ACL 3Q Results
American Commercial Lines Inc. (Nasdaq: ACLI) ("ACL" or the "Company") announced results for the three and nine months ended September 30, 2008. Revenues for the quarter were $313.7 million, a 21% increase compared with $258.4 million for the third quarter of 2007. Income from continuing operations for the quarter was $18.4 million or $0.36 per diluted share, compared to $15.9 million or $0.30 per diluted share for the third quarter of 2007.
Michael P. Ryan, President and Chief Executive Officer, stated, "The third quarter presented us with both challenges and opportunities. We again had multiple significant weather events, including two hurricanes, which limited our operating capabilities throughout the quarter. Despite all the disruptions, we delivered a 20% improvement in earnings per share over third quarter 2007. We have stayed focused on our program to continue making operational improvements, building a more sustainable book of business, and controlling our costs to improve profitability. In Transportation, we have experienced steady demand and pricing strength across both liquid and dry businesses, realizing an 8% fuel-neutral rate increase this quarter. But we remain cautious about the near-term outlook given the current global economic uncertainties. Our fuel price adjustment clauses are catching up to the price we're paying, and during the third quarter we were able to more than recover fuel price inflation, though year-to-date fuel inflation remains unfavorable. As a result of operational efficiencies we implemented, we are consuming less fuel per ton mile, and we are seeing increases in the percentage of loaded ton-miles. Our manufacturing segment also continues to make progress with its third consecutive quarter of improved productivity in the shipyard.
"Given the current market dynamics and the cost of capital in today's market, we continue to evaluate all of our options for refinancing our credit facility with the ultimate goal of developing a capital structure that utilizes our significant asset base and provides the longer-term resources and flexibility needed to reinvest in our fleet and to achieve our broader business goals."
For the nine months ended September 30, 2008 revenues were $906.9 million, a 21% increase compared with $747.8 million for the first nine months of 2007. Income from continuing operations for the nine months ended September 30, 2008 was $24.0 million or $0.47 per diluted share, compared to $20.7 million or $0.35 per diluted share for the first nine months of 2007. Results for the nine months ended September 30, 2008 included after-tax debt retirement expenses of $1.5 million or $0.03 per diluted share on the amendment of the Company's credit facility, and 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 for certain represented employees of the Company's terminal operations. Results for the first nine months of 2007 included after- tax debt retirement expenses of $15.3 million related to the retirement of the Company's 9.5% senior notes and the Company's previous revolving credit facility, which reduced earnings per share by $0.26.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) from continuing operations for the third quarter of 2008 was $49.6 million with an EBITDA margin of 15.8% compared to $43.2 million for the third quarter of 2007 with an EBITDA margin of 16.7%. For the nine months ended September 30, 2008, EBITDA from continuing operations was $99.8 million compared to $105.5 million for the nine months ended September 30, 2007. EBITDA margin was 11.0% for the nine months ended September 30, 2008 and 14.1% for the nine months ended September 30, 2007. The attachment to this press release reconciles net income to EBITDA.
Transportation Results
The transportation segment's revenues were $244.0 million in the third quarter 2008, an increase of 12.0% over the third quarter of the prior year. The revenue increase was driven by 27.5% higher pricing on affreightment contracts, higher outside towing and charter/day rate revenues and higher revenue from scrapping barges, partially offset by lower ton-mile volumes. Slightly more than two-thirds of the affreightment rate increases were driven by fuel escalations under the Company's contracts, with the remainder attributable to higher fuel-neutral pricing. On average, compared to the third quarter of 2007, the fuel-neutral rate on the dry freight business increased 6.6% and the liquid freight business increased 19.3% in 2008. Total volume measured in ton-miles declined in the third quarter of 2008 to 9.9 billion from 11.6 billion in the same period of the prior year, a decrease of 14.0%. Volume declines in the quarter were attributable to flooding conditions throughout much of the inland waterway system, the impacts of hurricanes Ike and Gustav and the closure of the Mississippi River at New Orleans for 10 days due to the previously disclosed oil spill. On average, 4.6% or 123 fewer affreightment barges operated in the third quarter of this year compared to the third quarter of last year.
Year-to-date, the 14.9% revenue increase over 2007 was driven by a 23.8% pricing increase on affreightment contracts, increases in outside towing and charter/day rate revenues and increased revenue from scrapping barges partially offset by lower ton-mile volumes. Almost two-thirds of the affreightment rate increases were driven by fuel escalations, with the remainder attributable to higher fuel-neutral pricing. On average, compared to the nine months ended September 30, 2007, the fuel neutral rate on the dry freight business increased 7.9% and the liquid freight business increased 12.8%. Year-to-date total volume measured in ton-miles declined in the first nine months of 2008 to 29.6 billion from 32.6 billion in the same period of the prior year, a decrease of 9.1%. This was mostly attributable to inclement weather conditions and severe flooding. On average, 5.4% or 148 fewer barges operated in the first nine months of this year compared to the first nine months of the prior year.
Operating income in the transportation segment increased 3.6% or $1.2 million to $34.0 million in the quarter ended September 30, 2008 compared to the same period of the prior year. This increase was due primarily to favorable fuel price recoveries, lower fuel consumption, fuel-neutral price increases and higher income from scrapping retired barges. The increase was nearly offset by cost inflation. Unfavorable weather-related operating conditions continued to impact operating profit in the quarter. Weather- related water conditions resulted in almost 11,000 idle barge days in the quarter, an increase of over 175% or more than 7,000 days over the prior year. The Company estimates this negatively impacted the transportation segment's operating margin by approximately $3.2 million in the quarter. Fuel prices increased 63% over third quarter 2007, with an average cost of $3.60 per gallon. The Company estimates it recovered through fuel price escalations approximately $6.8 million more than its direct and indirect fuel cost increases during the quarter. Additionally, operating profits improved due to a $2.5 million increase in income from scrapping and disposal of barges.
Year-to-date operating income in the transportation segment decreased 25.0%, or $15.7 million, to $47.1 million in the nine months ended September 30, 2008 compared to the same period of the prior year. This decline was due to significant increases in fuel prices and unfavorable weather-related operating conditions. The Company estimates it had approximately $10.4 million in direct and indirect unrecovered fuel price increases. During the past nine months high-water conditions caused by abnormally high precipitation levels along the inland waterways increased idle barge days 168% (almost 24,000 days) and drove additional cost inefficiencies of approximately $15 million. These were partially offset by the higher fuel-neutral pricing and a $7.0 million increase in income from scrapping and disposal of barges.
Manufacturing Results
Manufacturing revenues were $57.2 million in the third quarter of 2008 compared to $40.6 million during the same period last year. Manufacturing operating margin increased quarter-over-quarter by 2.1% to 5.3%, an increase of $1.7 million to $3.0 million, primarily driven by improved labor utilization in the shipyard and the reduction in build hours per barge. This margin comparison excludes the impact of certain reserves and write-downs of $3.3 million that were recorded in the third quarter of 2007. Manufacturing lost only one-half of a production day to weather during the quarter, 5.5 less days than in the third quarter 2007.
Manufacturing revenues were $216.9 million for the nine months ended September 30, 2008 compared to $168.0 million for the nine months ended September 30, 2007. This increase was also driven by additional liquid barge sales, higher steel pricing and less internal builds. Through September 30, 2008, 24.5 production days were lost this year due to weather, over 53% more than the days lost in the first nine months of 2007. Manufacturing operating margin for the nine months ended September 30, 2008 increased from 4.3% to 6.0% compared to the nine months ended September 30, 2007, excluding the prior year inventory reserves and write-downs discussed in the quarter comparison above. This represents an increase of $5.8 million to $13.0 million, primarily driven by improved labor utilization in the shipyard and the reduction in build-hours per barge.
Through the end of the third quarter of 2008 ACL's manufacturing business, Jeffboat LLC ("Jeffboat"), has not completed any barges for internal use by ACL compared to 41 dry and 11 liquid cargo barges completed during the quarter ended September 30, 2007. The mix of barges sold to third parties shifted significantly to liquid tank barges in the third quarter of 2008 compared to the third quarter of 2007. Jeffboat sold 19 dry hopper barges in the third quarter of 2008 and 55 in the third quarter of 2007. Jeffboat also sold 12 liquid tank barges and 10 hybrid vessels during the third quarter, an increase of 10 liquid tank barges and 10 hybrid vessels over the third quarter of 2007.
On a year-to-date basis through September 30, 2008, Jeffboat sold 242 barges to third parties and produced no barges for internal use by ACL. This is 57 fewer total barges than in the prior year. Although three fewer barges were produced for third parties in the current year, the sales mix in the current year included more higher-priced liquid tank barges and fewer lower- priced dry barges. Combined with higher steel pricing, these factors resulted in higher external revenue in the nine months ended September 30, 2008 than in the same period of the prior year. On a year-to-date basis through September 30, 2008, Jeffboat sold 191 dry cargo barges, 38 liquid tank barges, three ocean-going barges and ten hybrid vessels. This is 39 fewer dry hopper barges, 23 more liquid tank barges, three more ocean-going barges and 10 more hybrid vessels than sold in the prior year. On a year-to-date basis through September 30, 2007, 41 dry barges and 13 liquid tank barges were built for ACL. Our manufacturing sales backlog is $263 million at September 30, 2008 and extends into 2010.
Cash Flow and Debt
ACL's liquidity under the amended credit agreement was $114.2 million on September 30, 2008. We remain in compliance with our debt covenants.
During the third quarter, the Company had $30.4 million of capital expenditures, generated $32.8 million in cash from operations, and reduced its revolver by $12.3 million to $432.7 million.
For the nine months ended September 30, 2008, ACL had $55.4 million of capital expenditures, used $8.5 million to complete the acquisition of Summit Contracting, and reduced its revolver by $6.3 million.
(www.aclines.com)
