The MOU applies to stevedoring and terminal services provided to Horizon Lines by APMT in Jacksonville, Florida; Houston, Texas; Los Angeles, California; Tacoma, Washington and Elizabeth, New Jersey, through 2015, with an option to extend for two years. Horizon Lines has the option to exclude the Elizabeth terminal from the agreement if it chooses to serve the Northeast market from a port not located in New York or New Jersey.
At the same time, Horizon Lines announced plans to commence in December 2010 its own weekly trans-Pacific liner service between Asia and the U.S. West Coast. The new service will utilize the companyâ€™s five 2,824 twenty-foot-equivalent-unit (TEU) capacity, 23-knot, U.S. flag Hunter-class containerships that currently call on Guam and continue on to China as part of a space-charter agreement with Maersk Line. In preparation for these plans, Horizon Lines and Maersk Line have mutually agreed not to renew their current Asia space-charter agreement when it expires on December 10, 2010.
APMT and Maersk Line are divisions of the A.P. Moller-Maersk Group.
â€œWe are thrilled to continue to work with APMT as a trusted partner of 10 years, serving both our continued dedication to our Jones Act trades and our new Asian expansion,â€ said Chuck Raymond, Horizon Lines Chairman, President and Chief Executive Officer. â€œOur extended agreement provides both favorable financial terms and a framework for continuous process improvement. We share similar cultures and look forward to continuing to work with APMT as one of its largest customers in North America.â€
Eric A. Sisco, President of APM Terminal Americas, stated: â€œWe have enjoyed a long and valued relationship with Horizon Lines and are delighted to have renewed our terminal services agreement. For the past 10 years, our teams have worked solidly together developing a strong coordinated approach to operations, and we will continue to look for ways to optimize our joint processes. We look forward to working with Horizon Lines as the company furthers its growth strategy in North America and elsewhere in our global network.â€
Regarding Horizon Linesâ€™ new Asia strategy, Mr. Raymond said: â€œWe are excited about the prospects of providing an expedited ocean service between Asia and the West Coast. We carefully weighed various options, engaged the assistance of industry experts, conferred with our customers, and thoughtfully assessed our current service capabilities. This represents the best possible utilization of our Hunter-class vessels, which are already calling on Guam and ports in China.
â€œOur study of the market reveals an opportunity for a niche player that can offer quick transit times with the highest levels of service excellence,â€ Mr. Raymond continued. â€œWe believe the time is right. Container rates in the Pacific tradelane have bottomed out and are rebounding. Chinaâ€™s economy is showing solid signs of recovery and many major importers have reported that their service needs are not being met.â€
The company projects that the terminal agreement renewal and new Asia service will provide an additional stream of cost savings, revenue growth and resulting earnings improvement in future years. This outlook is based on cost efficiencies and continuity of service expected through the extended agreement with APMT, combined with what the company considers to be reasonable volume and rate assumptions for the new service. The company currently estimates a breakeven impact on profitability in 2011, relative to its previous APMT agreement and Maersk Asia space-charter agreement, with potential for accelerating growth in future years.
â€œMaersk Line has been an outstanding business partner for the past 10 years, and while we remain in constructive discussion on other aspects of our businesses, continuing this space-charter agreement no longer meets the financial objectives of either party,â€ Raymond said.
â€œBrian has a strong and diverse 26-year history with our company, which includes running our Puerto Rico and Hawaii/Guam tradelanes, serving as head of corporate sales and marketing, as well as holding international management positions in Asia and Hong Kong,â€ Mr. Raymond said. â€œHe has the unique experience and talents that make him the perfect leader to guide our Asia initiative.â€
Due to the organizational realignment and shift in strategic initiatives, Horizon Logistics will no longer be reported as a separate business segment, effective with the first quarter of 2010.
â€œOur entire team is excited to be able to expand Horizon Linesâ€™ scope of services,â€ Mr. Raymond said. â€œAlthough projected to initially represent less than 10 percent the companyâ€™s overall revenues, our planned Asia service will provide a new offering for our customers, most of whom have growing and evolving supply management needs in the Pacific theater.â€
New Asia Service Background
Horizon Lines currently calls ports in China under its space-charter agreement with Maersk Line. Once that agreement expires on December 10, 2010, Horizon will begin transporting general cargo on behalf of direct commercial customers. Sales and marketing efforts for the service are underway.
Webcast & Conference Call Information
A replay of the conference call will be accessible through March 8, 2010, by dialing
1-800-642-1687, pass code: 59749150. The recording will be available approximately two hours after completion of the call. The replay also will be archived on the Horizon Lines website.
About Horizon Lines
Forward Looking Statements
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 February 4, 2010, 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.