##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
 (Mark one)
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the quarterly period ended September 21, 2008
 OR
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the transition period from  to
 Commission 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)
    
    (Zip Code)
 (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)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  At October 22, 2008, 30,002,097 shares of the Registrants common stock, par value $.01 per
share, were outstanding.




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##### 



HORIZON LINES, INC.
Form 10-Q Index
 Page No.Part I. Financial Information
    
    
    31. Financial Statements
    
    
    3Unaudited Condensed Consolidated Balance Sheets
    
    
    3Unaudited Condensed Consolidated Statements of Income
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    62. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    203. Quantitative and Qualitative Disclosures About Market Risk
    
    
    374. Controls and Procedures
    
    
    37Part II. Other Information
    
    
    381. Legal Proceedings
    
    
    381A. Risk Factors
    
    
    382. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    393. Defaults Upon Senior Securities
    
    
    394. Submission of Matters to a Vote of Security Holders
    
    
    395. Other Information
    
    
    396. Exhibits
    
    
    39Signature
    
    
    40Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 1. Financial Statements
 Horizon Lines, Inc.
 
 Condensed Consolidated Balance Sheets
 (in thousands, except per share data)
 September 21,
    
    
    December 23,2008
    
    
    2007(unaudited)AssetsCurrent assetsCash
    
    $
    4,194
    
    
    $
    6,276Accounts receivable, net of allowance of
$8,325 and $6,191 at September 21, 2008 and
December 23, 2007, respectively
    
    
    169,674
    
    
    
    140,820Deferred tax asset
    
    
    5,655
    
    
    
    13,792Prepaid vessel rent
    
    
    4,749
    
    
    
    4,361Materials and supplies
    
    
    33,232
    
    
    
    31,576Other current assets
    
    
    11,039
    
    
    
    10,446Total current assets
    
    
    228,543
    
    
    
    207,271Property and equipment, net
    
    
    202,020
    
    
    
    194,679Goodwill
    
    
    334,717
    
    
    
    334,671Intangible assets, net
    
    
    134,418
    
    
    
    152,031Deferred tax asset
    
    
    10,520
    
    
    
    4,060Other long-term assets
    
    
    30,119
    
    
    
    33,729Total assets
    
    $
    940,337
    
    
    $
    926,441Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    27,269
    
    
    $
    40,225Current portion of long-term debt
    
    
    6,543
    
    
    
    6,537Accrued vessel rent
    
    
    
    
    
    
    6,503Other accrued liabilities
    
    
    110,718
    
    
    
    95,027Total current liabilities
    
    
    144,530
    
    
    
    148,292Long-term debt, net of current portion
    
    
    603,062
    
    
    
    572,469Deferred rent
    
    
    28,176
    
    
    
    31,531Other long-term liabilities
    
    
    21,458
    
    
    
    19,571Total liabilities
    
    
    797,226
    
    
    
    771,863Stockholders equityCommon stock, $.01 par value, 100,000 shares
authorized, 33,774 shares issued and 29,974
shares outstanding as of September 21, 2008
and 50,000 shares authorized, 33,674 shares
issued and 31,502 shares outstanding as of
December 23, 2007
    
    
    338
    
    
    
    337Treasury stock, 3,800 and 2,172 shares at cost
as of September 21, 2008 and December 23,
2007, respectively
    
    
    (78,538
    )
    
    
    (49,208
    )Additional paid in capital
    
    
    168,423
    
    
    
    163,760Retained earnings
    
    
    51,863
    
    
    
    39,994Accumulated other comprehensive income (loss)
    
    
    1,025
    
    
    
    (305
    )Total stockholders equity
    
    
    143,111
    
    
    
    154,578Total liabilities and stockholders equity
    
    $
    940,337
    
    
    $
    926,441
   3




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Horizon Lines, Inc.
 
 Unaudited Condensed Consolidated Statements of Income
 (in thousands, except per share amounts)
 Quarters Ended
    
    
    Nine Months EndedSeptember 21,
    
    
    September 23,
    
    
    September 21,
    
    
    September 23,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating revenue
    
    $
    352,638
    
    
    $
    321,145
    
    
    $
    989,544
    
    
    $
    890,509Operating expense:Cost of services (excluding depreciation expense)
    
    
    287,400
    
    
    
    246,402
    
    
    
    809,069
    
    
    
    698,530Depreciation and amortization
    
    
    11,449
    
    
    
    10,714
    
    
    
    34,325
    
    
    
    36,765Amortization of vessel dry-docking
    
    
    4,393
    
    
    
    4,820
    
    
    
    13,168
    
    
    
    13,139Selling, general and administrative
    
    
    26,513
    
    
    
    23,481
    
    
    
    80,517
    
    
    
    66,885Miscellaneous expense, net
    
    
    1,095
    
    
    
    445
    
    
    
    2,392
    
    
    
    525Total operating expense
    
    
    330,850
    
    
    
    285,862
    
    
    
    939,471
    
    
    
    815,844Operating income
    
    
    21,788
    
    
    
    35,283
    
    
    
    50,073
    
    
    
    74,665Other expense:Interest expense, net
    
    
    7,772
    
    
    
    10,077
    
    
    
    24,927
    
    
    
    32,953Loss on early extinguishment of debt
    
    
    
    
    
    
    37,958
    
    
    
    
    
    
    
    38,522Other (income) expense, net
    
    
    (4
    )
    
    
    25
    
    
    
    (2
    )
    
    
    45Income (loss) before income tax expense (benefit)
    
    
    14,020
    
    
    
    (12,777
    )
    
    
    25,148
    
    
    
    3,145Income tax expense (benefit)
    
    
    1,492
    
    
    
    (14,347
    )
    
    
    3,294
    
    
    
    (15,038
    )Net income
    
    $
    12,528
    
    
    $
    1,570
    
    
    $
    21,854
    
    
    $
    18,183Net income per share:Basic
    
    $
    0.42
    
    
    $
    0.05
    
    
    $
    0.73
    
    
    $
    0.54Diluted
    
    $
    0.42
    
    
    $
    0.05
    
    
    $
    0.72
    
    
    $
    0.53Number of shares used in calculations:Basic
    
    
    29,970
    
    
    
    33,131
    
    
    
    30,060
    
    
    
    33,460Diluted
    
    
    30,187
    
    
    
    33,770
    
    
    
    30,527
    
    
    
    34,066Dividends declared per common share
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.33
    
    
    $
    0.33
   4




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Horizon Lines, Inc.
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 (in thousands)
 Nine Months EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    21,854
    
    
    $
    18,183Adjustments to reconcile net income to net cash used in operating activities:Depreciation
    
    
    18,339
    
    
    
    21,826Amortization of other intangible assets
    
    
    15,986
    
    
    
    14,939Amortization of vessel dry-docking
    
    
    13,168
    
    
    
    13,139Amortization of deferred financing costs
    
    
    2,022
    
    
    
    2,296Deferred income taxes
    
    
    1,677
    
    
    
    (20,023
    )Gain on equipment disposals
    
    
    (7
    )
    
    
    (281
    )Stock-based compensation
    
    
    3,532
    
    
    
    2,401Loss on early extinguishment of debt
    
    
    
    
    
    
    38,522Accretion of interest on 11% senior discount notes
    
    
    
    
    
    
    6,062Changes in operating assets and liabilities:Accounts receivable
    
    
    (28,521
    )
    
    
    (37,142
    )Materials and supplies
    
    
    (1,655
    )
    
    
    (5,761
    )Other current assets
    
    
    (593
    )
    
    
    (1,537
    )Accounts payable
    
    
    (13,054
    )
    
    
    (6,727
    )Accrued liabilities
    
    
    17,590
    
    
    
    (8,650
    )Vessel rent
    
    
    (9,657
    )
    
    
    (30,790
    )Vessel dry-docking payments
    
    
    (9,291
    )
    
    
    (15,516
    )Other assets/liabilities
    
    
    1,613
    
    
    
    3,545Net cash provided by (used in) operating activities
    
    
    33,003
    
    
    
    (5,514
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (26,351
    )
    
    
    (16,714
    )Purchase of business
    
    
    (198
    )
    
    
    (32,082
    )Proceeds from the sale of property and equipment
    
    
    350
    
    
    
    3,078Net cash used in investing activities
    
    
    (26,199
    )
    
    
    (45,718
    )Cash flows from financing activities:Payments on long-term debt
    
    
    (4,902
    )
    
    
    (517,074
    )Borrowing under revolving credit facility
    
    
    73,000
    
    
    
    161,500Payments on revolving credit facility
    
    
    (37,500
    )
    
    
    (15,000
    )Issuance of convertible notes
    
    
    
    
    
    
    330,000Borrowing of term loan
    
    
    
    
    
    
    125,000Purchase of call spread options
    
    
    
    
    
    
    (52,541
    )Sale of common stock warrants
    
    
    
    
    
    
    11,958Redemption premiums
    
    
    
    
    
    
    (25,568
    )Dividends to stockholders
    
    
    (9,985
    )
    
    
    (11,011
    )Purchase of treasury stock
    
    
    (29,330
    )
    
    
    (28,560
    )Payments of financing costs
    
    
    (139
    )
    
    
    (11,929
    )Payments on capital lease obligation
    
    
    (81
    )
    
    
    (152
    )Common stock issued under employee stock purchase plan
    
    
    38
    
    
    
    8Proceeds from exercise of stock options
    
    
    13
    
    
    
    84Net cash used in financing activities
    
    
    (8,886
    )
    
    
    (33,285
    )Net decrease in cash
    
    
    (2,082
    )
    
    
    (84,517
    )Cash at beginning of period
    
    
    6,276
    
    
    
    93,949Cash at end of period
    
    $
    4,194
    
    
    $
    9,432
   5




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##### Table of Contents



HORIZON LINES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. Organization
  2. Basis of Presentation
    3. Acquisitions
    6




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Quarter Ended
    
    
    Nine Months EndedSeptember 23,
    
    
    September 23,2007
    
    
    2007Operating revenue
    
    $
    325,950
    
    
    $
    917,743Net income
    
    
    1,555
    
    
    
    18,186Earnings per share (basic)
    
    
    0.05
    
    
    
    0.54Earnings per share (diluted)
    
    
    0.05
    
    
    
    0.53
 4. Income Taxes
    Balance at December 23, 2007
    
    $
    8,482Additions based on tax positions related to the current year
    
    
    1,555Reductions for tax positions of prior years
    
    
    (585
    )Balance at September 21, 2008
    
    $
    9,452
 5. Stock-Based Compensation
   7




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59 1/2
 Quarters Ended
    
    
    Nine Months EndedSeptember 21,
    
    
    September 23,
    
    
    September 21,
    
    
    September 23,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock options
    
    $
    387
    
    
    $
    483
    
    
    $
    1,231
    
    
    $
    1,184Restricted stock
    
    
    699
    
    
    
    700
    
    
    
    2,067
    
    
    
    1,056ESPP
    
    
    69
    
    
    
    48
    
    
    
    234
    
    
    
    161Total
    
    $
    1,155
    
    
    $
    1,231
    
    
    $
    3,532
    
    
    $
    2,401
  Stock Options
  Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    ValueOptions
    
    Options
    
    
    Price
    
    
    Term (years)
    
    
    (000s)Outstanding at December 23, 2007
    
    
    1,599,008
    
    
    $
    15.93Granted (a)
    
    
    209,000
    
    
    
    14.38Exercised
    
    
    (1,312
    )
    
    
    10.00Forfeited
    
    
    (168,954
    )
    
    
    15.39Outstanding at September 21, 2008
    
    
    1,637,742
    
    
    $
    15.79
    
    
    
    7.80
    
    
    $
    898Vested or expected to vest at September 21, 2008
    
    
    1,603,230
    
    
    $
    15.66
    
    
    
    7.78
    
    
    $
    898Exercisable at September 21, 2008
    
    
    33,250
    
    
    $
    10.00
    
    
    
    7.02
    
    
    $
    52
 (a)
    
    On April 24, 2008, the Company granted 199,000 options to certain employees of the Company
and its subsidiaries to purchase shares of its common stock at a price of $14.63 per share. The
fair value of the options on the date of the grant was $4.05 per share. On July 21, 2008, the
Company granted 10,000 options to certain employees of the Company and its subsidiaries to
purchase shares of its common stock at a price of $9.38 per share. The fair value of the
options on the date of the grant was $2.38 per share.   8




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Restricted Stock
  Weighted-AverageFair ValueNumber of
    
    
    at GrantRestricted Shares
    
    Shares
    
    
    DateNonvested at December 23, 2007
    
    
    307,559
    
    
    $
    27.54Granted (a)
    
    
    182,827
    
    
    
    13.81Vested
    
    
    (17,440
    )
    
    
    34.42Forfeited
    
    
    (43,634
    )
    
    
    27.84Nonvested at September 21, 2008
    
    
    429,312
    
    
    $
    21.39
 (a)
    
    On June 3, 2008, the Company granted 4,502 shares of restricted stock each to all
non-employee members on the Companys Board of Directors. The grant date fair value of the
restricted shares was $13.33 per share and the shares will vest in full on June 3, 2009. On May
7, 2008, the Company granted 5,757 shares of restricted stock to the lead independent director
of the Companys Board of Directors. The grant date fair value of the restricted shares was
$10.35 per share and the shares will vest in full on June 2, 2009. On April 24, 2008, the
Company granted a total of 118,300 shares of restricted stock to certain employees of the
Company and its subsidiaries. The grant date fair value of the restricted shares was $14.63 per
share. Of the 118,300 shares granted, 36,300 will vest in full on April 24, 2011. The remaining
82,000 restricted shares will vest in full on April 24, 2011 provided an earnings per share
performance target for the Companys fiscal year 2010 is met. If such target is not met, the
restricted shares may vest in full on April 24th during each of the years 2012
through 2014, provided an earnings per share performance target for the preceding fiscal year
of the Company is met. If the restricted shares have not vested by April 24, 2014, the
restricted shares will be forfeited. On July 21, 2008, the Company granted a total of 13,750
shares of restricted stock to certain employees of the Company and its subsidiaries. The grant
date fair value of the restricted shares was $9.38 per share. Of the 13,750 shares granted,
3,750 will vest in full on July 21, 2011. The remaining 10,000 restricted shares will vest in
full on July 21, 2011 provided an earnings per share performance target for the Companys
fiscal year 2010 is met. If such target is not met, the restricted shares may vest in full on
July 21st during each of the years 2012 through 2014, provided an earnings per share
performance target for the preceding fiscal year of the Company is met. If the restricted
shares have not vested by July 21, 2014, the restricted shares will be forfeited.  6. Net Income per Common Share
   Quarters Ended
    
    
    Nine Months EndedSeptember 21,
    
    
    September 23,
    
    
    September 21,
    
    
    September 23,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Net income
    
    $
    12,528
    
    
    $
    1,570
    
    
    $
    21,854
    
    
    $
    18,183Denominator:Denominator for basic income per common share:Weighted average shares outstanding
    
    
    29,970
    
    
    
    33,131
    
    
    
    30,060
    
    
    
    33,460Effect of dilutive securities:Stock-based compensation
    
    
    217
    
    
    
    639
    
    
    
    467
    
    
    
    606Denominator for diluted net income per common share
    
    
    30,187
    
    
    
    33,770
    
    
    
    30,527
    
    
    
    34,066Basic net income per common share
    
    $
    0.42
    
    
    $
    0.05
    
    
    $
    0.73
    
    
    $
    0.54Diluted net income per common share
    
    $
    0.42
    
    
    $
    0.05
    
    
    $
    0.72
    
    
    $
    0.53
  9




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7. Comprehensive Income
  Quarters Ended
    
    
    Nine Months EndedSeptember 21,
    
    
    September 23,
    
    
    September 21,
    
    
    September 24,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    12,528
    
    
    $
    1,570
    
    
    $
    21,854
    
    
    $
    18,183Change in fair value of interest rate swap
    
    
    (1,113
    )
    
    
    
    
    
    
    1,260
    
    
    
    Amortization of pension and
post-retirement benefit transition
obligation
    
    
    39
    
    
    
    25
    
    
    
    70
    
    
    
    75Comprehensive income
    
    $
    11,454
    
    
    $
    1,595
    
    
    $
    23,184
    
    
    $
    18,258
 8. Segment Reporting
    10




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Quarters Ended
    
    
    Nine Months EndedSeptember 21,
    
    
    September 23,
    
    
    September 21,
    
    
    September 23,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating revenue:Horizon Lines
    
    $
    342,693
    
    
    $
    317,430
    
    
    $
    963,646
    
    
    $
    883,752Horizon Logistics
    
    
    60,974
    
    
    
    47,801
    
    
    
    169,681
    
    
    
    136,519403,667
    
    
    
    365,231
    
    
    
    1,133,327
    
    
    
    1,020,271Inter-segment revenue
    
    
    (51,029
    )
    
    
    (44,086
    )
    
    
    (143,783
    )
    
    
    (129,762
    )Consolidated operating revenue
    
    $
    352,638
    
    
    $
    321,145
    
    
    $
    989,544
    
    
    $
    890,509Depreciation and amortization:Horizon Lines
    
    $
    15,035
    
    
    $
    15,007
    
    
    $
    45,237
    
    
    $
    44,549Horizon Logistics
    
    
    807
    
    
    
    527
    
    
    
    2,286
    
    
    
    5,47615,842
    
    
    
    15,534
    
    
    
    47,523
    
    
    
    50,025Eliminations
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    (121
    )Consolidated depreciation and amortization
    
    $
    15,842
    
    
    $
    15,534
    
    
    $
    47,493
    
    
    $
    49,904Segment operating income (loss):Horizon Lines
    
    $
    23,134
    
    
    $
    36,223
    
    
    $
    54,012
    
    
    $
    81,132Horizon Logistics
    
    
    (1,346
    )
    
    
    (940
    )
    
    
    (3,939
    )
    
    
    (6,467
    )Consolidated operating income
    
    
    21,788
    
    
    
    35,283
    
    
    
    50,073
    
    
    
    74,665Unallocated interest expense, net
    
    
    7,772
    
    
    
    10,077
    
    
    
    24,927
    
    
    
    32,953Loss on early extinguishment of debt
    
    
    
    
    
    
    37,958
    
    
    
    
    
    
    
    38,522Unallocated other (income) expense, net
    
    
    (4
    )
    
    
    25
    
    
    
    (2
    )
    
    
    45Consolidated income (loss) before income
tax expense (benefit)
    
    $
    14,020
    
    
    $
    (12,777
    )
    
    $
    25,148
    
    
    $
    3,145Capital expenditures:Horizon Lines
    
    $
    17,619
    
    
    $
    6,142
    
    
    $
    24,049
    
    
    $
    16,163Horizon Logistics
    
    
    1,270
    
    
    
    195
    
    
    
    2,302
    
    
    
    551Consolidated capital expenditures
    
    $
    18,889
    
    
    $
    6,337
    
    
    $
    26,351
    
    
    $
    16,714
 September 21,2008Segment assets:Horizon Lines
    
    $
    931,805Horizon Logistics
    
    
    41,421973,226Eliminations
    
    
    (32,889
    )Consolidated assets
    
    $
    940,337
  11




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##### Table of Contents



9. Property and Equipment
  September 21,
    
    
    December 23,2008
    
    
    2007Vessels and vessel improvements
    
    $
    148,214
    
    
    $
    141,776Containers
    
    
    24,176
    
    
    
    24,522Chassis
    
    
    14,858
    
    
    
    14,923Cranes
    
    
    26,862
    
    
    
    25,179Machinery and equipment
    
    
    25,691
    
    
    
    23,923Facilities and land improvements
    
    
    13,244
    
    
    
    10,847Software
    
    
    32,233
    
    
    
    30,214Construction in progress
    
    
    31,685
    
    
    
    20,275Total property and equipment
    
    
    316,963
    
    
    
    291,659Accumulated depreciation
    
    
    (114,943
    )
    
    
    (96,980
    )Property and equipment, net
    
    $
    202,020
    
    
    $
    194,679
  10. Intangible Assets
  September 21,
    
    
    December 23,2008
    
    
    2007Customer contracts/relationships
    
    $
    145,079
    
    
    $
    144,824Trademarks
    
    
    63,800
    
    
    
    63,800Deferred financing costs
    
    
    13,011
    
    
    
    12,872Non-compete agreements
    
    
    262
    
    
    
    262Total intangibles with definite lives
    
    
    222,152
    
    
    
    221,758Accumulated amortization
    
    
    (87,734
    )
    
    
    (69,727
    )Net intangibles with definite lives
    
    
    134,418
    
    
    
    152,031Goodwill
    
    
    334,717
    
    
    
    334,671Intangible assets, net
    
    $
    469,135
    
    
    $
    486,702
 11. Accrued Liabilities
  September 21,
    
    
    December 23,2008
    
    
    2007Vessel operations
    
    $
    22,560
    
    
    $
    23,064Fuel
    
    
    20,975
    
    
    
    14,885Marine operations
    
    
    12,515
    
    
    
    9,682Terminal operations
    
    
    14,886
    
    
    
    9,278Payroll and employee benefits
    
    
    13,875
    
    
    
    12,574Interest
    
    
    3,605
    
    
    
    6,986Other liabilities
    
    
    22,302
    
    
    
    18,558Total other accrued liabilities
    
    $
    110,718
    
    
    $
    95,027
  12




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##### Table of Contents



12. Long-Term Debt
  September 21,
    
    
    December 23,2008
    
    
    2007Senior credit facilityTerm loan
    
    $
    120,313
    
    
    $
    125,000Revolving credit facility
    
    
    157,500
    
    
    
    122,0004.25% convertible senior notes
    
    
    330,000
    
    
    
    330,000Other
    
    
    1,792
    
    
    
    2,006Total long-term debt
    
    
    609,605
    
    
    
    579,006Current portion
    
    
    (6,543
    )
    
    
    (6,537
    )Long-term debt, net of current portion
    
    $
    603,062
    
    
    $
    572,469
 Senior Credit Facility
    Derivative Instruments
    13




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##### Table of Contents



4.25% Convertible Senior 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;
    
    Prior to May 15, 2012, if during the five business day period 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
    
    At any time after May 15, 2012 through the fourth scheduled trading day immediately preceding
August 15, 2012.
    Other Debt
   14




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##### Table of Contents



13. 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
   14. Pension and Post-retirement Benefit Plans
  Pension Plans
   Post-retirement Benefit Plans
   15




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Other Plans
  15. Commitments and Contingencies
 Legal Proceedings
        16




---



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SFL Agreements
   Standby Letters of Credit
  16. Recent Accounting Pronouncements
   17




---



##### Table of Contents



Quarter Ended September 21, 2008
    
    
    Nine Months Ended September 21, 2008As
    
    
    
    
    
    
    As
    
    
    As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    Adjusted
    
    
    Reported
    
    
    Adjustments
    
    
    AdjustedInterest expense, net
    
    $
    7,772
    
    
    $
    2,244
    
    
    $
    10,016
    
    
    $
    24,927
    
    
    $
    6,601
    
    
    $
    31,528Income tax expense
    
    
    1,492
    
    
    
    (844
    )
    
    
    648
    
    
    
    3,294
    
    
    
    (2,482
    )
    
    
    812Net income
    
    
    12,528
    
    
    
    (1,400
    )
    
    
    11,128
    
    
    
    21,854
    
    
    
    (4,119
    )
    
    
    17,735Net income per shareBasic
    
    
    0.42
    
    
    
    (0.05
    )
    
    
    0.37
    
    
    
    0.73
    
    
    
    (0.14
    )
    
    
    0.59Diluted
    
    
    0.42
    
    
    
    (0.05
    )
    
    
    0.37
    
    
    
    0.72
    
    
    
    (0.13
    )
    
    
    0.59
 Quarter Ended September 23, 2007
    
    
    Nine Months Ended September 23, 2007As
    
    
    
    
    
    
    As
    
    
    As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    Adjusted
    
    
    Reported
    
    
    Adjustments
    
    
    AdjustedInterest expense, net
    
    $
    10,077
    
    
    $
    1,092
    
    
    $
    11,169
    
    
    $
    32,953
    
    
    $
    1,092
    
    
    $
    34,045Income tax benefit
    
    
    (14,347
    )
    
    
    (411
    )
    
    
    (14,758
    )
    
    
    (15,038
    )
    
    
    (411
    )
    
    
    (15,449
    )Net income
    
    
    1,570
    
    
    
    (681
    )
    
    
    889
    
    
    
    18,183
    
    
    
    (681
    )
    
    
    17,502Net income per shareBasic
    
    
    0.05
    
    
    
    (0.02
    )
    
    
    0.03
    
    
    
    0.54
    
    
    
    (0.02
    )
    
    
    0.52Diluted
    
    
    0.05
    
    
    
    (0.02
    )
    
    
    0.03
    
    
    
    0.53
    
    
    
    (0.02
    )
    
    
    0.51
 Year Ended December 23, 2007As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    AdjustedInterest expense, net
    
    $
    41,672
    
    
    $
    3,204
    
    
    $
    44,876Income tax benefit
    
    
    (13,983
    )
    
    
    (1,205
    )
    
    
    (15,188
    )Net income
    
    
    28,859
    
    
    
    (1,999
    )
    
    
    26,860Net income per shareBasic
    
    
    0.87
    
    
    
    (0.06
    )
    
    
    0.81Diluted
    
    
    0.85
    
    
    
    (0.06
    )
    
    
    0.79
  Fiscal Year2008
    
    $
    8,9012009
    
    
    10,0112010
    
    
    11,0602011
    
    
    11,7652012
    
    
    4,821
  18




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##### Table of Contents



19




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##### Table of Contents



2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Executive Overview
    Quarters Ended
    
    
    Nine Months EndedSeptember 21,
    
    
    September 23,
    
    
    September 21,
    
    
    September 23,2008
    
    
    2007
    
    
    2008
    
    
    2007($ in thousands)Operating revenue
    
    $
    352,638
    
    
    $
    321,145
    
    
    $
    989,544
    
    
    $
    890,509Operating expense
    
    
    330,850
    
    
    
    285,862
    
    
    
    939,471
    
    
    
    815,844Operating income
    
    $
    21,788
    
    
    $
    35,283
    
    
    $
    50,073
    
    
    $
    74,665Operating ratio
    
    
    93.8
    %
    
    
    89.0
    %
    
    
    94.9
    %
    
    
    91.6
    %Revenue containers (units)
    
    
    71,748
    
    
    
    74,759
    
    
    
    209,112
    
    
    
    214,574
  20




---



##### Table of Contents



Quarters Ended
    
    
    Nine Months EndedSeptember 21,
    
    
    September 23,
    
    
    September 21,
    
    
    September 23,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands)Net income
    
    $
    12,528
    
    
    $
    1,570
    
    
    $
    21,854
    
    
    $
    18,183Interest expense, net
    
    
    7,772
    
    
    
    10,077
    
    
    
    24,927
    
    
    
    32,953Income tax expense (benefit)
    
    
    1,492
    
    
    
    (14,347
    )
    
    
    3,294
    
    
    
    (15,038
    )Depreciation and amortization
    
    
    15,842
    
    
    
    15,534
    
    
    
    47,493
    
    
    
    49,904EBITDA
    
    $
    37,634
    
    
    $
    12,834
    
    
    $
    97,568
    
    
    $
    86,002
 Recent Developments
  General
   History
   21




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##### Table of Contents



Critical Accounting Policies
   Seasonality
  Results of Operations
 Operating Revenue Overview
    Cost of Services Overview
   22




---



##### Table of Contents



Quarter Ended September 21, 2008 Compared with the Quarter Ended September 23, 2007
 Horizon Lines Segment
  Quarters EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    Change
    
    
    % Change($ in thousands)Operating revenue
    
    $
    342,002
    
    
    $
    317,430
    
    
    $
    24,572
    
    
    
    7.7
    %Operating expense:Vessel
    
    
    121,466
    
    
    
    93,914
    
    
    
    27,552
    
    
    
    29.3
    %Marine
    
    
    53,856
    
    
    
    53,213
    
    
    
    643
    
    
    
    1.2
    %Inland
    
    
    54,756
    
    
    
    50,548
    
    
    
    4,208
    
    
    
    8.3
    %Land
    
    
    37,961
    
    
    
    34,231
    
    
    
    3,730
    
    
    
    10.9
    %Rolling stock rent
    
    
    10,446
    
    
    
    11,738
    
    
    
    (1,292
    )
    
    
    (11.0
    )%Cost of services
    
    
    278,485
    
    
    
    243,644
    
    
    
    34,841
    
    
    
    14.3
    %Depreciation and amortization
    
    
    10,642
    
    
    
    10,187
    
    
    
    455
    
    
    
    4.5
    %Amortization of vessel dry-docking
    
    
    4,393
    
    
    
    4,820
    
    
    
    (427
    )
    
    
    (8.9
    )%Selling, general and administrative
    
    
    24,247
    
    
    
    22,125
    
    
    
    2,122
    
    
    
    9.6
    %Miscellaneous expense, net
    
    
    1,101
    
    
    
    431
    
    
    
    670
    
    
    
    155.5
    %Total operating expense
    
    
    318,868
    
    
    
    281,207
    
    
    
    37,661
    
    
    
    13.4
    %Operating income
    
    $
    23,134
    
    
    $
    36,223
    
    
    $
    (13,089
    )
    
    
    (36.1
    )%Operating ratio
    
    

    93.2
    %
    
    
    88.6
    %
    
    
    
    
    
    
    4.6
    %Revenue containers (units)
    
    
    71,748
    
    
    
    74,759
    
    
    
    (3,011
    )
    
    
    (4.0
    )%
 Operating Revenue.
 Bunker and intermodal fuel surcharges included in rates
    
    $
    23,099General rate increases
    
    
    8,334Increase in non-transportation services
    
    
    4,235Revenue container volume decrease
    
    
    (11,096
    )Total operating revenue increase
    
    $
    24,572
  Cost of Services.
   23




---



##### Table of Contents



Quarters EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    % Change(in thousands)Land expense:Maintenance
    
    $
    13,695
    
    
    $
    12,633
    
    
    
    8.4
    %Terminal overhead
    
    
    14,509
    
    
    
    13,128
    
    
    
    10.5
    %Yard and gate
    
    
    7,621
    
    
    
    6,325
    
    
    
    20.5
    %Warehouse
    
    
    2,136
    
    
    
    2,145
    
    
    
    0.4
    %Total land expense
    
    $
    37,961
    
    
    $
    34,231
    
    
    
    10.9
    %
  Depreciation and Amortization.
 Quarters EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    % Change(in thousands)Depreciation and amortization:Depreciationowned vessels
    
    $
    2,346
    
    
    $
    2,273
    
    
    
    3.2
    %Depreciation and amortizationother
    
    
    3,218
    
    
    
    2,836
    
    
    
    13.5
    %Amortization of intangible assets
    
    
    5,078
    
    
    
    5,078
    
    
    
    0.0
    %Total depreciation and amortization
    
    $
    10,642
    
    
    $
    10,187
    
    
    
    4.5
    %Amortization of vessel dry-docking
    
    $
    4,393
    
    
    $
    4,820
    
    
    
    (8.9
    )%
 Amortization of Vessel Dry-docking.
 Selling, General and Administrative.
  24




---



##### Table of Contents



Miscellaneous Expense (Income), Net
 Horizon Logistics Segment
  Quarters EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    Change
    
    
    % Change(in thousands)Operating revenue
    
    $
    10,636
    
    
    $
    3,715
    
    
    $
    6,921
    
    
    
    186.3
    %Operating expense:Inland
    
    
    8,046
    
    
    
    2,147
    
    
    
    5,899
    
    
    
    274.8
    %Land
    
    
    781
    
    
    
    596
    
    
    
    185
    
    
    
    31.0
    %Rolling stock rent
    
    
    88
    
    
    
    15
    
    
    
    73
    
    
    
    486.7
    %Cost of services
    
    
    8,915
    
    
    
    2,758
    
    
    
    6,157
    
    
    
    223.2
    %Depreciation and amortization
    
    
    807
    
    
    
    527
    
    
    
    280
    
    
    
    53.1
    %Selling, general and administrative
    
    
    2,266
    
    
    
    1,357
    
    
    
    909
    
    
    
    67.0
    %Miscellaneous (income) expense, net
    
    
    (6
    )
    
    
    13
    
    
    
    (19
    )
    
    
    (146.2
    )%Total operating expense
    
    
    11,982
    
    
    
    4,655
    
    
    
    7,327
    
    
    
    157.4
    %Operating loss
    
    $
    (1,346
    )
    
    $
    (940
    )
    
    $
    (406
    )
    
    
    (43.2
    )%
 Operating Revenue.
 Cost of Services.
 Depreciation and Amortization.
 Quarters EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    % Change(in thousands)Depreciation and amortization:Depreciation and amortizationother
    
    $
    563
    
    
    $
    447
    
    
    
    26.0
    %Amortization of intangible assets
    
    
    244
    
    
    
    80
    
    
    
    205.0
    %Total depreciation and amortization
    
    $
    807
    
    
    $
    527
    
    
    
    53.1
    %
 Selling, General and Administrative.
  25




---



##### Table of Contents



Unallocated Expenses
 Interest Expense, Net.
 Loss on Early Extinguishment of Debt.
 Income Tax Expense (Benefit).
 Nine Months Ended September 21, 2008 Compared with the Nine Months Ended September 23, 2007
 Horizon Lines Segment
 Nine Months EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    Change
    
    
    % Change($ in thousands)Operating revenue
    
    $
    962,059
    
    
    $
    883,752
    
    
    $
    78,307
    
    
    
    8.9
    %Operating expense:Vessel
    
    
    334,842
    
    
    
    269,793
    
    
    
    65,049
    
    
    
    24.1
    %Marine
    
    
    153,996
    
    
    
    147,206
    
    
    
    6,790
    
    
    
    4.6
    %Inland
    
    
    154,935
    
    
    
    145,762
    
    
    
    9,173
    
    
    
    6.3
    %Land
    
    
    110,281
    
    
    
    97,330
    
    
    
    12,951
    
    
    
    13.3
    %Rolling stock rent
    
    
    33,285
    
    
    
    33,748
    
    
    
    (463
    )
    
    
    (1.4
    )%Cost of services
    
    
    787,339
    
    
    
    693,839
    
    
    
    93,500
    
    
    
    13.5
    %Depreciation and amortization
    
    
    32,069
    
    
    
    31,410
    
    
    
    659
    
    
    
    2.1
    %Amortization of vessel dry-docking
    
    
    13,168
    
    
    
    13,139
    
    
    
    29
    
    
    
    0.2
    %Selling, general and administrative
    
    
    73,134
    
    
    
    63,803
    
    
    
    9,331
    
    
    
    14.6
    %Miscellaneous expense, net
    
    
    2,337
    
    
    
    429
    
    
    
    1,908
    
    
    
    444.8
    %Total operating expense
    
    
    908,047
    
    
    
    802,620
    
    
    
    105,427
    
    
    
    13.1
    %Operating income
    
    $
    54,012
    
    
    $
    81,132
    
    
    $
    (27,120
    )
    
    
    (33.4
    )%Operating ratio
    
    
    94.4
    %
    
    
    90.8
    %
    
    
    
    
    
    
    3.6
    %Revenue containers (units)
    
    
    209,112
    
    
    
    214,574
    
    
    
    (5,462
    )
    
    
    (2.5
    )%
 Operating Revenue.
 Bunker and intermodal fuel surcharges included in rates
    
    $
    56,011General rate increases
    
    
    22,137Increase in non-transportation services
    
    
    11,955Revenue related to acquisition of HSI
    
    
    8,026Revenue container volume decrease
    
    
    (19,822
    )Total operating revenue increase
    
    $
    78,307
  26




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##### Table of Contents



Cost of Services.
  Vessel fuel costs increase
    
    $
    59,236Vessel lease expense increase
    
    
    8,197Labor and other vessel operating decrease
    
    
    (2,384
    )Total vessel expense increase
    
    $
    65,049
     Nine Months EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    % Change(in thousands)Land expense:Maintenance
    
    $
    39,806
    
    
    $
    37,015
    
    
    
    7.5
    %Terminal overhead
    
    
    43,186
    
    
    
    37,312
    
    
    
    15.7
    %Yard and gate
    
    
    21,097
    
    
    
    17,527
    
    
    
    20.4
    %Warehouse
    
    
    6,192
    
    
    
    5,476
    
    
    
    13.1
    %Total land expense
    
    $
    110,281
    
    
    $
    97,330
    
    
    
    13.3
    %
  27




---



##### Table of Contents



Depreciation and Amortization.
 Nine Months EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    % Change(in thousands)Depreciation and amortization:Depreciationowned vessels
    
    $
    7,397
    
    
    $
    7,724
    
    
    
    (4.2
    )%Depreciation and amortizationother
    
    
    9,438
    
    
    
    8,827
    
    
    
    6.9
    %Amortization of intangible assets
    
    
    15,234
    
    
    
    14,859
    
    
    
    2.5
    %Total depreciation and amortization
    
    $
    32,069
    
    
    $
    31,410
    
    
    
    2.1
    %Amortization of vessel dry-docking
    
    $
    13,168
    
    
    $
    13,139
    
    
    
    0.2
    %
 Amortization of Vessel Dry-docking.
 Selling, General and Administrative.
 Miscellaneous Expense, Net
  28




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##### Table of Contents



Horizon Logistics Segment
 Nine Months EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    Change
    
    
    % Change(in thousands)Operating revenue
    
    $
    27,485
    
    
    $
    6,757
    
    
    $
    20,728
    
    
    
    306.8
    %Operating expense:Inland
    
    
    19,389
    
    
    
    3,114
    
    
    
    16,275
    
    
    
    522.6
    %Land
    
    
    2,044
    
    
    
    1,562
    
    
    
    482
    
    
    
    30.9
    %Rolling stock rent
    
    
    299
    
    
    
    15
    
    
    
    284
    
    
    
    1,893.3
    %Cost of services
    
    
    21,732
    
    
    
    4,691
    
    
    
    17,041
    
    
    
    363.3
    %Depreciation and amortization
    
    
    2,256
    
    
    
    5,355
    
    
    
    (3,099
    )
    
    
    (57.9
    )%Selling, general and administrative
    
    
    7,382
    
    
    
    3,082
    
    
    
    4,300
    
    
    
    139.5
    %Miscellaneous expense, net
    
    
    54
    
    
    
    96
    
    
    
    (42
    )
    
    
    (43.8
    )%Total operating expenses
    
    
    31,424
    
    
    
    13,224
    
    
    
    18,200
    
    
    
    137.6
    %Operating loss
    
    $
    (3,939
    )
    
    $
    (6,467
    )
    
    $
    2,528
    
    
    
    39.1
    %
 Operating Revenue.
 Cost of Services.
 Depreciation and Amortization.
 Nine Months EndedSeptember 21,
    
    
    September 23,2008
    
    
    2007
    
    
    % Change(in thousands)Depreciation and amortization:Depreciation and amortizationother
    
    $
    1,504
    
    
    $
    5,275
    
    
    
    (71.5
    )%Amortization of intangible assets
    
    
    752
    
    
    
    80
    
    
    
    840.0
    %Total depreciation and amortization
    
    $
    2,256
    
    
    $
    5,355
    
    
    
    (57.9
    )%
 Selling, General and Administrative.
 Unallocated Expenses
 Interest Expense, Net.
 Loss on Early Extinguishment of Debt.
  29




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##### Table of Contents



Income Tax Expense (Benefit).
 Liquidity and Capital Resources
  Operating Activities
  Decrease in vessel payments in excess of accrual
    
    $
    21,133Increase in accounts payable and accrued liabilities, net
    
    
    7,757Decrease in performance incentive plan payments in excess of accrual
    
    
    12,156Decrease in accounts receivable
    
    
    8,621Other increases in working capital, net
    
    
    9,617Earnings adjusted for non-cash charges
    
    
    (20,767
    )$
    38,517
 Investing Activities
  Financing Activities
   30




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##### Table of Contents



Outlook
    Capital Requirements
    31




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##### Table of Contents



Long-Term Debt
 Senior Credit Facility
    Derivative Instruments
   4.25% Convertible Senior Notes
   32




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##### 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 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;

    
    Prior to May 15, 2012, if during the five business day period
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

    
    At any time after May 15, 2012 through the fourth scheduled trading
day immediately preceding August 15, 2012.
    Interest Rate Risk
    33




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##### Table of Contents



Ratio of Earnings to Fixed Charges
  Quarter Ended
    
    
    Nine Months EndedSeptember 21, 2008
    
    
    September 21, 2008Pretax income
    
    $
    14,020
    
    
    $
    25,148Interest expense
    
    
    7,826
    
    
    
    25,085Rentals
    
    
    8,795
    
    
    
    26,486Total fixed charges
    
    $
    16,621
    
    
    $
    51,571Pretax earnings plus fixed charges
    
    $
    30,641
    
    
    $
    76,719Ratio of earnings to fixed charges
    
    
    1.84
    x
    
    
    1.49
    x
  Recent Accounting Pronouncements
   Quarter Ended September 21, 2008
    
    
    Nine Months Ended September 21, 2008As
    
    
    
    
    
    
    As
    
    
    As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    Adjusted
    
    
    Reported
    
    
    Adjustments
    
    
    AdjustedInterest expense, net
    
    $
    7,772
    
    
    $
    2,244
    
    
    $
    10,016
    
    
    $
    24,927
    
    
    $
    6,601
    
    
    $
    31,528Income tax expense
    
    
    1,492
    
    
    
    (844
    )
    
    
    648
    
    
    
    3,294
    
    
    
    (2,482
    )
    
    
    812Net income
    
    
    12,528
    
    
    
    (1,400
    )
    
    
    11,128
    
    
    
    21,854
    
    
    
    (4,119
    )
    
    
    17,735Net income per shareBasic
    
    
    0.42
    
    
    
    (0.05
    )
    
    
    0.37
    
    
    
    0.73
    
    
    
    (0.14
    )
    
    
    0.59Diluted
    
    
    0.42
    
    
    
    (0.05
    )
    
    
    0.37
    
    
    
    0.72
    
    
    
    (0.13
    )
    
    
    0.59
  34




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##### Table of Contents



Quarter Ended September 23, 2007
    
    
    Nine Months Ended September 23, 2007As
    
    
    
    
    
    
    As
    
    
    As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    Adjusted
    
    
    Reported
    
    
    Adjustments
    
    
    AdjustedInterest expense, net
    
    $
    10,077
    
    
    $
    1,092
    
    
    $
    11,169
    
    
    $
    32,953
    
    
    $
    1,092
    
    
    $
    34,045Income tax benefit
    
    
    (14,347
    )
    
    
    (411
    )
    
    
    (14,758
    )
    
    
    (15,038
    )
    
    
    (411
    )
    
    
    (15,449
    )Net income
    
    
    1,570
    
    
    
    (681
    )
    
    
    889
    
    
    
    18,183
    
    
    
    (681
    )
    
    
    17,502Net income per shareBasic
    
    
    0.05
    
    
    
    (0.02
    )
    
    
    0.03
    
    
    
    0.54
    
    
    
    (0.02
    )
    
    
    0.52Diluted
    
    
    0.05
    
    
    
    (0.02
    )
    
    
    0.03
    
    
    
    0.53
    
    
    
    (0.02
    )
    
    
    0.51
 Year Ended December 23, 2007As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    AdjustedInterest expense, net
    
    $
    41,672
    
    
    $
    3,204
    
    
    $
    44,876Income tax benefit
    
    
    (13,983
    )
    
    
    (1,205
    )
    
    
    (15,188
    )Net income
    
    
    28,859
    
    
    
    (1,999
    )
    
    
    26,860Net income per shareBasic
    
    
    0.87
    
    
    
    (0.06
    )
    
    
    0.81Diluted
    
    
    0.85
    
    
    
    (0.06
    )
    
    
    0.79
  Fiscal Year2008
    
    $
    8,9012009
    
    
    10,0112010
    
    
    11,0602011
    
    
    11,7652012
    
    
    4,821
      35




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##### Table of Contents



Forward Looking Statements
       36




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##### Table of Contents



3. Quantitative and Qualitative Disclosures About Market Risk
    
 4. Controls and Procedures
 Disclosure Controls and Procedures
  Internal Control over Financial Reporting
  Changes in Internal Control
   37




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##### Table of Contents



PART II. OTHER INFORMATION
 
 1. Legal Proceedings
        
 1A. Risk Factors
  The Company has received a subpoena from the Antitrust Division of the Department of
Justice regarding possible antitrust violations in the domestic ocean shipping business, and
numerous purported class action lawsuits have been filed against the Company. The government
investigation and the related antitrust lawsuits could have a material effect on our business.
   38




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##### Table of Contents



2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 3. Defaults Upon Senior Securities
  
 4. Submission of Matters to a Vote of Security-Holders
  
 5. Other Information
  
 6. Exhibits
 10.1
    
    
    Form of Indemnification Agreement (filed as Exhibit 10.1 to the Companys report on Form 8-K filed
July 18, 2008).31.1
    *
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    *
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    *
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    *
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
 *
    
    Filed herewith.  39




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##### Table of Contents



SIGNATURE
   HORIZON LINES, INC.By:
    /s/ MICHAEL T. AVARAMichael T. AvaraSenior Vice President & Chief Financial Officer
(Principal Financial Officer & Authorized Signatory)  40




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description10.1
    
    Form of Indemnification Agreement (filed as Exhibit 10.1 to the Companys report on Form 8-K filed
July 18, 2008).31.1*
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
 *
    
    Filed herewith.  41