Horizon Lines, Inc. , reported results for its fiscal second quarter ended June 21, 2009.
On a GAAP basis, the company reported a net loss of $(31.1) million, or $(1.02) per share, on revenue of $278.5 million. The results reflect certain items, including a $20 million charge related to the previously disclosed class-action legal settlement in Puerto Rico, and a $10.5 million tax valuation allowance. After excluding these and other charges totaling $35.2 million, or $1.15 per share after tax, adjusted net income was $4.1 million, or $0.13 per fully diluted share.
The company recorded the valuation allowance for book tax purposes against its deferred tax assets due to projected cumulative pre-tax GAAP losses for the three-year period ending in 2009. However, the previous years' pre-tax book losses include significant loss on debt extinguishment in connection with the August 2007 refinancing and recent expenses related to the anti-trust investigation. The valuation allowance has no cash impact and does not affect the company's ability to utilize its deferred tax assets to offset taxable income in future years as the company's net operating losses do not begin to expire until 2019 and 2024 for state and federal purposes, respectively.
In addition to the items related to the Puerto Rico class-action settlement and the tax valuation allowance, adjusted 2009 second-quarter results exclude antitrust-related legal expenses of $4.1million, and $0.9 million for impairment and restructuring charges, as well as a loss on debt modification.
Net income for the second quarter of 2008 totaled $5.8 million, or $0.19 per diluted share, on revenue of $331.0 million. Adjusted 2008 second-quarter net income totaled $8.5 million, or $0.28 per fully diluted share, after excluding anti-trust related legal expenses and a severance charge totaling $3.2 million pretax, or $0.09 per share after tax.
"Our company experienced weak volumes in all tradelanes during the second quarter, as the unabated global recession continued to dampen consumer sentiment and spending throughout our markets," said Chuck Raymond, Chairman, President and Chief Executive Officer. "We combated these challenges through continued focus on customer service excellence, schedule integrity, and cost reductions throughout the organization. While revenue and adjusted EBITDA for the quarter were below internal expectations, we achieved better-than-expected cash flow relative to EBITDA, earned a 2.5% container rate increase, net of fuel, and estimate that market share in each of our tradelanes held steady and in some cases improved slightly. We finished the second quarter with adequate corporate liquidity and in compliance with our credit facility financial covenants.
"Our volume levels compare very favorably to other transportation segments and reflect our focus on US domestic ocean markets, where we play a primary role in delivering cargo that is vital to the basic needs of our tradelanes," Mr. Raymond said. "We serve these markets with operational excellence and devotion to our customers, who include diverse, large, brand-name companies.
"The company's logistics business continued to be adversely impacted by the economic recession," Mr. Raymond noted. "Our ongoing strategy is to organically position this business to be able to capitalize on targeted growth opportunities when the economy rebounds. In the meantime, we are focused on accelerating revenue growth and more fully leveraging our Liner sales force in the logistics sales process.
"During the quarter, we reached an agreement to settle class action antitrust litigation in Puerto Rico and at the same time executed an amended credit agreement with our lender group, as we previously disclosed" Mr. Raymond said. "We also continue to fully cooperate with the Department of Justice in its investigation into pricing practices in domestic ocean shipping."
