Horizon Lines said it had a net loss of $17.9 million in the fourth quarter ending Dec. 23, compared to a net loss of $63.6 million (profit of $74.2 million from continuing operations) in the same 2011 period.
Revenue was $259.8 million in the fourth quarter last year compared to $264.1 million in the fourth quarter of 2011.
For the full year, Horizon had a loss of $94.7 million in 2012 compared to a net loss of $229.4 million in 2011. Revenue for the full year was $1.074 billion in 2012 compared to $1.026 billion in 2011.
Horizon, which operates containerships between the lower 48 states, Alaska, Hawaii and Puerto Rico, said its container volumes were down 6.1 percent in the fourth quarter compared to the same 2011 period, but that container revenue, net of fuel surcharges, was up 3.1 percent.
Sam Woodward, president and chief executive, said a decline in volume in Puerto Rico "drove the overall decrease in revenue and revenue loads" in the fourth quarter.
Woodward noted the company dry-docked three ships it uses in its Puerto Rico service in China during the year "to facilitate extensive maintenance and high-quality enhancements in the most cost-efficient manner possible. The work performed is intended to improve vessel reliability and service integrity in Puerto Rico. Incremental transit and crew costs associated with these dry-dockings negatively impacted 2012 fourth-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) by approximately $3.3 million and full-year adjusted EBITDA by approximately $18.2 million.”
He also said fourth-quarter financial results were negatively impacted by a $4.3 million restructuring charge related to the company’s decision in December to reduce sailings between Jacksonville, Fla., and San Juan, Puerto Rico, from twice to once a week, and to further reduce the company’s non-union workforce.
Woodward said the decision to reduce sailings out of Jacksonville, combined with its decision announced last week to move its the northeast service from a terminal in Elizabeth, N.J. to Philadelphia, "will produce lasting cost efficiencies while further improving customer service. These steps should allow Horizon Lines to strengthen the financial performance of our Puerto Rico trade lane and invest in the business over the long term.”
Horizon expects to record a restructuring charge of about $6 million during the first half of 2013, primarily resulting from the estimated liability for withdrawal from the port of Elizabeth’s multiemployer pension plan, as well as other costs to move to Philadelphia.
In 2013, Horizon said it expects "revenue container volume and rates to be slightly higher than 2012 levels, excluding the loss of revenue loads associated with the Puerto Rico service scope reduction. Revenue container rate increases are necessary to mitigate contractual and inflationary increases in expenses, including our vessel payroll costs and benefits, stevedoring, port charges, wharfage, inland transportation costs, and rolling stock costs, among others.
"We expect our 2013 vessel lease expense to be approximately $13.8 million lower than in 2012 due to the recent acquisition of three of our Jones Act-qualified vessels that were not previously owned. The lower vessel lease expense will be partially offset by approximately $8.5 million of additional interest expense in 2013 in connection with debt incurred for the acquisition of those vessels," the company said.
"During 2012, we dry-docked four vessels and incurred considerable transit expenses associated with the dry-docking in Asia of the three vessels currently serving our East Coast operations. Although we also intend to dry-dock four of our vessels currently serving the West Coast in 2013, the expenses will be significantly lower than in 2012 due to the much shorter transit and out of service times for the West Coast vessels," Horzon said.
"We expect overhead savings associated with the reduction in our non-union workforce beyond the reductions associated with the Puerto Rico service change. These reductions will be partially offset by higher incentive-based and stock-based compensation, as well as other administrative expenses," the company added.
Horizon said because of the changes it's making it expects 2013 financial results to significantly exceed 2012 results, with adjusted EBITDA projected between $85 million and $97 million in 2013 versus $66 million in 2012. - Chris Dupin