UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington,D.C.20549





Form 10-Q


(Mark One)





x
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the quarterly period ended March 31,
2009





OR





 ̈
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the transition period
from                    
to




Commission File
No. 001-32679




International Coal Group,
Inc.


(Exact Name of Registrant as Specified
in Its Charter)





Delaware
            
            20-2641185(State or Other Jurisdiction
      of
              Incorporation or
      Organization)
            
            (I.R.S.
      Employer
              Identification
      No.)





300 Corporate Centre
      Drive
              Scott Depot,West
    Virginia
            
            25560(Address of Principal Executive
      Offices)
            
            (Zip
  Code)





(304) 760-2400


(Registrant’s Telephone Number,
Including Area Code)





N/A


(Former Name, Former
Address and Former Fiscal Year, if Changed Since Last Report)





Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such
reports), and (2) has been subjectto such filing requirements for the past
90 days. YesxNo ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).   Yes   ̈No ̈




Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company. See definition of “largeaccelerated filer,” “accelerated filer”
and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.





Large accelerated filerxAccelerated filer ̈Non-accelerated filer ̈Smaller reporting company ̈





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ̈Nox





APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:





Indicate by check mark whether the
registrant has filed all documents and reports required to be filed by Sections
12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a
court. Yes ̈No ̈





APPLICABLE ONLY TO CORPORATE
ISSUERS:





Number of shares of the Registrant’s
Common Stock, $0.01 par value, outstanding as ofMay 1, 2009—154,149,939.





TABLE OF CONTENTS




PagePART
      I—FINANCIAL INFORMATIONItem 1.
            
            Financial
      Statements
            
            3Item 2.
            
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            22Item 3.
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            35Item 4.
            
            Controls
      and Procedures
            
            35PART
      II—OTHER INFORMATIONItem 1.
            
            Legal
      Proceedings
            
            36Item 1A.
            
            Risk
      Factors
            
            37Item2.
            
            UnregisteredSales of Equity Securities and
      Use of Proceeds
            
            38Item 6.
            
            Exhibits
            
            39




2







PART
I





Item 1.
            Financial
      Statements





INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


Condensed Consolidated Balance Sheets
(Unaudited)


(Dollars in thousands, except per share
amounts)





March31,
              2009
            
            
            December 31,
              2008ASSETSCURRENT
    ASSETS:Cash and cash
      equivalents
            
            $
            66,627
            
            
            $
            63,930Accounts receivable, net of
      allowances of $1,407and
      $1,516
            
            
            95,728
            
            
            
            75,321Inventories,
      net
            
            
            67,242
            
            
            
            58,788Deferred income
      taxes
            
            
            16,958
            
            
            
            17,649Prepaid
      insurance
            
            
            8,957
            
            
            
            13,380Income taxes
      receivable
            
            
            11
            
            
            
            8,030Prepaid expenses and
      other
            
            
            11,228
            
            
            
            10,893Total current
      assets
            
            
            266,751
            
            
            
            247,991PROPERTY, PLANT, EQUIPMENT AND
      MINE DEVELOPMENT, net
            
            
            1,057,902
            
            
            
            1,069,297DEBT ISSUANCE COSTS,
      net
            
            
            10,310
            
            
            
            10,462ADVANCE ROYALTIES,
      net
            
            
            17,405
            
            
            
            17,462OTHER NON-CURRENT
      ASSETS
            
            
            5,483
            
            
            
            5,435Total
assets
            
            $
            1,357,851
            
            
            $
            1,350,647LIABILITIES AND STOCKHOLDERS’
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
            
            $
            69,196
            
            
            $
            75,810Short-term
    debt
            
            
            3,026
            
            
            
            4,741Current portion of long-term debt
      and capital leases
            
            
            18,292
            
            
            
            15,319Current portion of reclamation and
      mine closure costs
            
            
            10,976
            
            
            
            11,139Current portion of employee
      benefits
            
            
            3,359
            
            
            
            3,359Accrued expenses and
      other
            
            
            87,234
            
            
            
            87,704Total current
      liabilities
            
            
            192,083
            
            
            
            198,072LONG-TERM DEBT AND CAPITAL
      LEASES
            
            
            424,671
            
            
            
            417,551RECLAMATION AND MINE CLOSURE
      COSTS
            
            
            68,398
            
            
            
            68,107EMPLOYEE
      BENEFITS
            
            
            63,768
            
            
            
            61,194DEFERRED INCOME
      TAXES
            
            
            49,852
            
            
            
            49,403BELOW-MARKET COAL SUPPLY
      AGREEMENTS
            
            
            41,139
            
            
            
            43,888OTHER NON-CURRENT
      LIABILITIES
            
            
            6,605
            
            
            
            6,195Total
      liabilities
            
            
            846,516
            
            
            
            844,410COMMITMENTS AND
      CONTINGENCIES
            
            
            —
            
            
            
            —STOCKHOLDERS’
      EQUITY:Preferred stock – par value $0.01,
      200,000,000 shares authorized, none issued
            
            
            —
            
            
            
            —Common stock – par value $0.01,
      2,000,000,000 shares authorized,154,159,777 and
      154,155,009shares issued and outstanding,
      respectively, as of March 31, 2009and 153,322,245 shares issued and
      outstanding, as of
      December 31, 2008
            
            
            1,541
            
            
            
            1,533Treasury
    stock
            
            
            (8
            )
            
            
            —Additional paid-in
      capital
            
            
            658,329
            
            
            
            656,997Accumulated other comprehensive
      loss
            
            
            (5,113
            )
            
            
            (5,157
            )Retained
      deficit
            
            
            (143,478
            )
            
            
            (147,171
            )TotalInternational Coal Group, Inc.stockholders’
      equity
            
            
            511,271
            
            
            
            506,202Noncontrolling
      interest
            
            
            64
            
            
            
            35Total stockholders’
      equity
            
            
            511,335
            
            
            
            506,237Total liabilities and
      stockholders’ equity
            
            $
            1,357,851
            
            
            $
            1,350,647




See notes to condensed consolidated
financial statements.


3







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


Condensed Consolidated Statements of
Operations (Unaudited)


(Dollars in thousands, except per share
amounts)




Three months
      ended
              March31,2009
            
            
            2008REVENUES:Coal sales
      revenues
            
            $
            273,816
            
            
            $
            226,604Freight and handling
      revenues
            
            
            8,634
            
            
            
            11,283Other
    revenues
            
            
            22,516
            
            
            
            14,038Total
    revenues
            
            
            304,966
            
            
            
            251,925COSTS AND
      EXPENSES:Cost of coal
      sales
            
            
            231,965
            
            
            
            208,804Freight and handling
      costs
            
            
            8,634
            
            
            
            11,283Cost of other
      revenues
            
            
            9,336
            
            
            
            8,935Depreciation, depletion and
      amortization
            
            
            26,263
            
            
            
            21,957Selling, general and
      administrative
            
            
            10,611
            
            
            
            8,526Gain on sale of assets,
      net
            
            
            (78
            )
            
            
            (211
            )Total costs and
      expenses
            
            
            286,731
            
            
            
            259,294Income (loss) from
      operations
            
            
            18,235
            
            
            
            (7,369
            )INTEREST EXPENSE, net
            
            
            (13,018
            )
            
            
            (12,571
            )Income (loss) before
      income
      taxes
            
            
            5,217
            
            
            
            (19,940
            )INCOME TAX (EXPENSE)
      BENEFIT
            
            
            (1,495
            )
            
            
            8,034Net income
      (loss)
            
            
            3,722
            
            
            
            (11,906
            )Net income attributable to
      noncontrolling interest
            
            
            (29
            )
            
            
            (7
            )Net income (loss)attributable to International
      Coal Group, Inc.
            
            $
            3,693
            
            
            $
            (11,913
            )Earnings per
      share:Basic
            
            $
            0.02
            
            
            $
            (0.08
            )Diluted
            
            $
            0.02
            
            
            $
            (0.08
            )Weighted-average common shares
      outstanding:Basic
            
            
            152,773,718
            
            
            
            152,448,665Diluted
            
            
            153,856,166
            
            
            
            152,448,665





See notes to condensed consolidated
financial statements.


4







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


Condensed Consolidated Statements of
Cash Flows (Unaudited)


(Dollars in
thousands)




Threemonths ended
              March 31,2009
            
            
            2008CASH FLOWS FROM OPERATING
      ACTIVITIES:Net income
      (loss)
            
            $
            3,722
            
            
            $
            (11,906
            )Adjustments to reconcile net
      income (loss) to net cash from operating
activities:Depreciation, depletion and
      amortization
            
            
            26,263
            
            
            
            21,957Amortization of deferred finance
      costsand debt
      discount
            
            
            1,664
            
            
            
            1,488Provision for bad
      debt
            
            
            (110
            )
            
            
            —Compensation expense onequity
      instruments
            
            
            1,340
            
            
            
            1,303Gain on sale of assets,
      net
            
            
            (78
            )
            
            
            (211
            )Deferred income
      taxes
            
            
            1,111
            
            
            
            (8,033
            )Amortization of accumulated
      postretirement benefit obligation
            
            
            73
            
            
            
            107Changes in assets and
      liabilities:Accounts
      receivable
            
            
            (20,297
            )
            
            
            (21,100
            )Inventories
            
            
            (8,454
            )
            
            
            (3,681
            )Prepaid expenses and
      other
            
            
            12,107
            
            
            
            2,881Other non-current
      assets
            
            
            124
            
            
            
            (2,471
            )Accounts
      payable
            
            
            (1,609
            )
            
            
            (1,281
            )Accrued expenses and
      other
            
            
            (470
            )
            
            
            3,688Reclamation and mine closure
      costs
            
            
            128
            
            
            
            (542
            )Other
      liabilities
            
            
            2,984
            
            
            
            (180
            )Net cash from operating
      activities
            
            
            18,498
            
            
            
            (17,981
            )CASH FLOWS FROM INVESTING
      ACTIVITIES:Proceeds from the sale of
      assets
            
            
            78
            
            
            
            99Additions to property, plant,
      equipment and mine development
            
            
            (18,815
            )
            
            
            (34,069
            )Withdrawals(deposits)of restricted
      cash
            
            
            (115
            )
            
            
            88Net cash from investing
      activities
            
            
            (18,852
            )
            
            
            (33,882
            )CASH FLOWS FROM FINANCING
      ACTIVITIES:Repayments on short-term
      debt
            
            
            (1,715
            )
            
            
            —Borrowings on long-term debt and
      capital leases
            
            
            9,085
            
            
            
            —Repayments on long-term
      debtand capital
      leases
            
            
            (3,800
            )
            
            
            (1,046
            )Purchases of treasury
      stock
            
            
            (8
            )
            
            
            —Debt issuance
      costs
            
            
            (511
            )
            
            
            (33
            )Net cash from financing
      activities
            
            
            3,051
            
            
            
            (1,079
            )NET CHANGE IN CASH AND CASH
      EQUIVALENTS
            
            
            2,697
            
            
            
            (52,942
            )CASH AND CASH EQUIVALENTS,
      BEGINNING OF PERIOD
            
            
            63,930
            
            
            
            107,150CASH AND CASH EQUIVALENTS, END OF
      PERIOD
            
            $
            66,627
            
            
            $
            54,208Supplemental
      information:Cash paid for interest (net of
      amount capitalized)
            
            $
            20,615
            
            
            $
            18,511Cash(paid)received for income taxes,
      net
            
            $
            8,186
            
            
            $
            (1
            )Supplemental disclosure of
      non-cash items:Purchases of property, plant,
      equipment and mine development through accounts
    payable
            
            $
            7,937
            
            
            $
            4,741Purchases of property, plant,
      equipment and mine development through financing
      arrangements
            
            $
            3,807
            
            
            $
            —





See notes to condensed consolidated
financial statements.


5







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





(1) Basis of
Presentation





The accompanying interim condensed
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in theUnited States of Americafor interim financial reporting and
include the accounts of International Coal Group, Inc. and its subsidiaries (the
“Company”) and its controlled affiliates. Significant intercompany transactions,
profits and balances have been eliminated in consolidation. The Company accounts
for its undivided interest in coalbed methane wells using the proportionate
consolidation method, whereby its share of assets, liabilities, revenues and
expenses are included in the appropriate classification in the financial
statements.





The accompanying interim condensed
consolidated financial statements as of March 31, 2009 and for the three months
ended March 31, 2009 and 2008, and the notes thereto, are unaudited. However, in
the opinion of management, these financial statements reflect all normal,
recurring adjustments necessary for a fair presentation of the results of the
periods presented. The balance sheet information as of December 31, 2008
has been derived from the Company’s audited consolidated balance sheet. These
statements should be read in conjunction with the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2008. The results of
operations for the three months ended March 31, 2009 are not necessarily
indicative of the results to be expected for future quarters or for the year
ending December 31, 2009.





(2) Summary of Significant Accounting
Policies and General





Fair Value
Measurements—In September
2006, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 157,Fair Value
Measurements(“SFAS
No. 157”). SFAS No. 157 clarifies the definition of fair value,
establishes a framework for measuring fair value and expands the disclosures on
fair value measurements. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. Adoption of SFAS No. 157 did not
have a material impact on the Company’s financial position, results of
operations or cash flows; however, adoption did result in additional information
being included in the footnotes accompanying the Company’s consolidatedfinancial statements. See
Note 9.





In February 2008, the FASB issued FASB
Staff Position (“FSP”)FAS
No.157-2,Effective Date of
FASB Statement No. 157(“FSPFAS No.157-2”). FSPFAS No.157-2 permits delayed adoption of SFASNo.157 for certain non-financial assets and
liabilities, which are not recognized at fair value on a recurring basis, until
fiscal years, and interim periods within those fiscal years, beginning after
November 15, 2008. Adoption of FSPFAS No.157-2 did not have a material impact on
the Company’s financial position, results of operations or cash
flows.





In October 2008, the FASB issued FSPFAS No.157-3,DeterminingtheFair Value of a
Financial AssetWhen theMarketforThatAssetIs Not
Active(“FSPFASNo. 157-3”). FSPFAS No.157-3 clarified the application of SFAS
No. 157 in an inactive market. It demonstrated how the fair value of a financial
asset is determined when the market for that financial asset is inactive. FSPFAS No.157-3 was effective upon issuance,
including prior periods for which financial statements had not been issued.
Adoption of FSPFAS No.157-3 did not have a
material impact on the Company’s financial position, results of operations or
cash flows.





6









INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





In April 2009, the FASB issued FSP FAS
No. 157-4,Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly(“FSP FAS No.
157-4”). FSP FAS No. 157-4 provides additional guidance on estimating fair value
when the volume and level of activity for an asset or liability have
significantly decreased in relation to normal market activity for the asset or
liability. FSP FAS No. 157-4 also provides additional guidance on circumstances
that may indicate that a transaction is not orderly. FSP FAS No. 157-4 is
effective for interim and annual periods ending after June 15, 2009. The Company
does not believe that adoption of FSP FAS No. 157-4 will materially impact the
Company’s financial position, results of operations or cash
flows.





Convertible
Debt—In May 2008, the FASB
issued FSP APB 14-1,Accounting for
Convertible Debt Instruments That May be Settled in Cash Upon Conversion
(Including Partial Cash Settlement)(“FSP APB 14-1”). FSP APB 14-1 requires
the liability and equity components of convertible debt instruments that may be
settled in cash upon conversion to be separately accounted for in a manner that
reflects the issuer’s nonconvertible debt borrowing rate. To allocate the
proceeds from a convertible debt offering in this manner, a company would first
need to determine the carrying amount of the liability component, which would be
based on the fair value of a similar liability, excluding any embedded
conversion options. The resulting debt discount would be amortized over the
period during which the debt is expected to be outstanding as additional
non-cash interest expense. FSP APB 14-1 was effective for financial
statements for fiscal years beginning after December 15, 2008, and interim
periods within those fiscal years, andhas beenapplied retrospectively for all periods
presented. The Company has determined its non-convertible borrowing rate would
have been 11.7% at issuance. The effect of adoption of FSP APB 14-1was as follows:








December 31,
      2008AsPreviously
              Reported
            
            
            Adjustment
            
            
            As
              AdjustedProperty, plant, equipment and
      mine development
            
            $
            1,068,146
            
            
            $
            1,151
            
            
            $
            1,069,297Debt issuance costs,
      net
            
            
            10,635
            
            
            
            (173
            )
            
            
            10,462Total
assets
            
            
            1,349,669
            
            
            
            978
            
            
            
            1,350,647Long-term debt and capital
      leases
            
            
            434,920
            
            
            
            (17,369
            )
            
            
            417,551Deferred tax
      liability
            
            
            42,468
            
            
            
            6,935
            
            
            
            49,403Total
      liabilities
            
            
            854,844
            
            
            
            (10,434
            )
            
            
            844,410Paid-in-capital
            
            
            643,480
            
            
            
            13,517
            
            
            
            656,997Retained
      deficit
            
            
            (145,066
            )
            
            
            (2,105
            )
            
            
            (147,171
            )TotalInternational Coal Group, Inc.stockholders’
      equity
            
            
            494,790
            
            
            
            11,412
            
            
            
            506,202Total liabilities and
      stockholders’ equity
            
            
            1,349,669
            
            
            
            978
            
            
            
            1,350,647





Three months
      ended
              March 31,
    2008AsPreviously
              Reported
            
            
            Adjustment
            
            
            As
              AdjustedInterest expense,
      net
            
            $
            (11,981
            )
            
            $
            (590
            )
            
            $
            (12,571
            )Income tax
      benefit
            
            
            7,811
            
            
            
            223
            
            
            
            8,034Net loss
            
            
            (11,546
            )
            
            
            (367
            )
            
            
            (11,913
            )








7





INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





Business
Combinations—In December
2007, the FASB issued SFAS No. 141 (Revised 2007),Business
Combinations(“SFAS
No. 141(R)”). SFAS No. 141(R) will significantly change the accounting
for business combinations. Under SFAS No. 141(R), an acquiring entity will
be required to recognize all the assets acquired and liabilities assumed in a
transaction at the acquisition-date fair value with limited exceptions. SFAS
No. 141(R) will change the accounting treatment for certain specific
acquisition-related items including: (i) expensing acquisition-related
costs as incurred, (ii) valuing noncontrolling interests at fair value at
the acquisition date and (iii) expensing restructuring costs associated
with an acquired business. SFAS No. 141(R) also includes a substantial
number of new disclosure requirements. SFAS No. 141(R) is to be applied to
any business combination for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
December 15, 2008. Adoption of SFAS No. 141(R)willimpact the accounting for the Company’s
future business combinations, as well as for tax uncertainties and
valuation allowances from prior acquisitions.





Noncontrolling
Interests—In December 2007,
the FASB issued SFAS No. 160,Noncontrolling
Interests in Consolidated Financial Statements(“SFAS No. 160”). SFAS
No. 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary
(minority interest) is an ownership interest in the consolidated entity that
should be reported as equity in the consolidated financial statements and
separate from the parent company’s equity. Among other requirements, this
statement requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolling
interest. It also requires disclosure, on the face of the consolidated statement
of operations, of the amounts of consolidated net income attributable to the
parent and to the noncontrolling interest. SFAS No. 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15,2008. Adoption of SFAS No. 160impacted the presentation
of noncontrolling interest in the Company’s balance sheet and statements of
operations and cash flows. The impact of the changes in presentation was not
material.





Derivative
Instruments—In March 2008,
the FASB issued SFAS No. 161,Disclosures about
Derivative Instruments and Hedging Activities – an amendment of FASB Statement
No. 133(“SFAS
No. 161”). SFAS No. 161 requires additional disclosures for derivative
instruments and hedging activities that include how and why an entity uses
derivatives, how these instruments and the related hedged items are accounted
for under FASB Statement No. 133,Accounting for
Derivative Instruments and Hedging Activities, and related interpretations and how
derivative instruments and related hedged items affect the entity’s financial
position, results of operations and cash flows. SFAS No. 161 is effective
for fiscal years, and interim periods within those fiscal years, beginning after
November 15, 2008. Adoption of SFAS No. 161 did not impact the
footnotes accompanying the Company’s consolidated financial
statements.





GAAP
Hierarchy—In May 2008,
the FASB issued SFAS No. 162,The Hierarchy of
Generally Accepted Accounting Principles(“SFAS No. 162”). SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles. SFAS No. 162 directs the hierarchy to the
entity, rather than the independent auditors, as the entity is responsible for
selecting accounting principles for financial statements that are presented in
conformity with generally accepted accounting principles. SFAS No. 162 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Adoption of SFAS No. 162 did not
have a material impact on the Company’s financial position, results of
operations or cash flows.








8





INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





Share-Based
Payments—In June 2008, the
FASB issuedFSPEITF 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities(“FSPEITF 03-6-1”).FSPEITF 03-6-1 clarifies that all
outstanding unvested share-based payment awards that contain rights to
nonforfeitable dividends participate in undistributed earnings with common
shareholders. Awards of this nature are considered participating securities and
the two-class method of computing basic and diluted earnings per share must be
applied.FSPEITF 03-6-1 is effective for fiscal
years beginning after December 15, 2008. Adoption ofFSPEITF 03-6-1 did not have a material
impact on the Company’s financial position, results of operationsorcash flows.





Financial
Instruments—In June 2008,
the FASB ratified EITF 07-5,Determining Whether
an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own
Stock(“EITF 07-5”). EITF
07-5 provides that an entity should use a two step approach to evaluate whether
an equity-linked financial instrument (or embedded feature) is indexed to its
own stock, including evaluating the instrument’s contingent exercise and
settlement provisions. It also clarifies the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008. Adoption of EITF 07-5 did not have a material impact on
the Company’s financial position, results of operations or cash
flows.





Impairments—In April 2009, the FASB issued FSP FAS
No. 115-2 and FAS No. 124-2,Recognition and
Presentation of Other-Than-Temporary Impairments(“FSP FAS No. 115-2 and FAS No.
124-2”). FSP FAS No. 115-2 and FAS No. 124-2 modifies the other-than-temporary
impairment guidance for debt securities through increased consistency in the
timing of impairment recognition and enhanced disclosures related to the credit
and noncredit components of impaired debt securities that are not expected to be
sold. In addition, increased disclosures are required for both debt and equity
securities regarding expected cash flows, credit losses and an aging of
securities with unrealized losses. FSP FAS No. 115-2 and FAS No. 124-2 is
effective for interim and annual reporting periods that end after June 15, 2009.
The Company does not believe that adoption of FSP FAS No. 115-2 and FAS No.
124-2 will materially impact the Company’s financial position, results of
operations or cash flows.





Fair Value
Instruments—In April 2009, the FASB issued FSP FAS
No. 107-1 and APB 28-1,Interim Disclosures
about Fair Value of Financial Instruments(“FSP FAS No. 107-1 and APB 28-1”). FSP
FAS No. 107-1 and APB 28-1 requires fair value disclosures for financial
instruments that are not reflected in the condensed consolidated balance sheets
at fair value to be disclosed on a quarterly basis, providing quantitative and
qualitative information about fair value estimates. FSP FAS No. 107-1 and APB
28-1 is effective for interim reporting periods ending after June 15, 2009. The
Company does not believe that adoption of FSP FAS No. 107-1 and APB 28-1 will
materially impact the Company’s financial position, results of operations or
cash flows.





(3) Inventories





Inventories consisted of the
following:




March 31,
              2009
            
            
            December 31,
              2008Coal
            
            $
            34,797
            
            
            $
            28,436Parts and
      supplies
            
            
            34,344
            
            
            
            32,159Reserve for obsolescence–parts and
      supplies
            
            
            (1,899
            )
            
            
            (1,807
            )Total
            
            $
            67,242
            
            
            $
            58,788





9









INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





(4) Property, Plant, Equipment and
Mine Development





Property, plant, equipment and mine
development are summarized by major classification as
follows:




March 31,
              2009
            
            
            December 31,
              2008Coal lands and mineral
      rights
            
            $
            586,512
            
            
            $
            586,512Plant and
      equipment
            
            
            583,339
            
            
            
            571,083Mine
      development
            
            
            185,176
            
            
            
            181,876Land and land
      improvements
            
            
            24,361
            
            
            
            24,119Coalbed methane well development
      costs
            
            
            14,889
            
            
            
            14,8891,394,277
            
            
            
            1,378,479Lessaccumulated depreciation,
      depletion and amortization
            
            
            (336,375
            )
            
            
            (309,182
            )Net property, plant, equipment and
      mine development
            
            $
            1,057,902
            
            
            $
            1,069,297





Depreciation, depletion and amortization
expense related to property, plant, equipment and mine development for the three
months ended March 31, 2009 and 2008 was $29,011and $26,478,
respectively.





(5) Debt





Long-Term Debt and Capital
Leases





Long-term debtand capital leasesconsisted of the
following:





March 31,
              2009
            
            
            December 31,
              20089.00% Convertible Senior Notes,
      due 2012, net of debt
      discount of $16,367 and $17,369, respectively
            
            $
            208,633
            
            
            $
            207,63110.25% Senior Notes, due
      2014
            
            
            175,000
            
            
            
            175,000Equipment
    notes
            
            
            53,300
            
            
            
            43,378Capital leases and
      other
            
            
            6,030
            
            
            
            6,861Total
            
            
            442,963
            
            
            
            432,870Less current
      portion
            
            
            (18,292
            )
            
            
            (15,319
            )Long-term debtand capital
      leases
            
            $
            424,671
            
            
            $
            417,551





Convertibleseniornotes—In 2007, the Company completed a
private offering of $225,000 aggregate principal amount of 9.00% Convertible
Senior Notes (the “Convertible Notes”) due 2012. The Convertible Notes are the
Company’s senior unsecured obligations and are guaranteed on a senior unsecured
basis by the Company’s materialcurrent andfuture domestic subsidiaries. The
Convertible Notes and the related guarantees rank equal in right of payment to
all of the Company’s and the guarantors’ respective existing and future
unsecured senior indebtedness. Interest is payable semi-annually in arrears on
February 1 and August 1 of each year.The Company assessesthe convertibilityof the Convertible Notesonan ongoingbasis.The Convertible Notes were not
convertible as of March 31, 2009.





10







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





The principal amount of the Convertible
Notes is payable in cash and amounts above the principal amount, if any, will be
convertible into shares of the Company’s common stock or, at the Company’s
option, cash. The Convertible Notes are convertible at an initial conversion
price, subject to adjustment, of $6.10 per share (approximating 163.8136 shares
per one thousand dollar principal amount of the Convertible Notes). The volume
weighted-average price of the Company’s stock subsequent to the expiration date
of the conversion period was below $6.10 per share. Accordingly, there were no
potentially convertible shares at March 31, 2009. The Convertible Notes are
convertible upon the occurrence of certain events, including (i) prior to
February 12, 2012 during any calendar quarter after September 30,
2007, if the closing sale price per share of the Company’s common stock for each
of 20 or more trading days in a period of 30 consecutive trading days ending on
the last trading day of the immediately preceding calendar quarter exceeds 130%
of the conversion price in effect on the last trading day of the immediately
preceding calendar quarter; (ii) prior to February 12, 2012 during the
five consecutive business days immediately after any five consecutive trading
day period in which the average trading price for the notes on each day during
such five trading-day period was equal to or less than 97% of the closing sale
price of the Company’s common stock on such day multiplied by the then current
conversion rate; (iii) upon the occurrence of specified corporate
transactions; and (iv) at any time from, and including February 1,
2012 until the close of business on the second business day immediately
preceding August 1, 2012. In addition, upon events defined as a
“fundamental change” under the Convertible Notes indenture, the Company may be
required to repurchase the Convertible Notes at a repurchase price in cash equal
to 100% of the principal amount of the notes to be repurchased, plus any accrued
and unpaid interest to, but excluding, the fundamental change repurchase date.
As such, in the event of a fundamental changeor the aforementioned average pricing
thresholds are met, the Company would be required to classify the entire amount
outstanding of the Convertible Notes as a current liability in the following
quarter. In the event that a significant number of the holders of the
Convertible Notes were to convert their notes prior to maturity, the Company may
not have enough available funds at any particular time to make the required
repayments. Under these circumstances, the Company would look toWL Ross & Co. LLC (“WLR”), its banking group and other potential
lenders to obtain short-term funding until such time that it could secure
necessary financing on a long-term basis. The availability of any such financing
would depend upon the circumstances at the time, including the terms of any such
financing, and other factors. In addition, if conversion occurs in connection
with certain changes in control, the Company may be required to deliver
additional shares of the Company’s common stock (a “make whole” premium) by
increasing the conversion rate with respect to such notes. For a discussion
of the effects of the Convertible Notes on earnings per share, see Note
10.





Effective January 1, 2009, the Company
adopted FSP APB 14-1 (see Note 2). FSP APB 14-1 requires disclosure of the
carrying amount of the equity component of the related convertible debt, as well
as the interest expense resulting from amortization of the debt discount and
interest expense recognized on the principal amount of the debt. As of March 31,
2009 and 2008, the equity component of the convertible debt was $13,517 and is
included in additional paid-in capital. For the three months ended March 31,
2009 and 2008 interest expense resulting from amortization of the debt discount
was $1,002 and $893, respectively. For both the three months ended March 31,
2009 and 2008, interest expense on the principal amount of the Convertible Notes
was $5,063.








11





INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





Creditfacility—The Companyis party to a $100,000revolving credit facility(the “Credit Facility”)which matures on June 23,
2011. Amaximum of $80,000 may be used for
letters of credit. In February 2009, the Company executed anamendment to the Credit Facility that
affected certain 2009 debt covenants. The amendment modified the maximum
permitted leverage and minimum interest coverage ratios. The amendment also
decreased the maximum capital spending and added a minimum liquidity
requirement. Debt covenants for years subsequent to 2009 were not affected by
the amendment. As of March 31, 2009, the Company had no borrowings outstanding
and letters of credit totaling $73,551outstanding, leaving $26,449available for future borrowing
capacity. Interest on the borrowings under the Credit Facility is payable, at
the Company’s option, at either the base rate plus an applicable
marginof2.25% to3.00% based on the Company’s
leverage ratio as ofMarch31, 2009or LIBOR plus an applicable
marginof3.25% to4.00% based on the Company’s
leverage ratio as ofMarch
31, 2009. As of March 31,
2009, the Company was in compliance with its financial covenants under the
Credit Facility.





Equipmentnotes—The equipment notes, having various
maturity dates extending toFebruary2014, are collateralized by mining
equipment. As of March 31, 2009, the Company had amounts outstandingwith terms ranging from36to60months anda weighted-average interest rate of7.21%. At March 31, 2009, additional funds
are available under the Company’s revolving equipment credit facility for terms
ranging from 36 to 60 months with a current interest rate of8.25%.





Capital leases and
other—The Company leases certain mining
equipment under capital lease. The Company imputed interest on its capital lease using
arate of10.44% in order to reduce the net minimum
lease paymentstotheir present
values.Additionally, the Company finances
certain of its annual insurance premiums at a current interest rate of5.42%.





Short-Term Debt





The Company finances the majority of its
insurance premiums, a portion of which is included in short-term debt. The
weighted-average interest rate applicable to the notes was 4.75%. As of March 31, 2009 andDecember 31,2008, the Company had $3,026and $4,741, respectively, outstanding related tothe financing ofinsurancepremiums.





(6) Income Taxes





The effective income tax rate for the
three months ended March 31, 2009 was calculated using an estimated annual
effective rate based on projected earnings for the year. The effective income
tax rate for the three months ended March 31, 2009 decreased to29%from40% for the three months ended March
31, 2008. The decrease wasprimarily a result of the effect of
income tax deductions for depletion of mineral rights on projected earnings
offset by an increase in other non-deductible expensesand miscellaneous
items.





12







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)




(7) Employee Stock
Awards





The Company’s 2005 Equity and
Performance Incentive Plan (the “Plan”) permits the granting of stock options,
restricted shares, stock appreciation rights, restricted share units,
performance shares or performance units to its employees for up to 8,000,000
shares of common stock. Option awards are generally granted with an exercise
price equal to the market price of the Company’s stock at the date of grant and
have 10-year contractual terms. The option and restricted stock awards generally
vest in equal annual installments of 25% over a four-year period. The Company
recognizes expense related to the awards on a straight-line basis over the
vesting period. The Company issues new sharesor uses shares held in
treasuryupon the exercise
of option awards.





The Black-Scholes option pricing model
was used to calculate the estimated fair value of the options granted. The
estimated grant date fair value of the options granted during the three months
ended March 31, 2009 and 2008 was calculated using the following
assumptions:





March 31,2009
            
            
            2008Expected term (in
      years)
            
            
            5
            
            
            
            5Weighted-average expectedvolatility
            
            
            50.8
            %
            
            
            43.0
            %Risk-free
    rate
            
            
            1.4% – 1.9
            %
            
            
            2.7% –3.2
            %Expected
      dividends
            
            
            —
            
            
            
            —





The Company estimated forfeiture
ratesof 4.50% and 3.25% at March 31, 2009
and 2008, respectively.





Due to the Company’s limited operating
history, the expected lives and volatility are estimated based on other
companies in the coal industry. The risk-free interest rates are based on the
rates of zero coupon U.S. Treasury bonds with similar maturities on the date of
grant. Theestimatedforfeiture ratesweredetermined based onhistoricalturnover of the Company’s employees
eligible under the plan.





Stock-based employee compensation
expense of $834and $782, net of tax of
$506and $521, related to the issuance of all stock-basedawards outstanding was
included in earnings for the three months ended March 31, 2009 and 2008,
respectively.





A summary of the Company’s outstanding
options as of March 31, 2009, and changes during the three months ended March
31, 2009, is as follows:




Options
            
            Shares
            
            
            Weighted-
              Average
              Exercise
              Price
            
            
            Weighted-
              Average
              Remaining
              Contractual
              Term
              (years)
            
            
            Aggregate
              Intrinsic
              ValueOutstanding at January 1,
      2009
            
            
            2,831,192
            
            
            $
            7.88Granted
            
            
            2,307,556
            
            
            
            1.53Forfeited
            
            
            (10,975
            )
            
            
            7.17Expired
            
            
            (13,900
            )
            
            
            8.78Outstanding at March 31,
      2009
            
            
            5,113,873
            
            
            
            5.01
            
            
            
            8.69
            
            
            $
            206Vested or expected to vest at March
      31, 2009
            
            
            4,797,819
            
            
            
            5.11
            
            
            
            8.65
            
            
            $
            188Exercisable at March 31,
      2009
            
            
            1,459,187
            
            
            
            8.98
            
            
            
            6.97
            
            
            $
            —





13







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





The weighted-average grant-date fair
value of options granted during the three months ended March 31, 2009 and 2008
was $0.73and $2.46, respectively. There were no
options exercised during the three months ended March 31, 2009 and
2008.





A summary of the status of the Company’s
nonvested restricted stock awards as of March 31, 2009,and changes during the three months
ended March 31, 2009,is as follows:




Nonvested
      Shares
            
            Shares
            
            
            Weighted-
              Average Grant-Date
              Fair ValueNonvested at January 1,
      2009
            
            
            556,344
            
            
            $
            7.00Granted
            
            
            837,697
            
            
            
            1.53Vested
            
            
            (41,867
            )
            
            
            6.38Forfeited
            
            
            (5,600
            )
            
            
            7.47Nonvested at March 31,
      2009
            
            
            1,346,574
            
            
            
            3.62





The weighted-average grant-date fair
value of restricted stock granted during the three months ended March 31, 2009
and 2008 was $1.53and $6.01, respectively. The total fair
value of restricted stock vested during the three months ended March 31, 2009
and 2008 was $267and $1,086,
respectively.





As of March 31, 2009, there was
$7,929of unrecognized compensation cost
related to nonvested stock-based awards that is expected to be recognized over a
weighted-average period of2.9years.





The
Plan provides recipients the ability to satisfy tax obligations upon vesting of
shares of restricted stock by having the Company withhold a portion of the
shares otherwise deliverable to the recipients. During the three months ended
March 31, 2009, the Company withheld 4,768 shares of common stock from employees
in connection with tax withholding obligations. The value of the common stock
that was withheld was based upon the closing price of the common stock on the
applicable vesting dates. Such shares were included in treasury stock in the
Company’s condensed consolidated balance sheet.





In
December 2008, the Company’s Board of Directors (the “Board”) approved an annual
restricted share unit grant with a grant date value equal to $50 for each member
of the Board to be granted at the same time as the annual equity awards granted
to executive officers. Each restricted share unit represents a contingent right
to receive one share of issuer common stock upon the six-month anniversary of
the date on which the director ceases to provide services, subject to certain
provisions. The number of shares issuable is calculated by dividing $50 by the
closing stock price of the Company’s common stock on the New York Stock Exchange
on the grant date. Each non-employee director was issued 32,895 restricted share
units on March 3, 2009. The weighted-average grant-date fair value of restricted
share units granted during the three months ended March 31, 2009 was $1.52. The
total fair value of restricted share units vested during the three months ended
March 31, 2009 was $350. There were no restricted share units granted during the
three months ended March 31, 2008.





14







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





(8) Employee
Benefits





The following table details the
components of the net periodic benefit cost for postretirement benefits other
than pensions for the three months ended March 31, 2009 and
2008.




Three months ended
              March 31,2009
            
            
            2008Net periodic benefit
      cost:Service
cost
            
            $
            834
            
            
            $
            652Interest
    cost
            
            
            436
            
            
            
            407Amortization of net
      loss
            
            
            73
            
            
            
            107Benefit
cost
            
            $
            1,343
            
            
            $
            1,166





The plan is unfunded, therefore, no
contributions were made by the Company for the three months ended March 31, 2009
and 2008.





(9) Fair Value
Measurements





Effective January 1, 2008, the
Company adopted SFAS No. 157, which clarifies the definition of fair value,
establishes a framework for measuring fair value and expands the disclosures on
fair value measurements. SFAS No. 157 applies whenever other statements
require or permit assets or liabilities to be measured at fair value.
SFAS No. 157 establishes the following fair value hierarchy that
prioritizes the inputs used to measure fair value:





•
            
            Level 1 –
            Unadjusted quoted prices for
      identical assets or liabilities in active
  markets.•
            
            Level 2 –
            Inputs other than Level 1 that are
      based on observable market data, either directly or indirectly. These
      include quoted prices for similar assets or liabilities in active markets,
      quoted prices for identical assets or liabilities in inactive markets,
      inputs that are observable that are not prices and inputs that are derived
      from or corroborated by observable markets.•
            
            Level 3 –
            Developed from unobservable data,
      reflecting an entity’s own
assumptions.





The Company entered into an Interest
Rate Collar Agreement (the “Collar”)thatexpiredand was settledon March 31, 2009. The interest
rate collar was designed as a cash flow hedge to offset the impact of changes in
the LIBOR interest rate above 5.92% and below 4.80%. The value of the interest
rate collarwasbased on a forward LIBOR curve, which
was observable at commonly quoted intervals for the full term of the agreement.
The Company recognizedthe change in the fair value of this
agreement in the period of change. For the three months ended March 31,
2009and 2008, the Company recorded lossesof $6and $2,725, respectively,related to the change in fair value. The
loss is included in interest expense in the Company’s consolidated statement of
operations.





15







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





The following table presents the fair
value hierarchy for financial liabilities measured at fair value on a recurring
basis:





Fair Value Measurements Using:Interest Rate Collar Agreement, as
      of:
            
            Total
            
            Quoted Prices
              in Active
              Markets for
              Identical
              Assets
              (Level 1)
            
            Significant
              Other
              Observable
              Inputs
              (Level 2)
            
            Significant
              Unobservable
              Inputs
              (Level 3)March 31,
    2009
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —December 31,
      2008
            
            
            1,665
            
            
            —
            
            
            1,665
            
            
            —





(10) Earnings Per
Share





Basic earnings per share is computed by
dividing net income available to common shareholders by the weighted-average
number of common shares outstanding during the period, excluding restricted
common stock subject to continuing vesting requirements. Diluted earnings per
share is calculated based on the weighted-average number of common shares
outstanding during the period and, when dilutive, potential common shares from
the exercise of stock options, restricted common stock subject to continuing
vesting requirements,
restricted stock unitsand
convertible debt, pursuant to the treasury stock method.





Reconciliations of weighted-average
shares outstanding used to compute basic and diluted earnings per share for the
three months ended March 31, 2009 and 2008 are as follows:




Three months
      ended
                March 31,2009
              
              
              2008Net income (loss)attributable to International
      Coal Group, Inc.
              
              $
              3,693
              
              
              $
              (11,913
              )Weighted-average common shares
      outstanding—basic
              
              
              152,773,718
              
              
              
              152,448,665Incremental shares arising from
      stock options
              
              
              —
              
              
              
              —Incremental shares arising from
      restricted shares
              
              
              1,082,448
              
              
              
              —Incremental shares arising fromrestricted stock
      units
              
              
              —
              
              
              
              —Incremental shares arising fromconvertible
      notes
              
              
              —
              
              
              
              —Weighted-average common shares
      outstanding—diluted
              
              
              153,856,166
              
              
              
              152,448,665Earnings Per
      Share:Basic
              
              $
              0.02
              
              
              $
              (0.08
              )Diluted
              
              $
              0.02
              
              
              $
              (0.08
              )


16





INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





Options topurchase2,818,317sharesof common stockoutstanding at March 31, 2009 have been
excluded from the computation of dilutedearningsper share for the three
monthsthenended because their effect would have
been anti-dilutive. Options to purchase 2,843,262 shares of common stock and
696,445 shares of restricted common stock outstanding at March 31, 2008 have
been excluded from the computation of dilutedearningsper share for the three monthsthenended because their effectwould havebeen anti-dilutive.





The principal amount of the Convertible
Notes is payable in cash and amounts above the principal amount, if any, will be
convertible into shares of the Company’s common stock or, at the Company’s
option, cash. The volume weighted-average price of the Company’s stock
subsequent to the expiration date of the conversion periodswas below $6.10 per share. Accordingly,
there were no potentially dilutive shares at March 31, 2009or 2008.





(11) Commitments and
Contingencies





Guarantees
and Financial Instruments with Off-balance Sheet Risk—In the normal course of business, the
Company is a party to certain guarantees and financial instruments with
off-balance sheet risk, such as bank letters of credit and performance or surety
bonds. No liabilities related to these arrangements are reflected in the
Company’s condensed consolidated balance sheets. Management does not expect any
material losses to result from these guarantees or off-balance sheet financial
instruments. The Company has outstanding surety bonds with third parties
totaling approximately $120,324as of March 31, 2009 to secure
reclamation and other performance commitments. As of March 31, 2009, the Company
has bank letters of credit outstanding of $73,551under its revolving credit
facility.





Legal
Matters—On August 23, 2006, a survivor of
the Sago mine accident, Randal McCloy, filed a complaint in the Kanawha Circuit
Court inKanawha
County,West Virginia. The claims brought by Randal McCloy
and his family againstthe
Companyand certain ofitssubsidiaries, and against W.L.
Ross & Co., and Wilbur L. Ross, Jr., individually, were dismissed on
February 14, 2008, after the parties reached a confidential settlement.
Sixteen other complaints have been filed in Kanawha Circuit Court by the
representatives of many of the miners who died in the Sago mine accident, and
several of these plaintiffs have filed amended complaints to expand the group of
defendants in the cases. The complaints allege various causes of action againstthe Companyanditssubsidiary, Wolf Run Mining Company,
one ofitsshareholders, W.L. Ross & Co.,
and Wilbur L. Ross Jr., individually, related to the accident and seek
compensatory and punitive damages. In addition, the plaintiffs also allege
causes of action against other third parties, including claims against the
manufacturer of Omega block seals used to seal the area where the explosion
occurred and against the manufacturer of self-contained self-rescuer (“SCSR”)
devices worn by the miners at the Sago mine. Some of these third parties have
been dismissed from the actions upon settlement. The amended complaints add
other ofthe
Company’ssubsidiaries to
the cases, including ICG, Inc., ICG, LLC and Hunter Ridge Coal Company, unnamed
parent, subsidiary and affiliate companies ofthe Company, W.L. Ross & Co., and Wilbur
L. Ross Jr., and other third parties, including a provider of electrical
services and a supplier of components used in the SCSR devices.The Companybelievesthatit isappropriately insured for these and
other potential claims, andhasfully paiditsdeductible applicable toitsinsurance policies. In addition to the
dismissal of the McCloy claim,the Company hassettled and dismissed five other
actions. These settlements required the release ofthe Company,itssubsidiaries, W.L. Ross & Co.,
and Wilbur L. Ross, Jr. Some of the plaintiffs involved in one of the dismissed
actions have sought permission from the Supreme Court of Appeals ofWest Virginiato appeal the settlement, alleging that
the settlement negotiated by the decedent’s estate should not have been approved
by the trial court. The trial court overruled those plaintiffs’ objections to
the settlement, and, although the West Virginia Supreme Court of Appeals refused
to stay the effectiveness of the settlement, the plaintiffs’ petition for appeal
to the West Virginia Supreme Court of Appeals was recently presented to the
court. The court has deferred its decision as to whether it will hear the
appeal, pending its ruling on an unrelated case that shares similar issues.The Companywill vigorously defenditselfagainst the remaining complaints and
any appeal of any prior settlements.





17







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)




Allegheny Energy Supply (“Allegheny”),
the sole customer of coal produced atthe Company’ssubsidiary Wolf Run Mining Company’s
(“Wolf Run”) Sycamore No. 2 mine, filed a lawsuit against Wolf Run, Hunter
Ridge Holdings, Inc. (“Hunter Ridge”), andthe Companyin state court in Allegheny County,
Pennsylvania on December 28, 2006, and amended its complaint on
April 23, 2007. Allegheny claims thatthe Companybreached a coal supply contract whenitdeclared force majeure under the
contract upon idling the Sycamore No. 2 mine in the third quarter of 2006.
The Sycamore No. 2 mine was idled after encountering adverse geologic
conditions and abandoned gas wells that were previously unidentified and
unmapped. The amended complaint also alleges that the production stoppages
constitute a breach of the guarantee agreement by Hunter Ridge and breach of
certain representations made upon entering into the contract in early 2005, a
claim that Allegheny has since voluntarily dropped. Allegheny claims that it
will incur costs in excess of $100,000to purchase replacement coal over the
life of the contract.The
Company, Wolf Run andHunterRidgeanswered the amended complaint on
August 13, 2007, disputing all of the remaining claims. On November 3, 2008,the Company, Wolf Run andHunterRidgefiled an amended answer and
counterclaim against the plaintiffs seeking to void the coal supply agreement
due to, among other things, fraudulent inducement and conspiracy. The
counterclaim alleges further that Allegheny breached a confidentiality agreement
withHunterRidge, which prohibited the solicitation of
its employees. After the coal supply agreement was executed, Allegheny hired the
then-president of Anker Coal Group, Inc. (nowHunterRidge) who engaged in negotiations on behalf
of Wolf Run andHunterRidge. In addition to seeking a declaratory
judgment that the coal supply agreement and guaranty be deemed void and
unenforceable and rescission of the contracts, the counterclaim also seeks
compensatory and punitive damages.





On December 6, 2007, the Kentucky
Waterways Alliance, Inc., and The Sierra Club sued the U.S. Army Corps of
Engineers (the “ACOE”) in the United States District Court for the Western
District of Kentucky, Louisville Division, asserting that a permit to construct
five valley fills was issued unlawfully tothe Company’sHazard subsidiary for its Thunder Ridge
Surface mine. The suit alleges that the ACOE failed to comply with the
requirements of both Section 404 of the Clean Water Act and the National
Environmental Policy Act. Hazard intervened in the suit to protectthe Company’sinterests. The ACOE suspended the
Section 404 permit on December 26, 2007 in order to evaluate the
issues raised by the plaintiffs. The ACOE completed its evaluation on March 25,
2009. Only a day prior, the U.S. Environmental Protection Agency (the
“EPA”) stated its intention
to more closely scrutinize Section 404 permitting decisions by the ACOE. On
March 27, 2009,theACOE reinstated Hazard’s
permit. Pursuant to earlier agreements with the plaintiffs in the litigation,the Companyprovided thirty (30) days notice to
plaintiffs’ counsel of Hazard’s intent to proceed with activities authorized
under the permit.After
such notice, the plaintiffs have agreed to amend the earlier agreement to
allow Hazard partial use of the reinstated permit, including construction of an
additional valley fill, thus delaying the plaintiffs' move to seek a temporary
restraining order and subsequent injunction to block Hazard’s use of the
permit.If thecourtultimatelyfinds that the permit is unlawful,
production could be materially affected at the Thunder Ridge Surface mine.TheEPA’s heightened scrutiny will likely
render the process of obtaining ACOE permits for coal mining activities inAppalachiamore difficult.





On January 7, 2008, Saratoga
Advantage Trust filed a class action lawsuit in the U.S. District Court for the
Southern District of West
Virginia against the Companyand certain ofitsofficers and directors. The complaint
asserts claims under Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934, and Rule 10b-5 promulgated thereunder, based on alleged false and
misleading statements in the registration statements filed in connection withthe Company’sNovember 2005 reorganization and
December 2005 public offering of common stock. In addition, the complaint
challenges other ofthe
Company’spublic statements
regardingitsoperating condition and safety record.The Companyintendsto vigorously defend the
action.





18







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





On July 3, 2007, Taylor Environmental
Advocacy Membership, Inc. (“T.E.A.M.”) filed a petition to appeal the issuance
ofICGTygartValley, LLC’s (“TygartValley”) Surface Mine Permit U-2004-06 against
the West Virginia Department of Environmental Protection (the “WVDEP”) in an
action before the West Virginia Surface Mine Board (the “Board”). On December
10, 2007, the Board remanded the permit to the WVDEP for revision to certain
provisions related to pre-mining water monitoring and cumulative hydrologic
impacts. The WVDEP issued a modification on April 1, 2008 addressing those
issues. T.E.A.M. filed an appeal of the WVDEP’s approval of the permit
modification on April 30, 2008. On October 7, 2008, the Board issued an order
remanding the permit to the WVDEP requiringTygartValleyto address a technical issue related to
projected post-mining water quality.TygartValleyhas prepared and submitted a permit
modification to alleviate the Board’s concerns. All site development has been
suspended until the WVDEP has approved the permit modification. If the
WVDEP issues the permit as modified, there will be additional opportunity for
appeal by T.E.A.M.





In addition, from time to time,the Company isinvolved in legal proceedings arising
in the ordinary course of business. These proceedings include assessments of
penalties for citations and orders asserted by MSHA and other regulatory
agencies, none of which are expected by management to, individually or in the
aggregate, have a material adverse effect onthe Company. In the opinion of management,the Company hasrecorded adequate reserves for
liabilities arising in the ordinary course and it is management’s belief there
is no individual case or group of related cases pending that is likely to have a
material adverse effect onthe Company’sfinancial condition, results of
operations or cash flows.





(12) Related Party Transactions and
Balances





Under an Advisory Services Agreement
dated as of October 1, 2004 between the Company and WLR, WLR has agreed to
provide advisory services to the Company (consisting of consulting and advisory
services in connection with strategic and financial planning, investment
management and administration and other matters relating to the business and
operation of the Company of a type customarily provided by sponsors of U.S.
private equity firms to companies in which they have substantial investments,
including any consulting or advisory services which the Board of Directors
reasonably requests). WLR is paid a quarterly fee of $500 and reimbursed for any
reasonable out-of-pocket expenses (including expenses of third-party advisors
retained by WLR). The agreement is for a period of seven years; however, it may
be terminated upon the occurrence of certain events.





(13) Segment
Information





The Company extracts, processes and
markets steam and metallurgical coal from deep and surface mines for sale to
electric utilities and industrial customers, primarily in the easternUnited States. The Company operates only in theUnited Stateswith mines in the Central Appalachian,
Northern Appalachian andIllinoisBasinregions. The Company has three
reportable business segments: Central Appalachian, Northern Appalachian andIllinoisBasin. The Company’s Central Appalachian
operations are located in southernWest Virginia, easternKentuckyand westernVirginiaand include eight mining complexes. The
Company’s Northern Appalachian operations are located in northernWest VirginiaandMarylandand include four mining complexes. The
Company’sIllinoisBasinoperations include one mining complex.
The Company also has an Ancillary category, which includes the Company’s
brokered coal functions, corporate overhead, contract highwall mining services
and land activities.





19







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)





Reportable segment results from
continuing operations for the three months ended March 31, 2009 and 2008 and
segment assets as of March 31, 2009 and 2008 were as
follows:





Three months ended March 31,
2009:




Central
              Appalachian
            
            
            Northern
              Appalachian
            
            
            Illinois
              Basin
            
            
            Ancillary
            
            
            ConsolidatedRevenue
            
            $
            189,562
            
            
            $
            66,167
            
            
            $
            21,005
            
            
            $
            28,232
            
            
            $
            304,966Adjusted
    EBITDA
            
            
            29,433
            
            
            
            10,152
            
            
            
            2,871
            
            
            
            2,042
            
            
            
            44,498Depreciation, depletion and
      amortization
            
            
            17,590
            
            
            
            5,575
            
            
            
            1,710
            
            
            
            1,388
            
            
            
            26,263Capital
      expenditures
            
            
            9,200
            
            
            
            5,191
            
            
            
            1,256
            
            
            
            1,970
            
            
            
            17,617Total
assets
            
            
            758,610
            
            
            
            186,590
            
            
            
            41,104
            
            
            
            371,547
            
            
            
            1,357,851





Three months ended March 31,
2008:




Central
              Appalachian
            
            
            Northern
              Appalachian
            
            
            Illinois
              Basin
            
            
            Ancillary
            
            
            ConsolidatedRevenue
            
            $
            155,070
            
            
            $
            50,689
            
            
            $
            20,640
            
            
            $
            25,526
            
            
            $
            251,925Adjusted
    EBITDA
            
            
            15,578
            
            
            
            1,795
            
            
            
            2,348
            
            
            
            (5,133
            )
            
            
            14,588Depreciation, depletion and
      amortization
            
            
            15,846
            
            
            
            2,127
            
            
            
            1,813
            
            
            
            2,171
            
            
            
            21,957Capital
      expenditures
            
            
            15,577
            
            
            
            12,318
            
            
            
            405
            
            
            
            1,244
            
            
            
            29,544Total
assets
            
            
            670,470
            
            
            
            175,182
            
            
            
            34,815
            
            
            
            398,602
            
            
            
            1,279,069Goodwill
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            30,237
            
            
            
            30,237





Revenue in the Ancillary category
consists primarily of $10,720and $16,697 relating to the Company’s
brokered coal sales and $6,840and $4,061 relating to contract highwall
mining activities for the three months ended March 31, 2009 and 2008,
respectively. Capital expenditures include non-cash amounts of $11,744for the three months ended March 31,
2009. Capital expenditures do not include $12,942 and $4,741paid during the three months ended
March 31, 2009and 2008,
respectively,related to
capital expenditures accrued in prior periods.





Adjusted EBITDA represents earnings
before deducting interest expense, income taxes, depreciation, depletion,
amortization andnoncontrollinginterest. Adjusted EBITDA is presented
because it is an important supplemental measure of the Company’s performance
used by the Company’s chief operating decision maker.





Reconciliation of net income
(loss)attributable toInternational Coal
Group, Inc.to Adjusted EBITDA for the three months
ended March 31, 2009 and 2008 is as follows:





Three months
      ended
              March 31,2009
            
            
            2008Net income (loss)attributable to International
      Coal Group, Inc.
            
            $
            3,693
            
            
            $
            (11,913
            )Depreciation, depletion and
      amortization
            
            
            26,263
            
            
            
            21,957Interest expense,
      net
            
            
            13,018
            
            
            
            12,571Income tax expense
      (benefit)
            
            
            1,495
            
            
            
            (8,034
            )Noncontrollinginterest
            
            
            29
            
            
            
            7Adjusted
    EBITDA
            
            $
            44,498
            
            
            $
            14,588





20







INTERNATIONAL COAL GROUP, INC. AND
SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)


March 31, 2009


(Dollars in thousands, except per share
amounts)




(14) Supplementary Guarantor
Information





International Coal Group, Inc. (the
“Parent Company”) issued $175,000 of Senior Notes due 2014 (the “Notes”) in June
2006 and $225,000 of Convertible Senior Notes due 2012 (the “Convertible Notes”)
in July 2007. The Parent Company has no independent assets or operations other
than those related to the issuance, administration and repayment of the Notes
and the Convertible Notes. All subsidiaries of the Parent Company (the
“Guarantors”), except for a minor non-guarantor joint venture, have fully and
unconditionally guaranteed the Notes and the Convertible Notes on a joint and
several basis. The Guarantors are 100% owned, directly or indirectly, by the
Parent Company. Accordingly, condensed consolidating financial information for
the Parent Company and the Guarantors is not presented.





The Notes and the Convertible Notes are
senior obligations of the Parent Company and are guaranteed on a senior basis by
the Guarantors and rank senior in right of payment to the Parent Company’s and
Guarantors’ future subordinated indebtedness. Amounts borrowed under the Amended
Credit Facility are secured by substantially all of the assets of the Parent
Company and the Guarantors on a priority basis, so the Notes and Convertible
Notes are effectively subordinated to amounts borrowed under the Amended Credit
Facility. Other than for corporate related purposes or interest payments
required by the Notes or Convertible Notes, the Amended Credit Facility
restricts the Guarantors’ abilities to make loans or pay dividends to the Parent
Company in excess of $25,000 per year (or at all upon an event of default) and
restricts the ability of the Parent Company to pay dividends. Therefore, all but
$25,000 of the subsidiaries’ assets are restricted assets.





The Parent Company and Guarantors are
subject to certain covenants under the indenture for the Notes. Under these
covenants, the Parent Company and Guarantors are subject to limitations on the
incurrence of additional indebtedness, payment of dividends and the incurrence
of liens, however, the indenture contains no restrictions on the ability of the
Guarantors to pay dividends or make payments to the Parent
Company.





The obligations of the Guarantors are
limited to the maximum amount permitted under bankruptcy law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
Federal or state law respecting fraudulent conveyance or fraudulent
transfer.




21










Item 2.
            Management’s Discussion and Analysis
      of Financial Condition and Results of
  Operations





Cautionary Note Regarding
Forward-Looking Statements





This Quarterly Report on Form 10-Q
contains forward-looking statements that are not statements of historical fact
and may involve a number of risks and uncertainties. We have used the words
“anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,”
“predict,” “project” and similar terms and phrases, including references to
assumptions, in this report to identify forward-looking statements. These
forward-looking statements are made based on expectations and beliefs concerning
future events affecting us and are subject to uncertainties and factors relating
to our operations and business environment, all of which are difficult to
predict and many of which are beyond our control, that could cause our actual
results to differ materially from those matters expressed in or implied by these
forward-looking statements. The following factors are among those that may cause
actual results to differ materially from our forward-looking
statements:





•
            market demand for coal,
      electricity and steel;•
            availability of qualified
      workers;•
            future economic or capital market
      conditions;•
            weather conditions or catastrophic
      weather-related damage;•
            our production
      capabilities;•
            consummation of financing,
      acquisition or disposition transactions and the effect thereof on our
      business;•
            a significant number of
      conversions of our Convertible Senior Notes prior to
      maturity;•
            our plans and objectives for
      future operations and expansion or
consolidation;•
            our relationships with, and other
      conditions affecting, our customers;•
            availability and costs of key
      supplies or commodities such as diesel fuel, steel, explosives and
      tires;•
            availability and costs of capital
      equipment;•
            prices of fuels which compete with
      or impact coal usage, such as oil and natural
  gas;•
            timing of reductions or increases
      in customer coal inventories;•
            long-term coal supply
      arrangements;•
            risks in or related to coal mining
      operations, including risks relating to third-party suppliers and carriers
      operating at our mines or complexes;•
            unexpected maintenance and
      equipment failure;•
            environmental, safety and other
      laws and regulations, including those directly affecting our coal mining
      and production, and those affecting our customers’ coal
      usage;•
            ability to obtain and maintain all
      necessary governmental permits and
  authorizations;•
            competition among coal and other
      energy producers in theUnited Statesand
      internationally;•
            railroad, barge, trucking and
      other transportation availability, performance and
      costs;•
            employee benefits costs and labor
      relations issues;•
            replacement of our
      reserves;•
            our assumptions concerning
      economically recoverable coal reserve
  estimates;





22








•
              availability and costs of credit,
      surety bonds and letters of credit;•
              title defects or loss of leasehold
      interests in our properties which could result in unanticipated costs or
      inability to mine these properties;•
              future legislation and changes in
      regulations or governmental policies or changes in interpretations or
      enforcement thereof, including with respect to safety enhancements and
      environmental initiatives relating to global
    warming;•
              impairment of the value of our
      long-lived and deferred tax assets;•
              our liquidity, including the
      ability to adhere to financial covenants related to our borrowing
      arrangements, results of operations and financial
      condition;•
              adequacy and sufficiency of our
      internal controls; and•
              legal and administrative
      proceedings, settlements, investigations and claims and the availability
      of related insurance
coverage.




You should keep in mind that any
forward-looking statement made by us in this Quarterly Report on Form 10-Q
speaks only as of the date on which we make it. New risks and uncertainties
arise from timetotime, and it is impossible for us to
predict these events or how they may affect us. We have no duty to, and do not
intend to, update or revise the forward-looking statements in this report after
the date of this report, except as may be required by law. In light of these
risks and uncertainties, you should keep in mind that any forward-looking
statement made in this report might not occur. When considering these
forward-looking statements, you should keep in mind the cautionary statements in
this document and in our other SEC filings, including the more detailed
discussion of these factors, as well as other factors that could affect our
results, contained in Item 3, “Quantitative and Qualitative Disclosures
About Market Risk,” as well as in the “Risks Relating to Our Business” section
of Item 1A of our 2008 Annual Report on Form 10-K.




23







RESULTS OF CONTINUING
OPERATIONS





Three months ended March 31, 2009
compared to the three months ended March 31, 2008





Revenues, coal sales revenues by segment
and tons sold by segment





The following table depicts revenues for
the three months ended March 31, 2009 and 2008 for the indicated
categories:


Three monthsended
                March 31,
              
              Increase
                (Decrease)2009
              
              
              2008
              
              $ or Tons
              
              %(in thousands, except percentages
      and per ton data)Coal sales
      revenues
              
              $
              273,816
              
              
              $
              226,604
              
              $
              47,212
              
              21
              %Freight and handling
      revenues
              
              
              8,634
              
              
              
              11,283
              
              
              (2,649
              )
              (23
              )%Other
    revenues
              
              
              22,516
              
              
              
              14,038
              
              
              8,478
              
              60
              %Total
    revenues
              
              $
              304,966
              
              
              $
              251,925
              
              $
              53,041
              
              21
              %Tons sold
              
              
              4,680
              
              
              
              4,850
              
              
              (170
              )
              (4
              )%Coal sales revenue per
      ton
              
              $
              58.51
              
              
              $
              46.72
              
              $
              11.79
              
              25
              %


The following table depicts coal sales
revenues by operating segment for three months ended March 31, 2009 and
2008:





Three monthsended
              March 31,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      Appalachian
            
            $
            184,122
            
            
            $
            146,792
            
            $
            37,330
            
            25
            %Northern
      Appalachian
            
            
            60,251
            
            
            
            45,221
            
            
            15,030
            
            33
            %IllinoisBasin
            
            
            18,723
            
            
            
            17,894
            
            
            829
            
            5
            %Ancillary
            
            
            10,720
            
            
            
            16,697
            
            
            (5,977
            )
            (36
            )%Total coal sales
      revenues
            
            $
            273,816
            
            
            $
            226,604
            
            $
            47,212
            
            21
            %





The following table depicts tons sold by
operating segment for the three months ended March 31, 2009 and
2008:





Three monthsended
              March 31,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            Tons
            
            %(in thousands, except percentages)Central
      Appalachian
            
            
            2,769
            
            
            
            2,882
            
            (113
            )
            (4
            )%Northern
      Appalachian
            
            
            1,108
            
            
            
            976
            
            132
            
            14
            %IllinoisBasin
            
            
            590
            
            
            
            600
            
            (10
            )
            (2
            )%Ancillary
            
            
            213
            
            
            
            392
            
            (179
            )
            (46
            )%Total tons
    sold
            
            
            4,680
            
            
            
            4,850
            
            (170
            )
            (4
            )%




Coal
sales revenues—Coal sales
revenues are derived from sales of produced coal and brokered coal contracts.
Coal sales revenues increased for the three months endedMarch31, 2009compared to thethree months ended March 31,
2008due to a 25% increase in sales realization per ton
resultingfrom favorable
pricing on new or amended short- and long-term contracts entered into throughout
2008.Partially offsetting the impact of
improved realization per tonwas a 4% decrease in tons
sold.




24







Central
Appalachian.Coal sales revenues from our Central
Appalachian segment for the three months ended March 31, 2009
increasedover the same period in 2008primarily due to an increase of
$15.55per ton, which was driven by higher
average prices of our coal sold pursuant to supply agreements. Partially offsetting the increase in
average prices was a 4% decrease in tons sold.





Northern
Appalachian. For thethree monthsendedMarch 31, 2009, our Northern Appalachian coal sales
revenues increased due to an increase of $8.08per ton resulting from higher average
prices of coal soldundercoal supplycontracts.Additionally, we experienced an
increase in tons sold,primarily from ourSentinelandHarrisoncomplexes,asproductionincreased towardtargetedlevels.





IllinoisBasin. The increase in coal sales revenues
from ourIllinoisBasinsegmentfor the three months ended March 31,
2009was due to
an increase of $1.91 per
ton, partially offset by a 2% decrease in tons sold.





Ancillary. Our Ancillary segment’s coal sales
revenues are comprised of coal sold under brokered coal contracts.For the three months ended March 31,
2009, our Ancillary coal sales revenues decreased due to a 46% decrease in tons
sold related to the expiration of certain coal supply agreements. The decrease
in tons sold was partially offset by an increase of $7.66 per ton resulting from
higher average prices.




Freight
and handling revenues—Freight and handling revenues represent
reimbursement of freight and handling costs for certain shipments for which we
initially pay the costs and are then reimbursed by the customer. Freight and
handling revenues and costsdecreasedfor the three months ended March 31,
2009 compared to thecomparableperiod of 2008 primarily due todecreased sales
volumes. Additionally, transportation rates and fuel surcharges have
decreased as a result of decreased fuel prices subsequent to the first quarter
of 2008.





Other
revenues—The increase in other revenues for thethree monthsendedMarch 31, 2009compared to thethree months ended March 31,
2008weredue toincreases in contract buydown income and
contract mining revenue. Partially offsetting these increases was decreased
revenue generated by coalbed methane wells ownedjointly by oursubsidiary, CoalQuest, and CDX Gas, LLC
(“CDX”) and decreased sales of scrap materials.





Costs and expenses





The following table depicts cost of
operations for the three months ended March 31, 2009 and 2008 for the indicated
categories:




Three monthsended
                March 31,
              
              Increase
                (Decrease)2009
              
              
              2008
              
              $
              
              %(in thousands, except percentages
      and per ton data)Cost of coal
      sales
              
              $
              231,965
              
              
              $
              208,804
              
              $
              23,161
              
              11
              %Freight and handling
      costs
              
              
              8,634
              
              
              
              11,283
              
              
              (2,649
              )
              (23
              )%Cost of other
      revenues
              
              
              9,336
              
              
              
              8,935
              
              
              401
              
              4
              %Depreciation, depletion and
      amortization
              
              
              26,263
              
              
              
              21,957
              
              
              4,306
              
              20
              %Selling, general and
      administrative expenses
              
              
              10,611
              
              
              
              8,526
              
              
              2,085
              
              24
              %Gain on sale of
      assets
              
              
              (78
              )
              
              
              (211
              )
              
              133
              
              (63
              )%Total costs and
      expenses
              
              $
              286,731
              
              
              $
              259,294
              
              $
              27,437
              
              11
              %Cost of coal sales per
      ton
              
              $
              49.57
              
              
              $
              43.05
              
              $
              6.52
              
              15
              %




25







The following table depicts cost of coal
sales by operating segment for the three months ended March 31, 2009 and
2008:





Three monthsended
              March 31,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      Appalachian
            
            $
            155,831
            
            
            $
            133,180
            
            $
            22,651
            
            17
            %Northern
      Appalachian
            
            
            52,378
            
            
            
            45,160
            
            
            7,218
            
            16
            %IllinoisBasin
            
            
            16,213
            
            
            
            15,951
            
            
            262
            
            2
            %Ancillary
            
            
            7,543
            
            
            
            14,513
            
            
            (6,970
            )
            (48
            )%Cost of coal
      sales
            
            $
            231,965
            
            
            $
            208,804
            
            $
            23,161
            
            11
            %




Cost
of coal sales—For thethreemonths ended March 31, 2009, our cost of coal sales increased
compared to thethree
months ended March 31, 2008primarily as a result of a 15% increase in cost per
ton.




Central
Appalachian. Cost of coal
sales from our Central Appalachian segment increased to $56.27per ton for thethree months ended March 31, 2009
from$46.21per ton for thethree months ended March 31,
2008primarilyas a result of increased labor and
benefits, repairs and maintenance and royalty expenses. Laborand benefitcosts increased due towage increases in the second half of
2008 in an effort to remain competitive in atight labor market.Repairs and maintenance costs increased
as a result of several major repairs performed at certain of our Central
Appalachian complexes. Royalties increased for the three months ended March 31,
2009 due to an increase in sales realization on tons sold and to increased
mining of leased reserves.Further impacting the increase in cost of coal sales were increases inseverance taxes, diesel
fuel, site preparation and maintenance costs and related
supplies.




Northern
Appalachian. Our Northern
Appalachian segment cost of coal sales per ton increased to $47.30for thethree months ended March 31, 2009 from
$46.27 for the three months ended March 31, 2008due to increased laborand benefits in the second half of 2008
in order to maintain continuity of our labor force. We also experienced
increases inoperating supplies and royalty
expenses.Partially
offsetting these increases was a decrease inrepairs and maintenance, transportation
andpurchased coal
costs.





IllinoisBasin. For thethree months ended March 31, 2009,ourIllinoisBasincost of coal sales increased by
$0.90per ton primarily due to increased
laborand benefitsand repairs and maintenance costs. Laborand benefitsincreasedin the second half of 2008 as a result
of increased wages in an effort to retain skilled miners. Additionally, repairs and
maintenance costs have increased due totwo major repairs onunderground mining equipment duringthe three months ended
March 31, 2009 with no comparable repairs performed in the first quarter of
2008.




Ancillary. Cost of coal sales from our Ancillary
segment decreased for thethree months ended March 31,
2009primarily due to a
decrease in purchased coal costs related to the expiration of certain brokered
coal contractsthroughout
2008 and continuing into 2009.





Cost
of other revenues—For thethree months ended March
31, 2009, cost of other
revenues increased primarily due to increases in labor and benefitsand ash disposal transportation costs.
Partially offsetting the increase was a decrease ingathering fees related to coalbed
methane wells owned jointly by our subsidiary, CoalQuest, and CDXand costs related to the sale of parts
and equipment in the first quarter of 2008.




Depreciation, depletion and amortization—Depreciation, depletion and amortization
expenseincreased for the
three months ended March 31, 2009 primarily as a result of capital spending
throughout 2008 and in the first quarter 2009, as well as a decrease in
amortization income related to the completion of shipments subsequent to the
first quarter of 2008 under a below market contract.These increases were partially offset by
a decrease in amortization of coalbed methane well development
costs.





26







Selling,
general and administrative expenses—Selling, general and administrative
expenses for thethree
months ended March 31, 2009increased primarily due to increases inprofessional fees, taxes and licenses
and share-based compensation.




Adjusted EBITDA by Operating
Segment





Adjusted EBITDA represents net
incomeor loss attributable
toInternational Coal
Group, Inc.before deductingnetinterest expense, income taxes,
depreciation, depletion,
amortizationandnoncontrollinginterest. Adjusted EBITDA is presented
because it is an important supplemental measure of our performance used by our
chief operating decision maker in such areas as capital investment and
allocation of resources. It is considered “adjusted” as we adjust EBITDA fornoncontrollinginterest. Other companies in our
industry may calculate Adjusted EBITDA differently than we do, limiting its
usefulness as a comparative measure. Adjusted EBITDA is reconciled to its most
comparable GAAP measure on page28of this Quarterly Report on Form 10-Q
and in Note13to ourcondensedconsolidated financial statements for
the three months ended March 31, 2009.





The following table depicts operating
segment Adjusted EBITDA for the three months ended March 31, 2009 and
2008:




Three monthsended
                March 31,
              
              Increase
                (Decrease)2009
              
              
              2008
              
              $
              
              %(in thousands, except percentages)Central
      Appalachian
              
              $
              29,433
              
              
              $
              15,578
              
              $
              13,855
              
              89
              %Northern
      Appalachian
              
              
              10,152
              
              
              
              1,795
              
              
              8,357
              
              466
              %IllinoisBasin
              
              
              2,871
              
              
              
              2,348
              
              
              523
              
              22
              %Ancillary
              
              
              2,042
              
              
              
              (5,133
              )
              
              7,175
              
              *
              %Total Adjusted
      EBITDA
              
              $
              44,498
              
              
              $
              14,588
              
              $
              29,910
              
              205
              %







Central
Appalachian.Adjusted EBITDA for thethree months ended March 31, 2009
increased compared to the three months ended March 31, 2008primarily due to a$15.55 per ton increase in sales
realization, resulting in$5.49 per ton increase in profit margins.
Partially offsetting the increase in profit margins was a decrease of
approximately 113,000 tons sold.




NorthernAppalachian.The increase in Adjusted EBITDA was due
to a combination of an increase in sales realization of $8.08per ton, resulting in increased profit
margins of $7.05per ton, as well as an increase of
approximately132,000 tons sold.




IllinoisBasin.Adjusted EBITDAincreased during thethree months ended March 31, 2009related to an
increase insales
realization of $1.91 per ton compared to the three months ended March 31,
2008.




Ancillary.Theincrease in Adjusted EBITDA was primarily
due toan increase in sales
realization of $7.66 per ton, resulting in profit margins of $9.32 per ton.
Further impacting the increase in Adjusted EBITDA from our Ancillary segment
were increases in contract buydown income and contract mining revenue. Partially
offsetting these increases was decreased revenue generated by coalbed methane
wells ownedjointly by oursubsidiary, CoalQuest, and
CDX anda decrease of
approximately179,000 tons sold related to the expiration
of brokered coal contractsthroughout 2008.





27







Reconciliation of
Adjusted EBITDA to Net income (loss) by Operating Segment





The following tables reconcile Adjusted
EBITDA to net income (loss) by operating segment for the three months ended
March 31, 2009 and 2008:





Three monthsended
              March 31,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      AppalachianNet income (loss)attributable to International
      Coal Group, Inc.
            
            $
            8,079
            
            
            $
            (719
            )
            $
            8,798
            
            *
            %Depreciation, depletion and
      amortization
            
            
            17,590
            
            
            
            15,846
            
            
            1,744
            
            11
            %Interest expense,
      net
            
            
            908
            
            
            
            451
            
            
            457
            
            101
            %Income tax
      expense
            
            
            2,856
            
            
            
            —
            
            
            2,856
            
            100
            %Adjusted
    EBITDA
            
            $
            29,433
            
            
            $
            15,578
            
            $
            13,855
            
            89
            %





Three monthsended
              March 31,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Northern
      AppalachianNet income (loss)attributable to International
      Coal Group, Inc.
            
            $
            3,217
            
            
            $
            (491
            )
            $
            3,708
            
            *
            %Depreciation, depletion and
      amortization
            
            
            5,575
            
            
            
            2,127
            
            
            3,448
            
            162
            %Interest expense,
      net
            
            
            131
            
            
            
            152
            
            
            (21
            )
            (14
            )%Income tax
      expense
            
            
            1,200
            
            
            
            —
            
            
            1,200
            
            100
            %Noncontrollinginterest
            
            
            29
            
            
            
            7
            
            
            22
            
            314
            %Adjusted
    EBITDA
            
            $
            10,152
            
            
            $
            1,795
            
            $
            8,357
            
            466
            %





Three monthsended
              March 31,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)IllinoisBasinNet incomeattributable to International
      Coal Group, Inc.
            
            $
            842
            
            
            $
            478
            
            $
            364
            
            76
            %Depreciation, depletion and
      amortization
            
            
            1,710
            
            
            
            1,813
            
            
            (103
            )
            (6
            )%Interest expense,
      net
            
            
            69
            
            
            
            57
            
            
            12
            
            21
            %Income tax
      expense
            
            
            250
            
            
            
            —
            
            
            250
            
            100
            %Adjusted
    EBITDA
            
            $
            2,871
            
            
            $
            2,348
            
            $
            523
            
            22
            %





Three monthsended
              March 31,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)AncillaryNet lossattributable to International
      Coal Group, Inc.
            
            $
            (8,445
            )
            
            $
            (11,181
            )
            $
            2,736
            
            24
            %Depreciation, depletion and
      amortization
            
            
            1,388
            
            
            
            2,171
            
            
            (783
            )
            (36
            )%Interest expense,
      net
            
            
            11,910
            
            
            
            11,911
            
            
            (1
            )
            *
            %Income tax
      benefit
            
            
            (2,811
            )
            
            
            (8,034
            )
            
            5,223
            
            65
            %Adjusted
    EBITDA
            
            $
            2,042
            
            
            $
            (5,133
            )
            $
            7,175
            
            140
            %





28










Three monthsended
              March 31,
            
            Increase
              (Decrease)2008
            
            
            2007
            
            $
            
            %(in thousands, except percentages)ConsolidatedNetincome (loss) attributable to International
      Coal Group, Inc.
            
            $
            3,693
            
            
            $
            (11,913
            )
            $
            15,606
            
            *
            %Depreciation, depletion and
      amortization
            
            
            26,263
            
            
            
            21,957
            
            
            4,306
            
            20
            %Interest expense,
      net
            
            
            13,018
            
            
            
            12,571
            
            
            447
            
            4
            %Income taxexpense (benefit)
            
            
            1,495
            
            
            
            (8,034
            )
            
            9,529
            
            *
            %Noncontrollinginterest
            
            
            29
            
            
            
            7
            
            
            22
            
            314
            %Adjusted
    EBITDA
            
            $
            44,498
            
            
            $
            14,588
            
            $
            29,910
            
            205
            %











Liquidity and Capital
Resources





Our business is capital intensive and
requires substantial capital expenditures for, among other things, purchasing
and upgrading equipment used in developing and mining our coal lands, as well as
remaining in compliance with environmental laws and regulations. Our principal
liquidity requirements are to finance our coal production, fund capital
expenditures and service our debt and reclamation obligations. We may also
engage in acquisitions from time to time. Our primary sources of liquidity to
meet these needs arecash
on hand,cash flows from
sales of our coal, other income, borrowings under our senior credit
facilityand capital equipment financing
arrangements.





We believe the principal indicators of
our liquidity are our cash position and remaining availability under our credit
facility. As of March 31, 2009, our available liquidity was $93.0million, including cash of
$66.6million and $26.4million available for borrowing under
our $100.0 million senior credit facility. Total debt represented
47% of our total
capitalization at March 31, 2009. Our total capitalization represents our
current and long-term debt combined with our total stockholders’
equity.





In February 2009, we executed an
amendment to our $100.0 million credit facility that affected certain 2009 debt
covenants. The amendment modified the maximum permitted leverage and minimum
interest coverage ratios. The amendment also decreased the maximum capital
spending and added a minimum liquidity requirement. Debt covenants for years
subsequent to 2009 were not affected by the amendment.Management believes, based
on currently available information, that we will be able to meet the financial
covenants in our credit facility through the end of 2009. Current market
volatility, surrounding coal prices in particular, has made it extraordinarily
difficult to forecast results for 2010 and beyond. Accordingly, there is
uncertainty as to whether we will be able to remain in compliance with our debt
covenants for those periods. We will seek a waiver or amendment from our lenders
or pursue other alternatives for any period we believe we will not be in
compliance with these financial covenants.





The recent and unprecedented disruption
in the current credit markets has had a significant adverse impact on a number
of financial institutions. At this time, our liquidity has not been materially
impacted by the current credit environment and we do not expect that it will be
materially impacted in the near-future. We will continue to closely monitor
our liquidity and the credit markets. However, we cannot predict with any
certainty the impact to us of any further disruption in the credit
environment.




29







We currently
expect our total capital expenditures will be approximately $90.0millionto $95.0 millionin 2009, substantially all of which will
be for equipment and infrastructure at our existing operations. Cash paid for
capital expenditures was approximately $18.8million for the three months ended
March 31, 2009. We have funded and will continue to fund these capital
expenditures from our internal operationsand financing arrangements. We believe that these sources of
capital and our $50.0 million equipment revolving credit facility with
Caterpillar Financial Services Corporation will be sufficient to fund our
anticipated capital expenditures under our current budget plan through the first
quarter of 2010. Although we expect to experience some periods of tight
liquidity, we expect to be able to manage through such periods. To the
extent necessary, management believes it has flexibilityin the timing of thecash requirements bymanaging the paceof capital spending. In addition,
management may from time to time raise additional capital through the
disposition of non-core assets or engaging in sale-leaseback transactions. The
need and timing of seeking additional capital in the future will be subject to
market conditions.


Approximately
$9.1 million of cash paid for capital expenditures in the three months ended
March 31, 2009 was attributable to our Central Appalachian operations. This
amount represents investments of approximately $2.9 million in our Beckley
mining complex and $2.1 million at Hazard, as well as additional investments of
$4.1 million for upgrades at the remaining Central Appalachian operations. We
paid approximately $6.3 million at our Northern Appalachian operations in the
three months ended March 31, 2009, approximately $2.5 million of which was for
investments in our Sentinel property. Expenditures of approximately $1.8 million
for our Illinois Basin operations were for ongoing operations improvements.
Approximately $1.6 million of cash paid for capital expenditures for the three
months ended March 31, 2009 was within our Ancillary segment for safety
equipment, as well as for upgrades at various other subsidiaries.





More stringent regulatory requirementsof the mining industrydemandsubstantialcapital expenditures to meet safety
standards. For the three months ended March 31, 2009, we spent $0.4million to meet these standards and
anticipate spending an additional $4.3million for the remainder of
2009.




Cash Flows





Net cash provided by operating
activities was $18.5million for the three
months ended March 31, 2009, an increase of $36.5million from the same period in 2008.
This increase is attributable to an increase in net income of $29.3million after adjustment for non-cash
chargesanda$7.2 millionincreasedue to the changein net operating assets and
liabilities.





For the three months ended March 31,
2009, net cash used in investing activities was $18.9million compared to $33.9million for the three months ended
March 31, 2008. For the three months ended March 31, 2009, $18.8million of cash was used toupgrade andsupport existing mining operations
compared to $34.1million in the same period of
2008.





Net cashprovided byfinancing activities of $3.1million for the three months ended March
31, 2009 was due toborrowings on our long-term debt of $9.1
million used to finance equipment. Offsetting the borrowings wererepayments on ourshort- andlong-term debt of $5.5millionanddeferred finance costs of $0.5millionpaid to amend our credit
facility.We also financed $3.8 million of
equipment through additional financing arrangements.





30







Credit Facility and Long-term Debt
Obligations





As of March 31, 2009 our total long-term
indebtedness consisted of the following (in thousands):




March 31,
              20099.00% Convertible Senior Notes,
      due 2012, net of debt
      discount of $16,367
            
            $
            208,63310.25% Senior Notes, due
      2014
            
            
            175,000Equipment
    notes
            
            
            53,300Capital leases and
      other
            
            
            6,030Total
            
            
            442,963Lesscurrent
    portion
            
            
            (18,292
            )Long-term
    debt
            
            $
            424,671




Other





As a regular part of our business, we
review opportunities for, and engage in discussions and negotiations concerning,
the acquisition of coal mining assets and interests in coal mining companies,
and acquisitions of, or combinations with, coal mining companies. When we
believe that these opportunities are consistent with our growth plans and our
acquisition criteria, we will make bids or proposals and/or enter into letters
of intent and other similar agreements, which may be binding or nonbinding, that
are customarily subject to a variety of conditions and usually permit us to
terminate the discussions and any related agreement if, among other things, we
are not satisfied with the results of our due diligence investigation. Any
acquisition opportunities we pursue could materially affect our liquidity and
capital resources and may require us to incur indebtedness, seek equity capital
or both. There can be no assurance that additional financing will be available
on terms acceptable to us, or at all.





Additionally, we have other long-term
liabilities, including, but not limited to, mine reclamation and mine closure
costs, below-market coal supply agreements and “black lung” costs, and some of
our subsidiaries have long-term liabilities relating to retiree health and other
employee benefits.




Our ability to meet our long-term debt
obligations will depend upon our future performance, which in turn, will depend
upon general economic, financial and business conditions, along with
competition, legislation and regulation—factors that are largely beyond our
control. We believe that cash flow from operations, together with other
available sources of funds, including additional borrowings under our credit
facilityand equipment
credit facility, will be
adequate at least through the first quarter of 2010 for making required payments
of principal and interest on our indebtedness and for funding anticipated
capital expenditures and working capital requirements. Although weexpect to experience some periods of
tight liquidity, we expect to be able to manage through such periods. To the
extent necessary, management believes it hassomeflexibilityto manage itscash requirements bycontrolling the pace and timingof capital
spending, utilizing
availability under its credit facilities, reducing certain costs and idling
high-cost operations. In
addition, management may from time to time raise additional capital through the
disposition of non-core assets or engaging in sale-leaseback transactions.
However, we cannot assure you that our operating results, cash flow and capital
resources will be sufficient for repayment of our debt obligations in the
future.





Our Convertible Senior Notes (the
“Convertible Notes”) were not convertible as of March 31, 2009.In the event thatthe Convertible Notes were to become
convertible anda
significant number of the holders were to convert their notes prior to maturity,wemay not have enough available funds at
any particular time to make the required repayments. Under these circumstances,wewould look toWL Ross & Co. LLC,ourbanking group and other potential
lenders to obtain short-term funding until such time thatwecould secure necessary financing on a
long-term basis. The availability of any such financing would depend upon the
circumstances at the time, including the terms of any such financing, and other
factors.





31







Recent Accounting
Pronouncements





Fair Value
Measurements.In September
2006, the FASB issued SFAS No. 157,Fair Value
Measurements(“SFAS
No. 157”). SFAS No. 157 clarifies the definition of fair value,
establishes a framework for measuring fair value and expands the disclosures on
fair value measurements. SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007. Adoption of SFAS No. 157 did not
have a material impact on our financial position, results of operations or cash
flows; however, adoption did result in additional information being included in
the footnotes accompanying our consolidated financial
statements.





In February 2008, the FASB issued
FASBStaffPosition (“FSP”)FAS No.157-2,Effective Date of
FASB Statement No. 157(“FSPFASNo. 157-2”). FSPFAS No.157-2 permits delayed adoption of SFAS
No. 157 for certain non-financial assets and liabilities, which are not
recognized at fair value on a recurring basis, until fiscal years, and interim
periods within those fiscal years, beginning after November 15, 2008.
Adoption of FSPFASNo. 157-2 did not have
a material impact on our financial position, results of operations or cash
flows.





In October 2008, the FASB issued FSP No.FAS157-3,DeterminingtheFairValue of a
Financial Asset When theMarketforThatAssetIs Not
Active(“FSPFAS No.157-3”). FSPFASNo. 157-3 clarified the application of
SFAS No. 157 in an inactive market. It demonstrated how the fair value of a
financial asset is determined when the market for that financial asset is
inactive. FSPFAS No.157-3 was effective upon
issuance, including prior periods for which financial statements had not been
issued. Adoption of FSPFAS
No.157-3 did not have a
material impact on our financial position, results of operations or cash
flows.





In April 2009, the FASB issued FSP No.
FAS 157-4,Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly(“FSP No. FAS
157-4”). FSP No. FAS 157-4 provides additional guidance on estimating fair value
when the volume and level of activity for an asset or liability have
significantly decreased in relation to normal market activity for the asset or
liability. FSP FAS No. 157-4 also provides additional guidance on circumstances
that may indicate that a transaction is not orderly. FSP FAS No. 157-4 is
effective for interim and annual periods ending after June 15, 2009. We do not
believe that adoption of FSP No. FAS 157-4 will materially impact our financial
position, results of operations or cash flows.





Convertible
Debt.In May 2008, the FASB
issued FSP APB 14-1,Accounting for
Convertible Debt Instruments That May be Settledin Cash Upon
Conversion(Including Partial
Cash Settlement)(“FSP APB
14-1”). FSP APB 14-1 requires the liability and equity components of convertible
debt instruments that may be settled in cash upon conversion to be separately
accounted for in a manner that reflects the issuer’s nonconvertible debt
borrowing rate. To allocate the proceeds from a convertible debt offering in
this manner, a company would first need to determine the carrying amount of the
liability component, which would be based on the fair value of a similar
liability (excluding any embedded conversion options). The resulting debt
discount would be amortized over the period during which the debt is expected to
be outstanding as additional non-cash interest expense. FSP APB 14-1 was
effective for financial statements for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years, andhas beenapplied retrospectively for all periods
presented. We have determined our non-convertible borrowing rate would have been
11.7% at issuance. The effect of adoption of FSP APB 14-1was as follows:





32










December 31,
      2008AsPreviously
              Reported
            
            
            Adjustment
            
            
            As
              AdjustedProperty, plant, equipment and
      mine development
            
            $
            1,068,146
            
            
            $
            1,151
            
            
            $
            1,069,297Debt issuance costs,
      net
            
            
            10,635
            
            
            
            (173
            )
            
            
            10,462Total
assets
            
            
            1,349,669
            
            
            
            978
            
            
            
            1,350,647Long-term debt and capital
      leases
            
            
            434,920
            
            
            
            (17,369
            )
            
            
            417,551Deferred tax
      liability
            
            
            42,468
            
            
            
            6,935
            
            
            
            49,403Total
      liabilities
            
            
            854,844
            
            
            
            (10,434
            )
            
            
            844,410Paid-in-capital
            
            
            643,480
            
            
            
            13,517
            
            
            
            656,997Retained
      deficit
            
            
            (145,066
            )
            
            
            (2,105
            )
            
            
            (147,171
            )TotalInternational Coal Group, Inc.stockholders’
      equity
            
            
            494,790
            
            
            
            11,412
            
            
            
            506,202Total liabilities and
      stockholders’ equity
            
            
            1,349,669
            
            
            
            978
            
            
            
            1,350,647





Three months
      ended
              March 31,
    2008AsPreviously
              Reported
            
            
            Adjustment
            
            
            As
              AdjustedInterest expense,
      net
            
            $
            (11,981
            )
            
            $
            (590
            )
            
            $
            (12,571
            )Income tax
      benefit
            
            
            7,811
            
            
            
            223
            
            
            
            8,034Net loss
            
            
            (11,546
            )
            
            
            (367
            )
            
            
            (11,913
            )








Business
Combinations.In December
2007, the FASB issued SFAS No. 141 (Revised 2007),Business
Combinations(“SFAS
No. 141(R)”). SFAS No. 141(R) will significantly change the accounting
for business combinations. Under SFAS No. 141(R), an acquiring entity will
be required to recognize all the assets acquired and liabilities assumed in a
transaction at the acquisition-date fair value with limited exceptions. SFAS
No. 141(R) will change the accounting treatment for certain specific
acquisition-related items including: (i) expensing acquisition-related
costs as incurred, (ii) valuing noncontrolling interests at fair value at
the acquisition date and (iii) expensing restructuring costs associated
with an acquired business. SFAS No. 141(R) also includes a substantial
number of new disclosure requirements. SFAS No. 141(R) is to be applied to
any business combination for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
December 15, 2008. Upon adoption, SFAS No. 141(R) will impact the
accounting for our future business combinations, as well as for tax uncertainties and
valuation allowances from prior acquisitions.





Noncontrolling
Interests.In December
2007, the FASB issued SFAS No. 160,Noncontrolling
Interests in Consolidated Financial Statements(“SFAS No. 160”). SFAS
No. 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary
(minority interest) is an ownership interest in the consolidated entity that
should be reported as equity in the consolidated financial statements and
separate from the parent company’s equity. Among other requirements, this
statement requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the noncontrolling
interest. It also requires disclosure, on the face of the consolidated statement
of operations, of the amounts of consolidated net income attributable to the
parent and to the noncontrolling interest. SFAS No. 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.Adoption of SFAS No. 160impacted the presentation
of noncontrolling interest in ourbalance sheet and statements of
operations and cash flows.The impact of the changes in
presentation was not material.




33







Derivative
Instruments.In March 2008,
the FASB issued SFAS No. 161,Disclosures about
Derivative Instruments and Hedging Activities – an amendment of FASB Statement
No. 133(“SFAS
No. 161”). SFAS No. 161 requires additional disclosures for derivative
instruments and hedging activities that include how and why an entity uses
derivatives, how these instruments and the related hedged items are accounted
for under FASB Statement No. 133,Accounting for
Derivative Instruments and Hedging Activities, and related interpretations and how
derivative instruments and related hedged items affect the entity’s financial
position, results of operations and cash flows. SFAS No. 161 is effective
for fiscal years, and interim periods within those fiscal years, beginning after
November 15, 2008. Adoption of SFAS No. 161 did not impact the
footnotes accompanying our consolidated financial
statements.





GAAP
Hierarchy.In
May 2008, the FASB issued SFAS No. 162,The Hierarchy of
Generally Accepted Accounting Principles(“SFAS No. 162”). SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles. SFAS No. 162 directs the hierarchy to the
entity, rather than the independent auditors, as the entity is responsible for
selecting accounting principles for financial statements that are presented in
conformity with generally accepted accounting principles. SFAS No. 162 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 31, 2008. Adoption of SFAS No. 162 did not
have a material impact on our financial position, results of operations or cash
flows.





Share-Based
Payments.In June 2008, the
FASB issuedFSPEITF 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities(“FSPEITF 03-6-1”).FSPEITF 03-6-1 clarifies that all
outstanding unvested share-based payment awards that contain rights to
nonforfeitable dividends participate in undistributed earnings with common
shareholders. Awards of this nature are considered participating securities and
the two-class method of computing basic and diluted earnings per share must be
applied.FSPEITF 03-6-1 is effective for fiscal
years beginning after December 15, 2008. Adoption ofFSPEITF 03-6-1 did not have a material
impact on our financial position, results of operations or cash
flows.





Financial
Instruments.In June
2008, the FASB ratified EITF 07-5,Determining Whether
an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own
Stock(“EITF 07-5”). EITF
07-5 provides that an entity should use a two step approach to evaluate whether
an equity-linked financial instrument (or embedded feature) is indexed to its
own stock, including evaluating the instrument’s contingent exercise and
settlement provisions. It also clarifies the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008. Adoption of EITF 07-5 did not have a material impact on
our financial position, results of operations or cash flows.





Impairments.In April 2009, the FASB issued FSP FAS
No. 115-2 and FAS No. 124-2,Recognition and
Presentation of Other-Than-Temporary Impairments(“FSP FAS No. 115-2 and FAS No.
124-2”). FSP FAS No. 115-2 and FAS No. 124-2 modifies the other-than-temporary
impairment guidance for debt securities through increased consistency in the
timing of impairment recognition and enhanced disclosures related to the credit
and noncredit components of impaired debt securities that are not expected to be
sold. In addition, increased disclosures are required for both debt and equity
securities regarding expected cash flows, credit losses and an aging of
securities with unrealized losses. FSP FAS No. 115-2 and FAS No. 124-2 is
effective for interim and annual reporting periods that end after June 15, 2009.
We do not believe that adoption of FSP FAS No. 115-2 and FAS No. 124-2 will
materially impact our financial position, results of operations or cash
flows.





Fair Value
Instruments.In April 2009, the FASB issued FSP FAS
No. 107-1 and APB 28-1,Interim Disclosures
about Fair Value of Financial Instruments(“FSP FAS No. 107-1 and APB 28-1”). FSP
FAS No. 107-1 and APB 28-1 requires fair value disclosures for financial
instruments that are not reflected in the condensed consolidated balance sheets
at fair value to be disclosed on a quarterly basis, providing quantitative and
qualitative information about fair value estimates. FSP FAS No. 107-1 and APB
28-1 is effective for interim reporting periods ending after June 15, 2009. We
do not believe that adoption of FSP FAS No. 107-1 and APB 28-1 will materially
impact our financial position, results of operations or cash
flows.





34







Critical Accounting Policies, Estimates
and Assumptions





The preparation of financial statements
in conformity with accounting principles generally accepted in theUnited Statesof Americarequires management to make estimates
and assumptions that affect reported amounts. These estimates and assumptions
are based on information available as of the date of the financial statements.
Accounting measurements at interim dates inherently involve greater reliance on
estimates than at year-end. The results of operations for the three months ended
March 31, 2009arenot necessarily indicative of results
that can be expected for the full year. Please refer to the section entitled
“Critical Accounting Policies and Estimates” of Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” in
our Annual Report on Form 10-K for the year ended December 31, 2008 for a
discussion of our critical accounting policies and
estimates.





Item 3.
            Quantitative and
      Qualitative Disclosures About Market
  Risk





Interest rate
risk. In May 2006, we
entered into an Interest Rate Collar Agreement, which became effective on
March 31, 2007 and expiredMarch 31, 2009, to hedge our
interest risk on $200.0million notional amount of revolving
debt. The interest rate collar was designed as a cash flow hedge to offset the
impact of changes in the LIBOR interest rate above 5.92% and below 4.80%. This
agreement was entered into in conjunction with ouramended and restatedcredit facility dated June 23,
2006. We recognizedthe change in the fair value of this
agreement in the income statement in the period of change.





Market price
risk. We are exposed to
market price risk in the normal course of mining and sellingcoal. As of March 31, 2009,
99% of 2009 planned
production is committed for sale, leaving approximately1% uncommitted for sale. A hypothetical
decrease of $1.00 per ton in the market price for coal wouldnot have a material impact onpre-tax
income.




Item 4.
            Controls and
      Procedures





Disclosure Controls and
Procedures





We maintain a set of disclosure controls
and procedures designed to provide reasonable assurance that information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Our disclosure controls and procedures are
also designed to provide reasonable assurance that information required to be
disclosed in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including the Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure. As of the end of the period covered by this Quarterly
Report on Form 10-Q, an evaluation of the effectiveness of our disclosure
controls and procedures was carried out under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief
Financial Officer. Based on that evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures are effective.





Changes in Internal Control Over
Financial Reporting





There have been no changes in our
internal control over financial reporting during the first quarter of fiscal
2009 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.





35







PART II




Item 1.
            Legal
      Proceedings





On August 23, 2006, a survivor of
the Sago mine accident, Randal McCloy, filed a complaint in the Kanawha Circuit
Court inKanawha
County,West Virginia. The claims brought by Randal McCloy
and his family against us and certain of our subsidiaries, and against W.L.
Ross & Co., and Wilbur L. Ross, Jr., individually, were dismissed on
February 14, 2008, after the parties reached a confidential settlement.
Sixteen other complaints have been filed in Kanawha Circuit Court by the
representatives of many of the miners who died in the Sago mine accident, and
several of these plaintiffs have filed amended complaints to expand the group of
defendants in the cases. The complaints allege various causes of action against
us and our subsidiary, Wolf Run Mining Company, one of our shareholders, W.L.
Ross & Co., and Wilbur L. Ross Jr., individually, related to the
accident and seek compensatory and punitive damages. In addition, the plaintiffs
also allege causes of action against other third parties, including claims
against the manufacturer of Omega block seals used to seal the area where the
explosion occurred and against the manufacturer of self-contained self-rescuer
(“SCSR”) devices worn by the miners at the Sago mine. Some of these third
parties have been dismissed from the actions upon settlement. The amended
complaints add other of our subsidiaries to the cases, including ICG, Inc., ICG,
LLC and Hunter Ridge Coal Company, unnamed parent, subsidiary and affiliate
companies of us, W.L. Ross & Co., and Wilbur L. Ross Jr., and other
third parties, including a provider of electrical services and a supplier of
components used in the SCSR devices. We believe that we are appropriately
insured for these and other potential claims, and we have fully paid our
deductible applicable to our insurance policies. In addition to the dismissal of
the McCloy claim, we have settled and dismissed five other actions. These
settlements required the release of us, our subsidiaries, W.L. Ross &
Co., and Wilbur L. Ross, Jr. Some of the plaintiffs involved in one of the
dismissed actions have sought permission from the Supreme Court of Appeals ofWest Virginiato appeal the settlement, alleging that
the settlement negotiated by the decedent’s estate should not have been approved
by the trial court. The trial court overruled those plaintiffs’ objections to
the settlement, and, although the West Virginia Supreme Court of Appeals refused
to stay the effectiveness of the settlement, the plaintiffs’ petition for appeal
to the West Virginia Supreme Court of Appeals was recently presented to the
court. The court has deferred its decision as to whether it will hear the
appeal, pending its ruling on an unrelated case that shares similar issues. We
will vigorously defend ourselves against the remaining complaints and any appeal
of any prior settlements.





Allegheny Energy Supply (“Allegheny”),
the sole customer of coal produced at our subsidiary Wolf Run Mining Company’s
(“Wolf Run”) Sycamore No. 2 mine, filed a lawsuit against Wolf Run, Hunter
Ridge Holdings, Inc. (“Hunter Ridge”), and us in state court in Allegheny
County, Pennsylvania on December 28, 2006, and amended its complaint on
April 23, 2007. Allegheny claims that we breached a coal supply contract
when we declared force majeure under the contract upon idling the Sycamore
No. 2 mine in the third quarter of 2006. The Sycamore No. 2 mine was
idled after encountering adverse geologic conditions and abandoned gas wells
that were previously unidentified and unmapped. The amended complaint also
alleges that the production stoppages constitute a breach of the guarantee
agreement by Hunter Ridge and breach of certain representations made upon
entering into the contract in early 2005, a claim that Allegheny has since
voluntarily dropped. Allegheny claims that it will incur costs in excess of
$100.0 million to purchase replacement coal over the life of the contract. We,
Wolf Run andHunterRidgeanswered the amended complaint on
August 13, 2007, disputing all of the remaining claims. On November 3, 2008, we,
Wolf Run andHunterRidgefiled an amended answer and
counterclaim against the plaintiffs seeking to void the coal supply agreement
due to, among other things, fraudulent inducement and conspiracy. The
counterclaim alleges further that Allegheny breached a confidentiality agreement
withHunterRidge, which prohibited the solicitation of
its employees. After the coal supply agreement was executed, Allegheny hired the
then-president of Anker Coal Group, Inc. (nowHunterRidge) who engaged in negotiations on behalf
of Wolf Run andHunterRidge. In addition to seeking a declaratory
judgment that the coal supply agreement and guaranty be deemed void and
unenforceable and rescission of the contracts, the counterclaim also seeks
compensatory and punitive damages.


36







On December 6, 2007, the Kentucky
Waterways Alliance, Inc., and The Sierra Club sued the U.S. Army Corps of
Engineers (the “ACOE”) in the United States District Court for the Western
District of Kentucky, Louisville Division, asserting that a permit to construct
five valley fills was issued unlawfully to our Hazard subsidiary for its Thunder
Ridge Surface mine. The suit alleges that the ACOE failed to comply with the
requirements of both Section 404 of the Clean Water Act and the National
Environmental Policy Act. Hazard intervened in the suit to protect our
interests. The ACOE suspended the Section 404 permit on December 26,
2007 in order to evaluate the issues raised by the plaintiffs. The ACOE
completed its evaluation on March 25, 2009. Only a day prior, the U.S.
Environmental Protection Agency (the“EPA”) stated its intention to more
closely scrutinize Section 404 permitting decisions by the ACOE. On March 27,
2009,theACOE reinstated Hazard’s permit.
Pursuant to earlier agreements with the plaintiffs in the litigation, we
provided thirty (30) days notice to plaintiffs’ counsel of Hazard’s intent to
proceed with activities authorized under the permit.After such notice,
the plaintiffs have agreed to amend the earlier agreement to allow Hazard
partial use of the reinstated permit, including construction of an additional
valley fill, thus delaying the plaintiffs' move to seek a temporary restraining
order and subsequent injunction to block Hazard’s use of the permit.If thecourtultimatelyfinds that the permit is unlawful,
production could be materially affected at the Thunder Ridge Surface mine.TheEPA’s heightened scrutiny will likely
render the process of obtaining ACOE permits for coal mining activities inAppalachiamore difficult.





On January 7, 2008, Saratoga
Advantage Trust filed a class action lawsuit in the U.S. District Court for the
Southern District of West Virginia against us and certain of our officers and
directors. The complaint asserts claims under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder,
based on alleged false and misleading statements in the registration statements
filed in connection with our November 2005 reorganization and December 2005
public offering of common stock. In addition, the complaint challenges other of
our public statements regarding our operating condition and safety record. We
intend to vigorously defend the action.





On July 3, 2007, Taylor Environmental
Advocacy Membership, Inc. (“T.E.A.M.”) filed a petition to appeal the issuance
ofICGTygartValley, LLC’s (“TygartValley”) Surface Mine Permit U-2004-06 against
the West Virginia Department of Environmental Protection (the “WVDEP”) in an
action before the West Virginia Surface Mine Board (the “Board”). On December
10, 2007, the Board remanded the permit to the WVDEP for revision to certain
provisions related to pre-mining water monitoring and cumulative hydrologic
impacts. The WVDEP issued a modification on April 1, 2008 addressing those
issues. T.E.A.M. filed an appeal of the WVDEP’s approval of the permit
modification on April 30, 2008. On October 7, 2008, the Board issued an order
remanding the permit to the WVDEP requiringTygartValleyto address a technical issue related to
projected post-mining water quality.TygartValleyhas prepared and submitted a permit
modification to alleviate the Board’s concerns. All site development has been
suspended until the WVDEP has approved the permit modification. If the
WVDEP issues the permit as modified, there will be additional opportunity for
appeal by T.E.A.M.





In addition, from time to time, we are
involved in legal proceedings arising in the ordinary course of business. These
proceedings include assessments of penalties for citations and orders asserted
by MSHA and other regulatory agencies, none of which are expected by management
to, individually or in the aggregate, have a material adverse effect on us. In
the opinion of management, we have recorded adequate reserves for liabilities
arising in the ordinary course and it is management’s belief there is no
individual case or group of related cases pending that is likely to have a
material adverse effect on our financial condition, results of operations or
cash flows.





Item 1A.
            Risk
  Factors





There have been no material changes in
the risk factors that weredisclosed in our Annual Report on Form 10-K for the fiscal year ended December
31, 2008.





37








Item2.
            Unregistered Sales of Securities
      and Use of Proceeds





There
were no unregistered sales of equity securities during the three months ended
March 31, 2009.





ISSUER PURCHASES OF EQUITY
      SECURITIESPeriod
            
            Total Number of Shares Purchased(1)
            
            Average Price Paid per
      Share(1)
            
            Total Number of Shares Purchased
      as Part of Publicly Announced Plans or Programs
            
            Approximate Dollar Value of Shares
      that May Yet be Purchased Under the Plans or
    ProgramsJanuary 1, 2009 through January
      31, 2009
            
            —
            
            $
            —
            
            —
            
            —February 1, 2009 through February
      28, 2009
            
            —
            
            
            —
            
            —
            
            —March 1, 2009 through March 31,
      2009
            
            4,768
            
            
            1.76
            
            —
            
            —Total
            
            4,768
            
            $
            1.76
            
            —
            
            —




(1)
            During
      the three months ended March 31, 2009, we withheld 4,768 shares of common
      stock from employees to satisfy estimated tax obligations upon the vesting
      of restricted stock under the terms of our 2005 Equity and Performance
      Incentive Plan. The value of the common stock that was withheld was based
      upon the closing price of our common stock on the applicable vesting
      dates.








38








Item 6.
            Exhibits





10-Q EXHIBIT
INDEX




2.1
            
            Business Combination Agreement
      among International Coal Group, Inc. (n/k/a ICG, Inc.), ICG Holdco, Inc.
      (n/k/a International Coal Group, Inc.), ICG Merger Sub, Inc., Anker Merger
      Sub, Inc. and Anker Coal Group, Inc., dated as of March 31,
      2005
            
            (A
            )2.2
            
            First Amendment to the Business
      Combination Agreement among International Coal Group, Inc. (f/k/a ICG
      Holdco, Inc.), ICG, Inc. (f/k/a International Coal Group, Inc.), ICG
      Merger Sub, Inc., Anker Merger Sub, Inc. and Anker Coal Group, Inc., dated
      as of May 10, 2005
            
            (A
            )2.3
            
            Second Amendment to the Business
      Combination Agreement among International Coal Group, Inc. (f/k/a ICG
      Holdco, Inc.), ICG, Inc. (f/k/a International Coal Group, Inc.), ICG
      Merger Sub, Inc., Anker Merger Sub, Inc. and Anker Coal Group, Inc.,
      effective as of June 29, 2005
            
            (B
            )2.4
            
            Business Combination Agreement
      among International Coal Group, Inc. (n/k/a ICG, Inc.), ICG Holdco, Inc.
      (n/k/a International Coal Group, Inc.), CoalQuest Merger Sub LLC,
      CoalQuest Development LLC and the members of CoalQuest Development LLC,
      dated as of March 31, 2005
            
            (A
            )2.5
            
            First Amendment to the Business
      Combination Agreement among International Coal Group, Inc. (f/k/a ICG
      Holdco, Inc.), ICG, Inc. (f/k/a International Coal Group, Inc.), CoalQuest
      Merger Sub LLC, CoalQuest Development LLC and the members of CoalQuest
      Development LLC, dated as of May 10, 2005
            
            (A
            )2.6
            
            Second Amendment to the Business
      Combination Agreement among International Coal Group, Inc. (f/k/a ICG
      Holdco, Inc.), ICG, Inc. (f/k/a International Coal Group, Inc.), CoalQuest
      Merger Sub LLC, CoalQuest Development LLC and the members of CoalQuest
      Development LLC, effective as of June 29, 2005
            
            (B
            )3.1
            
            Form of Second Amended and
      Restated Certificate of Incorporation of International Coal Group,
      Inc.
            
            (E
            )3.2
            
            Form of Second Amended and
      Restated By-laws of International Coal Group, Inc.
            
            (F
            )4.1
            
            Form of certificate of
      International Coal Group, Inc. common stock
            
            (C
            )4.2
            
            Registration Rights Agreement by
      and between International Coal Group, Inc., WLR Recovery Fund II, L.P.,
      Contrarian Capital Management LLC, Värde Partners, Inc., Greenlight
      Capital, Inc., and Stark Trading, Shepherd International Coal Holdings
      Inc.
            
            (A
            )4.4
            
            Indenture, dated June 23,
      2006, by and among ICG, the guarantors party thereto and The Bank of New
      York Trust Company, N.A., as trustee
            
            (G
            )4.5
            
            Form of 10.25%
      Note
            
            (G
            )4.6
            
            Indenture, dated July 31,
      2007, by and among ICG, the guarantors party thereto and The Bank of New
      York Trust Company, N.A., as trustee
            
            (J
            )4.7
            
            Form of Senior Convertible 9.00%
      Note
            
            (J
            )4.8
            
            Registration Rights Agreement,
      dated July 31, 2007, by and among ICG, the guarantors party thereto and
      UBS Securities LLC
            
            (J
            )4.9
            
            Registration Rights Agreement
      dated as of May 16, 2008 by and between ICG and Fairfax Financial Holdings
      Limited
            
            (K
            )10.1
            
            Amendment No. 1 to the Second
      Amended and Restated Credit Agreement, dated as of January 31, 2007, among
      ICG, LLC, as borrower, International Coal Group, Inc. and certain of its
      subsidiaries as guarantors, the lenders party thereto, J.P. Morgan Chase
      Securities Inc. and UBS Securities LLC, as joint lead arrangers and joint
      bookrunners, JPMorgan Chase Bank, N.A. and CIT Capital USA Inc., as
      co-syndication agents, Bank of America, N.A. and Wachovia Bank, N.A., as
      co-documentation agents, JPMorgan Chase Bank and Bank of America, N.A., as
      issuing banks, UBS Loan Finance LLC, as swingline lender, and UBS AG,
      Stamford Branch, as issuing bank, as administrative agent and as
      collateral agent for the lenders
            
            (H
            )


39




10.2
            
            Second Amendment and Limited
      Waiver to Second Amended and Restated Credit Agreement, effective as of
      July 31, 2007, by and among ICG, LLC, as borrower, the guarantors
      party thereto, the lenders party thereto, J.P. Morgan Securities Inc. and
      UBS Securities LLC, as joint lead arrangers and joint bookrunners,
      JPMorgan Chase Bank, N.A. and CIT Capital Securities LLC, as
      co-syndication agents, Bank of America, N.A. and Wachovia Bank, N.A. as
      co-documentation agents, JPMorgan Chase Bank, N.A. as an issuing bank, UBS
      Loan Finance LLC, as swingline lender, and UBS AG, Stamford Branch, as an
      issuing bank, administrative agent and collateral
    agent
            
            (J
            )10.3
            
            Amendment No. 3 to the Second
      Amended and Restated Credit Agreement, dated as of February 20, 2009,
      among ICG, LLC, as borrower, International Coal Group, Inc. and certain of
      its subsidiaries as guarantors, the lenders party thereto, J.P. Morgan
      Chase Securities Inc. and UBS Securities LLC, as joint lead arrangers and
      joint bookrunners, JPMorgan Chase Bank, N.A. and CIT Capital USA Inc., as
      co-syndication agents, Bank of America, N.A. and Wachovia Bank, N.A., as
      co-documentation agents, JPMorgan Chase Bank and Bank of America, N.A., as
      issuing banks, UBS Loan Finance LLC, as swingline lender, and UBS AG,
      Stamford Branch, as issuing bank, as administrative agent and as
      collateral agent for the lenders
            
            (M
            )31.1
            
            Certification of the Principal
      Executive Officer
            
            (D
            )31.2
            
            Certification of the Principal
      Financial Officer
            
            (D
            )32.1
            
            Certification Pursuant to §906 of
      the Sarbanes Oxley Act of 2002
            
            (D
            )







(A)
            
            Previously filed as an exhibit to
      Amendment No. 1 to International Coal Group, Inc.’s Registration
      Statement on Form S-1 (Reg. No. 333-124393), filed on June 15,
      2005 and incorporated herein by reference.(B)
            
            Previously filed as an exhibit to
      Amendment No. 2 to International Coal Group, Inc.’s Registration
      Statement on Form S-1 (Reg. No. 333-124393), filed on June 30,
      2005 and incorporated herein by reference.(C)
            
            Previously filed as an exhibit to
      Amendment No. 3 to International Coal Group, Inc.’s Registration
      Statement on Form S-1 (Reg. No. 333-124393), filed on
      September 28, 2005 and incorporated herein by
      reference.(D)
            
            Filed
    herewith.(E)
            
            Previously filed as an exhibit to
      Amendment No. 4 to International Coal Group, Inc.’s Registration
      Statement on Form S-1 (Reg. No. 333-124393), filed on
      October 24, 2005.(F)
            
            Previously filed as an exhibit to
      Amendment No. 5 to International Coal Group, Inc.’s Registration
      Statement on Form S-1 (Reg. No. 333-124393), filed on
      November 9, 2005.(G)
            
            Previously filed as an exhibit to
      International Coal Group, Inc.’s Current Report on Form 8-K filed on
      June 26, 2006.(H)
            
            Previously filed as an exhibit to
      International Coal Group, Inc.’s Annual Report on Form 10-K for the year
      ended December 31, 2006 filed on March 1,
      2007.(I)
            
            Previously filed as an exhibit to
      International Coal Group, Inc.’s Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2007 filed on May 8,
      2007.(J)
            
            Previously filed as an exhibit to
      International Coal Group, Inc.’s Current Report on Form 8-K filed on
      July 31, 2007.(K)
            
            Previously filed as an exhibit to
      Fairfax Financial Holdings Limited’s Amendment No. 1 to Form Schedule 13D
      filed on May 29, 2008.(L)
            
            Previously filed as an exhibit to
      International Coal Group, Inc.’s Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2008 filed on August 8,
  2008.(M)
            
            Previously filed as an exhibit to
      International Coal Group, Inc.’s Annual Report on Form 10-K for the year
      ended December 31, 2008 filed on February 27,
  2009.




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SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.





INTERNATIONAL COAL GROUP,
      INC.By:
            
            /s/ Bennett K.
      HatfieldName:
            
            Bennett K.
      HatfieldTitle:
            
            President, Chief Executive Officer and Director(Principal Executive
      Officer)By:
            
            /s/ Bradley W.
      HarrisName:
            
            Bradley W.
      HarrisTitle:
            
            Senior Vice President, Chief
      Financial Officer and Treasurer(Principal Financial
      Officer)






Date: May 8, 2009




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