U.S.-flag containership operator Horizon Lines, Inc. (OTCQB: HRZL) has reported financial results for the fiscal first quarter ended March 25, 2012 and revealed that it will be drydocking three of its vessels in Asia. The decision has been taken against a backdrop of a continuing operating loss. Still, it is likely to be viewed with concern by U.S. shipbuilders who will undoubtedly closely monitor how much U.S. duty the Jones Act operator pays on the work involved.
The GAAP operating loss from continuing operations for the first quarter totaled $6.1 million, compared with an operating loss of $9.4 million a year ago. The 2012 first-quarter GAAP operating loss includes a $1.1 million charge for severance expenses, $0.8 million in antitrust-related legal expenses, and $0.7 million in refinancing costs. The 2011 first-quarter GAAP operating loss includes a $2.8 million charge related to severance expenses and $2.2 million in antitrust-related legal expenses. Adjusting for these items, the first-quarter 2012 adjusted operating loss from continuing operations totaled $3.5 million, compared with an adjusted operating loss of $4.4 million a year ago. First-quarter 2012 operating results benefited from improved partial recovery of increased fuel costs, higher earnings from transportation services contracts, and slightly better volumes. The positive factors were partially offset by costs associated with vessel-related service disruptions, variable expense increases that exceeded the container rate improvements, and higher overhead costs.
"Horizon Lines generated slightly improved revenue container volume and higher EBITDA and adjusted EBITDA in the first quarter relative to a year ago, despite challenges that included severe winter weather in Alaska, higher fuel prices and increased expenses," said Stephen H. Fraser, interim President and Chief Executive Officer. "Hawaii's performance improved significantly on solid customer support and an improving economy. Alaska's results were also better despite record cold and snowfall, which had a significant, adverse impact on customer demand and operations. Alaska was buoyed in part by domestic southbound volume that was driven by a strong seafood market. Earnings declined in Puerto Rico from the same period a year ago, due to continued slow business conditions and vessel service disruptions.
"In 2012, we are making significant investments in our Jones Act fleet with the drydocking of three of our Puerto Rico vessels in Asia," Mr. Fraser said. "Although drydocking our vessels in Asia will add considerable transit expense in 2012, it will also facilitate extensive maintenance and high-quality enhancements that are instrumental in helping maintain service integrity in the Puerto Rico market."
May 10, 2012