Horizon Lines manages to pull off slight gain

The shipper was helped by its $5 million acquisition of Hawaii Stevedores

Horizon Lines Inc., overcoming softness in its Puerto Rico market and soaring fuel costs, boosted net income 0.3 percent in the fourth quarter.

Hawaiis second-largest ocean shipper said Friday it benefited from an improved cargo mix, a stable rate environment and its cost-reduction efforts.

The Charlotte, N.C.-based company also said that Hawaii Stevedores, which it purchased in June for about $5 million, was successfully integrated into the company and has added to earnings. Hawaii Stevedores, which is operating as a subsidiary of Horizon, provides ship loading and marine terminal services.

Net income was $10.7 million, or 32 cents a share, compared with $10.6 million, or 31 cents a share, a year ago. Analysts were looking for 31 cents a share, according to a survey by Thomson Financial Revenue grew 9.9 percent to $316 million from $287.5 million.

For the year, earnings fell 60.1 percent to $28.9 million, or 85 cents a share, from $72.4 million, of $2.14 a share. Revenue increased 4.3 percent to $1.21 billion from $1.16 billion.

Horizon, which accounts for 36 percent of the shipments from the mainland to Hawaii, Alaska, Guam and Puerto Rico, increased its fuel surcharge five consecutive times last year. An additional increase that goes into effect Monday will bring the fuel surcharge for its Hawaii and Guam trades to a record 31.5 percent.

Although Horizon didnt break out its fuel surcharge revenue, analyst Chaz Jones of Memphis, Tenn.-based Morgan Keegan calculated that Horizon had surcharge revenue of about $40 million last quarter versus $34.4 million a year ago and about $144 million for the year compared with $138 million a year earlier.

The company also revised its full-year 2008 earnings per share guidance to $2.01 to $2.26 on revenue of $1.35 billion to $1.37 billion.

In November, Horizon said it was projecting earnings per share of $1.94 to $2.18 on revenue of $1.36 billion to $1.38 billion.

"Looking ahead, we expect solid earnings growth in our core shipping business and expect to see increased momentum in our new logistics business as we continue to implement our growth strategy in 2008," said Chuck Raymond, chairman, president and chief executive of Horizon. "We believe we are well positioned to significantly grow earnings and free cash flow in 2008, despite the uncertain national economic outlook."

Jones, the analyst, called the results "a decent quarter."

"Obviously, the company has seen decelerating growth in all three of its key markets, that being Alaska, Puerto Rico and Hawaii," he said. "(Horizon) has still been able to secure rate increases for its services, which is encouraging given where the volume fundamentals stand. I think theyve done an outstanding job over the last 12 months, particularly on the cost structure on their business in reduced costs and, in many cases, putting cap ex (capital expenditure) dollars to work to upgrade facilities and service levels out of certain operations and facilities."

Jones said Horizons outlook for Hawaii is consistent with the states economic outlook of about 1 percent growth.

Thursday, Horizon maintained its dividend of 11 cents a share.

It will be payable March 15 to stockholders of record at the close of business on March 1.