8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 25, 2007

HORIZON LINES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	001-32627	74-3123672
(State or Other Jurisdiction of Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

4064 Colony Road, Suite 200

Charlotte, North Carolina 28211

(Address of Principal Executive Offices, including Zip Code)

(704) 973-7000

(Registrant’s telephone number, including area code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 26, 2007, Horizon Lines, Inc. (the “Company”) (i) held a conference call to discuss financial results for the quarter ended March 25, 2007, and (ii) issued a press release and made available its First Quarter 2007 Earnings Release. A copy of the transcript of the conference call is attached as Exhibit 99.1 hereto, a copy of the press release is attached as Exhibit 99.2 hereto, and a copy of the First Quarter 2007 Earnings Release is attached as Exhibit 99.3 hereto, and each is incorporated herein by reference. The press release and the First Quarter 2007 Earnings Release are available on the Company’s website, www.horizonlines.com until May 10, 2007.

ITEM 7.01 REGULATION FD DISCLOSURE

The disclosure contained in Item 2.02 is incorporated herein by reference.

ITEM 8.01. OTHER EVENTS

On April 25, 2007, the Company issued a press release announcing that its Board of Directors has voted to declare a cash dividend on its outstanding shares of common stock of $0.11 per share, payable on June 15, 2007 to all stockholders of record as of the close of business on June 1, 2007.

A copy of this press release is attached as Exhibit 99.4 hereto and is incorporated herein by reference.

SAFE HARBOR STATEMENT

The information contained in this Current Report on Form 8-K (including the exhibits hereto) should be read in conjunction with our filings made with the Securities and Exchange Commission. This Current Report on Form 8-K (including the exhibits hereto) 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,” “targets,” “projects,” “likely,” “will,” “would,” “could” and similar expressions or phrases identify forward-looking statements.

All forward-looking statements involve risk and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. Actual results may differ materially from expected results.

Factors that may cause actual results to differ from expected results include: our substantial debt; restrictive covenants under our debt agreements; decreases in shipping volumes; our failure to renew our commercial agreements with Maersk; raising fuel prices; labor interruptions or strikes; job related claims, liability under multi-employer pension plans; compliance with safety and environmental protection and other governmental requirements; new statutory and regulatory directives in the United States addressing homeland security concerns; the successful start-up of any Jones-Act competitor; delayed delivery or non-delivery of one or more of our new vessels; increased inspection procedures and tight import and export controls; restrictions on foreign ownership of our vessels; repeal or substantial amendment of the Jones Act; escalation of insurance costs, catastrophic losses and other liabilities; the arrest of our vessels by maritime claimants; severe weather and natural disasters; our inability to exercise our purchase options for our chartered vessels; the aging of our vessels; unexpected substantial drydocking costs for our vessels; the loss of our key management personnel; actions by our stockholders; changes in tax laws or in their interpretation or application, adverse tax audits and other tax matters; and legal or other proceedings to which we are or may become subject.

In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this Current Report on Form 8-K (including the exhibits hereto) might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. See the section entitled “Risk Factors” in our Form 10-K for the fiscal year ended December 24, 2006 as filed with the SEC or in our prospectus filed with the SEC pursuant to Rule 424(b)(4) on November 17, 2006 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 to, or effects on, us. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.

NON-GAAP FINANCIAL MEASURES

        This Current Report on Form 8-K includes the financial measures EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income and adjusted earnings per share which are non-GAAP financial measures. EBITDA is defined as net income plus net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and certain other adjustments. Adjusted operating income is defined as operating income adjusted to exclude unusual items. Adjusted net income is defined as net income adjusted to exclude unusual items. Adjusted earnings per share is defined as adjusted net income divided by basic shares outstanding. We acknowledge that there are limitations when using EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income or adjusted earnings per share. These financial measures are not recognized terms under GAAP and do not purport to be alternatives to operating income as a measure of operating performance, to net income or net income per share as a measure of earnings or to cash flows from operating activities as a measure of liquidity. Additionally, these financial measures are not intended to be measures of free cash flow for management’s discretionary use, as they do not consider certain cash requirements such as tax payments and debt service requirements. Because all companies do not use identical calculations, these presentations of EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, and adjusted earnings per share may not be comparable to other similarly titled measures of other companies.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

Exhibit No.		Description
99.1	*	Transcript of conference call held on April 26, 2007.
99.2	*	Press release dated April 26, 2007.
99.3	*	First Quarter 2007 Earnings Release.
99.4	*	Press Release dated April 25, 2007

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HORIZON LINES, INC.
	(Registrant)
Date: May 2, 2007	By:	/s/    M. Mark Urbania
		M. Mark Urbania
		Senior Vice President, Chief Financial Officer and Assistant Secretary

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EX-99.1

Exhibit 99.1

On April 26, 2007 Horizon Lines, Inc. hosted a conference call to discuss financial results for the first quarter ended March 25, 2007. The following transcript is an interpretation of the statements made on the call. The actual conference call may have differed slightly.

Operator:	Good morning ladies and gentlemen, and thank you for standing by. Welcome to the Horizon Lines first quarter 2007 earnings release conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. If you have a question, please press the star, followed by one, on your touchtone phone. If you would like to withdraw your question, press the star, followed by the two. If you are using speaker equipment, please lift the handset before making your selection. This conference is being recorded today, Thursday, April 26th, 2007.
	I would now like to turn the conference over to Mike Avara, Vice President of Investor Relations and Treasurer. Please go ahead, sir.
Mike Avara:	Thank you. Good morning everyone, and welcome to the Horizon Lines first quarter 2007 earnings release call. Thank you for joining us today.
	Our senior management team is quite dispersed again today for the call. Chuck Raymond, our Chairman, President and CEO; John Handy, our Executive Vice President; and Mark Urbania, our Senior Vice President and CFO; will be conducting the call from Oakland. John Keenan, our Senior Vice President and Chief Transportation Officer, is in South Korea, taking delivery on Monday of our fourth new vessel, the Horizon Falcon. Brian Taylor, our Senior Vice President of Sales and Marketing, is in Charlotte with me this morning.
	Before we begin, I need to take a minute to reference our Safe Harbor statement on page two. During this call, we will be making certain forward-looking statements. Although we believe these statements are reasonable, we can provide no assurance of course, that they will actually prove correct. Important risk factors that can cause these statements to vary from these projections are contained in our filings with the SEC and I would suggest that you review those filings for more information.
	With that, I’m going to turn the call over to Chuck Raymond, our Chairman, President and CEO. Chuck?
Chuck Raymond:	Good morning folks, and thank you very much for dialing in. I will speak just briefly about the highlights of the quarter and then turn it over to John Handy. John then will introduce Mark Urbania who will take you through the financials.
	Another great quarter for Horizon Lines; record first quarter earnings on operating revenues that are just slightly down from 2006. It is the 21st consecutive quarter of EBITDA growth for our Company. We were able to deliver those earnings through pretty stringent cost controls; the structural savings that we’re bringing

	into the Company through the EDGE initiative and some general rate increases that have more than offset our volume softness.
	I’m pleased to report that our new vessel fleet enhancement initiatives on the TP1 service, the Transpacific Line 1 Service, is on track and nearing completion. Our Horizon EDGE project, that we’ve talked to you about before, has met all of the milestones and continues to deliver increased benefits. And it’s important that we have that program. When revenue was soft, we did what good companies do, which is to anticipate that, be prepared for it and be able to manage the overhead and the variable costs of the Company according to it.
	And then finally, service excellence awards for the Company continue, something that we’re very proud of and it reflects the customer confidence that we’ve earned over the years. With that, I’ll turn this call over to John Handy, our Executive Vice President. John—?
John Handy:	Thank you Chuck and good morning, everyone. On chart 7 I’ll cover some of our operating highlights on subsequent slides, but just the top bullets here. If you look at our market conditions, they have been soft, especially in Puerto Rico. The extended extremely cold winter in Alaska had an impact on our volumes for Alaska as well.
	I’ll cover some higher cargo margin mix and general rate increases and the fuel surcharge on a later slide. And then I’ll give you a view of our economic outlook as we look to the rest of the year. Then, a few words about the competitive landscape as we view it. I’ll go into Horizon EDGE in a little bit more detail than what Chuck just mentioned. We’re really proud of that effort.
	I’ve got some updates on the TP1 fleet enhancement. I’ll reflect our vessel operating metrics. And then I’ll point out clearly those service excellence awards that Chuck mentioned that we’re so proud of.
	If you look at chart 8, volume updates, you’ll see from the bar chart that we were about 4,700 loads lower in the first quarter of 2007 than we were in the first quarter of 2006. As I mentioned just a minute ago, Alaska had the coldest winter they’ve had in five years, which certainly delayed the normal spring shipments up there. Seafood consequently was late starting, but we’re recovering significantly now. Those seafood loads will continue well into the second quarter.
	Hawaii volumes were impacted by adverse weather, not only on the island but en route. And then we had several minor ship malfunctions that certainly caused other delays that had an impact, especially on our reefer volumes. So we’re back on track now with the TP1 service initiatives. And I’ll talk about that in detail, in a second.

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Guam continues to be a very bright spot with solid growth. They’re up approximately 4% year over year, and continuing, driven predominantly by the military investment on the island.

As everyone knows, the Puerto Rico economy is recovering slower than we anticipated. Our volumes were certainly impacted by some holiday overstocks for the Thanksgiving-Christmas holidays. The bright spot for the island still is the pharma investment which remains robust; Abbott announced their $400 million investment in more pharmaceutical production. And tourism does remain strong, with a $3 billion contribution in 2006, with five million tourists. And as you notice, if you watch any of the TV ads, Puerto Rico really has a push on to bring tourism to them.

If you switch to chart 9, the unit revenue update; you can see the bar chart reflects the first quarter data there, just about $212 more rate per container better in the first quarter of 2007 than 2006. These rate improvements in all three trade lanes continue to offset the volume softness. As we’ve discussed many times before, this is reflective of our cargo mix focus as we get out of the lower-margin cargo and focus heavily on the reefer and higher-margin types of cargo.

And then I just mentioned that since fuel has had such a traumatic impact on everyone over the last year; it certainly had its impact on us, but we continue to appropriately mitigate those fuel prices with our fuel surcharges.

On chart 10, the 2007 economic outlook; as we look to the rest of the year, as I mentioned, Alaska is certainly warming up and the market is stabilizing. We had a record load out of Tacoma last night. It certainly indicates that we’re on the recovery there. We’re projecting a 1.2% growth in employment over 2006 in the state. Let me point out, too, that Alaska received $4.3 billion revenues out of oil in 2006, and they’re predicting a 13% increase in those revenues for 2007; all pointing to a robust economy in Alaska.

The deployment of the new vessels and schedules should improve on-time performances out to Guam, especially with the TP1 and our revised schedule serving Hawaii and the Northwest US. These are certainly a positive for the rest of the year. The Hawaii market continues to grow and we’re certainly positioned to capitalize. The gross state product still is expected to grow by over 2%, according to the economists in the State.

As to the 2007 GNP growth of 1.2% that the Government Development Bank of Puerto Rico predicted; we’ve just not seen that yet. We’ve watched, of course, the fact that energy prices and consumer confidence have depressed the economy in Puerto Rico. We remain positive, but very cautious as we see that volumes will remain pretty flat throughout the rest of the year.

In terms of a competitive update in light of those revenue and volume comments, overall market shares in all the trades remain very, very stable. Puerto Rico carriers, as we’ve mentioned before, have continued to withhold seasonal tonnage

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due to that slow economic growth. We’re doing the same thing.

We have regained our arrival advantage into Guam with the deployment of the new and faster TP1 vessels. Just as an anecdote; I was out at Guam for the arrival of the Hawk just a week ago, and it was a sight to see—beautiful. The customers out there are very excited to see the new tonnage in that trade.

On chart 12, the Horizon EDGE update; we have met all of our first quarter 2007 milestones. We’re excited by the fact that we completed most of our offshore port work at the end of 2006 because those very positive trends are having a powerful effect as EDGE process improvement continues to have an impact offshore. Now we have turned to domestic ports and focused on things such as supply chain and sales.

If you get right to the bottom line, we have achieved in gross savings, $0.7 million over our $6.5 million target. That’s after 46 weeks of work. And you can see the bottom line for the first quarter of 2007; our gross benefits of $3 million and net benefits of $1.4 million achieved. And I’d emphasize that we’re still very confident that the target for 2007 will be $13 million, as a minimum.

If you look at chart 13, that’s that beautiful sight I’m talking about with the Hawk coming into Tacoma fully loaded.

Chart 14, TP1 fleet enhancement update; you can see as Chuck briefly mentioned and Mike Avara I think mentioned, that John Keenan is out in Korea for the closing on the Falcon on Monday. And we’re looking excitedly towards the fact that we’ll bring the Tiger into the TP1 trade in the middle of June. Everything is on time; all the phase in has worked magnificently.

As you talk to vessel captains, they’re very, very excited about the performance of the ships. The fact that we hit the target of March 18th after so much planning is certainly something that we’re also very, very proud of.

If you look at chart 15, with our container fleet investments; we continue to invest heavily in our reefers. You’ll see that we had the first of 300 reefers in the first quarter of 2007, with an additional 600 reefers and an additional 1,600 dry boxes planned to be brought in the rest of the year. These containers have had a significant impact on our maintenance costs per load, which you’ll see if you look down to the lower left corner. And the refrigerated containers reducing from that $202 down to $74, and then certainly on dry containers, another good story with a reduction from $37 in maintenance cost down to $7.

We also were very pleased that we are acquiring 238 new flat racks of a new design that will take more and diverse cargo. We’re excited about that because of the growth in Hawaii and certainly because of the new TP1 trade out to Guam. We also are acquiring 20-foot high-cubed dual-voltage reefers for the Micronesia service, which we’re also very, very upbeat about. All of this strong investment in equipment improves our service to customers over time.

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	And chart 16 for vessel performance; our availability is up to a very positive 99.6% for 2007. And as we introduce those new ships, you should see that even squeak up a little bit more. Our utilization reflects that volume flatness at 84% for the first quarter of 2007, and our vessel on-time arrival, which is plus-or-minus zero minutes, is still steady at 78%.
	Those new ships that I keep talking about will give us 23-knot plus speed, which allows for some catch up and avoidance of any bad weather out in the Pacific. So that will add to that on-time arrival performance and make it even more extraordinary.
	And then on chart 17; this reflects all that effort on the part of the Company’s associates and that’s to deliver service excellence to all our customers. As you see there, Lowe’s 2006 Platinum Carrier Award for outstanding service for the sixth straight year; the Toyota 2006 Logistics Excellence Award for quality in export marine for the eighth consecutive year; this speaks incredibly well of the Company’s performance, but especially, as I said, of our associates. And we’re certainly thankful for them.
	And with that, I’ll turn it over to Mark Urbania.
Mark Urbania:	Thank you, John. I’m on page 19 of our presentation; as Chuck said earlier, 21 consecutive quarters of EBITDA growth despite challenging market conditions, particularly in Puerto Rico. Our first quarter earnings were slightly above our midpoint of our guidance at $0.13. Very stringent cost controls, EDGE benefits kicking in, continued cargo mix upgrade, rate increases; and fuel recovery to offset that volume softness.
	Deleveraging continues. We made a voluntary prepayment of $25 million on our term loan on March 30th. We are pleased to do that, our cash flows are strong. And as a result of that, our capital structure continues to improve. We’ll go over that in a moment.
	Page 20, adjusted EBITDA growth; a slide that we’re very proud of here, as you can see highlighted in the yellow, $34 million continues our streak of continuous earnings growth in the first quarter and our anticipation of continuous growth through the year, which we’ll go through in the guidance in a few slides.
	Page 21, our operating revenue; operating revenue is down slightly from $274.9 million to $273.7 million. Let’s turn to the next slide for an analysis of this revenue.
	Again, similar to the last couple of quarters, our volume variance was offset by our rate, cargo mix, fuel recovery and a little bit better on the non-transportation revenue line. In fact, our volume variance would have been less than the $15.8 million if we had been able to get one delayed sailing out of Tacoma in the quarter that accounted for about $1 million of revenue. That will certainly benefit us in the second quarter.

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From an operating income perspective, as we’ve stated, despite some volume softness in the first quarter, we were able to improve our operating income by 3.8%. Again, this was achieved through focusing on cargo mix, cost controls and just making sure we’re doing what we should do, from a P&L perspective.

On the EBITDA side, EBITDA is up 6% to $33.7 million; again a record for Horizon Lines in the first quarter.

Adjusted net income; on a comparable basis, net income improved by 25% to $4.5 million; although our actual net income was $7.1 million. The difference is a deferred tax revaluation benefit that we experienced in the first quarter as a result of the tonnage tax eligibility for the TP1 trade route.

Adjusted EPS; EPS was up 18.2% over the same period in 2006 on a comparable basis. However, EPS was actually $0.21 versus the $0.13 shown here; again, for the same deferred tax revaluation benefit in the first quarter.

Free cash flow; looking at free cash flow for the quarter, as is the case in every first quarter for Horizon Lines, we used cash. We did in the first quarter of last year, you can see $8.8 million. We used significantly more than that in the first quarter of 2007. And really it can be attributable to three things.

Working capital; we used more working capital in the first quarter of 2007 versus 2006 as we’ve paid down significantly more accounts payable. But really the main driver is the cash payments that we made on the three D-7 vessels that we lease for the Alaska trade. That was a balloon payment, if you will, in 2007 that we didn’t have in 2006, and we will not have again until 2014, when the end of the lease comes up. And then we had some TP1-related costs that weren’t there in the first quarter of 2006. All in all, that was a quarter for us, that from a cash perspective, we planned for and it’s pretty close to our plan.

On the capital structure side, it continues to improve. I already mentioned the voluntary prepayment on our term loan of $25 million. That is not reflected here because it was made after March 25th. You’ll see that benefit in the next quarter.

That said we’re very pleased to report that our debt is 3.1 times our LTM adjusted EBITDA. We’re very pleased with that. We’ll continue to improve. And then debt, as a percentage of our total capitalization of the Company is 71%, continuing to make good progress there.

Finally, for our guidance, for the second quarter we expect revenue to be $295 million to $300 million; EBITDA between $40 million and $43 million; and diluted EPS of $0.29 to $0.34. For the full year, we revised our revenue downward slightly to reflect the lower first quarter revenue. EBITDA remained unchanged; we’re at $173 million to $180 million. We have increased our earnings per share guidance to $1.62 to $1.73 to reflect the fact that we have refined our methodology for our tonnage tax election made in the third quarter of last year.

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	At that time, the guidance that I gave was to use a 20% tax rate. As we’ve refined that methodology over the last six months, our tax rate will be between 13% and 17%, down from the 20%. And that may move during the year, depending on the profitability of each of the markets that we serve; Puerto Rico, Hawaii and Alaska. As that changes, that tax rate could move up and down slightly. So I wanted to make sure that we got that out in front of you, and also to let you know as a result of that lower tax rate, we’re revising our EPS guidance upwards.
	From a free cash flow perspective, $42 million to $49 million; again it’s pretty close to the guidance we gave before, with one exception. We have excluded dividends from the calculation of our free cash flow. In the past, we’ve included dividend payments and then totaled to a free cash flow number. I think the market—or most exclude that. So our free cash flow expectation for the year is $42 million to $49 million.
	So very positive news for Horizon Lines for the first quarter; second quarter is looking very positive for us. We’re optimistic about the yearly guidance and with that; I’ll turn it back over to Chuck Raymond.
Chuck Raymond:	Thank you, Mark. And just a few closing remarks here. I think we’re very proud of the continued sustained history of growth in earnings at the Company, despite some market softness in the first quarter. Our earnings per share guidance for the year at $1.62 to $1.73, roughly up about 20% to 30% over 2006 full year.
	As we said, we’re making good progress on our strategic programs on Horizon EDGE and on the TP1 vessels. We’re very happy with the success on these new ships and what they’re going to do for us going forward.
	Effective use of our operating cash flows continue to improve our Company; making investments in containers and in facilities in Alaska, Hawaii and in Puerto Rico; and then finally, our management team, coupled with this improving balance sheet and the new members on our Board of Directors that we’re bringing on; is positioning the Company we believe, very well for more future successes.
	And with that, I’ll turn the call back to the questions and answers.
Question:	Thank you. Good morning, everybody.
Chuck Raymond:	Good morning.

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Question:	You just closed with talking about uses of cash in investments in the core business. Are there any acquisitions out there that you’re looking at, whether it be in your core business; but primarily in kind of secondary or complementary businesses to what you do right now—such as logistics?
Chuck Raymond:	We are working on one very small acquisition that we’ve had in the pipeline for a little while. We’ll be talking about that in a few weeks. That’s related to our Hawaii service. We are examining very carefully a number of opportunities both in the core business as well as very closely associated to it in the logistic space. But we’re not prepared obviously, to talk about who those companies might be at this point.
Question:	Any update on the use of the spare capacity that will be out there after the TP1 is fully implemented, whether it be coastwise trade or any other options?
Chuck Raymond:	We’ve had several options there. We’ve been working pretty aggressively to position those vessels for a successful coastwise venture, predominantly on the East Coast and in the Gulf. We have pushed Congress and the Administration to deal with the harbor maintenance tax issues. I believe that will be rectified during this year. We’ve also had some extensive discussions with port authorities, customers and our labor unions to help us find a way to start up a service and make it economically successful from the first day. So, yes we are moving along on those plans.
Question:	Okay, great. And then just one last one; if the Puerto Rican economy remains weak and then doesn’t meet I guess the Bank of Puerto Rico’s forecasts, are there any contingency plans? Is there a way for you to kind of take out costs temporarily there or redeploy assets into other trade lines?
Chuck Raymond:	Well, I think that there are. First of all, the Puerto Rico operating team is doing a magnificent job of improving productivity and managing their costs. We’ve been through some of these downturns in the past and have weathered through them. We have the same enthusiasm and desire to continue to challenge old ways of doing things down there; and that’s coupled with the EDGE process, which I think is really back-up ammunition here. Should we see that market continue to soften, I’m not sure we can pull capacity out, because we have pretty effective capacity utilization in that trade. But I think that the EDGE process has us positioned to operate much more efficiently for the rest of the year. I hope that answers your question.
Question:	Hi, good morning. Just a quick follow up on the cost front; with revenue expectations a little bit softer and putting aside the potential—maybe Puerto Rico stays soft or not—but based on your current expectations for business; are there additional cost levers you need to accelerate or pull to stay at that EBITDA outlook that you’ve given.

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Mark Urbania:	No. Based on the forecast that we put out there on the guidance side for revenues; we’re very comfortable that there are not additional things that need to be done on the cost side—levers to pull as you put it. We’re very comfortable with the guidance range that we’ve given, which we haven’t changed from the last time we were all gathered here on the phone. We’re very comfortable with that, and frankly, we’re very comfortable with our revenue and our earnings guidance.
Question:	Okay, great. And then just given the softness in tonnage in the first quarter, how do you sort of envision volumes looking? I mean do we get back into the black on volume growth as quickly as the second quarter or is that more in the second half of the year?
Chuck Raymond:	The way we’re looking at our revenue growth for the year is that it’s about 4.5% overall from the end of 2006 to the end of 2007. We believe that 1% of that will come through volume growth but the balance will be made up of rate and cargo mix. But that will come in the second half of the year as opposed to the first half of the year. I think that if you look at our second quarter here on the revenue and the EBITDA and the EPS guidance that we have, it is ahead of second quarter of 2006. So we feel pretty positive. And if you understood the message from what John Handy was saying earlier, Puerto Rico continues to be soft.
	The Alaskan economy is really just getting a late start because of the hard winter conditions. We were off-schedule in Hawaii. That really cost us some freight. We’re back on schedule now and we should have a pretty good second quarter and second half of the year.
Question:	Right, and just finally from a tax-rate standpoint, I understand the range for 2007. Thinking longer term, is that a reasonable range to think about beyond 2007?
Mark Urbania:	I think so. And the reason I say that—and the same reason I stated a couple of quarters ago— is that as our eligible tonnage tax service, which is Guam and Asia now; which is about a break even for us over the next 12 months as we’ve covered before—but as that picks up and we begin to generate more revenue and profitability, my expectation is that will offset the growth from an income perspective in Hawaii and Alaska, which means we should still stay in that tax range.

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Question:	A couple questions on Puerto Rico in particular; the temporary government shutdown occurred last May and the change in the tax law was last June—do you expect year-over-year comps to get easier in the back half of the year because of that and is that driving the sort of 6% to7% revenue growth you’re forecasting for the back half of the year?
Chuck Raymond:	We had the fortune to be down in Puerto Rico last week; several of us, and had a lot of discussions with our key customers. The view down there is that two things are happening. One is that the impact of the change in taxation process has not yet fully been worked through. As you know, there was a change from an excise tax to a consumption tax and so the citizens feel like they’re being double taxed right now. It will take a little bit of time for that to work through. And we believe that that will improve the disposable income in the latter half of 2007.
	I think the other thing is the same kind of political gridlock on the island as we’re experiencing somewhat here in Washington D.C. I think the combination of those two things right now has the confidence at a fairly low level.
	Now having said that, as we work through the tax issues and as we get closer to the 2008 election cycle in Puerto Rico, and we’ve gone back and checked how that market has responded in the face of the forward election year, we believe that things will strengthen as we get into the second half of this year and move in toward 2008. I hope that helps you.
Question:	It does. Thanks. And on TP1, we were under the impression that the TP1 would add an additional $15 million or so in operating costs in the second quarter and close to $40 million for the year. But based on sort of your guidance and margin expansion implied; I was just wondering if that’s still the case or if you can provide an update there.
Chuck Raymond:	What we’re seeing is the fact that yes, we will incur more costs from a TP1 perspective in the second quarter by virtue of the fact that a lot of these ships are being delivered. We’ve still got a couple of deliveries to go. So we will incur some of that cost. We also expect some of the EDGE benefits to offset that cost, along with normal growth in the business. That ends up with the numbers that we represent here in the second quarter.
Question:	Okay, and final question is that chart that you showed about the improvement in maintenance cost per load; is that solely driven—is that solely a function of the new containers or is there something else there that’s driving that, because it’s pretty significantly down 80% or so?

Page 10

John Handy:	It is two things. This is John Handy. Two things; new equipment and the EDGE process as we look at how you reduce maintenance cost overall. And so all of that contributes to those numbers that you see there and we’ll continue to push not only the new equipment, but certainly the EDGE aspects and its impacts.
Question:	Just maybe to follow up on the maintenance question; is that something that levels off at the level that you showed in the slide or is that an area of—maybe over the next couple of years you continue to sort of eek out additional improvement there as you bring on new equipment?
John Handy:	It’s the latter. What we’re really zeroed in on there of course are refrigerated containers and dry containers. But you could have the same math. It has an impact on all the new equipment that we’re buying, replacing old equipment. So all of the sum total of the efforts of reducing maintenance costs by acquisition and then EDGE process improvements, you’ll see it having an impact throughout not only the rest of the year but into next year as well.
Question:	Okay. And then just to clarify; it almost sounded like that you were saying that due to the weather impacts of Alaska in the first quarter that perhaps some volumes would be pushed into the second quarter in that market; am I misstating that?
John Handy:	No, you’re absolutely right. The impact not only was on what I would call the normal anticipated first quarter loads to Alaska, but in the seafood market coming back southbound. Because of the terrific freeze—there wasn’t a terrible snowfall, it’s just extreme cold that reduced the efforts of everybody on those two particular market areas. So as the thaw has taken place, you see the loads—essentially the volume that was built up is now flowing both north and southbound.
	So some of that seafood that was typically a first quarter gain is now into the second quarter and a lot of the spring push for everything from garden supplies to our prime customers; all that is continuing to improve. So you’ll see that where we normally have a little bit of a dry spell in this time of year, we’re getting that first quarter spillover into the second quarter.

Page 11

Question:	Hi. Can you clarify when you reconfigure your fleet—are you going to add capacity to Puerto Rico at all?
Chuck Raymond:	John, we are not. The additional capacity in the Puerto Rico trade is in the range of about 100 slots a week, which is about less than 1% capacity addition.
Question:	Okay. And one of your competitors recently announced a small capacity expansion in the lane. Does that concern you at all?
Chuck Raymond:	No, it doesn’t actually. We’re not concerned about that.
Question:	Okay. And you had a press release on the short sea initiative recently and you talked about it earlier in the call—can you give me any idea of what your long-range deployment could be if that comes together in terms of number of ships?
Chuck Raymond:	I’d rather not at this point. The reason being that we’re having pretty robust discussions with a number of parties on it; I think I should just characterize it as being a service that would run probably along the Atlantic and Gulf coasts and connect three or four major ports there.
Question:	Okay. And we’d all have no traffic on I-95 after that, right?
Chuck Raymond:	Actually, that’s part of the objective. I don’t think you’re going to see much of an impact on I-95 right away. Obviously a couple of ships aren’t going to do much there.
Question:	Thank you, good morning. Just one clarification; on the free cash flow projection, could you give us the updated CapEx figure that you’re using in making that projection?
Mark Urbania:	The CapEx that we’re using is the same CapEx that we’ve used all along here and it’s in the $30 million range.
Question:	$30 million? Okay. And do you have a figure tentative for 2008 on that?

Page 12

Mark Urbania:	No, we’ve not given any guidance for 2008 in terms of cash or capital.
Question:	Okay. Then maybe just sort of looking at the big picture; with these new ships coming on, my take is they’re meeting your expectations for efficiency and speed so far?
Chuck Raymond:	Yes they are.
Question:	Okay. And could you just give us an idea if you take a snapshot at year-end 2007, what the incremental capacity would be in 2008 both for maybe the two different basic components of the Company, the transpacific and the other versus 2007, the capacity increase?
Chuck Raymond:	The effective capacity increase in the Pacific trade is about 400 slots a week. And in the Puerto Rico trade, as I mentioned before answering a prior question, is about 100 slots a week.
Question:	Okay. And so is there any way to get sort of a handle on what the weighted average is next year versus this year, because you’re kind of a moving target with these new ships?
Chuck Raymond:	Well, it will all be phased in at the end of this year, so for 2008 there won’t be any incremental capacity additions unless there is something extraordinary that happens in the markets.
Question:	Okay. But you can’t say what your kind of weighted average would be next year versus this year, in terms of total available capacity?
Chuck Raymond:	No, there are a lot of things in play, including the coastwise service, which might give us a better ability to serve the Puerto Rico trade.
Question:	Right. And any further insights on the rate picture? You mentioned one thing about Puerto Rico with that one increase; any other kind of color or insights on the rate picture in either of your markets?
Chuck Raymond:	I think three things. I think number one, we have stability. The supply-demand relationship in the trades is stable. I believe that we are still, as an industry, doing the right thing in terms of recovering our fuel charges. You know, bunkers are now up at about $325-$330 a ton. And so the surcharges in all three trades continue to recover that. And then third, I would say that in the case of Puerto Rico, even though that market is a little light, we’re continuing to get rate increases that are slightly ahead of what our inflationary costs are. So in terms of real rate benefit in the Puerto Rico trade, that march that we’ve been on now since 2002, continues.

Page 13

Question:	The first question that I have; I know it’s a little bit of a long while away, but about a year from now the hold co coupons that you guys issued start going cash pay on the coupon and I was wondering if you guys had thought about whether or not you would want to take those out, or how you want to deal with that or would you just suck up the higher—the actual cash pay on that coupon?
Mark Urbania:	We’ve made no final determination on how we’re going to do that. Obviously we’re looking at our capital structure. It’s in the best interest of all of our stockholders to the extent that we’re in a position to do so to extinguish our highest-cost debt, which are the hold co notes, as you’re well aware of. So to the extent that our cash flows are good, our business is vibrant, there is the distinct possibility that we could be changing our capital structure.
Question:	You probably are not going to answer this, but when you say changing your capital structure, is that those hold co notes or is that kind of the whole thing because you could refinance at lower levels anyway?
Mark Urbania:	I think it could be just the hold co or we could do the entire debt structure. We have not made that determination yet, though.
Question:	Okay. The second question is regarding—I know that you had mentioned that you were looking at some smaller logistics acquisitions. Would those be debt financed?
Mark Urbania:	Depending on the size, more than likely.
Question:	Okay. But you said that the ones that you’re looking at, at the moment are relatively small in size.
Mark Urbania:	Yes.
Question:	Okay. And then the last question I had also pertains to logistics. We’ve heard from some other logistics-type companies that we’re seeing from the larger container shippers less of a desire to send their containers farther inland—I guess as intermodal transport in the US is becoming more clogged, these container companies less and less want to send their containers into for example, the middle of the US. They’d rather just keep them closer to the ports. And I was wondering

Page 14

	if that’s having any impact on your business or whether or not you guys have a similar desire to do that or if you could comment on that type of trend.
Chuck Raymond:	Well, I think it’s one or two particular carriers that have taken that approach. They’ve done the margin analysis on certain trade lanes. And because of the rising cost of rail, more so than anything else, I think they’ve made that determination. Now, we have access, as you know, to international containers, not only from Maersk, but other carriers as well. And so we will continue to tap that resource.
Chuck Raymond:	Okay, well I think we’ve pretty much said what the quarter looks like. We thank you for your interest and we look forward to talking to you at the end of the second quarter. Thank you and have a good day.
Operator:	Thank you. Ladies and gentlemen, this concludes the Horizon Lines first quarter 2007 earnings release conference call.

END

Page 15

EX-99.2

Exhibit 99.2

HORIZON LINES REPORTS RECORD FIRST QUARTER EARNINGS

CHARLOTTE, North Carolina, April 26, 2007 – Horizon Lines, Inc. (NYSE:HRZ) today reported record earnings for the first quarter of 2007.

Net income for the first quarter of 2007 was $7.1 million or $.21 per basic and diluted share compared to $2.4 million or $.07 per basic and diluted share in the 2006 first quarter. After adjustments to exclude a deferred tax revaluation benefit in 2007, and apply tonnage tax on a pro-forma basis in 2006, adjusted net income was $4.5 million or $.13 per basic and diluted share in the first quarter of 2007 versus $3.6 million or $.11 per basic and diluted share for the first quarter of 2006. The first quarter 2007 adjusted earnings per share of $.13 was within the Company’s previously announced earnings guidance of $.10 - $.15 per share and equaled the analysts’ consensus.

Operating revenue was essentially flat, falling slightly by $1.2 million or .4% to $273.7 million for the first quarter of 2007 compared to $274.9 million during the 2006 first quarter. The revenue decline was primarily due to a 6.5% reduction in volumes, reflecting continued soft market conditions in Puerto Rico and an extended winter in Alaska. Higher margin cargo mix, general rate increases and fuel recoveries nearly offset the volume-related revenue decline.

Operating income for the first quarter of 2007 grew by 3.8% to $16.5 million versus $15.9 million in the first quarter of 2006. The increase in operating income was driven by the Company’s on-going focus on controlling operating costs and its Horizon EDGE program.

Earnings before net interest expense, taxes, depreciation and amortization (EBITDA) was $33.7 million for the first quarter of 2007, growing by 6.0% from $31.8 million in the 2006 first quarter.

“Horizon Lines delivered record first quarter earnings and our 21^st consecutive quarter of adjusted EBITDA growth, despite less than ideal market conditions,” said Chuck Raymond, Chairman, President and Chief Executive Officer. “Stringent cost controls, Horizon EDGE savings, cargo mix upgrades and rate improvements all combined to more than offset some

lingering volume softness. Horizon EDGE, our customer service and process improvement program, captured all of its first quarter milestones and is delivering increasing benefits. Our TP1 fleet enhancement initiative is on track and the deployment of this new tonnage is nearing completion. We continue to invest in our business and were honored once again as the recipient of two prestigious service excellence awards in the first quarter. Additionally, we continue to focus on reducing our leverage, prepaying $25 million of debt on March 30^th, at the beginning of the second quarter. The Horizon Lines team overcame challenging conditions in the first quarter, as they have so many times in the past, and we look forward to an improving market environment throughout the remainder of 2007.”

The Company updated its earnings guidance for the full year 2007, with projections of operating revenue at $1,200 - $1,210 million, EBITDA of $173 - $180 million and earnings per share increased to $1.62 - $1.73, excluding a deferred tax revaluation benefit, on a lower effective tax rate assumption. Earnings guidance for the second quarter 2007 was also provided, with forecasts of operating revenue of $295 - $300 million, EBITDA of $40 - $43 million and EPS of $.29 - $.34.

Company executives will provide additional perspective on the Company’s earnings 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 1-800-240-5318 and asking for the Horizon Lines First Quarter 2007 Earnings Call. A hardcopy of the presentation materials may be printed from the Horizon Lines website, www.horizonlines.com, shortly before the start of the call. Alternatively, a live audio webcast of the call may be accessed at 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.

About Horizon Lines:

Horizon Lines, Inc. is the nation’s leading Jones Act container shipping and integrated logistics company, operating 16 U.S.-flag vessels on routes linking the continental United States with Alaska, Hawaii, Guam, and Puerto Rico. Horizon Lines also owns Horizon Services Group, an organization with a diversified offering of cargo management and tracking services being

marketed to shippers, carriers, and other supply chain participants. Horizon Lines, Inc. trades on the New York Stock Exchange under the ticker symbol HRZ.

Forward Looking Statement:

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 final Form 10-K filed with the SEC on March 2, 2007, 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.

Media Contact:

Michael Avara of Horizon Lines, Inc., 1-704-973-7000, or mavara@horizonlines.com.

Horizon Lines, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except per share data)

	March 25, 2007			December 24, 2006(1)
Assets
Current assets
Cash and cash equivalents	$	44,190		$	93,949
Accounts receivable, net of allowance of $6,020 and $4,972 at March 25, 2007 and December 24, 2006, respectively		138,447			120,732
Deferred tax asset		9,615			11,586
Prepaid vessel rent		10,661			1,163
Materials and supplies		25,250			24,658
Other current assets		7,627			7,103
Total current assets		235,790			259,191
Property and equipment, net		183,047			188,652
Goodwill		306,724			306,724
Intangible assets, net		162,238			167,882
Other long-term assets		28,314			22,580
Total assets	$	916,113		$	945,029
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	21,056		$	28,322
Current portion of long-term debt		2,244			6,758
Other accrued liabilities		108,535			126,548
Total current liabilities		131,835			161,628
Long-term debt, net of current		505,532			503,708
Deferred tax liability		30,829			31,339
Deferred rent		34,885			36,003
Other long-term liabilities		4,190			4,074
Total liabilities		707,271			736,752
Stockholders’ equity
Common stock, $.01 par value. 50,000 shares authorized and 33,617 and 33,591 shares issued and outstanding as of March 25, 2007 and December 24, 2006, respectively		337			336
Additional paid in capital		180,315			179,599
Accumulated other comprehensive loss		(986	)		(1,011	)
Retained earnings		29,176			29,353
Total stockholders’ equity		208,842			208,277
Total liabilities and stockholders’ equity	$	916,113		$	945,029

(1) The balance sheet at December 24, 2006 has been derived from the audited financial statements of Horizon Lines, Inc.

Horizon Lines, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

	Quarters Ended
	March 25, 2007			March 26, 2006
Operating revenue	$	273,664		$	274,934
Operating expense:
Operating expense (excluding depreciation expense)		217,681			219,924
Depreciation and amortization		13,467			12,503
Amortization of vessel dry-docking		3,760			3,414
Selling, general and administrative		21,893			22,922
Miscellaneous expense, net		384			299
Total operating expense		257,185			259,062
Operating income		16,479			15,872
Other expense (income):
Interest expense, net		11,214			11,720
Other (income) expense, net		(3	)		15
Income before income tax (benefit) expense		5,268			4,137
Income tax (benefit) expense		(1,784	)		1,771
Net income	$	7,052		$	2,366
Net income per share:
Basic	$	0.21		$	0.07
Diluted	$	0.21		$	0.07
Number of shares used in calculations:
Basic		33,613			33,544
Diluted		34,135			33,596
Dividends declared per common share	$	0.11		$	0.11

Horizon Lines, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	Quarters Ended
	March 25, 2007			March 26, 2006
Cash flows from operating activities:
Net income	$	7,052		$	2,366
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		8,577			7,613
Amortization of other intangible assets		4,890			4,890
Amortization of vessel dry-docking		3,760			3,414
Amortization of deferred financing costs		788			805
Deferred income taxes		(2,069	)		1,675
Gain on equipment disposals		(148	)		(275	)
Stock-based compensation		335			99
Accretion of interest on 11% senior discount notes		2,386			2,208
Changes in operating assets and liabilities
Accounts receivable		(17,715	)		(14,893	)
Materials and supplies		(643	)		1,143
Other current assets		(10,022	)		(2,000	)
Accounts payable		(7,266	)		3,271
Accrued liabilities		(24,044	)		(6,912	)
Vessel dry-docking payments		(2,403	)		(4,235	)
Other assets/liabilities		(1,644	)		(842	)
Net cash used in operating activities		(38,166	)		(1,673	)
Cash flows from investing activities:
Purchases of property and equipment		(3,338	)		(2,718	)
Proceeds from the sale of property and equipment		565			940
Net cash used in investing activities		(2,773	)		(1,778	)
Cash flows from financing activities:
Principal payments on long-term debt		(5,074	)		(625	)
Dividends to stockholders		(3,691	)		(3,690	)
Costs associated with initial public offering		—			(158	)
Proceeds from exercise of stock options		35			—
Payments of financing costs		(43	)		(816	)
Payments on capital lease obligation		(47	)		(45	)
Net cash used in financing activities		(8,820	)		(5,334	)
Net decrease in cash and cash equivalents		(49,759	)		(8,785	)
Cash and cash equivalents at beginning of period		93,949			41,450
Cash and cash equivalents at end of period	$	44,190		$	32,665

Horizon Lines, Inc.

Adjusted Net Income

(in Millions)

	Quarters Ended
	March 25, 2007			March 26, 2006
Net Income	$	7.1		$	2.4
Adjustments(a)
Tonnage Tax Adjustments:
•     2007 Deferred Tax Revaluation Benefit		(2.6	)		—
•     2006 Proforma Impact		—			1.2
Adjusted Net Income	$	4.5		$	3.6

(a) These items are not anticipated to recur regularly in the ordinary course of business.

Horizon Lines, Inc.

Net Income / EBITDA Reconciliation

(in Millions)

	Quarters Ended
	March 25, 2007			March 26, 2006
Net Income	$	7.1		$	2.4
Interest Expense, Net		11.2			11.7
Tax (Benefit) Expense		(1.8	)		1.7
Depreciation & Amortization		17.2			16.0
EBITDA	$	33.7		$	31.8

Note: EBITDA is defined as net income 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 Horizon Lines Holding 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.

EX-99.3

First Quarter 2007 Earnings

Release

April 26, 2007

Exhibit 99.3

2

Forward-Looking Statements

Risks, Uncertainties, Other Factors with Respect to “Forward-Looking

Statements”:

Certain statements contained in this presentation constitute “forward-

looking statements”

within the meaning of the Private Securities

Litigation

Reform

Act

of

1995.

Such

statements

that

are

not

of

historical

fact

constitute

“forward-looking

statements”

and,

accordingly,

involve

estimates,

assumptions,

judgments

and

uncertainties.

There

are a number of factors that could cause actual results or outcomes to

differ materially from those addressed in the “forward-looking

statements”.  Such factors are detailed in the Horizon Lines, Inc.’s

Form 10-K filed with the Securities and Exchange Commission on

March 2, 2007. 

3

Earnings Call Agenda

Introduction and Overview

Chuck Raymond –

Chairman, President & Chief Executive Officer

Operations Review

John Handy –

Executive Vice President

Financial Review

Mark Urbania –

Senior Vice President & Chief Financial Officer

Questions and Answers

4

First Quarter 2007 Earnings Release

Chuck Raymond

Chairman, President & Chief Executive Officer

Introduction and Overview

5

First Quarter 2007 –

Highlights

$15.9

$16.5

0

5

10

15

20

25

2006

2007

Operating Income

$274.9

$273.7

200

220

240

260

280

300

2006

2007

Operating Revenue

($ in Millions)

$0.11

$0.13

0.0

0.1

0.2

0.3

2006

2007

Adjusted EPS

($ in Millions)

Record first quarter earnings

21

st

consecutive quarter of adjusted

EBITDA growth

Cost controls, EDGE savings and rate

improvement more than offset volume

softness

TP1 fleet enhancement initiative on track

and nearing completion

Horizon EDGE meets all milestones and

delivers increasing benefits

Service excellence awards continue

($)

6

First Quarter 2007 Earnings Release

John Handy

Executive Vice President

Operations Review

7

Operating Highlights

Continued soft market conditions in Puerto Rico and an extended

winter in Alaska adversely impacted revenue volumes

Higher margin cargo mix, general rate increases and fuel surcharge

recoveries mitigated volume shortfalls

Economic outlook improving and remains positive

Competitive landscape stable and overall market share maintained

Horizon EDGE captured first quarter benefits in line with targets and

achieved all milestones

TP1 fleet enhancement initiative on schedule and deployment of

new vessels nearing completion

Vessel operating metrics in line with 2006

Service excellence awards continue

8

Volume Update

Unusually cold winter in

Alaska delayed spring

shipments

Alaska seafood late starting,

but recovering with shipments

extending into second quarter

Hawaii volumes impacted by

adverse weather conditions

Guam continues to be a bright

spot with solid growth

Puerto Rico economy

recovering slower than

anticipated

71,601

66,921

2006

2007

Container Volume

Variance

(4,680)

9

Unit Revenue Update

$3,375

$3,587

2006

2007

Rate Per Container

Variance

$212

Unit rate improvements in all

three tradelanes

continue to

offset volume softness

Cargo mix focus continues to

provide positive impact on

overall rate improvements

Fluctuations in fuel related

expenses were appropriately

mitigated by fleet conservation

efforts and surcharges

10

2007 Economic Outlook

Alaska thawing out and market stabilizing and returning to normal

Deployment of new vessels and schedules to improve on time

performances

Hawaii market continues to grow and we are positioned to capitalize

2007 GNP growth of 1.2% projected by the Government

Development Bank of Puerto Rico has not been seen yet

11

Competitive Update

Overall market share in all trades remained stable

Puerto Rico carriers withheld extra seasonal tonnage due to slow

economic growth

Regaining our arrival advantage into Guam with deployment of

new, faster vessels

12

Horizon EDGE Update

All Q1 2007 milestones completed per plan

Offshore Ports

–

EDGE process implementation completed

Supply Chain

–

Vessel fuel consumption initiative implemented

–

Data integrity improvement process ongoing

–

Benchmarking performed with CGM-CMA and NYK

–

Cost per move over North America trucking network reduced

–

Automated dispatch planning implemented

Sales

–

Sales performance metrics implemented

–

System upgrades and pricing tool enhancements in progress

Domestic Ports

–

EDGE process implementation accelerated

2007 Net Benefits

Q1 2007 gross benefits of $3.0M and net benefits of $1.4M achieved

2007 net benefits target remains $13M or better

13

Horizon Lines Hawk

14

TP1 Fleet Enhancement Update

Execution of the new TP1 Service phase-in is on schedule

Performance of vessels continues to meet expectations

New TP1 Service commenced as planned on March 18

Jul

May

Dec

Jan

Feb

Mar

Nov

Apr

Jun

New TP1 Commences Ex Asia

PEX Service Commences

Large Jones Act Vessel to PR

Horizon Falcon

Horizon Hunter

Horizon Hawk

Horizon Eagle

Horizon Tiger

15

Container Fleet Investments

300

900

1200

0

300

200

700

1200

2003

2004

2005

2006

1Q '07

New Refrigerated Containers

0

0

1000

2800

200

700

1200

1700

2200

2700

2003

2004

2005

2006

New Dry Containers

$202

$74

0

50

100

150

200

250

1Q '06

1Q '07

Refrigerated Containers

Investment in our business continues with 300 new refrigerated

containers (“reefers”) added in the first quarter of 2007

Maintenance cost per load has improved significantly

$37

$7

0

10

20

30

40

50

1Q '06

1Q '07

Dry Containers

16

Vessel Performance

99.3%

99.6%

0%

20%

40%

60%

80%

100%

2006

2007

Vessel Availability

89.0%

84.0%

0%

20%

40%

60%

80%

100%

2006

2007

Vessel Utilization

78.0%

78.0%

0%

20%

40%

60%

80%

100%

2006

2007

Vessel On-Time Arrival

17

Service Excellence Awards

Lowe’s 2006 “Platinum Carrier Award”

for

Outstanding Service for the sixth straight

year

Toyota 2006 “Logistics Excellence Award”

for Quality in Export Marine for the eighth

consecutive year

18

First Quarter 2007 Earnings Release

M. Mark Urbania

Senior Vice President & Chief Financial Officer

Financial Review

19

Financial Highlights

Adjusted EBITDA growth for the 21

st

consecutive quarter

Record first quarter earnings achieved above midpoint of guidance

Stringent cost controls, Horizon EDGE benefits, cargo mix upgrade,

rate increases and fuel recoveries combine to more than offset

volume softness

De-leveraging continues

Capital structure continues to improve

20

5

9

11

18

28

32

34

13

17

21

30

34

41

23

31

35

41

47

52

18

2122

29

36

39

59

78

89

118

145

163

0

20

40

60

80

100

120

140

160

180

Adjusted EBITDA Growth

Continuous Earnings Improvement

(1)

(1)

Adjusted EBITDA equal to EBITDA plus non-recurring items, management fees, and restricted stock

compensation charges

($ in Millions)

Q1

Q2

Q3

Q4

21

Operating Revenue

$274.9

$273.7

200

220

240

260

280

300

2006

2007

First Quarter

($ in Millions)

22

Operating Revenue

(15.8)

Volume Variance

Revenue Change

($ in Millions)

$

(1.2)

Total Revenue Decrease

0.4

Other / Non-Transportation Revenue

1.0

Fuel Recovery

$

13.2

Rate and Cargo Mix Improvement

First Quarter

2007

Cargo mix improvement and rate increases offset volume softness,

after accounting for one delayed sailing that fell into the second

quarter

23

Operating Income

$15.9

$16.5

0

5

10

15

20

25

2006

2007

First Quarter

($ in Millions)

24

EBITDA

(1)

$31.8

$33.7

0

10

20

30

40

50

2006

2007

First Quarter

($ in Millions)

(1)

See reconciliation of Net Income to EBITDA on page 33.

25

Adjusted Net Income

(1)

$3.6

$4.5

0

2

4

6

8

2006

2007

First Quarter

($ in Millions)

(1)

See reconciliation of Net Income to Adjusted Net Income on page 32.

26

Adjusted EPS

(1)

$0.11

$0.13

0.0

0.1

0.2

0.3

2006

2007

First Quarter

($)

(1)

See reconciliations on pages 31 and 32.

27

Free Cash Flow

(3.7)

(3.7)

Dividends

Quarter Ended

March 26, 2006

Quarter Ended

March 25, 2007

$

(49.8)

(5.1)

(41.0)

--

(3.5)

(0.4)

(2.4)

(2.9)

(3.3)

(36.0)

(26.2)

$

33.7

(1.0)

Transaction Costs

$

(8.8)

Net Cash Flow

(0.6)

Debt Payment

(4.5)

Free Cash Flow

(4.1)

Interest

(0.1)

Income Taxes

(4.2)

Dry-Dock Expenditures

(2.0)

Capital Expenditures, Net

--

TP1 Related Costs

(11.0)

Vessel Payments in Excess of Accrual

(13.9)

Working Capital

$

31.8

EBITDA

Free Cash Flow

($ in Millions)

28

Improving Capital Structure

(a)

Fully accreted balances were $160 million at September 25, 2005 and $102.5 million on March 25, 2007

(b)

Includes proforma

adjustment for lease expense buyouts in September 25, 2005 EBITDA

(c)

Excludes amortization of financing fees

--

62.2

Series A preferred stock

3.7x

2.9x

LTM adjusted EBITDA (b) / LTM interest expense (c)

71%

88%

Debt/capitalization

3.1x

4.3x

Debt/LTM adjusted EBITDA (b)

Credit statistics:

$716.9

$709.6

Total capitalization

208.8

22.7

Equity

508.1

624.7

Total debt

92.0

122.2

11% notes (a)

197.0

250.0

9% notes

219.1

252.5

Senior secured debt

0.3

0.5

Capital leases

--

4.5

Vessel mortgages

218.8

247.5

Term loan

$--

$--

Revolver

March 25,

2007

September 25,

2005

($ in Millions)

29

2007 Financial Guidance

Financial Guidance

($ in Millions except EPS)

Second Quarter

Year

Revenue

$ 295 -

$ 300

$1,200 -

$1,210

EBITDA

$   40  -

$   43

$   173 -

$   180

Diluted EPS

$  .29  -

$  .34

$   1.62 -

$ 1.73

Free Cash Flow

$    42  -

$    49

30

Financial Appendix

31

Income Statement Summary

33,596,230

34,135,084

33,596,230

34,135,084

Shares Outstanding –

Diluted

$

.11

$

.13

$

.07

$

.21

Earnings Per Share -

Diluted

33,544,170

33,612,667

33,544,170

33,612,667

Shares Outstanding –

Basic

94.2%

94.0%

94.2%

94.0%

Operating Ratio

$

31.8

$

33.7

$

31.8

$

33.7

EBITDA

$

.11

$

.13

$

.07

$

.21

Earnings Per Share –

Basic

$

3.6

$

4.5

$

2.4

$

7.1

Net Income

0.5

0.8

1.7

(1.8)

Income Tax (Benefit) Expense

4.1

5.3

4.1

5.3

Pretax Income

11.8

11.2

11.8

11.2

Other Expense

15.9

16.5

15.9

16.5

Operating Income

259.0

257.2

259.0

257.2

Operating Expense

$

274.9

$

273.7

$

274.9

$

273.7

Operating Revenue

Quarter

Ended

Mar. 26, 2006

Quarter

Ended

Mar. 25, 2007

Quarter

Ended

Mar. 26, 2006

Quarter

Ended

Mar. 25, 2007

Adjusted

(1)

Actual

(1)

Adjusted to exclude non-recurring IPO, other transaction and non-cash expenses, and to retroactively

apply tonnage tax.

($ in Millions, Except per Share Amounts)

32

Adjusted Net Income Results

1.2

--

•

2006

Proforma

Impact

--

(2.6)

•

2007 Deferred Tax Revaluation Benefit

Tonnage Tax Adjustments:

Adjusted Net Income

($ in Millions)

$

3.6

$

4.5

Adjusted Net Income

Adjustments

(a)

$

2.4

$

7.1

Net Income

Quarter

Ended

Mar 26, 2006

Quarter

Ended

Mar. 25, 2007

(a)

These

charges

are

not

anticipated

to

recur

regularly

in

the

ordinary

course

of

business.

33

Net Income/EBITDA Reconciliation

11.7

11.2

Interest Expense, Net

Note:  EBITDA is defined as net income 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 Horizon Lines Holding 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.

Net Income/EBITDA Reconciliation

($ in Millions)

$

31.8

$

33.7

EBITDA

16.0

17.2

Depreciation and Amortization

1.7

(1.8)

Tax (Benefit) Expense

$

2.4

$

7.1

Net Income

Quarter

Ended

Mar. 26, 2006

Quarter

Ended

Mar. 25, 2007

34

First Quarter 2007

Earnings Release

Questions & Answers

EX-99.4

Exhibit 99.4

Horizon Lines, Inc. Declares Quarterly Dividend

Charlotte, North Carolina, April 25, 2007 – Horizon Lines, Inc. (NYSE: HRZ) announced that its Board of Directors has voted to declare a cash dividend on its outstanding shares of common stock of $0.11 per share, payable on June 15, 2007 to all stockholders of record as of the close of business on June 1, 2007.

About Horizon Lines

Horizon Lines, Inc. is the nation’s leading Jones Act container shipping and integrated logistics company, operating 16 U.S.-flag vessels on routes linking the continental United States with Alaska, Hawaii, Guam, and Puerto Rico. Horizon Lines also owns Horizon Services Group, an organization with a diversified offering of cargo management and tracking services being marketed to shippers, carriers, and other supply chain participants. Horizon Lines, Inc. trades on the New York Stock Exchange under the ticker symbol HRZ.

Media Contact: Michael Avara, Horizon Lines, Inc., 704-973-7000, mavara@horizonlines.com