||||
2005 | 2004 | 2004 | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||
ROYALTY INCOME | $ | 431,410 | $ | 356,154 | $ | 1,769,324 | ||||||||
OPERATING EXPENSES | 137,007 | 104,245 | 449,112 | |||||||||||
OPERATING INCOME | 294,403 | 251,909 | 1,320,212 | |||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||
Interest income | 8,014 | 642 | 7,934 | |||||||||||
Interest expense | (144,283 | ) | (97,672 | ) | (535,200 | ) | ||||||||
Other income | — | — | 132,607 | |||||||||||
Total other income (expense) | (136,269 | ) | (97,030 | ) | (394,659 | ) | ||||||||
Net income | $ | 158,134 | $ | 154,879 | $ | 925,553 | ||||||||
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For the three months ended March 31, 2005 | |||||||||||||
(unaudited) and for the year ended | |||||||||||||
December 31, 2004 | |||||||||||||
Retained | |||||||||||||
Paid-in | earnings | ||||||||||||
capital | (deficit) | Total | |||||||||||
Balance at January 1, 2004 | $ | 8,450,890 | $ | (174,491 | ) | $ | 8,276,399 | ||||||
Capital contribution | 1,592,243 | — | 1,592,243 | ||||||||||
Net income | — | 925,553 | 925,553 | ||||||||||
Distributions | (6,793,133 | ) | (377,646 | ) | (7,170,779 | ) | |||||||
Balance at December 31, 2004 | 3,250,000 | 373,416 | 3,623,416 | ||||||||||
Net income (unaudited) | — | 158,134 | 158,134 | ||||||||||
Distributions (unaudited) | — | (75,005 | ) | (75,005 | ) | ||||||||
Balance at March 31, 2005 (unaudited) | $ | 3,250,000 | $ | 456,545 | $ | 3,706,545 | |||||||
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Three months ended | ||||||||||||||||
March 31, | For the year ended | |||||||||||||||
December 31, | ||||||||||||||||
2005 | 2004 | 2004 | ||||||||||||||
(unaudited) | ||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net income | $ | 158,134 | $ | 154,879 | $ | 925,553 | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depletion | 18,286 | 17,471 | 79,104 | |||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Royalties receivable | (153,902 | ) | (136,636 | ) | (199,769 | ) | ||||||||||
Prepaid expense | (19,569 | ) | — | (15,150 | ) | |||||||||||
Accounts payable and accrued expenses | (28,641 | ) | 45,211 | (6,835 | ) | |||||||||||
Interest payable | 144,283 | — | 535,200 | |||||||||||||
Net cash provided by operating activities | 118,591 | 80,925 | 1,318,103 | |||||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Principal payments on debt | (11,049,110 | ) | (11,049,110 | ) | ||||||||||||
Proceeds from debt | 16,250,000 | 16,250,000 | ||||||||||||||
Capital contribution | 1,592,243 | 1,592,243 | ||||||||||||||
Distributions of capital | (75,005 | ) | (6,793,133 | ) | (6,793,133 | ) | ||||||||||
Net cash (used in) financing activities | (75,005 | ) | 0 | 0 | ||||||||||||
Net increase in cash and cash equivalents | 43,586 | 80,925 | 1,318,103 | |||||||||||||
Cash and cash equivalents, beginning of period | 1,818,883 | 500,780 | 500,780 | |||||||||||||
Cash and cash equivalents, end of period | $ | 1,862,469 | $ | 581,705 | $ | 1,818,883 | ||||||||||
Supplemental disclosure of non-cash items: | ||||||||||||||||
Dividends declared included in accounts payable and accrued expenses | $ | 377,646 | ||||||||||||||
Deferred royalty income included in royalties receivable | $ | 1,038,960 | ||||||||||||||
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1. | DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES |
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2. | COAL RESERVES |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
Coal reserves | $ | 19,000,000 | $ | 19,000,000 | ||||
Less accumulated depletion | 97,390 | 79,104 | ||||||
Coal reserves, net | $ | 18,902,610 | $ | 18,920,896 | ||||
3. | NOTES PAYABLE |
4. | BUSINESS COMBINATION AGREEMENT |
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ANNEX B: SECTION 262 OF THE DGCL
Section 262 Appraisal Rights
(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to §228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word “stockholder” means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words “stock” and “share” mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words “depository receipt” mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to §251 (other than a merger effected pursuant to §251(g) of this title), §252, §254, §257, §258, §263 or §264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of §251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under §253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to §228 or §253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the
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merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder’s written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder’s certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court’s decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
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(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder’s demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers.
As permitted by Section 102 of the Delaware General Corporation Law, or the DGCL, International Coal Group’s amended and restated certificate of incorporation will include a provision that eliminates the personal liability of International Coal Group’s directors for monetary damages for breach of fiduciary duty as a director. International Coal Group’s amended and restated certificate of incorporation and bylaws also provides that:
• | International Coal Group must indemnify its directors and officers to the fullest extent permitted by Delaware law; | |
• | International Coal Group may advance expenses, as incurred, to its directors and executive officers in connection with a legal proceeding to the fullest extent permitted by Delaware Law; and | |
• | International Coal Group may indemnify its other employees and agents to the same extent that indemnified International Coal Group’s officers and directors, unless otherwise determined by International Coal Group’s board of directors. |
Pursuant to Section 145(a) of the DGCL, we may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, agent or employee of International Coal Group’s company or is or was serving at International Coal Group’s request as a director, officer, agent, or employee of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgment, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding. Pursuant to Section 145(b) of the DGCL, the power to indemnify also applies to actions brought by or in the right of the corporation as well, but only to the extent of defense expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit. Pursuant to Section 145(b), we shall not indemnify any person in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to us unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. The power to indemnify under Sections 145(a) and (b) of the DGCL applies (i) if such person is successful on the merits or otherwise in defense of any action, suit or proceeding, or (ii) if such person acted in good faith and in a manner he reasonably believed to be in the best interest, or not opposed to the best interest, of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 174 of the DGCL provides, among other things, that a director, who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered in the books containing the minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.
The indemnification provisions contained in International Coal Group’s amended and restated certificate of incorporation and bylaws will not be exclusive of any other rights to which a person may be entitled by law, agreement, vote of shareholders or disinterested directors or otherwise. In addition, we will maintain insurance on behalf of International Coal Group’s directors and executive officers insuring them against any liability asserted against them in their capacities as directors or officers or arising out of such status.
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ITEM 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following is a list of Exhibits to this Registration Statement:
Exhibit | ||||
Number | Description of Exhibit | Note | ||
2.1 | Business Combination Agreement among International Coal Group, Inc., ICG Holdco, Inc., ICG Merger Sub, Inc., Anker Merger Sub, Inc. and Anker Coal Group, Inc., dated as of March 31, 2005 | (B) | ||
2.2 | First Amendment to the Business Combination Agreement among International Coal Group, Inc., ICG Holdco, Inc., ICG Merger Sub, Inc., Anker Merger Sub, Inc. and Anker Coal Group, Inc., dated as of May 10, 2005 | (B) | ||
2.3 | Business Combination Agreement among International Coal Group, Inc., ICG Holdco, Inc., CoalQuest merger Sub LLC, CoalQuest Development LLC and the members of CoalQuest Development LLC dated as of March 31, 2005 | (B) | ||
2.4 | First Amendment to the Business Combination Agreement among International Coal Group, Inc., ICG Holdco, Inc., CoalQuest merger Sub LLC, CoalQuest Development LLC and the members of CoalQuest Development LLC, dated as of May 10, 2005 | (B) | ||
3.1 | Amended and Restated Certificate of Incorporation of International Coal Group, Inc. | (A) | ||
3.2 | Amended and Restated By-laws of International Coal Group, Inc. | (A) | ||
4.1 | Form of certificate of International Coal Group, Inc. common stock | (C) | ||
4.3 | Registration Rights Agreement by and between International Coal Group, Inc., WLR Recovery Fund II, L.P., Contrarian Capital Management LLC, Värde Partners, Inc., Greenlight Capital, Inc., and Stark Trading, Shepherd International Coal Holdings Inc. | (B) | ||
4.4 | Form of Registration Rights Agreement between International Coal Group, Inc. and certain former Anker stockholders and CoalQuest members | (C) | ||
5.1 | Opinion of Jones Day | (C) | ||
10.1 | Amended and Restated Credit Agreement dated as of November 5, 2004 among ICG, LLC, as Borrower, International Coal Group Inc., the guarantors party thereto, UBS Securities LLC, as Arranger, Bookmanager and Syndication Agent, General Electric Capital Corporation, as Documentation Agent, UBS AG, Stamford Branch, as Issuing Bank, Administrative Agent and Collateral Agent, and UBS Loan Finance, LLC, as Swingline Lender | (A) | ||
10.2 | First Amendment, dated as of November 30, 2004, to the Amended and Restated Credit Agreement dated as of November 5, 2004 among ICG, LLC, as Borrower, International Coal Group Inc., the guarantors party thereto, UBS Securities LLC, as Arranger, Bookmanager and Syndication Agent, General Electric Capital Corporation, as Documentation Agent, UBS AG, Stamford Branch, as Issuing Bank, Administrative Agent and Collateral Agent, and UBS Loan Finance, LLC, as Swingline Lender | (A) | ||
10.3 | Security Agreement dated as of September 30, 2004 among ICG, LLC and the guarantors party thereto and UBS AG, Stamford Branch, as Collateral Agent | (A) | ||
10.4 | Advisory Services Agreement effective as of October 1, 2004 between International Coal Group, LLC and W.L. Ross & Co. LLC | (A) | ||
10.5 | Employment Agreement dated March 14, 2005 by and between Bennett K. Hatfield and International Coal Group, Inc. | (A) | ||
10.6 | Employment Agreement dated April 25, 2005 by and between Roger L. Nicholson and | (B) |
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Exhibit | ||||
Number | Description of Exhibit | Note | ||
International Coal Group, Inc. | ||||
10.7 | Fee Lease between Kentucky Union Company, lessor, and ICG Hazard, LLC, lessee, of Flint Ridge Surface Mine | (C) | ||
10.8 | Fee Lease between Pocahontas Development Corp., lessor, and ICG East Kentucky, LLC, lessee, of Blackberry Creek Surface Mine | (C) | ||
10.9 | Coal Lease between N&G Holdings Company, lessor, and ICG Hazard, LLC, lessee, of Vicco Surface Mine | (C) | ||
10.10 | Coal Lease between Knight-Ink Heirs, lessor, and ICG Eastern, LLC, lessee, of Birch River Mine | (C) | ||
10.11 | Surface Lease between NGHD Land, et al., lessor, and ICG Eastern, LLC, lessee, of Birch River Mine | (C) | ||
10.12 | Coal Lease between NGHD Land, et al., lessor, and ICG Eastern, LLC, lessee, of Birch River Mine | (C) | ||
10.13 | Fee Lease between M-B, LLC, lessor, and ICG Eastern, LLC, lessee, of Birch River Mine | (C) | ||
10.14 | Fee Lease between ACIN (successor-in-interest to CSTL, LLC), lessor, and ICG Hazard, LLC, lessee, of County Line and Rowdy Gap Mines | (C) | ||
10.15 | Fee Lease between Kentucky River Properties, LLC, lessor, and ICG Hazard, LLC, lessee, of Rowdy Gap and Thunder Ridge Mines | (C) | ||
10.16 | Fee Lease between William Bach Marshall, et al., lessor, and ICG Hazard, LLC, lessee, of the Flint Ridge preparation plant site | (C) | ||
10.17 | Lease between Allegany Coal and Land Company, lessor, and Patriot Mining Company, Inc., lessee, of Allegany County, Maryland Mine | (C) | ||
10.18 | Lease between The Crab Orchard Coal and Land Company, lessor, and Anker West Virginia Mining Company, Beckley Smokeless Division, lessee, of Bay Hill Mine | (C) | ||
10.19 | Lease between Beaver Coal Corporation, lessor, and Anker West Virginia Mining Company, Beckley Smokeless Division, of Bay Hill Mine | (C) | ||
10.20 | Lease between Douglas Coal Company, lessor, and Patriot Mining Company, Inc., lessee, of Island and Douglas Mine | (C) | ||
10.21 | Lease between Southern Region Industrial Realty, Inc., lessor, and Anker Virginia Mining Company, Inc., lessee, of War Creek Mine | (C) | ||
10.22 | Sublease between Reserve Coal Properties, sublessors, and Patriot Mining Company, sublessee, of Sycamore No. 2 Mine | (C) | ||
10.23 | Amended and Restated Agreement for Sale and Purchase of Coal dated July 1, 1996, between Carolina Power & Light Company and ICG, LLC (assigned from Mountaineer Coal Development Company, d/b/a Marrowbone Development Company) and amended by: | (B) |
(a) Letter Agreement dated and effective July 19, 1996 | ||
(b) Amendment 1 dated July 29, 1998, effective January 1, 1998 | ||
(c) Amendment 2 dated April 19, 1999, effective January 1, 1999 | ||
(d) Letter Agreement dated and effective March 25, 2002 | ||
(e) Letter Agreement dated October 14, 2002, effective October 15, 2002 | ||
(f) Letter Agreement dated and effective July 28, 2003 |
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Exhibit | ||||
Number | Description of Exhibit | Note | ||
(g) Amendment No. 3 dated July 28, 2003, effective January 1, 2003 | ||||
10.24 | Agreement for Purchase and Sales of Coal dated April 10, 2003 and effective January 1, 2004, between Georgia Power Company and ICG, LLC (assigned from Horizon Natural Resources Company) | (C) | ||
10.25 | Contract for Sale and Purchase of Coal dated July 1, 1980, between City of Springfield, Illinois and ICG, Illinois, LLC (assigned from Turis Coal Company), amended by: | (B) | ||
(a) Amendment dated March 4, 1986, effective January 1, 1986 | ||||
(b) Second Amendment dated April 22, 1986, effective January 1, 1986 | ||||
(c) Modification dated and effective June 8, 1987 | ||||
(d) Modification dated and effective November 4, 1988 | ||||
(e) Amendment dated and effective January 1, 1989 | ||||
(f) Amendment dated March 20, 1992, effective January 1, 1992 | ||||
(g) Amendment dated March 21, 1995, effective January 1, 1995 | ||||
(h) Amendment dated May 10, 1996, effective May 1, 1996 | ||||
(i) Amendment dated August 20, 1998, effective January 1, 1998 | ||||
(j) Amendment dated May 30, 2001, effective January 1, 2001 | ||||
(k) Letter dated October 8, 2004 assigning to ICG Illinois, LLC | ||||
10.26 | Coal Supply Agreement, dated as of April 1, 1992, between Anker Energy and Logan Generating Company (formerly Keystone Energy Service Company, L.P.), amended by: | (C) | ||
(a) First Amendment, effective as of September 1, 1995 | ||||
(b) Second Amendment, effective as of March 15, 2002 | ||||
(c) Third Amendment, effective as of October 31, 2004 | ||||
(d) Coal Price Adjustment Agreement, effective as of October 31, 2004 | ||||
10.27 | Coal Sales Agreement, date as of February 17, 2005, between Anker West Virginia Mining Company, Inc. and Allegheny Energy Supply Company, LLC and Monongahela Power Company | (C) | ||
11.1 | Statement regarding computation of per share earnings | (B) | ||
21.1 | List of Subsidiaries | (A) | ||
23.1 | Consent of Jones Day (included as part of its opinion filed as Exhibit 5.1 hereto) | (C) | ||
23.2 | Consent of Deloitte & Touche, LLP | (D) | ||
23.3 | Consent of Marshall Miller & Associates, Inc. | (D) | ||
24.1 | Power of Attorney | (D) |
(A) | Previously filed as an exhibit to International Coal Group, Inc.’s Registration Statement on Form S-1 (Reg. No. 333-124393), filed on April 28, 2005 and incorporated herein by reference. | |
(B) | Previously filed as an exhibit to Amendment No. 1 to International Coal Group, Inc.’s Registration Statement on Form S-1 (Reg. No. 333-124393), filed on June 15, 2005 and incorporated herein by reference. | |
(C) | To be filed by amendment. | |
(D) | Filed herewith. |
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(b) Financial Statement Schedules.
Report of Independent Registered Public Accounting Firm | II-6 | |||
Report of Independent Registered Public Accounting Firm | II-7 | |||
Schedule II — Valuation and Qualifying Accounts. | II-8 |
Schedules other than that noted above are omitted because of an absence of other conditions under which they are required or because the information required to be disclosed is presented in the financial statements or notes thereto.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
International Coal Group, Inc.
We have audited the consolidated financial statements of ICG, Inc. and subsidiaries (the “Company”) as of December 31, 2004 and for the period May 13, 2004 (inception) to December 31, 2004, and have issued our report thereon dated April 22, 2005 (included elsewhere in this Registration Statement). Our audit also included the financial statement schedule listed in Item 16(b) of this Registration Statement. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note A to the accompanying financial statement schedule, such schedule has been restated.
/s/ Deloitte & Touche LLP
Louisville, Kentucky
April 22, 2005 (June 8, 2005 as to the matter described in Note A to the schedule)
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Horizon NR, LLC and Certain Subsidiaries
We have audited the combined financial statements of Horizon NR, LLC and Certain Subsidiaries (“Combined Companies”) as of September 30, 2004 and December 31, 2003 (“Reorganized Companies”) and for the period January 1, 2004 to September 30, 2004, the year ended December 31, 2003, the period May 10, 2002 to December 31, 2002 (“Reorganized Companies”), and for the period January 1, 2002 to May 9, 2002 (“Predecessor Companies”), and have issued our report thereon dated March 25, 2005 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 16(b) of this Registration Statement. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note A to the accompanying financial statement schedule, such schedule has been restated.
/s/ Deloitte & Touche LLP
Louisville, Kentucky
April 22, 2005 (June 8, 2005 as to the matter described in Note A to the schedule)
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Schedule II — Valuation and Qualifying Accounts (As Restated, See Note A)
Charged to | ||||||||||||||||
Balance at | revenue, | Other | ||||||||||||||
beginning | costs or | additions | Balance at | |||||||||||||
Description | of period | expenses | (deductions) | end of period | ||||||||||||
Period from May 13, 2004 to December 31, 2004 (ICG, Inc. period): | ||||||||||||||||
Reserve for inventory obsolescence | 74 | 74 | ||||||||||||||
Period ended September 30, 2004 (Predecessor Horizon): | ||||||||||||||||
Allowance for doubtful accounts | 7,798 | 1,590 | (3,947 | )(1) | 5,441 | |||||||||||
Reserve for inventory obsolescence | 2,803 | (6 | )(2) | 2,797 | ||||||||||||
Allowance for doubtful Notes | 2,422 | (442 | ) | 1,980 | ||||||||||||
Reserve for loss—Advance Royalties | 1,000 | 1,000 | ||||||||||||||
Year ended December 31, 2003 (Predecessor Horizon): | ||||||||||||||||
Allowance for doubtful accounts | 9,453 | (1,115 | ) | (540 | )(1) | 7,798 | ||||||||||
Reserve for inventory obsolescence | 2,485 | (190 | ) | 508 | (2) | 2,803 | ||||||||||
Allowance for doubtful Notes | 2,451 | (29 | ) | 2,422 | ||||||||||||
Reserve for loss—Advance Royalties | 1,000 | 1,000 | ||||||||||||||
Period from May 10, 2002 to December 31, 2002 (Predecessor Horizon): | ||||||||||||||||
Allowance for doubtful accounts | 7,918 | 344 | 1,191 | (3) | 9,453 | |||||||||||
Reserve for inventory obsolescence | 2,485 | 2,485 | ||||||||||||||
Reserve for loss—Advance Royalties | 1,000 | 1,000 | ||||||||||||||
Allowance for doubtful Notes | 2,451 | 2,451 | ||||||||||||||
Period from January 1, 2002 to May 9, 2002 (Predecessor AEI): | ||||||||||||||||
Allowance for doubtful accounts | 1,324 | 6,594 | 7,918 | |||||||||||||
Reserve for inventory obsolescence | 1,241 | 1,244 | (4) | 2,485 | ||||||||||||
Reserve for loss—Advance Royalties | 1,000 | 1,000 | ||||||||||||||
Allowance for doubtful Notes | 1,980 | 471 | (5) | 2,451 |
(1) | Reflects adjustment to allowance due to settlement of outstanding claims of predecessor. | |
(2) | Reflects adjustment of reserve based on annual physical inventory counts. | |
(3) | Reflects anticipated non-collection of balloon payment related to a lease agreement. | |
(4) | Reflects opening balance sheet adjustments. | |
(5) | Reflects reclass of excise tax attributable to export sales. |
Note A — | Amounts for the period from May 13, 2004 to December 31, 2004 have been restated to correct the allocation of the purchase price. Certain amounts in other periods have been reclassified between amounts charged to revenues, costs or expenses, and other additions (deductions). |
ITEM 22. Undertakings.
The undersigned registrant hereby undertakes:
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(a) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(b) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |||
(c) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |||
(d) | That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. | |||
(e) | That every prospectus (i) that is filed pursuant to paragraph (d) above, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to this registration statement and will not be used until such amendment has become effective, and that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |||
(f) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 20, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. | |||
(g) | To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. | |||
(h) | To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this registration statement when it became effective. |
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Form S-4 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Ashland, Kentucky, on June 27, 2005.
INTERNATIONAL COAL GROUP, INC. | ||||
By: | /s/ Bennett K. Hatfield | |||
Bennett K. Hatfield | ||||
President, Chief Executive Officer and Director | ||||
Pursuant to the requirements of the Securities Act of 1933, this Form S-4 Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Bennett K. Hatfield | President, Chief Executive Officer and Director | June 27, 2005 | ||
Bennett K. Hatfield | (Principal Executive Officer) | |||
/s/ William D. Campbell | Vice President, Treasurer and Secretary | June 27, 2005 | ||
William D. Campbell | (Principal Financial and Accounting Officer) | |||
* | Director | June 27, 2005 | ||
Wilbur L. Ross, Jr. | ||||
* | Director | June 27, 2005 | ||
Jon R. Bauer | ||||
* | Director | June 27, 2005 | ||
Cynthia B. Bezik | ||||
* | Director | June 27, 2005 | ||
William J. Catacosinos | ||||
Director | ||||
Marcia L. Page | ||||
* | Director | June 27, 2005 | ||
Wendy L. Teramoto |
*By: | /s/ William D. Campbell | |||
As: Attorney-in-Fact | ||||
Table of Contents
EXHIBIT INDEX
Exhibit | ||||
Number | Description of Exhibit | Note | ||
2.1 | Business Combination Agreement among International Coal Group, Inc., ICG Holdco, Inc., ICG Merger Sub, Inc., Anker Merger Sub, Inc. and Anker Coal Group, Inc., dated as of March 31, 2005 | (B) | ||
2.2 | First Amendment to the Business Combination Agreement among International Coal Group, Inc., ICG Holdco, Inc., ICG Merger Sub, Inc., Anker Merger Sub, Inc. and Anker Coal Group, Inc., dated as of May 10, 2005 | (B) | ||
2.3 | Business Combination Agreement among International Coal Group, Inc., ICG Holdco, Inc., CoalQuest merger Sub LLC, CoalQuest Development LLC and the members of CoalQuest Development LLC dated as of March 31, 2005 | (B) | ||
2.4 | First Amendment to the Business Combination Agreement among International Coal Group, Inc., ICG Holdco, Inc., CoalQuest merger Sub LLC, CoalQuest Development LLC and the members of CoalQuest Development LLC, dated as of May 10, 2005 | (B) | ||
3.1 | Amended and Restated Certificate of Incorporation of International Coal Group, Inc. | (A) | ||
3.2 | Amended and Restated By-laws of International Coal Group, Inc. | (A) | ||
4.1 | Form of certificate of International Coal Group, Inc. common stock | (C) | ||
4.3 | Registration Rights Agreement by and between International Coal Group, Inc., WLR Recovery Fund II, L.P., Contrarian Capital Management LLC, Värde Partners, Inc., Greenlight Capital, Inc., and Stark Trading, Shepherd International Coal Holdings Inc. | (B) | ||
4.4 | Form of Registration Rights Agreement between International Coal Group, Inc. and certain former Anker stockholders and CoalQuest members | (C) | ||
5.1 | Opinion of Jones Day | (C) | ||
10.1 | Amended and Restated Credit Agreement dated as of November 5, 2004 among ICG, LLC, as Borrower, International Coal Group Inc., the guarantors party thereto, UBS Securities LLC, as Arranger, Bookmanager and Syndication Agent, General Electric Capital Corporation, as Documentation Agent, UBS AG, Stamford Branch, as Issuing Bank, Administrative Agent and Collateral Agent, and UBS Loan Finance, LLC, as Swingline Lender | (A) | ||
10.2 | First Amendment, dated as of November 30, 2004, to the Amended and Restated Credit Agreement dated as of November 5, 2004 among ICG, LLC, as Borrower, International Coal Group Inc., the guarantors party thereto, UBS Securities LLC, as Arranger, Bookmanager and Syndication Agent, General Electric Capital Corporation, as Documentation Agent, UBS AG, Stamford Branch, as Issuing Bank, Administrative Agent and Collateral Agent, and UBS Loan Finance, LLC, as Swingline Lender | (A) | ||
10.3 | Security Agreement dated as of September 30, 2004 among ICG, LLC and the guarantors party thereto and UBS AG, Stamford Branch, as Collateral Agent | (A) | ||
10.4 | Advisory Services Agreement effective as of October 1, 2004 between International Coal Group, LLC and W.L. Ross & Co. LLC | (A) | ||
10.5 | Employment Agreement dated March 14, 2005 by and between Bennett K. Hatfield and International Coal Group, Inc. | (A) | ||
10.6 | Employment Agreement dated April 25, 2005 by and between Roger L. Nicholson and International Coal Group, Inc. | (B) |
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | Note | ||
10.7 | Fee Lease between Kentucky Union Company, lessor, and ICG Hazard, LLC, lessee, of Flint Ridge Surface Mine | (C) | ||
10.8 | Fee Lease between Pocahontas Development Corp., lessor, and ICG East Kentucky, LLC, lessee, of Blackberry Creek Surface Mine | (C) | ||
10.9 | Coal Lease between N&G Holdings Company, lessor, and ICG Hazard, LLC, lessee, of Vicco Surface Mine | (C) | ||
10.10 | Coal Lease between Knight-Ink Heirs, lessor, and ICG Eastern, LLC, lessee, of Birch River Mine | (C) | ||
10.11 | Surface Lease between NGHD Land, et al., lessor, and ICG Eastern, LLC, lessee, of Birch River Mine | (C) | ||
10.12 | Coal Lease between NGHD Land, et al., lessor, and ICG Eastern, LLC, lessee, of Birch River Mine | (C) | ||
10.13 | Fee Lease between M-B, LLC, lessor, and ICG Eastern, LLC, lessee, of Birch River Mine | (C) | ||
10.14 | Fee Lease between ACIN (successor-in-interest to CSTL, LLC), lessor, and ICG Hazard, LLC, lessee, of County Line and Rowdy Gap Mines | (C) | ||
10.15 | Fee Lease between Kentucky River Properties, LLC, lessor, and ICG Hazard, LLC, lessee, of Rowdy Gap and Thunder Ridge Mines | (C) | ||
10.16 | Fee Lease between William Bach Marshall, et al., lessor, and ICG Hazard, LLC, lessee, of the Flint Ridge preparation plant site | (C) | ||
10.17 | Lease between Allegany Coal and Land Company, lessor, and Patriot Mining Company, Inc., lessee, of Allegany County, Maryland Mine | (C) | ||
10.18 | Lease between The Crab Orchard Coal and Land Company, lessor, and Anker West Virginia Mining Company, Beckley Smokeless Division, lessee, of Bay Hill Mine | (C) | ||
10.19 | Lease between Beaver Coal Corporation, lessor, and Anker West Virginia Mining Company, Beckley Smokeless Division, of Bay Hill Mine | (C) | ||
10.20 | Lease between Douglas Coal Company, lessor, and Patriot Mining Company, Inc., lessee, of Island and Douglas Mine | (C) | ||
10.21 | Lease between Southern Region Industrial Realty, Inc., lessor, and Anker Virginia Mining Company, Inc., lessee, of War Creek Mine | (C) | ||
10.22 | Sublease between Reserve Coal Properties, sublessors, and Patriot Mining Company, sublessee, of Sycamore No. 2 Mine | (C) | ||
10.23 | Amended and Restated Agreement for Sale and Purchase of Coal dated July 1, 1996, between Carolina Power & Light Company and ICG, LLC (assigned from Mountaineer Coal Development Company, d/b/a Marrowbone Development Company) and amended by: | (B) |
(a) Letter Agreement dated and effective July 19, 1996 | ||
(b) Amendment 1 dated July 29, 1998, effective January 1, 1998 | ||
(c) Amendment 2 dated April 19, 1999, effective January 1, 1999 | ||
(d) Letter Agreement dated and effective March 25, 2002 | ||
(e) Letter Agreement dated October 14, 2002, effective October 15, 2002 | ||
(f) Letter Agreement dated and effective July 28, 2003 |
Table of Contents
Exhibit | ||||
Number | Description of Exhibit | Note | ||
(g) Amendment No. 3 dated July 28, 2003, effective January 1, 2003 | ||||
10.24 | Agreement for Purchase and Sales of Coal dated April 10, 2003 and effective January 1, 2004, between Georgia Power Company and ICG, LLC (assigned from Horizon Natural Resources Company) | (C) | ||
10.25 | Contract for Sale and Purchase of Coal dated July 1, 1980, between City of Springfield, Illinois and ICG, Illinois, LLC (assigned from Turis Coal Company), amended by: | (B) | ||
(a) Amendment dated March 4, 1986, effective January 1, 1986 | ||||
(b) Second Amendment dated April 22, 1986, effective January 1, 1986 | ||||
(c) Modification dated and effective June 8, 1987 | ||||
(d) Modification dated and effective November 4, 1988 | ||||
(e) Amendment dated and effective January 1, 1989 | ||||
(f) Amendment dated March 20, 1992, effective January 1, 1992 | ||||
(g) Amendment dated March 21, 1995, effective January 1, 1995 | ||||
(h) Amendment dated May 10, 1996, effective May 1, 1996 | ||||
(i) Amendment dated August 20, 1998, effective January 1, 1998 | ||||
(j) Amendment dated May 30, 2001, effective January 1, 2001 | ||||
(k) Letter dated October 8, 2004 assigning to ICG Illinois, LLC | ||||
10.26 | Coal Supply Agreement, dated as of April 1, 1992, between Anker Energy and Logan Generating Company (formerly Keystone Energy Service Company, L.P.), amended by: | (C) | ||
(a) First Amendment, effective as of September 1, 1995 | ||||
(b) Second Amendment, effective as of March 15, 2002 | ||||
(c) Third Amendment, effective as of October 31, 2004 | ||||
(d) Coal Price Adjustment Agreement, effective as of October 31, 2004 | ||||
10.27 | Coal Sales Agreement, date as of February 17, 2005, between Anker West Virginia Mining Company, Inc. and Allegheny Energy Supply Company, LLC and Monongahela Power Company | (C) | ||
11.1 | Statement regarding computation of per share earnings | (B) | ||
21.1 | List of Subsidiaries | (A) | ||
23.1 | Consent of Jones Day (included as part of its opinion filed as Exhibit 5.1 hereto) | (C) | ||
23.2 | Consent of Deloitte & Touche, LLP | (D) | ||
23.3 | Consent of Marshall Miller & Associates, Inc. | (D) | ||
24.1 | Power of Attorney | (D) |
(A) | Previously filed as an exhibit to International Coal Group, Inc.’s Registration Statement on Form S-1 (Reg. No. 333-124393), filed on April 28, 2005 and incorporated herein by reference. | |
(B) | Previously filed as an exhibit to Amendment No. 1 to International Coal Group, Inc.’s Registration Statement on Form S-1 (Reg. No. 333-124393), filed on June 15, 2005 and incorporated herein by reference. | |
(C) | To be filed by amendment. | |
(D) | Filed herewith. |