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Signature Sponsor
Highlights:
Scott Depot, WV, February 2 – International Coal Group, Inc. today reported its results for the fourth quarter of 2010. • Adjusted EBITDA was $47.8 million in the fourth quarter of 2010 compared to $40.3 million during the fourth quarter of 2009. • Net income was $9.6 million, or $0.05 per share on a diluted basis, in the fourth quarter of 2010 compared to a net loss of $11.3 million, or $0.07 per share on a diluted basis, during the fourth quarter of 2009. Net income for the fourth quarter of 2010 included a $0.4 million pre-tax loss on extinguishment of debt related to repurchases of 9% Convertible Senior Notes. Excluding the loss on extinguishment of debt in the fourth quarter of 2010, adjusted net income would have been $9.8 million, or $0.05 per share on a diluted basis. Fourth quarter 2009 financial results included a $13.3 million pre-tax loss on extinguishment of debt resulting from private exchanges of 9% Convertible Senior Notes for shares of the Company’s common stock. Excluding the loss on extinguishment of debt in the fourth quarter of 2009, net income and diluted earnings per share would have been essentially break-even. • Margin per ton sold increased 21% to $14.67 in the fourth quarter of 2010 compared to $12.11 during the same period in 2009, primarily due to higher price realization from growing metallurgical shipments. • Coal sales revenues increased to $243.4 million in the fourth quarter of 2010 compared to $231.3 million during the fourth quarter of 2009. “We were pleased to deliver solid fourth quarter results despite isolated operational challenges and late-quarter shipment delays,” said Ben Hatfield, President and CEO of ICG. “Although our Sentinel mine had several unplanned section moves that reduced metallurgical shipments, we were able to maintain attractive margins. Additionally, weather-related disruptions to rail service delayed approximately 100,000 tons of fourth quarter shipments, impacting Adjusted EBITDA by nearly $5.0 million.” Hatfield continued, “Current coal prices have moved up sharply for both metallurgical and thermal coal. Metallurgical prices are being driven by the severe flooding in Australia, which has idled substantial production there, and an improving global economic climate. Thermal markets have also shown marked improvement due to rebounding export demand and colder weather, although US utilities are delaying significant spot purchases in order to draw down stockpiles. We believe US domestic prices are poised for rapid improvement during the latter half of 2011.” Full Year Results The Company reported Adjusted EBITDA of $201.1 million in 2010 and $201.7 million in 2009. Adjusted EBITDA in 2010 was reduced by a $10.0 million contract buyout, but increased in 2009 by a $27.0 million payment received for early termination of coal supply agreements and a $7.7 million gain on the termination of a below-market contract. Excluding these transactions, Adjusted EBITDA would have been $211.1 million for 2010 and $167.0 million for 2009. Net income for 2010 was $30.1 million, or $0.15 per share on a diluted basis, versus net income of $21.5 million, or $0.14 per share on a diluted basis, for 2009. Excluding the $10.0 million contract buyout charge and a $29.4 million loss on extinguishment of debt, adjusted net income for 2010 would have been $54.9 million, or $0.27 per share on a diluted basis. Excluding the $27.0 million payment received for early termination of coal supply agreements, the $7.7 million gain related to the contract termination and a $13.3 million loss on extinguishment of debt, adjusted net income for 2009 would have been $11.3 million, or $0.07 per share on a diluted basis. Sales, Production and Reserves ICG sold 3.5 million tons of coal during the fourth quarter of 2010 compared to 3.8 million tons during the fourth quarter of 2009. Production totaled 3.6 million tons for the fourth quarter of both 2010 and 2009. Metallurgical shipments of 571,000 tons represented a 64% increase over the fourth quarter of 2009. As of December 31, 2010, ICG controlled approximately 1.1 billion tons of coal reserves, located primarily in Illinois, Kentucky, West Virginia, Maryland and Virginia. Additionally, the Company controlled approximately 434 million tons of non-reserve coal deposits, which may be classified as reserves in the future as additional drilling and geological work is completed. Operational and Other Updates • Construction at the new Tygart Valley #1 deep mine complex experienced minor weather-related delays during the fourth quarter, but major earthwork is now complete with site development expected to wrap up in March 2011. Construction of the slope commenced in early November and work on the shafts began in December. Initial coal production is projected for late fourth quarter 2011. At full output, currently projected for early 2014, Tygart Valley #1 is expected to boost the Company’s annual metallurgical sales to approximately 5.5 million tons. • Vindex Energy’s Dobbin Ridge preparation plant began processing coal in January 2011 after a $7.7 million upgrade. The associated Bismarck deep mine, despite a slower than anticipated start, is expected to contribute approximately 180,000 tons of low-volatile metallurgical coal sales in 2011, and achieve the targeted run-rate of 250,000 annual tons by the fourth quarter of 2011. • During the fourth quarter of 2010, the Company substantially completed its capital restructuring which began late in 2009. In October 2010, the Company redeemed $10.3 million aggregate principal amount of its 9.0% Convertible Senior Notes, incurring a $0.4 million loss. The Company used cash on hand to fund the repurchase. Market Outlook and Committed Sales Recent historic flooding in Australia has affected coal prices in world markets. The key metallurgical coal-producing region of Queensland has been especially impacted, driving spot metallurgical prices to over $300 per metric tonne FOB Australia. While US prices have not yet reached that level, the Company anticipates substantial spot price improvement over the next few quarters. • For 2011, the Company expects to produce and sell between 16.1 million and 16.7 million tons of coal, including 3.1 million to 3.5 million tons of metallurgical coal. The average selling price is projected to be $73.00 per ton to $77.00 per ton, with an anticipated average cost of $55.00 to $57.00 per ton, excluding selling, general and administrative expenses. • Adjusted EBITDA, or earnings before deducting interest, income taxes, depreciation, depletion, amortization and noncontrolling interest, is expected to be in the range of $270 million to $310 million in 2011. • The Company projects its effective tax rate to be approximately 30% for 2011. • The Company’s expectation for average coal pricing by region for 2011 is as follows: Region 2011 Forecast • The Company anticipates 2011 capital expenditures of between $225 million and $245 million, including approximately $125 million related to development projects at our Tygart Valley #1, Illinois and Vindex operations. |
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