- Volumes Down 5.7%; Rates Flat From Year Ago, Net of Fuel -
Adjusted EBITDA Totals $36.9 Million - Adjusted Free Cash Flow of
$23.8 million CHARLOTTE, N.C., Oct. 23 /PRNewswire-FirstCall/ --
Horizon Lines, Inc. (NYSE:HRZ), today reported results for its
fiscal third quarter ended September 20, 2009. On a GAAP basis, net
income totaled $8.4 million, or $0.27 per diluted share, on revenue
of $308.0 million. This compares with net income of $11.1 million,
or $0.37 per diluted share on revenue of $352.6 million for the
same period a year ago. Adjusted third-quarter 2009 net income
totaled $11.4 million, or $0.37per diluted share, after excluding
antitrust-related legal expenses and vessel impairment charges
totaling $3.0 million, or $0.10 per share after tax. Adjusted net
income for the 2008 third quarter totaled $14.7 million, or $0.48
per diluted share, which excludes antitrust-related legal fees
totaling $3.6 million, or $0.11 per share after tax. Comparison of
GAAP and Non-GAAP Earnings (in millions, except per share data)*
-------------------------------------------------------------
Quarters Ended Nine Months Ended -------------- -----------------
9/20/09 9/21/08 9/20/09 9/21/08 ------- ------- ------- -------
GAAP: ----- Operating revenue $308.0 $352.6 $858.8 $989.5
----------------- ------ ------ ------ ------ Net income (loss)(1)
$8.4 $11.1 $(32.6) $17.7 --------------- ---- ----- ------ -----
Net income (loss) per diluted share(1) $0.27 $0.37 $(1.07) $0.57
------------------ ----- ----- ------ ----- Non-GAAP: ---------
EBITDA $33.8 $37.6 $51.2 $97.6 ------ ----- ----- ----- -----
Adjusted EBITDA* $36.9 $42.2 $84.6 $105.4 --------------- -----
----- ----- ------ Adjusted net income* $11.4 $14.7 $10.8 $23.9
------------ ----- ----- ----- ----- Adjusted net income per
diluted share* $0.37 $0.48 $0.35 $0.78 ------------------- -----
----- ----- ----- * See attached schedules for reconciliation of
third-quarter 2009 and 2008 reported GAAP results to Non-GAAP
results. (1) Net income for the 2008 third-quarter and nine-month
period is adjusted for retrospective application of changes in
accounting for convertible notes, and restricted stock share-based
payment awards as participating securities.
-----------------------------------------------------------------
"During the third quarter, we continued to successfully battle the
economic turbulence that gripped our markets, focusing on cost
containment, customer service and schedule integrity," said Chuck
Raymond, Chairman, President and Chief Executive Officer. "The 5.7%
volume decline from the third quarter of 2008 was an improvement
over the past three quarters. We maintained stable margins relative
to a year ago, although revenue-per-container rates were flat. More
than half of the 12.6% revenue decline was due to reduced fuel
surcharges, as fuel prices were significantly lower than 2008.
"Cash flow was relatively strong, and we voluntarily made debt
payments of $10 million during the quarter." Mr. Raymond said. "We
completed the quarter well-positioned to withstand an ongoing weak
environment, and to capitalize quickly on even a mild recovery. "In
our liner business, our third-quarter cargo volumes continued to
compare very favorably with other transportation segments,
reflecting our focus on U.S. domestic ocean markets, where we play
a primary role in delivering cargo that is vital to the basic needs
of our tradelanes," Mr. Raymond said. "Our logistics business
continued to face the challenges of building a business through
organic growth in the worst recession since the Great Depression.
We expect our logistics business to continue to operate below
breakeven levels for the foreseeable future, but we continue to
believe that it remains an engine for the long-term growth of our
company." Third-Quarter 2009 Financial Highlights -- Operating
Revenue - Operating revenue declined 12.6% to $308.0 million from
$352.6 million a year ago. The largest factors in the $44.6 million
revenue decline were a $23.4 million reduction in fuel surcharges,
followed by $13.4 million decrease from a 5.7% reduction in volume.
The volume decline was due to a continuing weak macroeconomic
environment that impacted discretionary consumer spending across
all tradelanes; specifically, flattening economic growth and
cautious consumer sentiment in Alaska, a decline in visitors and
construction in Hawaii, and the ongoing recession in Puerto Rico.
-- Operating Income - GAAP operating income for the third quarter
totaled $19.0 million, compared with $21.8 million for the third
quarter of 2008. The 2009 GAAP operating income includes expenses
of $3.1 million consisting of $1.9 million in antitrust-related
legal expenses and $1.2 million in impairment charges for vessels.
The 2008 GAAP operating income includes $4.6 million in
antitrust-related legal expenses. Excluding these items, adjusted
operating income totaled $22.1 million for the third quarter of
2009, and $26.4 million for the prior year's third quarter. The
decline from last year was largely due to reduced volumes, lower
non-transportation revenue, and reduced logistics revenue, which
were partially offset by non-union workforce reduction savings. --
EBITDA - EBITDA totaled $33.8 million for the 2009 third quarter,
compared with $37.6 million for the same period a year ago.
Adjusted EBITDA for the 2009 third quarter was $36.9 million,
compared with $42.2 million for 2008. EBITDA and adjusted EBITDA
for the 2009 and 2008 third quarters were impacted by the same
factors affecting operating income. -- Shares Outstanding - The
company had a weighted daily average of 30.9 million diluted shares
outstanding for the third quarter of 2009, compared with 30.4
million for the third quarter of 2008. -- Nine-Month Results - For
the nine months ended September 20, 2009, operating revenue
decreased 13.2% to $858.8 million from $989.5 million for the same
period in 2008. EBITDA totaled $51.2 million compared with $97.6
million a year ago. Adjusted EBITDA was $84.6 million compared with
$105.4 million a year ago. The net loss for the nine-month period
totaled $(32.6) million, or $(1.07) per share, while adjusted net
income totaled $10.8 million, or $0.35 per diluted share. In the
same period a year ago, net income totaled $17.7 million, or $0.57
per diluted share, while adjusted net income was $23.9 million, or
$0.78 per diluted share. Adjusted EBITDA and adjusted net income
for the 2009 nine-month period exclude a $20.0 million charge
related to the previously disclosed class-action legal settlement
in Puerto Rico, a $10.5 million tax valuation allowance, $10.4
million in antitrust-related legal expenses, $1.9 million in
impairment charges, $1.0 million in restructuring costs and a $0.1
million loss on the previously disclosed modification of the
company's credit agreement. Adjusted EBITDA and net income for the
2008 nine-month period exclude $7.0 million in antitrust-related
legal expenses and $0.8 million related to early retirement for
certain union employees. Please see attached schedules for
reconciliation of third-quarter and nine-month 2009 and 2008
reported GAAP results and Non-GAAP adjusted results. Outlook "We
face a challenging fourth quarter, which we expect to be
characterized by lingering economic weakness that will continue to
impact volumes to varying degrees across all of our tradelanes, as
well as in our logistics business," Mr. Raymond said. "While our
third-quarter volume performance indicates we might be coming off
the bottom, we expect the recovery to be slow, muted and disparate.
"Horizon Lines remains well positioned in this environment," Mr.
Raymond continued. "We are intensely focused on both customer
service and cost containment, and are targeting selective revenue
growth opportunities even in these challenging times. We recently
added a Tampa call on our Houston-to-San Juan sailing, an addition
that provides new options for our customers, and new revenue
potential for Horizon Lines at little incremental cost. "Despite
the ongoing economic challenges, our outlook for 2009 remains
consistent with our second-quarter observations," Mr. Raymond said.
"We anticipate that 2009 adjusted EBITDA will be below the $130.0
million reported last year, but remain above levels that would
jeopardize compliance with the financial covenants in our credit
agreement. We also currently expect adjusted free cash flow for the
year to approximate the level of $59.9 million reached last year,
despite a decline in EBITDA. As we move through the fourth quarter
and into 2010, we believe Horizon Lines possesses the financial
resources and operational strength to endure a protracted economic
recovery and to quickly capitalize on even modest recoveries in our
tradelane economies." Webcast & Conference Call Information
Company executives will provide additional perspective on the
company's earnings during a conference call beginning at 11:00 a.m.
Eastern Time today. Those interested in participating in the call
may do so by dialing 1-866-394-6819, and providing the operator
with conference number 34382121. A copy of the presentation
materials may be printed from the Horizon Lines website,
http://www.horizonlines.com/, shortly before the start of the call.
Alternatively, a live audio webcast of the call may be accessed at
http://www.horizonlines.com/. In order to access the live audio
webcast, please allow at least 15 minutes before the start of the
call to visit Horizon Lines' website and download and install any
necessary audio/video software for the webcast. Use of Non-GAAP
Measures Horizon Lines reports its financial results in accordance
with U.S. generally accepted accounting principles (GAAP). The
company also believes that the presentation of certain non-GAAP
measures, i.e., results excluding certain costs and expenses,
provides useful information for the understanding of its ongoing
operations and enables investors to focus on period-over-period
operating performance without the impact of significant special
items, and thereby enhances the user's overall understanding of the
company's current financial performance relative to past
performance and provides a better baseline for modeling future
earnings expectations. Non-GAAP measures are reconciled in the
financial tables accompanying this news release. The company
cautions that non-GAAP measures should be considered in addition
to, but not as a substitute for, the company's reported GAAP
results. About Horizon Lines Horizon Lines, Inc. is the nation's
leading domestic ocean shipping and integrated logistics company
comprised of two primary operating subsidiaries. Horizon Lines,
LLC, owns or leases a fleet of 21 U.S.-flag containerships, one of
which is classified as held for sale, and operates five port
terminals linking the continental United States with Alaska,
Hawaii, Guam, Micronesia and Puerto Rico. Horizon Logistics, LLC,
offers customized logistics solutions to shippers from a suite of
transportation and distribution management services, information
technology developed by Horizon Services Group and intermodal
trucking and warehousing services provided by Sea-Logix. Horizon
Lines, Inc. is based in Charlotte, NC, and trades on the New York
Stock Exchange under the ticker symbol HRZ. Forward Looking
Statements The information contained in this press release should
be read in conjunction with our filings made with the Securities
and Exchange Commission. This press release contains
"forward-looking statements" within the meaning of the federal
securities laws. These forward-looking statements are intended to
qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are those that do not relate solely to historical fact.
They include, but are not limited to, any statement that may
predict, forecast, indicate or imply future results, performance,
achievements or events. Words such as, but not limited to,
"believe," "expect," "anticipate," "estimate," "intend," "plan,"
"target," "projects," "likely," "will," "would," "could," and
similar expressions or phrases identify forward-looking statements.
All forward-looking statements involve risk and uncertainties. In
light of these risks and uncertainties, expected results or other
anticipated events or circumstances discussed in this press release
might not occur. We undertake no obligation, and specifically
decline any obligation, to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. See the section entitled "Risk Factors"
in our Form 10-K filed with the SEC on February 5, 2009, for a more
complete discussion of these risks and uncertainties and for other
risks and uncertainties. Those factors and the other risk factors
described therein are not necessarily all of the important factors
that could cause actual results or developments to differ
materially from those expressed in any of our forward-looking
statements. Other unknown or unpredictable factors also could harm
our results. Consequently, there can be no assurance that actual
results or developments anticipated by us will be realized or, even
if substantially realized, that they will have the expected
consequences. (Tables Follow) Horizon Lines, Inc. Unaudited
Condensed Consolidated Balance Sheets (in thousands, except per
share data) December 21, September 20, 2008 2009 (As Adjusted) (1)
------------ --------------- Assets Current assets Cash $4,390
$5,487 Accounts receivable, net of allowance of $7,788 and $8,217
at September 20, 2009 and December 21, 2008, respectively 137,850
135,020 Prepaid vessel rent 5,940 4,471 Materials and supplies
27,940 23,644 Deferred tax asset 4,366 7,450 Other current assets
12,620 10,703 ------ ------ Total current assets 193,106 186,775
Property and equipment, net 195,198 208,453 Goodwill 317,068
317,068 Intangible assets, net 111,409 125,542 Deferred tax asset -
10,669 Other long-term assets 22,809 24,122 ------ ------ Total
assets $839,590 $872,629 ======== ======== Liabilities and
Stockholders' Equity Current liabilities Accounts payable $34,897
$41,947 Current portion of long-term debt 15,939 6,552 Accrued
vessel rent - 5,421 Other accrued liabilities 106,194 97,720
------- ------ Total current liabilities 157,030 151,640 Long-term
debt, net of current 534,387 526,259 Deferred rent 23,703 27,058
Deferred tax liability 5,458 - Other long-term liabilities 20,694
30,836 ------ ------ Total liabilities 741,272 735,793 -------
------- Stockholders' equity Preferred stock, $.01 par value,
30,500 shares authorized; no shares issued or outstanding - -
Common stock, $.01 par value, 100,000 shares authorized, 34,029
shares issued and 30,229 shares outstanding as of September 20,2009
and 33,808 shares issued and 30,008 shares outstanding as of
December 21, 2008 340 338 Treasury stock, 3,800 shares at cost
(78,538) (78,538) Additional paid in capital 199,454 199,644
(Accumulated deficit) retained earnings (17,198) 22,094 Accumulated
other comprehensive loss (5,740) (6,702) ------ ------ Total
stockholders' equity 98,318 136,836 ------ ------- Total
liabilities and stockholders' equity $839,590 $872,629 ========
======== (1) Results are adjusted for retrospective application of
changes in accounting for convertible notes and restricted stock
share-based payment awards as participating securities. Horizon
Lines, Inc. Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data) Quarters Ended Nine Months
Ended -------------- ----------------- September 21, September 21,
September 20, 2008 September 20, 2008 2009 (As Adjusted)(1) 2009
(As Adjusted)(1)
--------------------------------------------------------- Operating
revenue $307,972 $352,638 $858,807 $989,544 Operating expense: Cost
of services (excluding depreciation expense) 248,364 287,400
704,362 809,069 Depreciation and amortization 11,285 11,449 33,425
34,325 Amortization of vessel dry-docking 3,530 4,393 10,936 13,168
Selling, general and administrative 23,739 26,513 79,512 80,517
Settlement of class action lawsuit - - 20,000 - Restructuring
charge - - 1,001 - Impairment charge 1,208 - 1,867 - Miscellaneous
expense, net 890 1,095 773 2,392 --- ----- --- ----- Total
operating expense 289,016 330,850 851,876 939,471 Operating income
18,956 21,788 6,931 50,073 Other expense: Interest expense, net
10,563 10,016 29,249 31,528 Loss on modification of debt - - 50 -
Other expense (income), net 1 (4) 11 (2) -- -- -- -- Income (loss)
before income tax expense 8,392 11,776 (22,379) 18,547 Income tax
(benefit) expense (46) 673 10,219 885 --- --- ------ --- Net income
(loss) $8,438 $11,103 $(32,598) $17,662 ====== ======= ========
======= Net income (loss) per share: Basic $0.28 $0.37 $(1.07)
$0.58 Diluted $0.27 $0.37 $(1.07) $0.57 Number of shares used in
calculation: Basic 30,430 30,304 30,431 30,330 Diluted 30,914
30,393 30,431 30,583 Dividends declared per common share $0.11
$0.11 $0.33 $0.33 ===== ===== ===== ===== (1) Results are adjusted
for retrospective application of changes in accounting for
convertible notes and restricted stock share-based payment awards
as participating securities. Horizon Lines, Inc. Unaudited
Condensed Consolidated Statements of Cash Flows (in thousands) Nine
Months ----------- September 21, September 20, 2008 2009 (As
Adjusted)(1) ------------ -------------- Cash flows from operating
activities: Net (loss) income $(32,598) $17,662 Adjustments to
reconcile net income (loss) to net cash provided by operating
activities: Depreciation 17,950 18,339 Amortization of other
intangible assets 15,475 15,986 Amortization of vessel dry-docking
10,936 13,168 Restructuring charge 1,001 - Impairment charge 1,867
- Loss on modification of debt 50 - Amortization of deferred
financing costs 2,081 2,022 Deferred income taxes 10,312 (732) Gain
on equipment disposals (45) (7) Stock-based compensation 2,464
3,532 Accretion of interest on 4.25% convertible notes 7,428 6,601
Changes in operating assets and liabilities: Accounts receivable
(2,551) (28,521) Materials and supplies (4,425) (1,655) Other
current assets (2,349) (593) Accounts payable (7,050) (13,054)
Accrued liabilities 10,466 17,590 Vessel rent (9,650) (9,657)
Vessel dry-docking payments (11,269) (9,291) Other
assets/liabilities (664) 1,613 ---- ----- Net cash provided by
operating activities 9,429 33,003 ----- ------ Cash flows from
investing activities: Purchases of property and equipment (8,181)
(26,351) Purchase of business - (198) Proceeds from the sale of
property and equipment 1,009 350 ----- --- Net cash used in
investing activities (7,172) (26,199) ------ ------- Cash flows
from financing activities: Borrowing under revolving credit
facility 64,000 73,000 Payments on revolving credit facility
(49,000) (37,500) Payments on long-term debt (4,913) (4,902)
Dividends to stockholders (10,041) (9,985) Payments of financing
costs (3,475) (139) Common stock issued under employee stock
purchase plan 75 38 Proceeds from exercise of stock options - 13
Purchase of treasury stock - (29,330) Payments on capital lease
obligation - (81) ---- ---- Net cash provided by financing
activities (3,354) (8,886) ------ ------ Net decrease in cash
(1,097) (2,082) Cash at beginning of period 5,487 6,276 ----- -----
Cash at end of period $4,390 $4,194 ====== ====== (1) Results are
adjusted for retrospective application of changes in accounting for
convertible notes and restricted stock share-based payment awards
as participating securities. Horizon Lines, Inc. Adjusted Operating
Income ($ in Millions) Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended September September September September 20,
2009 21, 2008 20, 2009 21, 2008 --------- --------- ------------
----------- Operating Income $19.0 $21.8 $6.9 $50.1 Adjustments:
------------ Legal Settlement - - 20.0 - Anti-Trust Legal Expenses
1.9 4.6 10.4 7.0 Impairment Charge 1.2 - 1.9 - Restructuring Charge
- - 1.0 - OPEIU Severance - - - 0.8 ---- ---- ---- ---- Total
Adjustments 3.1 4.6 33.3 7.8 Adjusted Operating Income $22.1 $26.4
$40.2 $57.9 ===== ===== ===== ===== Horizon Lines, Inc. Adjusted
Net Income ($ in Millions) Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended September September September September 20,
2009 21, 2008 20, 2009 21, 2008 --------- --------- ------------
----------- Net Income (Loss)(1) $8.4 $11.1 $(32.6) $17.7
Adjustments: ------------ Legal Settlement - 20.0 - Anti-Trust
Legal Expenses 1.9 4.6 10.4 7.0 Impairment Charge 1.2 - 1.9 -
Restructuring Charge - - 1.0 - Loss on Modification of Debt - - 0.1
- OPEIU Severance - - - 0.8 Tax Valuation Allowance - - 10.5 - Tax
Impact of Adjustments (0.1) (1.0) (0.5) (1.6) ---- ---- ---- ----
Total Adjustments 3.0 3.6 43.4 6.2 Adjusted Net Income $11.4 $14.7
$10.8 $23.9 ===== ===== ===== ===== (1) 2008 results are adjusted
for retrospective application of changes in accounting for
convertible notes and restricted stock share-based payment awards
as participating securities. Horizon Lines, Inc. Adjusted Net
Income Per Diluted Share Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended September September September September 20,
2009 21, 2008 20, 2009 21, 2008 --------- --------- -----------
----------- Net Income (Loss) Per Diluted Share (1) $0.27 $0.37
$(1.07) $0.57 Adjustments Per Share: ---------------------- Legal
Settlement - - 0.66 - Anti-Trust Legal Expenses 0.06 0.14 0.34 0.23
Impairment Charge 0.04 - 0.06 - Restructuring Charge - - 0.03 -
OPEIU Severance - - - 0.02 Tax Valuation Allowance - - 0.35 - Tax
Impact of Adjustments - (0.03) (0.02) (0.04) ---- ----- ----- -----
Total Adjustments 0.10 0.11 1.42 0.21 Adjusted Net Income $0.37
$0.48 $0.35 $0.78 ===== ===== ===== ===== (1) 2008 results are
adjusted for retrospective application of changes in accounting for
convertible notes and restricted stock share-based payment awards
as participating securities. Horizon Lines, Inc. Net Income (Loss)
/ EBITDA / Adjusted EBITDA Reconciliation ($ in Millions) Quarter
Quarter Nine Months Nine Months Ended Ended Ended Ended September
September September September 20, 2009 21, 2008 20, 2009 21, 2008
--------- --------- ----------- ----------- Net Income (Loss)(1)
$8.4 $11.1 $(32.6) $17.7 Interest Expense, Net 10.6 10.0 29.2 31.5
Tax Expense - 0.7 10.2 0.9 Depreciation and Amortization 14.8 15.8
44.4 47.5 ---- ---- ---- ---- EBITDA 33.8 37.6 51.2 97.6 Legal
Settlement - - 20.0 - Anti-Trust Legal Fees 1.9 4.6 10.4 7.0
Impairment Charge 1.2 - 1.9 - Restructuring Charge - - 1.0 - Loss
on Modification of Debt - - 0.1 - OPEIU Severance - - - 0.8 ----
---- ---- ---- Adjusted EBITDA $36.9 $42.2 $84.6 $105.4 ===== =====
===== ====== (1) 2008 results are adjusted for retrospective
application of changes in accounting for convertible notes and
restricted stock share-based payment awards as participating
securities. Note: EBITDA is defined as net income plus net interest
expense, income taxes, depreciation and amortization. We believe
that EBITDA is a meaningful measure for investors as (i) EBITDA is
a component of the measure used by our board of directors and
management team to evaluate our operating performance, (ii) the
senior credit facility contains covenants that require the Company
to maintain certain interest expense coverage and leverage ratios,
which contain EBITDA, and (iii) EBITDA is a measure used by our
management team to make day-to-day operating decisions. Adjusted
EBITDA excludes certain charges in order to evaluate our operating
performance, for making day-to-day operating decisions and when
determining the payment of discretionary bonuses. Horizon Lines,
Inc. Operating Income (Loss) to Adjusted EBITDA Segment
Reconciliation ($ in Millions) Third Quarter 2009 Liner Logistics
Consolidated ----- --------- ------------ Operating Income (Loss)
$21.2 $(2.2) $19.0 Depreciation and Amortization 11.1 0.2 11.3
Amortization of Vessel Dry-docking 3.5 - 3.5 ---- ---- ---- EBITDA
35.8 (2.0) 33.8 Anti-Trust Legal Expenses 1.9 - 1.9 Impairment
Charge 1.2 - 1.2 ---- ---- ---- Adjusted EBITDA $38.9 $(2.0) $36.9
===== ===== ===== Horizon Lines, Inc. Operating Income (Loss) to
Adjusted EBITDA Segment Reconciliation ($ in Millions) Nine Months
2009 Liner Logistics Consolidated ----- --------- ------------
Operating Income (Loss) $14.0 $(7.1) $6.9 Depreciation and
Amortization 33.0 0.4 33.4 Amortization of Vessel Dry-docking 10.9
- 10.9 ---- ---- ---- EBITDA 57.9 (6.7) 51.2 Legal Settlement 20.0
- 20.0 Anti-Trust Legal Expenses 10.4 - 10.4 Impairment Charge 1.9
- 1.9 Restructuring Charge 0.8 0.2 1.0 Loss on Modification of Debt
0.1 - 0.1 ---- ---- ---- Adjusted EBITDA $91.1 $(6.5) $84.6 =====
===== ===== DATASOURCE: Horizon Lines, Inc. CONTACT: Jim Storey,
Director, Investor Relations & Corporate Communications,
+1-704-973-7107, Web Site: http://www.horizonlines.com/
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