Oct. 28, 2009 (PR Newswire) -- SCOTT DEPOT, W.Va., Oct. 28 /PRNewswire-FirstCall/ --
Third Quarter Highlights:
-- Adjusted EBITDA increases to $64.7 million
-- EPS increases to $0.12 per share on a diluted basis
-- Margins improve 7% to $9.36 per ton
International Coal Group, Inc. (NYSE: ICO) today reported its results for the third quarter of 2009.
-- Adjusted EBITDA, or earnings before deducting interest, income taxes,
depreciation, depletion, amortization and minority interest, was $64.7
million for the third quarter of 2009 compared to $45.0 million for the
third quarter of 2008. Third quarter 2009 results include the
previously disclosed $27.0 million payment received for the early
termination of two related coal supply agreements and lost margin on
pre-termination shipments.
-- Net income was $18.7 million, or $0.12 per share on a diluted basis, for
the third quarter of 2009 compared with net income of $9.3 million, or
$0.06 per share on a diluted basis, for the same quarter last year.
-- Revenues were $296.6 million for the third quarter of 2009 compared to
$309.2 million for the third quarter of 2008.
-- Margin per ton sold increased 7% to $9.36 in the third quarter of 2009,
compared to $8.77 for the same period last year.
"We are pleased to announce improved profit margins on our coal sales, compared to the third quarter of 2008, particularly given the extremely challenging market conditions now existing for coal producers," said Ben Hatfield, ICG President and CEO. "Weak natural gas prices, mild weather and low industrial demand for electricity limited coal-fired generation and coal shipments during the quarter. Customer-initiated shipment delays and contract suspensions reduced our anticipated third quarter shipments by approximately 350,000 tons and decreased adjusted EBITDA by an estimated $9.0 million. Nevertheless, our focus on controlling costs and managing production levels yielded reasonable performance despite the adverse environment."
Hatfield continued, "During the quarter, we continued to balance production with committed sales, selectively idling 400,000 annual tons of higher-cost production at our ICG East Kentucky complex and reducing work schedules at several other locations. In early October, we also reduced annual production at ICG Eastern by an additional 500,000 tons."
Hatfield concluded, "We have seen signs of recovery amid the market weakness as thermal coal prices have recently improved, and spot market interest for metallurgical coal from the international market has picked up. The outlook for domestic metallurgical demand has also improved as blast furnace utilization rates are climbing. We believe that 2010 could be a balancing year for coal demand that sets the stage for a much stronger market in 2011."
Sales, Production and Reserves
ICG sold 4.1 million tons of coal during the third quarter of 2009 compared to 4.8 million tons during the third quarter of 2008. Production totaled 3.9 million tons in the third quarter of 2009 versus 4.5 million tons in the same period of 2008.
As of September 30, 2009, ICG controlled approximately 1.0 billion tons of coal reserves, located primarily in Illinois, Kentucky, West Virginia, Maryland and Virginia. Additionally, the Company controlled approximately 523 million tons of non-reserve coal deposits, which may be classified as reserves in the future as additional drilling and geotechnical work is completed.
Operational and Other Updates
-- On October 6, 2009, ICG Hazard was awarded the 2009 Commissioner's Award
of Excellence in Reclamation by the Kentucky Department for Natural
Resources for outstanding reclamation work at the Company's surface mine
near Vicco, Kentucky. In announcing the award, the Department noted ICG
Hazard's "exceptional work and their commitment to the environment."
-- As previously disclosed, in September, ICG ADDCAR acquired certain
international patent rights that substantially expand its ability to
manufacture and market its ADDCAR highwall mining system beyond North
America. With this acquisition, ICG ADDCAR is now entitled to
manufacture and market its highwall mining system throughout North
America, South America, Africa, Europe, as well as the key
coal-producing countries of China, Russia and South Africa.
-- In September, ICG ADDCAR also concluded successful testing and sale of
its new Steep-Dip Highwall Mining System to a coal producer in British
Columbia. This innovative new model was designed to accommodate
highwall mining applications in geologically challenging coal fields
with steeply dipping seams, such as those found in Canada and parts of
the western United States.
Market Outlook and Committed Sales
The Company's committed and priced sales for 2009 total approximately 17.4 million tons, or essentially all of its projected shipments, with average pricing of approximately $59.45 per ton, excluding freight and handling expenses.
As of October 17, 2009, total year-to-date U.S. production was 63 million tons lower than the comparable prior year period. After factoring in recent weekly comparative data, the Company expects 2009 U.S. production to be approximately 100 million tons lower than 2008. The Company believes that U.S. coal production will continue to fall until utility inventories are significantly reduced.
While the Company expects that fourth quarter 2009 utility shipments will continue to be depressed by high inventories, there appear to be encouraging signs for a recovery by mid-2010. Favorable indicators include rising natural gas prices, which have climbed steadily since mid-September, and predictions from weather forecasting services of unusually cold winter weather in the areas affecting the Company's utility customer base. Metallurgical coal demand is also expected to increase, removing certain high-volatile "cross-over" coals from the thermal market and further tightening supply.
Committed sales for 2010 are approximately 14.7 million tons, or 85% of planned shipments, of which 13.8 million tons are priced, including 1.0 million tons subject to collared price adjustments for which the outcome can be projected with reasonable confidence. The Company projects an average price for the committed and priced sales of approximately $61.00 per ton, excluding freight and handling expenses. An additional 0.9 million tons of planned shipments are also committed, but pricing is subject to a market reopener. Approximately 1.2 million tons of uncommitted sales for 2010 are expected to be marketed as metallurgical coal.
Liquidity and Debt
As of September 30, 2009, the Company had $97.7 million in cash and $26.4 million in borrowing capacity available under its credit agreement. Total debt was $444.5 million, consisting primarily of $175.0 million of 10.25% Senior Notes and $225.0 million of 9% Convertible Senior Notes.
As previously disclosed, in September, the Company successfully reached an agreement with its banks to amend its $100 million credit facility. The amendment addressed the risk of noncompliance with certain covenants that were contractually scheduled to tighten effective January 1, 2010.
Outlook
The Company has updated its guidance to reflect modifications to its production mix and the global economic conditions affecting the coal market:
-- For 2009, the Company expects to sell approximately 17.3 million to 17.5
million tons of coal. The average selling price is projected to be
approximately $59.25 to $59.50 per ton. The projected average cost per
ton sold is $49.25 to $49.75, excluding selling, general and
administrative expenses. The Company expects coal production to be
approximately 16.4 million to 16.6 million tons.
-- The Company's updated outlook for its expected average coal pricing by
region for 2009 is as follows:
Region 2009 Forecast
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Central Appalachia $66.25 - $66.50
Northern Appalachia $55.75 - $56.00
Illinois Basin $33.80 - $34.10
Average $59.25 - $59.50
-- The Company anticipates 2009 capital expenditures of approximately $90.0
million to $95.0 million.
-- Due to the continued weakness in coal demand, the Company has reduced
the projected shipment level for 2010 and now expects to sell 16.5
million to 18.0 million tons of coal. Production for 2010 is expected
to total 16.0 million to 17.0 million tons.
-- Due to the high degree of market uncertainty, the Company is not
offering revenue or cost guidance for 2010 at this time. However, the
Company anticipates providing guidance information in its fourth quarter
2009 earnings release.
General Information
ICG is a leading producer of coal in Northern and Central Appalachia and the Illinois Basin. The Company has 13 active mining complexes, of which 12 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 domestically and internationally.
Forward-Looking Statements
Statements in this press release that are not historical facts are forward-looking statements within the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995 and may involve a number of risks and uncertainties.
