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Horizon Lines Reports Fourth-Quarter 2011 Financial Results

CHARLOTTE, N.C., April 10, 2012 /PRNewswire/ -- Horizon Lines, Inc. (OTCQB: HRZL) today reported financial results for the fiscal fourth quarter ended December 25, 2011.

Financial results are being presented on a continuing operations basis, excluding the discontinued FSX and logistics operations.  Per-share amounts reflect a 1-for-25 reverse stock split, effective December 7, 2011.   


Comparison of GAAP and Non-GAAP Results from Continuing Operations

Quarters Ended


(in millions, except per share data)*

12/25/2011


12/26/2010







GAAP:





Operating revenue

$            264.1


$            256.1


Net  income (loss)

$              74.2


$            (43.6)


Net  income (loss) per diluted share 

$            24.14


$          (35.49)







Non-GAAP:*





EBITDA

$            108.1


$            (17.1)


Adjusted EBITDA

$              18.9


$              19.8


Adjusted net loss

$            (14.6)


$              (6.8)


Adjusted net loss per share

$            (4.74)


$            (5.54)


* See attached schedules for reconciliation of fourth-quarter 2011 and 2010 reported GAAP results to Non-GAAP results.

On a GAAP basis, the fourth-quarter net income from continuing operations totaled $74.2 million, or $24.14 per diluted share, on revenue from continuing operations of $264.1 million.  On an adjusted basis, the company recorded a fourth-quarter net loss from continuing operations of $14.6 million, or $4.74 per diluted share, after adjustments totaling $(88.8) million, after tax, or $(28.88) per share.  The adjustments reflect the elimination of accounting gains totaling $103.3 million that were partially offset by charges totaling $14.5 million.  The gains related to marking the conversion feature in the company's convertible debt to fair value, the net gain on extinguishment of debt, and a reduction of the goodwill impairment charge recorded in the third quarter. The charges included antitrust legal settlements and expenses, an equipment impairment charge and severance costs.  (See reconciliation tables for specific line-item amounts.)     

Due to qualitative and quantitative indicators including the announced shutdown of the company's FSX service and a deterioration in earnings in 2011, the company recorded an estimated goodwill impairment charge of $117.5 million in the third quarter of 2011.  The final impairment charge of $115.3 million was determined in the fourth quarter of 2011, resulting in a $2.2 million reduction in the third-quarter estimate.  

Horizon Lines reported a 2010 fourth-quarter net loss from continuing operations of $43.6 million, or $35.49 per basic share, on revenue of $256.1 million.  On an adjusted basis, the net loss from continuing operations totaled $6.8 million, or $5.54 per basic share, after excluding charges for antitrust-related legal settlements and expenses, severance related to a non-union workforce reduction, impairment charges and tax adjustments totaling $36.8 million, or $29.95 per share.  (See reconciliation tables for specific line-item amounts.)    

Container volume for the 2011 fourth quarter totaled 60,279 loads, a 5.8% decrease from 63,977 loads for the same period a year ago. The volume decline resulted from an additional week in the 2010 fourth quarter.  Excluding the extra week, fourth-quarter 2011 container volume increased 0.2% from 60,133 loads a year ago.  Alaska volume was flat, while Hawaii and Puerto Rico were up slightly, excluding the extra week.

Container rates, net of fuel, were $3,136 for the 2011 fourth quarter, up slightly from $3,126 a year ago.

"Our fourth-quarter operating performance from continuing operations was relatively stable when compared with a year ago, as both container volumes and rates reflected marginal improvement on a comparable 52-week basis," said Stephen H. Fraser, interim President and Chief Executive Officer. "Our financial performance was pressured by high fuel prices, the ongoing recession in Puerto Rico, severe winter weather in Alaska, and increased expenses from incremental lift and equipment costs resulting from the expiration of certain of our Maersk agreements. Despite these challenges, our company produced adjusted EBITDA in the fourth quarter that nearly matched last year's performance, as we maintained our focus on disciplined cost management and customer service excellence."

As previously disclosed, Horizon Lines terminated its FSX trans-Pacific service during the fourth quarter of 2011. The service and associated operations were classified as discontinued operations, and the company recorded a pretax restructuring charge of $119.3 million. This charge includes costs to return excess rolling stock equipment, severance, facility lease expense, and vessel charter expense, net of estimated sub-charter income.

Fourth-Quarter 2011 Financial Highlights  

Operating Revenue – Fourth-quarter operating revenue from continuing operations increased 3.1% to $264.1 million from $256.1 million a year ago.  Fuel surcharges accounted for approximately 22.5% of total revenue in the 2011 fourth quarter, compared with 15.6% in the year-ago quarter.  The largest factors in the $8.0 million revenue improvement were: a $19.5 million growth in fuel surcharges, a $1.2 million rise in space charter revenue, and a $0.3 million increase from rate improvements. These gains were partially offset by a $13.0 million revenue decline resulting from an $11.6 million decrease related to domestic volume shortfalls and a $1.4 million decline in non-transportation revenue. (See 2010-2011 4th-quarter operating revenue bridge in the tables section of this news release.)

Operating Income – The GAAP operating loss from continuing operations for the fourth quarter totaled $6.9 million, compared with a loss of $33.0 million a year ago.  The 2011 GAAP operating loss includes $14.0 million in charges for antitrust-related legal settlements and expenses, employee severance expense, and equipment impairment charges, partially offset by a $2.2 million gain resulting from a reduction of the goodwill impairment charge recorded in the third quarter. (See reconciliation tables for specific line-item amounts.)  The 2010 fourth-quarter GAAP operating loss includes $36.8 million in charges for antitrust-related legal settlements and expenses, restructuring costs related to a non-union workforce reduction, equipment impairment charge, and costs for union employee severance.  Adjusting for these items, the fourth-quarter 2011 adjusted operating income from continuing operations totaled $4.9 million, compared with $3.8 million a year ago.  Fourth-quarter 2011 operating results were negatively impacted by reduced container volumes, additional equipment and container lift expense after the termination in 2010 of various Maersk agreements, and weather-related vessel incidents. These negative factors were partly offset by partial recovery of increased fuel costs, ongoing cost-savings initiatives, reduced vessel labor and leasing costs, and improved overhead.

EBITDA – EBITDA from continuing operations totaled $108.1 million for the 2011 fourth quarter, compared with a loss of $17.1 million for the same period a year ago.  Adjusted EBITDA from continuing operations for the fourth quarter of 2011 was $18.9 million, compared with $19.8 million for 2010.  EBITDA and adjusted EBITDA for the 2011 and 2010 fourth quarters were impacted by the same factors affecting operating income. Additionally, 2011 adjusted EBITDA excluded net gains of $101.1 million related to the company's debt refinancing transaction and marking the conversion feature in the company's convertible debt to fair value.  (See 2010-2011 4th-quarter adjusted EBITDA bridge in the tables section of this news release.)

Shares Outstanding – The company had a weighted daily average of 2.2 million basic and 3.1 million fully diluted shares outstanding for the fourth quarter of 2011, compared with 1.2 million basic and 1.2 million fully diluted shares outstanding for the fourth 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.

Full-Year Results – For the full fiscal year ended December 25, 2011, operating revenue from continuing operations increased 2.7% to $1.03 billion from $1.0 billion for fiscal 2010. Fiscal 2010 contained 53 weeks, compared with 52 weeks for 2011. EBITDA from continuing operations totaled $60.9 million compared with $63.4 million a year ago.  Adjusted EBITDA for 2011 totaled $82.1 million, after excluding charges totaling $126.3 million for goodwill impairment, antitrust-related legal expenses, severance, and asset impairment, which were partially offset by the inclusion of $105.1 million of net gains related to marking the conversion feature in the company's convertible debt to fair value, refinancing of the company's debt and adjustments to legal settlements. Adjusted EBITDA for the 2010 full year totaled $106.0 million. Excluded from the adjusted 2010 EBITDA were charges totaling $42.6 million related to antitrust-related legal settlements and expenses, equipment impairment and severance. (See reconciliation tables for specific line-item amounts.)  The net loss from continuing operations for 2011 totaled $53.2 million, or $36.33 per basic share, compared with $35.6 million, or $29.01 per basic share, for the prior year.  The 2011 adjusted net loss from continuing operations totaled $31.9 million, or $21.76 per basic share, compared with adjusted net income from continuing operations of $6.6 million, or $5.40 per basic share, for 2010.

Liquidity, Credit Facility Compliance & Debt Structure

As of December 25, 2011, the company had total liquidity of $74.0 million, consisting of cash of $21.1 million and $52.9 million available under its asset-based loan (ABL) revolving credit facility.  Funded debt outstanding totaled $612.8 million, consisting of: $225.0 million of 11.00% first-lien secured notes due October 15, 2016; $100.0 million of second-lien 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; and $278.1 million of 6.00% convertible secured notes due April 15, 2017.  Also remaining outstanding were $2.2 million of 4.25% convertible notes due August 15, 2012, and a $7.5 million capital lease.  The company's weighted average interest rate for funded debt was 9.02%.  Availability under the asset-based-loan (ABL) revolving credit facility is based on a percentage of eligible accounts receivable and customary reserves, with a maximum of $100 million.  Letters of credit issued against the ABL facility totaled $19.6 million at December 25, 2011, but there were no outstanding borrowings. 

On January 11, 2012, the company completed a mandatory debt-to-equity conversion of a portion of the 6.00% convertible secured notes due October 15, 2016.  The conversion reduced funded debt outstanding by $49.7 million

Additionally, on April 9, 2012, the company completed transactions with more than 99% of its noteholders, and with Ship Finance International Limited ("SFL") and certain of its subsidiaries, to substantially deleverage the company's balance sheet and terminate vessel charter obligations related to its discontinued trans-Pacific service.  These simultaneous transactions convert virtually all of the remaining $228.4 million of the Company's 6.00% Series A and Series B Convertible Secured Notes, partially offset by the issuance of $40.0 million of debt to SFL as part of the full settlement of the vessel charter obligations, resulting in a net debt reduction of $188.4 million. The Company's earnings and cash flows will be further improved by the termination of $32.0 million in annual vessel charter obligations for the five ships, as well as the elimination of approximately $3.0 million of annual lay-up costs for the idle vessels.  As a result of the transactions, the company's total funded debt outstanding has been reduced to approximately $404.4 million.

Please see attached schedules for the reconciliation of fourth-quarter and full-year 2011 and 2010 reported GAAP results and Non-GAAP adjusted results.

2012 Outlook 

The company currently projects that 2012 container volumes will increase modestly, in the 1-2% range, and rate, net of fuel, will increase slightly from 2011 levels.  Fuel prices for 2012 are projected in the $730-$735 per ton range, excluding costs for low sulfur fuel that will be required in the Alaska Tradelane, effective August 1, 2012.  Fuel costs averaged $631 per ton for 2011.

In 2012, the company currently projects adjusted EBITDA of approximately $75.0 million. The expected decline from 2011 adjusted EBITDA is primarily due to fuel and duplicate vessel operating expenses associated with the planned dry-docking of three vessels in Asia, lower terminal services revenues, and projections of continued slow economic growth.  (See 2012 Adjusted EBITDA reconciliation in the tables section of this press release.)

Use of Non-GAAP Measures

Horizon Lines reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). The company also believes that the presentation of certain non-GAAP measures, i.e., EBITDA, free cash flow and results excluding certain costs and expenses, provides useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance without the impact of significant special items. The company further feels these non-GAAP measures enhance the user's overall understanding of the company's current financial performance relative to past performance and provide a better baseline for modeling future earnings expectations. Non-GAAP measures are reconciled in the financial tables accompanying this news release. The company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the company's reported GAAP results.  

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.

Forward Looking Statements

The information contained in this press release should be read in conjunction with our filings made with the Securities and Exchange Commission.  This press release contains "forward-looking statements" within the meaning of the federal securities laws.  Forward-looking statements are those that do not relate solely to historical fact.  They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events.  Words such as, but not limited to, "believe," "anticipate," "plan," "targets," "projects," "will," "expect," "would," "could," "should," "may," and similar expressions or phrases identify forward-looking statements.

Factors that may cause expected results or anticipated events or circumstances discussed in this press release to not occur or to differ from expected results include: our ability to maintain adequate liquidity to operate our business; our ability to make interest payments on our outstanding indebtedness; failure to comply with the terms of our probation imposed by the court in connection with our pleas relating to antitrust and environmental matters; volatility in fuel prices; decreases in shipping volumes; the reaction of our customers and business partners to our announcements and filings, including those referred to herein; government investigations related to (i) the imposition of fuel surcharges in connection with government contracts, (ii) regulations covering products transported on our vessels, including the FDA and USDA, or (iii) any other government investigations and legal proceedings; suspension or debarment by the federal government; compliance with safety and environmental protection and other governmental requirements; increased inspection procedures and tighter import and export controls; repeal or substantial amendment of the coastwise laws of the United States, also known as the Jones Act;  catastrophic losses and other liabilities; our ability to integrate new and retain existing management; the successful start-up of any Jones-Act competitor; failure to comply with the various ownership, citizenship, crewing, and U.S. build requirements dictated by the Jones Act; the arrest of our vessels by maritime claimants; severe weather and natural disasters; and the aging of our vessels and unexpected substantial dry-docking or repair costs for our vessels.

All forward-looking statements involve risk and uncertainties. In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this press release might not occur. The forward-looking statements included in the press release are made only as of the date they are made and the company undertakes no obligation to update any such statements, except as otherwise required by applicable law. See the section entitled "Risk Factors" in our 2011 Form 10-K filed with the SEC on April 10, 2012, for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences.

(Tables Follow)

Horizon Lines, Inc.


Unaudited Condensed Consolidated Balance Sheets


(in thousands, except per share data)


















December 25,


December 26,



2011


2010


Assets





Current assets





Cash

$ 21,147


$ 2,751


Accounts receivable, net of allowance of $6,416 and $6,760 at





December 25, 2011 and December 26, 2010, respectively

105,949


94,181


Materials and supplies

28,091


24,332


Deferred tax asset

10,608


2,757


Assets of discontinued operations

12,975


56,773


Other current assets

7,196


6,435


Total current assets

185,966


187,229


Property and equipment, net

167,145


179,997


Goodwill

198,793


314,149


Intangible assets, net

69,942


80,824


Other long-term assets

17,963


23,577


Total assets

$ 639,809


$ 785,776







Liabilities and Stockholders' (Deficiency) Equity





Current liabilities





Accounts payable

$ 31,683


$ 39,509


Current portion of long-term debt, including capital lease

6,107


508,793


Accrued vessel rent

13,652


3,697


Current liabilities of discontinued operations

45,313


15,381


Other accrued liabilities

97,097


100,721


Total current liabilities

193,852


668,101


Long-term debt, including capital lease, net of current portion

509,741


7,530


Deferred rent

13,553


18,026


Deferred tax liability

10,702


4,457


Liabilities of discontinued operations

51,293


338


Other long-term liabilities

26,654


47,532


Total liabilities

805,795


745,984







Stockholders' (deficiency) equity





Preferred stock, $.01 par value, 30,500 shares authorized; no shares





issued or outstanding

-


-


Common stock, $.01 par value, 100,000 shares authorized, 2,421





shares issued and 2,269 shares outstanding as of December 25, 2011





and 1,382 shares issued and 1,230 shares outstanding as of





December 26, 2010

605


345


Treasury stock, 152 shares at cost

(78,538)


(78,538)


Additional paid in capital

213,135


193,266


Accumulated deficit

(303,260)


(73,843)


Accumulated other comprehensive income (loss)

2,072


(1,438)


Total stockholders' (deficiency) equity

(165,986)


39,792


Total liabilities and stockholders' (deficiency) equity

$ 639,809


$ 785,776





















Horizon Lines, Inc.





Unaudited Condensed Consolidated Statements of Operations





(in thousands, except per share data)


















Quarters Ended


Year Ended






December 25,


December 26,


December 25,


December 26,






2011


2010


2011


2010

















Operating revenue

$ 264,084


$ 256,131


$ 1,026,164


$ 1,000,055





Operating expense:












Vessel

80,098


71,935


311,645


276,351





Marine

50,929


51,345


194,002


188,086





Inland

46,984


48,090


179,583


175,394





Land

37,877


36,865


144,072


142,299





Rolling stock rent

10,327


10,183


40,727


38,330





Cost of services (excluding depreciation expense)

226,215


218,418


870,029


820,460





Depreciation and amortization

10,527


11,536


42,883


43,563





Amortization of vessel dry-docking

3,505


4,380


15,376


15,014





Selling, general and administrative

19,404


20,467


82,125


79,930





Goodwill impairment

(2,150)


-


115,356


-





Impairment charge

179


856


2,997


2,655





Legal settlements

12,719


32,270


(5,483)


32,270





Restructuring charge

-


1,843


-


1,843





Miscellaneous expense (income), net

612


(644)


737


(574)





Total operating expense

271,011


289,126


1,124,020


995,161





Operating (loss) income

(6,927)


(32,995)


(97,856)


4,894





Other expense:












Interest expense, net

18,633


10,608


55,677


40,117





Gain on extinguishment/modification of debt

(16,650)


-


(16,017)


-





Gain on change in value of debt conversion features

(84,480)


-


(84,480)


-





Other expense, net

97


8


32


27





Income (loss) from continuing operations before income tax (benefit) expense

75,473


(43,611)


(53,068)


(35,250)





Income tax expense

1,267


36


126


324





Income (loss) from continuing operations

74,206


(43,647)


(53,194)


(35,574)





Loss from discontinued operations

(137,769)


(12,475)


(176,223)


(22,395)





Net loss

$ (63,563)


$ (56,122)


$ (229,417)


$ (57,969)





























Basic net loss income per share:












Continuing operations

$ 34.43


$ (35.49)


$ (36.33)


$ (29.01)





Discontinued operations

(63.93)


$ (10.14)


(120.37)


$ (18.27)





Basic net loss per share

$ (29.50)


$ (45.63)


$ (156.70)


$ (47.28)

















Diluted net income (loss) income per share:












Continuing operations

$ 24.14


$ (35.49)


$ (36.33)


$ (29.01)





Discontinued operations

(44.82)


(10.14)


(120.37)


(18.27)





Diluted net income (loss) per share

$ (20.68)


$ (45.63)


$ (156.70)


$ (47.28)

















Number of shares used in calculation:












Basic

2,155


1,230


1,464


1,226





Diluted

3,074


1,230


1,464


1,226

















Dividends declared per common share

$         -


$ 1.25


$ -


$ 5.00





















Horizon Lines, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)






Years Ended


December 25,


December 26,


2011


2010





Cash flows from operating activities:




Net loss from continuing operations

$ (53,194)


$ (35,574)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:




Depreciation

22,566


22,865

Amortization of other intangible assets

20,317


20,698

Amortization of vessel dry-docking

15,376


15,014

Amortization of deferred financing costs

3,955


3,412

Goodwill impairment

115,356


-

Gain on change in value of conversion features

(84,480)


-

Impairment charge

2,997


2,655

Restructuring charge

-


1,843

Legal settlement

(5,483)


32,270

Gain on modification of debt

(16,017)


-

Deferred income taxes

162


148

Gain on equipment disposals

(935)


(47)

Gain on sale of interest in joint venture

-


(724)

Stock-based compensation

677


2,122

Accretion of interest on convertible notes

11,972


11,060

Accretion of interest on legal settlements

810


-

Changes in operating assets and liabilities:




Accounts receivable

(11,417)


1,236

Materials and supplies

(4,084)


(44)

Other current assets

3,148


(1,164)

Accounts payable

(7,826)


1,538

Accrued liabilities

(6,274)


6,210

Vessel rent

5,482


(5,199)

Vessel dry-docking payments

(12,547)


(19,110)

Accrued legal settlements

(8,518)


(5,000)

Other assets/liabilities

(3,495)


(768)





Net cash (used in) provided by operating activities from continuing operations

(11,452)


53,441

Net cash used in operating activities from discontinued operations

(50,588)


(17,008)





Cash flows from investing activities:




Purchases of property and equipment

(15,111)


(15,991)

Proceeds from the sale of property and equipment

2,274


454

Proceeds from the sale of interest in joint venture

-


1,100





Net cash used in investing activities from continuing operations

(12,837)


(14,437)

Net cash used in investing activities from discontinued operations

(705)


(545)





Cash flows from financing activities:




Borrowing under revolving credit facility

104,500


108,800

Payments on revolving credit facility

(204,500)


(108,800)

Proceeds from issuance of First Lien Notes

225,000


-

Proceeds from issuance of Second Lien Notes

100,000


-

Payments on long-term debt

(93,750)


(18,750)

Payments of financing costs

(35,644)


(75)

Payments on capital lease obligations

(1,628)


(124)

Dividends to stockholders

-


(6,281)

Common stock issued under employee stock purchase plan

-


111





Net cash provided by (used in) financing activities

93,978


(25,119)





Net increase in cash from continuing operations

69,689


13,885

Net decrease in cash from discontinued operations

(51,293)


(17,553)

Net increase (decrease) in cash

18,396


(3,668)

Cash at beginning of period

2,751


6,419

Cash at end of period

$ 21,147


$ 2,751





Horizon Lines, Inc.


Adjusted Operating Income Reconciliation


($ in Thousands)












Quarter Ended December 25, 2011


Quarter Ended December 26, 2010


Year Ended December 25, 2011


Year Ended December 26, 2010


Operating (Loss) Income

$ (6,927)


$ (32,995)


$ (97,856)


$ 4,894











Adjustments:









Legal Settlements

12,719


32,270


(5,483)


32,270


Antitrust Legal Expenses

674


1,780


4,480


5,243


Union/Other Severance

424


98


3,470


542


Impairment Charge

179


856


2,997


2,655


Refinancing Costs

-


-


905


-


Restructuring Charge

-


1,843


-


1,843


Goodwill Impairment

(2,150)


-


115,356


-


Total Adjustments

11,846


36,847


121,725


42,553











Adjusted Operating Income

$ 4,919


$ 3,852


$ 23,869


$ 47,447











Horizon Lines, Inc.

Adjusted Net (Loss) Income Reconciliation

($ in Thousands)










Quarter Ended

 December 25, 2011


Quarter Ended

 December 26, 2010


Year Ended

 December 25, 2011


Year Ended

 December 26, 2010

Net (Loss)

$ (63,563)


$ (56,122)


$ (229,417)


$ (57,969)

Net (Loss) from Discontinued Operations

(137,769)


(12,475)


(176,223)


(22,395)

Net Income (Loss) from Continuing Operations

74,206


(43,647)


(53,194)


(35,574)









Adjustments:








Legal Settlements

12,719


32,270


(5,483)


32,270

Antitrust Legal Expenses

674


1,780


4,480


5,243

Union/Other Severance

424


98


3,470


542

Accretion of Legal Settlement

263


-


810


-

Impairment Charge

179


856


2,997


2,655

Restructuring Charge

-


1,843


-


1,843

Goodwill Impairment

(2,150)


-


115,356


-

Gain on Modification/Extinguishment of Debt/Other Refinancing Costs

(16,650)


-


(15,112)


-

Gain on Change in Value of Conversion Features

(84,480)


-


(84,480)


-

Tax Impact of Adjustments

207


(30)


(717)


(369)

Total Adjustments

(88,814)


36,817


21,321


42,184









Adjusted Net (Loss) Income from Continuing Operations

$ (14,608)


$ (6,830)


$ (31,873)


$ 6,610









Horizon Lines, Inc.



Adjusted Net (Loss) Income Per Share Reconciliation














Quarter Ended

December 25, 2011


Quarter Ended

December 26, 2010


Year Ended 

December 25, 2011


Year Ended

December 26, 2010



Net (Loss) Per Share

$ (20.68)


$ (45.63)


$ (156.70)


$ (47.28)



Net (Loss) Per Share from Discontinued Operations

(44.82)


(10.14)


(120.37)


(18.27)



Net Income (Loss) Per Share from Continuing Operations

24.14


(35.49)


(36.33)


(29.01)













Adjustments Per Share:










Legal Settlements

4.14


26.24


(3.75)


26.32



Antitrust Legal Expenses

0.22


1.45


3.06


4.28



Union/Other Severance

0.14


0.08


2.37


0.44



Accretion of Legal Settlement

0.09


-


0.55


-



Impairment Charge

0.06


0.70


2.05


2.17



Restructuring Charge

-


1.50


-


1.50



Goodwill Impairment

(0.70)


-


78.80


-



Gain on Modification/Extinguishment of Debt/Other Refinancing Costs

(5.42)


-


(10.32)


-



Gain on Change in Value of Conversion Features

(27.48)


-


(57.70)


-



Tax Impact of Adjustments

0.07


(0.02)


(0.49)


(0.30)



Total Adjustments

(28.88)


29.95


14.57


34.41













Adjusted Net (Loss) Income Per Share from Continuing Operations

$ (4.74)


$ (5.54)


$ (21.76)


$ 5.40













Note: In periods where there is net income per share from continuing operations, per-share amounts are calculated using diluted shares; in periods where there is a net loss per share from continuing operations, per-share amounts are calculated using basic shares.



 

Horizon Lines, Inc.



EBITDA and Adjusted EBITDA Reconciliation



($ in Thousands)














Quarter Ended

 December 25, 2011


Quarter Ended

 December 26, 2010


Year Ended

 December 25, 2011


Year Ended

December 26, 2010



Net (Loss)

$ (63,563)


$ (56,122)


$ (229,417)


$ (57,969)



Net (Loss) from Discontinued Operations

(137,769)


(12,475)


(176,223)


(22,395)



Net Income (Loss) from Continuing Operations

74,206


(43,647)


(53,194)


(35,574)













Interest Expense, Net

18,633


10,608


55,677


40,117



Tax Expense

1,267


36


126


324



Depreciation and Amortization

14,032


15,916


58,259


58,577



EBITDA

108,138


(17,087)


60,868


63,444



Legal Settlements

12,719


32,270


(5,483)


32,270



Antitrust Legal Expenses

674


1,780


4,480


5,243



Union/Other Severance

424


98


3,470


542



Impairment Charge

179


856


2,997


2,655



Restructuring Charge

-


1,843


-


1,843



Goodwill Impairment

(2,150)


-


115,356


-



Gain on Modification/Extinguishment of Debt/Other Refinancing Costs

(16,650)


-


(15,112)


-



Gain on Change in Value of Conversion Features

(84,480)


-


(84,480)


-



Adjusted EBITDA

$ 18,854


$ 19,760


$ 82,096


$ 105,997













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 and (ii) EBITDA is a measure used by our management team to make day-to-day operating decisions. Adjusted EBITDA excludes certain charges in order to evaluate our operating performance, for making day-to-day operating decisions and when determining the payment of discretionary bonuses.



 


Horizon Lines, Inc.




Operating Revenue Change for Continuing Operations




($ in millions)





Fourth Quarter


Full Year


















2010 Operating Revenue

$ 256.1


$ 1,000.1




Fuel Surcharges

19.5


54.2




Space Charter

1.2


(0.7)




Revenue Container Rate Increase (Decrease)

0.3


(0.7)




Other Non-Transportation Service Revenue

(1.4)


2.6




Revenue Container Volume Decrease

(11.6)


(29.3)




2011 Operating Revenue

$ 264.1


$ 1,026.2




Total Increase

$ 8.0


$ 26.1











Horizon Lines, Inc.


Adjusted EBITDA Change for Continuing Operations


($ in millions)



Fourth Quarter


Full Year












2010 Adjusted EBITDA

$ 19.8


$ 106.0


Volume Shortfall

(7.0)


(16.9)


Equipment/Lift Costs Required after Maersk Agreements Termination

(2.8)


(12.1)


Vessel Incidents / Weather

(1.3)


-


Rate, Net of Fuel, Change

(2.3)


(10.2)


Maintenance

(0.1)


(0.9)


Sale of Joint Venure

-


(0.7)


Non-Transportation Revenue

0.1


2.1


Space Charter

0.7


(0.2)


Vessel Operating Costs

1.5


3.8


Cost Savings Initiatives

3.7


10.6


Fuel Recovery

6.3


0.6


Other

0.3


-


2011 Adjusted EBITDA

$ 18.9


82.1


Total Decrease

$ (0.9)


(23.9)






 

Horizon Lines, Inc.


2012 Estimated EBITDA and Adjusted EBITDA Reconciliation


($ in Thousands)









2012





Net Loss

$ (34,201)





Net Loss from Discontinued Operations

(5,713)





Net Income Loss from Continuing Operations                                                            

(28,488)











Interest Expense, Net (1)

55,991





Tax Benefit

(267)





Depreciation and Amortization

55,906





EBITDA

83,142





Antitrust Legal Expenses

2,076





Severance

1,125





Gain on Conversion of Series B Notes

(11,343)





Adjusted EBITDA

$ 75,000












Note: The 2012 projections exclude the gain or loss from the April 2012 conversion of the Series A and Series B Convertible Notes and the change in restructuring charge resulting from the vessel charter termination agreement with SFL, as the company is still in the process of quantifying the financial statement impact.

(1) Includes non-cash accretion, deferred financing amortization and payment-in-kind. Cash interest payments are expected to approximate $29.5 million.

SOURCE Horizon Lines, Inc.

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