ACL 1Q 2009 Results
American Commercial Lines Inc. (Nasdaq: ACLI) announced results for the first quarter ended March 31, 2009. Revenues for the quarter were $196.8 million, a 27.2% decrease compared with $270.5 million for the first quarter of 2008, as transportation revenue declined by 24.1% and manufacturing revenue fell 45% on fewer units sold. For the first quarter 2009, the company's net loss was $5.5 million or $0.11 per share compared to net income of $2.3 million or $0.05 per diluted share for the first quarter of 2008. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the first quarter of 2009 was $13.1 million with an EBITDA margin of 6.7% compared to $23 million for the first quarter of 2008 with an EBITDA margin of 8.5%. The attachment to this press release reconciles net income to EBITDA.
Results for the first quarter of 2009 included after tax severance and Houston office closure expenses of $2.4 million or $0.05 per share, higher after tax interest costs of $1.1 million or $0.02 per share and after tax charges of $0.4 million or $0.01 per share related to a customer's bankruptcy filing. Results for the first quarter of 2008 included an after tax benefit of $1.3 million or $0.03 per diluted share related to the decision not to withdraw from a multi-employer pension plan and an after tax charge of $0.7 million or $0.01 per diluted share related to a reduction in force ("RIF") in that period.
Commenting on first quarter results, Michael P. Ryan, President and Chief Executive Officer, stated, "The sustained weakness in the economy negatively impacted our results, from a volume and profitability perspective, in what is typically the least profitable quarter of each year. We had significantly lower backhaul demand from the Gulf and a higher mix of lower margin commodity shipments when compared to the prior year. We made progress in our manufacturing segment as we produced an 11.7% manufacturing operating margin compared to 5.2% in the prior year, surpassing the operating income level from the prior year period by $0.8 million on revenues that were $28.8 million lower.
"We continued to focus on the elements of our business that we can control and that we believe will position us for sustainable profitability. We continue to work to increase our boat productivity in the service lanes that we believe have the highest profit potential, not only as a necessary strategy in the existing demand environment but to position us for improved performance when demand recovers. Despite disappointing industry demand, which particularly impacted our bulk and liquids business, we generated $25 million of cash flow from operations. We finished the quarter with approximately $40 million in available liquidity under our credit facility as we continue to challenge every dollar we spend.
"Our March 2009 RIF and Houston office closure cost us $0.05 per share in the first quarter but is expected to generate more than $10 million in annualized savings, which together with other productivity and cost control initiatives, such as our 2009 wage and salary freeze, will position us for increased profitability in a more normal economic environment."
The transportation segment's revenues were $155.5 million in the first quarter of 2009, a decrease of 24.1% over the first quarter of the prior year. The revenue decrease was driven by a 10.7% decline in ton-mile volume and 20.3% lower pricing on affreightment contracts. Slightly more than a quarter of the affreightment rate decrease was attributable to fuel de-escalation in our contracts and the remainder was due to lower average fuel-neutral rates per ton-mile. The lower rates were driven by a revenue mix shift into lower margin products. Higher margin liquid and bulk affreightment volumes decreased 47.2% and 26.3% respectively, from the prior year, while lower margin grain and coal volume increased 11.6% and 14.1%, respectively. On average, compared to the first quarter of 2008, the fuel-neutral rate decreased 14.8%. Total affreightment volume measured in ton-miles declined in the first quarter of 2009 to 8.9 billion from 10 billion in the same period of the prior year. The average number of liquid barges in charter/day rate service decreased in the first quarter by 23 barges over the prior year quarter.
The transportation segment's operating loss in the quarter was $3.4 million compared to operating income of $6.4 million in 2008. Included in the transportation segment 2009 first quarter operating income results are the $4.0 million cost of the 2009 RIF and Houston sales office closure and $0.7 million related to the bankruptcy filing of a customer. The first quarter of 2008 included the benefit of the reversal of $2.1 million related to the represented employee pension buy out and the cost impact of a RIF of $1.2 million. Excluding these non-comparable items, operating ratios for 2009 and 2008 were 99.1% and 97.3%, respectively.
The deterioration in the operating ratio between years was primarily attributable to the impact of lower overall volume. The deterioration in the ratio was also exacerbated by the commodity mix shift into grain and coal. The decline in bulk volumes also lowered backhaul percentages which negatively impacted margin. Weather related impacts were not as significant in 2009. Vessel employee compensation increased quarter-over-quarter due to multiple market-based 2008 wage increases and higher vessel incentive and share-based compensation accruals in the current year quarter. These negative impacts were partially offset by lower fuel prices and improved productivity and cost control.
Transportation segment selling, general and administrative expenses increased by $1.6 million but included $2.8 million of costs for the Houston office closure and higher RIF-related charges recorded in the first quarter of 2009.
ACL's manufacturing business, Jeffboat, completed 12 and 89 barges during the first quarters of 2009 and 2008, respectively. In the first quarter of 2009, Jeffboat sold 11 liquid tank barges, delivered one liquid tank barge for internal use and substantially completed several special vessels within the loss provisions estimated at the prior year end. In the first quarter of 2008, Jeffboat sold 79 dry hopper barges, 9 liquid tank barges and one special vessel. No barges were built during the 2008 first quarter for internal use by ACL.
Manufacturing revenues were $35.2 million in the first quarter 2009 compared to $64.1 million in the first quarter 2008. Manufacturing operating margin was 11.7% or $4.1 million in the first quarter 2009 compared to 5.2% or $3.3 million in the first quarter 2008. The improvement is attributable to the higher margins on the current year's production of liquid tank barges vs. the prior year production of legacy dry hopper barges and to the improvements in labor productivity.
During the first quarter the Company had $8.4 million of capital expenditures primarily related to costs of new tank barges begun in the fourth quarter of 2008, boat and barge maintenance and improvements to the shipyard. The Company generated $25.1 million in cash from operations during the quarter compared to a use of cash from operations in the prior year of $8.3 million. The current year cash performance was driven by working capital, including improved management of accounts receivable and the manufacturing segment's inventory, as changes to the manufacturing supply chain generated a $6 million reduction in steel inventory. Borrowings under the revolver increased by $13.2 million to $431.7 million primarily due to the $21.2 million cost of the credit facility amendment and capital expenditures partially offset by cash flow from operations. Availability under the amended credit agreement was approximately $40 million at March 31, 2009. The Company also has the ability to enhance liquidity through certain sale leaseback and asset sales permitted under the amended credit agreement. ACL remains in compliance with the debt covenants in its credit facility with a leverage ratio, as defined in our bank agreement, of 2.8 compared to the permitted 3.5 leverage.