Stock Alert for International Coal Group Inc. (ICO)
  • Stock Alert for International Coal Group Inc. (ICO)
  • Stock Alert for International Coal Group Inc. (ICO)
  • " />

    Stock Alert for International Coal Group Inc. ($ICO)

    International Coal Group Inc. (NYSE: $ICO)

    International Coal Group Inc. (ICO) is a producer of coal in Northern and Central Appalachia with a range of mid to high British thermal unit (Btu), low to medium sulfur steam and metallurgical coal. The Company’s Appalachian mining complexes are located in West Virginia, Kentucky, Virginia and Maryland. It also has a complementary mining complex of mid to high sulfur steam coal located in the Illinois Basin. ICO markets its coal to a customer base of largely investment grade electric utilities, as well as domestic and international industrial customers. The Company has three business segments, which are based on the coal regions in which it operates: Central Appalachian, comprised of both surface and underground mines; Northern Appalachian, comprised of both surface and underground mines, and Illinois Basin, representing one underground mine.

    As of December 31, 2009, ICO operated a total of 11 surface and 11 underground coal mines located in Kentucky, Maryland, Virginia, West Virginia and Illinois. Approximately 53% of its production has come from surface mines, and the remaining production came from its underground mines. These mining facilities include 10 preparation plants, each of which receive, blend, process and ship coal that is produced from one or more of its 22 active mines. The Company’s surface mines are a combination of mountain top removal, highwall contour and cross ridge operations using truck/loader equipment fleets along with large production tractors.

    Share Statistics (26-April-10) FY

    2008

    FY

    2009

    %

    Chg

    Q4 2008 Q4 2009 %

    Chg

    Symbol ICO Revenue, $Mn 1,096.74 1,125.35 2.6% 257.73 245.96 -4.6%
    Current price $5.44 Gross marg. 12.1% 20.5% 69.4% 9.2% 19.5% 112%
    52wk Range: 1.78-5.71 Oper. margin 7.3% 0.1%
    Avg Vol (3m): 3,951,510 Net margin -2.4% 1.9% -179.2% -14.5% -4.6% -68.3%
    Market Cap. 973.84M
    Shares Outstanding 179.01M EPS, $ -0.15 0.18 -220% -0.08 -0.02 -75%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    Revenues for the years ended December 31, 2009, and December 31, 2008, each totaled $1.1 billion. The Company reported 2009 Adjusted EBITDA of $201.7 million, the highest level in Company history, compared to $127.2 million for 2008.  Net income for 2009 was $21.5 million, or $0.14 per share on a diluted basis, versus a net loss for 2008 of $26.2 million, or $0.17 per share on a diluted basis.

    The Company’s 2009 results include a non-cash charge totaling $13.3 million for losses on extinguishment of debt resulting from private exchanges of the Company’s Convertible Notes and $42.6 million of revenue related to the termination of several coal supply agreements.

    Results in 2008 include a non-cash charge of $37.4 million for goodwill impairment and non-recoverable mine development costs and a $24.6 million gain realized on the exchange of coal reserves.

    Sales, Production and Reserves

    ICO sold 3.8 million tons of coal during the fourth quarter of 2009 compared to 4.4 million tons during the fourth quarter of 2008. Production totaled 3.6 million tons in the fourth quarter of 2009 versus 4.3 million tons in the same period of 2008.

    As of December 31, 2009, ICO controlled approximately 1.1 billion tons of coal reserves, located primarily in Illinois, Kentucky, West Virginia, Maryland and Virginia.  Additionally, the Company controlled approximately 431 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 December 21, 2009, Allegheny Energy, the sole customer of the Company’s Sycamore 2 mine and a substantial contract customer at two other operations, ended its three-month suspension of contract shipments reportedly due to improving demand.  The Sycamore 2 mine was immediately restarted.  All three of the affected mining operations have now returned to normal production levels.

    ICO Beckley commenced production from a third section on November 30, 2009, that is expected to increase production of premium low-volatile metallurgical coal by approximately 300,000 tons in 2010.

    On November 16, 2009, the Company reached a settlement with the Kentucky Waterways Alliance and the Sierra Club in a lawsuit over the issuance of a Clean Water Act Section 404 permit to ICG Hazard’s Thunder Ridge surface mine in Leslie County, Kentucky. Under the settlement, ICG Hazard was allowed to construct a fourth and final valley fill at the Thunder Ridge mine in exchange for a contribution to a non-profit group conducting watershed assessments.

    In the fourth quarter, ICG ADDCAR began manufacturing a new Steep-Dip Highwall Mining System for delivery to a coal producer in India. The highwall mining system is expected to be shipped in the second quarter of 2010.

    Committed Sales and Market Outlook

    For 2010, committed and priced sales are approximately 15.5 million tons, or about 91% of planned shipments, at an average price of approximately $61.50 per ton, excluding freight and handling expenses. Approximately 1.0 million uncommitted tons for 2010 are expected to be marketed as metallurgical coal. Â Metallurgical coal sales in 2010 are projected to total approximately 2.4 million tons.

    For 2011, committed and priced sales are approximately 8.1 million tons, or 49% of planned shipments, at an average price of $55.50 per ton, excluding freight and handling expenses. The Company expects to sell approximately 2.5 million tons of metallurgical coal in 2011, essentially all of which is unpriced.

    The Company believes that producer discipline and improved demand will result in utility inventories approaching normalized levels by mid-to-late summer. According to published reports, utility stockpiles were reduced by nearly 30.0 million tons in December 2009 and early January 2010.  In addition, growing thermal demand from Asia offers encouraging signs that U. S. exports could rebound by mid-year, further improving market fundamentals.

    Liquidity and Debt

    As of December 31, 2009, the Company had $92.6 million in cash and $26.4 million in borrowing capacity available under its credit agreement. Total debt was $386.5 million, consisting primarily of $175.0 million of 10.25% Senior Notes and $161.5 million of 9% Convertible Senior Notes.

    In December 2009, the Company entered into a series of privately negotiated agreements in order to exchange its outstanding Convertible Notes. In connection with such agreements, the Company issued 18.7 million shares of its common stock in exchange for $63.5 million aggregate principal amount of its Convertible Notes through December 31, 2009. One of the exchange agreements, as amended, provided for closing of additional exchanges on each of January 11, 2010, and January 19, 2010. In connection with this agreement, the noteholder exchanged an additional $22.0 million aggregate principal amount of Convertible Notes for 6.2 million shares of the Company’s common stock in January 2010. As a result of these private exchanges, the Company has reduced its indebtedness by approximately $85.5 million and its related annual interest expense by approximately $10.0 million.

    Also in December, the Company filed a shelf registration statement with the Securities and Exchange Commission (SEC). The statement, which was declared effective on January 15, 2010, is expected to provide the Company with the flexibility to raise up to $600.0 million through future sales of securities, including common stock and debt securities. The registration is effective for three years.

    Source: http://www.intlcoal.com/


    Financial Strength (26-April-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 1.20 0.64 0.97 0.75
    Current Ratio (MRQ) 1.68 0.94 1.33 0.89
    LT Debt to Equity (MRQ) 60.17 69.85 50.12 145.67
    Total Debt to Equity (MRQ) 63.44 85.95 66.11 209.05
    Interest Coverage (TTM) -0.14 0.02 1.77 8.78

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Buy Outperform Hold Underperform Sell No Opinion

    This is the consensus forecast amongst six polled investment analysts. Against the International Coal Group Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 2 3 1 0 0 0
    4 weeks ago 2 2 2 0 0 0
    2 months ago 2 1 3 0 0 0
    3 months ago 2 1 3 0 0 0
    Last year 2 0 3 0 0 0

    The five analysts offering 12-month price targets for ICO have a median target of 6.00, with a high estimate of 7.50 and a low estimate of 5.50. The median estimate represents a 9.69% increase from the last price of 5.47.

    Source: www.ft.com

    Consensus Estimates Analysis


    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Jun-10 2 285.27 287.00 283.54
    Quarter Ending Sep-10 2 291.51 298.00 285.03
    Year Ending Dec-10 5 1,162.22 1,194.00 1,114.26 1,402.47
    Year Ending Dec-11 5 1,304.43 1,373.00 1,243.90 1,544.02
    EARNINGS (per share)
    Quarter Ending Jun-10 4 0.06 0.08 0.02 0.13
    Quarter Ending Sep-10 4 0.08 0.10 0.06 0.13
    Year Ending Dec-10 6 0.21 0.32 0.12 0.22
    Year Ending Dec-11 6 0.49 0.72 0.22 0.36

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=ICO


    Investment Highlights

    ICO is a leading producer of coal in Northern and Central Appalachia and the Illinois Basin. It has 13 active mining complexes, of which 12 are located in Northern and Central Appalachia and one in Central Illinois. The Company controls one billion tons of high-quality coal reserves that are primarily high-BTU, low-sulfur steam and metallurgical quality coal. Its mining operations and reserves are strategically located to serve utility, metallurgical and industrial customers throughout the Eastern United States.

    In its 10-K SEC filing for 2009, ICO stated that it sold 16.8 million tons of coal for the year ended December 31, 2009, of which approx. 16.0 million tons were produced from its mining activities and approx. 0.8 million tons were purchased through brokered coal contracts (coal purchased from third parties for resale), at an average sale price of  $60.16 and $52.62, respectively. Of the tons sold, 15.8 million tons were steam coal and 1.0 million tons were metallurgical coal. The Company’s steam coal sales volume in 2009 consisted of mid- to high-quality, high-Btu (greater than 12,000 Btu/lb.), low- to medium-sulfur (1.5% or less) coal, which typically sells at a premium to lower quality, lower Btu, higher sulfur steam coal.

    ICO’s three largest customers for the year ended December 31, 2009, were Progress Energy, Georgia Power and Santee Cooper and it derived approximately 36% of its revenues from sales to its five largest customers. ICO did not derive more than 10% of its revenues from any single customer in 2009.

    Despite the broad market weakness the industry encountered last year, ICO’s president and CEO Ben Hatfield stated that a growing number of signs point toward meaningful thermal coal price recovery in 2010: (1) Natural gas prices have climbed above the critical $5.00 benchmark, thus encouraging utilities to increase coal utilization; (2) Unusually cold winter weather throughout most of the country in December and January accelerated stockpile normalization; (3) Continued economic recovery is expected to lift industrial electricity demand; and (4) Demand for high-volatile metallurgical coal has increased substantially and is expected to reduce the supply of coal available for eastern thermal markets.

    ICO expects metallurgical coal demand to continue to improve in 2010 due to tighter global markets and increased domestic utilization, said Hatfield, adding that met pricing has increased rapidly since early December and the Company has recently secured several new contracts at attractive prices.”

    ICO has announced it will release its Q1 2010 results after the market closes on Wednesday, April 28, 2010. The Company will hold its quarterly conference call and Internet Web cast the following day, April 29, at 11:00 a.m. Eastern Time.  According to SmarTrend, analysts, on average, expect the Company to post earnings of $0.01 on sales of $263 million in the first quarter.

    Source: http://www.intlcoal.com/

    Technical Analysis

    Source: http://stockcharts.com

    ICO is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

    ICO is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

    The MACD for ICO currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average.  Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Apr26-2010 symbol Share, $ $ Mn 2009 2010 2009 2010
    Massey Energy Company MEE 43.61 3,750 n/a 16.21 n/a 1.14
    Arch Coal Inc. ACI 27.96 4,540 n/a 23.69 n/a 1.45
    CONSOL Energy Inc. CNX 45.28 9,960 n/a 14.33 n/a 1.95
    Alpha Natural Resources Inc. ANR 52.21 6,310 n/a 15.82 n/a 1.65
    Industrial Metals & Minerals Median n/a 29.40 n/a 4.34
    International Coal Group Inc. ICO 5.44 973.84 n/a 25.90 n/a 0.85

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases n/a 0
    Sales n/a 0
    Net Shares Purchased (Sold) n/a 0
    Total Insider Shares Held 71.25M n/a
    % Net Shares Purchased (Sold) 0.0% n/a

    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) (5,856,070)
    % Change in Institutional Shares Held (10.6%)

    Source: Yahoo Finance

    DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority.  We are neither licensed nor qualified to provide investment advice.

    The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.  The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.  We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

    Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company.  An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report.  Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

    Any individual who chooses to invest in any securities should do so with caution.  Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

    Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.  Subscribers are cautioned not to place undue reliance upon these forward looking statements.  These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.  Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC.  You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

    We are committed to providing factual information on the companies that are profiled.  However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions.  We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.  Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

    To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

    We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

    Leave a Reply

    Your email address will not be published. Required fields are marked *