Horizon Lines quarter revenue rises 9.4 percent
Horizon Lines, Inc. on May 9th reported financial results for the fiscal first quarter ended March 25, 2012. Financial results are presented on a continuing operations basis, excluding the discontinued trans-Pacific FSX service and logistics operations. Per-share amounts reflect a 1-for-25 reverse stock split, effective December 7, 2011, the carrier said in a press release.
In the reporting period, container volume for the 2012 first quarter totaled 57,086 revenue loads, up 0.4% from 56,841 loads for the same period a year ago. Unit revenue per container totaled $4,257 in the 2012 first quarter, compared with $3,896 a year ago. First-quarter unit revenue per container, net of fuel surcharges, was $3,225, up 1.0% from $3,192 a year ago. Bunker fuel costs averaged $693 per metric ton in the first quarter, 26.5% above the average price of $548 per ton in the same quarter a year ago.
First-quarter operating revenue from continuing operations increased 9.4% to $263.4 million from $240.7 million a year ago. The factors driving the $22.7 million revenue improvement were: an $18.9 million increase in fuel surcharges; growth of $1.7 million in revenue container rates; a $1.3 million rise in other non-transportation services revenue; and a $0.8 million gain in volume.
The GAAP operating loss from continuing operations for the first quarter totaled $6.1 million, compared with an operating loss of $9.4 million a year ago. The 2012 first-quarter GAAP operating loss includes a $1.1 million charge for severance expenses, $0.8 million in antitrust-related legal expenses, and $0.7 million in refinancing costs. The 2011 first-quarter GAAP operating loss includes a $2.8 million charge related to severance expenses and $2.2 million in antitrust-related legal expenses. Adjusting for these items, the first-quarter 2012 adjusted operating loss from continuing operations totaled $3.5 million, compared with an adjusted operating loss of $4.4 million a year ago. First-quarter 2012 operating results benefited from improved partial recovery of increased fuel costs, higher earnings from transportation services contracts, and slightly better volumes. The positive factors were partially offset by costs associated with vessel-related service disruptions, variable expense increases that exceeded the container rate improvements, and higher overhead costs.
EBITDA from continuing operations totaled $5.6 million for the 2012 first quarter, compared with $5.0 million for the same period a year ago. Adjusted EBITDA from continuing operations for the first quarter of 2012 was $10.9 million, an increase of 2.8% from $10.6 million for 2011. EBITDA and adjusted EBITDA for the 2012 and 2011 first quarters were impacted by the same factors affecting operating loss. Additionally, 2012 adjusted EBITDA reflects the exclusion of a $13.7 million non-cash loss on marking the conversion feature in the company’s convertible debt to fair value, partially offset by the elimination of a non-cash $10.3 million net gain resulting from the conversion of debt into equity. First-quarter 2011 adjusted EBITDA also excluded a charge of $0.6 million related to a loss on the modification of debt.
On a GAAP basis, the first-quarter net loss from continuing operations totaled $26.8 million, or $8.58 per share, compared with a 2011 first-quarter net loss from continuing operations of $20.2 million, or $16.43 per share. On an adjusted basis, the first-quarter net loss from continuing operations totaled $21.0 million, or $6.74 per share, compared with an adjusted net loss of $15.8 million, or $12.83 per share, a year ago. The 2012 and 2011 first-quarter net losses reflect the same items impacting adjusted EBITDA in each period. Additionally, the net loss for both periods reflects noncash accretion of payments associated with antitrust-related legal settlements, and the tax impact on the adjustments.
The company had a weighted daily average of 3.1 million basic and fully diluted shares outstanding for the first quarter of 2012, compared with 1.2 million basic and fully diluted shares outstanding for the first quarter a year ago. Shares outstanding reflect a 1-for-25 reverse stock split approved at a special meeting of stockholders on December 2, 2011, and made effective on December 7, 2011. Liquidity, Credit Facility Compliance & Debt Structure – Based on accounts receivable outstanding as of March 25, 2012, the company had total liquidity of $50.9 million, consisting of $24.9 million in cash and $26.0 million of asset-based loan (“ABL”) borrowing availability. Funded debt outstanding totaled $592.7 million, consisting of: $225.0 million of 11.00% first-lien senior secured notes due October 15, 2016; $100.0 million of second-lien senior secured notes due October 15, 2016, bearing interest at 13.00% if paid in cash, 14.00% if paid 50% in cash and 50% in kind, and 15.00% if paid in kind with additional second-lien secured notes; $228.4 million of 6.00% convertible secured notes due April 15, 2017; and $30.0 million drawn on the ABL facility, bearing interest at a weighted average of 3.73%. Also remaining outstanding were $2.2 million of 4.25% convertible notes due August 15, 2012, and a $7.1 million capital lease. The company’s weighted average interest rate for funded debt was 9.01%. Availability under the ABL facility is based on a percentage of eligible accounts receivable and customary reserves, with a maximum of $100.0 million. Letters of credit issued against the ABL facility totaled $19.6 million at March 25, 2012.
Stephen H. Fraser, interim President and Chief Executive Officer comments: “Horizon Lines generated slightly improved revenue container volume and higher EBITDA and adjusted EBITDA in the first quarter relative to a year ago, despite challenges that included severe winter weather in Alaska, higher fuel prices and increased expenses.”
“Hawaii’s performance improved significantly on solid customer support and an improving economy. Alaska’s results were also better despite record cold and snowfall, which had a significant, adverse impact on customer demand and operations. Alaska was buoyed in part by domestic southbound volume that was driven by a strong seafood market. Earnings declined in Puerto Rico from the same period a year ago, due to continued slow business conditions and vessel service disruptions. “In 2012, we are making significant investments in our Jones Act fleet with the dry-docking of three of our Puerto Rico vessels in Asia,” Mr. Fraser said. “Although dry-docking our vessels in Asia will add considerable transit expense in 2012, it will also facilitate extensive maintenance and high-quality enhancements that are instrumental in helping maintain service integrity in the Puerto Rico market.”
About Horizon Lines
Horizon Lines, Inc. is one of the nation’s leading domestic ocean shipping companies and the only ocean cargo carrier serving all three noncontiguous domestic markets of Alaska, Hawaii and Puerto Rico from the continental United States. The company maintains a fleet of 15 fully Jones Act qualified vessels and operates five port terminals in Alaska, Hawaii and Puerto Rico. A trusted partner for many of the nation’s leading retailers, manufacturers and U.S. government agencies, Horizon Lines provides reliable transportation services that leverage its unique combination of ocean transportation and inland distribution capabilities to deliver goods that are vital to the prosperity of the markets it serves. The company is based in Charlotte, NC, and its stock trades on the over-the-counter market under the symbol HRZL.