Horizon Lines, Inc. (NYSE:HRZ) reported results for its fiscal first quarter ended March 21, 2010. On a GAAP basis, the first-quarter net loss totaled $13.2 million, or $0.43 per share, on revenue of $286.1 million. This compares with a net loss of $10.0 million, or $0.33 per share on revenue of $272.4 million for the same period a year ago. The adjusted first-quarter 2010 net loss was $12.0 million, or $0.39 per share, after excluding charges totaling $1.2 million pre-tax, or $0.04 per share after tax adjustment, for antitrust-related legal expenses and for a voluntary separation program for certain union employees. The adjusted net loss for the 2009 first quarter totaled $4.7 million, or $0.15 per share, which excluded antitrust-related legal fees and restructuring charges totaling $5.3 million pre-tax, or $0.18 per share after tax adjustments.
"Horizon Lines finished a challenging quarter in line with our own internal expectations," said Chuck Raymond, Chairman, President and Chief Executive Officer. "As a result, our view of the overall year remains in line with our outlook in late January.
"After a slow start to what typically is our weakest quarter of the year, overall volume turned slightly positive in March, a trend that has continued in April," Raymond said. "We also managed costs well and our overall market share appears to be holding steady.
"During the quarter, we faced ongoing rate pressures, high fuel costs and increased contractual labor expenses relative to last year, and we expect these to continue," Raymond noted. "We are meeting these anticipated challenges through stringent cost management initiatives as well as through strategic steps designed to drive future revenue growth and cost efficiencies. These steps include the previously disclosed early renewal of a long-term terminal services agreement with APM Terminals North America and our plans to launch our own Asia-U.S. West Coast liner service in December.
"In the meantime, we are beginning to see signs of economic stabilization and modest improvement in two of our three domestic tradelanes. Our business in Hawaii is reflecting a modest economic recovery and Alaska is stabilizing. The four-year recession in Puerto Rico is ongoing. Given these overall trends, we could experience modest volume improvement as the year progresses. Accordingly, we still expect our 2010 financial performance to be in the range of 2009 actual results."
First-Quarter 2010 Financial Highlights:
-- Operating Revenue - First-quarter operating revenue increased 5.0% to $286.1 million from $272.4 million a year ago. The largest factor in the $13.7 million revenue gain was a $14.8 million increase in fuel surcharges to help partially mitigate higher fuel costs. The increase was partially offset by a $4.0 million decline related to a 1.9% decrease in container volume, due primarily to weak market conditions in Puerto Rico and Alaska. Hawaii/Guam registered a modest volume increase for the quarter relative to a year ago. In general, all of our markets continued to experience challenging business conditions due to ongoing softness in consumer spending, tourism and commercial construction.
-- Operating (Loss) Income - The GAAP operating loss for the first quarter totaled $3.0 million, compared with an operating loss of $0.8 million for the first quarter of 2009. The 2010 GAAP operating loss includes expenses of $1.2 million, consisting of $1.0 million in antitrust-related legal expenses and $0.2 million in union severance charges. The 2009 GAAP operating income includes $4.4 million in antitrust-related legal expenses and a $0.8 million restructuring charge. Excluding these items, the first-quarter 2010 adjusted operating loss totaled $1.8 million, compared with adjusted operating income of $4.4 million for the prior year's first quarter. The first-quarter operating loss widened from last year primarily due to the inability to fully recover fuel price increases, as well as from overall volume shortfalls, vessel incidents, rate decreases and contractual labor assessments. These were partially offset by overhead savings related to January 2009 non-union workforce reductions, and savings from new terminal services agreements.
-- EBITDA - EBITDA totaled $11.1 million for the 2010 first quarter, compared with $14.0 million for the same period a year ago. Adjusted EBITDA for the first quarter of 2010 was $12.3 million, compared with $19.2 million for 2009. EBITDA and adjusted EBITDA for the 2010 and 2009 first quarters were impacted by the same factors affecting operating (loss) income.
-- Shares Outstanding - The company had a weighted daily average of 30.5 million shares outstanding for the first quarter of 2010, compared with 30.4 million for the first quarter of 2009.
-- Liquidity, Credit Facility Compliance & Debt Structure - As of March 21, 2010, the company had total liquidity of $50.0 million, consisting of $4.7 million in cash and $45.3 million of effective revolver availability. The company's trailing 12-month interest coverage and senior secured leverage ratios were 3.86 times and 2.32 times, respectively, as compared to the credit agreement requirement of above 3.5 times and below 2.75 times, respectively. Funded debt outstanding totaled $577.8 million, consisting of $247.8 million in senior secured debt and $330 million in convertible notes, at a weighted average interest rate of 4.34%. The company's debt matures in 2012.
