International Coal Group, Inc. (

ICO

)

Q1 2011 Earnings Call

April 28, 2011 11:00 am ET

Executives

Roger L. Nicholson – Senior Vice President, Secretary and General Counsel

Bennett K. Hatfield – President, Chief Executive Officer and Director

Bradley W. Harris – Senior Vice President, Chief Financial Officer and Treasurer

Analysts

Michael Dudas – Jeffries & Company

Brian Gamble – Simmons & Company

Shneur Gershuni – UBS

Brett Levy – Jeffries & Company

David Katz – J.P. Morgan

Jeremy Sussman – Brean Murray

Mark Levin – BB&T Capital Markets

Jamie Melzer – Bank of America/Merrill Lynch

David Beard – IBS

Presentation

Operator

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» International Coal Group Inc. Q1 2010 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the First Quarter 2011 International Coal Group Incorporated Earnings Conference Call. My name is Francine and I am your operator for today. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

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I would now like to turn the presentation over to your host for today’s call, Mr. Roger Nicholson, Senior Vice President, Secretary and General Counsel. Sir, you may proceed.

Roger L. Nicholson

Thank you. Welcome to International Coal Group’s first quarter 2011 earnings conference call. I’m Roger Nicholson, Senior Vice President, Secretary and General Counsel of ICG. We released our earnings report yesterday after the market closed.

With me on the call today are Ben Hatfield, President and CEO of International Coal Group; Brad Harris, Senior Vice President, CFO and Treasurer; Mike Hardesty, Senior Vice President, Sales and Marketing and Ross Mazza, Director of Financial Reporting and Investor Relations.

Before we get started, please let me remind you that various remarks we may make on this call concerning future expectations, plans and prospects for the company constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

These statements are made on the basis of management’s views and assumptions regarding feature events and business performance as of the time the statements were made. Because these forward-looking statements are subject to various risks and uncertainties, actual results may differ materially from those implied.

Factors that could cause actual results to differ materially are contained in our filings from time to time with the Securities and Exchange Commission and are also contained in our press release dated April 27, 2011.

Non-GAAP financial measures will also be discussed. You will find a reconciliation of the differences between the non-GAAP financial measures and the most directly comparable GAAP financial measures at the end of our press release, a copy of which has been posted on our website.

At this time I’d like to turn the call over to Ben Hatfield for his opening remarks.

Bennett K. Hatfield

Thank you for joining us this morning. Increasing metallurgical coal production and steady operating performance at virtually all of our business units provided strong first quarter results. Despite weather related production challenges at Vindex unscheduled contract customer outages at ICG Illinois and erratic rail service that delayed shipments at several operations, we were able to expand metallurgical sales and achieve record per ton margins.

Improving demand for coking coal has lead to remarkably strong metallurgical pricing, a trend that we anticipate will continue into 2012. Although we expect the thermal market to strengthen in the second half of this year, low natural gas prices will likely continue to suppress coal-fired electricity output through mid-year.

At this time, I’d like to turn the call over to Brad Harris, our Chief Financial Officer.

Bradley W. Harris

Thanks Ben. For the first quarter of 2011, we reported total revenues of $302 million including $283.7 million attributable to coal sales of 3.9 million tons. First quarter 2010 revenues totalled $288.6 million, of which $270.5 million was attributable to coal sales of 4.3 million tons.

Adjusted EBITDA for the first quarter of 2011 was $65.1 million, which represents a 39% increase over the $46.9 million of adjusted EBITDA reported in the same period of 2010.

Net income for the first quarter of 2011 was $22 million or $0.10 per share on a diluted basis, compared to a net loss of $8.9 million or $0.05 per share on a diluted basis during the first quarter of 2010.

Net loss for the first quarter of 2010 included a $22 million pre-tax loss on extinguishment of debt related to the company’s capital restructuring. Excluding this loss, first quarter 2010 net income would have been $6.2 million or $0.03 per share on diluted basis.

Average coal sales revenue per ton for the first quarter was $73.67 compared to $62.57 for the comparable period in 2010, while cost per ton sold was $56.60 versus $50.90 for the same period in 2010. Cost per ton for the first quarter of 2011 was adversely impacted by rising diesel fuel prices and continuing regulatory issues that hampered production.

Also contributing to the increase in cost per ton over the prior year was our expanded metallurgical production, as these reserves are generally more expensive to mine than thermal serves.

Margin per ton increased by 46% to $17.07 for the quarter compared to $11.67 per ton for the first quarter of 2010, primarily due to higher price realization on increased metallurgical sales. Metallurgical shipments of 718,000 tons during the quarter represented a 53% increase versus the first quarter of 2010.

Depreciation, depletion and amortization expense totaled $25.7 million for the first quarter compared to $26.4 million for the same quarter last year. Corporate SG&A for the first quarter was $11.2 million compared to $8.6 million for the same period in 2010, primarily due to increased labor and legal cost and a reserve for potential bad debt.

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