Horizon Lines Reports 2009 Financial Results

-- Adjusted Full-Year EBITDA Totals $112.7 Million

-- Adjusted Full-Year Free Cash Flow Totals $70.5 million

-- Fourth-Quarter Volume Down 4.2%; Rate, Net of Fuel, Flat from Year Ago

-- Dividend Set at $0.05 per Share for First Quarter of 2010

Jan 29, 2010, 07:55 ET from Horizon Lines, Inc.

CHARLOTTE, N.C., Jan. 29 /PRNewswire-FirstCall/ -- Horizon Lines, Inc. (NYSE: HRZ), today reported results for its fiscal fourth quarter and year ended December 20, 2009.  

On a GAAP basis, fourth-quarter net income totaled $1.3 million, or $0.04 per diluted share, on revenue of $299.7 million. This compares with a net loss of $20.3 million, or $0.67 per diluted share on revenue of $314.7 million for the same period a year ago.  Adjusted fourth-quarter 2009 net income totaled $3.7 million, or $0.12 per diluted share, after excluding charges for antitrust-related legal expenses and for a voluntary separation program for certain union employees and tax adjustments totaling $2.4 million, or $0.08 per share.  Adjusted net income for the 2008 fourth quarter totaled $1.2 million, or $0.04 per diluted share, which excluded antitrust-related legal fees, and impairment and restructuring charges totaling $32.4 million pre-tax, or $0.71 per share after tax adjustments.  

    
    
    Comparison of GAAP and Non-GAAP Earnings 
    (in millions, except per share data)*
    
                                  Quarter Ended         Fiscal Year Ended
                                  -------------         -----------------
                             12/20/09     12/21/08    12/20/09     12/21/08
                             --------     --------    --------     --------
    GAAP:
    -----
      Operating revenue        $299.7      $314.7     $1,158.5     $1,304.3
      Net income (loss)(1)       $1.3      $(20.3)      $(31.3)       $(2.6)
      Net income (loss) per
       Diluted share(1)         $0.04      $(0.67)      $(1.03)      $(0.09)
    
    Non-GAAP:
    ---------
      EBITDA                    $26.1       $(7.7)       $77.3        $89.9
      Adjusted EBITDA*          $28.2       $24.7       $112.7       $130.0
      Adjusted net income*       $3.7        $1.2        $14.5        $25.2
      Adjusted net income per
       diluted share*           $0.12       $0.04        $0.47        $0.82
    
     *  See attached schedules for reconciliation of fourth-quarter and fiscal
        year 2009 and 2008 reported GAAP results to Non-GAAP results.
    
    (1) Net income for the 2008 fourth-quarter and fiscal year is adjusted for
        retrospective application of changes in accounting for convertible 
        notes and restricted stock share-based payment awards as participating
        securities.

“Our company performed well in the fourth quarter, considering the continued challenging economic environment,” said Chuck Raymond, Chairman, President and Chief Executive Officer. “Our revenue remained under pressure from lower cargo volumes that were impacted by the ongoing economic challenges in our markets, but the rate of decline improved for the second consecutive quarter.  We also maintained stable revenue per container, net of fuel, and generated increased revenue from our logistics business. We believe our market share held steady as we remained intensely focused on customer service, schedule integrity and cost management. Horizon Lines once again was recognized by some of the nation’s largest shippers as being best in class.

“For 2009, we produced adjusted free cash flow totaling $70.5 million, compared with $59.8 million for 2008,” Mr. Raymond continued. “We used the cash generated in the fourth quarter to voluntarily repay $36.5 million of debt, which followed voluntary payments of $10 million in the third quarter and $5 million in the second quarter.  As a result, we ended the year with $28 million less in funded debt than at year end 2008.”

Horizon Lines also announced that its Board of Directors voted at its regularly scheduled meeting yesterday to declare a quarterly cash dividend of $0.05 per share, payable on March 15, 2010, to stockholders of record on March 1, 2010. The decision to reduce the dividend to $0.05 from $0.11 per share will preserve approximately $7.3 million of cash on an annualized basis.

“We believe the revised dividend retains an attractive and appropriate payout to our stockholders, while at the same time giving management additional flexibility to augment our ongoing focus on debt reduction,” Mr. Raymond said.

Fourth-Quarter 2009 Financial Highlights

  • Operating Revenue – Operating revenue declined 4.8% to $299.7 million from $314.7 million a year ago.  The largest factor in the $15 million revenue decrease was a $9.3 million reduction related to volume, which fell 4.2% from the same period last year.  Reduced fuel surcharges accounted for $7.8 million of the decline. The volume decrease was a result of continuing overall economic weakness that negatively impacted discretionary consumer spending across all tradelanes. Specifically, these factors included a slowdown in retail expansion and cautious consumer sentiment in Alaska, a decline in visitors and construction in Hawaii, and the ongoing recession in Puerto Rico.  These declines were partially offset by a slight increase in rates, net of fuel, and cargo mix, and by revenue improvement in the company’s Logistics business. Logistics experienced strengthening volumes in its International Non-Vessel Operating Common Carrier business and its domestic Less-Than-Truckload freight brokerage business.    
  • Operating Income – GAAP operating income for the fourth quarter totaled $11.9 million, compared with a loss of $23.1 million for the fourth quarter of 2008.  The 2009 GAAP operating income includes expenses of $2.1 million, consisting of $1.8 million in antitrust-related legal expenses and $0.3 million in union severance charges. The 2008 GAAP operating income includes $32.4 million in expenses comprised of $3.8 million in antitrust-related legal expenses, a $25.4 million impairment charge, and a $3.2 million restructuring charge. Excluding these items, adjusted operating income totaled $14.0 million for the fourth quarter of 2009, and $9.3 million for the prior year’s fourth quarter.   The improvement from last year was largely due to non-union workforce reduction savings and other cost-containment efforts, as well as lower dry-dock amortization.  
  • EBITDA – EBITDA totaled $26.1 million for the 2009 fourth quarter, compared with a loss of $7.7 million for the same period a year ago.  Adjusted EBITDA for the fourth quarter of 2009 was $28.2 million, compared with $24.7 million for 2008.  EBITDA and adjusted EBITDA for the 2009 and 2008 fourth quarters were impacted by the same factors affecting operating income.  
  • Shares Outstanding – The company had a weighted daily average of 30.9 million diluted shares outstanding for the fourth quarter of 2009, compared with 30.3 million for the fourth quarter of 2008.  
  • Fiscal-Year Results – For the fiscal year ended December 20, 2009, operating revenue decreased 11.2% to $1.16 billion from $1.30 billion for 2008.  EBITDA totaled $77.3 million compared with $89.9 million a year ago.  Adjusted EBITDA was $112.7 million compared with $130.0 million a year ago.  The 2009 net loss totaled $31.3 million, or $1.03 per diluted share, while adjusted net income totaled $14.5 million, or $0.47 per diluted share.  For fiscal 2008, the net loss totaled $2.6 million, or $0.09 per diluted share, while adjusted net income was $25.2 million, or $0.82 per diluted share.  Adjusted EBITDA and adjusted net income for 2009 exclude a $20.0 million charge related to the previously disclosed pending class-action legal settlement in Puerto Rico, $12.2 million in antitrust-related legal expenses, a $10.5 million tax valuation allowance, a $1.9 million impairment charge, a $1.0 million restructuring charge, and $0.3 million related to a voluntary separation program for certain union employees.  Adjusted EBITDA and net income for 2008 exclude a $25.4 million impairment charge, $10.7 million in antitrust-related legal expenses, a $3.2 million restructuring charge, and $0.8 million related to a voluntary separation program for certain union employees.  

Please see attached schedules for the reconciliation of fourth-quarter and fiscal-year 2009 and 2008 reported GAAP results and Non-GAAP adjusted results.

Outlook

“We expect conditions in the markets where we operate to remain challenging in 2010,” Mr. Raymond said. “Some of our market economies are beginning to exhibit possible signs of modest recovery, which could be further fueled by the federal economic stimulus program.  While we see the potential for volume stabilization and slight rate improvement given this scenario, we also expect ongoing fuel price volatility and increased contractual labor costs and benefits assessments through 2010. Based on these expectations, we will continue to aggressively manage costs, liquidity, and cash flow as we move forward.”

Webcast & Conference Call Information

Company executives will provide additional perspective on the company’s financial results during a conference call beginning at 11:00 a.m. Eastern Time today.  Those interested in participating in the call may do so by dialing 1-866-394-6819, and providing the operator with conference number 50331482.   A copy of the presentation materials may be printed from the Horizon Lines website, http://www.horizonlines.com, shortly before the start of the call.  Alternatively, a live audio webcast of the call may be accessed at http://www.horizonlines.com. In order to access the live audio webcast, please allow at least 15 minutes before the start of the call to visit Horizon Lines' website and download and install any necessary audio/video software for the webcast.

Use of Non-GAAP Measures

Horizon Lines reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). The company also believes that the presentation of certain non-GAAP measures, i.e., EBITDA, free cash flow and results excluding certain costs and expenses, provides useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance without the impact of significant special items. The company further feels these non-GAAP measures enhance the user’s overall understanding of the company’s current financial performance relative to past performance and provide a better baseline for modeling future earnings expectations. Non-GAAP measures are reconciled in the financial tables accompanying this news release. The company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the company’s reported GAAP results.  

About Horizon Lines

Horizon Lines, Inc. is the nation's leading domestic ocean shipping and integrated logistics company comprised of two primary operating subsidiaries. Horizon Lines, LLC, owns or leases a fleet of 20 U.S.-flag containerships and operates five port terminals linking the continental United States with Alaska, Hawaii, Guam, Micronesia and Puerto Rico. Horizon Logistics, LLC, offers customized logistics solutions to shippers from a suite of transportation and distribution management services, using information technology developed by Horizon Services Group and intermodal trucking and warehousing services provided by Sea-Logix. Transportation offerings include international ocean intermediary services and North American LTL and trucking networks. Horizon Lines, Inc. is based in Charlotte, NC, and trades on the New York Stock Exchange under the ticker symbol HRZ.

Forward Looking Statements

The information contained in this press release should be read in conjunction with our filings made with the Securities and Exchange Commission.  This press release contains “forward-looking statements” within the meaning of the federal securities laws.  These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are those that do not relate solely to historical fact.  They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “projects,” “likely,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking  statements.  

All forward-looking statements involve risk and uncertainties.  In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this press release might not occur.  We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.  See the section entitled “Risk Factors” in our Form 10-K to be filed with the SEC on or about February 4, 2010, for a more complete discussion of these risks and uncertainties and for other risks and uncertainties.  Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements.  Other unknown or unpredictable factors also could harm our results.  Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences.

    
    
                               Horizon Lines, Inc.
                 Unaudited Condensed Consolidated Balance Sheets
                      (in thousands, except per share data)
    
    
                                                          December 21,
                                          December 20,        2008
                                              2009      (As Adjusted)(1)
                                          ------------  ----------------
     Assets
       Current assets
          Cash                                $6,419            $5,487
          Accounts receivable, net of
           allowance of $7,578 and
           $8,217 at December 20, 2009
           and December 21, 2008,
           respectively                      123,536           135,020
          Prepaid vessel rent                  4,580             4,471
          Materials and supplies              30,254            23,644
          Deferred tax asset                   2,929             7,450
          Other current assets                 9,027            10,703
                                               -----            ------
            Total current assets             176,745           186,775
       Property and equipment, net           193,438           208,453
       Goodwill                              317,068           317,068
       Intangible assets, net                105,405           125,542
       Deferred tax asset                          -            10,669
       Other long-term assets                 25,854            24,122
                                              ------            ------
            Total assets                    $818,510          $872,629
                                            ========          ========
    
     Liabilities and
      Stockholders’ Equity
       Current liabilities
          Accounts payable                   $43,257           $41,947
          Current portion of long-
           term debt                          18,750             6,552
          Accrued vessel rent                  4,339             5,421
          Other accrued liabilities          110,473            97,720
                                             -------            ------
            Total current liabilities        176,819           151,640
       Long-term debt, net of
        current portion                      496,105           526,259
       Deferred rent                          22,585            27,058
       Deferred tax liability                  4,248                 - 
       Other long-term liabilities            17,475            30,836
                                              ------            ------
            Total liabilities                717,232           735,793
                                             -------           -------
    
       Stockholders’ equity
          Preferred stock, $.01 par
           value, 30,500 shares
           authorized; no shares
           issued or outstanding                   -                 -
          Common stock, $.01 par
           value, 100,000 shares
           authorized, 34,091 shares
           issued and 30,291 shares
           outstanding as of December 20,
           2009 and 33,808 shares issued
           and 30,008 shares outstanding
           as of December 21, 2008               341               338
          Treasury stock, 3,800 shares
           at cost                           (78,538)          (78,538)
          Additional paid in capital         196,900           199,644
          (Accumulated deficit)
           retained earnings                 (15,874)           22,094
          Accumulated other
           comprehensive loss                 (1,551)           (6,702)
                                              ------            ------
            Total stockholders’ equity       101,278           136,836
                                             -------           -------
            Total liabilities and
             stockholders’ equity           $818,510          $872,629
                                            ========          ========
    
    (1)  Results are adjusted for retrospective application of changes in 
    accounting for convertible notes and restricted stock share-based payment 
    awards as participating securities.
    
    
    
                                   Horizon Lines, Inc.
                  Unaudited Condensed Consolidated Statements of Income
                          (in thousands, except per share data)
    
    
                      Fiscal Quarters Ended          Fiscal Years Ended
                      ---------------------          ------------------
                                  December 21,                  December 21,
                    December 20,      2008       December 20,      2008
                       2009     (As Adjusted)(1)    2009      (As Adjusted)(1)
                    ------------ --------------  ------------  --------------
    
     Operating 
      revenue         $299,674       $314,715     $1,158,481      $1,304,259
     Operating
      expense:
        Cost of
         services
         (excluding
         depreciation
         expense)      250,551        265,606        954,915       1,074,675
        Depreciation
         and
         amortization   11,441         11,318         44,866          45,643
        Amortization
         of vessel
         dry-docking     2,758          3,994         13,694          17,162
        Selling, general
         and
         administrative 22,721         27,689        102,231         108,206
        Settlement
         of class
         action lawsuit      -              -         20,000               -
        Restructuring
         charge              -          3,244          1,001           3,244
        Impairment charge    -         25,415          1,867          25,415
        Miscellaneous
         expense, net      295            506          1,069           2,898
                           ---            ---          -----           -----
    
          Total
           operating
           expense     287,766        337,772      1,139,643       1,277,243
    
     Operating income
      (loss)            11,908        (23,057)        18,838          27,016
     Other expense:
        Interest
         expense, net   10,426          9,871         39,675          41,399
        Loss on
         modification
         of debt             -              -             50               -
        Other
         expense
         (income), net       8            (59)            18             (62)
                           ---            ---            ---             ---
    
     Income (loss)
      before income
      tax expense        1,474         (32,869)      (20,905)        (14,321)
     Income tax
      expense
      (benefit)            148         (12,613)       10,367         (11,728)
                           ---         -------        ------         -------
    
     Net income (loss)  $1,326        $(20,256)     $(31,272)        $(2,593)
                        ======        ========      ========         =======
    
     Net income (loss)
      per share:
        Basic            $0.04          $(0.67)       $(1.03)         $(0.09)
        Diluted          $0.04          $(0.67)       $(1.03)         $(0.09)
    
     Number of shares
      used in
      calculation:
        Basic           30,484          30,338        30,451          30,278
        Diluted         30,942          30,338        30,451          30,278
    
     Dividends declared
      per common share   $0.11           $0.11         $0.44           $0.44
                         =====           =====         =====           =====
    
    (1)  Results are adjusted for retrospective application of changes in
    accounting for convertible notes and restricted stock share-based
    payment awards as participating securities.
    
    
    
                               Horizon Lines, Inc.
            Unaudited Condensed Consolidated Statements of Cash Flows
                                 (in thousands)
    
    
                                               Fiscal Years Ended
                                               ------------------
                                                             December 21,
                                         December 20,            2008
                                             2009          (As Adjusted)(1)
                                         ------------      ----------------
    
     Cash flows from operating
      activities:
     Net loss                             $(31,272)              $(2,593)
     Adjustments to reconcile net 
      loss to net cash provided 
      by operating activities:
       Depreciation                         24,235                24,343
       Amortization of other
        intangible assets                   20,631                21,300
       Amortization of vessel dry-
        docking                             13,694                17,162
       Impairment charge                     1,867                25,415
       Restructuring charge                  1,001                 3,244
       Amortization of deferred
        financing costs                      2,947                 2,693
       Deferred income taxes                10,396               (12,985)
       Gain on equipment disposals            (154)                  (24)
       Loss on modification of debt             50                     -
       Stock-based compensation              3,096                 3,651
       Accretion of interest on
        4.25% convertible notes             10,011                 8,901
     Changes in operating assets
      and liabilities:
       Accounts receivable, net             11,763                 5,854
       Materials and supplies               (6,739)                7,636
       Other current assets                  1,245                    23
       Accounts payable                      1,310                 1,625
       Accrued liabilities                  16,515                (2,721)
       Vessel rent                          (4,874)               (4,883)
       Vessel dry-docking payments         (14,735)              (13,913)
       Other assets/liabilities             (3,489)                4,640
                                            ------                 -----
    
          Net cash provided by
           operating activities             57,498                89,368
                                            ------                ------
    
     Cash flows from investing
      activities:
       Purchases of equipment              (13,050)              (39,149)
       Purchase of business                      -                  (198)
       Proceeds from the sale of
        equipment                            1,237                   500
                                             -----                   ---
    
          Net cash used in investing
           activities                      (11,813)              (38,847)
                                           -------               -------
    
     Cash flows from financing
      activities:
       Borrowing under revolving
        credit facility                     64,000                78,000
       Payments on revolving credit
        facility                           (84,000)              (80,000)
       Payments on long-term debt           (7,968)               (6,538)
       Dividends to stockholders           (13,397)              (13,273)
       Payments of financing costs          (3,492)                 (139)
       Common stock issued under
        employee stock purchase plan           104                    38
       Purchase of treasury stock                -               (29,330)
       Payments on capital lease
        obligation                               -                   (81)
       Proceeds from exercise of
        stock options                            -                    13
                                               ---                   ---
    
          Net cash used in financing
           activities                      (44,753)              (51,310)
                                           -------               -------
    
     Net increase (decrease) in cash           932                  (789)
     Cash at beginning of year               5,487                 6,276
                                             -----                 -----
    
     Cash at end of year                    $6,419                $5,487
                                            ======                ======
    
    (1)  Results are adjusted for retrospective application of changes in
    accounting for convertible notes and restricted stock share-based
    payment awards as participating securities.
    
    
    
                               Horizon Lines, Inc.
                     Adjusted Operating Income Reconciliation
                                 ($ in Millions)
    
    
                        
                     Quarter Ended Quarter Ended  Year Ended   Year Ended
                        December      December     December     December
                        20, 2009      21, 2008     20, 2009     21, 2008
                     ------------- -------------  ----------   ----------
    Operating Income
     (Loss)               $11.9          $(23.1)        $18.8       $27.0
    
    Adjustments:
    ------------
    Legal Settlement          -               -          20.0           -
    Anti-Trust Legal
     Expenses               1.8             3.8          12.2        10.7
    Impairment Charge         -            25.4           1.9        25.4
    Restructuring
     Charge                   -             3.2           1.0         3.2
    OPEIU Severance         0.3               -           0.3         0.8
                            ---             ---           ---         ---
    Total Adjustments       2.1            32.4          35.4        40.1
    
    Adjusted Operating
     Income               $14.0            $9.3         $54.2       $67.1
                          =====            ====         =====       =====
    
    
    
                               Horizon Lines, Inc.
                        Adjusted Net Income Reconciliation
                                 ($ in Millions)
    
                                    
                         Quarter Ended  Quarter Ended  Year Ended  Year Ended
                            December       December     December    December
                            20, 2009       21, 2008     20, 2009    21, 2008
                         -------------  -------------  ----------  ----------
    Net Income (Loss)(1)       $1.3         $(20.3)      $(31.3)      $(2.6)
    
    Adjustments:
    ------------
    Legal Settlement              -              -         20.0           -
    Anti-Trust Legal Expenses   1.8            3.8         12.2        10.7
    Impairment Charge             -           25.4          1.9        25.4
    Restructuring Charge          -            3.2          1.0         3.2
    OPEIU Severance             0.3              -          0.3         0.8
    Tax Adjustments             0.3          (10.9)        (0.1)      (12.3)
    Tax Valuation Allowance       -              -         10.5           -
                                ---            ---         ----         ---
    Total Adjustments           2.4           21.5         45.8        27.8
    
    Adjusted Net Income        $3.7           $1.2        $14.5       $25.2
                               ====           ====        =====       =====
    
    (1)  2008 results are adjusted for retrospective application of changes in
    accounting for convertible notes.
    
    
    
                                Horizon Lines, Inc.
               Adjusted Net Income Per Diluted Share Reconciliation
    
    
                   Quarter Ended  Quarter Ended     Year Ended    Year Ended
                    December 20,   December 21,    December 20,  December 21,
                        2009           2008            2009          2008
                   -------------  -------------    ------------  ------------
    Net Income
     (Loss) Per
     Diluted
     Share(1)           $0.04        $(0.67)          $(1.03)       $(0.09)
    
    Adjustments
     Per Share:
     -----------
    Legal Settlement        -             -             0.66             -
    Anti-Trust
     Legal Expenses      0.06          0.13             0.40          0.35
    Impairment Charge       -          0.84             0.06          0.84
    Restructuring Charge    -          0.11             0.03          0.11
    Loss on Modification
     of Debt                -             -                -             - 
    OPEIU Severance      0.01             -             0.01          0.03
    Tax Adjustments      0.01         (0.37)               -         (0.42)
    Tax Valuation
     Allowance              -             -             0.34             -
                          ---           ---             ----           ---
    Total Adjustments    0.08          0.71             1.50          0.91
    
    Adjusted Net
     Income Per
     Diluted Share      $0.12         $0.04            $0.47         $0.82
                        =====         =====            =====         =====
    
    (1)  2008 results are adjusted for retrospective application of changes in
    accounting for convertible notes and restricted stock share-based payment 
    awards as participating securities.
    
    
    
                                 Horizon Lines, Inc.
                      EBITDA and Adjusted EBITDA Reconciliation
                                   ($ in Millions)
    
    
                   Quarter Ended  Quarter Ended    Year Ended    Year Ended
                    December 20,   December 21,   December 20,  December 21,
                        2009           2008          2009          2008
                   -------------  -------------   ------------  ------------
    Net Income
     (Loss)(1)          $1.3         $(20.3)         $(31.3)         $(2.6)
    
    Interest Expense,
     Net                10.4            9.9            39.7           41.4
    Tax Expense          0.2          (12.6)           10.4          (11.7)
    Depreciation
     and Amortization   14.2           15.3            58.5           62.8
                        ----           ----            ----           ----
    EBITDA              26.1           (7.7)           77.3           89.9
    Legal Settlement       -              -            20.0              -
    Anti-Trust
     Legal Fees          1.8            3.8            12.2           10.7
    Impairment Charge      -           25.4             1.9           25.4
    Restructuring
     Charge                -            3.2             1.0            3.2
    OPEIU Severance      0.3              -             0.3            0.8
                         ---            ---             ---            ---
    Adjusted EBITDA    $28.2          $24.7          $112.7         $130.0
                       =====          =====          ======         ======
    
    (1)  2008 results are adjusted for retrospective application of changes in
    accounting for convertible notes.
    
    Note:  EBITDA is defined as net income (loss) plus net interest expense, 
    income taxes, depreciation and amortization.  We believe that EBITDA is a 
    meaningful measure for investors as (i) EBITDA is a component 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 the Company to maintain certain interest expense coverage and
    leverage ratios, which contain EBITDA, and (iii) EBITDA is a measure used 
    by our management team to make day-to-day operating decisions.  Adjusted 
    EBITDA excludes certain charges in order to evaluate our operating 
    performance, for making day-to-day operating decisions and when 
    determining the payment of discretionary bonuses.
    
    
    
                           Horizon Lines, Inc.
            EBITDA and Adjusted EBITDA Segment Reconciliation
                             ($ in Millions)
    
                        Fiscal Fourth Quarter 2009
    
                                 Liner         Logistics       Consolidated
                                 -----         ---------       ------------
    Operating Income (Loss)      $13.3           $(1.4)            $11.9
    Depreciation and
     Amortization                 11.2             0.2              11.4
    Amortization of Vessel
     Dry-docking                   2.8               -               2.8
                                   ---             ---               ---
    EBITDA                        27.3            (1.2)             26.1
    Anti-Trust Legal Expenses      1.8               -               1.8
    OPEIU Severance                0.3               -               0.3
                                   ---             ---               ---
    Adjusted EBITDA              $29.4           $(1.2)            $28.2
                                 =====           =====             =====
    
    
    
                           Horizon Lines, Inc.
            EBITDA and Adjusted EBITDA Segment Reconciliation
                             ($ in Millions)
    
                            Fiscal Year 2009
    
                                   Liner         Logistics       Consolidated
                                   -----         ---------       ------------
    Operating Income (Loss)        $27.3           $(8.5)            $18.8
    Depreciation and
     Amortization                   44.2             0.6              44.8
    Amortization of Vessel
     Dry-docking                    13.7               -              13.7
                                    ----             ---              ----
    EBITDA                          85.2            (7.9)             77.3
    Legal Settlement                20.0               -              20.0
    Anti-Trust Legal Expenses       12.2               -              12.2
    Impairment Charge                1.9               -               1.9
    Restructuring Charge             0.8             0.2               1.0
    OPEIU Severance                  0.3               -               0.3
                                     ---             ---               ---
    Adjusted EBITDA               $120.4           $(7.7)           $112.7
                                  ======           =====            ======

SOURCE Horizon Lines, Inc.



RELATED LINKS

http://www.horizonlines.com