Exhibit 99.1
FOR IMMEDIATE RELEASE
INTERNATIONAL COAL GROUP REPORTS
FIRST QUARTER 2006 RESULTS
Ashland, Kentucky, April 27, 2006. International Coal Group, Inc. (NYSE: ICO) today reported revenues of $212.2 million for the quarter ended March 31, 2006, which is a 38% increase compared with $153.2 million in the first quarter of 2005.
The Company also reported an operating loss of $7.9 million for the quarter, compared to operating income of $20.1 million in last year’s first quarter. Earnings before net interest, income taxes and depreciation, depletion and amortization and minority interests (EBITDA) were $10.6 million, compared with $29.2 million in last year’s first quarter. In the first quarter of 2006, the Company reported a net loss of $6.2 million, or $0.04 per fully diluted share, versus net income of $10.9 million, or $0.10 per share, for the comparable period in 2005. As anticipated, the first quarter 2006 results were negatively impacted by $11.7 million in costs attributable to the fatal accident at the Company’s Sago mine in West Virginia on January 2. These costs include all out-of-pocket expenses incurred during the quarter, including reserves established for legal and other future costs, offset by minor revenue received after the Sago mine resumed coal production on March 15.
The Company’s first quarter performance was further negatively affected by the failure of certain third party coal producers upon which the former Anker operations relied to fulfill commitments to a key utility customer. To meet those contractual obligations, coal was shipped from ICG’s nearby Vindex operations at a significantly reduced margin. As previously reported, Vindex purchased the assets associated with the Barton surface mine in late March and has initiated production from that mine, thus eliminating reliance on third party suppliers to service that contractual commitment.
“Although the first quarter performance fell significantly short versus 2005, we are encouraged that revenue, production, shipments and EBITDA were all at or above the quarter guidance we provided earlier this year in the aftermath of the Sago mine accident,” said Ben Hatfield, president and chief executive officer.
The increased revenues in the first quarter resulted from a combination of the Anker acquisition, which was completed in November 2005, and favorable coal pricing.
The Company’s cost of coal sales in the first quarter of 2006 was $189.2 million, compared with $117.2 million in last year’s first quarter. This 61% increase was the result of the sale of an additional 1.1 million tons of coal compared to the prior year, costs related to the Sago mine accident, continued rising prices of crude oil and natural gas, as well as increased labor costs. Additionally, implementation of various planned operational improvements at the Anker operating companies has taken longer than originally anticipated, negatively impacting first quarter profitability. Recent performance among the former Anker operating companies has generally improved and the
Company expects that increases in coal production and decreases in production costs at those subsidiaries will be seen as the year progresses.
“We are, of course, disappointed that we did not see better results,” said Hatfield. “The Sago mine accident was a tragedy that unexpectedly and negatively affected not only our financial performance for the quarter, but also strained our management resources as we responded to the accident and its aftermath. However, thanks to the resilience of our dedicated employees, the cooperation of our customers, and the support of the communities in which we operate, we believe that ICG is now getting back on track with the implementation of our planned operational improvements and long-range growth plans.”
Capital Resources, Reserves, Sales and Sales Commitments
At March 31, 2006, cash totaled $20.2 million and ICG had an additional $98.8 million of unused borrowing capacity. Total debt was $91.7 million, versus net worth of $660.1 million. Capital expenditures totaled $53.2 million during the first quarter of 2006.
ICG has an estimated 916 million tons of reserves located principally in Kentucky, West Virginia, Maryland, Illinois and Virginia.
ICG sold 4.7 million tons of coal during the first quarter of 2006, an increase of nearly 32% over the 3.6 million tons sold in the first quarter of 2005. Production of 4.0 million tons represented an increase of 34% from the prior year.
Price realizations per ton remained strong in the first quarter. ICG’s overall average price per ton of coal rose to $43.27 during the first quarter of 2006, representing a 6.7% gain compared with the same period in 2005.
As of March 31, 2006, consistent with the Company’s marketing strategy, ICG had committed sales for approximately 90 percent of its planned shipments for 2006.
Other Business Developments
As previously reported, on March 23, 2006, ICG’s Vindex Energy subsidiary purchased the assets of Barton Mining Company and George’s Creek Land Company. Vindex is now producing coal from those permitted properties to serve utility customers in close proximity to the mine. The surface mining complex, located near Frostburg, Maryland, is expected to produce about 500,000 tons annually.
On April 1, 2006, the Company’s Wolf Run subsidiary acquired a strategic lease that will allow development of over 14 million tons of Clarion seam reserves that can be accessed from the Sentinel Mine complex. The Company has initiated design and construction efforts to extend the mine slope and shaft facilities that will access these low-cost reserves and improve the mine’s financial performance. Initial production from the Clarion seam is projected for late 2006.
On April 8, 2006, the Viper Mine near Elkhart, Illinois, operated by the Company’s ICG Illinois, LLC subsidiary, suffered a fire in its production shaft that has idled the mine and necessitated the replacement of its high angle conveyor belt. Repairs are underway and the Company expects coal production to resume in early
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May. The Company issued force majeure notices to affected customers, but to date, coal has continued to be shipped from existing inventory. No one was injured in the incident.
Basis of Reporting
ICG’s results of operations include Anker and CoalQuest in the first quarter of 2006 compared to only the ICG companies in the first quarter of 2005.
2006 Outlook
At this time, the Company continues to believe that it will deliver revenues in the range of $1.02 billion to $1.1 billion and earnings in the range of $0.39 to $0.53 per diluted share in 2006.
Conference Call Webcast
ICG will hold a conference call to discuss the results for the first quarter of 2006 on Friday, April 28, 2006 at 11:00 a.m. Eastern time. The call will be accessible on the Internet at the Company’s web site, www.intlcoal.com. A replay will be available through at least May 28, 2006 on the web site, and until May 5, 2006 by telephone replay at 888-286-8010 (passcode #90718666).
General Information
ICG is a leading producer of coal in Northern and Central Appalachia and the Illinois Basin. The Company has 11 active mining complexes, of which 10 are located in Northern and Central Appalachia and one in Central Illinois. ICG’s mining operations and reserves are strategically located to serve utility, metallurgical and industrial customers throughout the Eastern United States.
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For more information, contact: William D. Campbell, vice president and treasurer, or Ben Hatfield, president and chief executive officer at (606) 920-7400.
Forward-Looking Statements
This press release contains certain statements that are forward-looking statements within the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements are subject to various risks and uncertainties, actual results may differ materially from those implied in the forward-looking statements. The following factors are among those that may cause actual results to differ materially from the forward-looking statements: market demand for coal, electricity and steel; availability of qualified workers; future economic or capital market conditions; weather conditions or catastrophic weather-related damage; ICG’s production capabilities; the ongoing integration of Anker and CoalQuest into ICG’s business; the consummation of financing, acquisition or disposition transactions and the effect thereof on ICG’s business; ICG’s plans and objectives for future operations and expansion or consolidation; ICG’s relationships with, and other conditions affecting, ICG’s customers; the availability and costs of key supplies or commodities such as diesel fuel, steel, explosives or tires; prices of fuels which compete with or impact coal usage, such as oil or natural gas; timing of reductions or increases in customer coal inventories; long-term coal supply arrangements; risks in coal mining;
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unexpected maintenance and equipment failure; environmental, safety and other laws and regulations, including those directly affecting ICG’s coal mining and production, and those affecting our customers’ coal usage; competition; railroad, barge, trucking and other transportation availability, performance and costs; employee benefits costs and labor relations issues; replacement of ICG’s reserves; ICG’s assumptions concerning economically recoverable coal reserve estimates; availability and costs of credit, surety bonds and letters of credit; title defects or loss of leasehold interests in ICG’s properties which could result in unanticipated costs or inability to mine these properties; future legislation and changes in regulations or governmental policies or changes in interpretations thereof, including with respect to safety enhancements; the impairment of the value of goodwill; the ongoing investigation into the Sago mine explosion; and ICG’s liquidity, results of operations and financial condition. Forward-looking statements made by ICG in this press release or elsewhere speak only as of the date on which the Company makes it. New risks and uncertainties come up from time to time, and it is impossible for the Company to predict these events or how they may affect the Company or its anticipated results. ICG has no duty to, and does not intend to, update or revise the forward-looking statements in this news release after the date of issue, except as may be required by law.
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INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2006 AND 2005
(dollars in thousands)
Three Months Ended March 31, | ||||||||
2006 | 2005 | |||||||
Revenue: | ||||||||
Coal revenue | $ | 203,336 | $ | 144,197 | ||||
Freight and handling | 4,597 | 2,499 | ||||||
Other revenue | 4,255 | 6,536 | ||||||
Total revenues | 212,188 | 153,232 | ||||||
Costs and expenses: | ||||||||
Cost of operations | 189,200 | 117,185 | ||||||
Freight and handling | 4,597 | 2,499 | ||||||
Depreciation, depletion and amortization | 17,096 | 8,522 | ||||||
Selling, general and administrative | 9,993 | 4,935 | ||||||
(Gain) or loss on sale of assets | (771 | ) | — | |||||
Total costs and expenses | 220,115 | 133,141 | ||||||
Income (loss) from operations | (7,927 | ) | 20,091 | |||||
Interest and other income (expense): | ||||||||
Interest income (expense) | (2,055 | ) | (3,076 | ) | ||||
Other, net | 1,406 | 568 | ||||||
Total interest and other expense, net | (649 | ) | (2,508 | ) | ||||
Net income (loss) before income taxes and minority interest | $ | (8,576 | ) | $ | 17,583 | |||
Income tax (expense) benefit | 2,275 | (6,726 | ) | |||||
Minority interest income | 112 | — | ||||||
Net income (loss) | $ | (6,189 | ) | $ | 10,857 | |||
Other Data | ||||||||
EBITDA(a) | $ | 10,575 | $ | 29,181 | ||||
Net income per share: | ||||||||
Basic and diluted | $ | (0.04 | ) | $ | 0.10 | |||
Weighted average shares – basic | 151,879,547 | 106,613,638 | ||||||
Weighted average shares – diluted | 151,879,547 | 106,613,638 |
(a) | This press release includes a non-GAAP financial measure within the meaning of applicable SEC rules and regulations. EBITDA is defined as income from operations before deducting net interest expense, income taxes and depreciation, depletion and amortization, and minority interests. EBITDA is not and should not be used as a substitute for operating income, net income and cash flow as determined in accordance with generally accepted accounting principles. We present EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, substantially all of which present EBITDA when reporting their results. We also use EBITDA for the following purposes: Our executive compensation plan bases incentive compensation payments on our EBITDA performance measured against budgets and a peer group. Our credit agreement uses EBITDA (with additional adjustments) to measure our compliance with covenants, such as interest coverage and debt incurrence. EBITDA is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. EBITDA has limitations as an analytical tool, and you should not consider it as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments, changes in, or cash requirements for, our working capital needs; the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure. A reconciliation of EBITDA to GAAP net income appears at the end of this document. |
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INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2006 AND DECEMBER 31, 2005
(dollars in thousands)
2006 | 2005 | ||||||
Assets | (Unaudited | ) | |||||
Current Assets | |||||||
Cash and cash equivalents | $ | 20,203 | $ | 9,187 | |||
Accounts receivable | 65,046 | 64,841 | |||||
Inventories, net | 32,944 | 20,667 | |||||
Deferred income taxes | 6,268 | 4,923 | |||||
Prepaid expenses and other | 24,104 | 21,509 | |||||
Total current assets | 148,565 | 121,127 | |||||
Property, plant and equipment, net | 603,979 | 571,484 | |||||
Debt issuance costs, net | 6,232 | 6,523 | |||||
Advanced royalties | 10,021 | 9,344 | |||||
Goodwill | 342,972 | 340,736 | |||||
Other non-current assets, net | 6,600 | 6,949 | |||||
Total assets | $ | 1,118,369 | $ | 1,056,163 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 69,496 | $ | 52,230 | |||
Short-term debt | 6,692 | 4,113 | |||||
Current portion of long-term debt and capital leases | 1,484 | 1,646 | |||||
Current portion of reclamation and mine closure costs | 4,697 | 4,697 | |||||
Current portion of employee benefits | 1,524 | 1,524 | |||||
Accrued expenses and other | 51,799 | 43,444 | |||||
Total current liabilities | 135,692 | 107,654 | |||||
Long-term debt and capital leases | 83,475 | 43,816 | |||||
Reclamation and mine closure costs | 79,886 | 79,655 | |||||
Long-term employee benefits | 34,714 | 33,297 | |||||
Deferred income taxes | 44,089 | 43,198 | |||||
Below-market coal supply agreements | 71,203 | 72,376 | |||||
Other non-current liabilities | 8,241 | 9,257 | |||||
Total liabilities | 457,300 | 389,253 | |||||
Minority interest | 926 | 1,038 | |||||
Stockholders’ equity | |||||||
Common stock | 1,527 | 1,523 | |||||
Additional paid-in capital | 629,369 | 628,275 | |||||
Retained earnings | 29,247 | 36,074 | |||||
Total stockholders’ equity | 660,143 | 665,872 | |||||
Total liabilities and stockholders’ equity | $ | 1,118,369 | $ | 1,056,163 | |||
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INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(dollars in thousands)
Three Months Ended March 31, | ||||||||
2006 | 2005 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (6,189 | ) | $ | 10,857 | |||
Adjustments to reconcile net income (loss) to net cash from operating activities: | ||||||||
Depreciation, depletion and amortization | 17,096 | 8,522 | ||||||
Stock compensation | 1,098 | — | ||||||
Minority interest | (112 | ) | — | |||||
Amortization of finance costs included in interest expense | 429 | 271 | ||||||
(Gain) loss on sale of assets | (771 | ) | — | |||||
Deferred income taxes | (54 | ) | 1,759 | |||||
Receivables, trade | (205 | ) | (10,143 | ) | ||||
Inventories | (13,316 | ) | (2,873 | ) | ||||
Prepaid expenses | (2,595 | ) | 2,625 | |||||
Other non-current assets | (1,926 | ) | 365 | |||||
Accounts payable | 10,268 | 2,816 | ||||||
Accrued expenses | 8,355 | 1,804 | ||||||
Accrued income tax | — | 2,935 | ||||||
Reclamation and mine closure costs | 831 | (136 | ) | |||||
Other liabilities | 401 | 710 | ||||||
Net cash from operating activities | 13,310 | 19,512 | ||||||
Cash flows from investing activities: | ||||||||
Net proceeds from the sale of assets | 2,718 | — | ||||||
Additions to property, plant and equipment and mine development | (41,199 | ) | (14,820 | ) | ||||
Cash paid related to acquisitions, net | (963 | ) | ||||||
(Deposits) withdrawals of/from restricted cash | 232 | (1,374 | ) | |||||
Net cash from investing activities | (39,212 | ) | (16,194 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments on short-term debt | (2,441 | ) | (1,598 | ) | ||||
Borrowings on long-term debt | 40,000 | — | ||||||
Repayments on long-term debt | (503 | ) | (713 | ) | ||||
Deferred finance costs | (138 | ) | — | |||||
Net cash from financing activities | 36,918 | (2,311 | ) | |||||
Net change in cash and cash equivalents | 11,016 | 1,007 | ||||||
Cash and cash equivalents, beginning of period | 9,187 | 23,967 | ||||||
Cash and cash equivalents, end of period | $ | 20,203 | $ | 24,974 | ||||
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INTERNATIONAL COAL GROUP, INC.
Reconciliation of Net Income to EBITDA
for the Three Months Ended March 31, 2006 and 2005 (unaudited)
(dollars in thousands)
Three Months Ended March 31, | |||||||
2006 | 2005 | ||||||
Net income (loss) | $ | (6,189 | ) | $ | 10,857 | ||
Depreciation, depletion & amortization | 17,096 | 8,522 | |||||
Interest expense, net | 2,055 | 3,076 | |||||
Income tax expense (benefit) | (2,275 | ) | 6,726 | ||||
Minority interest | (112 | ) | — | ||||
EBITDA (a) | $ | 10,575 | $ | 29,181 | |||
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