CHARLOTTE, N.C., July 29, 2011 /PRNewswire/ -- Horizon Lines, Inc.
(NYSE: HRZ) today reported financial results for the fiscal second
quarter ended June 26, 2011.
Financial results are being presented on a continuing operations
basis, excluding discontinued logistics operations.
Comparison of GAAP and Non-GAAP
Earnings from Continuing Operations
|
|
(in millions, except per share
data)*
|
Quarters
Ended
|
|
06/26/11
|
06/20/10
|
|
GAAP:
|
|
|
|
Operating revenue
|
$ 307.5
|
$ 291.4
|
|
Net (loss)
income
|
$ (7.0)
|
$ 4.1
|
|
Net (loss) income
per diluted share
|
$ (0.22)
|
$ 0.14
|
|
|
|
Non-GAAP:*
|
|
|
|
EBITDA
|
$ 19.7
|
$ 28.3
|
|
Adjusted EBITDA
|
$ 6.3
|
$ 29.4
|
|
Adjusted net (loss)
income
|
$ (20.9)
|
$ 5.2
|
|
Adjusted net (loss) income per
share
|
$ (0.67)
|
$ 0.17
|
|
* See attached schedules
for reconciliation of second-quarter 2011 and 2010
reported GAAP results to Non-GAAP
results.
|
|
|
|
|
On a GAAP basis, the second-quarter net loss from continuing
operations totaled $7.0 million, or
$0.22 per diluted share, on revenue
from continuing operations of $307.5
million. On an adjusted basis, the company recorded a
second-quarter net loss from continuing operations of $20.9 million, or $0.67 per diluted share, after adjustments
totaling a negative $13.9 million, or
$0.45 a share. The adjusted net loss
excludes the net reversal of $18.2
million related to legal settlements. The amounts include
$19.2 million from the reversal of
the $30.0 million charge recorded in
the fourth quarter of fiscal 2010 for the company’s antitrust
settlement with the U.S. Department of Justice. As previously
disclosed, the company originally agreed to a fine of $45.0 million, payable over five years without
interest, to resolve the DOJ’s antitrust investigation related to
domestic ocean shipping. That fine was reduced to $15.0 million in April, and the $19.2 million reversal represents the change in
present value of the fine. The net legal settlement exclusion
is partially offset by $4.8 million
in charges related to an impairment on cranes held for sale that
were originally destined for Alaska, antitrust-related legal expenses,
refinancing costs, employee severance, and the associated tax
impact of $0.5 million (see the
reconciliation tables for specific line-item amounts).
In the year-ago second quarter, Horizon Lines reported net
income from continuing operations of $4.1
million, or $0.14 per diluted
share, on revenue of $291.4 million.
On an adjusted basis, net income from continuing operations
totaled $5.2 million, or $0.17 per diluted share, after excluding
antitrust-related legal expenses and costs for early retirement of
certain union employees totaling $1.1
million, or $0.03 per share.
Container volume for the 2011 second quarter totaled 75,208
loads, a 16.4% increase from 64,596 loads for the same period a
year ago. The volume growth was due to the company’s new
China service, which began
operating in December 2010.
Excluding China, volume totaled 61,315 loads, a decrease of
2,908 loads, or 4.5%, from 64,223 loads a year ago. Relative
to the 2010 second quarter, volumes were up in Alaska and Guam, and down in Puerto Rico and Hawaii.
Container rates, net of fuel, for the 2011 second quarter fell
7.9% to $2,989 from $3,246 a year ago. The reduction was due to the
addition of China volume, with
lower average and declining rates, and the continued pricing
pressures in Puerto Rico.
Excluding China, container rates, net of fuel, rose 0.7% to
$3,278 in the second quarter from a
year ago.
Volume, Rates and Fuel
|
|
|
Quarters
Ended
|
|
|
06/26/11
|
06/20/10
|
Change
|
|
Volume :
|
|
|
|
Domestic Ocean Services*
|
61,315
|
64,223
|
(4.5) %
|
|
China
|
13,893
|
373
|
NM
|
|
Total
|
75,208
|
64,596
|
16.4 %
|
|
|
|
Unit Revenue Per
Container:
|
|
|
|
|
Total
|
$ 3,852
|
$ 3,934
|
(2.1) %
|
|
Net of Fuel
|
$ 2,989
|
$ 3,246
|
(7.9) %
|
|
Net of Fuel, excluding China*
|
$ 3,278
|
$ 3,254
|
0.7 %
|
|
|
|
Average Fuel Cost:
|
$ 669
|
$ 475
|
40.9 %
|
|
* Alaska, Hawaii, Puerto Rico
& Guam
NM: Not
Meaningful
|
|
|
|
|
|
The company’s vessels delivered 83% on-time performance,
measured to the minute, in the second quarter, 10 percentage points
below the 93% on-time performance recorded in the same quarter a
year ago. The decline was mostly due to delays in the
trans-Pacific service related to fog and port congestion in
Asia, as well as extra mileage
required to avoid the radioactive plume resulting from the nuclear
plant incident in Fukushima, Japan. Combined on-time performance for
Alaska, Hawaii and Puerto
Rico was 91%.
Vessel utilization was 59% during the quarter, compared with 60%
in 2010, while vessel availability remained near 100%, driven by
the company’s comprehensive fleet maintenance program.
“Soft container rates in the trans-Pacific market and high fuel
prices pushed our second-quarter financial performance
significantly below last year’s,” said Stephen H. Fraser, President and Chief Executive
Officer. “Trans-Pacific rates remained under pressure throughout
most of the quarter, as some large international carriers continued
to take aggressive rate actions amid capacity expansion in the
tradelane. This excess capacity pressured overall volumes in June,
resulting in further deterioration of spot rates and the
postponement of peak-season surcharges. In addition, average fuel
costs during the quarter were up 41% from a year ago.
“The start-up of a new trans-Pacific service has coincided with
one of the most challenging periods in the history of the
tradelane,” Mr. Fraser said. “The revenue shortfalls and
costs associated with this service negatively impacted adjusted
EBITDA by approximately $16.0 million
in the second quarter, or by $11.6
million when compared against the previous year’s
performance under the Maersk space charter agreement, which ended
in December.
“Looking at our traditional domestic ocean shipping business,
Alaska and Hawaii continued to demonstrate operating
profitability during the second quarter, although higher fuel costs
and volume declines in Puerto Rico
and Hawaii negatively impacted
results relative to a year ago,” Mr. Fraser said. “Rate pressures
also persisted in Puerto Rico, due
largely to overcapacity in the tradelane. In contrast, our
operation in Alaska operated at
near-full capacity utilization during the quarter and also
continued to generate strong third-party terminal services
revenue.
“During the quarter, we continued to focus on cost management
and efficient customer service,” Mr. Fraser added. “We worked
to preserve liquidity by significantly reducing operating costs,
and we are continuing to move towards a comprehensive restructuring
of our existing debt.”
Second-Quarter 2011 Financial Highlights
- Operating Revenue – Second-quarter operating revenue
from continuing operations increased 5.5% to $307.5 million from $291.4
million a year ago. Fuel surcharges accounted for
approximately 20.7% of total revenue in the 2011 second quarter,
and 15.0% of total revenue in the year-ago quarter. The
largest factors in the $16.1 million
revenue improvement were: a $29.3
million increase in revenue from the new China service; a $14.0
million growth in fuel surcharges; a $1.0 million improvement in non-transportation
services revenue; and $1.3 million in
domestic revenue container rate increases. These gains were
partially offset by a $20.0 million
revenue decline resulting from lost space charter revenue,
approximately $19.0 million of which
was related to the expired Maersk TP1 contract, and a $9.5 million decline in revenue related to
domestic volume shortfalls.
Operating Revenue Change
(in millions)
|
|
|
|
|
Second
Quarter
|
Six
Months
|
|
|
|
|
International
revenue
|
$ 29.3
|
$ 52.5
|
|
Fuel Surcharges
|
14.0
|
16.1
|
|
Terminal services
|
1.0
|
4.7
|
|
Domestic Rate / Mix
|
1.3
|
3.6
|
|
Domestic volume
|
(20.0)
|
(40.7)
|
|
Space charter
|
(9.5)
|
(9.4)
|
|
Total Increase
|
$ 16.1
|
$ 26.8
|
|
|
|
|
|
|
|
|
- Operating Income – GAAP operating income from continuing
operations for the second quarter totaled $4.3 million, compared with $14.0 million a year ago. The GAAP
operating income includes the $18.2
million net reversal related to legal settlements and
$4.8 million in charges related to
equipment impairment, antitrust-related legal expenses, refinancing
costs, and employee severance (see reconciliation tables for
specific line-item amounts). The 2010 second-quarter GAAP
operating income includes $1.0
million in antitrust-related legal expenses and $0.1 million in costs for union employee
severance. Adjusting for these items, the second-quarter 2011
adjusted operating loss from continuing operations totaled
$9.1 million, compared with adjusted
operating income from continuing operations of $15.1 million a year ago. Second-quarter
2011 operating results were negatively impacted by the termination
of various Maersk agreements, lower fuel recovery, reduced domestic
container volumes and lower rates. These negative factors were
partially offset by vessel labor and lease savings, inland rail and
trucking savings, and strong non-transportation/terminal services
revenue.
- EBITDA – EBITDA from continuing operations totaled
$19.7 million for the 2011 second
quarter, compared with $28.3 million
for the same period a year ago. Adjusted EBITDA from
continuing operations for the second quarter of 2011 was
$6.3 million, compared with
$29.4 million for 2010. EBITDA
and adjusted EBITDA for the 2011 and 2010 second quarters were
impacted by the same factors affecting operating income, as noted
in the table below:
Adjusted EBITDA Change*
(in thousands)
|
|
|
|
|
Second
Quarter
|
Six
Months
|
|
2010 Adjusted
EBITDA
|
$ 29,434
|
$ 42,703
|
|
Termination of Maersk
agreements*
|
(20,536)
|
(42,355)
|
|
Fuel recovery shortfall
deterioration
|
(6,919)
|
(14,553)
|
|
Rate, net of fuel,
decline
|
(3,922)
|
(3,751)
|
|
Domestic volume
shortfall
|
(3,795)
|
(4,728)
|
|
Equipment required after Maersk
termination
|
(1,699)
|
(3,491)
|
|
Vessel operating
costs
|
(1,219)
|
219
|
|
Sale of joint venture
|
(799)
|
(760)
|
|
Space charter revenue
reduction
|
(595)
|
(1,160)
|
|
No vessel incidents in
2011
|
-
|
2,206
|
|
Non-transportation revenue
gain
|
695
|
2,973
|
|
Cost savings
initiatives
|
3,635
|
4,251
|
|
China volume
|
11,596
|
22,850
|
|
Other
|
409
|
101
|
|
2011 Adjusted
EBITDA*
|
$ 6,285
|
$ 4,505
|
|
*Termination of Maersk
agreements includes loss of TP1 trans-Pacific fixed-income
stream,
terminal services, and
additional expenses associated with stevedoring and
containers.
|
|
|
|
|
- Shares Outstanding – The company had a weighted daily
average of 31.0 million fully diluted shares outstanding for the
second quarter of 2011, compared with 30.9 million a year ago.
- Six-Month Results – For the six months ended
June 26, 2011, operating revenue from
continuing operations increased 4.8% to $592.9 million from $566.0
million for the same period in 2010. EBITDA from continuing
operations totaled $12.3 million
compared with $40.4 million a year
ago. Adjusted EBITDA for the first six months of 2011 totaled
$4.5 million, after excluding the
$18.2 million net reversal related to
legal settlements and $10.4 million
in antitrust-related legal expenses, impairment charges,
refinancing costs and severance-related charges (see reconciliation
tables for specific line-item amounts). Adjusted EBITDA for the
first six months of 2010 totaled $42.7
million, after excluding charges related to
antitrust-related legal expenses and severance-related charges
totaling $2.3 million. The net loss
from continuing operations for the 2011 six-month period totaled
$40.3 million, or $1.30 per share, compared with a net loss from
continuing operations of $7.6
million, or $0.24 per share,
for the same period a year earlier. The adjusted net loss
from continuing operations for the first six months of 2011 totaled
$48.6 million, or $1.57 per share, compared with an adjusted net
loss from continuing operations of $5.2
million, or $0.17 per share, a
year ago.
- Liquidity, Credit Facility Compliance & Debt Structure
– As of June 26, 2011, the
company had total liquidity of $21.3
million, consisting of $3.4
million in cash and $17.9
million of revolver availability. The company’s
trailing 12-month interest coverage and senior secured leverage
ratios were 1.88 times and 5.17 times, respectively, in compliance
with the amended credit agreement requirement for the second
quarter of above 1.5 times and below 6.25 times, respectively.
Funded debt outstanding totaled $611.3
million, compared with $585.3
million at the end of the first quarter, and $563.1 million a year ago. The funded debt
outstanding at June 26, 2011,
consisted of $272.9 million in senior
secured debt, $330.0 million in
convertible notes, and $8.4 million
of capital lease obligations, at a weighted average interest rate
of 5.63%.
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 made for their
refinancing by that date. The company expects to experience a
covenant breach under the senior credit facility in connection with
the amended financial covenants upon the close of the third quarter
of 2011, when covenant ratios tighten to above 2.75 times for
interest coverage and below 3.0 times for senior secured leverage.
The company anticipates that it will be refinanced prior to
any possible covenant noncompliance, or will work with its lenders
and their advisors to obtain waivers and amendments.
Please see attached schedules for the reconciliation of
second-quarter and first-half 2011 and 2010 reported GAAP results
and Non-GAAP adjusted results.
Second-Quarter Tradelane Review
Second-quarter volume in Alaska
improved from a year ago, and business conditions strengthened from
the first-quarter due to seasonality and the state’s improving
economy. The company’s Alaska
business continued to benefit from third-party terminal services
operations, and also experienced growth in seafood, groceries and
refrigerated commodities, as well as household goods. The
company expects volumes to remain strong through the third quarter.
In Hawaii, second-quarter
volume contracted from a year ago, as the business environment
remained challenging due to the state’s slow and uneven economic
recovery. A gradual recovery in tourism is expected to slowly
add jobs, although overall construction remains flat and the state
government continues to operate under fiscal constraints. The
company believes the steady military sector and the gradual
economic recovery will help stabilize volumes as the year
progresses.
Second-quarter volume in Puerto
Rico declined from a year ago, due to the island’s
continuing recession and ongoing overcapacity. However, the company
expects volume to improve in the second half of the year, due in
part to the recent decision by a competitor to suspend vessel
service from the Northeast.
The company’s new China service
experienced a very challenging second quarter due to general market
rate softness and high fuel prices. The company expects to operate
at near-full capacity through the third quarter, but at
significantly lower-than-anticipated container rates. The
overcapacity situation has caused some carriers to pull out of the
market or postpone seasonal sailings, which might help stabilize
rates.
In Guam, the company’s
second-quarter volume increased from a year ago, due to service and
schedule improvements combined with some growth in construction
project business. While overall tradelane volume remains stable,
the company expects its second-half volumes to improve from
year-earlier levels, due largely to service improvements and
construction projects. Additional new construction projects
associated with the military buildup are expected to be placed on
hold until the U.S. and Japan
agree to a new timeline for the military relocation from
Okinawa to Guam. In late June, the two countries
agreed to delay the move beyond 2014, increasing the likelihood
that spending associated with the Guam buildup will be gradual and spread over
numerous years.
Outlook & Refinancing Update
While challenges remain in the second half of 2011, the company
is somewhat encouraged by developments in its domestic ocean
business. Volume and business trends in Alaska remain strong, and Hawaii volumes are showing signs of
stabilization, as the state’s economy continues to slowly improve.
Puerto Rico remains in a
multi-year recession, but volumes and prices could begin to
stabilize, partly as a result of a competitor’s recent decision
suspend vessel operations from the port of Philadelphia.
The company’s new trans-Pacific express service to China remains significantly challenged by the
depressed rate environment and high fuel prices, despite good
customer support and the recent departure of some new carriers
serving the tradelane.
“Financially, we anticipate that our China service will continue to operate at a
sizeable loss in absolute terms and at a significant deficit
relative to the revenue and operating profit generated by the
previous Maersk business,” Mr. Fraser said. “However, the rate of
loss should begin to improve in the third quarter. Overall, we
expect adjusted EBITDA to improve in the second half from the same
period a year ago, as a result of stabilizing fuel prices and more
secure conditions in our Jones Act markets. Due to the
second-quarter shortfall, we now expect full-year adjusted EBITDA
will be below our previous projections.”
Regarding the company’s refinancing, Horizon Lines and the
majority of the holders of its 4.25% convertible senior notes
continue to make significant progress in negotiations concerning
certain substantive modifications to the recapitalization
transaction announced on June 1,
2011, and the parties anticipate completing such
negotiations and announcing a definitive transaction in the next
several weeks. There is no assurance that negotiations will
be successful.
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 provides express
trans-Pacific service between the U.S. West Coast and the ports of
Ningbo and Shanghai in China, 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, “anticipate,” “will,” “may,” “expect,” “would,”
“could,” and similar expressions or phrases identify
forward-looking statements.
Factors that may cause expected results or anticipated events or
circumstances discussed in this press release to not occur or to
differ from expected results include: our ability to maintain
adequate liquidity to operate our business; our ability to repay
our indebtedness; volatility in fuel prices and in freight rates;
decreases in shipping volumes; or our ability to continue as a
going concern.
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
March 28, 2011, 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
26,
|
|
December
26,
|
|
|
2011
|
|
2010
|
|
Assets
|
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
$ 3,389
|
|
$
2,751
|
|
Accounts receivable, net
of allowance of $6,768 and $6,959 at
|
|
|
|
|
June 26, 2011 and December
26, 2010, respectively
|
129,066
|
|
112,196
|
|
Prepaid vessel
rent
|
4,131
|
|
4,076
|
|
Materials and
supplies
|
35,665
|
|
29,413
|
|
Deferred tax
asset
|
3,250
|
|
2,964
|
|
Assets held for
sale
|
15,420
|
|
18,215
|
|
Assets of discontinued
operations
|
1,367
|
|
6,883
|
|
Other current
assets
|
13,162
|
|
7,406
|
|
Total current
assets
|
205,450
|
|
183,904
|
|
Property and equipment,
net
|
170,696
|
|
176,442
|
|
Goodwill
|
314,149
|
|
314,149
|
|
Intangible assets,
net
|
74,910
|
|
80,824
|
|
Other long-term
assets
|
29,756
|
|
30,438
|
|
Total assets
|
$ 794,961
|
|
$
785,757
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts
payable
|
$ 31,666
|
|
$
43,413
|
|
Current portion of
long-term debt, including capital leases
|
593,767
|
|
508,793
|
|
Accrued vessel
rent
|
3,697
|
|
3,697
|
|
Current liabilities of
discontinued operations
|
579
|
|
3,699
|
|
Other accrued
liabilities
|
111,041
|
|
108,499
|
|
Total current
liabilities
|
740,750
|
|
668,101
|
|
Capital leases, net of
current portion
|
6,661
|
|
7,530
|
|
Deferred rent
|
15,790
|
|
18,026
|
|
Deferred tax
liability
|
5,222
|
|
4,775
|
|
Other long-term
liabilities
|
25,030
|
|
47,533
|
|
Total
liabilities
|
793,453
|
|
745,965
|
|
|
|
|
|
|
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, 34,707
|
|
|
|
|
shares issued and 30,907
shares outstanding as of June 26, 2011
|
|
|
|
|
and 34,546 shares issued
and 30,746 shares outstanding as of
|
|
|
|
|
December 26,
2010
|
347
|
|
345
|
|
Treasury stock, 3,800
shares at cost
|
(78,538)
|
|
(78,538)
|
|
Additional paid in
capital
|
193,758
|
|
193,266
|
|
Accumulated
deficit
|
(113,331)
|
|
(73,843)
|
|
Accumulated other
comprehensive loss
|
(728)
|
|
(1,438)
|
|
Total stockholders’
equity
|
1,508
|
|
39,792
|
|
Total liabilities and
stockholders’ equity
|
$ 794,961
|
|
$
785,757
|
|
|
|
|
|
Horizon
Lines, Inc.
|
|
Unaudited
Condensed Consolidated Statements of Operations
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Quarters
Ended
|
|
Six Months
Ended
|
|
|
June
26,
|
|
June
20,
|
|
June
26,
|
|
June
20,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
$ 307,527
|
|
$ 291,387
|
|
$ 592,881
|
|
$ 566,045
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
Vessel
|
117,040
|
|
98,454
|
|
225,210
|
|
200,899
|
|
Marine
|
61,603
|
|
53,622
|
|
121,771
|
|
105,538
|
|
Inland
|
54,806
|
|
45,256
|
|
104,683
|
|
87,202
|
|
Land
|
36,985
|
|
35,591
|
|
74,556
|
|
71,437
|
|
Rolling stock
rent
|
11,717
|
|
10,018
|
|
23,263
|
|
19,823
|
|
Cost of services
(excluding depreciation expense)
|
282,151
|
|
242,941
|
|
549,483
|
|
484,899
|
|
Depreciation and
amortization
|
11,280
|
|
11,030
|
|
22,493
|
|
21,875
|
|
Amortization of vessel
dry-docking
|
4,081
|
|
3,318
|
|
8,158
|
|
6,371
|
|
Selling, general and
administrative
|
22,107
|
|
20,959
|
|
46,396
|
|
41,476
|
|
Impairment
charge
|
2,818
|
|
-
|
|
2,818
|
|
-
|
|
Legal
settlements
|
(19,202)
|
|
-
|
|
(19,202)
|
|
-
|
|
Miscellaneous (income)
expense, net
|
(52)
|
|
(825)
|
|
437
|
|
(690)
|
|
Total operating
expense
|
303,183
|
|
277,423
|
|
610,583
|
|
553,931
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
4,344
|
|
13,964
|
|
(17,702)
|
|
12,114
|
|
Other expense:
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
12,910
|
|
9,846
|
|
23,626
|
|
19,676
|
|
Loss on modification of
debt
|
11
|
|
-
|
|
630
|
|
-
|
|
Other expense,
net
|
14
|
|
6
|
|
30
|
|
5
|
|
(Loss) income from
continuing operations before income tax (benefit)
expense
|
(8,591)
|
|
4,112
|
|
(41,988)
|
|
(7,567)
|
|
Income tax (benefit)
expense
|
(1,585)
|
|
(13)
|
|
(1,671)
|
|
3
|
|
(Loss) income from continuing
operations
|
(7,006)
|
|
4,125
|
|
(40,317)
|
|
(7,570)
|
|
Income (loss) from discontinued
operations
|
1,590
|
|
(475)
|
|
830
|
|
(2,024)
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
$ (5,416)
|
|
$ 3,650
|
|
$ (39,487)
|
|
$ (9,594)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net (loss)
income per share:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
(0.22)
|
|
$
0.14
|
|
$
(1.30)
|
|
$
(0.24)
|
|
Discontinued
operations
|
0.05
|
|
$
(0.02)
|
|
0.03
|
|
$
(0.07)
|
|
Basic and diluted net
(loss) income per share
|
$
(0.17)
|
|
$
0.12
|
|
$
(1.27)
|
|
$
(0.31)
|
|
|
|
|
|
|
|
|
|
|
Number of shares used in
calculation:
|
|
|
|
|
|
|
|
|
Basic
|
31,018
|
|
30,595
|
|
30,971
|
|
30,431
|
|
Diluted
|
31,018
|
|
30,942
|
|
30,971
|
|
30,431
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common
share
|
$
-
|
|
$
0.05
|
|
$
-
|
|
$
0.10
|
|
|
|
|
|
|
|
|
|
Horizon
Lines, Inc.
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
June
26,
|
|
June
20,
|
|
|
2011
|
|
2010
|
|
|
|
|
|
|
Cash flows
from operating activities:
|
|
|
|
|
Net loss from continuing
operations
|
$ (40,317)
|
|
$ (7,570)
|
|
Adjustments to reconcile
net loss to net cash used in operating activities:
|
|
|
|
|
Depreciation
|
12,332
|
|
11,716
|
|
Amortization of other
intangible assets
|
10,161
|
|
10,159
|
|
Amortization of vessel
dry-docking
|
8,158
|
|
6,371
|
|
Amortization of deferred
financing costs
|
2,018
|
|
1,700
|
|
Impairment
charge
|
2,818
|
|
-
|
|
Legal
settlement
|
(19,202)
|
|
-
|
|
Loss on modification of
debt
|
630
|
|
-
|
|
Deferred income
taxes
|
161
|
|
44
|
|
Gain on equipment
disposals
|
(368)
|
|
-
|
|
Gain on sale of interest
in joint venture
|
-
|
|
(724)
|
|
Stock-based
compensation
|
364
|
|
1,563
|
|
Accretion of interest on
convertible notes
|
5,764
|
|
5,313
|
|
Accretion of interest on
legal settlements
|
284
|
|
-
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
(19,280)
|
|
(5,750)
|
|
Materials and
supplies
|
(6,251)
|
|
2,263
|
|
Other current
assets
|
(5,755)
|
|
(1,226)
|
|
Accounts
payable
|
(11,747)
|
|
(2,276)
|
|
Accrued
liabilities
|
1,554
|
|
(6,137)
|
|
Vessel rent
|
(1,894)
|
|
(14,115)
|
|
Vessel dry-docking
payments
|
(7,966)
|
|
(10,764)
|
|
Accrued legal
settlements
|
(884)
|
|
-
|
|
Other
assets/liabilities
|
(838)
|
|
322
|
|
Net cash used in operating
activities
|
(70,258)
|
|
(9,111)
|
|
|
|
|
|
|
Cash flows
from investing activities:
|
|
|
|
|
Purchases of property and
equipment
|
(7,041)
|
|
(5,442)
|
|
Proceeds from the sale of
property and equipment
|
1,402
|
|
234
|
|
Proceeds from the sale of
interest in joint venture
|
-
|
|
1,100
|
|
Net cash used in investing
activities
|
(5,639)
|
|
(4,108)
|
|
|
|
|
|
|
Cash flows
from financing activities:
|
|
|
|
|
Borrowing under revolving
credit facility
|
97,500
|
|
75,500
|
|
Payments on revolving
credit facility
|
(9,000)
|
|
(45,500)
|
|
Payments on long-term
debt
|
(9,375)
|
|
(9,375)
|
|
Payments of financing
costs
|
(6,848)
|
|
-
|
|
Payments on capital lease
obligations
|
(783)
|
|
-
|
|
Dividends to
stockholders
|
-
|
|
(3,060)
|
|
Common stock issued under
employee stock purchase plan
|
-
|
|
70
|
|
Net cash provided by
financing activities
|
71,494
|
|
17,635
|
|
|
|
|
|
|
Net (decrease) increase in
cash from continuing operations
|
(4,403)
|
|
4,416
|
|
Net increase (decrease) in
cash from discontinued operations
|
5,041
|
|
(6,263)
|
|
Net increase (decrease) in
cash
|
638
|
|
(1,847)
|
|
Cash at beginning of
period
|
2,751
|
|
6,419
|
|
Cash at end of
period
|
$ 3,389
|
|
$ 4,572
|
|
|
|
|
|
Horizon
Lines, Inc.
|
|
Adjusted
Operating (Loss) Income Reconciliation
|
|
($ in
Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
June 26,
2011
|
|
Quarter
Ended
June 20,
2010
|
|
Six Months
Ended
June 26,
2011
|
|
Six Months
Ended
June 20,
2010
|
|
Operating Income
(Loss)
|
$
4,344
|
|
$
13,964
|
|
$
(17,702)
|
|
$
12,114
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Impairment Charge
|
2,818
|
|
-
|
|
2,818
|
|
-
|
|
Antitrust Legal
Expenses
|
949
|
|
1,030
|
|
3,128
|
|
1,988
|
|
Refinancing Costs
|
878
|
|
-
|
|
878
|
|
-
|
|
Union/Other Severance
|
151
|
|
97
|
|
2,964
|
|
360
|
|
Legal Settlements
|
(18,202)
|
|
-
|
|
(18,202)
|
|
-
|
|
Total Adjustments
|
(13,406)
|
|
1,127
|
|
(8,414)
|
|
2,348
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating (Loss)
Income
|
$
(9,062)
|
|
$
15,091
|
|
$
(26,116)
|
|
$
14,462
|
|
|
|
|
|
|
|
|
|
Horizon
Lines, Inc.
|
|
Adjusted Net
(Loss) Income Reconciliation
|
|
($ in
Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
June 26,
2011
|
|
Quarter
Ended
June 20,
2010
|
|
Six Months
Ended
June 26,
2011
|
|
Six Months
Ended
June 20,
2010
|
|
Net (Loss) Income
|
$
(5,416)
|
|
$
3,650
|
|
$
(39,487)
|
|
$
(9,594)
|
|
Net Income (Loss) from
Discontinued Operations
|
1,590
|
|
(475)
|
|
830
|
|
(2,024)
|
|
Net (Loss) Income from
Continuing Operations
|
(7,006)
|
|
4,125
|
|
(40,317)
|
|
(7,570)
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Impairment Charge
|
2,818
|
|
-
|
|
2,818
|
|
-
|
|
Antitrust Legal
Expenses
|
949
|
|
1,030
|
|
3,128
|
|
1,988
|
|
Loss on Modification of
Debt/Other Refinancing Costs
|
889
|
|
-
|
|
1,508
|
|
-
|
|
Union/Other Severance
|
151
|
|
97
|
|
2,964
|
|
360
|
|
Accretion of legal
settlement
|
45
|
|
-
|
|
284
|
|
-
|
|
Legal Settlement
|
(18,202)
|
|
-
|
|
(18,202)
|
|
-
|
|
Tax Impact of
Adjustments
|
(521)
|
|
(7)
|
|
(775)
|
|
(5)
|
|
Total Adjustments
|
(13,871)
|
|
1,120
|
|
(8,275)
|
|
2,343
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net (Loss) Income from
Continuing Operations
|
$
(20,877)
|
|
$
5,245
|
|
$
(48,592)
|
|
$
(5,227)
|
|
|
|
|
|
|
|
|
|
Horizon
Lines, Inc.
|
|
Adjusted Net
(Loss) Income Per Share Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
June 26,
2011
|
|
Quarter
Ended
June 20,
2010
|
|
Six Months
Ended
June 26,
2011
|
|
Six Months
Ended
June 20,
2010
|
|
Net (Loss) Income Per
Share
|
$
(0.17)
|
|
$
0.12
|
|
$
(1.27)
|
|
$
(0.31)
|
|
Net Income (Loss) Per Shares
from Discontinued Operations
|
0.05
|
|
(0.02)
|
|
0.03
|
|
(0.07)
|
|
Net (Loss) Income Per Share from
Continuing Operations
|
(0.22)
|
|
0.14
|
|
(1.30)
|
|
(0.24)
|
|
|
|
|
|
|
|
|
|
|
Adjustments Per
Share:
|
|
|
|
|
|
|
|
|
Impairment Charge
|
0.09
|
|
-
|
|
0.09
|
|
-
|
|
Antitrust Legal
Expenses
|
0.03
|
|
0.03
|
|
0.10
|
|
0.06
|
|
Loss on Modification of
Debt/Other Refinancing Costs
|
0.03
|
|
-
|
|
0.05
|
|
-
|
|
Union/Other Severance
|
-
|
|
-
|
|
0.10
|
|
0.01
|
|
Loss on Modification of
Debt
|
-
|
|
-
|
|
-
|
|
-
|
|
Legal Settlements
|
(0.59)
|
|
-
|
|
(0.59)
|
|
-
|
|
Tax Impact of
Adjustments
|
(0.01)
|
|
-
|
|
(0.03)
|
|
-
|
|
Total Adjustments
|
(0.45)
|
|
0.03
|
|
(0.27)
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net (Loss) Income Per
Share from Continuing Operations
|
$
(0.67)
|
|
$
0.17
|
|
$
(1.57)
|
|
$
(0.17)
|
|
|
|
|
|
|
|
|
|
Horizon
Lines, Inc.
|
|
EBITDA and
Adjusted EBITDA Reconciliation
|
|
($ in
Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
June 26,
2011
|
|
Quarter
Ended
June 20,
2010
|
|
Six Months
Ended
June 26,
2011
|
|
Six Months
Ended
June 20,
2010
|
|
Net (Loss) Income
|
$
(5,416)
|
|
$
3,650
|
|
$
(39,487)
|
|
$
(9,594)
|
|
Net Income (Loss) from
Discontinued Operations
|
1,590
|
|
(475)
|
|
830
|
|
(2,024)
|
|
Net (Loss) Income from
Continuing Operations
|
(7,006)
|
|
4,125
|
|
(40,317)
|
|
(7,570)
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net
|
12,910
|
|
9,846
|
|
23,626
|
|
19,676
|
|
Tax (Benefit) Expense
|
(1,585)
|
|
(13)
|
|
(1,671)
|
|
3
|
|
Depreciation and
Amortization
|
15,361
|
|
14,348
|
|
30,651
|
|
28,246
|
|
EBITDA
|
19,680
|
|
28,306
|
|
12,289
|
|
40,355
|
|
Impairment Charge
|
2,818
|
|
-
|
|
2,818
|
|
-
|
|
Antitrust Legal
Expenses
|
949
|
|
1,030
|
|
3,128
|
|
1,988
|
|
Loss on Modification of
Debt/Other Refinancing Costs
|
889
|
|
-
|
|
1,508
|
|
-
|
|
Union/Other Severance
|
151
|
|
97
|
|
2,964
|
|
360
|
|
Legal Settlements
|
(18,202)
|
|
-
|
|
(18,202)
|
|
-
|
|
Adjusted EBITDA
|
$
6,285
|
|
$
29,433
|
|
$
4,505
|
|
$
42,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
June YTD
Free Cash Flow
|
|
($ in
millions)
|
|
|
2011
|
|
2010
|
|
Adjusted EBITDA
|
$ 4.5
|
|
$ 42.7
|
|
Stock Based
Compensation
|
0.4
|
|
1.6
|
|
Gain on Equipment
Disposals
|
(0.5)
|
|
(0.7)
|
|
Working Capital
|
(42.3)
|
|
(6.8)
|
|
Vessel Payments in Access of
Accrual
|
(1.9)
|
|
(14.1)
|
|
Annual Cash Incentive
Plan
|
-
|
|
(4.7)
|
|
Capital Expenditures
|
(7.1)
|
|
(5.4)
|
|
Dry-Dock Expenditures
|
(8.0)
|
|
(11.2)
|
|
Sale of joint venture
|
-
|
|
1.1
|
|
Interest, Net
|
(13.2)
|
|
(13.1)
|
|
Proceeds from Equipment
Disposals
|
1.4
|
|
0.2
|
|
Taxes
|
(0.1)
|
|
0.1
|
|
Adjusted Free Cash
Flow
|
(66.8)
|
|
(10.3)
|
|
Antitrust Legal
Expenses
|
(5.8)
|
|
(2.6)
|
|
Restructuring Charge
Payments
|
(0.9)
|
|
(0.1)
|
|
Equipment Impairment
|
(0.5)
|
|
-
|
|
Union / Other
Severance
|
(1.0)
|
|
(0.2)
|
|
Free Cash Flow
|
(75.0)
|
|
(13.2)
|
|
Debt Borrowing
|
97.5
|
|
75.5
|
|
Debt/Capital Lease
Payments
|
(19.2)
|
|
(54.9)
|
|
Financing Fees / Loss of Debt
Modification
|
(7.7)
|
|
-
|
|
Dividends
|
-
|
|
(3.0)
|
|
Net Cash Flow for Continuing
Operations
|
$ (4.4)
|
|
$ 4.4
|
|
|
|
|
|
|
Net Cash Flow for Discontinued
Operations
|
5.0
|
|
(6.3)
|
|
|
|
|
|
|
Net Cash Flow
|
$ 0.6
|
|
$ (1.9)
|
|
|
|
|
|
SOURCE Horizon Lines, Inc.