May 6, 2008
American Commercial reports first quarter results
High fuel prices and high water levels both impacted first quarter performance by American Commercial Lines Inc. (Nasdaq: ACLI).
"We faced many challenges during the quarter," commented President and CEO Michael P. Ryan. "Unfavorable operating conditions due to inclement weather drove a 70 percent increase in idle barge days compared to the prior year and resulted in twice as many lost production days in our shipyard. This resulted in significant inefficiencies in our transportation business and lower than expected manufacturing output. In addition, our operating costs continued to escalate, largely driven by an almost 60% increase in fuel cost per gallon over the first quarter of 2007. Despite these factors and weaker import demand as a result of the falling U.S. dollar, we continued to see positive barge freight pricing. We achieved productivity-related improvements in our manufacturing margins during the quarter. We will continue to execute our strategy and manage the business through these challenges, while implementing strict discipline around cost control, including a reduction of SG&A expenses that will result in $3 million of annual savings."
For the quarter ended March 31, 2008, American Commercial reported evenues for the quarter were $270.5 million, an 18.5% increase compared with $228.2 million for the first quarter of 2007. Net income for the quarter was $2.3 million or $0.05 per diluted share, compared to a net loss of $1.1 million or $0.02 per diluted share for the first quarter of 2007. 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 for certain represented employees of the company's terminal operations. Results for the first quarter of 2007 included after tax debt retirement expenses of $13.6 million on the retirement of the company's 9.5% senior notes which reduced earnings per share by $0.22.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the first quarter of 2008 were $23.0 million with an EBITDA margin of 8.5% compared to $35.3 million for the first quarter of 2007 with an EBITDA margin of 15.5%. The attachment to this press release reconciles net income to EBITDA.
The transportation segment's revenues increased 16.3% over the prior year to $204.8 million in the first quarter. The revenue increase was driven by increases in outside towing and charter/day rate revenues combined with an overall 16.1% increase in affreightment rates, largely driven by fuel escalation, on 4.5% lower affreightment ton-miles. On average, compared to the first quarter of 2007, the fuel neutral rate on the dry freight business increased 5.1% and the liquid freight business increased 6.7%. Total volume measured in ton-miles declined in the first quarter to 10.0 billion from 10.2 billion in the same period of the prior year, a decrease of 1.9%. On average, 5.3% fewer barges operated in the first quarter of this year compared to the first quarter of last year.
Operating income in the transportation segment decreased 68.1% or $13.6 million to $6.4 million in the quarter ended March 31, 2008 compared to the prior year. This decline was due primarily to significant increases in fuel prices and unfavorable weather-related operating conditions. The company estimates it had approximately $9.4 million in direct and indirect unrecovered fuel price increases. High water conditions caused by abnormally high precipitation levels over the past six months along the inland waterway increased idle barge days and drove additional cost inefficiencies of approximately $4.7 million during the quarter compared to the prior year.
ACL's manufacturing business, Jeffboat, completed 89 barges during each of the first quarters of 2008 and 2007. In 2008, Jeffboat sold 79 dry hopper barges, 9 liquid tank barges and one special vessel. This was three fewer dry cargo barges, two additional liquid tank barges and one blue water vessel compared to first quarter 2007. No barges were built during the quarter for internal use by ACL in 2008 or 2007.
Manufacturing revenues were $64.1 million in the first quarter compared to $52.1 million during the same period last year. This increase was driven by higher steel price pass-throughs and the additional liquid barge sales, despite the loss of over twice as many production days due to weather compared to last year. Manufacturing operating margin increased quarter-over-quarter from 3.8% to 5.2%, or an increase of $1.3 million to $3.3 million, primarily driven by improved labor utilization in the shipyard and the reduction in build hours per barge.
Cash Flow and Debt
During the first quarter, ACL spent $12.1 million on capital expenditures to support its infrastructure. The company made a deposit of $8.5 million to purchase the remaining 70% interest in Summit Contracting on the last day of the quarter. This transaction closed on April 1, 2008. Debt increased $33.1 million during the quarter to $472.9 million.