International Coal Group Revises First Quarter 2011 Results

INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

(in thousands, except share and per share amounts)

Three months ended

March 31,

2011

2010

REVENUES:

Coal sales revenues

$

283,711

$

270,490

Freight and handling revenues

7,152

9,377

Other revenues

11,126

8,727

Total revenues

301,989

288,594

COSTS AND EXPENSES:

Cost of coal sales

217,964

220,065

Freight and handling costs

7,152

9,377

Cost of other revenues

7,342

7,181

Depreciation, depletion and amortization

25,656

26,397

Selling, general and administrative

51,152

8,585

Gain on sale of assets, net

(6,723)

(3,481)

Total costs and expenses

302,543

268,124

Income (loss) from operations

(554)

20,470

INTEREST AND OTHER INCOME (EXPENSE)

Loss on extinguishment of debt

—

(21,987)

Interest expense, net

(8,110)

(13,300)

Total interest and other income (expense)

(8,110)

(35,287)

Loss before income taxes

(8,664)

(14,817)

INCOME TAX BENEFIT

2,357

5,965

Net loss

(6,307)

(8,852)

Net income attributable to noncontrolling interest

(11)

—

Net loss attributable to International Coal Group, Inc.

$

(6,318)

$

(8,852)

Other Data:

Adjusted EBITDA (a)

$

65,102

$

46,867

Earnings per share:

Basic

$

(0.03)

$

(0.05)

        Diluted

$

(0.03)

$

(0.05)

Weighted-average shares:

        Basic

202,699,052

181,382,766

        Diluted

202,699,052

181,382,766

(a)

This press release includes a non-GAAP financial measure within the meaning of applicable SEC rules and regulations. Adjusted EBITDA is a non-GAAP financial measure used by management to gauge operating performance. We define Adjusted EBITDA as net income or loss attributable to International Coal Group, Inc. before deducting interest, income taxes, depreciation, depletion, amortization, legal reserve for the Allegheny lawsuit, loss on extinguishment of debt and noncontrolling interest. Adjusted EBITDA is not, and should not be used as, a substitute for operating income, net income and cash flow as determined in accordance with GAAP. We present Adjusted 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 or Adjusted EBITDA when reporting their results. We also use Adjusted EBITDA as our executive compensation plan bases incentive compensation payments on our Adjusted EBITDA performance measured against budgets. Our ABL Loan Facility uses Adjusted EBITDA (with additional adjustments) to measure our compliance with covenants, such as fixed charge ratio. EBITDA or Adjusted EBITDA is also widely used by us and others in our industry to evaluate and price potential acquisition candidates. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that Adjusted 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; interest expense, or the cash requirements necessary to service interest or principal payments, on our debts. Although depreciation, depletion and amortization are non-cash charges, the assets being depreciated, depleted and amortized will often have to be replaced in the future. Adjusted EBITDA does not reflect any cash requirements for such replacements. Other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. A reconciliation of Adjusted EBITDA to GAAP net income or loss attributable to International Coal Group, Inc. appears at the end of this press release.

INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2011 AND DECEMBER 31, 2010

(in thousands)

March 31,

2011

December 31,

2010

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

186,566

$

215,276

Accounts receivable, net

111,210

82,557

Inventories, net

80,724

70,029

Deferred income taxes

1,420

13,563

Prepaid expenses and other

21,441

19,172

Total current assets

401,361

400,597

PROPERTY, PLANT, EQUIPMENT AND MINE DEVELOPMENT, net

1,051,064

1,040,118

DEBT ISSUANCE COSTS, net

8,937

11,998

ADVANCE ROYALTIES, net

21,639

16,037

OTHER NON-CURRENT ASSETS

12,008

10,947

Total assets

$

1,495,009

$

1,479,697

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

80,294

$

78,899

Short-term debt

1,598

2,797

Current portion of long-term debt and capital leases

103,527

17,928

Current portion of reclamation and mine closure costs

8,364

8,414

Current portion of employee benefits

3,831

3,831

Accrued expenses and other

47,582

61,092

Total current liabilities

245,196

172,961

LONG-TERM DEBT AND CAPITAL LEASE

228,437

308,422

RECLAMATION AND MINE CLOSURE COSTS

71,541

70,730

EMPLOYEE BENEFITS

84,129

81,868

DEFERRED INCOME TAXES

46,515

60,452

BELOW-MARKET COAL SUPPLY AGREEMENTS

25,934

26,823

OTHER NON-CURRENT LIABILITIES

43,921

4,176

Total liabilities

745,673

725,432

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Common stock

2,042

2,038

Treasury stock

(309)

(216)

Additional paid-in capital

852,812

851,440

Accumulated other comprehensive loss

(3,353)

(3,459)

Retained deficit

(101,920)

(95,602)

Total International Coal Group, Inc. stockholders' equity

749,272

754,201

Noncontrolling interest

64

64

Total stockholders' equity

749,336

754,265

Total liabilities and stockholders' equity

$

1,495,009

$

1,479,697

INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

(in thousands)

Three months ended

March 31,

2011

2010

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(6,307)

$

(8,852)

Adjustments to reconcile net loss to net cash from operating activities:

Depreciation, depletion and amortization

25,656

26,397

Loss on extinguishment of debt

—

21,987

Amortization and write-off of deferred finance costs and debt discount

1,458

3,158

Amortization of accumulated employee benefit obligations

172

(7)

Compensation expense on share based awards

1,218

984

Gain on sale of assets, net

(6,723)

(3,481)

Provision for bad debt

329

(79)

Deferred income taxes

(1,860)

(7,583)

Changes in assets and liabilities:

Accounts receivable

(18,813)

(24,463)

Inventories

(10,695)

3,914

Prepaid expenses and other

(2,269)

856

Other non-current assets

(4,530)

761

Accounts payable

912

5,425

Accrued expenses and other

(13,510)

(16,133)

Reclamation and mine closure costs

761

(339)

Other liabilities

42,067

2,890

Net cash from operating activities

7,866

5,435

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from the sale of assets

245

1,000

Additions to property, plant, equipment and mine development

(31,106)

(20,635)

Withdrawals of restricted cash

394

8,854

Distribution to joint venture

(11)

—

Net cash from investing activities

(30,478)

(10,781)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments on short-term debt

(1,199)

(833)

Repayments on long-term debt and capital lease

(4,964)

(4,928)

Proceeds from convertible notes offering

—

115,000

Proceeds from senior notes offering

—

198,596

Proceeds from common stock offering

—

102,453

Repurchases of senior notes

—

(181,612)

Purchases of treasury stock

(93)

(11)

Proceeds from stock options exercised

158

—

Debt issuance costs

—

(14,243)

Net cash from financing activities

(6,098)

214,422

NET CHANGE IN CASH AND CASH EQUIVALENTS

(28,710)

209,076

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

215,276

92,641

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

186,566

$

301,717

INTERNATIONAL COAL GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Unaudited)

(in thousands)

Three months ended

March 31,

2011

2010

Net loss attributable to International Coal Group, Inc.

$

(6,318)

$

(8,852)

Depreciation, depletion and amortization

25,656

26,397

Interest expense, net

8,110

13,300

Income benefit expense

(2,357)

(5,965)

Legal reserve for the Allegheny lawsuit

40,000

Loss on extinguishment of debt

—

21,987

Noncontrolling interest

11

—

Adjusted EBITDA

$

65,102

$

46,867

RECONCILIATION OF NET LOSS TO ADJUSTED NET INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (Unaudited)

(in thousands)

Three months ended

March 31,

2011

2010

Net loss attributable to International Coal Group, Inc.

$

(6,318)

$

(8,852)

Legal reserve for the Allegheny lawsuit

40,000

Loss on extinguishment of debt

—

21,987

Income tax benefit

(11,714)

(6,926)

Adjusted net income attributable to International Coal Group, Inc.

$

21,968

$

6,209

OPERATING STATISTICS

FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2011 (Unaudited)

(in thousands, except per ton amounts)

Central

Appalachia

Northern

Appalachia

Illinois

Basin

Purchased

Coal and Ancillary

Total

For the three months ended March 31, 2011:

Tons sold

2,240

957

654

—

3,851

Coal sales revenues

$

179,359

$

79,080

$

25,272

$

—

$

283,711

Cost of coal sales

$

142,777

$

55,672

$

18,513

$

1,002

$

217,964

Coal sales revenue per ton (b)

$

80.07

$

82.66

$

38.61

$

n/m

(c)

$

73.67

Cost of coal sales per ton (b)

$

63.74

$

58.19

$

28.29

$

n/m

(c)

$

56.60

For the three months ended March 31, 2010:

Tons sold

2,473

1,069

651

130

4,323

Coal sales revenues

$

178,964

$

60,365

$

23,536

$

7,625

$

270,490

Cost of coal sales

$

140,266

$

53,671

$

19,408

$

6,720

$

220,065

Coal sales revenue per ton (b)

$

72.36

$

56.45

$

36.14

$

59.00

$

62.57

Cost of coal sales per ton (b)

$

56.71

$

50.19

$

29.80

$

52.00

$

50.90

(b)

"Coal sales revenue per ton" and "Cost of coal sales per ton" are calculated as Coal sales revenues or Cost of coal sales, respectively, divided by Tons sold. Although Coal sales revenue per ton and Cost of coal sales per ton are not measures of performance calculated in accordance with GAAP, management believes that they are useful to an investor in evaluating performance because they are widely used in the coal industry as a measure to evaluate a company's sales performance or control over its costs. Coal sales revenue per ton and Cost of coal sales per ton should not be considered in isolation or as substitutes for measures of performance in accordance with GAAP. In addition, because Coal sales revenue per ton and Cost of coal sales per ton are not calculated identically by all companies, ICG's presentation may not be comparable to other similarly titled measures of other companies.

(c)

Coal sales within the Purchased Coal and Ancillary segment represent coal sold under brokered coal contracts, all of which were legacy contracts obtained in conjunction with business combinations. Per ton information for the three months ended March 31, 2011 within the Purchased Coal and Ancillary segment is not meaningful as all such supply contracts have expired. Cost of coal sales shown for the three months ended March 31, 2011 represents costs incurred at non-producing coal operations.