Horizon reports $33 million 1st quarter loss
Horizon Lines reported a $33.3 million loss from continuing operations in the first quarter, compared to a loss of $11.7 million in the same 2010 period.
The country’s largest operator of domestic container ships said revenue for the quarter ending March 27 was $285.4 million, an increase from $274.7 million first quarter of 2010.
The company also said it also had a loss of $760,000 in the most recent quarter from its logistics business, which it is selling.
Container volumes increased to 71,529 loads compared to 60,288 in the year earlier period. Horizon said the additional volume was largely due to it its new service from China, which began operating in December.
The company said revenue per container, minus fuel surcharges, declined 6.4 percent to $3,072 because of the additional of China volume, which has lower rates. It also said there was pricing pressure in the Puerto Rico trade. Excluding the China business, revenue per container, minus fuel surcharges, was up $3,324, 1.2 percent higher than in the first quarter of 2010.
“As anticipated, the first quarter was very challenging,” said Stephen H. Fraser, president and chief executive officer. “The historically soft quarter was additionally impacted by the termination of various Maersk agreements, and the seasonal slowness associated with the startup of our new China service in the post Chinese New Year period. These factors were further exacerbated by a steep decline in international rates, a sharp rise in fuel prices, and the ongoing slow business conditions in Puerto Rico and Hawaii.
“We have responded to these volatile conditions by intensely focusing on cost management and customer service,” Fraser continued. “Already, we have achieved more than $18 million in annualized cost savings by reaching agreements with our vessel union partners, reducing our non-union workforce, generating rate and efficiency savings from our trucking partners, and modifying vessel leases, among other initiatives.”
Meanwhile, the company said Thursday a U.S. District Court judge in Puerto Rico granted a request by the U.S. Justice Department to reduce a $45 million fine against Horizon Lines to $15 million. The criminal antitrust fine was levied against Horizon for its role in a price-fixing conspiracy in the U.S. mainland/Puerto Rico trade.
As a result of the reduced fine, Horizon Lines said it is no longer facing the prospect of a May 21 default under its convertible note indenture. The company said it could have been declared in default by the convertible note holders on any judgment more than $15 million that the company was unable to pay, bond, or otherwise discharge in full within 60 days of the March 22 judgment.
Judge Daniel Dominguez said Horizon has five years to pay the penalty, under a back-loaded schedule. Horizon has paid $1 million of the fine, and has until next March 24, 2012 to pay another $1 million. It must pay $2 million during the second year, $3 million during the third year, $4 million in the fourth and fifth years.
“The fine reduction should give our business partners renewed confidence in our company’s ability to continue supporting our customer,” Fraser said. “We look forward to executing a comprehensive refinancing that will better position Horizon Lines for long-term success.”
Horizon also said it has reached a deal with direct shippers participating in a class action lawsuit against Puerto Rico carriers. Under a settlement agreement, Horizon will pay $20 million into a fund to compensate shippers who said they were overcharged for shipping services because of the price fixing conspiracy. Sea Star and Crowley also agreed to pay into the fund.
Horizon said it has paid $10 million into the fund and that it will pay the remainder of the $10 million in two equal installments, with the first due within 30 days after final approval of the settlement by the court and the second due within 60 days after final approval by the court.
As a result, Horizon said it does not intend to exercise its right to terminate the agreement.
The Puerto Rico carriers also face the possibility of lawsuits from shippers who decided to opt out of the class action settlement and wanted to pursue action separately against the shipping lines. ' Chris Dupin