Company hopes refinancing and exit from the trans-Pacific market will
bring stability
Horizon Lines, the US’s busiest domestic ocean shipping company, sustained considerable losses of $126.5 million from continuing operations in the third quarter, the company has revealed.
The huge losses compared with a $8.2 million net profit a year earlier. In a defiant statement issued yesterday Horizon said it expects its recent refinancing and exit from the trans-Pacific market to stabilize future results despite “challenging” economic conditions.
Last month , as the US’s largest shipping line announced its decision to discontinue its Five Star Express (FSX) transpacific container shipping service between the US west coast, Guam and China, President and CEO Stephen Fraser said: “Our decision to exit this highly volatile market will allow Horizon to focus on our core domestic ocean shipping services, and provide the opportunity to produce a more profitable and stable financial performance over time.”
The results, announced yesterday included a $117.5 million goodwill impairment charge stemming mainly from the shutdown of the trans-Pacific service and deteriorating earnings.
Horizon said the amount of the goodwill impairment is an estimate that may be adjusted during the fourth quarter.
The company said it expects the shutdown of the trans-Pacific service to produce a pretax restructuring charge of $105 million to $110 million in the fourth quarter, following negative adjusted earnings before interest, taxes, depreciation and amortization of approximately $43.7 million for the year’s first nine months.
Horizon launched the trans-Pacific service last December after Maersk Line did not renew a take-or-pay agreement for eastbound capacity on the backhaul of Horizon’s service from the U.S. mainland to Guam. Horizon is laying up the service’s five chartered ships, each with capacities of 2,824 20-foot-equivalent units, and seeking to subcharter them.
Earlier this year Horizon Lines completed a complicated $650 million financial restructure that saved the shipping line from bankruptcy and will left bondholders with most of the company’s stock.
The carrier had struggled to straighten its finances since pleading guilty last March to price-fixing in the Puerto Rico trade.
Horizon operates between the US mainland and Puerto Rico, Alaska, Hawaii and Guam, and between China and the US west coast.
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