UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form 10-Q/A


(Amendment
No. 1)





(Mark
One)





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





For
the quarterly period ended June 30, 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 subject to
such filing requirements for the past 90 days.  Yesx
   No ̈





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 “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
accelerated filerx
Accelerated 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  ̈  No x





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 of
August 1, 2009—154,152,600.









EXPLANATORY
NOTE





We
are filing this Form 10-Q/A Amendment No. 1 (this “Amendment”) to amend and
restate certain information that was included in our original Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2009 (the “Second Quarter
2009 Form 10-Q”) as described below. For the convenience of the reader, this
Amendment sets forth the entire Second Quarter 2009 Form 10-Q. However, this
Amendment amends and restates only Item 1 of Part I of the Second Quarter 2009
Form 10-Q. The other Items are not being amended. Except as described in this
Explanatory Note, this Amendment does not modify or update the disclosures in
our Second Quarter 2009 Form 10-Q. Therefore, this Amendment does not reflect
any other events that occurred after the original August 6, 2009 filing date of
the Second Quarter 2009 Form 10-Q. Forward-looking statements in this Amendment
have also not been updated from the Second Quarter 2009 Form 10-Q that we filed
on August 6, 2009. For updated information, please see the reports that we have
filed with the SEC for subsequent periods. In addition, in connection with the
filing of this Amendment and pursuant to Rules 12b-15 and 13a-14 under the
Exchange Act, we are including with this Amendment currently dated
certifications.





Subsequent
to the issuance of our consolidated financial statements for the period ended
June 30, 2009, we identified an error in the application of Statement of
Financial Accounting Standards No. 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements
No. 87, 88, 106 and 132(R), on our employee benefits liability. We had
not previously recorded the unfunded status of our black lung obligation as a
liability in our statement of financial position or recognized changes in the
funded status of the obligation in the year in which the changes occurred
through comprehensive income. As a result of this error, as of June 30, 2009, we
overstated our employee benefits liability by approximately $4.4 million and
accumulated other comprehensive loss by approximately $2.7 million and
understated our deferred tax liability by approximately $1.7 million. We do not
believe these errors are material to the consolidated financial statements. See
Note 15 accompanying our condensed consolidated financial statements for further
information regarding adjustment of the applicable financial statement line
items.







TABLE
OF CONTENTS





PagePART
      I—FINANCIAL INFORMATIONItem 1.
            
            Condensed
      Consolidated 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
            
            41Item 4.
            
            Controls
      and Procedures
            
            42PART
      II—OTHER INFORMATIONItem 1.
            
            Legal
      Proceedings
            
            42Item 1A.
            
            Risk
      Factors
            
            44Item 2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            47Item
      4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            48Item 6.
            
            Exhibits
            
            49





2








PART
I





Item 1.
            Condensed
      Consolidated Financial Statements





INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


Condensed
Consolidated Balance Sheets (Unaudited)


(Dollars
in thousands, except per share amounts)




June
      30,
                2009
              
              
              December 31,
                2008ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              66,315
              
              
              $
              63,930Accounts
      receivable, net of allowances of $1,406 and $1,516
              
              
              84,739
              
              
              
              75,321Inventories,
      net
              
              
              81,600
              
              
              
              58,788Deferred
      income taxes
              
              
              17,666
              
              
              
              17,649Prepaid
      insurance
              
              
              6,027
              
              
              
              13,380Income
      taxes receivable
              
              
              11
              
              
              
              8,030Prepaid
      expenses and other
              
              
              9,602
              
              
              
              10,893Total
      current assets
              
              
              265,960
              
              
              
              247,991PROPERTY,
      PLANT, EQUIPMENT AND MINE DEVELOPMENT, net
              
              
              1,044,939
              
              
              
              1,069,297DEBT
      ISSUANCE COSTS, net
              
              
              9,714
              
              
              
              10,462ADVANCE
      ROYALTIES, net
              
              
              18,037
              
              
              
              17,462OTHER
      NON-CURRENT ASSETS
              
              
              5,613
              
              
              
              5,435Total
      assets
              
              $
              1,344,263
              
              
              $
              1,350,647LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Accounts
      payable
              
              $
              55,878
              
              
              $
              75,810Short-term
      debt
              
              
              1,163
              
              
              
              4,741Current
      portion of long-term debt and capital lease
              
              
              17,769
              
              
              
              15,319Current
      portion of reclamation and mine closure costs
              
              
              10,976
              
              
              
              11,139Current
      portion of employee benefits
              
              
              3,359
              
              
              
              3,359Accrued
      expenses and other
              
              
              82,646
              
              
              
              87,704Total
      current liabilities
              
              
              171,791
              
              
              
              198,072LONG-TERM
      DEBT AND CAPITAL LEASE
              
              
              424,353
              
              
              
              417,551RECLAMATION
      AND MINE CLOSURE COSTS
              
              
              67,899
              
              
              
              68,107EMPLOYEE
      BENEFITS
              
              
              62,346
              
              
              
              56,563DEFERRED
      INCOME TAXES
              
              
              54,787
              
              
              
              51,154BELOW-MARKET
      COAL SUPPLY AGREEMENTS
              
              
              31,032
              
              
              
              43,888OTHER
      NON-CURRENT LIABILITIES
              
              
              6,695
              
              
              
              6,195Total
      liabilities
              
              
              818,903
              
              
              
              841,530COMMITMENTS
      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, 154,155,550 and
      154,148,229 shares issued and outstanding, respectively, as of June 30,
      2009 and 153,322,245 shares issued and outstanding, as of December 31,
      2008
              
              
              1,541
              
              
              
              1,533Treasury
      stock
              
              
              (14
              )
              
              
              —Additional
      paid-in capital
              
              
              659,222
              
              
              
              656,997Accumulated
      other comprehensive loss
              
              
              (2,313
              )
              
              
              (2,277
              )Retained
      deficit
              
              
              (133,096
              )
              
              
              (147,171
              )Total
      International Coal Group, Inc. stockholders’ equity
              
              
              525,340
              
              
              
              509,082Noncontrolling
      interest
              
              
              20
              
              
              
              35Total
      stockholders’ equity
              
              
              525,360
              
              
              
              509,117Total
      liabilities and stockholders’ equity
              
              $
              1,344,263
              
              
              $
              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
              June
      30,
            
            
            Six
      months ended
              June
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008REVENUES:Coal
      sales revenues
            
            $
            254,677
            
            
            $
            253,109
            
            
            $
            528,493
            
            
            $
            479,713Freight
      and handling revenues
            
            
            6,041
            
            
            
            11,870
            
            
            
            14,675
            
            
            
            23,153Other
      revenues
            
            
            17,079
            
            
            
            12,906
            
            
            
            39,595
            
            
            
            26,944Total
      revenues
            
            
            277,797
            
            
            
            277,885
            
            
            
            582,763
            
            
            
            529,810COSTS
      AND EXPENSES:Cost
      of coal sales
            
            
            207,324
            
            
            
            217,590
            
            
            
            439,289
            
            
            
            426,394Freight
      and handling costs
            
            
            6,041
            
            
            
            11,870
            
            
            
            14,675
            
            
            
            23,153Cost
      of other revenues
            
            
            6,630
            
            
            
            9,222
            
            
            
            15,966
            
            
            
            18,157Depreciation,
      depletion and amortization
            
            
            26,035
            
            
            
            24,694
            
            
            
            52,298
            
            
            
            46,651Selling,
      general and administrative
            
            
            8,670
            
            
            
            10,129
            
            
            
            19,281
            
            
            
            18,655Gain
      on sale of assets, net
            
            
            (3,108
            )
            
            
            (26,081
            )
            
            
            (3,186
            )
            
            
            (26,292
            )Total
      costs and expenses
            
            
            251,592
            
            
            
            247,424
            
            
            
            538,323
            
            
            
            506,718Income from
      operations
            
            
            26,205
            
            
            
            30,461
            
            
            
            44,440
            
            
            
            23,092INTEREST
      EXPENSE, net
            
            
            (13,214
            )
            
            
            (8,793
            )
            
            
            (26,232
            )
            
            
            (21,364
            )Income before
      income taxes
            
            
            12,991
            
            
            
            21,668
            
            
            
            18,208
            
            
            
            1,728INCOME
      TAX (EXPENSE) BENEFIT
            
            
            (2,613
            )
            
            
            (7,900
            )
            
            
            (4,108
            )
            
            
            134Net
      income
            
            
            10,378
            
            
            
            13,768
            
            
            
            14,100
            
            
            
            1,862Net
      (income) loss attributable to noncontrolling interest
            
            
            4
            
            
            
            2
            
            
            
            (25
            )
            
            
            (5
            )Net
      income attributable to International Coal Group, Inc.
            
            $
            10,382
            
            
            $
            13,770
            
            
            $
            14,075
            
            
            $
            1,857Earnings
      per share:Basic
            
            $
            0.07
            
            
            $
            0.09
            
            
            $
            0.09
            
            
            $
            0.01Diluted
            
            $
            0.07
            
            
            $
            0.08
            
            
            $
            0.09
            
            
            $
            0.01Weighted-average
      common shares outstanding:Basic
            
            
            152,832,797
            
            
            
            152,550,960
            
            
            
            152,803,420
            
            
            
            152,499,812Diluted
            
            
            154,672,255
            
            
            
            167,912,909
            
            
            
            153,983,725
            
            
            
            167,551,824





See
notes to condensed consolidated financial statements.





4







INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


Condensed
Consolidated Statements of Cash Flows (Unaudited)


(Dollars
in thousands)





Six
      months ended
              June
      30,2009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
            
            $
            14,100
            
            
            $
            1,862Adjustments
      to reconcile net income to net cash from operating
    activities:Depreciation,
      depletion and amortization
            
            
            52,298
            
            
            
            46,651Amortization
      of deferred finance costs and debt discount
            
            
            3,378
            
            
            
            3,001Provision
      for bad debt
            
            
            (110
            )
            
            
            (522
            )Compensation
      expense on equity instruments
            
            
            2,233
            
            
            
            2,377Gain
      on sale of assets, net
            
            
            (3,186
            )
            
            
            (26,292
            )Deferred
      income taxes
            
            
            3,632
            
            
            
            (285
            )Amortization
      of accumulated employee benefit obligations
            
            
            (52
            )
            
            
            (259
            )Changes
      in assets and liabilities:Accounts
      receivable
            
            
            (9,308
            )
            
            
            (29,664
            )Inventories
            
            
            (22,812
            )
            
            
            (3,277
            )Prepaid
      expenses and other
            
            
            16,663
            
            
            
            1,156Other
      non-current assets
            
            
            (630
            )
            
            
            823Accounts
      payable
            
            
            (10,784
            )
            
            
            298Accrued
      expenses and other
            
            
            (5,058
            )
            
            
            17,802Reclamation
      and mine closure costs
            
            
            176
            
            
            
            (1,125
            )Other
      liabilities
            
            
            (1,438
            )
            
            
            2,464Net
      cash from operating activities
            
            
            39,102
            
            
            
            15,010CASH
      FLOWS FROM INVESTING ACTIVITIES:Proceeds
      from the sale of assets
            
            
            3,066
            
            
            
            4,179Additions
      to property, plant, equipment and mine development
            
            
            (35,750
            )
            
            
            (55,379
            )Cash
      paid related to acquisitions and net assets acquired
            
            
            —
            
            
            
            (558
            )Withdrawals
      (deposits) of restricted cash
            
            
            (163
            )
            
            
            14Net
      cash from investing activities
            
            
            (32,847
            )
            
            
            (51,744
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Repayments
      on short-term debt
            
            
            (3,578
            )
            
            
            —Borrowings
      on long-term debt and capital lease
            
            
            9,086
            
            
            
            —Repayments
      on long-term debt and capital lease
            
            
            (8,755
            )
            
            
            (2,147
            )Purchases
      of treasury stock
            
            
            (14
            )
            
            
            —Debt
      issuance costs
            
            
            (609
            )
            
            
            (183
            )Net
      cash from financing activities
            
            
            (3,870
            )
            
            
            (2,330
            )NET
      CHANGE IN CASH AND CASH EQUIVALENTS
            
            
            2,385
            
            
            
            (39,064
            )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            63,930
            
            
            
            107,150CASH
      AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            66,315
            
            
            $
            68,086Supplemental
      information:Cash
      paid for interest (net of amount capitalized)
            
            $
            22,402
            
            
            $
            17,630Cash
      received for income taxes, net
            
            $
            7,588
            
            
            $
            —Supplemental
      disclosure of non-cash items:Purchases
      of property, plant, equipment and mine development through accounts
      payable
            
            $
            3,794
            
            
            $
            2,383Purchases
      of property, plant, equipment and mine development through financing
      arrangements
            
            $
            6,900
            
            
            $
            5,840Assets
      acquired through assumption of liabilities
            
            $
            —
            
            
            $
            17,464Assets
      acquired through the exchange of coal reserves
            
            $
            —
            
            
            $
            21,633





See
notes to condensed consolidated financial statements.





5











INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 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 the
United States of America for 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 June 30,
2009 and for the three and six months ended June 30, 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/A for the fiscal year
ended December 31, 2008. The results of operations for the three and six
months ended June 30, 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.





In
February 2008, the FASB issued FASB Staff Position (“FSP”) FAS No. 157-2,Effective Date of FASB Statement
No. 157  (“FSP FAS No. 157-2”). FSP FAS 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 FSP FAS 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 FSP FAS No. 157-3,Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not
Active  (“FSP FAS No. 157-3”). FSP FAS 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. FSP FAS No. 157-3 was effective upon issuance, including
prior periods for which financial statements had not been issued. Adoption of
FSP FAS No. 157-3 did not have a material impact on the Company’s financial
position, results of operations or cash flows.





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. Adoption of
FSP FAS No. 157-4 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)


June
30, 2009


(Dollars
in thousands, except per share amounts)





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 determines the carrying amount of the liability
component, which is based on the fair value of a similar liability, excluding
any embedded conversion options. The resulting debt discount is 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, and has been applied 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 14-1 was as
follows:





Three
      months ended
              June
      30, 2008
            
            Six
      months ended
              June
      30, 2008Consolidated
      Statement of Operations
            
            As
      Previously
              Reported
            
            
            Adjustment
            
            
            As
              Adjusted
            
            As
      Previously
              Reported
            
            
            Adjustment
            
            
            As
              AdjustedInterest expense,
      net
            
            $
            (8,201
            )
            
            $
            (592
            )
            
            $
            (8,793
            )
            $
            (20,182
            )
            
            $
            (1,182
            )
            
            $
            (21,364
            )Income
      tax (expense) benefit
            
            
            (8,124
            )
            
            
            224
            
            
            
            (7,900
            )
            
            (313
            )
            
            
            447
            
            
            
            134Net
      income attributable to International Coal Group, Inc.
            
            
            14,138
            
            
            
            (368
            )
            
            
            13,770
            
            
            2,592
            
            
            
            (735
            )
            
            
            1,857Earnings
      per share:Basic
            
            $
            0.09
            
            
            $
            —
            
            
            $
            0.09
            
            $
            0.02
            
            
            $
            (0.01
            )
            
            $
            0.01Diluted
            
            $
            0.08
            
            
            $
            —
            
            
            $
            0.08
            
            $
            0.02
            
            
            $
            (0.01
            )
            
            $
            0.01





Six
      months ended
              June
      30, 2008Consolidated
      Statement of Cash Flows
            
            As
      Previously
              Reported
            
            
            Adjustment
            
            
            As
              AdjustedNet
      loss
            
            $
            2,597
            (1)
            
            $
            (735
            )
            
            $
            1,862Amortization
      of deferred finance costs and debt discount
            
            
            1,414
            
            
            
            1,587
            
            
            
            3,001Deferred
      income taxes
            
            
            161
            
            
            
            (446
            )
            
            
            (285
            )Additions
      to property, plant, equipment and mine development
            
            
            (54,973
            )
            
            
            (406
            )
            
            
            (55,379
            )





(1)
            Amount
      reflects immaterial adjustment of $5 related to the Company’s
      retrospective adoption of SFAS No.
160.





7









INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 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) will impact 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. 160 impacted 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.





Share-Based Payments—In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities  (“FSP EITF 03-6-1”). FSP EITF 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. FSP EITF 03-6-1 is effective for fiscal years beginning after December
15, 2008. Adoption of FSP EITF 03-6-1 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)


June
30, 2009


(Dollars
in thousands, except per share amounts)





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. Adoption of FSP FAS No. 115-2 and FAS No. 124-2 did not 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. Adoption of FSP FAS No. 107-1 and APB 28-1 did not impact 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 consolidated financial statements. See Note
9.





Subsequent Events—In May 2009,
the FASB issued SFAS No. 165,Subsequent Events (“SFAS No. 165”). SFAS No. 165 establishes principles
and requirements for events that occur after the balance sheet date, but before
the issuance of the financial statements. SFAS No. 165 requires disclosure of
the date through which subsequent events have been evaluated and disclosure of
certain non-recognized subsequent events. SFAS No. 165 is effective for interim
and annual periods ending after June 15, 2009. Adoption of SFAS No. 165 did not
have a material impact on the Company’s financial position, results of
operations or cash flows.





Variable Interest Entities—In
June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation
No. 46(R) (“SFAS No. 167”). SFAS No. 167 amends certain requirements of
FASB Interpretation No. 46(R),Consolidation of Variable Interest Entities,  to improve
financial reporting by enterprises involved with variable interest entities and
to provide more relevant and reliable information to users of financial
statements. SFAS No. 167 is effective as of the first fiscal year beginning
after November 15, 2009. The Company does not believe that adoption of SFAS
No. 167 will materially impact its financial position, results of operations or
cash flows.





FASB Codification—In
June 2009, the FASB issued SFAS No. 168,The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles– a
replacement of FASB Statement No. 162  (“SFAS No. 168”). SFAS
No. 168 makes the FASB Accounting Standards Codification the single source of
authoritative U.S. accounting and reporting standards, but it does not change
U.S. generally accepted accounting principles. SFAS No. 168 is effective for
interim and annual periods ending after September 15, 2009. Adoption of
SFAS No. 168 will not impact the Company’s financial condition, results of
operations or cash flows.


FASB Interpretation No.
46(R)


9










INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





Corporate Vacation Policy—In
June 2009, the Company changed its policy related to when employees are credited
with vacation time. Under the original policy, employees earned their vacation
in the year prior to vesting, and were vested with 100% of their annual vacation
time on January 1st of
each year. Under the revised policy, employees are vested in their
vacation time ratably throughout the year as it is earned. If the Company
continued to account for vacation under the old policy, it would have recognized
additional cost of coal sales, cost of other revenues and selling, general and
administrative expenses of $1,626, $100 and $140, respectively, for the three
months ended June 30, 2009 and $3,548, $230 and $268, respectively, for the six
months ended June 30, 2009.


Aments
to


(3) Inventories





Inventories
consisted of the following:





June
      30,
              2009
            
            
            December 31,
              2008Coal
            
            $
            45,070
            
            
            $
            28,436Parts
      and supplies
            
            
            38,507
            
            
            
            32,159Reserve
      for obsolescence–parts and supplies
            
            
            (1,977
            )
            
            
            (1,807
            )Total
            
            $
            81,600
            
            
            $
            58,788





(4) Property,
Plant, Equipment and Mine Development





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





June
      30,
              2009
            
            
            December 31,
              2008Coal
      lands and mineral rights
            
            $
            588,098
            
            
            $
            586,512Plant
      and equipment
            
            
            587,416
            
            
            
            571,083Mine
      development
            
            
            188,103
            
            
            
            181,876Land
      and land improvements
            
            
            25,406
            
            
            
            24,119Coalbed
      methane well development costs
            
            
            14,888
            
            
            
            14,8891,403,911
            
            
            
            1,378,479Less
      accumulated depreciation, depletion and amortization
            
            
            (358,972
            )
            
            
            (309,182
            )Net
      property, plant, equipment and mine development
            
            $
            1,044,939
            
            
            $
            1,069,297





Depreciation,
depletion and amortization expense related to property, plant, equipment and
mine development for the three months ended June 30, 2009 and 2008 was
$28,422 and $25,629, respectively. Depreciation, depletion and amortization
expense related to property, plant, equipment and mine development for the six
months ended June 30, 2009 and 2008 was $57,433 and $52,107,
respectively.





On
June 23, 2008, the Company exchanged coal reserves with a third-party. In
addition to reserves, the Company received $3,000 in cash. As a result, the
Company recognized a pre-tax gain of $24,633 based upon the fair value of the
underlying assets received in the exchange, which is included in gain on sale of
assets in its statement of operations for the three and six months ended June
30, 2008.





10








INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





(5)
Debt





Long-Term
Debt and Capital Lease





Long-term
debt and capital lease consisted of the following:





June
      30,
              2009
            
            
            December 31,
              20089.00%
      Convertible Senior Notes, due 2012, net of debt discount of $15,347 and
      $17,369, respectively
            
            $
            209,653
            
            
            $
            207,63110.25%
      Senior Notes, due 2014
            
            
            175,000
            
            
            
            175,000Equipment
      notes
            
            
            52,473
            
            
            
            43,378Capital
      lease and other
            
            
            4,996
            
            
            
            6,861Total
            
            
            442,122
            
            
            
            432,870Less
      current portion
            
            
            (17,769
            )
            
            
            (15,319
            )Long-term
      debt and capital lease
            
            $
            424,353
            
            
            $
            417,551





Convertible senior notes—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 material current and
future 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 1st and
August 1st of
each year. The Company assesses the convertibility of the Convertible Notes on
an ongoing basis. The Convertible Notes were not convertible as of June 30,
2009.





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 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 the
Convertible Notes become convertible, 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 to WL Ross &
Co. LLC (“WLR”), its banking group and other potential lenders to obtain
short-term





11











INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





funding
until such time that it could





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 June 30, 2009 and December 31, 2008, the
equity component of the convertible debt was $13,517 and is included in
additional paid-in capital. Interest expense resulting from amortization of the
debt discount was $1,020 and $911 for the three months ended June 30, 2009 and
2008, respectively, and $2,022 and $1,804 for the six months ended June 30, 2009
and 2008, respectively. Interest expense on the principal amount of the
Convertible Notes was $5,063 for each of the three month periods ended June 30,
2009 and 2008 and $10,126 for each of the six month periods ended June 30, 2009
and 2008.





Credit facility—The Company
has a $100,000 revolving credit facility (the “Credit Facility”) which matures
on June 23, 2011. A maximum of $80,000 may be used for letters of credit.
In February 2009, the Company executed an amendment 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 June 30, 2009, the Company had no borrowings outstanding
and letters of credit totaling $73,551 outstanding, leaving $26,449 available
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 margin of 2.25% to 3.00% or LIBOR plus an applicable
margin of 3.25% to 4.00%, based on the Company’s leverage ratio as of June
30, 2009. As of June 30, 2009, the Company was in compliance with its financial
covenants under the Credit Facility. The Company believes, based on
currently available information, that it will be able to meet the financial
covenants in the 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, the
potential exists that the Company may not remain in compliance with certain
covenants in 2010. The Company will seek a waiver or amendment from its lenders
or pursue other alternatives for any period it believes it will not be in
compliance.





Equipment notes—The equipment
notes, having various maturity dates extending to February 2014, are
collateralized by mining equipment. As of June 30, 2009, the Company had amounts
outstanding with terms ranging from 36 to 60 months and a weighted-average
interest rate of 7.30%. At June 30, 2009, additional funds are available under
the Company’s revolving equipment credit facility for terms up to 60 months with
a current interest rate of 6.90%.





Capital lease and other—The
Company leases certain mining equipment under a capital lease. The Company
imputed interest on its capital lease using a rate of 10.44%. Additionally,
the Company has an insurance policy with a coverage period of 17 months that it
financed over 15 months at an interest rate of 5.42%.





Short-Term
Debt





The
Company finances the majority of its insurance premiums, a portion of which is
included in short-term debt. As of June 30, 2009, the weighted-average interest
rate applicable to the notes was 5.04%. As of June 30, 2009 and December 31,
2008, the Company had $1,163 and $4,741, respectively, outstanding related to
the financing of insurance premiums.





12







INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





(6) Income Taxes





The
effective income tax rates for the three and six months ended June 30, 2009
and 2008 were calculated using estimated annual effective rates based on
projected earnings for the respective years, exclusive of discrete items. The
effective income tax rate for the three months ended June 30, 2009
decreased to 18% from 36% for the three months ended June 30, 2008.
The decrease was primarily a result of the effect of income tax deductions for
depletion of mineral rights on reduced quarterly earnings. The effective income
tax rate for the six months ended June 30, 2009 increased to 20%
from an 8% tax benefit for the six months ended June 30, 2008.
The increase was primarily a result of the effect of income tax deductions for
depletion of mineral rights on increased projected earnings, combined with an
increase in other non-deductible expenses and miscellaneous
items.





(7)
Employee Benefits





Postretirement
Benefits





The
following table details the components of the net periodic benefit cost for
postretirement benefits other than pensions for the three and six months
ended June 30, 2009 and 2008.





Three months ended
              June 30,
            
            
            Six
      months ended
              June 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      periodic benefit cost:Service
      cost
            
            $
            834
            
            
            $
            652
            
            
            $
            1,668
            
            
            $
            1,304Interest
      cost
            
            
            438
            
            
            
            406
            
            
            
            874
            
            
            
            813Amortization
      of actuarial loss
            
            
            71
            
            
            
            108
            
            
            
            144
            
            
            
            215Benefit
      cost
            
            $
            1,343
            
            
            $
            1,166
            
            
            $
            2,686
            
            
            $
            2,332





The
plan is unfunded, therefore, no contributions were made by the Company for the
three and six months ended June 30, 2009 and 2008.





Black
Lung Benefits





The
following table details the components of the net periodic benefit cost for
black lung benefits for the three and six months ended June 30, 2009 and
2008.





Three months ended
              June 30,
            
            
            Six
      months ended
              June 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      periodic benefit cost:Service
      cost
            
            $
            693
            
            
            $
            512
            
            
            $
            1,386
            
            
            $
            1,023Interest
      cost
            
            
            395
            
            
            
            403
            
            
            
            789
            
            
            
            806Amortization
      of actuarial gain
            
            
            (98
            )
            
            
            (237
            )
            
            
            (196
            )
            
            
            (474
            )Benefit
      cost
            
            $
            990
            
            
            $
            678
            
            
            $
            1,979
            
            
            $
            1,355





The
plan is unfunded, therefore, no contributions were made by the Company for the
three and six months ended June 30, 2009 and 2008.





13







INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





(8)
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 units
and 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 and six months ended June 30, 2009 and
2008 are as follows:





Three months ended
              June 30,
            
            
            Six
      months ended
              June 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      income attributable to International Coal Group, Inc.
            
            $
            10,382
            
            
            $
            13,770
            
            
            $
            14,075
            
            
            $
            1,857Weighted-average
      common shares outstanding—basic
            
            
            152,832,797
            
            
            
            152,550,960
            
            
            
            152,803,420
            
            
            
            152,499,812Incremental
      shares arising from:Stock
      options
            
            
            253,801
            
            
            
            154,763
            
            
            
            268
            
            
            
            —Restricted
      shares
            
            
            1,392,231
            
            
            
            203,967
            
            
            
            1,122,381
            
            
            
            48,793Restricted
      stock units
            
            
            193,426
            
            
            
            —
            
            
            
            57,656
            
            
            
            —Convertible
      notes
            
            
            —
            
            
            
            15,003,219
            
            
            
            —
            
            
            
            15,003,219Weighted-average
      common shares outstanding—diluted
            
            
            154,672,255
            
            
            
            167,912,909
            
            
            
            153,983,725
            
            
            
            167,551,824Earnings
      Per Share:Basic
            
            $
            0.07
            
            
            $
            0.09
            
            
            $
            0.09
            
            
            $
            0.01Diluted
            
            $
            0.07
            
            
            $
            0.08
            
            
            $
            0.09
            
            
            $
            0.01





Options
to purchase 2,777,822 and 2,797,022 shares of common stock outstanding at
June 30, 2009 have been excluded from the computation of diluted net income
per share for the three and six months ended June 30, 2009 because their effect
would have been anti-dilutive. Options to purchase 1,069,292 and 1,096,292
shares of common stock outstanding at June 30, 2008 have been excluded from the
computation of diluted net income per share for the three and six months ended
June 30, 2008 because their effect would have been 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 common stock for the applicable cash settlement averaging
period was below $6.10 per share. Accordingly, there were no potentially
dilutive shares at June 30, 2009.





(9)
Fair Value of Financial Instruments





The
estimated fair values of the Company’s financial instruments are determined
based on relevant market information. These estimates involve uncertainty and
cannot be determined with precision. The following methods and assumptions were
used to estimate the fair value of each class of financial
instrument.





Cash and Cash
Equivalents, Accounts Receivable, Accounts Payable, Short-Term Debt and Other
Current Liabilities —The carrying amounts approximate the fair value due
to the short maturity of these instruments.





14








INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





Long-term
Debt—At June 30, 2009 and December 31, 2008, the Company had
$225,000 aggregate principal amount of 9.00% Convertible Notes outstanding. The
fair value of the Convertible Notes was approximately $185,423 and $114,683 as
of June 30, 2009 and December 31, 2008, respectively. At June 30, 2009 and
December 31, 2008, the Company had $175,000 aggregate principal amount of
10.25% Senior Notes outstanding. The fair value of the Senior Notes was
approximately $123,375 and $131,250 as of June 30, 2009 and December 31,
2008, respectively. The fair value of the Convertible Notes and Senior Notes
were based upon their respective values in active markets.





The
carrying value of the Company’s capital lease obligations and other debt
approximate fair value at June 30, 2009 and December 31, 2008.





(10)
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 $119,046 as of June 30, 2009 to secure reclamation and
other performance commitments. As of June 30, 2009, the Company has bank letters
of credit outstanding of $73,551 under its revolving credit
facility.





Coal Supply
Agreements—Purchase price allocated to the Company’s below-market coal
supply agreements (sales contracts) acquired in acquisitions accounted for as
business combinations were capitalized and are being amortized on the basis of
coal to be shipped over the term of the contracts. Purchase price allocated to
the Company’s above-market coal supply agreement was capitalized and is being
reduced as related cash payments are received. Value was allocated to coal
supply agreements based on discounted cash flows attributable to the difference
between the above- or below-market contract price and the prevailing market
price at the date of acquisition. The net book value of the Company’s
above-market coal supply agreement was $3,322 and $3,447 at June 30, 2009 and
December 31, 2008, respectively. This amount is recorded in other assets in the
Company’s consolidated balance sheets. The net book value of the below-market
coal supply agreements was $31,032 and $43,888 at June 30, 2009 and December 31,
2008, respectively. Amortization income on the below-market coal supply
agreements was $2,386 and $934 for the three months ended June 30, 2009 and
2008, respectively, and $5,135 and $5,455 for the six months ended June 30,
2009 and 2008, respectively. Amortization income is included in depreciation,
depletion and amortization expense. During the three months ended June 30, 2009,
the Company terminated a below-market coal supply agreement and realized a
$7,721 pre-tax non-cash gain. The gain is included in other revenues in the
Company’s statement of operations for the three and six months ended June 30,
2009. Based on expected shipments related to the remaining below-market
contracts, the Company expects to record annual amortization income on the
below-market coal supply agreements in each of the next five years as reflected
in the table below.




Below-market
              contracts2009
      (remainder of year)
            
            $
            1,5652010
            
            
            3,2322011
            
            
            3,2322012
            
            
            3,2322013
            
            
            3,232





15











INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





Legal
Matters—On August 23, 2006, a survivor of the Sago mine accident,
Randal McCloy, filed a complaint in the Kanawha Circuit Court in Kanawha County,
West Virginia. The claims brought by Randal McCloy and his family against the
Company and certain of its 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 the Company and its
subsidiary, Wolf Run Mining Company, one of its 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 the Company’s subsidiaries to the cases, including ICG,
Inc., ICG, LLC and Hunter Ridge Coal Company, unnamed parent, subsidiary and
affiliate companies of the 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 Company believes that it is
appropriately insured for these and other potential claims, and has fully paid
its deductible applicable to its insurance policies. In addition to the
dismissal of the McCloy claim, the Company has settled and dismissed five other
actions. These settlements required the release of the Company, its
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 of West Virginia to 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 deferred its decision as to whether it will
hear the appeal, pending its ruling on an unrelated case that shares similar
issues. That case was decided on June 23, 2009, but the court has taken no
further action on the plaintiffs' appeal in this case. The Company will
vigorously defend itself against the remaining complaints and any appeal of any
prior settlements.





Allegheny
Energy Supply (“Allegheny”), the sole customer of coal produced at the Company’s
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 the Company in state court in Allegheny County,
Pennsylvania on December 28, 2006, and amended its complaint on
April 23, 2007. Allegheny claims that the Company breached a coal supply
contract when it 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
$100,000 to purchase replacement coal over the life of the contract. The
Company, Wolf Run and Hunter Ridge answered the amended complaint on August
13, 2007, disputing all of the remaining claims. On November 3, 2008, the
Company, Wolf Run and Hunter Ridge filed 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 with
Hunter Ridge, which prohibited the solicitation of its employees. After the
coal supply agreement was executed, Allegheny hired the then-president of Anker
Coal Group, Inc. (now Hunter Ridge) who engaged in negotiations on behalf
of Wolf Run and Hunter Ridge. 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.





16











INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





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
the Company’s 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 the Company’s 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, and on March 27, 2009, reinstated Hazard’s permit. Pursuant
to earlier agreements with the plaintiffs in the litigation, the Company
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 agreed to amend the earlier agreement to allow Hazard partial use of
the reinstated permit, including construction of an additional valley fill.
Subsequently, the parties agreed to pursue resolution of the case in accordance
with a scheduling order entered by the court. Pursuant to that order, the
plaintiffs filed an amended complaint on July 10, 2009. The amended complaint
modifies the plaintiffs’ allegations to apply to the reissued permit, rather
than the original permit. The action will proceed in accordance with the
scheduling order through November 2009, after which the court is expected to
render a decision. If the court ultimately finds that the permit is unlawful,
production could be materially affected at the Thunder Ridge Surface mine. The
EPA’s heightened scrutiny will likely render the process of obtaining ACOE
permits for coal mining activities in Appalachia more difficult.





On
January 7, 2008, Saratoga Advantage Trust (“Saratoga”) filed a class action
lawsuit in the U.S. District Court for the Southern District of West Virginia
against the Company and certain of its 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
the Company’s November 2005 reorganization and December 2005 public offering of
common stock. In addition, the complaint challenges other of the Company’s
public statements regarding its operating condition and safety record. On July
6, 2009, Saratoga filed an amended complaint asserting essentially the same
claims but seeking to add an individual co-plaintiff. The Company intends 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 of ICG Tygart Valley, LLC’s
(“Tygart Valley”) 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
requiring Tygart Valley to address a technical issue related to projected
post-mining water quality. Tygart Valley prepared and submitted a permit
modification to alleviate the Board’s concerns. The revision was approved by the
WVDEP on May 27, 2009, reinstating the Tygart permit. As expected, T.E.A.M.
appealed the reinstatement. No hearing date has been set.





In
addition, from time to time, the Company is 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 the Company. In the
opinion of management, the Company has 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 the Company’s financial condition, results of
operations or cash flows.





17







INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





(11)
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.





(12)
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 eastern United States. The Company operates only in the United
States with mines in the Central Appalachian, Northern Appalachian and
Illinois Basin regions. The Company has three reportable business segments:
Central Appalachian, Northern Appalachian and Illinois Basin. The Company’s
Central Appalachian operations are located in southern West Virginia, eastern
Kentucky and western Virginia and include eight mining complexes. The Company’s
Northern Appalachian operations are located in northern West Virginia and
Maryland and include four mining complexes. The Company’s Illinois Basin
operations 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.





Reportable
segment results from continuing operations for the three and six months
ended June 30, 2009 and 2008 and segment assets as of June 30, 2009 and
2008 were as follows:





Three
months ended June 30, 2009:





Central
              Appalachian
            
            
            Northern
              Appalachian
            
            
            Illinois
              Basin
            
            
            Ancillary
            
            
            ConsolidatedRevenue
            
            $
            187,589
            
            
            $
            52,279
            
            
            $
            19,465
            
            
            $
            18,464
            
            
            $
            277,797Adjusted
      EBITDA
            
            
            47,166
            
            
            
            5,301
            
            
            
            3,762
            
            
            
            (3,989
            )
            
            
            52,240Depreciation,
      depletion and amortization
            
            
            17,250
            
            
            
            5,246
            
            
            
            1,953
            
            
            
            1,586
            
            
            
            26,035Capital
      expenditures
            
            
            4,724
            
            
            
            5,991
            
            
            
            4,032
            
            
            
            1,138
            
            
            
            15,885Total
      assets
            
            
            743,917
            
            
            
            180,111
            
            
            
            46,838
            
            
            
            373,397
            
            
            
            1,344,263





Three
months ended June 30, 2008:





Central
              Appalachian
            
            
            Northern
              Appalachian
            
            
            Illinois
              Basin
            
            
            Ancillary
            
            
            ConsolidatedRevenue
            
            $
            174,434
            
            
            $
            64,645
            
            
            $
            18,645
            
            
            $
            20,161
            
            
            $
            277,885Adjusted
      EBITDA
            
            
            46,567
            
            
            
            9,730
            
            
            
            3,895
            
            
            
            (5,037
            )
            
            
            55,155Depreciation,
      depletion and amortization
            
            
            15,719
            
            
            
            5,434
            
            
            
            1,949
            
            
            
            1,592
            
            
            
            24,694Capital
      expenditures
            
            
            23,193
            
            
            
            9,389
            
            
            
            171
            
            
            
            2,298
            
            
            
            35,051Total
      assets
            
            
            722,007
            
            
            
            180,646
            
            
            
            36,890
            
            
            
            408,288
            
            
            
            1,347,831Goodwill
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            30,237
            
            
            
            30,237





18











INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





Revenue
in the Ancillary category consists primarily of $12,720 and $10,393 relating to
the Company’s brokered coal sales and $4,018 and $5,717 relating to contract
highwall mining activities for the three months ended June 30, 2009 and
2008, respectively. Capital expenditures include non-cash amounts of
$10,693 and $12,964 for the three months ended June 30, 2009 and 2008,
respectively. Capital expenditures do not include $11,744 paid during the three
months ended June 30, 2009 related to capital expenditures accrued in prior
periods.





Six
months ended June 30, 2009:





Central
              Appalachian
            
            
            Northern
              Appalachian
            
            
            Illinois
              Basin
            
            
            Ancillary
            
            
            ConsolidatedRevenue
            
            $
            377,151
            
            
            $
            118,446
            
            
            $
            40,471
            
            
            $
            46,695
            
            
            $
            582,763Adjusted
      EBITDA
            
            
            76,599
            
            
            
            15,453
            
            
            
            6,633
            
            
            
            (1,947
            )
            
            
            96,738Depreciation,
      depletion and amortization
            
            
            34,840
            
            
            
            10,821
            
            
            
            3,663
            
            
            
            2,974
            
            
            
            52,298Capital
      expenditures
            
            
            13,924
            
            
            
            11,182
            
            
            
            5,288
            
            
            
            3,108
            
            
            
            33,502Total
      assets
            
            
            743,917
            
            
            
            180,111
            
            
            
            46,838
            
            
            
            373,397
            
            
            
            1,344,263





Six
months ended June 30, 2008:





Central
              Appalachian
            
            
            Northern
              Appalachian
            
            
            Illinois
              Basin
            
            
            Ancillary
            
            
            ConsolidatedRevenue
            
            $
            329,504
            
            
            $
            115,334
            
            
            $
            39,285
            
            
            $
            45,687
            
            
            $
            529,810Adjusted
      EBITDA
            
            
            62,145
            
            
            
            11,525
            
            
            
            6,243
            
            
            
            (10,170
            )
            
            
            69,743Depreciation,
      depletion and amortization
            
            
            31,565
            
            
            
            7,561
            
            
            
            3,762
            
            
            
            3,763
            
            
            
            46,651Capital
      expenditures
            
            
            38,769
            
            
            
            21,708
            
            
            
            576
            
            
            
            3,542
            
            
            
            64,595Total
      assets
            
            
            722,007
            
            
            
            180,646
            
            
            
            36,890
            
            
            
            408,288
            
            
            
            1,347,831Goodwill
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            30,237
            
            
            
            30,237





Revenue
in the Ancillary category consists primarily of $23,440 and $27,090 relating to
the Company’s brokered coal sales and $10,858 and $9,778 relating to contract
highwall mining activities for the six months ended June 30, 2009 and 2008,
respectively. Capital expenditures include non-cash amounts of $10,693 and
$8,223 for the six months ended June 30, 2009 and 2008, respectively.
Capital expenditures do not include $12,942 paid during the six months
ended June 30, 2009 related to capital expenditures accrued in prior
periods.





19











INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





Adjusted
EBITDA represents earnings before deducting interest, income taxes,
depreciation, depletion, amortization and noncontrolling interest. 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 attributable to International Coal Group, Inc. to Adjusted EBITDA
for the three and six months ended June 30, 2009 and 2008 is
as follows:





Three months ended
              June 30,
            
            
            Six
      months ended
              June 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Net
      income attributable to International Coal Group, Inc.
            
            $
            10,382
            
            
            $
            13,770
            
            
            $
            14,075
            
            
            $
            1,857Depreciation,
      depletion and amortization
            
            
            26,035
            
            
            
            24,694
            
            
            
            52,298
            
            
            
            46,651Interest
      expense, net
            
            
            13,214
            
            
            
            8,793
            
            
            
            26,232
            
            
            
            21,364Income
      tax expense (benefit)
            
            
            2,613
            
            
            
            7,900
            
            
            
            4,108
            
            
            
            (134
            )Noncontrolling
      interest
            
            
            (4
            )
            
            
            (2
            )
            
            
            25
            
            
            
            5Adjusted
      EBITDA
            
            $
            52,240
            
            
            $
            55,155
            
            
            $
            96,738
            
            
            $
            69,743





(13)
Supplementary Guarantor Information





International
Coal Group, Inc. (the “Parent Company”) issued $175,000 of Senior Notes (the
“Notes”) due 2014 in June 2006 and $225,000 of Convertible Senior Notes (the
“Convertible Notes”) due 2012 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.





20










INTERNATIONAL
COAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


June
30, 2009


(Dollars
in thousands, except per share amounts)





(14)
Subsequent Event





On
July 14, 2009, one of the Company’s customers elected to exercise contractual
options that provided for early termination of two coal supply agreements in
exchange for a payment of $18,000. Furthermore, the Company received an
additional $9,000 that represents the lost margin on pre-termination shipments
that the customer was unable to accept. The Company received the $27,000 payment
on July 30, 2009.





The
Company has evaluated events and transactions occurring subsequent to the
balance sheet date for items that should potentially be recognized or disclosed
in its financial statements. The evaluation was conducted through August 6,
2009, the date of the original filing of the Quarterly Report on Form
10-Q.





(15)
Restatement of Previously Issued Financial Statements





Subsequent to the issuance of its consolidated financial statements for the
period ended June 30, 2009, the Company identified an error in the application
of SFAS No. 158 on its employee benefits liability. The Company had not
previously recorded the unfunded status of its black lung obligation as a
liability in its statement of financial position or recognized changes in the
funded status of the obligation in the year in which the changes occurred
through comprehensive income. This error resulted in an overstatement of the
employee benefits liability and accumulated other comprehensive loss and an
understatement of the deferred tax liability as of June 30, 2009. The Company
does not believe these errors are material to the consolidated financial
statements.





Consolidated
      Balance Sheet
            
            As
      Originally Filed
            
            
            Correction
      for Application of SFAS No. 158
            
            
            As
              RestatedJune
      30, 2009Employee
      benefits
            
            $
            66,781
            
            
            $
            (4,435
            )
            
            $
            62,346Deferred
      income taxes
            
            
            53,110
            
            
            
            1,677
            
            
            
            54,787Total
      liabilities
            
            
            821,661
            
            
            
            (2,758
            )
            
            
            818,903Accumulated
      other comprehensive loss
            
            
            (5,071
            )
            
            
            2,758
            
            
            
            (2,313
            )Total
      International Coal Group, Inc. stockholders’ equity
            
            
            522,582
            
            
            
            2,758
            
            
            
            525,340Total
      stockholders’ equity
            
            
            522,602
            
            
            
            2,758
            
            
            
            525,360








Consolidated
      Statement of Cash Flows
            
            As
      Originally Filed
            
            
            Correction
      for Application of SFAS No. 158
            
            
            As
              RestatedSix
      months ended June 30, 2009Amortization
      of accumulated postretirement benefit obligation
            
            $
            144
            
            
            $
            (196
            )
            
            $
            (52
            )Other
      liabilities
            
            
            (1,634
            )
            
            
            196
            
            
            
            (1,438
            )Six
      months ended June 30, 2008Amortization
      of accumulated postretirement benefit obligation
            
            $
            215
            
            
            $
            (474
            )
            
            $
            (259
            )Other
      liabilities
            
            
            1,990
            
            
            
            474
            
            
            
            2,464








21











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





Cautionary
Note Regarding Forward-Looking Statements





Statements
in this Quarterly Report on Form 10-Q/A that are not historical facts are
forward-looking statements within the “safe harbor” provision of the Private
Securities Litigation Reform Act of 1995 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 various risks, 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;•
            reductions
      and/or deferrals of purchases by major customers;•
            risks
      in or related to coal mining operations, including risks related 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 the United States and
      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 statements made by us in this
Quarterly Report on Form 10-Q/A or elsewhere speaks only as of the date on which
the statements were made. New risks and uncertainties arise from
time to time, and it is impossible for us to predict these events or
how they may affect us or anticipated results. 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/A.





23











RESULTS
OF CONTINUING OPERATIONS





Three
months ended June 30, 2009 compared to the three months ended June 30,
2008





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





The
following table depicts revenues for the three months ended June 30, 2009
and 2008 for the indicated categories:





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
      or Tons
            
            %(in thousands, except percentages
      and per ton data)Coal
      sales revenues
            
            $
            254,677
            
            
            $
            253,109
            
            $
            1,568
            
            1
            %Freight
      and handling revenues
            
            
            6,041
            
            
            
            11,870
            
            
            (5,829
            )
            (49
            )%Other
      revenues
            
            
            17,079
            
            
            
            12,906
            
            
            4,173
            
            32
            %Total
      revenues
            
            $
            277,797
            
            
            $
            277,885
            
            $
            (88
            )
            *
            %Tons
      sold
            
            
            4,180
            
            
            
            4,858
            
            
            (678
            )
            (14
            )%Coal
      sales revenue per ton
            
            $
            60.92
            
            
            $
            52.10
            
            $
            8.82
            
            17
            %





The
following table depicts coal sales revenues by reportable segment for the three
months ended June 30, 2009 and 2008:





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      Appalachian
            
            $
            175,571
            
            
            $
            166,933
            
            $
            8,638
            
            5
            %Northern
      Appalachian
            
            
            48,685
            
            
            
            59,776
            
            
            (11,091
            )
            (19
            )%Illinois Basin
            
            
            17,701
            
            
            
            16,195
            
            
            1,506
            
            9
            %Ancillary
            
            
            12,720
            
            
            
            10,205
            
            
            2,515
            
            25
            %Total
      coal sales revenues
            
            $
            254,677
            
            
            $
            253,109
            
            $
            1,568
            
            1
            %





The
following table depicts tons sold by reportable segment for the three months
ended June 30, 2009 and 2008:





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            Tons
            
            %(in thousands, except percentages)Central
      Appalachian
            
            
            2,480
            
            
            
            3,004
            
            (524
            )
            (17
            )%Northern
      Appalachian
            
            
            947
            
            
            
            1,075
            
            (128
            )
            (12
            )%Illinois Basin
            
            
            546
            
            
            
            543
            
            3
            
            1
            %Ancillary
            
            
            207
            
            
            
            236
            
            (29
            )
            (12
            )%Total
      tons sold
            
            
            4,180
            
            
            
            4,858
            
            (678
            )
            (14
            )%





*
not meaningful





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
ended June 30, 2009 compared to the three months ended June 30, 2008 due to
a 17% increase in sales realization per ton resulting from favorable pricing on
contracts entered into throughout 2008. Offsetting the impact of improved
realization per ton was a 14% decrease in tons sold, primarily as a result of
decreased participation in the spot market.





24











Central Appalachian. Coal
sales revenues from our Central Appalachian segment for the three months
ended June 30, 2009 increased over the same period in 2008 primarily due to
an increase in sales realization of $15.24 per ton, which was driven by higher
average contract prices of our coal. Partially offsetting the increase in
realization was a 17% decrease in tons sold, largely driven by decreased spot
market sales.





Northern Appalachian. For the
three months ended June 30, 2009, our Northern Appalachian coal sales
revenues decreased due to a 12% decrease in tons sold, primarily related to
reduced spot market sales. Coal sales revenue also decreased due to a decrease
in sales realization of $4.24 per ton, principally resulting from a decrease in
sales of high-priced metallurgical-quality coal.





Illinois Basin. The
increase in coal sales revenues from our Illinois Basin segment for the
three months ended June 30, 2009 was due to an increase in sales realization of
$2.58 per ton and a 1% increase 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 June 30, 2009, our Ancillary coal sales
revenues increased 25% primarily due to an increase in sales realization of
$18.31 per ton. The increase in average prices was partially offset by a 12%
decrease in tons sold related to the expiration of certain coal supply
agreements, as well as to decreased shipments on various remaining
contracts.





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 costs decreased for the three months ended June 30, 2009 compared to
the comparable period of 2008 primarily due to decreased sales volumes.
Additionally, transportation rates and fuel surcharges have decreased as a
result of decreased fuel prices subsequent to the second quarter of
2008.





Other
revenues—The increase in other revenues for the three months
ended June 30, 2009 compared to the three months ended June 30,
2008 was due to a $7.7 million gain on the termination of a below-market
contract and incentive payments received related to rail transportation.
Partially offsetting these increases were decreased revenues from coalbed
methane wells and decreased contract mining revenues from our ADDCAR
subsidiary.





Costs
and expenses





The
following table depicts cost of operations for the three months ended June
30, 2009 and 2008 for the indicated categories:





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages
      and per ton data)Cost
      of coal sales
            
            $
            207,324
            
            
            $
            217,590
            
            $
            (10,266
            )
            (5
            )%Freight
      and handling costs
            
            
            6,041
            
            
            
            11,870
            
            
            (5,829
            )
            (49
            )%Cost
      of other revenues
            
            
            6,630
            
            
            
            9,222
            
            
            (2,592
            )
            (28
            )%Depreciation,
      depletion and amortization
            
            
            26,035
            
            
            
            24,694
            
            
            1,341
            
            5
            %Selling,
      general and administrative expenses
            
            
            8,670
            
            
            
            10,129
            
            
            (1,459
            )
            (14
            )%Gain
      on sale of assets
            
            
            (3,108
            )
            
            
            (26,081
            )
            
            22,973
            
            (88
            )%Total
      costs and expenses
            
            $
            251,592
            
            
            $
            247,424
            
            $
            4,168
            
            2
            %Cost
      of coal sales per ton
            
            $
            49.60
            
            
            $
            44.79
            
            $
            4.81
            
            11
            %





25











The
following table depicts cost of coal sales by reportable segment for the three
months ended June 30, 2009 and 2008:





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      Appalachian
            
            $
            140,142
            
            
            $
            146,079
            
            $
            (5,937
            )
            (4
            )%Northern
      Appalachian
            
            
            44,745
            
            
            
            51,834
            
            
            (7,089
            )
            (14
            )%Illinois Basin
            
            
            14,274
            
            
            
            12,675
            
            
            1,599
            
            13
            %Ancillary
            
            
            8,163
            
            
            
            7,002
            
            
            1,161
            
            17
            %Cost
      of coal sales
            
            $
            207,324
            
            
            $
            217,590
            
            $
            (10,266
            )
            (5
            )%





Cost of coal
sales—For the three months ended June 30, 2009, our cost of coal sales
decreased compared to the three months ended June 30, 2008 primarily as a result
of a 14% decrease in tons sold. Partially offsetting the decrease in tons sold
was an 11% increase in cost per ton.





Central Appalachian. Cost of
coal sales from our Central Appalachian segment decreased due to a 17% decrease
in tons sold. Offsetting the decrease in tons sold was an increase in cost of
coal sales from $48.63 per ton for the three months ended June 30, 2008 to
$56.52 per ton for the three months ended June 30, 2009. This increase in cost
per ton was primarily a result of increased labor and benefits, royalty expense
and repairs and maintenance. Labor and benefit costs increased on a per ton
basis as a result of lower production volumes associated with idled and start-up
operations over the three months ended June 30, 2008. Royalties increased for
the three months ended June 30, 2009 due to an increase in sales realization on
tons sold, as well as increased mining of leased reserves. Repairs and
maintenance costs increased as a result of several major repairs. Further
impacting the increase in cost of coal sales per ton were increases in diesel
fuel, tire expense, severance taxes and miscellaneous operating
supplies.





Northern Appalachian. Our
Northern Appalachian segment cost of coal sales decreased due to a 12% decrease
in tons sold coupled with a decrease in cost of coal sales per ton from $48.22
per ton for the three months ended June 30, 2008 to $47.21 per ton for the three
months ended June 30, 2009. The decrease in cost per ton was primarily due to
decreased transportation costs, offset by increases in labor and benefits and
contract labor costs.





Illinois Basin. For the
three months ended June 30, 2009 cost of coal sales increased by $2.79 per ton,
while tons sold remained relatively consistent with the three months ended June
30, 2008. The increase in cost per ton was primarily due to increased labor and
benefits and repairs and maintenance costs. Labor and benefits increased in the
second quarter of 2009 as a result of an increase in average employee headcount
over the three months ended June 30, 2008. Additionally, repairs and maintenance
costs were higher due to increased utilization of underground mining equipment.
Partially offsetting the increases was a decrease in the cost of roof control
supplies as a result of reductions in steel prices.





Ancillary. Cost of coal sales
from our Ancillary segment increased for the three months ended June 30, 2009
primarily due to a $9.83 increase in cost per ton, partially offset by a 12%
decrease in tons sold.





Cost of other
revenues—For the three months ended June 30, 2009, cost of other revenues
decreased primarily due to decreases in gathering fees related to coalbed
methane wells, trucking costs and repairs and maintenance. Partially
offsetting the decrease was an increase in labor and benefit costs at our ADDCAR
subsidiary.





26








Depreciation,
depletion and amortization—Depreciation, depletion and amortization
expense increased for the three months ended June 30, 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 on a
below-market contract subsequent to the second quarter of 2008. These increases
were partially offset by a decrease in amortization of coalbed methane well
development costs.





Selling, general
and administrative expenses—Selling, general and administrative expenses
for the three months ended June 30, 2009 decreased primarily due to
decreases in labor and benefits and bad debt expense.





Gain on sale of
assets—Gain on sale of assets decreased $23.0 million for the three
months ended June 30, 2009 due to a $24.6 million pre-tax gain on exchange of
coal reserves with a third-party in the comparable period in 2008.





Adjusted
EBITDA by reportable segment





Adjusted
EBITDA represents earnings before deducting interest, income taxes,
depreciation, depletion, amortization and noncontrolling interest. 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 for noncontrolling interest. 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 page 29 of this Quarterly Report on Form 10-Q/A and in Note 12 to our
condensed consolidated financial statements for the three months ended June
30, 2009.





The
following table depicts Adjusted EBITDA by reportable segment for the three
months ended June 30, 2009 and 2008:





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      Appalachian
            
            $
            47,166
            
            
            $
            46,567
            
            $
            599
            
            1
            %Northern
      Appalachian
            
            
            5,301
            
            
            
            9,730
            
            
            (4,429
            )
            (46
            )%Illinois Basin
            
            
            3,762
            
            
            
            3,895
            
            
            (133
            )
            (3
            )%Ancillary
            
            
            (3,989
            )
            
            
            (5,037
            )
            
            1,048
            
            21
            %Total
      Adjusted EBITDA
            
            $
            52,240
            
            
            $
            55,155
            
            $
            (2,915
            )
            (5
            )%





Central Appalachian. Adjusted
EBITDA for the three months ended June 30, 2009 increased compared to the three
months ended June 30, 2008 primarily due to a $15.24 per ton increase in sales
realization coupled with a $7.89 increase in cost per ton, resulting in $7.35
per ton increase in profit margins. Partially offsetting the increase in profit
margins was a decrease of approximately 524,000 tons sold.





Northern Appalachian. The
decrease in Adjusted EBITDA was due to a combination of a decrease in sales
realization of $4.24 per ton, and a decrease of $1.01 in cost per ton, resulting
in decreased profit margins of $3.23 per ton, as well as a decrease of
approximately 128,000 tons sold.





Illinois Basin. Adjusted
EBITDA decreased during the three months ended June 30, 2009 related to a
decrease in profit margins of $0.21 per ton as a result of increased sales
realization and increased cost per ton of $2.58 and $2.79,
respectively.





27







Ancillary. The increase in
Adjusted EBITDA was primarily due to an increase in sales realization of $18.31
per ton offset by a $9.83 increase in cost per ton, resulting in an increase in
profit margins of $8.48 per ton. Partially offsetting this increase were
decreased revenue from coalbed methane wells and a decrease of approximately
29,000 tons sold related to the expiration of brokered coal contracts throughout
2008, as well as to decreased shipments on various remaining
contracts.





Reconciliation
of adjusted EBITDA to net income (loss) by reportable segment





The
following tables reconcile Adjusted EBITDA to net income (loss) by reportable
segment for the three months ended June 30, 2009 and 2008:





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      AppalachianNet
      income attributable to International Coal Group, Inc.
            
            $
            23,257
            
            
            $
            30,400
            
            $
            (7,143
            )
            (23
            )%Depreciation,
      depletion and amortization
            
            
            17,250
            
            
            
            15,719
            
            
            1,531
            
            10
            %Interest
      expense, net
            
            
            1,189
            
            
            
            448
            
            
            741
            
            165
            %Income
      tax expense
            
            
            5,470
            
            
            
            —
            
            
            5,470
            
            100
            %Adjusted
      EBITDA
            
            $
            47,166
            
            
            $
            46,567
            
            $
            599
            
            1
            %





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Northern
      AppalachianNet
      income attributable to International Coal Group, Inc.
            
            $
            106
            
            
            $
            4,152
            
            $
            (4,046
            )
            (97
            )%Depreciation,
      depletion and amortization
            
            
            5,246
            
            
            
            5,434
            
            
            (188
            )
            (3
            )%Interest
      expense, net
            
            
            9
            
            
            
            146
            
            
            (137
            )
            (94
            )%Income
      tax benefit
            
            
            (56
            )
            
            
            —
            
            
            (56
            )
            100
            %Noncontrolling
      interest
            
            
            (4
            )
            
            
            (2
            )
            
            (2
            )
            (100
            )%Adjusted
      EBITDA
            
            $
            5,301
            
            
            $
            9,730
            
            $
            (4,429
            )
            (46
            )%





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Illinois BasinNet
      income attributable to International Coal Group, Inc.
            
            $
            1,422
            
            
            $
            1,887
            
            $
            (465
            )
            (25
            )%Depreciation,
      depletion and amortization
            
            
            1,953
            
            
            
            1,949
            
            
            4
            
            *
            %Interest
      expense, net
            
            
            75
            
            
            
            59
            
            
            16
            
            27
            %Income
      tax expense
            
            
            312
            
            
            
            —
            
            
            312
            
            100
            %Adjusted
      EBITDA
            
            $
            3,762
            
            
            $
            3,895
            
            $
            (133
            )
            (3
            )%





28











Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)AncillaryNet
      loss attributable to International Coal Group, Inc.
            
            $
            (14,403
            )
            
            $
            (22,669
            )
            $
            8,266
            
            36
            %Depreciation,
      depletion and amortization
            
            
            1,586
            
            
            
            1,592
            
            
            (6
            )
            *
            %Interest
      expense, net
            
            
            11,941
            
            
            
            8,140
            
            
            3,801
            
            47
            %Income
      tax expense (benefit)
            
            
            (3,113
            )
            
            
            7,900
            
            
            (11,013
            )
            *
            %Adjusted
      EBITDA
            
            $
            (3,989
            )
            
            $
            (5,037
            )
            $
            1,048
            
            (21
            )%





Three
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)ConsolidatedNet
      income attributable to International Coal Group, Inc.
            
            $
            10,382
            
            
            $
            13,770
            
            $
            (3,388
            )
            (25
            )%Depreciation,
      depletion and amortization
            
            
            26,035
            
            
            
            24,694
            
            
            1,341
            
            5
            %Interest
      expense, net
            
            
            13,214
            
            
            
            8,793
            
            
            4,421
            
            50
            %Income
      tax expense
            
            
            2,613
            
            
            
            7,900
            
            
            (5,287
            )
            (67
            )%Noncontrolling
      interest
            
            
            (4
            )
            
            
            (2
            )
            
            (2
            )
            100
            %Adjusted
      EBITDA
            
            $
            52,240
            
            
            $
            55,155
            
            $
            (2,915
            )
            (5
            )%





*
not meaningful





RESULTS
OF CONTINUING OPERATIONS





Six
months ended June 30, 2009 compared to the six months ended June 30,
2008





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





The
following table depicts revenues for the six months ended June 30, 2009 and
2008 for the indicated categories:





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
      or Tons
            
            %(in thousands, except percentages
      and per ton data)Coal
      sales revenues
            
            $
            528,493
            
            
            $
            479,713
            
            $
            48,780
            
            10
            %Freight
      and handling revenues
            
            
            14,675
            
            
            
            23,153
            
            
            (8,478
            )
            (37
            )%Other
      revenues
            
            
            39,595
            
            
            
            26,944
            
            
            12,651
            
            47
            %Total
      revenues
            
            $
            582,763
            
            
            $
            529,810
            
            $
            52,953
            
            10
            %Tons
      sold
            
            
            8,860
            
            
            
            9,708
            
            
            (848
            )
            (9
            )%Coal
      sales revenue per ton
            
            $
            59.65
            
            
            $
            49.41
            
            $
            10.24
            
            21
            %





29











The
following table depicts coal sales revenues by reportable segment for the six
months ended June 30, 2009 and 2008:





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      Appalachian
            
            $
            359,693
            
            
            $
            313,725
            
            $
            45,968
            
            15
            %Northern
      Appalachian
            
            
            108,936
            
            
            
            104,997
            
            
            3,939
            
            4
            %Illinois Basin
            
            
            36,424
            
            
            
            34,089
            
            
            2,335
            
            7
            %Ancillary
            
            
            23,440
            
            
            
            26,902
            
            
            (3,462
            )
            (13
            )%Total
      coal sales revenues
            
            $
            528,493
            
            
            $
            479,713
            
            $
            48,780
            
            10
            %





The
following table depicts tons sold by reportable segment for the six months
ended June 30, 2009 and 2008:





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            Tons
            
            %(in thousands, except percentages)Central
      Appalachian
            
            
            5,249
            
            
            
            5,886
            
            (637
            )
            (11
            )%Northern
      Appalachian
            
            
            2,055
            
            
            
            2,051
            
            4
            
            *
            %Illinois Basin
            
            
            1,136
            
            
            
            1,143
            
            (7
            )
            (1
            )%Ancillary
            
            
            420
            
            
            
            628
            
            (208
            )
            (33
            )%Total
      tons sold
            
            
            8,860
            
            
            
            9,708
            
            (848
            )
            (9
            )%





*
not meaningful





Coal sales
revenues—Coal sales revenues are derived from sales of produced coal and
brokered coal contracts. Coal sales revenues increased for the six months
ended June 30, 2009 compared to the six months ended June 30,
2008 primarily due to a 21% increase in sales realization per ton resulting
from favorable pricing on contracts entered into throughout 2008. Partially
offsetting the impact of improved realization per ton was a 9% decrease in tons
sold, primarily as a result of decreased participation in the spot
market.





Central Appalachian. Coal
sales revenues from our Central Appalachian segment for the six months
ended June 30, 2009 increased over the same period in 2008 primarily due to
an increase in sales realization of $15.23 per ton, which was driven by higher
average contract prices of our coal. Partially offsetting the increase in
realization was an 11% decrease in tons sold, largely driven by decreased spot
market sales.





Northern Appalachian. For the
six months ended June 30, 2009, our Northern Appalachian coal sales
revenues increased due to an increase in sales realization of $1.82 per ton
resulting from higher average prices of coal sold under our coal supply
contracts.





Illinois Basin. The
increase in coal sales revenues from our Illinois Basin segment for the six
months ended June 30, 2009 was due to an increase in sales realization of $2.24
per ton, partially offset by a 1% decrease in tons sold.





Ancillary. Our Ancillary
segment’s coal sales revenues are comprised of coal sold under brokered coal
contracts. For the six months ended June 30, 2009, our Ancillary coal sales
revenues decreased due to a 33% decrease in tons sold related to the expiration
of certain coal supply agreements, as well as to decreased shipments on various
remaining contracts. This decrease in tons sold was partially offset by an
increase in sales realization of $12.97 per ton sold.





30











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 costs decreased for the six months ended June 30, 2009 compared to the
comparable period of 2008 primarily due to decreased sales volumes.
Additionally, transportation rates and fuel surcharges have decreased as a
result of decreased fuel prices subsequent to the second quarter of
2008.





Other
revenues—The increase in other revenues for the six months
ended June 30, 2009 compared to the six months ended June 30, 2008 was
due to $7.9 million received in settlement of contract terminations, a $7.7
million gain on the termination of a below-market contract, increased contract
mining revenue and incentive payments received related to rail transportation.
Partially offsetting these increases were decreases in revenue from coalbed
methane wells and sales of scrap materials.





Costs
and expenses





The
following table depicts cost of operations for the six months ended June
30, 2009 and 2008 for the indicated categories:





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages
      and per ton data)Cost
      of coal sales
            
            $
            439,289
            
            
            $
            426,394
            
            $
            12,895
            
            3
            %Freight
      and handling costs
            
            
            14,675
            
            
            
            23,153
            
            
            (8,478
            )
            (37
            )%Cost
      of other revenues
            
            
            15,966
            
            
            
            18,157
            
            
            (2,191
            )
            (12
            )%Depreciation,
      depletion and amortization
            
            
            52,298
            
            
            
            46,651
            
            
            5,647
            
            12
            %Selling,
      general and administrative expenses
            
            
            19,281
            
            
            
            18,655
            
            
            626
            
            3
            %Gain
      on sale of assets
            
            
            (3,186
            )
            
            
            (26,292
            )
            
            23,106
            
            88
            %Total
      costs and expenses
            
            $
            538,323
            
            
            $
            506,718
            
            $
            31,605
            
            6
            %Cost
      of coal sales per ton
            
            $
            49.58
            
            
            $
            43.92
            
            $
            5.66
            
            13
            %





The
following table depicts cost of coal sales by reportable segment for the six
months ended June 30, 2009 and 2008:





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      Appalachian
            
            $
            295,973
            
            
            $
            279,259
            
            $
            16,714
            
            6
            %Northern
      Appalachian
            
            
            97,123
            
            
            
            96,994
            
            
            129
            
            *
            %Illinois Basin
            
            
            30,487
            
            
            
            28,626
            
            
            1,861
            
            7
            %Ancillary
            
            
            15,706
            
            
            
            21,515
            
            
            (5,809
            )
            (27
            )%Cost
      of coal sales
            
            $
            439,289
            
            
            $
            426,394
            
            $
            12,895
            
            3
            %





*
not meaningful





Cost of coal
sales—For the six months ended June 30, 2009, our cost of coal sales
increased compared to the six months ended June 30, 2008 primarily as a result
of a 13% increase in cost per ton. Partially offsetting the increase in cost per
ton was a 9% decrease in tons sold.





31











Central Appalachian. Our
Central Appalachian segment cost of coal sales increased to $56.39 per ton for
the six months ended June 30, 2009 from $47.44 per ton for the six months ended
June 30, 2008 primarily a result of increased labor and benefits, repairs and
maintenance and royalty expenses. Labor and benefit costs increased due to wage
increases in the second half of 2008 in an effort to remain competitive in a
tight labor market and as a result of an increase in high dollar medical claims
incurred in the six months ended June 30, 2009. Repairs and maintenance costs
increased as a result of several major repairs performed at certain complexes.
Royalties increased for the six months ended June 30, 2009 due to an increase in
sales realization on tons sold, as well as increased mining of leased reserves.
Further impacting the increase in cost of coal sales were increases in diesel
fuel costs and severance taxes.





Northern Appalachian. Cost of
coal sales and tons sold from our Northern Appalachian segment for the six
months ended June 30, 2009 remained consistent as compared to the six
months ended June 30, 2008.





Illinois Basin. For the
six months ended June 30, 2009, our Illinois Basin cost of coal sales
increased by $1.79 per ton primarily due to increased labor and benefits and
repairs and maintenance costs. Labor and benefits increased subsequent to the
second quarter of 2008 as a result of increased wages in an effort to retain
skilled miners. Additionally, repairs and maintenance costs were higher due to
major repairs on, and increased utilization of, underground mining equipment
during the six months ended June 30, 2009.





Ancillary. Cost of coal sales from our Ancillary segment decreased for
the six months ended June 30, 2009 primarily due to decreased purchased coal
costs related to the expiration of certain brokered coal contracts, as well as
to decreased shipments on various remaining contracts, throughout 2008 and into
2009.





Cost of other
revenues—For the six months ended June 30, 2009, cost of other revenues
decreased primarily due to a decrease in gathering fees related to coalbed
methane wells, offset by an increase in labor and benefit costs at our ADDCAR
subsidiary.





Depreciation, depletion and amortization—Depreciation, depletion and
amortization expense increased for the six months ended June 30, 2009 primarily
as a result of capital spending throughout 2008 and during the first half of
2009, as well as a decrease in amortization income related to the completion of
shipments on a below-market contract subsequent to the second quarter of 2008.
These increases were partially offset by a decrease in amortization of coalbed
methane well development costs.





Selling, general
and administrative expenses—Selling, general and administrative expenses
for the six months ended June 30, 2009 increased primarily due to an increase in
legal and professional fees. Partially offsetting the increase were decreases in
bad debt expense and sales and use taxes.





Gain on sale of
assets—Gain on sale of assets decreased $23.1 million for the six months
ended June 30, 2009 due to a $24.6 million pre-tax gain on exchange of coal
reserves with a third-party in the comparable period in 2008.





32








Adjusted
EBITDA by reportable segment





Adjusted
EBITDA represents earnings before deducting interest, income taxes,
depreciation, depletion, amortization and noncontrolling interest. 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 for noncontrolling interest. 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 page 35 of this Quarterly Report on Form 10-Q/A and in Note 12 to our
condensed consolidated financial statements for the six months ended June
30, 2009.





The
following table depicts Adjusted EBITDA by reportable segment for the six months
ended June 30, 2009 and 2008:





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      Appalachian
            
            $
            76,599
            
            
            $
            62,145
            
            $
            14,454
            
            23
            %Northern
      Appalachian
            
            
            15,453
            
            
            
            11,525
            
            
            3,928
            
            34
            %Illinois Basin
            
            
            6,633
            
            
            
            6,243
            
            
            390
            
            6
            %Ancillary
            
            
            (1,947
            )
            
            
            (10,170
            )
            
            8,223
            
            81
            %Total
      Adjusted EBITDA
            
            $
            96,738
            
            
            $
            69,743
            
            $
            26,995
            
            39
            %





Central Appalachian. Adjusted
EBITDA for the six months ended June 30, 2009 increased compared to the six
months ended June 30, 2008 primarily due to a $15.23 per ton increase in sales
realization coupled with an $8.95 increase in cost per ton, resulting in $6.28
per ton increase in profit margins. Partially offsetting this increase from
improved profit margins was a decrease of approximately 637,000 tons
sold.





Northern Appalachian. The
increase in Adjusted EBITDA was due to a combination of an increase in sales
realization of $1.82 per ton, and a decrease of $0.03 in cost per ton, resulting
in increased profit margins of $1.85 per ton, as well as an increase of
approximately 4,000 tons sold.





Illinois Basin. Adjusted
EBITDA increased during the six months ended June 30, 2009 related to an
increase in profit margins of $0.45 per ton as a result of increased sales
realization and increased cost per ton of $2.24 and $1.79, respectively, per ton
compared to the six months ended June 30, 2008.





Ancillary. The increase in
Adjusted EBITDA was primarily due to an increase in sales realization of $12.97
per ton, offset by a $3.14 increase in cost per ton, resulting in an increase in
profit margins of $9.83 per ton. Further impacting the increase in Adjusted
EBITDA from our Ancillary segment were $7.9 million received in settlement of
contract terminations and increased contract mining revenue, offset by decreased
revenue from coalbed methane wells and a decrease of approximately 208,000 tons
sold related to the expiration of brokered coal contracts throughout 2008, as
well as to decreased shipments of various remaining contracts.





33







Reconciliation
of adjusted EBITDA to net income (loss) by reportable segment





The
following tables reconcile Adjusted EBITDA to net income (loss) by reportable
segment for the six months ended June 30, 2009 and 2008:





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Central
      AppalachianNet
      income attributable to International Coal Group, Inc.
            
            $
            31,336
            
            
            $
            29,681
            
            $
            1,655
            
            6
            %Depreciation,
      depletion and amortization
            
            
            34,840
            
            
            
            31,565
            
            
            3,275
            
            10
            %Interest
      expense, net
            
            
            2,097
            
            
            
            899
            
            
            1,198
            
            133
            %Income
      tax expense
            
            
            8,326
            
            
            
            —
            
            
            8,326
            
            100
            %Adjusted
      EBITDA
            
            $
            76,599
            
            
            $
            62,145
            
            $
            14,454
            
            23
            %





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Northern
      AppalachianNet
      income attributable to International Coal Group, Inc.
            
            $
            3,323
            
            
            $
            3,661
            
            $
            (338
            )
            (9
            )%Depreciation,
      depletion and amortization
            
            
            10,821
            
            
            
            7,561
            
            
            3,260
            
            43
            %Interest
      expense, net
            
            
            140
            
            
            
            298
            
            
            (158
            )
            (53
            )%Income
      tax expense
            
            
            1,144
            
            
            
            —
            
            
            1,144
            
            100
            %Noncontrolling
      interest
            
            
            25
            
            
            
            5
            
            
            20
            
            400
            %Adjusted
      EBITDA
            
            $
            15,453
            
            
            $
            11,525
            
            $
            3,928
            
            34
            %





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)Illinois BasinNet
      income attributable to International Coal Group, Inc.
            
            $
            2,264
            
            
            $
            2,365
            
            $
            (101
            )
            (4
            )%Depreciation,
      depletion and amortization
            
            
            3,663
            
            
            
            3,762
            
            
            (99
            )
            (3
            )%Interest
      expense, net
            
            
            144
            
            
            
            116
            
            
            28
            
            24
            %Income
      tax expense
            
            
            562
            
            
            
            —
            
            
            562
            
            100
            %Adjusted
      EBITDA
            
            $
            6,633
            
            
            $
            6,243
            
            $
            390
            
            6
            %





Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)AncillaryNet
      loss attributable to International Coal Group, Inc.
            
            $
            (22,848
            )
            
            $
            (33,850
            )
            $
            11,002
            
            33
            %Depreciation,
      depletion and amortization
            
            
            2,974
            
            
            
            3,763
            
            
            (789
            )
            (21
            )%Interest
      expense, net
            
            
            23,851
            
            
            
            20,051
            
            
            3,800
            
            19
            %Income
      tax benefit
            
            
            (5,924
            )
            
            
            (134
            )
            
            (5,790
            )
            *
            %Adjusted
      EBITDA
            
            $
            (1,947
            )
            
            $
            (10,170
            )
            $
            8,223
            
            (81
            )%





34











Six
      months ended
              June
      30,
            
            Increase
              (Decrease)2009
            
            
            2008
            
            $
            
            %(in thousands, except percentages)ConsolidatedNet
      income attributable to International Coal Group, Inc.
            
            $
            14,075
            
            
            $
            1,857
            
            $
            12,218
            
            658
            %Depreciation,
      depletion and amortization
            
            
            52,298
            
            
            
            46,651
            
            
            5,647
            
            12
            %Interest
      expense, net
            
            
            26,232
            
            
            
            21,364
            
            
            4,868
            
            23
            %Income
      tax expense (benefit)
            
            
            4,108
            
            
            
            (134
            )
            
            4,242
            
            *
            %Noncontrolling
      interest
            
            
            25
            
            
            
            5
            
            
            20
            
            400
            %Adjusted
      EBITDA
            
            $
            96,738
            
            
            $
            69,743
            
            $
            26,995
            
            39
            %





*   not
meaningful





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 are cash on hand, cash flows from
operations, borrowings under our senior credit facility and equipment
financing arrangements.





We
believe the principal indicators of our liquidity are our cash position and
remaining availability under our credit facility. As of June 30, 2009, our
available liquidity was $92.7 million, including cash of $66.3 million and $26.4
million available for borrowing under our $100.0 million senior credit facility.
Total debt represented 46% of our total capitalization at June 30, 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, the potential exists that we may not remain in
compliance with certain covenants in 2010. 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.





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. It
is possible that, due to the financial position of one or more of our lenders in
the credit facility, they will be unable to fund future borrowings. 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.





35







We
currently expect our total capital expenditures will be approximately $90.0
million to $95.0 million in 2009, substantially all of which will be for
equipment and infrastructure at our existing operations. Cash paid for capital
expenditures was approximately $35.7 million for the six months ended June
30, 2009. We have funded and expect to continue to fund these capital
expenditures from our internal operations and equipment financing arrangements,
such as our $50.0 million equipment revolving credit facility with Caterpillar
Financial Services Corporation. We believe that these sources of capital will be
sufficient to fund our anticipated capital expenditures through the second
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 flexibility in the timing of the
cash requirements by managing the pace of 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
$14.9 million of cash paid for capital expenditures in the six months ended June
30, 2009 was attributable to our Central Appalachian operations. This amount
represents investments of approximately $3.6 million in our Beckley mining
complex and $2.7 million at Hazard, as well as additional investments of $8.6
million for upgrades at the remaining Central Appalachian operations. We paid
approximately $12.6 million at our Northern Appalachian operations in the six
months ended June 30, 2009, approximately $5.1 million of which was for
investments at our Sentinel complex. Expenditures of approximately $5.8 million
for our Illinois Basin operations were for development of a new mine portal
and ongoing operations improvements. Approximately $2.4 million of cash paid for
capital expenditures for the six months ended June 30, 2009 was within our
Ancillary segment for safety equipment, as well as for various other
upgrades.





On
July 14, 2009, one of our customers elected to exercise contractual options that
provided for early termination of two coal supply agreements in exchange for a
payment of $18.0 million. Furthermore, we received an additional $9.0 million
that represents the lost margin on pre-termination shipments that the customer
was unable to accept. We received the $27.0 million payment on July 30,
2009.





More
stringent regulatory requirements imposed upon the mining
industry demand substantial capital expenditures to meet safety
standards. For the six months ended June 30, 2009, we spent $1.1 million to
meet these standards and anticipate spending an additional $4.6 million for the
remainder of 2009.





Cash
Flows





Net
cash provided by operating activities was $39.1 million for the six months
ended June 30, 2009, an increase of $24.1 million from the same period in
2008. This increase is attributable to an increase in net income of $45.8
million, after adjustment for non-cash charges, partially offset by a $21.7
million decrease due to the change in net operating assets and
liabilities.





For
the six months ended June 30, 2009, net cash used in investing activities
was $32.8 million compared to $51.7 million for the six months ended June
30, 2008. For the six months ended June 30, 2009, $35.7 million of cash was
used to upgrade and support existing mining operations compared to $55.4 million
in the same period of 2008.





Net
cash used in financing activities of $3.9 million for the six months
ended June 30, 2009 was due to borrowings of $9.1 million used to finance
equipment. Offsetting these borrowings were repayments on our short- and
long-term debt of $12.3 million and deferred finance costs of $0.6 million paid
to amend our credit facility.





36











Credit
Facility and Long-term Debt Obligations





As
of June 30, 2009 our total long-term indebtedness consisted of the following (in
thousands):





June
      30,
              20099.00%
      Convertible Senior Notes, due 2012, net of debt discount of
      $15,347
            
            $
            209,65310.25%
      Senior Notes, due 2014
            
            
            175,000Equipment
      notes
            
            
            52,473Capital
      lease and other
            
            
            4,996Total
            
            
            442,122Less
      current portion
            
            
            (17,769
            )Long-term
      debt
            
            $
            424,353





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 facility and equipment credit facility, will be
adequate at least through the second 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 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
some flexibility to manage its cash requirements by controlling the pace and
timing of 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
June 30, 2009. In the event that the Convertible Notes were to become
convertible and a significant number of the holders were to convert their notes
prior to maturity, we may not have enough available funds at any particular time
to make the required repayments. Under these circumstances, we would look to WL
Ross & Co. LLC, our banking group and other potential lenders to obtain
short-term funding until such time that we 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.





37





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.





In
February 2008, the FASB issued FASB Staff Position (“FSP”) FAS No.
157-2,Effective Date of FASB
Statement No. 157 (“FSP FAS No. 157-2”). FSP FAS 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 FSP FAS No. 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 FAS No. 157-3,Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active (“FSP FAS
No. 157-3”). FSP FAS 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. FSP FAS No.
157-3 was effective upon issuance, including prior periods for which financial
statements had not been issued. Adoption of FSP FAS 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 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. Adoption of
FSP FAS No. 157-4 did not have a material impact on 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 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 determines the carrying amount of the liability
component, which is based on the fair value of a similar liability (excluding
any embedded conversion options). The resulting debt discount is 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, and has been applied 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 14-1 was as
follows:





38

















Three
      months ended
              June
      30, 2008
            
            Six
      months ended
              June
      30, 2008Consolidated
      Statement of Operations
            
            As
      Previously
              Reported
            
            
            Adjustment
            
            
            As
              Adjusted
            
            As
      Previously
              Reported
            
            
            Adjustment
            
            
            As
              AdjustedInterest expense,
      net
            
            $
            (8,201
            )
            
            $
            (592
            )
            
            $
            (8,793
            )
            $
            (20,182
            )
            
            $
            (1,182
            )
            
            $
            (21,364
            )Income
      tax (expense) benefit
            
            
            (8,124
            )
            
            
            224
            
            
            
            (7,900
            )
            
            (313
            )
            
            
            447
            
            
            
            134Net
      income attributable to International Coal Group, Inc.
            
            
            14,138
            
            
            
            (368
            )
            
            
            13,770
            
            
            2,592
            
            
            
            (735
            )
            
            
            1,857Earnings
      per share:Basic
            
            $
            0.09
            
            
            $
            —
            
            
            $
            0.09
            
            $
            0.02
            
            
            $
            (0.01
            )
            
            $
            0.01Diluted
            
            $
            0.08
            
            
            $
            —
            
            
            $
            0.08
            
            $
            0.02
            
            
            $
            (0.01
            )
            
            $
            0.01





Six
      months ended
              June
      30, 2008Consolidated
      Statement of Cash Flows
            
            As
      Previously
              Reported
            
            
            Adjustment
            
            
            As
              AdjustedNet
      loss
            
            $
            2,597
            (1)
            
            $
            (735
            )
            
            $
            1,862Amortization
      of deferred finance costs and debt discount
            
            
            1,414
            
            
            
            1,587
            
            
            
            3,001Deferred
      income taxes
            
            
            161
            
            
            
            (446
            )
            
            
            (285
            )Additions
      to property, plant, equipment and mine development
            
            
            (54,973
            )
            
            
            (406
            )
            
            
            (55,379
            )





(1)
            Amount
      reflects immaterial adjustment of $5 related to our retrospective adoption
      of SFAS No. 160.





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.








39







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. 160 impacted the
presentation of noncontrolling interest in our 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 our consolidated
financial statements.





Share-Based Payments. In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(“FSP EITF 03-6-1”). FSP EITF 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. FSP EITF 03-6-1
is effective for fiscal years beginning after December 15, 2008. Adoption of FSP
EITF 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.
Adoption of FSP FAS No. 115-2 and FAS No. 124-2 did not impact our financial
position, results of operations or cash flows.








40











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.
Adoption of FSP FAS No. 107-1 and APB 28-1 did not impact 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.





Subsequent Events. In May
2009, the FASB issued SFAS No. 165,Subsequent Events (“SFAS No.
165”). SFAS No. 165 establishes principles and requirements for events that
occur after the balance sheet date, but before the issuance of the financial
statements. SFAS No. 165 requires disclosure of the date through which
subsequent events have been evaluated and disclosure of certain non-recognized
subsequent events. SFAS No. 165 is effective for interim and annual periods
ending after June 15, 2009. Adoption of SFAS No. 165 did not have a material
impact on our financial position, results of operations or cash
flows.





Variable Interest Entities. In
June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation
No. 46(R) (“SFAS No. 167”). SFAS No. 167 amends certain requirements of
FASB Interpretation No. 46(R),Consolidation of
Variable Interest Entities,  to improve financial reporting by
enterprises involved with variable interest entities and to provide more
relevant and reliable information to users of financial statements. SFAS No. 167
is effective as of the first fiscal year beginning after November 15,
2009. We do not believe that adoption of SFAS No. 167 will materially
impact our financial position, results of operations or cash flows.





FASB Codification. In
June 2009, the FASB issued SFAS No. 168,The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles– a
replacement of FASB Statement No. 162  (“SFAS No. 168”). SFAS
No. 168 makes the FASB Accounting Standards Codification the single source of
authoritative U.S. accounting and reporting standards, but it does not change
U.S. generally accepted accounting principles. SFAS No. 168 is effective for
interim and annual periods ending after September 15, 2009. Adoption of
SFAS No. 168 will not impact our financial condition, results of operations or
cash flows.





Critical
Accounting Policies, Estimates and Assumptions





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires 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 six
months ended June 30, 2009 are not 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/A 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





Market price risk. We are
exposed to market price risk in the normal course of mining and selling
coal. We manage this risk through the use of long-term coal supply
agreements, rather than through the use of derivative instruments. As of June
30, 2009, substantially all of our 2009 projected sales are committed and
priced. Any committed and unpriced projected sales are subject to future market
price volatility.





41











Item4.
            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/A, an evaluation of the effectiveness of our
disclosure controls and procedures has been 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 Controls Over Financial Reporting





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





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 in Kanawha 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 of West Virginia to 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
deferred its decision as to whether it will hear the appeal, pending its ruling
on an unrelated case that shares similar issues. That case was decided on June
23, 2009, but the court has taken no further action on the plaintiffs' appeal in
this case. We will vigorously defend ourselves against the remaining complaints
and any appeal of any prior settlements.





42











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 and Hunter Ridge answered the
amended complaint on August 13, 2007, disputing all of the remaining claims. On
November 3, 2008, we, Wolf Run and Hunter Ridge filed 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
with Hunter Ridge, which prohibited the solicitation of its employees.
After the coal supply agreement was executed, Allegheny hired the then-president
of Anker Coal Group, Inc. (now Hunter Ridge) who engaged in negotiations on
behalf of Wolf Run and Hunter Ridge. 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 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, and on March
27, 2009, 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 agreed to amend the earlier agreement
to allow Hazard partial use of the reinstated permit, including construction of
an additional valley fill. Subsequently, the parties agreed to pursue resolution
of the case in accordance with a scheduling order entered by the court. Pursuant
to that order, the plaintiffs filed an amended complaint on July 10, 2009. The
amended complaint modifies the plaintiffs’ allegations to apply to the reissued
permit, rather than the original permit. The action will proceed in accordance
with the scheduling order through November 2009, after which the court is
expected to render a decision. If the court ultimately finds that the permit is
unlawful, production could be materially affected at the Thunder Ridge Surface
mine. The EPA’s heightened scrutiny will likely render the process of obtaining
ACOE permits for coal mining activities in Appalachia more
difficult.





On
January 7, 2008, Saratoga Advantage Trust (“Saratoga”) 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. On July 6, 2009, Saratoga
filed an amended complaint asserting essentially the same claims but seeking to
add an individual co-plaintiff. We intend to vigorously defend the
action.





43











On
July 3, 2007, Taylor Environmental Advocacy Membership, Inc. (“T.E.A.M.”) filed
a petition to appeal the issuance of ICG Tygart Valley, LLC’s
(“Tygart Valley”) 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
requiring Tygart Valley to address a technical issue related to projected
post-mining water quality. Tygart Valley prepared and submitted a permit
modification to alleviate the Board’s concerns. The revision was approved by the
WVDEP on May 27, 2009, reinstating the Tygart permit. As expected, T.E.A.M.
appealed the reinstatement. No hearing date has been set.





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





Listed
below are risk factors that have been revised or added to those disclosed in our
Annual Report on Form 10-K/A for the fiscal year ended December 31,
2008.





Judicial
rulings that restrict disposal of mining spoil material could significantly
increase our operating costs, discourage customers from purchasing our coal and
materially harm our financial condition and operating results.





Mining
in the mountainous terrain of Appalachia typically requires the use of valley
fills for the disposal of excess spoil (rock and soil material) generated by
construction and mining activities. In our surface mining operations, we use
mountaintop removal mining wherever feasible because it allows us to recover
more tons of coal per acre and facilitates the permitting of larger projects,
which allows mining to continue over a longer period of time than would be the
case using other mining methods. Mountaintop removal mining, along with other
methods of surface mining, depends on valley fills to dispose of mining spoil
material. Construction of roads, underground mine portal sites, coal processing
and handling facilities and coal refuse embankments or impoundments related to
both surface and underground mining also require the development of valley
fills. We obtain permits to construct and operate valley fills and surface
impoundments from the Army Corps of Engineers (the “ACOE”) under the auspices of
Section 404 of the federal Clean Water Act. Lawsuits challenging the ACOE’s
authority to authorize surface mining activities under Nationwide Permit 21
(“NWP21”) or under more comprehensive individual permits have been instituted by
environmental groups, which also advocate for changes in federal and state laws
that would prevent or further restrict the issuance of such permits. Under the
provisions of a Memorandum of Understanding executed on June 11, 2009 between
the Environmental Protection Agency, the ACOE and the Department of the
Interior, the ACOE intends to suspend the use of NWP21 for surface mining
activities in Appalachia while NWP21 is modified to prohibit its use to
authorize discharges of dredged or fill material into waters of the United
States for surface coal mining activities in the Appalachian region of the
following states: Kentucky, Ohio, Pennsylvania, Tennessee, Virginia and West
Virginia.





44











In
a March 2007 decision pertaining originally to certain Section 404 permits
issued to Massey Energy Company, Judge Robert C. Chambers of the U.S. District
Court for the Southern District of West Virginia ruled that the ACOE failed to
adequately assess the impacts of surface mining on headwaters and approved
mitigation that did not appropriately compensate for stream losses. Judge
Chambers in June 2007 found that sediment ponds situated within a stream channel
violated the prohibition against using the waters of the U.S. for waste
treatment and further decided that using the reach of stream between a valley
fill and the sediment pond to transport sediment-laden runoff is prohibited by
the Clean Water Act. The ACOE along with several intervenors appealed Judge
Chambers’ decisions to the Fourth Circuit Court of Appeals, which heard oral
arguments in September 2008. A three-judge panel of the Fourth Circuit on
February 13, 2009 reversed, vacated and remanded Judge Chambers’ March 2007 and
June 2007 decisions in their entirety, ruling that the ACOE properly exercised
its discretion in the permit review and approval process. On May 29, 2009 the
Fourth Circuit Court of Appeals declined to rehear the case or to conduct a
hearing en banc. The appellees have stated their intentions to appeal the
February 13, 2009 decision to the U.S. Supreme Court.





A
similar challenge to the ACOE Section 404 permit process was launched by
environmental groups in Kentucky in December 2007 when a lawsuit was filed in
federal court against the ACOE alleging that it wrongfully issued a
Section 404 authorization for the expansion of ICG Hazard’s Thunder Ridge
surface mine. 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, and on March 27, 2009, reinstated Hazard’s permit. Pursuant
to earlier agreements with the plaintiffs in the litigation, the Company
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 agreed to amend the earlier agreement to allow Hazard partial use of
the reinstated permit, including construction of an additional valley fill.
Subsequently, the parties agreed to pursue resolution of the case in accordance
with a scheduling order issued by the court on June 24, 2009. In accordance with
that order, the plaintiffs filed an amended complaint on July 10, 2009. The
amended complaint updates the plaintiffs’ allegation to challenge the reissued
permit, rather than the original permit. The sequence of filings outlined in the
scheduling order will continue through November 2009, after which the court is
expected to render a decision. The Company currently has two subsidiaries in
that jurisdiction of Kentucky that will require Section 404 permits within
the next two years. If permitting requirements are substantially increased or if
mining methods at issue are limited or prohibited, it could greatly lengthen the
time needed to permit new reserves, significantly increase our operational
costs, make it more difficult to economically recover a significant portion of
our reserves and lead to a material adverse effect on our financial condition
and results of operation. We may not be able to increase the price we charge for
coal to cover higher production costs without reducing customer demand for our
coal. See “Legal Proceedings” contained in Part II, Item 1 of this Quarterly
Report on Form 10-Q/A.





Federal
or state legislation that restricts disposal of mining spoil material or coal
refuse material could eliminate certain mining methods, significantly increase
our operating costs and materially harm our financial condition and operating
results.





Congress
and state legislatures from time to time consider proposals that would
effectively prohibit the placement of materials generated by coal mining into
waters of the United States, which practice is essential to surface mining in
central Appalachia. A prohibition against excess spoil placement in streams
would essentially eliminate surface mining in steep terrain, thus rendering much
of our coal reserves unmineable. Restrictions on the placement of coal refuse
material in streams or in abandoned underground coal mines could limit the life
of existing coal processing operations, potentially block new coal preparation
plants and at minimum significantly increase our operating costs.





45











Reduced
coal consumption by North American electric power generators could result in
lower prices for our coal, which could reduce our revenues and adversely impact
our earnings and the value of our coal reserves.





Restrictions
on the emission of greenhouse gases, including carbon dioxide, continue to be
proposed and adopted by various legislative and regulatory bodies at federal,
state and local levels of government. The intended effect of these restrictions
is to discourage the combustion of fossil fuels in general and the generation of
electricity by coal in particular in favor of "alternative sources" of
energy which do not involve the combustion of fossil fuels. Most notably, on
June 26, 2009 the U.S. House of Representatives passed The American Clean Energy
and Security Act of 2009 (House Bill 2454). If enacted, this Bill would create
or expand myriad federal programs designed to reduce energy produced by burning
fossil fuels and increase alternative energy sources. In particular, the Bill
would reduce greenhouse gas emissions via a cap and trade system for larger
emitters, including coal-fired power plants. A cap would be placed on overall
U.S. greenhouse gas emissions beginning in 2012 and, compared to 2005 levels,
would increasingly reduce emissions by 83 percent in 2050. The economic impact
of the cost of this cap on coal users would be mitigated by allocating to
electric utilities and certain other industries "free allowances" which would
progressively decrease over time. The imposition of such a program may result in
more electric power generators shifting from coal to natural gas-fired plants or
alternative energy sources. Any reduction in the amount of coal consumed by
North American electric power generators could reduce the price of steam coal
that we mine and sell, thereby reducing our revenues and adversely impacting our
earnings and the value of our coal reserves.





46











Item 2.
            Unregistered
      Sales of Securities and Use of
Proceeds





There
were no unregistered sales of equity securities during the three months ended
June 30, 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
      ProgramsApril
      1, 2009 through April 30, 2009
            
            2,165
            
            $
            1.99
            
            —
            
            —May
      1, 2009 through May 31, 2009
            
            —
            
            
            —
            
            —
            
            —June
      1, 2009 through June 30, 2009
            
            388
            
            
            2.86Total
            
            2,553
            
            $
            2.12
            
            —
            
            —





(1)
            During the three months
      ended June 30, 2009, we withheld 2,553 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.





47








Item 4.
            Submission
      of Matters to a Vote of Security
Holders





We
held our Annual Meeting of shareholders on May 20, 2009. In connection with
the meeting, proxies were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934. Matters voted upon were (1) the election
of three Class I directors for a term of three years expiring in 2012; (2)
the approval of an amendment to our 2005 Equity and Performance Incentive Plan;
(3) the ratification of the Board of Directors’ selection of
Deloitte & Touche LLP as our independent registered public accounting
firm for 2009 and (4) to consider a stockholder proposal regarding global
warming. The number of votes cast for, against or withheld, as well as
abstentions and broker non-votes, if applicable, with respect to each matter are
set out below.





1.
            All
      of the nominees for Director listed in the proxy statement were elected to
      hold office for a three-year term or until their successors are elected
      and qualified with the following
vote:





DIRECTOR
      NOMINEE
            
            SHARES
      VOTED “FOR”
            
            SHARES
      “WITHHELD”Maurice
      E. Carino, Jr.
            
            133,209,444
            
            2,152,879Stanley
      N. Gaines
            
            133,145,022
            
            2,217,301Samuel
      A. Mitchell
            
            133,167,690
            
            2,194,633





The
following Directors remained in office: Cynthia B. Bezik, William J.
Catacosinos, Bennett K. Hatfield, Wilbur L. Ross, Jr. and Wendy L.
Teramoto.





2.
            The
      amendment to our 2005 Equity and Performance Incentive plan was approved
      with the following vote:





SHARES
      VOTED “FOR”
            
            SHARES
      VOTED “AGAINST”
            
            SHARES
      “ABSTAINING”
            
            BROKER
      NON VOTES85,878,205
            
            11,548,243
            
            115,440
            
            37,820,435





3.
            The
      ratification of the Board of Directors’ selection of Deloitte &
      Touche LLP as our independent registered accounting firm for the fiscal
      year ending December 31, 2009 was approved with the following
      vote:





SHARES
      VOTED “FOR”
            
            SHARES
      VOTED “AGAINST”
            
            SHARES
      “ABSTAINING”134,223,749
            
            452,317
            
            686,257








4.
            The
      stockholder proposal regarding global warming was not approved with the
      following vote:








SHARES
      VOTED “FOR”
            
            SHARES
      VOTED “AGAINST”
            
            SHARES
      “ABSTAINING”
            
            BROKER
      NON VOTES6,979,224
            
            83,301,089
            
            7,261,575
            
            37,820,435





48











Item 6.
            Exhibits





10-Q/A
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
      June 30, 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 June 30, 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
            )





49







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
            )10.4
            
            International
      Coal Group, Inc. Amended and Restated 2005 Equity and Performance
      Incentive Plan
            
            (N
            )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 June 30, 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.(N)
            
            Previously
      filed as Annex A to International Coal Group, Inc.’s Definitive Proxy
      Statement on Schedule 14A (File No. 1-32679) filed on April 15,
      2009.





50














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:
December 18,
2009





51