ACL Reports Q3 Results

Tuesday, November 03, 2009

American Commercial Lines Inc. (NASDAQ: ACLI) (ACL) announced results for the quarter and nine months ended September 30, 2009. Revenues for the quarter ended September 30, 2009 were $216.0 million, a 31.1% decrease compared with $313.7 million for the quarter ended September 30, 2008. The decrease in revenue was primarily due to changes in the mix of commodities shipped by our customers in the respective quarters into lower revenue commodities and to lower volume in the current year. The impact of lower fuel prices which contractually is passed through to our customers in the current year quarter also contributed to the decline in revenue and was partially offset by the increase in manufacturing segment's revenues in the quarter. For the quarter ended September 30, 2009, the company's net loss was $12.2 million or $0.96 per diluted share, compared to net income of $18.3 million or $1.44 per diluted share for the comparable quarter of 2008. Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") for the third quarter of 2009 was $22.4 million, with an EBITDA margin of 10.4%, compared to $49.6 million for the third quarter of 2008 with an EBITDA margin of 15.8%. The attachment to this press release reconciles net income to EBITDA.

Results for the quarter ended September 30, 2009 were impacted by three significant non-comparable charges: (i) after-tax debt retirement expenses of $11.2 million or $0.88 per diluted share related to the company's third quarter debt refinancing, (ii) an after-tax charge of $2.8 million or $0.22 per diluted share related to an impairment charge on the intangible assets of the Company's Summit engineering business and (iii) an after-tax charge of $1.5 million or $0.11 per diluted share related to a customer contract dispute in its manufacturing segment. In the third quarter 2009, though average outstanding debt declined from the prior year's third quarter, after-tax interest expenses were $2.0 million higher, negatively impacting the quarter by $0.16 per diluted share. The current quarter also benefitted from higher after-tax net gains from asset management actions of $7.7 million or $0.61 per diluted share.

Commenting on results, Michael P. Ryan, President and Chief Executive Officer, stated, "We have not seen a recovery in our most profitable markets, and we have been negatively impacted by the late grain harvest, which deferred any anticipated benefit from the harvest activity to the fourth quarter and early 2010. We continue to aggressively manage all of our costs, having completed additional reductions in force both at the shipyard and through our transportation operations realignment during the third quarter. We have now reduced total annualized salaried compensation costs by approximately $25 million since May 2008, establishing a more efficient organizational structure through the recent realignment of our barging operations. Additionally, we have reduced our shipyard production headcount by over 10% in the quarter and 30% overall, right sizing the manufacturing workforce. We have succeeded in producing positive cash flow and EBITDA for the quarter and nine months ended September 30, 2009 and have continued to judiciously manage our capital expenditures to position us for improved performance when the transportation markets begin to recover."

Revenues for the nine months ended September 30, 2009 were $637.5 million, a 29.7% decrease compared with $906.9 million for the same period during 2008. Transportation revenues declined by 33.4% while manufacturing revenues fell 21.5%. For the nine months ended September 30, 2009, the company's net loss was $21.4 million, or $1.68 per diluted share, compared to net income of $24.3 million or $1.91 per diluted share for the same period of 2008. EBITDA for the nine months ended September 30, 2009 was $55.7 million, with an EBITDA margin of 8.7%, compared to $100.3 million for the same period of 2008 with an EBITDA margin of 11.1%.

In addition to the significant non-comparable charges in the quarter, comparison of the nine months ended September 30, 2009 to the comparable period of the prior year is impacted by severance related to current year reductions in force and expenses for the closure of the Houston office that exceeded the severance related to prior year actions by $1.9 million after-tax or $0.15 per diluted share, current year after-tax charges of $0.4 million or $0.03 per diluted share related to a customer's bankruptcy filing and a prior year after-tax benefit of $1.3 million or $0.10 per diluted share related to a pension reversal. Results for the nine months ended September 30, 2009 included after-tax interest expense that was $7.0 million higher than the comparable prior year period, negatively impacting income by $0.55 per diluted share. The nine months ended September 30, 2009 benefitted from higher after-tax net gains from asset management actions of $5.1 million or $0.41 per diluted share.

The higher margin metals and refined liquid petrochemical products markets remained weak in the third quarter, impacting year-over-year comparisons. While the transportation segment had strong grain and legacy coal volumes, grain rates are significantly lower than the prior year due primarily to the lateness of the 2009 harvest.

The segment's revenues were $142.1 million in the third quarter and $443.4 million in the nine months ended September 30, 2009, a decrease of 41.7% from the third quarter of 2008 and 33.4% from the first nine months of the prior year or 35.3% and 28.1%, respectively, on a fuel-neutral basis. Ton-mile volumes decreased approximately 12% from the prior year quarter to 8.7 billion ton-miles and 7.5% from the prior year for the first nine months. During the quarter ended September 30, 2009, three boats that did not fit within the company's new strategic power model were sold producing $23 million of cash proceeds. Also in the quarter impairment charges were incurred for certain other boats that have been identified as surplus. The net gain from the sale and the additional impairment was partially offset by $2.7 million and $9.4 million in lower margins from scrapping of surplus barges when compared to the prior year third quarter and nine months ended September 30, 2008, respectively.

The mix shift into lower margin commodities and lower grain pricing drove total dry portfolio fuel-neutral pricing down 25% from the prior year quarter and down 24% for the three quarters. The grain revenue price variance of negative $19.0 million in the quarter and negative $37.6 million in the first three quarters drove much of the dry portfolio decline. Liquid portfolio fuel-neutral pricing was down 8% for the quarter and up 3% from the prior year's first nine months. Higher margin liquid and bulk affreightment volumes decreased 35% and 26% in the quarter and 41% and 27% for the first nine months, respectively, from the prior year levels. Lower margin grain and legacy coal volumes increased 25% and 27% in the quarter and 41% and 39% in the first three quarters over the prior year periods.

For the current quarter and first nine months, the negative impact of volume, price, and mix significantly impacted margins. Operating income was negatively impacted by higher costs of relocating empty barges due to the current year imbalance of north and south bound freight, estimated at $6.4 million in the quarter and $16.1 million in the nine month period, and lower scrapping activity. These items were only partially offset by higher boat productivity, net gains on asset management described above and favorable SG&A. Additionally, the delayed harvest in 2009 significantly lowered normal September grain volumes. The average number of liquid barges in charter/day rate service decreased in the third quarter by 38 barges or 25% from the prior year quarter. The transportation segment's operating income in the quarter was $9.9 million compared to operating income of $34.0 million in the third quarter of 2008. The operating ratios for the third quarter of 2009 and 2008 were 93.0% and 86.1%, respectively.

Manufacturing segment revenues of $64.2 million in the quarter ended September 30, 2009 were $7.0 million higher, or 12.2% above the prior-year, primarily due to the number of barges built and relative steel pricing, with 53 dry hoppers produced in the current year compared to 19 in the prior year. Nine liquid tankers and one special vessel were sold this quarter versus 12 tankers and 10 hybrid barges in last year's quarter. In the nine months ended September 30, 2009, manufacturing segment revenues were $46.5 million lower on fewer barges produced for external customers, with 72 dry hoppers produced in the current year compared to 191 in the prior year. In the first nine months of 2009 39 liquid tankers and three special vessels were sold versus 38 tankers, three special vessels and 10 hybrid barges in last year's first nine months.

The manufacturing segment's EBITDA increased 34.5% for the quarter and 41.9% for the nine months ended September 30, 2009, despite a $2.3 million charge related to a contract dispute. This improvement resulted from a better mix of higher margin barges sold year-to-date and improved productivity. EBITDA margin for the quarter was 8.0% and for the nine months ended September 30, 2009 was 12.7%.

Manufacturing operating profit improved by $1.1 million quarter-over-quarter and $5.8 million for the first nine months on the better mix of barges, improved productivity and safe operations, as the shipyard is approaching two million hours worked without a lost time injury in the fourth quarter of 2009. The higher provision for the customer dispute negatively impacted quarterly performance.
The manufacturing backlog has not been robust, though relatively low steel prices are stimulating a higher level of quote activity. In July, in order to right size the workforce, the shipyard headcount was reduced by approximately 10% in response to reduced demand. New orders for 25 dry cargo barges and five liquid tank barges were added to our manufacturing backlog during the quarter and 50 new dry cargo barges will be built in 2010 for our transportation segment.

At September 30, 2009, the company had $413.8 million in total debt outstanding. In the nine months ended September 30, 2009, the company generated $83.8 million of cash flow from operations, compared to $75.4 million in the prior year. The increase, on lower net income, was primarily due to working capital changes, mainly lower accounts receivable. At September 30, 2009, the company had approximately $196 million in available liquidity under its revolver, considering quarter-end temporarily restricted cash of $23 million which was used in October to reduce outstanding debt balances. During the first nine months of 2009 the Company had $20.1 million of capital expenditures primarily related to costs of new tank barges begun in the fourth quarter of 2008, boat and barge maintenance, improvements to the shipyard and software.

(www.aclines.com)

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