Exhibit 99.2
HORIZON LINES REPORTS STRONG GAIN IN FIRST QUARTER EARNINGS
CHARLOTTE, North Carolina, April 28, 2006 – Horizon Lines, Inc. (NYSE:HRZ) reported a strong gain in the first quarter 2006 earnings compared to the first quarter of 2005.
Net income for the first quarter of 2006 was $2.4 million or $.07 per share versus a net loss of $(9.7) million or $(.52) per share in the first quarter of 2005. After adjustment for non-recurring expenses, net income in the first quarter of 2005 was $.3 million or $.01 per share.
Operating revenue increased by $17.3 million or 6.7% to $274.9 million for the first quarter of 2006, compared to $257.6 million during the 2005 first quarter.
Operating income for the first quarter of 2006 was $15.9 million versus $3.8 million in the first quarter of 2005. Absent non-recurring expenses, operating income for the first quarter of 2005 would have been $11.0 million.
Earnings before net interest expense, taxes, depreciation and amortization (EBITDA) was $31.8 million in the 2006 first quarter in comparison to $20.5 million in the first quarter of 2005. Excluding the non-recurring expenses, EBITDA was $27.7 million for the 2005 first quarter. Please see attached reconciliation from net income to EBITDA.
“Horizon Lines picked up in 2006 where we left off in 2005 and the year is off to a great start,” said Chuck Raymond, President and Chief Executive Officer. “All earnings measurements in the first quarter of 2006 were significantly better than in the first quarter of 2005. We closed the transaction on April 11th to lease five new vessels for deployment in our TransPacific 1 Service in the first half of 2007. Investment in our container fleet continued with the acquisition of 1,000 40’ high cube dry containers in the first quarter. Validation of the success of our customer service efforts continued in 2006, with three awards for customer service received already this year.”
The Company confirmed its earnings guidance for the full year 2006, with projections of operating revenue at $1,140 - $1,160 million, EBITDA at $158 - $162 million and earnings per share (EPS) at $.85 - $.90. Earnings guidance for the second quarter of 2006 was also provided, with forecasts of operating revenue of $282 - $287 million, EBITDA of $38 - $40 million and EPS of $.18 - $.20.
Company executives will provide additional perspective on the Company’s quarterly results during its first quarter earnings call, beginning at 11:00 a.m., Eastern Time, today. Those interested in participating in the call may do so by dialing 1-800-240-4186 and asking for the Horizon Lines Earnings Call. Presentation materials and a live audio webcast will be accessible at Horizon Lines’ website www.horizonlines.com. In addition, Horizon Lines’ detailed financial information contained in its Form 10-Q document will be posted on www.horizonlines.com after filing with the Securities and Exchange Commission after the earnings call.
Horizon Lines, Inc. is the nation’s leading Jones Act container shipping and integrated logistics company. It accounts for approximately 36% 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 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 agreements; decreases in shipping volumes; our failure to renew our commercial agreements with Maersk; rising 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 Untied 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 statement, whether as a result of new information, future events or otherwise.
Media Contact:
Michael Avara of Horizon Lines, Inc. 1-704-973-7000, or mavara@horizonlines.com
Horizon Lines, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
($ in thousands)
March 26, 2006 | December 25, 2005(1) | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 32,665 | $ | 41,450 | ||||
Accounts receivable, net of allowance of $6,413 and $6,064 at March 26, 2006 and December 25, 2005, respectively | 134,732 | 119,838 | ||||||
Income taxes receivable | 726 | 470 | ||||||
Deferred tax asset | 18,211 | 16,380 | ||||||
Materials and supplies | 25,212 | 26,355 | ||||||
Other current assets | 7,713 | 5,969 | ||||||
Total current assets | 219,259 | 210,462 | ||||||
Property and equipment, net | 194,939 | 200,597 | ||||||
Goodwill | 306,724 | 306,724 | ||||||
Intangible assets, net | 185,939 | 191,502 | ||||||
Other long term assets | 22,418 | 18,034 | ||||||
Total assets | $ | 929,279 | $ | 927,319 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 25,639 | $ | 22,368 | ||||
Current portion of long term debt | 2,500 | 2,500 | ||||||
Other accrued liabilities | 114,454 | 118,483 | ||||||
Total current liabilities | 142,593 | 143,351 | ||||||
Long term debt, net of current | 529,151 | 527,568 | ||||||
Deferred tax liability | 65,386 | 61,880 | ||||||
Deferred rent | 39,358 | 40,476 | ||||||
Other long term liabilities | 2,453 | 2,284 | ||||||
Total liabilities | 778,941 | 775,559 | ||||||
Stockholders’ equity | ||||||||
Common stock, $.01 par value, 50,000,000 shares authorized and 33,544,170 shares issued and outstanding at March 26, 2006 and December 25, 2005 | 336 | 336 | ||||||
Additional paid in capital | 179,531 | 179,590 | ||||||
Accumulated other comprehensive income | 35 | 74 | ||||||
Retained deficit | (29,564 | ) | (28,240 | ) | ||||
Total stockholders’ equity | 150,338 | 151,760 | ||||||
Total liabilities and stockholders’ equity | $ | 929,279 | $ | 927,319 | ||||
(1) | The balance sheet at December 25, 2005 has been derived from the audited financial statements of Horizon Lines, Inc. |
Horizon Lines, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
($ in thousands)
For the Period through March 26, 2006 | For the Period December 27, 2004 through March 27, 2005 | ||||||
Operating revenue | $ | 274,934 | $ | 257,562 | |||
Operating expenses: | |||||||
Operating expense (excluding depreciation expense) | 219,924 | 206,203 | |||||
Selling, general and administrative | 22,922 | 29,513 | |||||
Depreciation and amortization | 12,503 | 12,893 | |||||
Amortization of vessel drydocking | 3,414 | 3,798 | |||||
Miscellaneous expense, net | 299 | 1,314 | |||||
Total operating expense | 259,062 | 253,721 | |||||
Operating income | 15,872 | 3,841 | |||||
Other expense: | |||||||
Interest expense, net | 11,720 | 12,852 | |||||
Other expense, net | 15 | 3 | |||||
Income (loss) before income taxes | 4,137 | (9,014 | ) | ||||
Income tax expense (benefit) | 1,771 | (841 | ) | ||||
Net income (loss) | $ | 2,366 | $ | (8,173 | ) | ||
Less: accretion of preferred stock | — | 1,561 | |||||
Net income (loss) available to common stockholders | $ | 2,366 | $ | (9,734 | ) | ||
Net income (loss) per share: | |||||||
Basic | $ | 0.07 | $ | (0.52 | ) | ||
Diluted | $ | 0.07 | $ | (0.52 | ) | ||
Number of shares used in calculations: | |||||||
Basic | 33,544,170 | 18,790,879 | |||||
Diluted | 33,596,230 | 18,790,879 | |||||
Dividends declared per common share | $ | 0.11 | $ | — | |||
Horizon Lines, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
($ in thousands)
For the Period March 26, 2006 | For the Period December 27, 2004 through March 27, 2005 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 2,366 | $ | (8,173 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation | 7,613 | 8,003 | ||||||
Amortization of other intangible assets | 4,890 | 4,890 | ||||||
Amortization of vessel drydocking | 3,414 | 3,798 | ||||||
Amortization of deferred financing costs | 805 | 780 | ||||||
Deferred income taxes | 1,675 | (841 | ) | |||||
Gain on equipment disposals | (275 | ) | (45 | ) | ||||
Stock-based compensation | 99 | 6,412 | ||||||
Accretion of interest on 11% senior discount notes | 2,208 | 3,082 | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | (14,893 | ) | (16,902 | ) | ||||
Materials and supplies | 1,143 | (144 | ) | |||||
Other current assets | (2,000 | ) | 1,667 | |||||
Accounts payable | 3,271 | (4,955 | ) | |||||
Accrued liabilities | (6,912 | ) | (4,448 | ) | ||||
Vessel drydocking payments | (4,235 | ) | (5,101 | ) | ||||
Other assets/liabilities | (842 | ) | 87 | |||||
Net cash used in operating activities | (1,673 | ) | (11,890 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (2,718 | ) | (1,188 | ) | ||||
Proceeds from the sale of property and equipment | 940 | 249 | ||||||
Net cash used in investing activities | (1,778 | ) | (939 | ) | ||||
Cash flows from financing activities: | ||||||||
Principal payments on long term debt | (625 | ) | (625 | ) | ||||
Dividend to stockholders | (3,690 | ) | — | |||||
Payment of financing costs | (816 | ) | — | |||||
Costs associated with initial public offering | (158 | ) | — | |||||
Sale of stock | — | 1,108 | ||||||
Distribution to holders of preferred stock | — | (535 | ) | |||||
Payments on capital lease obligation | (45 | ) | (53 | ) | ||||
Net cash used in financing activities | (5,334 | ) | (105 | ) | ||||
Net decrease in cash and cash equivalents | (8,785 | ) | (12,934 | ) | ||||
Cash and cash equivalents at beginning of period | 41,450 | 56,766 | ||||||
Cash and cash equivalents at end of period | $ | 32,665 | $ | 43,832 | ||||
Horizon Lines, Inc. and Subsidiaries
Adjusted Net Income
($ in millions)
Quarter Ended | |||||||
March 26, 2006 | March 27, 2005 | ||||||
Net Income (Loss) | $ | 2.4 | $ | (8.2 | ) | ||
Adjustments:(a) | |||||||
Stock Compensation Expense | — | 6.4 | |||||
Management Fees | — | 0.8 | |||||
Interest Expense Reduction | — | 2.5 | |||||
Tax Impact | — | (1.2 | ) | ||||
Total Adjustments | — | 8.5 | |||||
Adjusted Net Income | $ | 2.4 | $ | 0.3 | |||
(a) | These charges are not expected to occur regularly in the ordinary course of business. |
Horizon Lines, Inc. and Subsidiaries
Adjusted Operating Income
($ in millions)
Quarter Ended | ||||||
March 26, 2006 | March 27, 2005 | |||||
Operating Income | $ | 15.9 | $ | 3.8 | ||
Adjustments:(a) | ||||||
Stock Compensation Expense | — | 6.4 | ||||
Management Fees | — | 0.8 | ||||
Total Adjustments | — | 7.2 | ||||
Adjusted Operating Income | $ | 15.9 | $ | 11.0 | ||
(a) | These charges are not expected to occur regularly in the ordinary course of business. |
Horizon Lines, Inc. and Subsidiaries
Net Income / EBITDA Reconciliation
($ in millions)
Quarter Ended | |||||||
March 26, 2006 | March 27, 2005 | ||||||
Net Income (Loss) | $ | 2.4 | $ | (8.2 | ) | ||
Interest Expense, Net | 11.7 | 12.8 | |||||
Tax Expense (Benefit) | 1.7 | (0.8 | ) | ||||
Depreciation & Amortization | 16.0 | 16.7 | |||||
EBITDA | 31.8 | 20.5 | |||||
Stock Compensation Expense | — | 6.4 | |||||
Management Fee | — | 0.8 | |||||
Adjusted EBITDA | $ | 31.8 | $ | 27.7 | |||
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 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.