- Adjusted EBITDAR of $232.1 million for the year -- a 33% increase over prior year
- Operating income of $61.1 million for the year -- an increase of $57.4 million compared to prior year
- Cash generated from operating activities of $65.8 million during the quarter
- Net Funded Debt to Adjusted EBITDAR ratio of 2.0 times at year-end
- Strong liquidity with $176.6 million in available borrowing capacity as of December 31, 2012
- Company announces offering of $650 million senior secured term loan. Proceeds to redeem ACL I Notes and Senior Notes of the Company and pay distribution to shareholders
Commercial Barge Line Company announced results for the quarter and year ended December 31, 2012. For the year, the Company reported total revenues of $811.6 million and Adjusted EBITDAR of $232.1 million. Compared to 2011 results, revenues declined $41.4 million, or 4.9%, while Adjusted EBITDAR improved by $57.8 million, or 33.2%. For the quarter, total revenues were $207.9 million compared to $244.5 million in 2011 and Adjusted EBITDAR was $62.8 million compared to $60.3 million in 2011.
Commenting on the results, Mark Knoy, President and Chief Executive Officer, said, "We are quite pleased with the continued strong operating performance we experienced, despite the challenges we faced due to the drought-related operating conditions as well as its impact on the US grain harvest. While we experienced a decline in transportation segment revenue of over $26 million in the quarter compared to last year, driven by a 27% reduction in grain ton-mile volume, our EBITDAR margin was essentially flat with what we achieved in the prior year and our Adjusted EBITDAR, which adjusts for non-comparable items including our estimate of drought-impact, exceeded last year by $2.5 million, resulting in a 5.6 percentage point increase in our Adjusted EBITDAR margin. For the year, this trend was even more marked, with an improvement in Adjusted EBITDAR of $57.8 million on a transportation revenue base that was nearly $34 million lower, for an Adjusted EBITDAR margin improvement of over 8%. Our ability to continue to deliver improved operating performance and earnings is the direct result of our execution of the operating priorities that we have been driving for the past two years -- maintaining a focused distribution footprint within our core operating network, reducing non-value miles, investing wisely to improve the reliability of our equipment and providing a safe environment for our teammates to deliver on our productivity initiatives."
As previously announced, the Company entered into new contractual agreements with MEG Energy (US) Inc. and SeaRiver Maritime Inc. (a marine affiliate of Exxon Mobil Corporation) ("Exxon") during the fourth quarter, further extending the Company's scope within the fast growing petroleum distribution market. Mr. Knoy stated, "We have identified the petroleum market as a significant growth opportunity for the Company, and have aggressively pursued new opportunities in this space. We are excited about working with MEG Energy and Exxon on these new contracts. Bolstered by these new relationships and the anticipated additions of tank barges to our fleet during 2013, we will move more than 60 million barrels of crude oil, refined petroleum products, chemicals and other liquid products on an annualized basis, greatly increasing our market position in this fast-growing sector, and thereby strengthening our business mix and improving our quality of earnings. As we continue to expand in this space, we expect that our liquids business will contribute approximately 60% of our consolidated EBITDAR in the future."
During the fourth quarter, the Company continued to experience adverse operating conditions associated with the severe drought which began during the late second quarter of 2012. Commenting on operating conditions during the quarter, Mr. Knoy stated, "Operating conditions on the inland waterways gradually improved as we moved through the fourth quarter. We saw some much needed precipitation through the Ohio River Valley and Lower Mississippi River area at key points during that time. These improved weather patterns resulted in river conditions in these regions that allowed us to begin operating at near-normal barge drafts and tow sizes as we entered 2013. Conditions on the Mississippi River between St. Louis and Cairo, Illinois continued to disrupt operations in that area as well as at our St. Louis coal transfer terminal; however, we have seen these conditions improve as well with some late-January precipitation and today, operating conditions are back to normal. As a result, we believe that we will no longer experience drought-related operating constraints by the end of the first quarter of 2013 and the negative financial impact of these challenges will then be behind us."
Senior Secured Term Loan Offering Announced
The Company today announced that it has launched a financing whereby it intends to raise $650 million through a new senior secured term loan (the "Term Loan Financing") with Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co., UBS Investment Bank and Wells Fargo Securities as Joint Lead Arrangers and Joint-Bookrunners, together with PNC Capital Markets LLC, Royal Bank of Scotland and SunTrust Robinson Humphrey, Inc. as Co-Managers. The Company also announced that, concurrent with the Term Loan Financing, it expects to increase the overall commitment of its asset-based revolving line of credit from $475 million to $550 million (together with the Term Loan Financing, the "Financing"). The net proceeds from the Financing, if consummated, are expected to be used to discharge and then subsequently redeem the outstanding principal amount of: (i) ACL I Corporation's 10.625%/11.375% Senior PIK Toggle Notes due 2016 at a redemption price of 105% of the principal amount and (ii) the Company's 12 1/2% Senior Secured Notes due 2017 at a redemption price of 106.25% of the principal amount, in each case, plus accrued and unpaid interest to the date of redemption. The proceeds for the redemption will be deposited with the trustee of each series of notes upon the closing of the Financing, at which time the respective obligations under the related indentures will be discharged. It is expected that the redemption payments will be received by the holders of ACL I Corporation's notes in mid-April and by the holders of the Company's notes in mid-July. In addition, proceeds of the Financing will fund a $207 million dividend to the shareholders of the Company's ultimate Parent, Finn Holding Corporation.
Commenting on the Company's outlook, Mr. Knoy said, "We continue to see opportunities in the energy sector, as North American oil production continues to rise. Tank barge capacity in the industry continues to be in tight supply, so we are confident that we will be able to quickly realize the earnings benefit of the new tank barges that will be completed by Jeffboat during the first half of 2013. We estimate that the strength of this market segment coupled with our significant investment in equipment to serve it will provide the Company with approximately $20 million in improved annual EBITDAR performance when fully deployed. North American production of natural gas will continue to support a pricing environment that will support growing chemical production in the US, further increasing the demand for tank barge capacity. While low natural gas prices will pressure domestic coal volumes as domestic utilities increase their use of gas powered generation, we believe that our exposure to this is mitigated as our sole domestic coal contract is dependent upon Powder River Basin coal, which is the most cost competitive coal versus natural gas. We do, however, remain cautious on our opportunities in the export coal market in the near term due to negative volume pressure resulting from high coal inventories in Europe and continued downward pricing pressure on open barge capacity in the US. A significant majority of our dry bulk cargo business is contracted, and as such, will be relatively stable, subject to some nearby variation as the US economy continues to gain its footing."
"Although river conditions are now back to pre-drought conditions, we will continue to suffer market related effects of the 2012 drought through the first half of 2013, as grain stockpiles available for export have fallen off significantly from historic levels. This reduction in available product has also driven domestic prices to levels that are not competitive in the international export markets, thereby putting further downward pressure on export volumes. We do expect that domestic plantings will again be at historically high levels in 2013, and that we may see improved dynamics in this sector when the first harvested acres reach market in the early third quarter."
Mr. Knoy went on to say, "We entered 2013 positioned very well to respond to improved operating and market conditions as a result of the investments made in our fleet assets over the past 18 months. We have eliminated nearly 450 of our poorest performing barges from our fleet and have invested over $90 million in our fleet of tow boats, greatly improving their reliability, towing capacity and fuel efficiency. We countered the impact of these barge retirements through the addition of 95 new covered hopper barges during the year. In addition, we invested $69 million in new tank barges to take advantage of the strong market fundamentals in that sector and similarly expect to invest an additional $38 million in 2013 to support contracted business in this space. With these actions, we have improved the age of our covered hopper fleet to approximately 12 years and the age of our 30,000 barrel tank barge fleet will be approximately the same level as we complete our current construction program in 2013. Despite the magnitude of these investments, we entered 2013 with significant liquidity, with $177 million of total availability on our line of credit." The Company estimates that capital spending for 2013 will be in the range of $40 million to $45 million, excluding the $38 million that will be spent to complete the new barge construction referred to above.