Exhibit 99.2
HORIZON LINES REPORTS FOURTH QUARTER 2005 EARNINGS
CHARLOTTE, North Carolina, February 24, 2006 - Horizon Lines, Inc. (NYSE: HRZ) reported a gain in fourth quarter 2005 earnings versus the 2004 fourth quarter, adjusted to exclude the impact of non-recurring expenses associated with the Company’s initial public offering (IPO) in September 2005, a December 2004 debt issuance, and the July 2004 acquisition of the Company.
Including non-recurring IPO and transaction-related expenses, the net loss for the fourth quarter 2005 was $(10.9) million or $(.38) per share, compared to a net loss of $(5.2) million, or $(.62) per share in the 2004 fourth quarter. However, after adjustment to exclude non-recurring IPO and transaction related expenses, adjusted net income was $4.9 million or $.15 per share in the fourth quarter of 2005, compared to an adjusted net loss of $(2.0) million or $(.06) per share in the fourth quarter of 2004.
Operating revenue increased by $5.6 million or 2.0% to $279.0 million for the fourth quarter of 2005 versus $273.4 million in the 2004 fourth quarter.
Operating income for the fourth quarter 2005 was $12.5 million compared to $5.2 million in the fourth quarter 2004. Absent the non-recurring IPO and transaction related expenses, fourth quarter 2005 operating income would have been $20.0 million, an increase of $12.7 million or 174.0% over the $7.3 million in the fourth quarter of 2004.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $15.9 million for the fourth quarter of 2005 compared to $27.8 million for the 2004 fourth quarter. Excluding the non-recurring IPO and transaction related expenses, EBITDA was $36.6 million in the 2005 fourth quarter versus $29.9 million in the fourth quarter of 2004, an improvement of $6.7 million or 22.4%. Please see attached reconciliation from net income to EBITDA.
“The fourth quarter capped a terrific year for Horizon Lines in many ways,” said Chuck Raymond, President and Chief Executive Officer. “Operating revenue surpassed a record billion dollars and earnings also set new highs after adjustment for non-recurring IPO and transaction costs. Significant investments in both our vessel and container fleets continued. Our senior management team was further strengthened by the appointment of retired four-star General John Handy to Executive Vice President and a number of other senior level promotions and realignments. Some of the most revered and demanding companies in America once again recognized Horizon Lines for service excellence. As we enter the 50th year of containerized shipping in 2006 in the industry our predecessor, Sea-Land Service, Inc., founded, we will continue to make every effort to win new business, improve capacity utilization, realize additional operating efficiencies, increase the portion of higher value added services sold, and build on our reputation for excellent performance and customer service.”
Company executives will provide additional perspective on the Company’s quarterly results during its fourth quarter earnings call, beginning at 11:00 a.m., Eastern Time, today. Those interested in participating in the call may do so by dialing 1-800-218-0713 and asking for the Horizon Lines Earnings Call. Presentation materials and a live audio webcast will be accessible at Horizon Lines’ website atwww.horizonlines.com. In addition, Horizon Lines’ detailed financial information contained in its Form 10-K document will be posted onwww.horizonlines.com, after filing with the Securities and Exchange Commission in early March.
Horizon Lines, Inc. is the nation’s leading Jones Act container shipping and integrated logistics company. It accounts for approximately 37% of total U.S. marine container shipments from the continental U.S. to the three non-contiguous Jones Act markets, Alaska, Hawaii and Puerto Rico, and to Guam.
This press release includes “forward-looking statements,” as defined by federal securities laws, with respect to financial condition, results of operations and business. All forward-looking statements involve risk and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. Actual results may differ materially from expected results.
Factors that may cause actual results to differ from expected results include: substantial debt; restrictive covenants under our debt; decreases in shipping volumes; our failure to renew our commercial agreements with Maersk; raising fuel prices; labor interruptions or strikes; job related claims, liability under multi-employer pension plans; compliance with safety and environmental protection and other governmental requirements; new statutory and regulatory directives in the United States addressing homeland security concerns; the successful start-up of any Jones-Act competitor; increased inspection procedures and tight import and export controls; restrictions on foreign ownership of our vessels; repeal or substantial amendment of the Jones Act; escalation of insurance costs, catastrophic losses and other liabilities; the arrest of our vessels by maritime claimants; severe weather and natural disasters; our inability to exercise our purchase options for our chartered vessels; the loss of our key management personnel; actions by our significant stockholder, and legal or other proceedings to which we are or may become subject.
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 statements, whether as a result of new information, future events or otherwise.
Media Contact:
Michael Avara of Horizon Lines, Inc. 1 704 973 7000, ormavara@horizonlines.com
Horizon Lines, Inc. and Subsidiaries
Consolidated Balance Sheets
($ in thousands, except share amounts)
December 25, 2005 | December 26, 2004 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 41,450 | $ | 56,766 | ||||
Accounts receivable, net of allowance | 119,838 | 110,801 | ||||||
Income tax receivable | 470 | 9,354 | ||||||
Deferred tax asset | 16,380 | 3,997 | ||||||
Materials and supplies | 26,355 | 21,680 | ||||||
Other current assets | 5,969 | 7,019 | ||||||
Total current assets | 210,462 | 209,617 | ||||||
Property and equipment, net | 200,597 | 190,123 | ||||||
Goodwill | 306,724 | 306,680 | ||||||
Intangible assets, net | 191,502 | 215,732 | ||||||
Other long term assets | 18,034 | 15,640 | ||||||
Total assets | $ | 927,319 | $ | 937,792 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 22,368 | $ | 25,275 | ||||
Current portion of long term debt | 2,500 | 2,500 | ||||||
Other accrued liabilities | 118,483 | 114,590 | ||||||
Total current liabilities | 143,351 | 142,365 | ||||||
Long term debt, net of current | 527,568 | �� | 609,694 | |||||
Deferred tax liability | 61,880 | 56,039 | ||||||
Deferred rent | 40,476 | 44,949 | ||||||
Other long-term liabilities | 2,284 | 2,429 | ||||||
Total liabilities | 775,559 | 855,476 | ||||||
Preferred stock | — | 56,708 | ||||||
Stockholders’ equity: | ||||||||
Common Stock, $.01 par value, 50,000,000 shares authorized and 33,544,170 and 16,345,421 issued and outstanding at December 25, 2005 and December 26, 2004, respectively | 336 | 163 | ||||||
Additional paid in capital | 179,590 | 26,530 | ||||||
Accumulated other comprehensive income | 74 | 71 | ||||||
Retained deficit | (28,240 | ) | (1,156 | ) | ||||
Total stockholders’ equity | 151,760 | 25,608 | ||||||
Total liabilities and stockholders’ equity | $ | 927,319 | $ | 937,792 | ||||
Horizon Lines, Inc. and Subsidiaries and Predecessor Company
Consolidated and Combined Statements of Operations
($ in thousands, except share and per share amounts)
Horizon Lines, Inc. | Predecessor A | ||||||||||
For the period December 25, 2005 | For the period July 7, 2004 through December 26, 2004 | For the period July 06, 2004 | |||||||||
Operating revenue | $ | 1,096,156 | $ | 481,898 | $ | 498,430 | |||||
Operating expense: | |||||||||||
Operating expense (excluding depreciation expense) | 867,307 | 377,468 | 402,875 | ||||||||
Depreciation and amortization | 51,141 | 24,633 | 20,937 | ||||||||
Amortization of vessel dry-docking | 15,766 | 7,118 | 8,743 | ||||||||
Selling, general and administrative | 114,639 | 41,482 | 43,323 | ||||||||
Miscellaneous expense | 649 | 269 | 1,891 | ||||||||
Total operating expense | 1,049,502 | 450,970 | 477,769 | ||||||||
Operating income | 46,654 | 30,928 | 20,661 | ||||||||
Other expense: | |||||||||||
Interest expense, net | 51,357 | 21,770 | 5,111 | ||||||||
Interest expense – preferred units of subsidiary | — | — | 2,686 | ||||||||
Loss on early extinguishment of debt | 13,154 | — | — | ||||||||
Other expense, net | 26 | 15 | 7 | ||||||||
Income (loss) before income taxes | (17,883 | ) | 9,143 | 12,857 | |||||||
Income tax expense | 438 | 3,543 | 4,896 | ||||||||
Net income (loss) | (18,321 | ) | 5,600 | 7,961 | |||||||
Less: accretion of preferred stock | 5,073 | 6,756 | — | ||||||||
Net income (loss) available to common stockholders | $ | (23,394 | ) | $ | (1,156 | ) | $ | 7,961 | |||
Net income (loss) per share: | |||||||||||
Basic | $ | (1.05 | ) | $ | (.07 | ) | $ | 9.95 | |||
Diluted | $ | (1.05 | ) | $ | (.07 | ) | $ | 8.94 | |||
Number of shares used in calculations: | |||||||||||
Basic | 22,376,797 | 15,585,322 | 800,000 | ||||||||
Diluted | 22,381,756 | 15,585,322 | 890,138 |
Horizon Lines, Inc. and Subsidiaries and Predecessor Company
Consolidated and Combined Statements of Cash Flows
($ in thousands)
Horizon Lines, Inc. | Predecessor A | |||||||||||
For the period December 27, 2004 December 25, 2005 | For the period July 7, 2004 through December 26, 2004 | For the period July 06, 2004 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | (18,321 | ) | $ | 5,600 | $ | 7,961 | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation | 31,580 | 15,187 | 19,385 | |||||||||
Amortization | 19,561 | 9,446 | 1,552 | |||||||||
Amortization of vessel dry-docking | 15,766 | 7,118 | 8,743 | |||||||||
Amortization of deferred financing costs | 3,363 | 1,303 | 550 | |||||||||
Deferred income taxes | (7,394 | ) | 4,644 | 2,968 | ||||||||
Loss (gain) on equipment disposals | (993 | ) | (140 | ) | 24 | |||||||
Loss on early extinguishment of debt | 13,154 | — | — | |||||||||
Accretion on 11% senior discount notes | 12,057 | 549 | ||||||||||
Accretion of preferred units of subsidiary | — | — | 2,686 | |||||||||
Stock based compensation | 19,052 | — | 1,765 | |||||||||
Tax benefit from exercise of stock options | 5,495 | 9,494 | — | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (9,037 | ) | 8,633 | (13,678 | ) | |||||||
Materials and supplies | (5,309 | ) | (161 | ) | (3,020 | ) | ||||||
Other current assets | 9,846 | (8,390 | ) | (6,152 | ) | |||||||
Accounts payable | (2,907 | ) | (3,203 | ) | 200 | |||||||
Accrued liabilities | 3,470 | 26,079 | (13,152 | ) | ||||||||
Vessel dry-docking payments | (16,038 | ) | (2,075 | ) | (10,198 | ) | ||||||
Other assets/liabilities | (2,464 | ) | (1,287 | ) | (2,562 | ) | ||||||
Net cash provided by (used in) operating activities | 70,881 | 72,797 | (2,928 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of equipment | (41,234 | ) | (11,000 | ) | (21,889 | ) | ||||||
Acquisition of company | (663,031 | ) | — | |||||||||
Transaction costs associated with acquisition | — | (246 | ) | — | ||||||||
Proceeds from sale of equipment | 2,417 | 354 | 1,399 | |||||||||
Other investing activities | — | (150 | ) | |||||||||
Net cash used in investing activities | (38,817 | ) | (673,923 | ) | (20,640 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Initial capitalization of Company | — | 87,027 | — | |||||||||
Borrowing under 13% promissory notes | — | 70,000 | — | |||||||||
Borrowing of term loans | — | 250,000 | — | |||||||||
Issuance of senior notes | — | 362,819 | — | |||||||||
Borrowing under line of credit | — | 6,000 | — | |||||||||
Payment on line of credit | — | (6,000 | ) | — | ||||||||
Payment of financing costs | (1,754 | ) | (4,800 | ) | — | |||||||
Sale of stock | 1,108 | 20,655 | — | |||||||||
Capital contribution | — | — | — | |||||||||
Initial public offering proceeds | 143,750 | — | — | |||||||||
Costs associated with initial public offering | (15,717 | ) | — | — | ||||||||
Prepayments of long-term debt | (96,196 | ) | (70,000 | ) | — | |||||||
Payment of interest on convertible debt | — | (3,506 | ) | — | ||||||||
Redemption premiums | (9,522 | ) | — | — | ||||||||
Principal payments on long-term debt | (2,500 | ) | (625 | ) | — | |||||||
Redemption of preferred stock | (62,689 | ) | (53,613 | ) | — | |||||||
Dividend to stockholders | (3,690 | ) | — | — | ||||||||
Payments on capital lease obligation | (170 | ) | (65 | ) | (87 | ) | ||||||
Net cash provided by (used in) financing activities | (47,380 | ) | 657,892 | (87 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | (15,316 | ) | 56,766 | (23,655 | ) | |||||||
Cash and cash equivalents at beginning of period | 56,766 | — | 41,811 | |||||||||
Cash and cash equivalents at end of period | $ | 41,450 | $ | 56,766 | $ | 18,156 | ||||||
Horizon Lines, Inc. and Subsidiaries and Predecessor Company
Condensed Quarterly Financial Data (Unaudited)
($ in thousands, except per share amounts)
Quarter Ended December 25, 2005 | Quarter Ended December 26, 2004 | |||||||
Operating revenue | $ | 278,975 | $ | 273,374 | ||||
Operating income | 12,463 | 5,198 | ||||||
Net loss | (10,893 | ) | (5,216 | ) | ||||
Less: accretion of preferred stock | 1,472 | 4,959 | ||||||
Net loss available to common stockholders | (12,365 | ) | (10,175 | ) | ||||
Basic net loss per share | (.38 | ) | (.62 | ) | ||||
Diluted net loss per share | (.38 | ) | (.62 | ) |
Horizon Lines, Inc. and Subsidiaries
Adjusted Net Income (Loss)
($ in millions)
Quarter Ended December 25, 2005 | Quarter Ended December 26, 2004 | Twelve Months December 25, 2005 | Twelve Months Ended December 26, 2004 | |||||||||||||
Net Income (Loss) | $ | (10.9 | ) | $ | (5.2 | ) | $ | (18.3 | ) | $ | 13.6 | |||||
Adjustments(a) | ||||||||||||||||
Purchase Price Accounting Depreciation & Amortization | — | — | — | (7.3 | ) | |||||||||||
Stock Compensation Expense | 7.3 | — | 19.3 | 1.8 | ||||||||||||
Management Fees | — | 1.3 | 9.7 | 2.2 | ||||||||||||
Transaction Related Expense | 0.2 | 0.8 | 2.1 | 1.1 | ||||||||||||
Loss on Extinguishment of Debt | 13.2 | — | 13.2 | — | ||||||||||||
Interest Expense Reduction (Increase) | 1.2 | 3.1 | 8.8 | (10.7 | ) | |||||||||||
Tax Impact | (6.1 | ) | (2.0 | ) | (13.1 | ) | 4.9 | |||||||||
Total Adjustments | 15.8 | 3.2 | 40.0 | (8.0 | ) | |||||||||||
Adjusted Net Income (Loss) | $ | 4.9 | $ | (2.0 | ) | $ | 21.7 | $ | 5.6 | |||||||
(a) | These changes are not expected to occur regularly in the ordinary course of business. |
Horizon Lines, Inc. and Subsidiaries
Adjusted Operating Income
($ in millions)
Quarter Ended December 25, 2005 | Quarter Ended December 26, 2004 | Twelve Months December 25, 2005 | Twelve Months Ended December 26, 2004 | ||||||||||
Operating Income | $ | 12.5 | $ | 5.2 | $ | 46.7 | $ | 51.6 | |||||
Adjustments(a) | |||||||||||||
Purchase Price Accounting Depreciation & Amortization | — | — | — | (7.3 | ) | ||||||||
Stock Compensation Expense | 7.3 | — | 19.3 | 1.8 | |||||||||
Management Fees | — | 1.3 | 9.7 | 2.2 | |||||||||
Transaction Related Expense | .2 | .8 | 2.1 | 1.1 | |||||||||
Total Adjustments | 7.5 | 2.1 | 31.1 | (2.2 | ) | ||||||||
Adjusted Operating Income | $ | 20.0 | $ | 7.3 | $ | 77.8 | $ | 49.4 | |||||
(a) | These charges are not anticipated to recur regularly in the ordinary course of business. |
Horizon Lines, Inc. and Subsidiaries
Net Income / EBITDA Reconciliation
($ in millions)
Quarter Ended December 25, 2005 | Quarter Ended December 26, 2004 | Twelve Months December 25, 2005 | Twelve Months December 26, 2004 | ||||||||||||
Net Income (Loss) | $ | (10.9 | ) | $ | (5.2 | ) | $ | (18.3 | ) | $ | 13.6 | ||||
Tax Expense (Benefit) | (2.0 | ) | (3.7 | ) | 0.4 | 8.4 | |||||||||
Interest Expense | 12.8 | 14.2 | 53.1 | 29.8 | |||||||||||
Depreciation & Amortization | 16.0 | 22.5 | 66.9 | 61.4 | |||||||||||
EBITDA | 15.9 | 27.8 | 102.1 | 113.2 | |||||||||||
Stock Compensation Expense | 7.3 | — | 19.3 | 1.8 | |||||||||||
Management Fees | — | 1.3 | 9.7 | 2.2 | |||||||||||
Transaction Related Expenses | 0.2 | .8 | 2.1 | 1.1 | |||||||||||
Loss on Extinguishment of Debt | 13.2 | — | 13.2 | — | |||||||||||
Adjusted EBITDA | $ | 36.6 | $ | 29.9 | $ | 146.4 | $ | 118.3 | |||||||
Note: EBITDA is defined as net income plus 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 Horizon Lines Holding Corp. 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.