Horizon Lines, the Puerto Rico and Pacific Jones Act trades carrier, reported a sharp drop in profit for the third quarter, which the company attributed to the impacts of its refinancing program.

With quarterly earning adjusted to exclude the special non-recurring items, its net income would have been up slightly compared to last year's third quarter.

Net income for the third quarter was $1.6 million, compared to $52.9 million for the quarter in 2006.

But the company noted that the results were impacted by its non-recurring extinguishment of debt in 2007, as well as secondary offering expenses in 2006 and to the retroactive application of tonnage tax in 2006.

With the non-recurring items excluded, the adjusted net income for the 2007 third quarter would have been $20.7 million, while the adjusted net income for the quarter in 2006 would have been $20.2 million.

Quarterly operating revenue this year increased $16.4 million to $321.1 million, an increase of 5.4 percent.

Earnings before interest expense, taxes, depreciation and amortization (EBITDA) was $12.8 million, compared to $51.0 million a year ago. Excluding the non-recurring loss on extinguishment of debt in 2007 and secondary offering expenses in 2006, adjusted EBITDA would have been $50.8 million in the third quarter, down from $51.8 million for the third quarter of 2006.

"Horizon Lines once again rose to the challenge and overcame a less than ideal operating environment, to deliver improved earnings in the third quarter of 2007," said Chuck Raymond, Horizon Lines chairman, president and chief executive officer. Volume softness, primarily caused by lingering difficult economic conditions in our Puerto Rico trade lane, was offset by unit revenue improvements, benefits derived from our Horizon EDGE process re-engineering and customer service program and tight controls on our costs.

He closed on a refinancing of our capital structure in August that is generating significant benefits in terms of a lower cost of capital, improved cash flow, and enhanced flexibility and greater liquidity that will allow us to take advantage of future growth opportunities. In addition, we changed the structure of Horizon Lines into two separate transportation and logistics operations. This will allow us to stay focused on our core Jones Act transportation operations, while at the same time providing for future growth and development of our fully integrated logistics services. As the first step in growing our new logistics offering, we also acquired Aero Logistics during the quarter.