##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  Form 10-K
 (Mark one)x


Annual Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For the fiscal
    year ended December 26,
    2010ORo


Transition report pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For the transition period
    from            toCommission File Number
    001-32627   HORIZON LINES, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

74-3123672(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification
    No.)   4064 Colony Road,
    Suite 200, Charlotte, North Carolina 28211(Address of principal executive
    offices)
 (704) 973-7000
 (Registrants telephone
    number, including area code)
  NOT APPLICABLE
 (Former name, former address and
    former fiscal year, if changed since last report)
  Securities registered pursuant to Section 12 (b) of
    the Act:
  Title of each class

Name of each exchange on which registeredCommon stock, par value $0.01 per share

New York Stock Exchange   Securities registered pursuant to Section 12 (g) of
    the Act: None
   Yes o     No x
   Yes o     No x
  x o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer x
    Non-accelerated
    filer o
    Smaller reporting
    company o (Do not check if a smaller
    reporting company)
  Rule 12b-2
 Yes o     No x
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




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##### 





Horizon Lines,
    Inc.
  FORM 10-K
    INDEX
   
 PagePART IItem 1.


Business


1Item 1A.


Risk Factors


12Item 1B.


Unresolved Staff Comments


35Item 2.


Properties


36Item 3.


Legal Proceedings


36Item 4.


Submission of Matters to a Vote of Security
    Holders


39PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters, and Issuer Purchases of Equity
    Securities


40Item 6.


Selected Financial Data


42Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


46Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


71Item 8.


Financial Statements and Supplementary Data


72Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


72Item 9A.


Controls and Procedures


73Item 9B.


Other Information


73PART IIIItem 10.


Directors and Executive Officers of the
    Registrant


74Item 11.


Executive Compensation


74Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


74Item 13.


Certain Relationships and Related Transactions


74Item 14.


Principal Accountant Fees and Services


74PART IVItem 15.


Exhibits and Financial Statement Schedules


75EX-10.50EX-10.51EX-12EX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2    Safe Harbor
    Statement
  Form 10-K
   (i)




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##### Table of Contents




    our ability to maintain adequate liquidity to operate our
    business,
    our ability to repay or extend our indebtedness when it becomes
    due or if maturity is accelerated,
    our ability to obtain waivers or reach agreements with respect
    to indebtedness that we expect to default upon during the second
    and third quarter of 2011,
    volatility in fuel prices
    cyclical nature of international shipping industry and resulting
    volatile changes 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 plea relating to antitrust matters,
    any new developments relating to antitrust matters in any of our
    trades,
    failure to resolve or successfully defend pending and future
    civil antitrust claims in Puerto Rico,
    our ability to integrate new management and retain existing
    management,
    government investigations related to recordkeeping and reporting
    requirements for ship generated pollution and any other
    government investigations and legal proceedings,
    suspension or debarment by the federal government
    international regulatory and currency environment,
    compliance with safety and environmental protection and other
    governmental requirements,
    the successful
    start-up of
    any Jones-Act competitor,
    increased inspection procedures and tighter import and export
    controls,
    repeal or substantial amendment of the coastwise laws of the
    United States, also known as the Jones Act,
    catastrophic losses and other liabilities,
    the arrest of our vessels by maritime claimants,
    severe weather and natural disasters, or
    the aging of our vessels; unexpected substantial dry-docking
    costs for our vessels.  Form 10-K
  Form 10-K Form 10-K
 (ii)




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Part I.  Item 1.
    Business  Background
    Sea-Land (Sea-Land) Sea-Land Sea-Land
  Recent
    Developments
     1




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2




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##### Table of Contents



Operations
          The Jones
    Act
    U.S.-organized U.S.-flagged
 3




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U.S.-flagged U.S.-crewed, U.S.-built.
    Market Overview
    and Competition
    pick-up
       4




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Vessel
    Fleet
  54-year
      Year



Reefer

Max.

Owned/

CharterVessel Name

Market

Built

TEU(1)

Capacity(2)

Speed

Chartered

ExpirationU.S Built  Jones Act QualifiedHorizon Anchorage

Alaska

1987

1,668

280

20.0 kts

Chartered

Jan 2015Horizon Tacoma

Alaska

1987

1,668

280

20.0 kts

Chartered

Jan 2015Horizon Kodiak

Alaska

1987

1,668

280

20.0 kts

Chartered

Jan 2015Horizon Fairbanks(3)

Alaska

1973

1,476

140

22.5 kts

Owned

Horizon Pacific

Hawaii & Guam

1980

2,407

150

21.0 kts

Owned

Horizon Enterprise

Hawaii & Guam

1980

2,407

150

21.0 kts

Owned

Horizon Spirit

Hawaii & Guam

1980

2,653

150

22.0 kts

Owned

Horizon Reliance

Hawaii & Guam

1980

2,653

156

22.0 kts

Owned

Horizon Producer

Puerto Rico

1974

1,751

170

22.0 kts

Owned

Horizon Challenger

Puerto Rico

1968

1,424

71

21.2 kts

Owned

Horizon Navigator

Puerto Rico

1972

2,386

190

21.0 kts

Owned

Horizon Trader

Puerto Rico

1973

2,386

190

21.0 kts

Owned

Horizon Discovery(4)



1968

1,442

100

21.2 kts

Owned

Horizon Consumer(4)



1973

1,751

170

22.0 kts

Owned

Horizon Hawaii(4)



1973

1,420

170

22.5 kts

Owned

Foreign Built  Non-Jones Act QualifiedHorizon Hunter

Transpacific

2006

2,824

566

23.0 kts

Chartered

Nov 2018Horizon Hawk

Transpacific

2007

2,824

566

23.0 kts

Chartered

Mar 2019Horizon Tiger

Transpacific

2006

2,824

566

23.0 kts

Chartered

May 2019Horizon Eagle

Transpacific

2007

2,824

566

23.0 kts

Chartered

Apr 2019Horizon Falcon

Transpacific

2007

2,824

566

23.0 kts

Chartered

Apr 2019     (1)
    
    Twenty-foot equivalent unit, or TEU, is a standard measure of
    cargo volume correlated to the volume of a standard 20-foot dry
    cargo container. 5




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(2)
    
    Reefer capacity, or refrigerated container capacity, refers to
    the total number of 40-foot equivalent units, or FEUs, which the
    vessel can hold. The FEU is a standard measure of refrigerated
    cargo volume correlated to the volume of a standard 40-foot
    reefer, or refrigerated cargo container.(3)
    
    Serves as a spare vessel available for deployment in any of our
    markets and seasonal operation in the Alaska trade.(4)
    
    Vessels are available for seasonal needs, dry-dock relief and to
    respond to potential new revenue opportunities, and thus are not
    specific to any given market. Horizon Hawaii must undergo
    inspection and maintenance (dry-docking) in order to be
    available for deployment. Given current economic conditions, and
    if the new revenue opportunities fail to materialize, we may
    make a decision to scrap one of more of the spare vessels.  Vessel
    Charters
      Container
    Fleet
    6




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Container Type

Owned


Leased


Combined20 Standard Dry


10



1,053



1,06320 Flat Rack


1







120 High-Cube Reefer


72







7220 Miscellaneous


66







6620 Tank


1



1



240 Standard Dry


57



2,573



2,63040 Flat Rack


111



598



70940 High-Cube Dry


1,267



11,801



13,06840 Standard Insulated


13







1340 High-Cube Insulated


370







37040 Standard Opentop






59



5940 Miscellaneous


57







5740 Tank


1







140 Car Carrier


165







16540 High-Cube Reefer


1,952



3,635



5,58745 High-Cube Dry


1,094



4,962



6,05645 High-Cube Flatrack






25



2545 High-Cube Insulated


469







46945 High-Cube Reefer






325



32548 High-Cube Dry


238







238Total


5,944



25,032



30,976     Maersk
    Arrangements
  Sea-Land
   7




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Capital
    Construction Fund
  U.S.-built U.S.-flagged U.S.-built U.S.-built U.S.-flagged U.S.-built
  U.S.-built U.S.-flagged 2003-2005, U.S.-built U.S.-flagged
    Sales and
    Marketing
     8




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Customers
          Form 10-K,
  Operations
    Overview
    less-than-truckload e-mail
  and/or
 9




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e-mail
  Insurance
    Security
      Employees
     10




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Number ofCollective Bargaining

OurAgreement(s)

EmployeesUnion

Expiration Date

RepresentedInternational Brotherhood of Teamsters

March 31, 2013


254International Brotherhood of Teamsters, Alaska

June 30, 2011


110International Longshore & Warehouse Union (ILWU)

July 1, 2014


210International Longshore and Warehouse Union, Alaska (ILWU-Alaska)

June 30, 2011


99International Longshoremens Association, AFL-CIO (ILA)

September 30, 2012



(1)International Longshoremens Association, AFL-CIO, Puerto
    Rico

September 30, 2012


86Marine Engineers Beneficial Association (MEBA)

June 15, 2017


105International Organization of Masters, Mates & Pilots,
    AFL-CIO (MMP)

June 15, 2017


68Office & Professional Employees International Union,
    AFL-CIO

November 9, 2012


59Seafarers International Union (SIU)

June 30, 2011


276     (1)
    
    Multi-employer arrangement representing workers in the industry,
    including workers who may perform services for us but are not
    our employees.    HawaiiandAlaska


Guam


Puerto Rico


HorizonMarket


Market


Market


Logistics


Corporate(a)


TotalSenior Management


1



1



1



3



11



17Operations


33



88



46



66



28



261Sales and Marketing


16



26



51



13



7



113Administration(b)


3



34



8



14



173



232Total Headcount


53



149



106



96



219



623     (a)
    
    Corporate headcount includes employees in both Charlotte, North
    Carolina (headquarters) and in Irving, Texas and other locations.(b)
    
    Administration headcount is comprised of back-office functions
    and also includes customer service and documentation.  Environmental
    Initiatives
    Marine
    Environment
   11




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Emissions
    Sustainability
    Carbon
    Offsets
    Available
    Information
  (704) 973-7000. Form 10-K Form 10-K. 1-800-SEC-0330.
  Item 1A.
    Risk
    Factors  We expect to
    be in covenant default under our outstanding $330.0 million
    aggregate principal amount of 4.25% Convertible Senior
    Notes due 2012 (the Notes) during the second fiscal
    quarter of 2011. In addition, we expect to be in covenant
    default under our Senior Credit Facility during the third
    quarter of 2011. If we are unable to return to compliance, the
    indenture trustee for the Notes and our lenders under the Senior
    Credit Facility may exercise remedies that would have a material
    adverse effect on us and our shareholders.
   12




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We are
    currently in discussions with our lenders to implement a
    restructuring of our financial obligations, including waivers of
    expected defaults. There can be no assurance that these efforts
    will be successful and we could be forced to seek reorganization
    under federal bankruptcy laws.
      Our Cash Flows
    and Capital Resources May Be Insufficient to Make Required
    Payments on Our Substantial Indebtedness and Future
    Indebtedness.
  debt-to-equity
    
    operating difficulties;
    increased operating costs;
    increased fuel costs;
    general economic conditions;
    decreased demand for our services;
    market cyclicality;
    tariff rates;
    prices for our services;
    the actions of competitors;
    regulatory developments; and
    delays in implementing strategic projects.   13




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Our
    Substantial Indebtedness and Future Indebtedness Could
    Significantly Impair Our Operating and Financial
    Condition.
      
    make it difficult for us to satisfy our debt obligations;
    make us more vulnerable to general adverse economic and industry
    conditions;
    limit our ability to obtain additional financing for working
    capital, capital expenditures, acquisitions and other general
    corporate requirements;
    expose us to interest rate fluctuations because the interest
    rate on the debt under our revolving credit facility is variable;
    require us to dedicate a substantial portion of our cash flow
    from operations to payments on our debt, thereby reducing the
    availability of our cash flow for operations and other purposes;
    limit our flexibility in planning for, or reacting to, changes
    in our business and the industry in which we operate; and
    place us at a competitive disadvantage compared to competitors
    that may have proportionately less debt.   14




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If We do not
    Meet the New York Stock Exchange Continued Listing Requirements,
    Our Common Stock May be Delisted, and We May be Required to
    Repurchase or Refinance Our 4.25% Convertible Notes Due
    2012.
    Further
    issuances of our common stock could be dilutive.
    We Pled Guilty
    to a Charge of Violating Federal Antitrust Laws and are Subject
    to a Material Criminal Penalty That May Have a Material Adverse
    Effect on Our Business.
    Numerous
    Purported Class Action Lawsuits Related to the Subject of
    the Antitrust Investigations Have Been Filed Against Us and We
    May Be Subject to Civil Liabilities.
     15




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We may be
    required to make significant payments to customers in connection
    with antitrust-related proceedings.
      We have
    Incurred Significant Costs in Connection with the
    Antitrust-Related Proceedings and Any Additional Costs May Have
    a Material Adverse Effect on Our Financial Condition, Liquidity
    and Cash Flow.
    Our Ability to
    Pay the DOJ Fine, the Puerto Rico Settlement or Any Other
    Judgment or Settlement is Very Limited, and the Fine, Settlement
    or Any Other Payments May Have a Material Adverse Effect on Our
    Business, Operations and Financial Condition.
   16




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We Depend on
    the Federal Government for a Substantial Portion of Our
    Business, and We Could Be Adversely Affected by Suspension or
    Debarment by the Federal Government.
    Under Our
    Credit Agreement Amendment, We Are Not Permitted to Pay
    Dividends on Our Common Stock and Our Board of Directors Has
    Decided Not to Pay Dividends at This Time, And We May Not Have
    Sufficient Cash to Pay Dividends in the Future.
      
    Our obligations under our credit agreement;
    The state of our business, the environment in which we operate,
    and the various risks we face, including financing risks and
    other risks summarized in this Annual Report on
    Form 10-K;
    Our results of operations, financial condition, liquidity needs
    and capital resources;
    Our expected cash needs, including for interest and any future
    principal payments on indebtedness, capital expenditures and
    payment of fines and settlements related to antitrust
    matters; and
    Potential sources of liquidity, including borrowing under our
    revolving credit facility or possible asset sales.   17




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Restrictions
    in our debt agreements or applicable state legal and regulatory
    requirements may prevent us from paying dividends.
    Further
    Economic Decline and Decrease in Market Demand For the
    Companys Services in the Jones Act and Guam Markets Will
    Adversely Affect the Companys Operating Results and
    Financial Condition.
    Volatility in
    Fuel Prices May Adversely Affect Our Profits.
    Repeal,
    Substantial Amendment, or Waiver of the Jones Act or Its
    Application Could Have a Material Adverse Effect on Our
    Business.
  U.S.-citizen
 18




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A Decrease in
    the Level of Chinas Export of Goods or an Increase in
    Trade Protectionism Could Have a Material Adverse Impact on Our
    International Business.
      The Growth of
    Our New Trans-Pacific Ocean Transportation Service Between Asia
    and the West Coast of the United States Depends on Continued
    Increases in World and Regional Demand for Container Shipping,
    and the Global Economic Slowdown May Impede Our Ability to Grow
    Our New International Service.
      
    supply and demand for products shipped in containers;
    changes in global production of products transported by
    containerships;
    global and regional economic and political conditions;
    developments in international trade; and
    currency exchange rates.   19




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The
    Trans-Pacific Ocean Transportation Market Between Asia and the
    West Coast of the United States is Highly Competitive, and We
    May Not be Able to Compete Successfully With Established
    Companies That Have Greater Resources or Other New
    Entrants.
      Our
    Trans-Pacific Service Faces a Regulatory and Currency
    Environment That Does Not Exist in Our Domestic Tradelanes and
    is Specific to Operating as an Ocean Common Carrier in the
    International Marketplace.
      Change in Tax
    Laws or the Interpretation Thereof, Adverse Tax Audits and Other
    Tax Matters Related to Our Tonnage Tax Election or Such Tax May
    Adversely Affect Our Future Results.
      Our Industry
    is Unionized and Strikes By Our Union Employees or Others in the
    Industry May Disrupt Our Services and Adversely Affect Our
    Operations.
   20




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10-day
    Our Employees
    are Covered By Federal Laws That May Subject Us to Job-Related
    Claims in Addition to Those Provided By State
    Laws.
    Due to Our
    Participation in Multi-Employer Pension Plans, We May Have
    Exposure Under Those Plans That Extends Beyond What Our
    Obligations Would Be With Respect to Our
    Employees.
  We contribute to fifteen multi-employer pension
    plans.
   21




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Compliance
    With Safety and Environmental Protection and Other Governmental
    Requirements May Adversely Affect Our Operations.
  U.S.-flagged
    We Are Subject
    to Regulation and Liability Under Environmental Laws That Could
    Result in Substantial Fines and Penalties That May Have a
    Material Adverse Affect on Our Results of
    Operations.
  200-mile
  We are Subject
    to Statutory and Regulatory Directives in the United States
    Addressing Homeland Security Concerns That May Increase Our
    Costs and Adversely Affect Our Operations.
     22




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Increased
    Inspection Procedures and Tighter Import and Export Controls
    Could Increase Costs and Disrupt Our Business.
  and/or
    Restrictions
    on Foreign Ownership of Our Vessels Could Limit Our Ability to
    Sell Off Any Portion of Our Business or Result in the Forfeiture
    of Our Vessels.
    No Assurance
    Can Be Given That Our Insurance Costs Will Not
    Escalate.
   23




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Catastrophic
    Losses and Other Liabilities Could Adversely Affect Our Results
    of Operations and Such Losses and Liability May Be Beyond
    Insurance Coverage.
             24




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Interruption
    or Failure of Our Information Technology and Communications
    Systems Could Impair our Ability to Effectively Provide Our
    Shipping and Logistics Services, Especially HITS, Which Could
    Damage Our Reputation and Harm Our Operating
    Results.
    Our Vessels
    Could Be Arrested By Maritime Claimants, Which Could Result in
    Significant Loss of Earnings and Cash Flow.
      We are
    Susceptible to Severe Weather and Natural
    Disasters.
    We May Face
    New Competitors.
  start-up
   25




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non-U.S. originated non-U.S. originated U.S.-flagged U.S.-built
  We May Not
    Exercise Our Purchase Options For Our Chartered
    Vessels.
  U.S.-flag
  We May Face
    Significant Costs As the Vessels Currently in Our Fleet
    Age.
    We May Face
    Unexpected Substantial Dry-Docking Costs For Our
    Vessels.
    Our Recent
    Change of Chief Executive Officer May be Viewed Negatively and
    Could Have an Adverse Impact on Our Business, and if We Do Not
    Successfully Manage the Transitions Associated with Our New
    Management Team, It Could Have an Adverse Impact on Our
    Business.
   26




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Loss of Any
    Additional Personnel Could Adversely Affect Our
    Business.
    We are Subject
    to, and May in the Future Be Subject to, Disputes, or Legal or
    Other Proceedings, That Could Have a Material Adverse Effect on
    Us.
  Form 10-K. and/or
  Our Secured
    Credit Facility Exposes Us to the Variability of Interest
    Rates.
   27




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If
    Non-U.S.
    Citizens Own More Than 19.9% of Our Stock, We May Not Have the
    Funds or the Ability to Redeem Any Excess Shares and We Could Be
    Forced to Suspend Our Jones Act Operations.
  non-U.S. citizens, non-U.S. citizen.
  non-U.S. citizens non-U.S. citizens
  Our Share
    Price Will Fluctuate.
   28




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Environmental and
    Other Regulation
  200-mile
  non-U.S. ports and/or
      The United
    States Oil Pollution Act of 1990 and the Comprehensive
    Environmental Response, Compensation and Liability
    Act
    
    natural resources damages and the costs of assessment thereof;
    damages for injury to, or economic losses resulting from the
    destruction of, real or personal property;
    the net loss of taxes, royalties, rents, fees and profits by the
    United States government, and any state or political subdivision
    thereof; 29




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
    lost profits or impairment of earning capacity due to property
    or natural resources damage;
    the net costs of providing increased or additional public
    services necessitated by a spill response, such as protection
    from fire, safety or other hazards; and
    the loss of subsistence use of natural resources.               30




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2009-2010 2011-2012
  The Act to
    Prevent Pollution from Ships and MARPOL Requirements for Oil
    Pollution Prevention
      The United
    States Clean Water Act
         31




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U.S.-flag
  The National
    Invasive Species Act
        The United
    States Clean Air Act and Air Emission Standards under
    MARPOL
   32




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and/or
    17.0g-NOx/kW-hr.
        The Resource
    Conservation and Recovery Act
   33




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Endangered
    Species Regulation
    Greenhouse Gas
    Regulation
    Vessel Security
    Regulations
  and/or
  
    on-board installation of automatic information systems to
    enhance
    vessel-to-vessel
    and
    vessel-to-shore
    communications;
    on-board installation of ship security alert systems;
    the development of vessel and facility security plans; 34




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
    the implementation of a Transportation Worker Identification
    Credential program; and
    compliance with flag state security certification requirements.  U.S.-flag
  Item 1B.
    Unresolved
    Staff Comments   35




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Item 2.
    Properties    SquareLocation

Description of Facility

Footage(1)Anchorage, Alaska

Stevedoring building and various terminal and related property


1,429,425Charlotte, North Carolina

Corporate headquarters


28,900Chicago, Illinois

Regional sales office


1,929Compton, California

Terminal supervision office and warehouse


176,676Dedeo, Guam

Terminal and related property


108,425Dominican Republic

Operations office


1,500Dutch Harbor, Alaska

Office and various terminal and related property


658,167Elizabeth, New Jersey

Terminal supervision and sales office


4,994Honolulu, Hawaii

Terminal property and office


97,124
(2)Houston, Texas

Terminal supervision and sales office


166Irving, Texas

Operations center


51,989Jacksonville, Florida

Terminal supervision, sales office & warehousing


15,943Kenilworth, New Jersey

Ocean shipping services office


12,110Kodiak, Alaska

Office and various terminal and related property


265,232Laredo, Texas

Warehousing and office


56,800Lexington, North Carolina

Warehousing and office


23,984Oakland, California

Office and various terminal and related property


247,732Piti, Guam

Office and various terminal and related property


24,837Renton, Washington

Regional sales office


9,146San Francisco, California

Warehousing and office


19,900San Juan, Puerto Rico

Office and various terminal and related property


3,451,013Sparks, Nevada

Warehousing


20,000Tacoma, Washington

Office and various terminal and related property


797,348     (1)
    
    Square footage for marine terminal facilities excludes common
    use areas used by other terminal customers and us.(2)
    
    Excludes 1,647,952 square feet of terminal property, which
    we have the option to use and pay for on an as-needed basis.  Item 3.
    Legal
    Proceedings  Antitrust Matters
   36




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37




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38




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Environmental Matters
    and/or
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   39




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Part II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Cash Dividend2011

High


Low


DeclaredFirst Quarter (through March 21, 2011)

$
5.91


$
3.30


$
   2010

High


Low


Cash DividendFirst Quarter

$
6.54


$
3.68


$
0.05Second Quarter

$
6.09


$
3.80


$
0.05Third Quarter

$
4.97


$
3.65


$
0.05Fourth Quarter

$
4.77


$
3.53


$
0.05   2009

High


Low


Cash DividendFirst Quarter

$
4.73


$
2.44


$
0.11Second Quarter

$
6.33


$
3.00


$
0.11Third Quarter

$
6.92


$
3.08


$
0.11Fourth Quarter

$
6.92


$
5.00


$
0.11   Rule 10b-18(a)(3)
  Equity
    Compensation Plan Information
   40




---



##### Table of Contents



Total Return
    Comparison Graph
    Comparison of
    Cumulative Total Return*
  
  Form 10-K,
    *
    
    Comparison graph is based upon $100 invested in the given
    average or index at the close of trading on December 24,
    2005 and $100 invested in the Companys stock by the
    opening bell on December 25, 2005, as well as the
    reinvestment of dividends.  12/25/2005


12/24/2006


12/23/2007


12/21/2008


12/20/2009


12/26/2010Horizon Lines, Inc.



100.00




223.59




158.86




40.19




57.90




50.68Dow Jones U.S. Industrial
    Transportation Index



100.00




103.57




111.62




83.67




104.73




135.77S&P 500 Index



100.00




111.20




117.01




69.99




86.90




99.06  41




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K, Form 10-K.
      Fiscal Years EndedDec. 26,


Dec. 20,


Dec. 21,


Dec. 23,


Dec. 24,2010


2009


2008


2007


2006Statement of Operations Data:Operating revenue

$
1,162,505


$
1,124,215


$
1,270,978


$
1,196,700


$
1,156,892Legal settlements(1)


31,770



20,000











Impairment of assets


2,655



1,867



6,030







Restructuring costs


2,057



787



3,126







Operating (loss) income


(5,850
)


22,288



46,062



93,044



94,910Interest expense, net


40,117



38,036



39,923



43,567



47,491Loss on modification/early extinguishment of debt






50







38,546



581Income tax expense (benefit)(2)


305



10,589



(4,153
)


(15,152
)


(25,332
)Net (loss) income from continuing operations


(46,299
)


(26,407
)


10,353



26,003



72,357Net (loss) income from discontinued operations(3)


(11,670
)


(4,865
)


(12,946
)


822



Net (loss) income

$
(57,969
)

$
(31,272
)

$
(2,593
)

$
26,825


$
72,357Basic net (loss) income per share:Continuing operations

$
(1.50
)

$
(0.87
)

$
0.34


$
0.79


$
2.16Discontinued operations

$
(0.38
)

$
(0.16
)

$
(0.43
)

$
0.02



Basic net (loss) income per share

$
(1.88
)

$
(1.03
)

$
(0.09
)

$
0.81


$
2.16Diluted net (loss) income per share:Continuing operations

$
(1.50
)

$
(0.87
)

$
0.34


$
0.77


$
2.14Discontinued operations

$
(0.38
)

$
(0.16
)

$
(0.43
)

$
0.02



Diluted net (loss) income per share

$
(1.88
)

$
(1.03
)

$
(0.09
)

$
0.79


$
2.14Number of shares used in calculations:Basic


30,788,681



30,450,975



30,278,573



33,327,567



33,551,335Diluted


30,788,681



30,450,975



30,523,182



33,864,818



33,772,341Cash dividends declared

$
6,281


$
13,397


$
13,273


$
14,653


$
14,764Cash dividends declared per common share

$
0.20


$
0.44


$
0.44


$
0.44


$
0.44Balance Sheet Data:Cash

$
2,751


$
6,419


$
5,487


$
6,276


$
93,949Total assets


785,757



819,111



872,629



920,886



945,029Total debt, including capital lease obligations


516,323



514,855



532,811



532,108



510,788Long term debt, including capital lease obligations, net of
    current portion(4)


7,530



496,105



526,259



525,571



503,850Stockholders equity(5)


39,792



101,278



136,836



183,409



208,277 42




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##### Table of Contents



Fiscal Years EndedDec. 26,


Dec. 20,


Dec. 21,


Dec. 23,


Dec. 24,2010


2009


2008


2007


2006Other Financial Data:EBITDA(6)

$
53,644


$
80,218


$
107,823


$
119,457


$
159,391Capital expenditures(7)


16,298



12,931



38,639



29,314



21,288Vessel dry-docking payments


19,159



14,735



13,913



21,414



16,815Cash flows provided by (used in):Operating activities


44,432



61,081



88,357



62,237



115,524Investing activities(7)


(14,744
)


(11,694
)


(38,139
)


(25,952
)


(19,340
)Financing activities(7)


(25,159
)


(44,753
)


(51,310
)


(83,123
)


(43,685
)     (1)
    
    We entered into a plea agreement, dated February 23, 2011,
    with the United States of America, under which we agreed to
    plead guilty to a charge of violating federal antitrust laws
    solely with respect to the Puerto Rico tradelane. We agreed to
    pay a fine of $45.0 million over five years without
    interest. We recorded a charge during the year ended
    December 26, 2010 of $30.0 million, which represents
    the present value of the expected installment payments. The year
    ended December 20, 2009 includes a $20.0 million
    charge for the potential settlement of the Puerto Rico MDL.(2)
    
    During 2006, we elected the application of a tonnage tax instead
    of the federal corporate income tax on income from our
    qualifying shipping activities. This 2006 election of the
    tonnage tax was made in connection with the filing of our 2005
    federal corporate income tax return. We accounted for this
    election as a change in the tax status of its qualifying
    shipping activities. The impact of this tonnage tax election
    resulted in a decrease in income tax expense of approximately
    $43.5 million during the year ended December 24, 2006.
    We modified our trade routes between the U.S. west coast and
    Guam and Asia during 2007. As such, our shipping activities
    associated with these modified trade routes became qualified
    shipping activities, and thus the income from these vessels is
    excluded from gross income in determining federal income tax
    liability. During 2007, we recorded a $7.7 million tax
    benefit due to the revaluation of deferred taxes related to the
    qualified shipping income expected to be generated by the new
    vessels and related to a change in estimate resulting from
    refinements in the methodology for computing secondary
    activities and cost allocations for tonnage tax purposes. During
    the second quarter of 2009, we determined that it was unclear as
    to the timing of when we will generate sufficient taxable income
    to realize our deferred tax assets. Accordingly, we recorded a
    full valuation allowance against our deferred tax assets.(3)
    
    During the 4th quarter of 2010, we began a review of strategic
    alternatives for our logistics operations. It was determined
    that as a result of several factors, including: 1) the
    historical operating losses within the logistics operations,
    2) the projected continuation of operating losses, and
    3) focus on the recently commenced international shipping
    activities, we would begin exploring the sale of our logistics
    operations. We have determined to reclassify our logistics
    operations as discontinued operations because they qualify as
    assets held for sale.(4)
    
    We expect that we will experience a covenant default under the
    indenture related to our Notes. We have until May 21, 2011
    to obtain a waiver from the holders of the Notes. The remedies
    available to the indenture trustee in the event of default
    include acceleration of all principal and interest payments. In
    addition, in the third quarter of 2011, we believe that it is
    likely that we will not be in compliance with the minimum
    interest coverage ratio covenant contained in our Senior Credit
    Facility. In March 2011, we amended our Senior Credit Facility
    to decrease the interest coverage ratio for the fiscal quarters
    ending March 27, 2011 and June 26, 2011; however, we
    do not expect to be in compliance with the revised interest
    coverage ratio. Noncompliance with the financial covenants in
    the Senior Credit Facility constitutes an event of default,
    which, if not waived, could prevent us from making borrowings
    under the Senior Credit Facility. We anticipate working with our
    lenders to obtain amendments prior to any possible covenant
    noncompliance; however we cannot assure you that we will be able
    to secure such amendments. Due to cross default provisions, we 43




---



##### Table of Contents



have classified our obligations under the Notes and Senior
    Credit Facility totaling $523.8 million as current
    liabilities in the accompanying Consolidated Balance Sheet as of
    December 26, 2010.(5)
    
    Concurrent with the issuance of the 4.25% convertible senior
    notes, we entered into note hedge transactions whereby we have
    the option to receive shares of our common stock when the share
    price is between certain amounts and the we sold warrants to
    financial institutions whereby the financial institutions have
    the option to receive shares when the share price is above
    certain levels. The cost of the note hedge transactions to us
    was approximately $52.5 million and we received proceeds of
    $11.9 million related to the sale of the warrants. We
    recorded a $19.1 million income tax benefit related to the
    cost of the hedge transaction that was subsequently fully
    reserved as part of recording a full valuation allowance against
    our deferred tax assets.(6)
    
    EBITDA is defined as net income plus net interest expense,
    income taxes, depreciation and amortization. We believe that in
    addition to GAAP based financial information, EBITDA and
    Adjusted EBITDA are meaningful disclosures for the following
    reasons: (i) EBITDA and Adjusted EBITDA are components of
    the measure used by our board of directors and management team
    to evaluate our operating performance, (ii) the senior
    credit facility contains covenants that require us to maintain
    certain interest expense coverage and leverage ratios, which
    contain EBITDA and Adjusted EBITDA as components, and restrict
    certain cash payments if certain ratios are not met, subject to
    certain exclusions, and our management team uses EBITDA and
    Adjusted EBITDA to monitor compliance with such covenants,
    (iii) EBITDA and Adjusted EBITDA are components of the
    measure used by our management team to make
    day-to-day
    operating decisions, (iv) EBITDA and Adjusted EBITDA are
    components of the measure used by our management to facilitate
    internal comparisons to competitors results and the marine
    container shipping and logistics industry in general and
    (v) the payment of discretionary bonuses to certain members
    of our management is contingent upon, among other things, the
    satisfaction by Horizon Lines of certain targets, which contain
    EBITDA and Adjusted EBITDA as components. We acknowledge that
    there are limitations when using EBITDA and Adjusted EBITDA.
    EBITDA and Adjusted EBITDA are not recognized terms under GAAP
    and do not purport to be an alternative to net income as a
    measure of operating performance or to cash flows from operating
    activities as a measure of liquidity. Additionally, EBITDA and
    Adjusted EBITDA are not intended to be a measure of free cash
    flow for managements discretionary use, as it does not
    consider certain cash requirements such as tax payments and debt
    service requirements. Because all companies do not use identical
    calculations, this presentation of EBITDA and Adjusted EBITDA
    may not be comparable to other similarly titled measures of
    other companies. The EBITDA amounts presented below contain
    certain charges that our management team excludes when
    evaluating our operating performance, for making
    day-to-day
    operating decisions and that have historically been excluded
    from EBITDA to arrive at Adjusted 44




---



##### Table of Contents



EBITDA when determining the payment of discretionary bonuses. A
    reconciliation of net (loss) income to EBITDA and Adjusted
    EBITDA is included below (in thousands):  Year


Year


Year


Year


YearEnded


Ended


Ended


Ended


EndedDec. 26,


Dec. 20,


Dec. 21,


Dec. 23,


Dec. 24,2010


2009


2008


2007


2006Net (loss) income

$
(57,969
)

$
(31,272
)

$
(2,593
)

$
26,825


$
72,357Net (loss) income from discontinued operations


(11,670
)


(4,865
)


(12,946
)


822



Net (loss) income from continuing operations


(46,299
)


(26,407
)


10,353



26,003



72,357Interest expense, net


40,117



38,036



39,923



43,567



47,491Income tax expense (benefit)


305



10,589



(4,153
)


(15,152
)


(25,332
)Depreciation and amortization


59,521



58,000



61,700



65,039



64,875EBITDA


53,644



80,218



107,823



119,457



159,391Legal settlements and contingencies


32,270



20,000











Department of Justice antitrust investigation costs


5,243



12,192



10,711







Impairment of assets


2,655



1,867



6,030







Restructuring costs


2,057



787



3,126







Other severance charges


468



306



765







Loss on modification/ extinguishment of debt






50







38,546



581Transaction related expenses


















2,032Adjusted EBITDA

$
96,337


$
115,420


$
128,455


$
158,003


$
162,004   (7)
    
    Investing activities during 2007 include the acquisition of HSI.
    Financing activities during 2007 include our private placement
    of $330.0 million aggregate principal amount of 4.25%
    convertible senior notes due 2012 and credit agreement providing
    for a $250.0 million five year revolving credit facility
    and a $125.0 million term loan with various financial
    lenders. We utilized a portion of the proceeds from these
    transactions to (i) repay $192.8 million of borrowings
    outstanding under the Prior Senior Credit Facility (as defined
    below), (ii) purchase the outstanding principal and pay
    associated premiums of the 9% senior notes and
    11% senior discount notes purchased in our tender offer and
    (iii) purchase 1,000,000 shares of our common stock.
    Also during 2007, our Board of Directors approved a stock
    repurchase program under which we acquired 1,172,000 shares
    of our common stock at a total cost of $20.6 million.
    During 2008, we completed our share repurchase program by
    acquiring an additional 1,627,500 at a total cost of
    $29.4 million. 45




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K. Form 10-K.
  Recent
    Developments
           46




---



##### Table of Contents



Executive
    Overview
         47




---



##### Table of Contents



Year


Year


YearEnded


Ended


EndedDecember 26,


December 20,


December 21,2010


2009


2008(In thousands)Operating revenue

$
1,162,505


$
1,124,215


$
1,270,978Operating expense


1,168,355



1,101,927



1,224,916Operating (loss) income

$
(5,850
)

$
22,288


$
46,062Operating ratio


100.5
%


98.0
%


96.4
%Revenue containers (units)


260,037



257,625



276,282   General
  U.S.-organized
    History and
    Transactions
  Sea-Land
 48




---



##### Table of Contents



Sea-Land Sea-Land
  Basis of
    Presentation
      Fiscal
    Year
    Critical
    Accounting Policies
   49




---



##### Table of Contents



Revenue
    Recognition
  No. 91-9
    Allowance for
    Doubtful Accounts and Revenue Adjustments
      Casualty and
    Property Insurance Reserves
   50




---



##### Table of Contents



Goodwill and
    Other Identifiable Intangible Assets
         51




---



##### Table of Contents



Vessel
    Dry-docking
  30-month
    Income
    Taxes
      Stock-Based
    Compensation
   52




---



##### Table of Contents



Property and
    Equipment
      Recent Accounting
    Pronouncements
        Shipping
    Rates
   53




---



##### Table of Contents



Seasonality
    Results of
    Operations
  Operating
    Revenue Overview
      Form 10-K,
  Cost of
    Services Overview
    Year Ended
    December 26, 2010 Compared to Year Ended December 20,
    2009
    54




---



##### Table of Contents



Year Ended


Year EndedDecember 26,


December 20,2010


2009


% Change(In thousands)Operating revenue

$
1,162,505


$
1,124,215



3.4
%Operating expense:Vessel


400,827



355,352



12.8
%Marine


215,750



210,322



2.6
%Inland


184,892



179,651



2.9
%Land


147,488



140,586



4.9
%Rolling stock rent


40,966



37,048



10.6
%Cost of services


989,923



922,959



7.3
%Depreciation and amortization


44,475



44,307



0.4
%Amortization of vessel dry-docking


15,046



13,694



9.9
%Selling, general and administrative


83,232



97,257



(14.4
)%Legal settlements


31,770



20,000



58.9
%Impairment of assets


2,655



1,867



42.2
%Restructuring costs


2,057



787



161.4
%Miscellaneous (income) expense, net


(803
)


1,056



(176.0
)%Total operating expense


1,168,355



1,101,927



6.0
%Operating (loss) income

$
(5,850
)

$
22,288



(126.2
)%Operating ratio


100.5
%


98.0
%


2.5
%Revenue containers (units)


260,037



257,625



0.9
%   Operating Revenue.
  Bunker and intermodal fuel surcharges increase

$
40,971Non-transportation services increase


12,678Revenue container volume increase


9,269Expiration of government vessel management contract


(22,749
)General rate decreases


(1,879
)Total operating revenue increase

$
38,290    55




---



##### Table of Contents



Cost of Services.
    Vessel fuel costs increase

$
58,487Labor and other vessel operating increase


10,052Vessel space and lease charter expense increase


1,362Government vessel management expense decrease


(24,426
)Total vessel expense increase

$
45,475           Year Ended


Year EndedDecember 26,


December 20,2010


2009


% Change(In thousands)Land expense:Maintenance

$
54,548


$
49,585



10.0
%Terminal overhead


55,319



54,413



1.7
%Yard and gate


29,830



29,169



2.3
%Warehouse


7,791



7,419



5.0
%Total land expense

$
147,488


$
140,586



4.9
%      56




---



##### Table of Contents



Depreciation and Amortization.
  Year Ended


Year EndedDecember 26,


December 20,


%2010


2009


Change(In thousands)Depreciation and amortization:Depreciation  owned vessels

$
9,549


$
9,186



4.0
%Depreciation and amortization  other


14,229



14,816



(4.0
)%Amortization of intangible assets


20,697



20,305



1.9
%Total depreciation and amortization

$
44,475


$
44,307



0.4
%Amortization of vessel dry-docking

$
15,046


$
13,694



9.9
%   Amortization of Vessel
    Dry-docking.
  Selling, General and Administrative.
  Legal Settlements.
   57




---



##### Table of Contents



Impairment Charge.
  Restructuring Charge.
  Miscellaneous (Income) Expense,
    Net.
  Unallocated
    Expenses
  Interest Expense, Net.
  Income Tax Expense.
 58




---



##### Table of Contents



Year Ended
    December 20, 2009 Compared to Year Ended December 21,
    2008
  Year Ended


Year EndedDecember 20,


December 21,2009


2008


% Change(In thousands)Operating revenue

$
1,124,215


$
1,270,978



(11.5
)%Operating expense:Vessel


355,352



439,552



(19.2
)%Marine


210,322



205,907



2.1
%Inland


179,651



207,784



(13.5
)%Land


140,586



150,552



(6.6
)%Rolling stock rent


37,048



44,076



(15.9
)%Cost of services


922,959



1,047,871



(11.9
)%Depreciation and amortization


44,307



44,537



(0.5
)%Amortization of vessel dry-docking


13,694



17,162



(20.2
)%Selling, general and administrative


97,257



103,328



(5.9
)%Settlement of class action lawsuit


20,000







100.0
%Impairment of assets


1,867



6,030



(69.0
)%Restructuring costs


787



3,126



(74.8
)%Miscellaneous expense, net


1,056



2,862



(63.1
)%Total operating expense


1,101,927



1,224,916



(10.0
)%Operating income

$
22,288


$
46,062



(51.6
)%Operating ratio


98.0
%


96.4
%


1.6
%Revenue containers (units)


257,625



276,282



(6.8
)%   Operating Revenue.
  Bunker and intermodal fuel surcharges decrease

$
(79,226
)Revenue container volume decrease


(60,487
)Other non-transportation services decrease


(19,237
)Revenue container rate increase


12,187Total operating revenue decrease

$
(146,763
)    59




---



##### Table of Contents



Cost of Services.
    Vessel fuel costs decline

$
(81,014
)Vessel space charter expense decrease


(1,655
)Labor and other vessel operating decreases


(1,531
)Total vessel expense decrease

$
(84,200
)           Year Ended


Year EndedDecember 20,


December 21,2009


2008


% Change(In thousands)Land expense:Maintenance

$
49,585


$
54,163



(8.5
)%Terminal overhead


54,413



59,211



(8.1
)%Yard and gate


29,169



28,720



1.6
%Warehouse


7,419



8,458



(12.3
)%Total land expense

$
140,586


$
150,552



(6.6
)%    60




---



##### Table of Contents



Depreciation and Amortization.
  Year Ended


Year EndedDecember 20,


December 21,2009


2008


% Change(In thousands)Depreciation and amortization:Depreciation  owned vessels

$
9,186


$
9,627







(4.6
)%Depreciation and amortization  other


14,816



14,605







1.4
%Amortization of intangible assets


20,305



20,305







Total depreciation and amortization

$
44,307


$
44,537







(0.5
)%Amortization of vessel dry-docking

$
13,694


$
17,162







(20.2
)%   Amortization of Vessel
    Dry-docking.
  Selling, General and Administrative.
  Settlement of Class Action Lawsuit.
  Impairment Charge.
  Restructuring Charge.
 61




---



##### Table of Contents



Miscellaneous Expense, Net.
  Unallocated
    Expenses
  Interest Expense, Net.
  Income Tax Expense.
    Liquidity and
    Capital Resources
   62




---



##### Table of Contents



Operating
    Activities
    Earnings adjusted for non-cash charges

$
(27,016
)Increase in accounts receivable


(12,409
)Increase in payments related to dry-dockings


(4,424
)Increase in accrual for legal settlements


11,770Decrease in payments related to Department of Justice antitrust
    investigation and related legal proceedings


7,906Decrease in payments related to restructuring and early
    termination of leased assets


5,855Other increase in working capital, net


1,669$
(16,649
)     Investing
    Activities
      Financing
    Activities
     63




---



##### Table of Contents



Stock Repurchase
    Program
    Capital
    Requirements and Liquidity
           64




---



##### Table of Contents



Contractual
    Obligations and Off-Balance Sheet Arrangements
    Total











AfterObligations


2011


2012-2013


2014-2016


2016Principal and operating lease obligations:Senior credit facility(1)

$
193,750


$
18,750


$
175,000


$



$
4.25% convertible senior notes(1)


330,000







330,000







Operating leases(2)


658,080



100,373



211,361



203,311



143,035Capital lease


9,158



1,629



2,614



2,268



2,647Subtotal


1,190,988



120,752



718,975



205,579



145,682Interest obligations:(3)Senior credit facility


22,291



6,704



15,587







4.25% convertible senior notes


28,050



14,025



14,025







Capital lease


3,160



857



1,239



787



277Subtotal


53,501



21,586



30,851



787



277Legal settlements


56,767



12,767



4,000



20,000



20,000Other commitments(4)


15,151



14,932



219







Total obligations

$
1,316,407


$
170,037


$
754,045


$
226,366


$
165,959Standby letters of credit

$
11,272


$
11,272


$



$



$
     (1)
    
    As discussed in more detail in Capital Requirements and
    Liquidity, we may not be in compliance with our debt covenants
    throughout 2011. We expect that we will experience a covenant
    default under the indenture related to our Notes. We have until
    May 21, 2011 to obtain a waiver from the holders of the
    Notes. The remedies available to the indenture trustee in the
    event of default include acceleration of all principal and
    interest payments. In addition, The Senior Credit Facility
    contains cross default provisions and certain acceleration
    clauses whereby if the maturity of the Notes is accelerated,
    maturity of the Senior Credit Facility can also be accelerated.(2)
    
    The above contractual obligations table does not include the
    residual guarantee related to our transaction with Ship Finance
    Limited. If Horizon Lines does not elect to purchase the vessels
    at the end of the initial twelve year period and the vessel
    owners sell the vessels for less than a specified amount,
    Horizon Lines is responsible for paying the amount of such
    shortfall which will not exceed $3.8 million per vessel.
    Such residual guarantee has been recorded at its fair value of
    approximately $0.3 million as a liability.(3)
    
    Included in contractual obligations are scheduled interest
    payments. Interest payments on the term loan portion of the
    senior credit facility are fixed and based on the interest rate
    swap (as defined below). Interest payments on the revolver
    portion of the senior credit facility are variable and are based
    as of December 26, 2010 upon the London Inter-Bank Offered
    Rate (LIBOR) plus 3.25%. The three-month LIBOR /swap curve has
    been utilized to estimate interest payments on the senior credit
    facility. Interest on the 4.25% convertible senior notes is
    fixed and is paid
    semi-annually
    on February 15 and August 15 of each year, until maturity on
    August 15, 2012.(4)
    
    Other commitments includes the purchase commitment related to
    the three new cranes and restructuring liabilities.   65




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##### Table of Contents



Long-Term
    Debt
  Senior Credit
    Facility
    12-month
     66




---



##### Table of Contents



Derivative
    Instruments
      4.25% Convertible
    Senior Notes
     67




---



##### Table of Contents




    Prior to May 15, 2012, if during any calendar quarter, and
    only during such calendar quarter, if the last reported sale
    price of our common stock for at least 20 trading days in a
    period of 30 consecutive trading days ending on the last trading
    day of the preceding calendar quarter exceeds 120% of the
    applicable conversion price in effect on the last trading day of
    the immediately preceding calendar quarter;
    During any five business day period prior to May 15, 2012,
    immediately after any five consecutive trading day period (the
    measurement period) in which the trading price per
    $1,000 principal amount of notes for each day of such
    measurement period was less than 98% of the product of the last
    reported sale price of our common stock on such date and the
    conversion rate on such date;
    If, at any time, a change in control occurs or if we are a party
    to a consolidation, merger, binding share exchange or transfer
    or lease of all or substantially all of its assets, pursuant to
    which the Companys common stock would be converted into
    cash, securities or other assets; or
    At any time after May 15, 2012 through the fourth scheduled
    trading day immediately preceding August 15, 2012.       68




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##### Table of Contents



Goodwill
    Performance
    Metrics
  day-to-day
    Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Net loss

$
(57,969
)

$
(31,272
)

$
(2,593
)Net loss from discontinued operations


(11,670
)


(4,865
)


(12,946
)Net (loss) income from continuing operations


(46,299
)


(26,407
)


10,353Adjustments:Legal settlements and contingencies


32,270



20,000



Anti-trust legal expenses


5,243



12,192



10,711Impairment charge


2,655



1,867



6,030Restructuring charge


2,057



787



3,126Union severance


468



306



765Loss on modification of debt






50



Tax valuation allowance






10,561



Tax impact of adjustments


(389
)


(232
)


(3,338
)Total adjustments


42,304



45,531



17,294Adjusted net (loss) income

$
(3,995
)

$
19,124


$
27,647   69




---



##### Table of Contents



Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Net loss per share

$
(1.88
)

$
(1.03
)

$
(0.09
)Net loss per share from discontinued operations


(0.38
)


(0.16
)


(0.43
)Net (loss) income per share from continuing operations


(1.50
)


(0.87
)


0.34Adjustments:Legal settlements and contingencies


1.04



0.66



Anti-trust legal expenses


0.17



0.40



0.35Impairment charge


0.09



0.06



0.20Restructuring charge


0.07



0.03



0.10Union severance


0.01



0.01



0.03Tax valuation allowance






0.35



Tax impact of adjustments


(0.01
)


(0.02
)


(0.11
)Total adjustments:


1.37



1.49



0.57Adjusted net (loss) income per share

$
(0.13
)

$
0.62


$
0.91   Outlook
         70




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk                 71




---



##### Table of Contents



Fair ValueDecember 26,2011

2012

Thereafter

Total

2010(1)LiabilitiesLong-term Debt:Fixed rate

$



$
330,000


$



$
330,000


$
304,293Average interest rate


4.3
%Variable rate

$
18,750


$
175,000


$



$
193,750


$
193,750Average interest rate


4.6
%Interest Rate DerivativesInterest Rate Swap:Variable to Fixed

$
73,828


$
18,750


$



$
93,750


$
93,750Average pay rate


3.2
%


3.2
%Average receive rate


0.5
%


0.9
%     (1)
    
    We receive the arithmetic average of the reference price
    calculated using the unweighted method of averaging.  Item 8.
    Financial
    Statements and Supplementary Data  Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   72




---



##### Table of Contents



Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
    Rule 13a-15(b)
  Managements
    Report on Internal Control over Financial Reporting
  Rules 13a-15(f)
    page F-2 Form 10-K.
  Changes in
    Internal Control over Financial Reporting
      Item 9B.
    Other
    Information   73




---



##### Table of Contents



Part III    Item 10.
    Directors
    and Executive Officers of the Registrant    and/or Form 10-K
    Item 11.
    Executive
    Compensation      Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters      Item 13.
    Certain
    Relationships and Related Transactions      Item 14.
    Principal
    Accountant Fees and Services   74




---



##### 



Part IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Financial Statements:
  Horizon Lines,
    Inc.
    Index to Consolidated Financial Statements
   
 PageReports of Independent Registered Public
    Accounting Firm


F-2Consolidated Financial Statements for the fiscal year ended
    December 26, 2010:Consolidated Balance Sheets


F-3Consolidated Statements of Operations


F-4Consolidated Statements of Cash Flows


F-5Consolidated Statements of Changes In
    Stockholders Equity


F-6Notes to Consolidated Financial Statements


F-7Schedule II  Valuation and
    Qualifying Accounts


F-42    Exhibits:
  Incorporated by ReferenceExhibit







Date of First

Exhibit

FiledNumber

Description

Form

File No.

Filing

Number

Herewith3
.1

Amended and Restated Certificate of Incorporation of the
    Registrant.

S-1

333-123073

9/22/05

3.13
.1.1

Certificate of Amendment of Amended and Restated Certificate of
    Incorporation

8-K

001-32627

6/5/07

3.13
.1.2

Certificate of Amendment of Amended and Restated Certificate of
    Incorporation

10-K

001-32627

2/5/09

3.1.23
.2

Amended and Restated Bylaws of the Registrant.

8-K

001-32627

2/4/09

3.23
.3

Certificate of Amendment of Amended and Restated Certificates of
    Incorporation of the Registrant.

8-K

001-32627

6/5/07

3.14
.1

Specimen of Common Stock Certificate.

S-1

333-123073

9/19/05

4.84
.2

Indenture, dated August 8, 2007, by and among Horizon Lines,
    Inc. and The Bank of New York Trust Company, N.A., as Trustee.

8-K

001-32627

8/13/07

4.34
.3

Form of Note (included in Exhibit 4.7).

8-K

001-32627

8/13/07

4.4 75




---



##### Table of Contents



Incorporated by ReferenceExhibit







Date of First

Exhibit

FiledNumber

Description

Form

File No.

Filing

Number

Herewith10
.1

Preferential Usage Agreement dated December 1, 1985, between the
    Municipality of Anchorage, Alaska and Horizon Lines of Alaska,
    LLC (formerly known as CSX Lines of Alaska, LLC, as successor in
    interest to SL Service, Inc. (formerly known as Sea-Land
    Service, Inc.), pursuant to a consent to general assignment and
    assumption, dated September 5, 2002), as amended by the
    Amendment to Preferential Usage Agreement dated January 31,
    1991, Second Amendment to December 1, 1985 Preferential Usage
    Agreement dated June 20, 1996, and Third Amendment to December
    1, 1985 Preferential Usage Agreement dated January 7, 2003.

S-1

333-123073

3/2/05

10.1010
.2

Amended and Restated Guarantee and Indemnity Agreement dated as
    of February 27, 2003, by and among HLH, LLC, Horizon Lines, LLC,
    CSX Corporation, CSX Alaska Vessel Company, LLC and SL Service,
    Inc., as supplemented by the joinder agreements, dated as of
    July 7, 2004, of Horizon Lines Holding Corp., Horizon Lines of
    Puerto Rico, Inc., Falconhurst, LLC, Horizon Lines Ventures,
    LLC, Horizon Lines of Alaska, LLC, Horizon Lines of Guam, LLC,
    Horizon Lines Vessels, LLC, Horizon Services Group, LLC, Sea
    Readiness, LLC, Sea-Logix, LLC,
    S-L
    Distribution Services, LLC and SL Payroll Services, LLC.

S-1

333-123073

3/2/05

10.26*10
.3

Amended and Restated Put/Call Agreement, dated as of September
    20, 2005, by and among Horizon Lines, Inc. and other parties
    thereto.

8-K

001-32627

10/24/05

99.4*10
.4

Form of Restricted Stock Award Agreement.

8-K

001-32627

4/30/08

10.110
.5

International Intermodal Agreement 5124-5024, dated as of March
    1, 2002, between Horizon Lines, LLC, Horizon Lines of Puerto
    Rico, Inc., Horizon Lines of Alaska, LLC and CSX Intermodal, Inc.

S-4

333-123681

6/23/05

10.1410
.6

Sub-Bareboat Charter Party Respecting 3 Vessels, dated as of
    February 27, 2003, in relation to U.S.-flag vessels Horizon
    Anchorage, Horizon Tacoma and Horizon Kodiak, between CSX Alaska
    Vessel Company, LLC, as charterer, and Horizon Lines, LLC, as
    sub-charterer.

S-4

333-123681

3/30/05

10.1510
.7

TP1 Space Charter and Transportation Service Contract, dated May
    9, 2004, between A.P. Møller-Maersk A/S and Horizon Lines,
    LLC.

S-4

333-123681

6/23/05

10.16 76




---



##### Table of Contents



Incorporated by ReferenceExhibit







Date of First

Exhibit

FiledNumber

Description

Form

File No.

Filing

Number

Herewith10
.8.1

Amendment No. 1 to TP1 Space Charter and Transportation Service
    Contract, dated November 30, 2006 between A.P.
    Møller-Maersk A/S and Horizon Lines, LLC.

10-K

001-32627

3/2/07

10.12.110
.8.2

Amendment No. 2 to TP1 Space Charter and Transportation Service
    Contract, dated July 2, 2007 between A.P. Møller-Maersk A/S
    and Horizon Lines, LLC.

10-Q

001-32627

7/27/07

10.12.210
.9

Container Interchange Agreement, dated April 1, 2002, between
    A.P. Møller-Maersk A/S, CSX Lines, LLC, CSX Lines of Puerto
    Rico, Inc., CSX Lines of Alaska, LLC and Horizon Lines of
    Alaska, LLC.

S-4

333-123681

3/20/05

10.1710
.9.1

Agreement Regarding the Container Interchange Agreement, dated
    November 30, 2006, among A.P. Møller-Maersk A/S, Horizon
    Lines, LLC, Horizon Lines of Puerto Rico, Inc. and Horizon Lines
    of Alaska, LLC.

10-K

001-32627

3/2/07

10.13.110
.10

Stevedoring and Terminal Services Agreement, dated May 9, 2004,
    between APM Terminals, North America, Inc., Horizon Lines, LLC
    and Horizon Lines of Alaska, LLC.

S-4

333-123681

3/30/05

10.1810
.10.1

Amendment No. 2 to Stevedoring and Terminal Services Agreement,
    dated November 30, 2006, among APM Terminals, North America,
    Inc., Horizon Lines, LLC and Horizon Lines of Alaska, LLC.

10-K

001-32627

3/2/07

10.14.110
.10.2

Amendment No. 3 to Stevedoring and Terminal Services Agreement,
    dated June 8, 2010, among APM Terminals, North America, Inc.,
    Horizon Lines, LLC and Horizon Lines of Alaska, LLC.

10-Q

001-32627

7/23/10

10.110
.11.1

Assignment and Assumption Agreement dated as of September 2,
    1999, by and between Sea-Land Service, Inc. and
    Sea-Land
    Domestic Shipping, LLC.

S-4

333-123681

3/30/05

10.2110
.12

Capital Construction Fund Agreement, dated March 29, 2004,
    between Horizon Lines, LLC and the United States of America,
    represented by the Secretary of Transportation, acting by and
    through the Maritime Administrator.

S-1

333-123073

3/2/05

10.3610
.13

Harbor Lease dated January 12, 1996, between Horizon Lines, LLC
    (formerly known as CSX Lines, LLC, as successor in interest to
    SL Services, Inc. (formerly known as Sea-Land Service, Inc.),
    pursuant to Consent to Two Assignments of Harbor Lease No.
    H-92-22,
    dated February 14, 2003) and the State of Hawaii, Department of
    Transportation, Harbors Division.

S-1

333-123073

3/2/05

10.37 77




---



##### Table of Contents



Incorporated by ReferenceExhibit







Date of First

Exhibit

FiledNumber

Description

Form

File No.

Filing

Number

Herewith10
.14

Agreement dated May 16, 2002, between Horizon Lines of Puerto
    Rico, Inc. (formerly known as CSX Lines of Puerto Rico, Inc.)
    and The Puerto Rico Ports Authority.

S-1

333-123073

3/2/05

10.3810
.15

Agreement dated March 29, 2001, between Horizon Lines of Puerto
    Rico, Inc. (formerly known as CSX Lines of Puerto Rico, Inc.)
    and The Puerto Rico Ports Authority.

S-1

333-123073

3/2/05

10.3910
.16

Port of Kodiak Preferential Use Agreement dated April 12, 2002,
    between the City of Kodiak, Alaska and Horizon Lines of Alaska,
    LLC (formerly known as CSX Lines of Alaska, LLC, as successor in
    interest to CSX Lines, LLC, pursuant to Amendment No. 1 to the
    Preferential Use Agreement, dated April 12, 2002).

S-1

333-123073

3/2/05

10.4010
.16.1

Port of Kodiak Preferential Use Agreement dated January 1, 2005,
    between the City of Kodiak, Alaska and Horizon Lines of Alaska,
    LLC.

S-1

333-123073

7/29/05

10.40.110
.17

Terminal Operation Contract dated May 2, 2002, between the City
    of Kodiak, Alaska and Horizon Lines of Alaska, LLC (formerly
    known as CSX Lines of Alaska, LLC).

S-1

333-123073

3/2/05

10.4110
.17.1

Terminal Operation Contract dated January 1, 2005, between the
    City of Kodiak, Alaska and Horizon Lines of Alaska, LLC.

S-1

333-123073

7/29/05

10.41.110
.18

Sublease, Easement and Preferential Use Agreement dated October
    2, 1990, between the City of Unalaska and Horizon Lines, LLC
    (formerly known as CSX Lines LLC), as successor in interest to
    Sea-Land Service, Inc., together with the addendum thereto dated
    October 2, 1990, as amended by the Amendment to Sublease,
    Easement and Preferential Use Agreement dated May 31, 2000, and
    Amendment #1 dated May 1, 2002.

S-1

333-123073

3/2/05

10.4210
.18.1

Amendment #2 dated February 27, 2003 to Preferential Use
    Agreement dated October 2, 1990 between the City of Unalaska and
    Horizon Lines of Alaska, LLC (formerly known as CSX Lines of
    Alaska, LLC).

S-1

333-123073

7/29/05

10.42.1*10
.19

Form of Directors and Officers Indemnification
    Agreement.

S-1

333-123073

9/19/05

10.4310
.19.1

Form of Non-management Directors Indemnification Agreement

8-K

001-32627

7/18/08

10.1*10
.20

Employment Agreement dated as of September 16, 2005, between
    Horizon Lines, LLC and John V. Keenan.

S-1

333-123073

9/19/05

10.44 78




---



##### Table of Contents



Incorporated by ReferenceExhibit







Date of First

Exhibit

FiledNumber

Description

Form

File No.

Filing

Number

Herewith*10
.21.1

First Amendment to Employment Agreement dated as of December 20,
    2003, between Horizon Lines and John V. Keenan.

8-K

001-32627

12/21/05

10.44.1*10
.22.1

Amended and Restated Equity Incentive Plan.

8-K

001-32627

12/19/08

10.1*10
.23

Horizon Lines, Inc., Employee Stock Purchase Plan.

S-1

333-123073

9/19/05

10.46*10
.24

Stock Option Award Agreement.

8-K

001-32627

4/11/06

10.110
.25

Bareboat Charter Agreement dated as of April 7, 2006, by and
    among Horizon Lines Eagle and Horizon Lines, LLC.

S-1

333-134270

5/19/06

10.5210
.26

Bareboat Charter Agreement dated as of April 7, 2006, by and
    among Horizon Lines Falcon and Horizon Lines, LLC.

S-1

333-134270

5/19/06

10.5310
.27

Bareboat Charter Agreement dated as of April 7, 2006, by and
    among Horizon Lines Hunter and Horizon Lines, LLC.

S-1

333-134270

5/16/06

10.5410
.28

Bareboat Charter Agreement dated as of April 7, 2006, by and
    among Horizon Lines Tiger and Horizon Lines, LLC.

S-1

333-134270

5/19/06

10.5510
.29

Bareboat Charter Agreement dated as of April 7, 2006, by and
    among Horizon Lines Hawk and Horizon Lines, LLC.

S-1

333-134270

5/19/06

10.5610
.30

Restricted Stock Agreement dated as of February 1, 2006, among
    Horizon Lines, Inc. and John Handy.

S-1

333-134270

5/19/06

10.5910
.31

Purchase Agreement, dated August 1, 2007, by and among Horizon
    Lines, Inc. and Goldman, Sachs & Co., as representatives of
    the Initial Purchasers.

8-K

001-32627

8/13/07

10.110
.32

Registration Rights Agreement, dated August 8, 2007, by and
    among Horizon Lines, Inc. and Goldman, Sachs & Co., as
    representatives of the Initial Purchasers.

8-K

001-32627

8/13/07

10.210
.33

Confirmation of Convertible Bond Hedge Transaction, dated as of
    August 1, 2007, by and among Horizon Lines, Inc. and Goldman,
    Sachs & Co.

8-K

001-32627

8/13/07

10.310
.34

Confirmation of Convertible Bond Hedge Transaction, dated as of
    August 1, 2007, by and among Horizon Lines, Inc. and Bank of
    America, N.A.

8-K

001-32627

8/13/07

10.410
.35

Confirmation of Convertible Bond Hedge Transaction, dated as of
    August 1, 2007, by and among Horizon Lines, Inc. and Wachovia
    Capital Markets, LLC, solely as agent of Wachovia Bank, National
    Association.

8-K

001-32627

8/13/07

10.510
.36

Confirmation of Issuer Warrant Transaction, dated as of August
    1, 2007, by and among Horizon Lines, Inc. and Goldman, Sachs
    & Co.

8-K

001-32627

8/13/07

10.6 79




---



##### Table of Contents



Incorporated by ReferenceExhibit







Date of First

Exhibit

FiledNumber

Description

Form

File No.

Filing

Number

Herewith10
.37

Confirmation of Issuer Warrant Transaction, dated as of August
    1, 2007, by and among Horizon Lines, Inc. and Bank of America,
    N.A.

8-K

001-32627

8/13/07

10.710
.38

Confirmation of Issuer Warrant Transaction, dated as of August
    1, 2007, by and among Horizon Lines, Inc. and Wachovia Capital
    Markets, LLC, solely as agent of Wachovia Bank, National
    Association.

8-K

001-32627

8/13/07

10.810
.39

Amendment to Confirmation of Issuer Warrant Transaction dated as
    of August 3, 2007, by and among Horizon Lines, Inc. and Goldman,
    Sachs & Co.

8-K

001-32627

8/13/07

10.910
.40

Amendment to Confirmation of Issuer Warrant Transaction dated as
    of August 3, 2007, by and among Horizon Lines, Inc. and Bank of
    America, N.A.

8-K

001-32627

8/13/07

10.1010
.41

Amendment to Confirmation of Issuer Warrant Transaction dated as
    of August 3, 2007, by and among Horizon Lines, Inc. and Wachovia
    Capital Markets, LLC, solely as agent of Wachovia Bank, National
    Association.

8-K

001-32627

8/13/07

10.1110
.42

Credit Agreement, dated August 8, 2007, by and among Horizon
    Lines, Inc., as Borrower; certain subsidiaries of the Borrower
    for time to time parties thereto, as Guarantors; the Lenders
    parties thereto; Wachovia Bank, National Association, as
    Administrative Agent; Bank of America, N.A., as Syndication
    Agent; and Goldman Sachs Credit Partners, L.P., LaSalle Bank,
    National Association and JP Morgan Chase Bank, N.A., as Joint
    Documentation Agents.

8-K

001-32627

8/13/07

10.1210
.43

First Amendment to Credit Agreement, dated June 11, 2009

8-K

001-32627

6/12/09

10.210
.44

Second Amendment to Credit Agreement, dated March 9, 2011

8-K

001-32627

3/11/11

10.110
.45

Settlement Agreement, dated June 11, 2009

8-K

001-32627

6/12/09

10.1*10
.46

Restricted Stock Agreement between the Registrant and Charles G.
    Raymond dated June 28, 2007.

8-K

001-32627

7/3/07

10.1*10
.47

Form of Performance Grant Agreement for Charles G. Raymond.

8-K

001-32627

5/20/09

10.1*10
.48

Form of 2010 Performance-Based Restricted Stock Award.

10-Q

001-32627

4/23/10

10.2*10
.49

Form of 2010 Time-Based Restricted Stock Award.

10-Q

001-32627

4/23/10

10.310
.50

Separation Agreement between the Registrant and Charles G.
    Raymond, dated February 23, 2011









X 80




---



##### Table of Contents



Incorporated by ReferenceExhibit







Date of First

Exhibit

FiledNumber

Description

Form

File No.

Filing

Number

Herewith*10
.51

Employment Agreement between the Registrant and Stephen H.
    Fraser executed March 28, 2011









X12


Ratio of Earnings to Fixed Charges.









X14


Code of Ethics.

10-K

001-32627

2/5/0921


List of Subsidiaries of Horizon Lines, Inc.









X23
.1

Consent of Independent Registered Public Accounting Firm.









X31
.1

Certification of Chief Executive Officer pursuant to Rules
    13a-14 and 15d-14, as adopted pursuant to Section 302 of
    Sarbanes-Oxley Act of 2002.









X31
.2

Certification of Chief Financial Officer pursuant to Rules
    13a-14 and 15d-14, as adopted pursuant to Section 302 of
    Sarbanes-Oxley Act of 2002.









X32
.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to Section 906
    of Sarbanes-Oxley Act of 2002.









X32
.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to Section 906
    of Sarbanes-Oxley Act of 2002.









X     *
    
    Exhibit represents a management contract or compensatory plan.
    
    Portions of this document were omitted and filed separately
    pursuant to a request for confidential treatment in accordance
    with Rule 406 of the Securities Act.
    
    Portions of this document were omitted and filed separately
    pursuant to a request for confidential treatment in accordance
    with
    Rule 24b-2
    of the Exchange Act. 81




---



##### Table of Contents



SIGNATURES
  Pursuant to the requirements of Section 13 or 15(d) of
    the Securities Exchange Act of 1934, the Registrants have duly
    caused this report to be signed on its behalf by the undersigned
    thereunto duly authorized, on the 28th day of March
    2011.
    By:
    /s/  Stephen
    H. Fraser  Stephen H. Fraser
 President and Chief Executive
    Officer
  Pursuant to the requirements of the Securities and Exchange
    Act of 1934, this report has been signed below by the following
    persons on behalf of the Registrants and in the capacities and
    on the 28th day of March 2011.
  Signature

Title/s/  Stephen
    H. FraserStephen
    H. Fraser

President and Chief Executive Officer
    (Principal Executive Officer)/s/  Michael
    T. AvaraMichael
    T. Avara

Executive Vice President and Chief Financial
    Officer (Principal Financial Officer 
    and Principal Accounting Officer)/s/  Alex
    J. MandlAlex
    J. Mandl

Chairman of the Board and Director/s/  James
    G. CameronJames
    G. Cameron

Director/s/  Vernon
    E. ClarkVernon
    E. Clark

Director/s/  William
    J. FlynnWILLIAM
    J. FLYNN

Director/s/  Bobby
    J. GriffinBobby
    J. Griffin

Director/s/  Norman
    Y. MinetaNorman
    Y. Mineta

Director/s/  Thomas
    P. StorrsThomas
    P. Storrs

Director  82




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
               
    F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm                 
    F-2




---



##### Table of Contents



Horizon Lines,
    Inc.
  Consolidated
    Balance Sheets
  December 26,


December 20,2010


2009(In thousands, exceptper share data)ASSETSCurrent assets:Cash

$
2,751


$
6,419Accounts receivable, net of allowance


111,887



115,069Prepaid vessel rent


4,076



4,580Materials and supplies


29,413



30,254Deferred tax asset


2,964



3,227Assets of discontinued operations


7,192



13,228Other current assets


7,406



9,024Total current assets


165,689



181,801Property and equipment, net


194,657



192,624Goodwill


314,149



314,149Intangible assets, net


80,824



104,859Other long-term assets


30,438



25,678Total assets

$
785,757


$
819,111LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
43,413


$
42,372Current portion of long-term debt, including capital lease


508,793



18,750Accrued vessel rent


3,697



4,339Liabilities of discontinued operations


3,699



6,599Other accrued liabilities


108,499



104,759Total current liabilities


668,101



176,819Long-term debt, including capital lease, net of current portion


7,530



496,105Deferred rent


18,026



22,585Deferred tax liability


4,775



4,849Other long-term liabilities


47,533



17,475Total liabilities


745,965



717,833Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value, 30,500 authorized; no
    shares issued or outstanding






Common stock, $.01 par value, 100,000 shares
    authorized, 34,546 shares issued and 30,746 shares
    outstanding at December 26, 2010 and 34,091 shares
    issued and 30,291 shares outstanding at December 20,
    2009


345



341Treasury stock, 3,800 shares at cost


(78,538
)


(78,538
)Additional paid in capital


193,266



196,900Accumulated deficit


(73,843
)


(15,874
)Accumulated other comprehensive loss


(1,438
)


(1,551
)Total stockholders equity


39,792



101,278Total liabilities and stockholders equity

$
785,757


$
819,111    F-3




---



##### Table of Contents



Horizon Lines,
    Inc.
  Consolidated
    Statements of Operations
  Fiscal Years EndedDecember 26,


December 20,


December 212010


2009


2008(In thousands, except per share amounts)Operating revenue

$
1,162,505


$
1,124,215


$
1,270,978Operating expense:Cost of services (excluding depreciation expense)


989,923



922,959



1,047,871Depreciation and amortization


44,475



44,307



44,537Amortization of vessel dry-docking


15,046



13,694



17,162Selling, general and administrative


83,232



97,257



103,328Legal settlements


31,770



20,000



Impairment charge


2,655



1,867



6,030Restructuring charge


2,057



787



3,126Miscellaneous (income) expense


(803
)


1,056



2,862Total operating expense


1,168,355



1,101,927



1,224,916Operating (loss) income


(5,850
)


22,288



46,062Other expense (income):Interest expense, net


40,117



38,036



39,923Loss on modification of debt






50



Other expense (income), net


27



20



(61
)(Loss) income from continuing operations before income taxes


(45,994
)


(15,818
)


6,200Income tax expense (benefit)


305



10,589



(4,153
)Net (loss) income from continuing operations


(46,299
)


(26,407
)


10,353Loss from discontinued operations


(11,670
)


(4,865
)


(12,946
)Net loss

$
(57,969
)

$
(31,272
)

$
(2,593
)Basic net (loss) income per share:Continuing operations

$
(1.50
)

$
(0.87
)

$
0.34Discontinued operations


(0.38
)


(0.16
)


(0.43
)Basic net loss income per share

$
(1.88
)

$
(1.03
)

$
(0.09
)Diluted net (loss) income per share:Continuing operations

$
(1.50
)

$
(0.87
)

$
0.34Discontinued operations


(0.38
)


(0.16
)


(0.43
)Diluted net loss per share

$
(1.88
)

$
(1.03
)

$
(0.09
)Number of shares used in calculations:Basic


30,789



30,451



30,279Diluted


30,789



30,451



30,523Cash dividends declared per share

$
0.20


$
0.44


$
0.44    F-4




---



##### Table of Contents



Horizon Lines,
    Inc.
  Consolidated Statements of Cash
    Flows
  Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008(In thousands)Cash flows from operating activities:Net (loss) income from continuing operations

$
(46,299
)

$
(26,407
)

$
10,353Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Depreciation


23,777



24,002



24,232Amortization of intangibles


20,698



20,305



20,305Amortization of vessel dry-docking


15,046



13,694



17,162Impairment charge


2,655



1,867



6,030Restructuring charge


2,057



787



3,126Amortization of deferred financing costs


3,412



2,947



2,693Deferred income taxes


148



10,617



(4,153
)Gain on equipment disposals


(47
)


(154
)


(24
)Gain on sale of interest in joint venture


(724
)






Loss on early modification/extinguishment of debt






50



Accretion on convertible notes


11,060



10,011



8,901Stock-based compensation


2,122



3,096



3,651Changes in operating assets and liabilities:Accounts receivable, net


1,301



13,710



7,931Materials and supplies


807



(6,739
)


7,636Other current assets


(1,148
)


1,247



23Accounts payable


1,041



910



1,434Accrued liabilities


5,581



(767
)


(5,653
)Vessel rent


(3,898
)


(4,874
)


(4,883
)Vessel dry-docking payments


(19,159
)


(14,735
)


(13,913
)Accrued legal settlements


26,770



15,000



Other assets/liabilities


(768
)


(3,486
)


3,506Net cash provided by operating activities


44,432



61,081



88,357Cash flows from investing activities:Purchases of equipment


(16,298
)


(12,931
)


(38,639
)Proceeds from the sale of interest in joint venture


1,100







Proceeds from sale of equipment


454



1,237



500Net cash used in investing activities


(14,744
)


(11,694
)


(38,139
)Cash flows from financing activities:Borrowing under revolving credit facility


108,800



64,000



78,000Payments on revolving credit facility


(108,800
)


(84,000
)


(80,000
)Payments of long-term debt


(18,750
)


(7,968
)


(6,538
)Dividend to stockholders


(6,281
)


(13,397
)


(13,273
)Payment of financing costs


(75
)


(3,492
)


(139
)Common stock issued under employee stock purchase plan


111



104



38Payments on capital lease obligation


(124
)






(81
)Purchase of treasury stock










(29,330
)Proceeds from exercise of stock options










13Net cash used in financing activities


(25,119
)


(44,753
)


(51,310
)Net change in cash from continuing operations


4,569



4,634



(1,092
)Net change in cash from discontinued operations


(8,237
)


(3,702
)


303Net change in cash


(3,688
)


932



(789
)Cash at beginning of year


6,419



5,487



6,276Cash at end of year

$
2,751


$
6,419


$
5,487    F-5




---



##### Table of Contents



Horizon Lines,
    Inc.
  Consolidated Statements of Changes in
    Stockholders Equity
  Retained


AccumulatedAdditional


Earnings


OtherCommon


Common


Treasury


Paid in


(Accumulated


Comprehensive


StockholdersShares


Stock


Stock


Capital


Deficit)


Loss


Equity(In thousands)Stockholders equity at December 23, 2007


31,502


$
337


$
(49,208
)

$
194,625


$
37,960


$
(305
)

$
183,409Exercise of stock options


1











13











14Vesting of restricted stock


15











(34
)










(34
)Dividend to shareholders


















(13,273
)






(13,273
)Stock-based compensation














3,651











3,651Stock issued under Employee Stock Purchase Plan


118



1







1,389











1,389Common stock repurchases


(1,628
)






(29,330
)














(29,330
)Net income


















3,059







3,059Effects of the adoption of FSP
    APB 14-1


















(5,652
)






(5,652
)Unrecognized actuarial losses, net of tax






















(4,095
)


(4,095
)Fair value of interest rate swap, net of tax






















(2,402
)


(2,402
)Amortization of pension and post-retirement benefit transition
    obligation, net of tax






















100



100Comprehensive loss


























(8,990
)Stockholders equity at December 21, 2008


30,008


$
338


$
(78,538
)

$
199,644


$
22,094


$
(6,702
)

$
136,836Vesting of restricted stock


121



1







(178
)










(177
)Dividend to shareholders














(6,701
)


(6,696
)






(13,397
)Stock-based compensation














3,582











3,582Stock issued under Employee Stock Purchase Plan


162



2







553











555Net loss


















(31,272
)






(31,272
)Unrecognized actuarial gains, net of tax






















4,475



4,475Fair value of interest rate swap, net of tax






















229



229Amortization of pension and post-retirement benefit transition
    obligation, net of tax






















447



447Comprehensive loss


























(26,121
)Stockholders equity at December 20, 2009


30,291


$
341


$
(78,538
)

$
196,900


$
(15,874
)

$
(1,551
)

$
101,278Vesting of restricted stock


197



2







(3
)










(1
)Dividend to shareholders














(6,448
)










(6,448
)Stock-based compensation














2,122











2,122Stock issued under Employee Stock Purchase Plan


258



2







695











697Net loss


















(57,969
)






(57,969
)Unrecognized actuarial gains, net of tax






















(1,442
)


(1,442
)Fair value of interest rate swap, net of tax






















1,141



1,141Amortization of pension and post-retirement benefit transition
    obligation, net of tax






















414



414Comprehensive loss


























(57,856
)Stockholders equity at December 26, 2010


30,746


$
345


$
(78,538
)

$
193,266


$
(73,843
)

$
(1,438
)

$
39,792    F-6




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes
    to Consolidated Financial Statements
  1.
    Basis of
    Presentation and Operations  U.S.-organized
      Going
    Concern
    2.
    Significant
    Accounting Policies  Cash
   F-7




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Allowance for
    Doubtful Accounts and Revenue Adjustments
    65-85 days
    Materials and
    Supplies
    Property and
    Equipment
   F-8




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Buildings, chassis and cranes


25 yearsContainers


15 yearsVessels


20-40 yearsSoftware


3 yearsOther


3-10 years     Vessel
    Dry-docking
  30-month
    Intangible
    Assets
      Revenue
    Recognition
   F-9




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Insurance
    Reserves
    Derivative
    Instruments
        Income
    Taxes
    U.S.-flag
 F-10




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Stock-based
    Compensation
    Pension and
    Post-retirement Benefits
        Computation of
    Net Income (Loss) per Share
    Fiscal
    Period
   F-11




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Use of
    Estimates
    Recent
    Accounting Pronouncements
        Supplemental
    Cash Flow Information
   F-12




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Interest

$
26,199


$
24,479


$
29,116Income taxes


(14
)


(678
)


711   3.
    Long-Term
    Debt    December 26,


December 20,2010


2009Term loan

$
93,750


$
112,500Revolving credit facility


100,000



100,0004.25% convertible senior notes, net of original issue discount


313,414



302,355Capital lease obligations


9,159



Total long-term debt


516,323



514,855Current portion


(508,793
)


(18,750
)Long-term debt, net of current

$
7,530


$
496,105        F-13




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Senior Credit
    Facility
    12-month
       F-14




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    4.25% Convertible
    Senior Notes
  On August 8, 2007, the Company issued the
    Notes.
    
    Prior to May 15, 2012, if during any calendar quarter, and
    only during such calendar quarter, if the last reported sale
    price of the Companys common stock for at least 20 trading
    days in a period of 30 consecutive trading days ending on the
    last trading day of the preceding calendar quarter exceeds 120%
    of the applicable conversion price in effect on the last trading
    day of the immediately preceding calendar quarter;
    During any five business day period prior to May 15, 2012,
    immediately after any five consecutive trading day period (the
    measurement period) in which the trading price per
    $1,000 principal amount of notes for each day of such
    measurement period was less than 98% of the product of the last
    reported sale price of the Companys common stock on such
    date and the conversion rate on such date;
    If, at any time, a change in control occurs or if the Company is
    a party to a consolidation, merger, binding share exchange or
    transfer or lease of all or substantially all of its assets,
    pursuant to which the Companys common stock would be
    converted into cash, securities or other assets; or F-15




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   
    At any time after May 15, 2012 through the fourth scheduled
    trading day immediately preceding August 15, 2012.        Fair Value of
    Financial Instruments
      2011

$
18,7502012


505,000$
523,750    F-16




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  4.
    Impairment
    Charges    Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Equipment

$
2,655


$



$
2,738Vessels






1,867



3,292Total

$
2,655


$
1,867


$
6,030   Equipment
      Vessels
    5.
    Restructuring   F-17




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Balance at








Balance atDecember 20,








December 26,2009


Provision


Payments


2010Personnel related costs

$
150


$
2,047


$
(165
)

$
2,032Other associated costs






10







10Total

$
150


$
2,057


$
(165
)

$
2,042     6.
    Discontinued
    Operations      December 26,


December 20,2010


2009Accounts receivable, net of allowance

$
10,628


$
8,467Property and equipment, net


721



814Intangible assets, net






3,465Deferred tax asset


648



303Other assets


178



179Subtotal


12,175



13,228Valuation allowance


(4,983
)


Total current assets of discontinued operations

$
7,192


$
13,228   December 26,


December 20,2010


2009Accounts payable

$
890


$
885Other accrued liabilities


2,809



5,714Total current liabilities of discontinued operations

$
3,699


$
6,599  F-18




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Operating revenue

$
52,157


$
34,266


$
33,281Operating loss


(11,974
)


(5,087
)


(20,521
)Net loss


(11,670
)


(4,865
)


(12,946
)     Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Cash (used in) provided by operating activities

$
(7,999
)

$
(3,583
)

$
1,011Cash used in investing activities


(238
)


(119
)


(708
)Change in cash from discontinued operations

$
(8,237
)

$
(3,702
)

$
303   7.
    Property and
    Equipment    December 26,


December 20,2010


2009Vessels

$
152,641


$
148,823Containers


37,212



24,035Chassis


14,524



14,599Cranes


37,294



36,965Machinery & equipment


29,756



28,379Facilities & land improvement


26,368



23,990Software


23,837



23,112Construction in progress


25,850



22,529Total property and equipment


347,482



322,432Accumulated depreciation


(152,825
)


(129,808
)Property and equipment, net

$
194,657


$
192,624      F-19




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      8.
    Intangible
    Assets    December 26,


December 20,2010


2009Customer contracts/relationships

$
141,430


$
141,430Trademarks


63,800



63,800Deferred financing costs


14,906



14,831Total intangibles with definite lives


220,136



220,061Less: accumulated amortization


(139,312
)


(115,202
)Net intangibles with definite lives


80,824



104,859Goodwill


314,149



314,149Total intangible assets, net

$
394,973


$
419,008     Fiscal Year Ending2011

$
23,5672012


19,5012013


12,0662014


6,4782015


4,253   9.
    Other Accrued
    Liabilities    December 26,


December 20,2010


2009Vessel operations

$
20,147


$
17,922Payroll and employee benefits


13,996



16,348Marine operations


8,777



10,668Terminal operations


11,863



8,768Fuel


8,032



9,418Interest


7,344



7,298Legal settlements


12,767



15,000Restructuring


1,853



150Other liabilities


23,720



19,187Total other accrued liabilities

$
108,499


$
104,759  F-20




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  10.
    Fair Value
    Measurement    Level 1:
    Observable inputs such as quoted prices in active marketsLevel 2:
    Inputs other than the quoted prices in active markets that are
    observable either directly or indirectlyLevel 3:
    Unobservable inputs in which there is little or no market data,
    which requires the Company to develop its own assumptions       F-21




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  11.
    Net (Loss) Income
    Per Common Share    Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Numerator:(Loss) income from continuing operations

$
(46,299
)

$
(26,407
)

$
10,353Loss from discontinued operations


(11,670
)


(4,865
)


(12,946
)Net loss

$
(57,969
)

$
(31,272
)

$
(2,593
)Denominator:Denominator for basic loss per common share:Weighted average shares outstanding


30,789



30,451



30,279Effect of dilutive securities:Stock-based compensation










244Denominator for diluted net loss per common share


30,789



30,451



30,523Basic net (loss) income per common share from continuing
    operations

$
(1.50
)

$
(0.87
)

$
0.34Basic net loss per common share from discontinued operations


(0.38
)


(0.16
)


(0.43
)Basic net loss per common share

$
(1.88
)

$
(1.03
)

$
(0.09
)Diluted net (loss) income per common share from continuing
    operations

$
(1.50
)

$
(0.87
)

$
0.34Diluted net loss per common share from discontinued operations


(0.38
)


(0.16
)


(0.43
)Diluted net loss per common share

$
(1.88
)

$
(1.03
)

$
(0.09
)    F-22




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  12.
    Derivative
    Financial Instruments      13.
    Leases   F-23




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Non-CancelableFiscal Year Ending

Operating


CapitalDecember

Leases


Lease2011

$
100,373


$
2,4862012


103,057



2,3262013


108,304



1,5272014


127,948



1,5272015


75,363



1,527Thereafter


143,035



2,925Total future minimum lease obligation

$
658,080



12,318Less: amounts representing interest






3,159Present value of future minimum lease obligation






9,159Current portion of capital lease obligation






1,629Long-term portion of capital lease obligation





$
7,530   14.
    Employee Benefit
    Plans  Savings
    Plans
    Pension and
    Post-Retirement Benefit Plans
    Pension
    Plans
   F-24




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Post-retirement
    Benefit Plans
  his/her his/her his/her his/her
  his/her his/her his/her his/her
 F-25




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Obligations
    and Funded Status
  Pension


Post-retirementPlans


Benefit Plans2010


2009


2010


2009(In thousands)Change in Benefit ObligationBeginning obligations

$
(10,771
)

$
(11,788
)

$
(8,925
)

$
(10,123
)Service cost


(396
)


(356
)


(312
)


(562
)Interest cost


(675
)


(638
)


(557
)


(545
)Amendments














Actuarial (loss) gain


(464
)


1,648



(1,223
)


1,877Benefits paid


392



363



229



428Ending obligations


(11,914
)


(10,771
)


(10,788
)


(8,925
)Change in Plans AssetsBeginning fair value


7,064



4,700







Actual return on plans assets


786



1,212







Employer contributions


670



1,514







Benefits paid


(392
)


(362
)






Ending fair value


8,128



7,064







Funded status at end of year

$
(3,786
)

$
(3,707
)

$
(10,788
)

$
(8,925
)   Net Periodic
    Benefit Cost
  Post-retirementPension Plans


Benefit Plans2010


2009


2010


2009(In thousands)Service cost

$
396


$
356


$
312


$
562Interest cost


675



638



558



545Expected return on plan assets


(526
)


(420
)






Amortization of prior service cost


255



255



103



103Amortization of transition obligation


102



102







Amortization of (gain) loss


(23
)


125



(26
)


31Net periodic benefit cost

$
879


$
1,056


$
947


$
1,241  F-26




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Rate
    Assumptions
  PensionBenefits

Post-retirement Benefits2010

2009

2010

2009Weighted-average discount rate used in determining net periodic
    cost


6.4
%


5.5
%


6.4
%


5.5
%Weighted-average expected long-term rate of return on plan
    assets in determination of net periodic costs


7.5
%


7.5
%


0.0
%


0.0
%Weighted-average rate of compensation increase(1)


0.0
%


0.0
%


0.0
%


0.0
%Weighted-average discount rate used in determination of
    projected benefit obligation


6.1
%


6.4
%


6.1
%


6.4
%Assumed health care cost trend:Initial trend


N/A



N/A



9.00
%


9.00
%Ultimate trend rate


N/A



N/A



5.00
%


5.00
%     (1)
    
    The defined benefit plan benefit payments are not based on
    compensation, but rather on years of service.    Pension


Post-retirementFiscal Year Ending

Benefits


Benefits2011

$
471


$
4232012


554



4632013


581



4742014


604



4872015


629



5072016-2020


4,190



3,029$
7,029


$
5,383     Pension Benefits at


Pension Benefits atDecember 26,


December 20,Asset Category

2010


2009Cash


2
%


1
%Equity securities


58
%


63
%Debt securities


40
%


36
%100
%


100
%    F-27




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  time-to-time
    Other
    Plans
    15.
    Stock-Based
    Compensation      Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Stock options

$
429


$
1,223


$
1,585Restricted stock


1,550



1,743



1,779Employee stock purchase plan


143



130



287Total

$
2,122


$
3,096


$
3,651    F-28




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Stock
    Options
  10-year
    2008Expected dividend yield

3.4%-4.7%Expected stock price volatility

33.3%-35.7%Weighted average risk-free interest rate

3.44%-3.69%Expected life of options (years)

6.5     Expected Life:
  Expected Volatility:
   F-29




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Weighted-Weighted-


Average


AggregateAverage


Remaining


IntrinsicNumber of


Exercise


Contractual


ValueOptions

Shares


Price


Term (Years)


(000s)Outstanding at December 20, 2009


1,515,190



15.77



6.68


$
Granted






Exercised






Forfeited


(13,500
)


16.60Expired


(63,977
)


13.65Outstanding at December 26, 2010


1,437,713


$
15.78



5.68


$
Vested or expected to vest at December 26, 2010


1,436,033


$
15.79



5.68


$
Exercisable at December 26, 2010


1,274,713


$
15.97



5.47


$
   Restricted
    Stock
        Weighted-AverageFair ValueNumber of


at GrantRestricted Shares

Shares


DateNonvested at December 20, 2009


607,221



10.21Granted


542,763



4.81Vested


(197,290
)


18.14Forfeited


(320,989
)


5.20Nonvested at December 26, 2010


631,705


$
5.64    F-30




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Employee Stock
    Purchase Plan
          2010

2009Expected dividend yield

3.7%-4.8%

7.5%-11.8%Expected stock price volatility

44.7%-71.1%

83.2%-110.7%Weighted average risk-free interest rate

0.08%-0.16%

0.10%-0.17%Expected term (years)

0.25

0.25Fair value at grant date

$1.14-$1.62

$1.25-$1.57     16.
    Income
    Taxes   F-31




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Current:Federal

$
70


$
(119
)

$
1,096State/territory


44



218



186Total current


114



99



1,282Deferred:Federal






10,359



(5,457
)State/territory


191



131



22Total deferred


191



10,490



(5,435
)Income tax expense (benefit)

$
305


$
10,589


$
(4,153
)     Fiscal Years EndedDecember 26,


December 20,


December 21,2010


2009


2008Income tax (benefit) expense at statutory rates:

$
(15,914
)

$
(5,537
)

$
2,170State/territory, net of federal income tax benefit (excluding
    valuation allowance)


(200
)


(898
)


6Qualifying shipping income


(1,690
)


3,280



(6,725
)Fines and penalties


11,168



46



20Valuation allowance


6,241



13,162



Other Items


700



536



376Income tax expense (benefit)

$
305


$
10,589


$
(4,153
)    F-32




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    December 26,


December 20,2010


2009Deferred tax assets:Leases

$
8,407


$
10,011Convertible note hedge


1,360



1,294Allowance for doubtful accounts


1,329



1,372Net operating losses, AMT carryforwards, and state credit
    carryforwards


35,735



28,964Post retirement benefits


1,639



1,374Other


12,752



10,662Valuation allowances


(16,136
)


(8,349
)Total deferred tax assets


45,086



45,328Deferred tax liabilities:Depreciation


(18,496
)


(16,376
)Capital construction fund


(14,791
)


(14,211
)Intangibles


(11,556
)


(14,575
)Other


(2,054
)


(1,788
)Total deferred tax liabilities


(46,897
)


(46,950
)Net deferred tax liability

$
(1,811
)

$
(1,622
)       2010


2009


2008Beginning balance

$
12,531


$
8,989


$
8,482Additions based on tax positions related to the current year


840



409



2,196Additions for tax positions of prior years


225



5,793



Reductions for tax positions of prior years






(2,660
)


(1,689
)Ending balance

$
13,596


$
12,531


$
8,989  F-33




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      non-U.S. income 2005-2010.
  17.
    Commitments and
    Contingencies  Legal
    Proceedings
  Antitrust
    Matters
       F-34




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
             F-35




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
                 F-36




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Environmental
    Matters
    and/or
  SFL
    Agreements
   F-37




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Standby
    Letters of Credit
    Labor
    Relations
   F-38




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  18.
    Quarterly
    Financial Data  (Unaudited)    Fiscal Year 2010First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterOperating revenue

$
274,658


$
291,387


$
297,612


$
298,849Operating (loss) income(1)(2)


(1,848
)


13,962



18,107



(35,526
)(Loss) income from continuing operations

$
(11,695
)

$
4,125


$
8,218


$
(46,947
)Loss from discontinued operations


(1,549
)


(475
)


(471
)


(9,175
)Net (loss) income(1)(2)

$
(13,244
)

$
3,650


$
7,747


$
(56,122
)Basic net (loss) income per share from continuing operations

$
(0.38
)

$
0.14


$
0.27


$
(1.53
)Basic net loss per share from discontinued operations


(0.05
)


(0.02
)


(0.02
)


(0.29
)Basic net (loss) income per share

$
(0.43
)

$
0.12


$
0.25


$
(1.82
)Diluted net (loss) income per share from continuing operations

$
(0.38
)

$
0.14


$
0.27


$
(1.53
)Diluted net loss per share from discontinued operations


(0.05
)


(0.02
)


(0.02
)


(0.29
)Diluted net (loss) income per share

$
(0.43
)

$
0.12


$
0.25


$
(1.82
)   Fiscal Year 2009First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterOperating revenue

$
265,033


$
271,186


$
301,305


$
286,691Operating income (loss)(1)(2)


56



(9,648
)


20,007



11,863(Loss) income from continuing operations

$
(8,718
)

$
(29,204
)

$
9,964


$
1,551Loss from discontinued operations


(1,235
)


(1,879
)


(1,526
)


(225
)Net (loss) income(1)(2)(3)

$
(9,953
)

$
(31,083
)

$
8,438


$
1,326Basic net (loss) income per share from continuing operations

$
(0.29
)

$
(0.96
)

$
0.33


$
0.05Basic net loss per share from discontinued operations


(0.04
)


(0.06
)


(0.05
)


(0.01
)Basic net (loss) income per share

$
(0.33
)

$
(1.02
)

$
0.28


$
0.04Diluted net (loss) income per share from continuing operations

$
(0.29
)

$
(0.96
)

$
0.32


$
0.05Diluted net loss per share from discontinued operations


(0.04
)


(0.06
)


(0.05
)


(0.01
)Diluted net (loss) income per share

$
(0.33
)

$
(1.02
)

$
0.27


$
0.04     (1)
    
    The first, second, third, and fourth quarter of 2010 include
    expenses of $1.0 million, $1.0 million,
    $1.5 million, and $1.7 million, respectively, related
    to legal and professional fees associated with the DOJ
    investigation and the antitrust related litigation. The first,
    second, third, and fourth quarter of 2009 include expenses of
    $4.4 million, $4.1 million, $2.0 million, and
    $1.7 million, respectively, related to legal and
    professional fees associated with the DOJ investigation and the
    antitrust F-39




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  related litigation. The fourth quarter of 2010 includes expenses
    of $2.0 million related to the Companys restructuring
    plan. The third and fourth quarter of 2010 include
    $1.8 million and $0.8 million, respectively, related
    to an impairment charge.(2)
    
    The third quarter of 2010 includes $1.8 million related to
    an impairment charge. The first and second quarter of 2009
    include a $0.8 million and $0.2 million charge,
    respectively, related to the Companys restructuring plan.
    The second and third quarter of 2009 include $0.7 million
    and $1.2 million, respectively, related to an impairment
    charge. The fourth quarter of 2010 includes a $30.0 million
    charge for the settlement with the DOJ and a $1.8 million
    charge for the settlement of the Puerto Rico indirect purchaser
    lawsuit. The second quarter of 2009 includes a
    $20.0 million charge for the settlement of a class action
    lawsuit.(3)
    
    During the second quarter of 2009, the Company determined it was
    unclear as to the timing of when it will generate sufficient
    taxable income to realize its deferred tax assets. Accordingly,
    the Company recorded a valuation allowance against its deferred
    tax assets which resulted in a $10.5 million income tax
    provision.  19.
    Subsequent
    Events       F-40




---



##### Table of Contents



Horizon Lines,
    Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   F-41




---



##### Table of Contents



Schedule II



Horizon Lines,
    Inc.
    Valuation and Qualifying Accounts
    Years Ended December 2010, 2009 and 2008 Chargedto Cost





ChargedBeginning


and





to other


EndingBalance


Expenses


Deductions


Accounts


Balance(In thousands)Accounts receivable reserve:Year ended December 26, 2010:Allowance for doubtful accounts

$
5,965


$
1,459


$
(1,195
)

$



$
6,229Allowance for revenue adjustments


1,030



3,401



(3,701
)






730$
6,996


$
4,860


$
(4,896
)

$



$
6,959Year ended December 20, 2009:Allowance for doubtful accounts

$
6,675


$
1,975


$
(2,685
)

$



$
5,965Allowance for revenue adjustments


1,030



5,824



(5,824
)






1,030$
7,705


$
7,799


$
(8,509
)

$



$
6,996Year ended December 21, 2008:Allowance for doubtful accounts

$
4,650


$
2,937


$
(912
)

$



$
6,675Allowance for revenue adjustments


1,030



4,723



(4,723
)






1,030$
5,680


$
7,660


$
(5,635
)

$



$
7,705Restructuring costs:Year ended December 26, 2010

$
150


$
2,057


$
(165
)

$



$
2,042Year ended December 20, 2009

$
3,197


$
1,001


$
(3,563
)

$
(485
)(1)

$
150Year ended December 21, 2008

$



$
3,244


$
(47
)

$



$
3,197Deferred tax assets valuation allowance:Year ended December 26, 2010

$
8,349


$
7,513


$



$
274
(2)

$
16,136Year ended December 20, 2009

$
1,262


$
9,102


$



$
(2,015
)(2)

$
8,349Year ended December 21, 2008

$
1,262


$



$



$



$
1,262     (1)
    
    Includes $0.5 million of stock-based compensation recorded
    in additional paid in capital.(2)
    
    Includes $0.7 million and $2.0 million of recorded in
    other comprehensive income (loss). F-42