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International Coal Group Management Discusses Q3 2010 Results – Earnings Call Transcript

International Coal Group Management Discusses Q3 2010 Results â¿¿ Earnings Call Transcript

International Coal Group (

ICO

)

Q3 2010 Earnings Call

October 28, 2010 11:00 a.m. ET

Executives

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

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

Ross [Inaudible] – Manager of External Reporting

Analysts

Bret Levy – Jefferies & Co.

Jeff Kramer - UBS

TheStreet Recommends

Dave Katz – JP Morgan

Michael Dudas – Jeffries & Co.

Shneur Gershuni – UBS

Mark Levin – BB&T Capital Market

Brian Gamble – Simmons & Company

Jeremy Sussman – Brean Murray

Presentation

Operator

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Previous Statements by ICO
» International Coal Group, Inc Q2 2010 Earnings Call Transcript
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» International Coal Group Inc. Q4 2009 Earnings Call Transcript
» International Coal Group Q3 2009 Earnings Call Transcript

Good day ladies and gentlemen, and welcome to the International Coal Group third quarter Earnings Conference Call. My name is Jen, and I will be your coordinator for today. At this time, all participants are on a listen only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions).

I would now like to turn the call over to your, Mr. Roger Nicholson, Senior Vice President, Secretary, and General Counsel. Please proceed sir.

Roger Nicholson

Thank you. Welcome to International Coal Group's third quarter 2010 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 [inaudible], Manager of External Recording.

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 future 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 October 27, 2010.

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 to our website.

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

Ben Hatfield

Thank you for joining us this morning. Yesterday, we were pleased to report our company’s strongest operational performance to date, as adjusted EBITDA increased to $61.6 million compared to $37.7 million in the same period a year ago, excluding non-routine transactions.

These results are due in large part to increased sales of metallurgical coal, solid Thermal deliveries, and cost containment, and a challenging regulatory environment. These factors led to a 63% increase in per-ton margins compared to the third quarter of 2009.

Again, exclusive of non-routine transactions, net income for the quarter was $25.3 million or $0.12 per share on a diluted basis, compared to $1.9 million or $0.01 per share on a diluted basis for the same quarter last year.

Metallurgical coal processing has been improving steadily while Thermal demand is being slowed by mild weather and the low cost of competing fuel sources. We expect Thermal process to rebound in 2011 as a result of constrained production, and improving economic conditions.

Further, we expect continued upward pressure on metallurgical pricing in 2011, due to rising international demand. At this time, I’d like to turn the call over to Brad Harris, our Chief Financial Officer.

Brad Harris

Thanks, Ben. In the third quarter of 2010, we reported total revenues of $313.1 million including $293.6 million attributable to coal sales of 4.4 million tons. Third quarter 2009 revenues totaled $296.6 million of which $246.8 million was attributable to coal sales of 4.1 million tons.

Adjusted EBITDA for the third quarter of 2010 was $61.6 million; adjusted EBITDA for the third quarter of 2009 was $64.7 million, including a $27 million payment received for the early termination of two related coal supply agreements and loss margin on pre-termination shipments. Exclusive of this payment, adjusted EBITDA would have been $37.7 million for the third quarter of 2009.

Net income for the third quarter of 2010 was $24.9 million or $0.12 per share from diluted basis compared to net income of $18.7 million or $0.12 per share for the same quarter a year ago. Net income for the current quarter included a 0.9 million pretax loss on extinguishment of debt related to repurchases of senior and convertible notes. Excluding the loss on debt extinguishment, adjust net income in the third quarter of 2010 would have been $25.3 million or $0.12 per share on diluted basis.

Adjusted net income for the third quarter of 2009, exclusive of the before mentioned $27 million payment received related to the contract terminations, would have been $1.9 million or $0.01 per share on a diluted basis.

Average coal sales revenue per ton for the third quarter was $67.40 compared to $59.67 per ton for the same period in 2009; while cost per ton was $52.10 in the third quarter versus $50.31 per ton for the same period in 2009.

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