Download release as PDF file 
- Adjusted EBITDA of $24.7 Million for 4th Quarter, $130.0 Million for
Full Year
- Adjusted Free Cash Flow of $59.9 Million Generated in 2008
CHARLOTTE, N.C., Jan. 30 /PRNewswire-FirstCall/ -- Horizon Lines, Inc.
(NYSE: HRZ), today reported results for the fourth quarter and fiscal year
ended December 21, 2008.
On a GAAP basis, the company reported a fourth-quarter net loss of $18.8
million, or $0.63 per share, which includes an impairment charge,
restructuring charge and anti-trust related legal expenses totaling $32.4
million pre-tax, or $0.72 per share after tax. Revenue for the fourth quarter
totaled $314.7 million. Adjusted net income, which excludes these items on an
after tax basis, totaled $2.8 million, or $0.09 per diluted share. For the
same period in 2007, net income totaled $10.7 million, or $0.32 per diluted
share, on revenue of $316.0 million.
Adjusted 2008 fourth-quarter results exclude:
-- An impairment charge of $25.4 million pre-tax, or $0.57 per diluted
share after tax, comprised of a write-down of goodwill and intangible assets
related to the 2007 Aero Logistics acquisition, spare vessels, and surplus
equipment;
-- A restructuring charge of $3.2 million pre-tax, or $0.07 per diluted
share after tax, for the company's non-union workforce reduction; and
-- Anti-trust related legal expenses totaling $3.8 million pre-tax, or
$0.08 per diluted share after tax, related to the Department of Justice
anti-trust investigation and related litigation.
Comparison of GAAP and Non-GAAP Earnings (in millions, except per share
data)
Quarters Ended Fiscal Years Ended
12/21/08 12/23/07 12/21/08 12/23/07
GAAP:
Operating revenue $314.7 $316.0 $1,304.3 $1,206.5
Net (loss) income ($18.8) $10.7 $3.1 $28.9
Net (loss) income per
diluted share ($0.63) $0.32 $0.10 $0.85
Non-GAAP:
EBITDA ($7.7) $35.9 $89.9 $121.9
Adjusted EBITDA* $24.7 $35.9 $130.0 $160.5
Adjusted Net income* $2.8 $10.7 $30.8 $45.9
Adjusted Net income per
diluted share* $0.09 $0.32 $1.02 $1.36
* See attached schedules for reconciliation of fourth-quarter and
full-year 2008 and 2007 reported GAAP results to adjusted Non-GAAP
results.
"Our company faced an extremely challenging environment in the fourth
quarter, but we performed well under the circumstances," said Chuck Raymond,
Chairman, President and Chief Executive Officer. "We generated adjusted free
cash flow totaling $47.9 million, paid down $37.5 million in debt, and
achieved adjusted EBITDA of $24.7 million for the quarter and $130.0 million
for the year. We completed the quarter with adequate corporate liquidity and
in compliance with our credit facility financial covenants.
"Volumes during the quarter were negatively impacted by the continued
sharp downturn of our Hawaii market, and ongoing weakness in Puerto Rico,
which is in its third year of recession," Mr. Raymond said. "Partially
offsetting this was a slight volume increase in our Alaska market and modest
revenue per container increases across all of our tradelanes. The overall rate
increase of 2.3%, net of fuel, was due in part to our focus on refrigerated
and other higher-value cargo.
"During the quarter, we embarked on a number of initiatives to reduce
costs and conserve cash in order to remain well positioned in this uncertain
economic environment," Mr. Raymond continued. "Among these actions, we
reduced our non-union permanent, temporary and consultants workforce by more
than 16%, which we expect will result in annualized cost savings of more than
$11 million. We also are evaluating scrapping one of our spare vessels, an
action that could save approximately $700,000 in annual lay up costs and
produce more than $1 million in cash for the steel."
Fourth-Quarter 2008 Financial Highlights
-- Operating Revenue - The 0.4% decline in operating revenue for the
quarter to $314.7 million from $316.0 million for the fourth quarter of 2007
was largely due to a 5.8% overall volume decline, resulting from the weakening
economies in Hawaii and Puerto Rico. The volume decline was partially offset
by revenue per container improvements in all tradelanes. Revenue per
container increased by $273, or 7.4% from the prior year on a gross basis, and
2.3%, net of fuel.
-- Operating (Loss) Income - The operating loss for the fourth quarter of
2008 totaled $23.1 million, compared with operating income of $20.5 million
for the fourth quarter of 2007. The operating loss primarily reflects charges
and expenses totaling $32.4 million, related to impairment, the non-union
workforce reduction and legal costs related to the antitrust investigation and
related litigation. Excluding these items, adjusted operating income totaled
$9.3 million for the fourth quarter. The decline from last year was largely
due to reduced volumes and an 81% increase in the average cost of fuel, which
were partially offset by increases in revenue per container and fuel
surcharges.
-- EBITDA - EBITDA totaled ($7.7 million) for the 2008 fourth quarter,
compared with $35.9 million for the same period a year ago. Adjusted EBITDA
for the 2008 fourth quarter was $24.7 million, compared with $35.9 million for
the 2007 fourth quarter. Adjusted EBITDA was impacted by the same factors
affecting operating income.
-- Shares Outstanding - As a result of share repurchases completed in the
first quarter of 2008, the company had a weighted daily average of 30.0
million diluted shares outstanding for the fourth quarter of 2008, compared
with 33.1 million for the fourth quarter of 2007.
-- Full-Year Results - For the full fiscal year ended December 21, 2008,
operating revenue increased 8.1% to $1,304.3 million from $1,206.5 million for
2007. EBITDA totaled $89.9 million compared with $121.9 million a year ago.
Adjusted EBITDA, excluding the items previously mentioned, as well as a 2008
second-quarter severance cost related to early retirement for certain union
employees, totaled $130.0 million versus $160.5 million for 2007. Full-year
net income totaled $3.1 million, or $0.10 per diluted share, compared with net
income of $28.9 million, or $0.85 per diluted share for 2007. Adjusted net
income was $30.8 million, or $1.02 per diluted share, compared with $45.9
million, or $1.36 per diluted share, a year ago, which excludes an after-tax
loss related to the extinguishment of debt.
(Please see attached schedules for reconciliation of fourth-quarter and
full-year 2008 and 2007 reported GAAP results and Non-GAAP adjusted results.)
Outlook
"We believe that 2009 will be a very challenging year for the ocean
transport industry," Mr. Raymond said, "with the world economies likely
sinking deeper into a recession and financial markets continuing in disarray.
In light of this tremendous economic uncertainty and lack of visibility, we
are temporarily suspending our practice of providing specific annual financial
guidance until economic conditions stabilize and offer more clarity. We
intend to re-evaluate this position at the end of the first quarter, when we
hope to have a clearer look at the year.
"Nevertheless, we believe we are well positioned to meet the challenges of
2009, based on our operating and financial performance in a very challenging
fourth quarter of 2008, and additional steps we have taken to eliminate
expense and conserve cash," Mr. Raymond continued. "Strategically, we enjoy
long-standing relationships with the nation's leading brand-name customers,
serving as their vital supply link transporting basic goods between the U.S.
mainland and Alaska, Puerto Rico, Hawaii and Guam. Operationally, we continue
to drive costs out of our organization while delivering service excellence for
our customers. Financially, we remain properly capitalized, operating with
adequate liquidity, within our financial covenants, and currently have no
refinancing needs until 2012."
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 81193818.
A hardcopy 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 and 5
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 designed by Aero Logistics, 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 to be filed with the SEC on or about February 4,
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.
Horizon Lines, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except per share data)
December 21, December 23,
2008 2007
Assets
Current assets
Cash $5,487 $6,276
Accounts receivable, net of allowance
of $8,217 and $6,191 at
December 21, 2008 and December 23,
2007, respectively 135,299 140,820
Deferred tax asset 7,450 13,792
Prepaid vessel rent 4,471 4,361
Materials and supplies 23,644 31,576
Other current assets 10,424 10,446
Total current assets 186,775 207,271
Property and equipment, net 208,453 194,679
Goodwill 317,068 334,671
Intangible assets, net 126,697 152,031
Deferred tax asset 23,992 4,060
Other long-term assets 24,122 33,729
Total assets $887,107 $926,441
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $41,947 $40,225
Current portion of long-term debt 6,552 6,537
Accrued vessel rent 5,421 6,503
Other accrued liabilities 97,720 95,027
Total current liabilities 151,640 148,292
Long-term debt, net of current 563,916 572,469
Deferred rent 27,058 31,531
Other long-term liabilities 30,836 19,571
Total liabilities 773,450 771,863
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, 33,808
shares issued and 30,008 shares
outstanding as of December 21,2008
and 50,000 shares authorized, 33,674
shares issued and 31,502 shares
outstanding as of December 23, 2007 338 337
Treasury stock, 3,800 and 2,172
shares at cost as of December 21,
2008 and December 23, 2007,
respectively (78,538) (49,208)
Additional paid in capital 168,779 163,760
Retained earnings 29,780 39,994
Accumulated other comprehensive loss (6,702) (305)
Total stockholders' equity 113,657 154,578
Total liabilities and stockholders'
equity $887,107 $926,441
Horizon Lines, Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
Quarters Ended Years Ended
Dec. 21, Dec. 23, Dec. 21, Dec. 23,
2008 2007 2008 2007
Operating revenue $314,715 $316,006 $1,304,259 $1,206,515
Operating expense:
Cost of services
(excluding depreciation
expense) 265,606 255,476 1,074,675 954,006
Depreciation and
amortization 11,318 11,105 45,643 47,870
Amortization of vessel
dry-docking 3,994 4,352 17,162 17,491
Selling, general and
administrative 27,689 24,093 108,206 90,978
Impairment of assets 25,415 - 25,415 -
Restructuring costs 3,244 - 3,244 -
Miscellaneous expense, net 506 472 2,898 997
Total operating expense 337,772 295,498 1,277,243 1,111,342
Operating (loss) income (23,057) 20,508 27,016 95,173
Other expense:
Interest expense, net 7,571 8,719 32,498 41,672
Loss on early extinguishment
of debt - 24 - 38,546
Other (income) expense, net (60) 34 (62) 79
(Loss) income before income
tax (benefit) expense (30,568) 11,731 (5,420) 14,876
Income tax (benefit) expense (11,773) 1,055 (8,479) (13,983)
Net (loss) income $(18,795) $10,676 $3,059 $28,859
Net (loss) income per share:
Basic $(0.63) $0.33 $0.10 $0.87
Diluted $(0.63) $0.32 $0.10 $0.85
Number of shares used in
calculation:
Basic 30,000 32,506 29,963 33,221
Diluted 30,000 33,095 30,331 33,859
Dividends declared per common
share $0.11 $0.11 $0.44 $0.44
Horizon Lines, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Year Ended
December 21, December 23,
2008 2007
Cash flows from operating activities:
Net income $3,059 $28,859
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 24,343 27,631
Amortization of other intangible
assets 21,300 20,239
Amortization of vessel dry-docking 17,162 17,491
Impairment of assets 25,415 -
Restructuring costs 3,244 -
Amortization of deferred financing
costs 2,693 2,973
Deferred income taxes (8,479) (13,983)
Gain on equipment disposals (24) (171)
Stock-based compensation 3,651 3,769
Loss on early extinguishment of debt - 38,546
Accretion of interest on 11% senior
discount notes - 6,062
Tax benefit from exercise of stock
options - 101
Changes in operating assets and
liabilities:
Accounts receivable 5,854 (12,653)
Materials and supplies 7,636 (7,368)
Other current assets 23 (3,340)
Accounts payable 1,625 11,106
Accrued liabilities (2,721) (15,305)
Vessel rent (4,883) (26,013)
Vessel dry-docking payments (13,913) (21,414)
Other assets/liabilities 3,383 (1,693)
Net cash provided by operating
activities 89,368 54,837
Cash flows from investing activities:
Purchases of property and equipment (39,149) (31,426)
Purchase of business (198) (31,323)
Proceeds from the sale of property
and equipment 500 3,362
Net cash used in investing
activities (38,847) (59,387)
Cash flows from financing activities:
Borrowing under revolving credit
facility 78,000 163,500
Payments on revolving credit facility (80,000) (41,500)
Purchase of treasury stock (29,330) (49,208)
Payments on long-term debt (6,538) (517,167)
Dividends to stockholders (13,273) (14,653)
Payments of financing costs (139) (12,912)
Payments on capital lease obligation (81) (152)
Common stock issued under employee
stock purchase plan 38 216
Proceeds from exercise of stock
options 13 29
Tax deficiency from exercise of stock
options - (101)
Issuance of convertible notes - 330,000
Borrowing of term loan - 125,000
Purchase of call spread options - (52,541)
Sale of common stock warrants - 11,958
Redemption premiums - (25,592)
Net cash used in financing
activities (51,310) (83,123)
Net decrease in cash (789) (87,673)
Cash at beginning of year 6,276 93,949
Cash at end of year $5,487 $6,276
Horizon Lines, Inc.
Adjusted Operating Income
($ in Millions)
Quarter Quarter Year Year
Ended Ended Ended Ended
Dec. 21, Dec. 23, Dec. 21, Dec. 23,
2008 2007 2008 2007
Operating (Loss) Income $(23.1) $20.5 $27.0 $95.2
Adjustments:
Impairment Charge 25.4 - 25.4 -
Restructuring Charge 3.2 - 3.2 -
Anti-Trust Legal Expenses 3.8 - 10.7 -
Union Severance - - 0.8 -
Total Adjustments 32.4 - 40.1 -
Adjusted Operating Income $9.3 $20.5 $67.1 $95.2
Horizon Lines, Inc.
Adjusted Net Income
($ in Millions)
Quarter Quarter Year Year
Ended Ended Ended Ended
Dec. 21, Dec. 23, Dec. 21, Dec. 23,
2008 2007 2008 2007
Net (Loss) Income $(18.8) $10.7 $3.1 $28.9
Adjustments:
Impairment Charge 25.4 - 25.4 -
Restructuring Charge 3.2 - 3.2 -
Anti-Trust Legal Expenses 3.8 - 10.7 -
Union Severance - - 0.8 -
Loss on Extinguishment of Debt - - - 38.6
Tax Impact of Adjustments (10.8) - (12.4) (14.2)
2007 Tonnage Tax Deferred Tax
Revaluation Benefit - - - (7.4)
Total Adjustments 21.6 - 27.7 17.0
Adjusted Net Income $2.8 $10.7 $30.8 $45.9
Horizon Lines, Inc.
Adjusted Net Income Per Diluted Share
Quarter Quarter Year Year
Ended Ended Ended Ended
Dec. 21, Dec. 23, Dec. 21, Dec. 23,
2008 2007 2008 2007
Net (Loss) Income Per Diluted
Share $(0.63) $0.32 $0.10 $0.85
Adjustments Per Share:
Impairment Charge 0.85 - 0.85 -
Restructuring Charge 0.11 - 0.11 -
Anti-Trust Legal Expenses 0.12 - 0.35 -
Union Severance - - 0.03 -
Loss on Extinguishment of Debt - - - 1.14
Tax Impact of Adjustments (0.36) - (0.42) (0.42)
2007 Tonnage Tax Deferred Tax
Revaluation Benefit - - - (0.21)
Total Adjustments Per Share 0.72 - 0.92 0.51
Adjusted Net Income Per Diluted
Share $0.09 $0.32 $1.02 $1.36
Horizon Lines, Inc.
Net Income / EBITDA / Adjusted EBITDA Reconciliation
($ in Millions)
Quarter Quarter Year Year
Ended Ended Ended Ended
Dec. 21, Dec. 23, Dec. 21, Dec. 23,
2008 2007 2008 2007
Net (Loss) Income $(18.8) $10.7 $3.1 $28.9
Interest Expense, Net 7.6 8.7 32.5 41.7
Tax (Benefit) Expense (11.8) 1.1 (8.5) (14.0)
Depreciation and Amortization 15.3 15.4 62.8 65.3
EBITDA (7.7) 35.9 89.9 121.9
Impairment Charge 25.4 - 25.4 -
Restructuring Charge 3.2 - 3.2 -
Anti-Trust Legal Fees 3.8 - 10.7 -
Union Severance - - 0.8 -
Loss on Extinguishment of Debt - - - 38.6
Adjusted EBITDA $24.7 $35.9 $130.0 $160.5
Note: EBITDA is defined as net income plus net interest expense, income
taxes, depreciation and amortization. We believe that EBITDA is a
meaningful measure for investors as (i) EBITDA is a component of the
measure used by our board of directors and management team to evaluate
our operating performance, (ii) the senior credit facility contains
covenants that require the Company to maintain certain interest expense
coverage and leverage ratios, which contain EBITDA, and (iii) EBITDA is
a measure used by our management team to make day-to-day operating
decisions.
Horizon Lines, Inc.
Operating Income to Adjusted EBITDA Segment Reconciliation
($ in Millions)
Fourth Quarter 2008
Liner Logistics Consolidated
Operating (Loss) Income $(1.8) $(21.3) $(23.1)
Depreciation and Amortization 10.4 1.0 11.4
Amortization of Vessel Dry-docking 4.0 - 4.0
EBITDA 12.6 (20.3) (7.7)
Impairment Charge 6.0 19.4 25.4
Restructuring Charge 3.1 0.1 3.2
Anti-Trust Legal Expenses 3.8 - 3.8
Adjusted EBITDA $25.5 $(0.8) $24.7
Full Year 2008
Liner Logistics Consolidated
Operating Income (Loss) $52.3 $(25.3) $27.0
Depreciation and Amortization 42.4 3.2 45.7
Amortization of Vessel Dry-docking 17.2 - 17.2
EBITDA 111.9 (22.1) 89.9
Impairment Charges 6.0 19.4 25.4
Restructuring Costs 3.1 0.1 3.2
Anti-Trust Legal Expenses 10.7 - 10.7
Union Severance 0.8 - 0.8
Adjusted EBITDA $132.5 $(2.6) $130.0
SOURCE Horizon Lines, Inc.
CONTACT:
Jim Storey
Director of Investor Relations & Corporate Communications
Horizon Lines, Inc.
+1-704-973-7107
jstorey@horizonlines.com
Web site: http://www.horizonlines.com
View printer-friendly version