-- Revenue, Net Income and EBITDA Up from Year Ago
-- Container Volumes Increase Slightly; Rate, Net of Fuel, Marginally Lower
-- Full-Year Expectations Remain In Line with Prior Year
CHARLOTTE, N.C., July 23, 2010 /PRNewswire via COMTEX/ -- Horizon Lines, Inc. (NYSE: HRZ) today reported improved financial results for its fiscal second quarter ended June 20, 2010.
Comparison of GAAP and Non-GAAP Earnings (in millions, except per share data)*
Operating revenue $305.6 $278.5
Net income (loss) $3.7 $(31.1)
Net income (loss) per share $0.12 $(1.02)
EBITDA $28.4 $3.5
Adjusted EBITDA* $29.6 $28.5
Adjusted net income * $4.8 $4.1
Adjusted net income per share* $0.15 $0.13
* See attached schedules for reconciliation of second-quarter 2010 and 2009 reported GAAP results to adjusted Non-GAAP results.
On a GAAP basis, Horizon achieved second-quarter net income of $3.7 million, or $0.12 per fully diluted share, on revenue of $305.6 million. This compares with a net loss of $31.1 million, or $1.02 per share, on revenue of $278.5 million for the second quarter of 2009. On an adjusted basis, second-quarter net income rose to $4.8 million, or $0.15 per fully diluted share, from $4.1 million, or $0.13 per fully diluted share, a year ago. The 2010 second-quarter adjusted net income excludes charges of $1.1 million, or $0.03 per diluted share, for antitrust-related legal expenses and a voluntary separation program for certain union employees. The 2009 adjusted net income excludes expenses totaling $35.2 million, or $1.15 per share, consisting primarily of a $20 million pretax charge related to the class-action legal settlement in Puerto Rico, a $10.6 million tax valuation allowance, and $4.1 million in pretax antitrust-related legal expenses.
"Conditions improved somewhat, but remained challenging during the second quarter as the pace of our business continued to be impacted by the slow, uneven global economic recovery," said Chuck Raymond, Chairman, President and Chief Executive officer. "We nevertheless achieved improved financial results by focusing on profitable revenue growth and continued diligent cost management. Free cash flow and debt paydown were ahead of expectations and we finished the quarter with adequate liquidity.
"The quarter's financial results were positively impacted by improved contributions from our Alaska tradelane, terminal services provided to third parties, and logistics, as well as from increased overhead savings," Mr. Raymond said. "Overall volume trends continued to improve slowly, resulting in very modest quarterly volume growth from a year ago. Although this trend is encouraging, the rate and degree of volume change in our GDP-driven domestic ocean freight business is historically slower and more muted than in many other transportation sectors. We expect the pace and sustainability of this trend will depend largely on the strength of the ongoing economic recovery in our markets and the corresponding impact on consumer confidence.
"Container rates, net of fuel, decreased slightly for the quarter, largely reflecting rate pressures in Puerto Rico, where capacity was added to the market in the second quarter, despite the ongoing recession there," Mr. Raymond said. "We expect rates to remain under pressure in Puerto Rico."
Second-Quarter 2010 Financial Highlights
* Operating Revenue - Second-quarter operating revenue increased 9.7% to $305.6 million from $278.5 million a year ago. The largest factor in the $27.1 million revenue gain was an $18.5 million increase in fuel surcharges to help partially mitigate higher fuel costs. Terminal services and other revenue contributed $7.7 million of the improvement, while logistics added $6.9 million. Increased container volume accounted for $1.4 million of the revenue growth. Alaska registered a volume increase for the quarter, relative to a year ago, while volume in Hawaii/Guam and Puerto Rico declined slightly. Alaska and Hawaii/Guam have begun showing signs of modest economic recovery. Puerto Rico remains in recession, but has shown signs of stabilization, with overall industry ocean freight volumes to the island firming in recent months. However, vessel capacity was added to the Puerto Rico tradelane by a competitor in the second quarter, further pressuring pricing and contributing to an overall rate decline that decreased revenue by $1.1 million. Also partially offsetting the operating revenue increase was a $6.3 million decline related to the expiration of vessel management contracts with the federal government.
* Operating Income (Loss) - GAAP operating income for the second quarter totaled $13.9 million, compared with an operating loss of $11.2 million for the second quarter of 2009. The 2010 GAAP operating income includes expenses of $1.1 million, consisting of $1.0 million in antitrust-related legal expenses and $0.1 million in union severance charges. The 2009 GAAP operating loss includes a $20.0 million charge related to the class-action legal settlement in Puerto Rico, $4.1 million in antitrust-related legal expenses and $0.9 million in impairment and restructuring charges. Excluding these items, the second-quarter 2010 adjusted operating income totaled $15.0 million, compared with adjusted operating income of $13.7 million for the prior year's second quarter. Second-quarter adjusted operating income improved from last year primarily due to better results from the Alaska tradelane, terminal services and logistics revenue gains, overhead savings, and lower costs related to new terminal services agreements. These favorable variances were partially offset primarily by higher expenses associated with crane repairs, tugboat usage, incremental maintenance and the inability to fully recover fuel price increases.
* EBITDA - EBITDA totaled $28.4 million for the 2010 second quarter, compared with $3.5 million for the same period a year ago. Adjusted EBITDA for the second quarter of 2010 was $29.6 million, compared with $28.5 million for 2009. EBITDA and adjusted EBITDA for the 2010 and 2009 second quarters were impacted by the same factors affecting operating income (loss).
* Shares Outstanding - The company had a weighted daily average of 30.9 million diluted shares outstanding for the second quarter of 2010, compared with 30.4 million outstanding for the second quarter of 2009.
* Six-Month Results - For the six months ended June 20, 2010, operating revenue increased 7.4% to $591.7 million from $550.8 million for the same period in 2009. EBITDA totaled $39.5 million compared with $17.5 million a year ago. Adjusted EBITDA for the first six months of 2010 totaled $41.9 million, after excluding $2.4 million in antitrust-related legal expenses and union severance charges. Adjusted EBITDA for the first six months of 2009 totaled $47.7 million, after excluding $20 million for the Puerto Rico class-action settlement, $8.5 million in antitrust-related legal expenses, and $1.7 million for impairment, restructuring and other charges. The 2010 six-month net loss totaled $9.6 million, or $0.31 per share, compared with a net loss of $41.0 million, or $1.35 per share for the same period a year earlier. The adjusted net loss for the first six months of 2010 totaled $7.3 million, or $0.24 per share, compared with an adjusted net loss of $0.6 million, or $0.02 per share, a year ago.
* Liquidity, Credit Facility Compliance & Debt Structure - As of June 20, 2010, the company had total liquidity of $68.1 million, consisting of $4.6 million in cash and $63.5 million of effective revolver availability. The company's trailing 12-month interest coverage and senior secured leverage ratios were 3.81 times and 2.16 times, respectively, as compared to the credit agreement requirement of above 3.5 times and below 2.75 times, respectively. Funded debt outstanding totaled $563.1 million, consisting of $233.1 million in senior secured debt and $330.0 million in convertible notes, at a weighted average interest rate of 4.46%. The company's senior secured debt matures in August 2012, but the maturity will accelerate to February 2012 if the convertible notes are not refinanced or if arrangements are not being made for their refinancing by that date.
Please see attached schedules for the reconciliation of second-quarter 2010 and 2009 reported GAAP results and Non-GAAP adjusted results.
"We continue to expect our 2010 adjusted EBITDA performance to be in the range of 2009 results," Mr. Raymond said. "We are experiencing some economic stabilization and recovery in our markets, evidenced in part by the ongoing modest volume firming trend. But we also face continuing high fuel prices and ongoing rate pressure in Puerto Rico. To help mitigate these rate pressures, we are focusing on schedule integrity, customer service and cost management.
"We are making steady progress in preparation for the launch of our transpacific Asia liner service," Mr. Raymond continued. "We have chosen Ningbo and Shanghai in Central China as our ports of call and continue to receive enthusiastic customer response to our service launch in December."
Webcast & Conference Call Information
Company executives will provide additional perspective on the company's financial results 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 88026736. A copy of the presentation materials may be obtained 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., EBITDA, free cash flow and 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. The company further feels these non-GAAP measures enhance the user's overall understanding of the company's current financial performance relative to past performance and provide 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. The company owns or leases a fleet of 20 U.S.-flag containerships and operates five port terminals linking the continental United States with Alaska, Hawaii, Guam, Micronesia and Puerto Rico. The company also manages a domestic and overseas service partner network and provides integrated, reliable and cost competitive logistics solutions. 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 4, 2010, and in our Form 10-Q to be filed on July 23, 2010, 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.