As a result of the reduced fine, Horizon Lines is no longer facing the prospect of a May 21, 2011, default under its convertible note indenture. The company could have been declared in default by the convertible note holders on any judgment over $15 million that the company was unable to pay, bond, or otherwise discharge in full within 60 days of the March 22, 2011 judgment.
â€œWe are greatly appreciative of this action by the Department of Justice, which also allows the company to proceed with settlement of the class action litigation in Puerto Rico,â€ said Michael T. Avara, Executive Vice President and Chief Financial Officer. â€œThe fine reduction will preserve our companyâ€™s financial flexibility, and we are confident that it will facilitate our efforts to secure new long-term financing. We remain in constructive discussions as we continue to move forward with our refinancing efforts.â€
The reduced fine of $15 million is payable over five years without interest, with $1 million payable within 30 days of March 24, 2011 (which has been paid), $1 million on or before the first anniversary, $2 million on the second anniversary, $3 million on the third anniversary, and $4 million annually on the fourth and fifth anniversaries.
Stephen H. Fraser, President and Chief Executive Officer, stated: â€œWhile our customers have been overwhelmingly supportive since we filed the 10-K, our company has faced a challenging business environment through the first-quarter. We have been operating under increasingly tight constraints imposed by certain of our suppliers due to the going-concern audit opinion, which resulted in part from the note holdersâ€™ decision to not grant us a waiver. This, in turn, has reduced our liquidity. The fine reduction should help give our business partners renewed confidence in our companyâ€™s ability to continue supporting our customers and providing superior service. We look forward to executing a comprehensive refinancing with the note holders or other partners that will better position Horizon Lines for long-term success.â€
Mr. Fraser continued: â€œIn addition to our loyal customers and suppliers, I want to thank the dedicated associates of Horizon Lines for their hard work and unrelenting focus on customer service, safety and operational excellence. The associates of Horizon Lines are truly this companyâ€™s greatest asset, and with their support, I am confident that we have a bright future ahead.â€
Company Intends to Proceed with Puerto Rico Class Action Settlement
Horizon Lines also announced that the plaintiffs in the direct purchaser antitrust class action in Puerto Rico will not object to the company paying the remainder of the $10 million due under the settlement agreement in two equal installments, with the first due within 30 days after final approval by the court and the second due within 60 days after final approval by the court. As a result, the company does not intend to exercise its right to terminate the agreement.
About Horizon Lines
Horizon Lines, Inc., is the nation’s leading domestic ocean shipping and integrated logistics company. The company owns or leases a fleet of 20 U.S.-flag containerships and operates five port terminals linking the continental United States with Alaska, Hawaii, Guam, Micronesia, and Puerto Rico. The company provides express trans-Pacific service between the U.S. West Coast and the ports of Ningbo and Shanghai in China, manages a domestic and overseas service partner network and provides integrated, reliable and cost competitive logistics solutions. Horizon Lines, Inc., is based in Charlotte, NC, and trades on the New York Stock Exchange under the ticker symbol HRZ.
Forward Looking Statements
The information contained in this press release should be read in conjunction with our filings made with the Securities and Exchange Commission. This press release contains â€œforward-looking statementsâ€ within the meaning of the federal securities laws. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Words such as, but not limited to, â€œwill,â€ â€œremain,â€™ â€œcontinues,â€ â€œshould,â€ â€œmay,â€ â€œexpect,â€ â€œwould,â€ â€œcould,â€ and similar expressions or phrases identify forward-looking statements.
Factors that may cause expected results or anticipated events or circumstances discussed in this press release to not occur or to differ from expected results include: our ability to maintain adequate liquidity to operate our business; volatility in fuel prices and in freight rates; decreases in shipping volumes; our ability to continue as a going concern; failure to comply with the terms of our probation imposed by the court in connection with our plan relating to antitrust matters; or failure to resolve or successfully defend pending and future civil antitrust claims in Puerto Rico.
All forward-looking statements involve risk and uncertainties. In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this press release might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. See the section entitled â€œRisk Factorsâ€ in our Form 10-K filed with the SEC on March 28, 2011, for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences.