February 19, 2008
Ryan takes helm at ACL
American Commercial Lines Inc. (Nasdaq: ACLI) yesterday reported fourth quarter and annual financial results for fiscal 2007, announced the replacement of President and CEO Mark Holden by SVP of Sales and Marketing Michael P. Ryan--and said it is suspending earnings guidance for 2008.
Ryan will succeed Holden effective March 1 and will also take his seat on the board.
ACL says Ryan has 27 years of experience in the transportation industry, with jobs in the truck, rail and barge sectors. He has held senior leadership positions in all of these units, including top positions directing several commercial business units with CSX Transportation. Since joining the company in 2005, says ACL, he "has designed the company's shift toward a stronger, more reliable portfolio base." Ryan built a new Sales and Customer Service Program over the past two years, which is focusing on business retention and organic growth, expanding ACL's market share in more ratable lines of business.
Ryan said: "We will maintain our current strategy of taking every opportunity, both in transportation and in manufacturing, to stabilize our revenue stream with more predictable, ratable and profitable business. We launched this effort in 2006 with new contract agreements in our transportation segment, and we will continue this initiative in transportation as well as manufacturing. Our industry is subject to external forces, and we will continue to take aggressive steps to neutralize those effects on our revenue base and profitability."
Fourth Quarter 2007 revenues were $302.5 million, a 13.8% increase compared with $265.9 million for the fourth quarter of 2006. Net income for the quarter was $23.7 million or $0.46 per diluted share, a 32.3% decrease compared to $35.0 million or $0.56 per diluted share for the fourth quarter of 2006. Results included an after-tax charge of $1.4 million or $0.03 per diluted share for the withdrawal from a multi-employer pension plan and a $1.8 million or $0.04 per diluted share favorable tax adjustment related to realization of certain deferred tax assets. Results for the fourth quarter 2006 included a gain of $4.8 million (net of tax) or $0.08 per diluted share on the sale of the company's Venezuelan operations and a charge for the early retirement of debt of $0.9 million (net of tax) or $0.01 per diluted share.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the fourth quarter 2007 were $54.4 million, an EBITDA margin of 18.0% compared to $70.0 million for the fourth quarter 2006, an EBITDA margin of 25.9%.
Revenues for the full year 2007 were $1.05 billion, an 11.4% increase compared with the $942.6 million for the full year 2006. Net income for the full year was $44.4 million or $0.77 per diluted share, a 51.9% decrease compared to net income for the full year 2006 of $92.3 million, or $1.47 per diluted share. Results for 2007 included after-tax charges of $16.0 million or $0.28 per diluted share for debt retirement expenses related to the retirement of the company's senior notes and the replacement of its credit facility. Results for 2006 included the $4.8 million from the sale of the Venezuelan operations and a charge for the early retirement of debt of $0.9 million (net of tax).
For the full year 2007, EBITDA was $159.8 million, an EBITDA margin of 15.2% compared to $211.8 million for the full year 2006, an EBITDA margin of 22.0%.
n the fourth quarter 2007, revenues in transportation, which comprise almost 80% of ACL's business, were $228.8 million, an increase of 4.7% from the fourth quarter 2006. The increase was driven by an average fuel-neutral rate increase of 16.4% on the liquid freight business, which more than offset an average fuel-neutral rate decrease of 0.3% on the dry freight business, compared to fourth quarter 2006. Excluding grain, the average fuel-neutral rate for the dry business increased 8.0% in the fourth quarter 2007 compared to the fourth quarter 2006.
For the full year, 2007 transportation revenues increased 2.7% over the prior year to $808.6 million. Average fuel-neutral freight rates for the full year were up 13.4% on the liquid business and were down 1.2% on the dry freight business. Excluding grain, the average fuel-neutral rate for the dry business increased 4.9% over 2006.
In the fourth quarter 2007, ACL generated approximately 11.0 billion ton- miles compared to 11.4 billion ton-miles in the same period of the prior year, a decrease of 3.6% with 8.0% fewer barges. For the full year 2007, ACL moved approximately 43.6 billion ton-miles of cargo compared to
45.1 billion ton- miles transported in 2006, a decrease of 3.4% with 5.6% fewer barges. Revenues per barge increased 13.8% in the fourth quarter 2007 and 8.8% for the full year 2007 compared to 2006.
Ryan commented, "Our value proposition continues to position us with price strength from our services. In 2007, we repriced 33% of our contract business, renewing agreements with an average 15% increase over prior year levels. We also improved our contract protection against fuel, labor and inflation increases to coverage in 85% of our contracts."
ACL's manufacturing business, Jeffboat, completed 404 barges during 2007, a 28% increase in production volume. Jeffboat sold 361 dry hopper barges, 41 liquid tank barges and two ocean-going vessels.
Manufacturing revenues, inclusive of barges manufactured for internal use by ACL, were $76.9 million in the fourth quarter 2007 compared to $58.0 million during the same period in 2006. External revenues in the fourth quarter 2007 increased 51.8% to $71.9 million from $47.4 million in the same period of the prior year due to the higher level of internal builds in the fourth quarter of 2006.
For the full year 2007, manufacturing revenues, inclusive of barges manufactured for internal use, were $290.1 million, a 37.2% increase over the prior year. Jeffboat had $50.1 million in internal sales to ACL's transportation segment. Net of the internal builds, external revenues increased 54.6% to $239.9 million for the full year 2007, compared to $155.2 million in 2006. Manufacturing operating margins declined over the prior year due primarily to higher labor costs, reduced productivity associated with a larger and less experienced work force, and the continuing impact of ongoing production of barges that were bid at lower margins in 2005 and prior.
Cash Flow and Debt
In 2007, ACL generated cash from operations of $115.8 million. The company spent $109.3 million on capital expenditures to support its infrastructure and growth, and invested: $15.6 million for the acquisition of towboats and certain assets from the McKinney companies; $6.2 million for Summit Contracting; and $4.3 million for the acquisition of Elliott Bay Design Group. Debt increased by $320.3 million during the year to $439.8 million at the end of 2007. The increased borrowing in 2007 was primarily the result of $300 million used to fund the repurchase of 12 million shares of ACL common stock. ACL had approximately 50 million shares outstanding at December 31, 2007.
Separately, Christopher Black, the Company's Senior Vice President and Chief Financial Officer, who previously announced that he would leave the Company following the expiration of his employment agreement on February 22, 2008, has agreed to remain with the Company in his current capacity through March 1, 2008. Thereafter, Black will serve in a consulting capacity with the Company for a two month period to assist with the transition to a new Chief Financial Officer.
Due to a number of factors, ACL is suspending earnings guidance for
"The volatility in the transportation industry as a whole and grain shipping in particular, along with a weak economy, escalating fuel costs and unpredictable weather patterns, obscure our visibility to accurately predict financial results at this time," said Ryan. "We will revisit this decision later in the year, but cannot commit to reinstating guidance."
"Looking forward, we will be providing quarterly updates on reliable metrics, which will enable investors and analysts to track our progress toward increasing our transportation business based on a stronger customer and contract base, and toward improving efficient production at Jeffboat."