Press Release Source: International Coal Group, Inc.
International Coal Group Reports Fourth Quarter 2005 Results
Wednesday March 15, 6:41 pm ET
ASHLAND, Ky., March 15 /PRNewswire-FirstCall/ -- International Coal Group, Inc. ("ICG") (NYSE: ICO - News) today reported net income of $31.8 million, or $0.29 per fully diluted share, for the year ended December 31, 2005, versus a loss of $103.4 million for the comparable twelve month period in 2004. However, the results of operations for the three months ended December 31, 2005 were mixed when compared to the fourth quarter of the prior year. International Coal was formed to acquire the principal operations of then-bankrupt Horizon Natural Resources ("Horizon") on October 1, 2004.
ICG's 2005 results, compared to the comparable period in 2004, were:
- Revenue was $647.7 million for the twelve months ended December 31,
2005, up 27% from $509.5 million in 2004;
- Operating income was $56.8 million for the year ended December 31,
2005, up 112% from $26.8 million in 2004;
- Net income was $31.8 million for the twelve months ended December 31,
2005, or $0.29 per share on a diluted basis, versus a loss of $103.4
million, in 2004 or ($.97) per share; and
- Earnings before net interest, income taxes and depreciation, depletion
and amortization, or EBITDA, was $106.1 million for the twelve months
ended December 31, 2005, up 103% from $52.3 million in 2004.
For the three months ended December 31, 2005, compared to the comparable period in 2004, revenue was $182.1 million, up 34% from $136.1 million; operating income was $7.0 million, down 25% from $9.4 million; net income was $3.3 million, or $0.03 per share on a diluted basis, versus $4.2 million or $0.04 per share on a diluted basis; and EBITDA was $23.1 million, up 26% from $18.2 million, in each case, from the fourth quarter of 2004.
Fourth quarter results were adversely impacted by significant price increases for diesel fuel, blasting agents, and other services or commodities that are dependent on crude oil or natural gas. The tight labor market in Eastern Kentucky constrained hiring and delayed the production ramp-up schedule at our Flint Ridge complex. Also, shortfalls in coal deliveries from purchased coal suppliers forced ICG to postpone certain shipments. Additionally, fourth quarter and year end profitability was affected by approximately $0.6 million and $3.9 million, respectively, of non-cash costs associated with initial restricted stock grants to senior management.
ICG completed the acquisition of Anker Coal Group, Inc. and CoalQuest Development, LLC on November 18, 2005. Implementation of various operational improvements planned for the former Anker operating companies has taken longer than originally anticipated, delaying the expected increase in coal production and decrease in production costs for the fourth quarter. The Anker entities reported fourth quarter (11/18 - 12/31) production of approximately 276,000 tons with sales of approximately 486,000 tons which resulted in negative EBITDA of $3.2 million and a loss of $4.1 million (pre-tax). Performance of the Anker group prior to the merger is not included in ICG's reported financial results. Recent performance has generally improved, indicating that the operating issues are being appropriately addressed and suggesting that 2006 production rates and profit margins should be higher.
"With respect to ICG's performance in 2005, we are pleased that significant milestones were achieved such as the acquisition of Anker and CoalQuest and ICG's listing on the New York Stock Exchange," said Ben Hatfield, President and Chief Executive Officer of ICG. "We have established a position that we believe will allow us to capitalize on the continuing strong fundamentals for the coal industry, despite what we perceive as temporary margin pressures caused by recent cost increases across the industry. We plan to continue investing in upgrading our equipment and developing our sizeable reserves to fuel internal growth."
Wilbur Ross, the Chairman of ICG's Board of Directors and a leading investor in ICG, said, "We remain excited by ICG's prospects. The company endured an eventful fourth quarter followed by a heart-wrenching first quarter. However, the company's management has remained focused on taking the right steps for its investors and employees by moving forward with its ambitious development plans."
Sago Mine
An explosion at the Sago Mine on January 2, 2006 tragically resulted in the death of twelve workers and serious injuries to another employee. ICG has cooperated fully with federal and state agencies investigating the cause of the explosion and also commissioned an independent inquiry by a team of consultants, each of whom are recognized as industry experts in their respective fields. Initial findings of the ICG investigation were released publicly on March 14, 2006 prior to the resumption of coal production at the Sago Mine today, March 15. "This tragedy will always remain in our memories, but we must do more than just remember the good people that died and were injured," said Mr. Hatfield. "We must learn lessons from this accident that will make coal miners safer in years to come. That is our commitment to the families of the twelve miners lost."
Capital Resources, Reserves, Sales and Sales Commitments
At December 31, 2005, cash totaled $9.2 million and ICG had an additional $28.8 million of unused borrowing capacity. Total debt was $49.6 million, versus net worth of $665.9 million. Capital expenditures totaled $40.1 million during the fourth quarter and $116.0 million for the twelve months ending December 31, 2005.
ICG has an estimated 916 million tons of reserves located principally in Kentucky, West Virginia, Maryland, Illinois, and Virginia.
Excluding the former Anker companies, ICG sold 3.7 millions tons of coal during the quarter, 2.7% more than the 3.6 millions tons sold in the fourth quarter of 2004. Again excluding the former Anker companies, production of 3.1 million tons represented an increase of 4.5% from last year.
Price realizations per ton remained strong in the fourth quarter, both year-over-year and sequentially. ICG's overall average price per ton of coal rose to $43.15 during the fourth quarter of 2005, which represents an 18% gain compared to the comparable period in 2004 and relatively constant compared to the third quarter of 2005.
As of December 31, 2005, consistent with our marketing strategy, ICG had committed sales for approximately 82% of its planned shipments for 2006.
Market Outlook
Overall, market prices have been stable although near-term prices are under pressure due to the mild 2005-2006 winter. Partially counterbalancing the mild winter have been the significant production outages in the Company's operating areas. Recent short term price weaknesses have not had a significant impact as ICG is essentially sold up for the next six months' production. The longer-term price environment is solid and we are seeing more interest from customers wanting to lock in to term business for three to five years forward. We are in final discussions with two significant customers to lock in firm commitments through 2009, and preliminary talks with other customers on terms extending beyond 2009.
New Mine Developments
Construction work has commenced at ICG Beckley's underground mine complex in Raleigh County, WV. Originally started by Westmoreland Coal as its Triangle Complex, ICG Beckley intends to complete the unfinished slope and ventilation shaft and construct the necessary ancillary facilities such as a new preparation plant that will allow mining to commence in the Pocahontas #3 seam, a high quality low volatile metallurgical coal, in late 2007.
Design and permitting activities continue on schedule for the Tygart #1 Mine, which is to be the first mining complex on CoalQuest Development's Hillman property. A mining permit application for the underground mine and all surface facilities has been submitted to the West Virginia Department of Environmental Protection. Construction of the mine facilities will commence upon issuance of the necessary permits, which is expected to occur in early 2007.
Other Business Developments
On December 12, 2005, ICG successfully closed its public offering of 21 million common shares. ICG received approximately $210.5 million, net of expenses, which was used to retire outstanding long-term debt.
On November 18, 2005, ICG completed its acquisition of Anker and CoalQuest Development, LLC issuing 24.1 million shares to the former owners
The former Anker companies produce steam and metallurgical coal from five deep and surface mining complexes strategically located in West Virginia and Maryland. The former Anker/CoalQuest companies own or control approximately 374 million tons of coal reserves, as well as 142 million tons of coal resources, in Northern and Central Appalachia. The former Anker companies lease the majority of their coal reserves from CoalQuest. CoalQuest has no material operations other than its leasing activity.
International Coal Group's ICG Knott County subsidiary acquired the assets of Greymont Mining Corp. in November 2005. Greymont controlled approximately 15 million tons of high quality coal reserves near Raven, Kentucky, together with the right to acquire certain existing mining permits. ICG Knott County intends to operate a new 650 ton-per-hour preparation plant to be constructed during 2006. ICG expects this complex to produce and ship approximately one million tons of coal annually after it reaches full capacity in 2007. Initial coal production is planned for spring of 2006.
In connection with the coalbed methane recovery project between CoalQuest and CDX Gas, LLC, the first production well site, located in Barbour County, West Virginia, is now fully permitted and drilling began in mid-November.
2006 Guidance
During the first quarter of 2006, the Company expects to produce approximately 4.0 million tons of coal, with sales of approximately 4.7 million tons during the same period. The Company expects that this will yield between $200 million and $216 million in total revenues and EBITDA in the range of $9 million to $11 million during the first quarter.
During the last nine months of 2006, the Company expects to produce 15 to 16 million tons of coal from its operations, and it expects to sell 17 to 19 million tons of coal during that same period. Based on those projections, the Company expects to receive between $820 million and $880 million in total revenues during the last nine months of 2006, with EBITDA in the range of $160 million to $180 million for the same period.
The Company forecasts earnings of $60 to $80 million during 2006, with expected earnings per share during that period of $0.39 to $0.53 per share.
While ICG's policy is not to offer earnings guidance beyond the current year, in 2007 we expect to produce 22 to 24 million tons of coal with expected sales of 23 to 25 million tons of coal.
Basis of Reporting
The financial statements for the year ended December 31, 2004 include the results of operations of Horizon from the period January 1 through September 30, 2004, which have been prepared on a "carve-out" basis to include the assets, liabilities and results of operations of ICG that were previously included in the consolidated financial statements of Horizon. The financial statements for the predecessor period include allocations of certain expenses, taxation charges, interest and cash balances relating to the predecessor based on management's estimates. The predecessor financial information is not necessarily indicative of the consolidated financial position, results of operations and cash flows of ICG if it had operated during the predecessor period presented. The financial results for 2005 include the results of operations of Anker and CoalQuest since the acquisition on November 18, 2005.
Conference Call Webcast
ICG will hold a conference call to discuss the results for the fourth quarter and full year 2005 on March 16th, 2006 at 11:00 a.m. ET. The call will be accessible through the Internet at intlcoal.com and will be archived on ICG's web site as well. A replay will be available through at least April 16, 2006 on the web site and until March 23, 2006 by telephone replay at 888-286-8010 (passcode #48654504).
General Information
ICG is a leading producer of coal in Northern and Central Appalachia and the Illinois Basin. The company has eleven active mining complexes, of which ten 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. |
