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Horizon Lines, Inc. – IPO: ‘S-1’ on 3/1/05

On:  Tuesday, 3/1/05, at 6:43pm ET   ·   As of:  3/2/05   ·   Private-to-Public:  Document/Exhibit ¶  –  Release Delayed   ·   Accession #:  1193125-5-40055   ·   File #:  333-123073

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/02/05  Horizon Lines, Inc.               S-1¶        3/01/05   37:10M                                    Donnelley … Solutions/FA

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Registration Statement (General Form)               HTML   1.85M 
37: COVER     ¶ Comment-Response or Cover Letter to the SEC         HTML      6K 
 2: EX-2        Amended and Restated Merger Agreement, Dated as of  HTML    398K 
                          July 7, 2004                                           
 3: EX-4.1      Indenture, Dated as of July 7, 2004                 HTML    693K 
 4: EX-4.2      Indenture, Dated as of December 10, 2004            HTML    598K 
 5: EX-4.5      Exchange and Registration Rights Agreement, Dated   HTML    184K 
                          as of July 7, 2004                                     
 6: EX-4.6      Exchange and Registration Rights Agreement, Dated   HTML    174K 
                          as of December 10, 2004                                
 7: EX-9.1      Voting Trust Agreement Dated as of July 7, 2004     HTML     81K 
 8: EX-9.2      Amended and Restated Voting Trust Agreement Dated   HTML    210K 
                          as of October 15, 2004                                 
 9: EX-10.1     Membership Interest Purchase and Sale Agreement     HTML     46K 
                          Dated as of July 7, 2004                               
18: EX-10.10    Preferential Usage Agreement Dated December 1,      HTML    269K 
                          1985                                                   
19: EX-10.11    Crane Relocation Agreement, Dated August 20, 1992   HTML    147K 
20: EX-10.12    Employment Agreement Dated as of July 7, 2004 -     HTML    131K 
                          Charles G. Raymond                                     
21: EX-10.13    Employment Agreement Dated as of July 7, 2004 - M.  HTML     87K 
                          Mark Urbania                                           
10: EX-10.2     Credit Agreement Dated as of July 7, 2004           HTML    588K 
22: EX-10.23    Purchase Agreement, Dated January 28, 2005 -        HTML     96K 
                          Admiral James L. Holloway Iii                          
23: EX-10.24    Purchase Agreement, Dated January 28, 2005 - James  HTML     96K 
                          G. Cameron                                             
24: EX-10.25    Purchase Agreement, Dated January 28, 2005 - Ernie  HTML     96K 
                          L. Danner                                              
25: EX-10.26    Amended and Restated Guarantee and Indemnity        HTML    530K 
                          Agreement Dated as of 2-27-03                          
26: EX-10.27    Put/Call Agreement, Dated as of July 7, 2004        HTML     63K 
27: EX-10.28    Horizon Lines Holding Corp. Stock Option Plan       HTML    124K 
11: EX-10.3     Amendment No. 1 to Credit Agreement Dated as of     HTML    122K 
                          September 30, 2004                                     
28: EX-10.36    Capital Construction Fund Agreement, Dated March    HTML     50K 
                          29, 2004                                               
29: EX-10.37    Harbor Lease, Dated January 12, 1996                HTML    137K 
30: EX-10.38    Agreement Dated May 16, 2002                        HTML    104K 
31: EX-10.39    Agreement Dated March 29, 2001                      HTML    103K 
12: EX-10.4     Collateral Agreement Dated as of July 7, 2004       HTML    160K 
32: EX-10.40    Port of Kodiak Preferential Use Agreement, Dated    HTML     63K 
                          April 12, 2002                                         
33: EX-10.41    Terminal Operation Contract, Dated May 2, 2002      HTML     50K 
34: EX-10.42    Sublease, Easement and Preferential Use Agreement   HTML    117K 
13: EX-10.5     Agreement Dated as of July 7, 2004                  HTML     47K 
14: EX-10.6     Stock Purchase Agreement, Dated as of October 15,   HTML    122K 
                          2004                                                   
15: EX-10.7     Stockholders Agreement, Dated as of July 7, 2004    HTML    170K 
16: EX-10.8     First Amendment to Stockholders Agreement, Dated    HTML    108K 
                          as of October 15, 2004                                 
17: EX-10.9     Instrument of Accession to Stockholders Agreement,  HTML     25K 
                          as Amended                                             
35: EX-21       List of Subsidiaries of Horizon Lines, Inc.         HTML     15K 
36: EX-23.1     Consent of Ernst & Young LLP                        HTML     13K 

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As filed with the Securities and Exchange Commission on March 1, 2005

Registration No. 333-                    

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

HORIZON LINES, INC.

(Exact name of registrant as specified in Its Charter)

4064 Colony Road, Suite 200

Charlotte, North Carolina 28211

(704) 973-7000

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Office)

M. Mark Urbania, Chief Financial Officer

4064 Colony Road, Suite 200

Charlotte, North Carolina 28211

(704) 973-7000

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:

Approximate Date of Commencement of Proposed Offer to the Public:    As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box:  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering:  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering:  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box:  ¨

CALCULATION OF REGISTRATION FEE

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor dues it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated                      , 2005.

             Shares

Horizon Lines, Inc.

Class A Common Stock

Horizon Lines, Inc. is offering              shares of Class A common stock. We will receive all of the net proceeds from the sale of this Class A common stock. We intend to use approximately $131.5 million of the net proceeds from this offering to redeem our outstanding Series A redeemable preferred stock at an aggregate cost of approximately $60.7 million and to pay a special dividend of approximately $70.8 million to holders of our Class B common stock of which approximately $6.4 million will be reinvested by our management in Class A common stock at the initial public offering price. Upon the payment of such dividend, all of our outstanding Class B common stock will automatically convert into our Class A common stock on a one-to-one basis. We intend to use the balance of the proceeds of this offering to redeem portions of the 9% senior notes due 2012 and the 11% senior discount notes due 2013 of our subsidiaries and to pay fees and expenses incurred in connection with this offering and the related transactions. Prior to this offering, there has been no public offering for our common stock. It is currently estimated that the initial public offering price per share will be between $             and $            . We intend to list our Class A common stock on the New York Stock Exchange under the symbol “HRZ.”

Before buying shares, you should carefully consider the risk factors described in “ Risk Factors” beginning on page     .

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters may also purchase up to an additional              shares of Class A common stock from us at the initial public offering price less the underwriting discounts and commissions within 30 days from the date of this prospectus. We intend to use the net proceeds from any shares sold pursuant to the underwriters’ option to purchase additional shares to pay an additional dividend to holders of our Class B common stock.

The underwriters expect to deliver the shares against payment in New York, New York on or about                      , 2005.

Joint Book-Running Lead Managers

The date of this prospectus is                      , 2005.

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[Photo shows the off-loading of refrigerated container units, referred to in this prospectus as “reefers,” that bear the Horizon Lines logo from the Horizon Expedition, one of our container vessels, at the Port of Tacoma, Washington. In the foreground, two yard tractors are hauling away off-loaded reefers bearing the logo of Horizon Lines. In the background, a large crane is lifting reefers off the Horizon Expedition, which is nearly fully stacked with reefers bearing the Horizon Lines logo.]

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TABLE OF CONTENTS

We have not authorized anyone to provide you any information other than the information contained in this prospectus. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus regardless of the time of delivery of this prospectus or any sale of the common stock.

Until                         , 2005 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

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BASIS OF PRESENTATION

In this prospectus, unless the context otherwise requires, the term “the issuer” refers to Horizon Lines, Inc., a Delaware corporation, and the terms “we,” “our” and “us” refer to the issuer and its subsidiaries. Unless the context otherwise requires, the term “H-Lines Finance” refers to our direct wholly owned subsidiary, H-Lines Finance Holding Corp., a Delaware corporation, and the term “Horizon Lines Holding” refers to our indirect wholly owned subsidiary, Horizon Lines Holding Corp., a Delaware corporation.

As used in this prospectus, unless we specifically state otherwise, we refer to the “Offering-Related Transactions” collectively as:

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Unless we specifically state otherwise, all information in this prospectus assumes no exercise by the underwriters of their option to purchase additional shares.

Also, unless we specifically state otherwise, references to “pro forma” in this prospectus give effect, in the manner described under “Unaudited Pro Forma Condensed Consolidated Financial Statements”, and the notes thereto, beginning on page          of this prospectus, to (i) the Acquisition-Related Transactions, the Fourth-Quarter 2004 Transactions, and the 2005 Transactions, in each case as described in the “Historical Transactions Summary” beginning on page          of this prospectus and (ii) the Offering-Related Transactions.

In addition, unless we specifically state otherwise, references to “existing stockholders” in this prospectus mean Castle Harlan Partners IV, L.P. and its affiliates and associates which hold shares of our stock, Stockwell Fund, L.P., our directors and members of our management team (and their family members) who beneficially own shares of our stock.

As of the date of this prospectus, we have one class of common stock. As described above, immediately before the consummation of this offering, we will complete a recapitalization in which we will create two classes of common stock. The shares sold in the initial public offering of our common stock will be Class A common stock. Our existing shares of common stock will be exchanged for shares of Class B common stock on the basis of the reclassification ratio described above, which will enable them to receive the Special Class B Dividend on July 8, 2005. All options or other contractual rights to receive our existing common stock will become rights to receive Class B common stock based on such ratio. The Class B common stock will automatically convert into Class A common stock immediately following the payment in full of the Special Class B Dividend on July 8, 2005. Until such automatic conversion occurs, the Class B common stock may be converted into Class A common stock on a one-for-one basis at any time at the option of the holder. Shares of Class A common stock and shares of Class B common stock will be identical (including with respect to voting rights), except for (i) the Special Class B Dividend, (ii) the convertibility of Class B common stock into Class A common stock prior to the payment in full of the Special Class B Dividend as described herein and (iii) the right of the holders of the Class B common stock to consent to any changes to our governing documents that would adversely affect the Class B common stock.

As used in this prospectus, the term “common stock,” when used in reference to our capital structure before the consummation of this offering, means our existing single class of common stock, and, when used in reference to our capital structure following the consummation of this offering, means, collectively, the Class A common stock and the Class B common stock, unless otherwise specified.

The amount of the Special Class B Dividend and the reinvestment amount disclosed in this prospectus are based on an initial public offering price of $                 per share of Class A common

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stock (assuming no exercise of the underwriters’ option to purchase additional shares). The amount of the Special Class B Dividend will be increased by the amount of the net proceeds from the sale of any shares of our Class A common stock pursuant to the exercise of the underwriters’ option to purchase additional shares, after deducting discounts and estimated offering expenses. If the initial public offering price is less than $       per share, the amount of the debt of our subsidiaries that is intended to be repaid with the net proceeds of this offering will be reduced.

The issuer was formed in connection with the Acquisition-Related Transactions, as described on page          of this prospectus, and has no independent operations. Consequently, all financial data for the period (or any portion thereof) from December 27, 1999 through February 26, 2003 reflect the combined company CSX Lines, LLC and its wholly owned subsidiaries, CSX Lines of Puerto Rico, Inc., and the Domestic Liner Business of SL Service, Inc. (formerly known as Sea-Land Service, Inc.), all of which were stand-alone wholly owned entities of CSX Corporation. Financial data for the period (or any portion thereof) from February 27, 2003 through July 6, 2004 presented in this prospectus reflect Horizon Lines Holding on a consolidated basis. Financial data for the period (or any portion thereof) from July 7, 2004 through December 26, 2004 presented in this prospectus reflect the issuer on a consolidated basis. All unaudited pro forma condensed financial data for each other period (or portion thereof) presented in this prospectus reflects Horizon Lines Holding on a combined and consolidated basis with the entities reflected in the combined and consolidated financial data from which such unaudited pro forma condensed financial data was derived.

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PROSPECTUS SUMMARY

This summary does not contain all the information that may be important to you. You should carefully read this prospectus in its entirety before making an investment decision. In particular, you should read the section titled “Risk Factors” and the consolidated financial statements and notes related to those statements included elsewhere in this prospectus.

Our Company

We are the nation’s leading Jones Act container shipping and logistics company, accounting for approximately 37% of total U.S. marine container shipments from the continental U.S. to the three non-contiguous Jones Act markets, Alaska, Hawaii and Puerto Rico, and to Guam. Under the Jones Act, enacted in 1920, domestic U.S. maritime trade is restricted to U.S. owners of U.S.-built and flagged vessels manned by predominantly U.S.-citizen crews. With 16 vessels and approximately 22,400 cargo containers, we operate the largest Jones Act containership fleet, providing comprehensive shipping and sophisticated logistics services in our markets. We have long-term access to terminal facilities in each of our ports, operating our own terminals in Alaska, Hawaii, and Puerto Rico and contracting for terminal services in our seven ports in the continental U.S. and in our ports in Guam, Hong Kong and Taiwan. We also offer inland cargo trucking and logistics for our customers through our own trucking operations on the U.S. west coast and our relationships with third-party truckers, railroads, and barge operators in our markets. For the twelve months ended December 26, 2004, we generated revenue and Adjusted EBITDA of $980.3 million and $120.7 million, respectively. This represents revenue growth of 10.7% and Adjusted EBITDA growth of 26.7% for the twelve months ended December 26, 2004. For the definition of Adjusted EBITDA and its reconciliation to net income, see footnote 5 to the table under “—Summary Consolidated, Combined and Unaudited Pro Forma Financial Data.”

Our long operating history dates back to 1956, when Sea-Land Service, Inc. pioneered the marine container shipping industry and established our business. In 1958 we introduced container shipping to the Puerto Rico market, and in 1964 we pioneered container shipping in Alaska with the first year-round scheduled vessel service. In 1987, we began providing container shipping services between the U.S. west coast and Hawaii and Guam through our acquisition from an existing carrier of all of its vessels and certain other assets that were already serving that market. Today, as the only Jones Act vessel operator with one integrated organization serving Alaska, Hawaii and Puerto Rico, we are uniquely positioned to serve customers requiring shipping and logistics services in more than one of these markets.

Our revenue is derived primarily from Alaska, Hawaii and Guam, and Puerto Rico. These markets account for approximately 23%, 41% and 35%, respectively, of our revenue in 2004. We are one of only two major container shipping operators currently serving the Alaska market, each accounting for approximately 42% of total container loads traveling from the continental U.S. to Alaska. We are also only one of two container shipping companies currently serving the Hawaii and Guam markets with an approximate 37% share of total domestic marine container shipments from the continental U.S. to these markets. This percentage reflects 36% and 48% shares of total domestic marine container shipments from the continental U.S. to Hawaii and Guam, respectively. In Puerto Rico, we are the largest provider of marine container shipping, accounting for approximately 36% of Puerto Rico’s total container loads from the continental U.S. Since we are the only Jones Act container shipping and logistics company with an integrated organization operating in all three non-contiguous Jones Act markets, we believe that we have a stronger competitive position in our markets, serve more effectively our national customers with shipping and logistics needs across one or more of these markets, spread our fixed costs over a larger revenue base, achieve greater network operating efficiencies and negotiate larger volume discounts from our inland shipping providers.

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We ship a wide spectrum of consumer and industrial items used everyday in our markets, ranging from foodstuffs (refrigerated and non-refrigerated) to household goods and auto parts to building materials and various materials used in manufacturing. Many of these cargos are consumer goods vital to the expanding populations in our markets, thereby providing us with a stable base of growing demand for our shipping and logistics services. Container loads of foodstuffs (refrigerated and non-refrigerated) and household goods traveling from the continental U.S. to Alaska, Hawaii and Guam, and Puerto Rico constituted approximately 40% of our revenue in each of 2003 and 2004. We have approximately two thousand customers and have many long-standing customer relationships, including with large consumer and industrial products companies such as Costco Wholesale Corporation, Johnson & Johnson, Lowe’s Companies, Inc., PepsiCo, Inc., Safeway, Inc., Toyota Motor Corporation and Wal-Mart Stores, Inc. We also serve several agencies of the U.S. government, including the Department of Defense and the Postal Service. Our customer base is broad and diversified, with our top ten customers accounting for approximately 33% of revenue and our largest customer accounting for approximately 7% of revenue.

We focus on maintaining our reputation for service and operational excellence by emphasizing strict vessel maintenance, employing experienced vessel crews, expanding and improving our national sales presence, and employing industry-leading information technology as part of our complete logistics solutions:

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The Jones Act

Over 90% of our revenue is generated from our shipping and logistics services in markets where the marine trade is subject to the Jones Act or other U.S. maritime laws.

The Jones Act, officially the Merchant Marine Act, 1920, is a long-standing cornerstone of U.S. maritime policy. Under the Jones Act, the marine trade between U.S. ports is reserved for U.S.-owned and organized companies operating U.S.-built and U.S.-flagged vessels manned predominantly by U.S.-citizen crews. U.S.-flagged vessels are generally required to be maintained at higher standards than foreign-flagged vessels and are supervised by, as well as subject to rigorous inspections by, or on behalf of the U.S. Coast Guard, which requires appropriate certifications and background checks of the crew members. Our trade routes between Alaska, Hawaii and Puerto Rico and the continental U.S. represent the three non-contiguous Jones Act markets. Vessels operating on these trade routes are required to be fully-qualified Jones Act vessels. Other U.S. maritime laws require vessels operating on the trade routes between Guam, a U.S. territory, and U.S. ports to be U.S.-flagged and predominantly U.S.-crewed, but not U.S.-built.

Cabotage laws, which reserve the right to ship cargo between domestic ports to domestic vessels, are not unique to the United States; similar laws are common around the world and exist in over 40 countries. In general, all interstate and intrastate marine commerce within the U.S. falls under the Jones Act, which is a cabotage law. The Jones Act enjoys broad support from both major political parties. During the 2004 presidential election, both major political parties supported the retention of the Jones Act as currently in effect. In addition, the Jones Act has enjoyed strong congressional support. We believe that the ongoing war on terrorism has further solidified political support for the Jones Act, as a vital and dedicated U.S. merchant marine is a cornerstone for a strong homeland defense, as well as a critical source of trained U.S. mariners for war-time support.

Market Overview

The Jones Act distinguishes the U.S. domestic shipping market from international shipping markets. Given the limited number of existing Jones Act qualified vessels, the relatively high capital investment and long delivery lead times associated with building a new containership in the U.S., the substantial investment required in infrastructure and the need to develop a broad base of customer relationships, the markets in which we operate have been less vulnerable to over-capacity and volatility than international shipping markets. Over the past 11 years, Alaska, Hawaii and Guam and Puerto Rico have experienced low average rate volatility of 0.4%, 1.3% and 2.4% per annum while the major Trans-Pacific and Trans-Atlantic trade routes have experienced average rate volatility of 34.3% and 8.9% per annum.

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Although the U.S. container shipping industry is affected by general economic conditions, the industry does not tend to be as cyclical as other sectors within the shipping industry. Specifically, most of the cargos shipped via container vessels consist of a wide range of consumer and industrial items as well as military and postal loads. Since many of these types of cargos are consumer goods vital to the expanding populations in our markets, they provide us with a stable base of growing demand for our shipping and logistics services.

The Jones Act markets are not as fragmented as international shipping markets. In particular, the three non-contiguous Jones Act markets and Guam are currently served predominantly by four shipping companies, Horizon Lines, Matson Navigation Company, Inc., Crowley Maritime Corporation, and Totem Ocean Trailer Express, Inc., or TOTE. Horizon Lines and Matson serve the Hawaii and Guam market, and Horizon Lines and TOTE serve the Alaska market. The Puerto Rico market is currently served by two containership companies, Horizon Lines and Sea Star Lines, which is an independently-operated company majority-owned by an affiliate of TOTE. Two barge operators, Crowley and Trailer Bridge, Inc., also currently serve this market.

The U.S. container shipping industry as a whole is experiencing rising customer expectations for real-time shipment status information and the on-time pick-up and delivery of cargo, as customers seek to optimize efficiency through greater management of the delivery process of their products. Commercial and governmental customers are increasingly requiring the tracking of the location and status of their shipments at all times and have developed a strong preference to retrieve information and communicate using the Internet. A broad range of domestic and foreign governmental agencies are also increasingly requiring access to shipping information in automated formats for customs oversight and security purposes.

To ensure on-time pick-up and delivery of cargo, shipping companies must maintain strict vessel schedules and efficient terminal operations for expediting the movement of containers in and out of terminal facilities. The departure and arrival of vessels on schedule is heavily influenced by both vessel maintenance standards (i.e., minimizing mechanical break-downs) and terminal operating discipline. Marine terminal gate and yard efficiency can be enhanced by efficient yard layout, high-quality information systems, and streamlined gate processes.

Our Competitive Strengths

We believe that our competitive strengths include:

Leading Jones Act container shipping and logistics company.    We are the nation’s leading Jones Act container shipping and logistics company, with the largest Jones Act container vessel fleet and with shipping activity accounting for approximately 37% of total domestic marine container shipments from the continental U.S. to the three non-contiguous Jones Act markets and Guam. We are the only container vessel operator with an integrated organization serving all three non-contiguous Jones Act markets and have a number-one or a number-two market position within each of our markets. As a result, we are able to serve the needs of customers shipping to individual markets as well as the needs of large customers that require shipping and sophisticated logistics services across more than one of these markets. For many of our customers with a nationwide retailing presence, such as Costco Wholesale Corporation, Lowe’s Companies, Inc. and Wal-Mart Stores, Inc., we provide complete supply chain shipping and logistics solutions, including automated on-line cargo booking, tracking and tracing, as well as inland cargo pick-up and delivery logistics and shipping services, across two or more of our geographic markets. Approximately 59% of our revenue in 2004 was derived from customers shipping with us in more than one of our geographic markets and approximately 29% of our revenue in 2004 was derived from

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customers shipping with us in all of our geographic markets. In addition to enabling us to effectively serve a long-standing customer base, our presence in all of these geographic markets mitigates our geographic exposure to any one particular market.

Favorable industry dynamics.    The Jones Act stipulates that only U.S.-built and U.S.-flagged vessels owned by U.S.-organized and U.S.-owned companies and manned predominantly by U.S. crews can operate in the Jones Act markets. Given the level of services already provided by us or our existing competitors in our markets and the increasing requirements of customers in our markets, any future viable competitor would not only have to make substantial investments in vessels and infrastructure but also establish regularity of service, develop customer relationships, develop inland cargo shipping and logistics solutions and acquire or build infrastructure at ports that are currently limited in space, berths and water depth.

Stable and growing revenue base.    We have achieved five consecutive years of revenue growth and have averaged a compounded annual growth rate of 8.7% in revenue during that period. Our revenue base is stable and growing due to our presence across three geographic markets, the breadth of our customer base served and the diversity of our cargos shipped, all of which better protect us against external events adversely affecting any one of our markets. We ship a diverse mix of cargos, and benefit from serving substantial and growing customers with sophisticated container shipping and logistics requirements across two or more geographic markets that we serve. In addition, many of the cargos we ship are consumer goods which are vital to the expanding populations in our markets, thereby providing us with a stable base of growing demand for our shipping and logistics services. Also, our presence across multiple geographic markets, along with our expertise in supply chain management and our sophisticated on-line shipping and logistics information technology, enables us to be the shipping and logistics solution of choice in these markets for many of our national customers. As a result, we participate in economic and demographic growth trends in each of these markets at a relatively early stage. For example when Lowe’s opened two new retail stores in Alaska, Lowe’s expanded our relationship by selecting us to provide the shipping and logistics services required to stock these stores upon their opening and thereafter. When Lowe’s opened one new retail store in Hawaii, Lowe’s again selected us to provide these services.

Long-standing relationships with leading, established customers.    We serve a diverse base of long-standing, established customers consisting of many of the world’s largest consumer and industrial products companies, as well as a variety of smaller and middle-market customers. Our customers include Costco Wholesale Corporation, Johnson & Johnson, Lowe’s Companies, Inc., PepsiCo, Inc., Safeway, Inc., Toyota Motor Corporation and Wal-Mart Stores, Inc. In addition, we serve several agencies of the U.S. government, including the Department of Defense and the Postal Service. We have a long-standing history of service to our customer base, with some of our customer relationships extending back over 40 years and our relationships with our top ten customers averaging 20 years.

Customer-oriented sales and marketing presence.    Our 120-person national and regional sales and marketing presence enables us to forge and maintain close customer relationships. Senior sales and marketing professionals in Charlotte, North Carolina are responsible for developing sales and marketing strategies and are closely involved in servicing our largest national customers. We also maintain a regional sales presence strategically located in our various ports as well as in seven regional offices across the continental U.S. Regional sales professionals are responsible for day-to-day customer coverage and work closely with customers to address customer needs as they arise. Our national and regional presence, combined with our operational excellence, results in high levels of repeat business from our diverse customer base.

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Operational excellence.    As the leading Jones Act shipping and logistics company, we pride ourselves on our operational excellence and our ability to provide consistent, high quality service. We maintain the largest Jones Act containership fleet consisting of vessels maintained in accordance with strict guidelines. For example, in 2004, our vessels in service on our trade routes were in operational condition, ready to sail, 99% of the time when they were required to be ready to sail. The quality of our vessels as well as the expertise of our vessel crews and engineering resources help us maintain highly reliable and consistent dock-to-dock on-time arrival performance. Our terminal management efficiency and inland cargo shipping and logistics expertise result in high customer satisfaction with respect to equipment availability, transit time and cargo availability. Our track record of service and operational excellence has been widely recognized by some of the most demanding customers in the world. For example, we have received the “Outstanding Ocean Service Provider Award” from Lowe’s Companies, Inc. for the last four years for which this award has been announced, the “Logistics Partners Excellence Award” from Toyota Motor Corporation, for on-time performance where we were judged against all of Toyota’s global shippers, for the last five years for which this award has been announced and the “Carrier of the Year Award” by Wal-Mart Stores, Inc. for three of the last four years for which this award has been announced.

Experienced management with strong culture of commitment to service and operational excellence.    Our senior management, headed by Charles G. Raymond, is comprised of seasoned leaders in the shipping and logistics industry with an average of 18 years of experience in the industry. Our senior management has a long history of working together as a team, with six of our eight most senior managers having worked together at Horizon Lines or our predecessors for over 15 years. In addition, seven of our eight most senior managers have served in multiple roles at the Company or have continuing direct involvement with multiple aspects of our business, including servicing our largest customers and the operation of our shipping and logistics services. We believe that our management’s experience, cohesiveness and depth, as well as our management’s long-standing relationships within the industry, enable us to readily identify market opportunities and develop and execute strategies to pursue these opportunities. Furthermore, as of the date hereof, without giving effect to the Offering-Related Transactions, our management team, including family members, beneficially owns approximately 19% of our common equity on a fully diluted basis. We believe that our cash incentive plan further incentivizes our management to achieve and surpass our targeted performance and goals.

Our Business Strategy

Our financial and operational success has largely been driven by providing customers with reliable shipping and logistics solutions, supported by consistent and value-added service and expertise. Our goal is to continue to provide high-quality service and continue to seek to increase sales and improve profitability through the principal strategies outlined below.

Continue to organically grow our revenue.    Our revenue growth has averaged a compounded annual growth rate of 8.7% during the past five years. We believe that we are well positioned to achieve ongoing revenue growth in our markets by focusing our national and regional sales force on acquiring business from new customers, growing business with existing customers and continuing to focus on increasing the share of our revenue that is derived from our customers’ most important cargo movements. These cargo movements include high-value cargos, time-sensitive cargos and cargos that require complete door-to-door logistics solutions and supply chain management.

Expand our services and logistics solutions.    We seek to build on our market-leading logistics platform and operational expertise by providing new services and logistics solutions. These services

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and solutions include delivery planning and comprehensive shipping logistics expertise. In particular, on the U.S. west coast, we supplement our vessel services with proprietary trucking services, as well as the door-to-door logistics and shipping solutions we offer across our markets. Timing of shipments is crucial to our customers, and our ability to provide these combined offerings has enabled us to expand our business with our customers. By offering this wide range of services and logistics solutions, we believe that we strengthen our franchise and further grow our revenues and profits.

Expand and enhance our customer relationships.    We seek to leverage our capabilities to serve a broad and growing range of customers across varied industries and geographies of different size and growth profiles. In order to enhance our overall cargo mix, we place a strong emphasis on the development and expansion of our relationships with substantial and growing customers which meet high credit standards and have sophisticated container shipping and logistics requirements across more than one of the geographic markets that we serve. This strategy has resulted in our long-term and successful relationships with customers who are growing their operations in our markets, such as Costco, Lowe’s, and Wal-Mart. As the only Jones Act container shipping and logistics company with an integrated organization operating in all three non-contiguous Jones Act markets, and having a sales and marketing team that sells to all of these markets, we are uniquely positioned to maintain and expand our customer relationships.

Leverage our brand.    We actively promote, through our sales and marketing efforts, the broad recognition that Horizon Lines has a long and successful history of service to customers in the three non-contiguous Jones Act trades and in Guam. This heritage dates back to 1956, when Sea-Land pioneered the marine container shipping industry and established our business. In 1958, we introduced container shipping to the Puerto Rico market, and in 1964 we pioneered container shipping in Alaska with the first year-round vessel service. In 1987, we began operating vessels between the U.S. west coast and Hawaii and Guam. We believe that our brand is synonymous with quality and operational excellence and intend to continue to build and leverage it in order to further enhance our business.

Maintain leading information technology.    We are focused on maintaining our Horizon IT system, or HITS, as an industry-leading ocean shipping and logistics information technology system with cargo booking, tracking and tracing capabilities more advanced than those of any system employed by our competitors. All orders that we receive through any medium are booked and processed through HITS, which has electronic data interface capabilities, including an Internet portal, which enables us to achieve operating efficiencies. Since its launch in 2000, we have migrated our customers to the on-line interfaces of HITS, with on-line bookings via HITS exceeding 57% of our total bookings. We have also made available to our customers, through HITS, automated cargo booking, tracking and tracing so our customers can reduce their labor time and costs with respect to these activities. We routinely incorporate additional capabilities into HITS to further differentiate us from our competitors. We believe that HITS’ functionality and cost savings potential for our customers produce strong loyalty.

Pursue new business opportunities.    We actively pursue new business opportunities in addition to growing our core business. For example, in June, 2004, we were awarded a contract by the U.S. Military Sealift Command to manage seven vessels under a one-year renewable contract. Through our performance of these management services, we believe that we can develop an effective relationship with the U.S. Military Sealift Command and demonstrate our breadth and depth of capabilities and become a leading candidate in the future for the award of additional vessel management contracts. In addition, the Port of Jacksonville, Florida, subject to receipt of funding from the U.S. Department of Transportation, has chosen us to develop and launch a new information technology system based on HITS to track all containers (and their contents) entering or departing the port. In the future, we intend

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to explore business opportunities that may arise in areas such as marine container shipping and logistics on trade routes between ports within the continental U.S. (i.e., the contiguous Jones Act markets).

Reduce operating costs.    We continually seek to identify opportunities to reduce our operating costs, and our continued examination of unit cost economics is a critical part of our culture. We have been successful in improving our EBITDA margin from 9.54% for the twelve months ended December 21, 2003 to 11.53% for the twelve months ended December 26, 2004, an increase of 20.87%. We have several multi-functional process improvement teams engaged in cost-saving and cost-reduction initiatives for 2005. These teams are focused on the major cost areas of inland cargo operations (including truck, rail and equipment management), equipment maintenance, vessel overhaul and drydocking and technology. Each of these teams has specific cost-savings goals and objectives and tracks its progress against its goals using quantitative measures. In addition, we focus on enhancing safety practices in our terminals and on our vessels through aggressive internal safety programs conducted with the active backing of our senior management. Over the short term, these safety programs have already yielded reductions in our expenses related to worker compensation, personal injury, and cargo claims, and, over the long term, we expect these programs to continue to yield savings in our insurance costs.

Our Acquisition by the Castle Harlan Group

Our current ownership and corporate structure relates to the acquisition by the issuer, Horizon Lines, Inc. of Horizon Lines Holding Corp. on July 7, 2004. The foregoing acquisition, referred to in this prospectus as the “acquisition,” included a merger, referred to in this prospectus as the “merger,” whereby Horizon Lines Holding became our direct wholly owned subsidiary. We were formed at the direction of Castle Harlan Partners IV, L.P., or CHP IV, a private equity investment fund managed by Castle Harlan, Inc., or Castle Harlan, which provided a substantial portion of our equity financing and bridge financing in connection with the acquisition. See “—Our Equity Sponsor, The Castle Harlan Group” on page      of this prospectus.

The consideration that was paid in the acquisition consisted of approximately $663.3 million in cash, net of purchase price adjustments, but including transaction costs. This amount was used to repay certain indebtedness of Horizon Lines Holding and its subsidiaries, to pay the equity holders of Horizon Lines Holding for their equity interests in Horizon Lines Holding, and to pay certain other equity holders for their minority equity interests in Horizon Lines, LLC, the principal operating subsidiary of Horizon Lines Holding.

In connection with the acquisition, CHP IV and its associates and affiliates invested approximately $157.0 million in us, of which approximately $87.0 million was in the form of our common shares and, Series A redeemable preferred shares, or Series A preferred shares, and $70.0 million was in the form of our 13% promissory notes, which were convertible into our common shares and Series A preferred shares. In addition, as part of the merger, management converted a portion of its equity interest in Horizon Lines Holding, valued at the time of the merger at approximately $13.0 million, into our equity.

For information regarding the acquisition and related matters and subsequent developments concerning our capitalization, see “Historical Transactions Summary” on page       .

As of the date hereof, without giving effect to this offering, CHP IV and its affiliates and associates beneficially own approximately 65% of our common stock on a fully diluted basis and our management team, including family members, beneficially owns approximately 19% of our common stock on a fully diluted basis.

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Our Equity Sponsor, The Castle Harlan Group

Castle Harlan is a New York-based private equity investment firm founded in 1987 specializing in investments in middle-market companies through leveraged buyouts, industry consolidations, divestitures, restructurings, turnarounds, workouts, and bankruptcies. Since its inception, Castle Harlan has invested, on behalf of the private equity funds which it manages, in 40 companies with a total enterprise value of approximately $7.0 billion. Castle Harlan has maintained a disciplined strategy and achieved success in making control investments in middle-market companies, becoming one of the premier equity sponsors within this sector. Castle Harlan’s initial investment in us of approximately $157.0 million was funded by CHP IV and its affiliates and associates. CHP IV is an investment fund, which, together with certain of its affiliated investment funds, has approximately $1.2 billion in commitments from its limited partners. CHP IV was closed in August 2003. Castle Harlan’s portfolio companies include Morton’s Restaurant Group, Inc., Ames True Temper, Inc. and Caribbean Restaurants, LLC.

We refer to Castle Harlan and its affiliates and associates (other than us and our subsidiaries) in this prospectus as “The Castle Harlan Group.”

Corporate Information

Our principal executive offices are located at 4064 Colony Road, Suite 200, Charlotte, North Carolina 28211. Our telephone number is (704) 973-7000. Our website address is http://www.horizonlines.com. The contents of our website are not incorporated by reference into this prospectus.

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The Offering

Shares of Class A common stock and shares of Class B common stock will be identical (including with respect to voting rights), except for (i) the Special Class B Dividend which we will pay on July 8, 2005 to the holders of outstanding shares of Class B common stock of record on such date, (ii) the convertibility of Class B common stock into Class A common stock prior to the payment in full of the Special Class B Dividend as described herein and (iii) the right of the holders of the Class B common stock to consent to any changes to our governing documents that would adversely affect the Class B common stock.

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In the event that the net proceeds from this offering are less than $             million, we will reduce the amount of the net proceeds from this offering applied to redeem the 9% senior notes and/or the 11% senior discount notes.

Immediately prior to the consummation of this offering, members of our management team (and their family members) will enter into agreements with us requiring them to purchase, with the proceeds of the Special Class B Dividend, an aggregate amount of approximately $6.4 million of shares of our Class A common stock at the initial public offering price per share. See “Certain Relationships and Related Party Transactions—Reinvestment Agreements,” on page          of this prospectus.

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Except as otherwise indicated in this prospectus, the number of common shares to be outstanding immediately after the consummation of the Offering-Related Transactions excludes a total of              shares of our common stock that may be purchased if the underwriters exercise in full their option to purchase additional shares.

Risk Factors

You should carefully consider all of the information set forth in this prospectus and, in particular, the information under the heading “Risk Factors” beginning on page      prior to purchasing the common shares offered by us.

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Summary Consolidated, Combined and Unaudited Pro Forma Financial Data

The following tables provide summary consolidated, combined and unaudited pro forma financial data and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated and combined financial statements and the related notes appearing elsewhere in this prospectus.

The combined and consolidated balance sheet data and statement of operations data as of and for the year ended December 22, 2002 and for the twelve months ended December 21, 2003 and December 26, 2004 presented below have been derived from the audited financial statements contained in this prospectus. The combined and consolidated statement of operations data for the twelve months ended December 21, 2003 is derived by combining the statement of operations data for the period December 23, 2002 through February 26, 2003 with the data for the period from February 27, 2003 through December 21, 2003. The combined and consolidated statement of operations data for the twelve months ended December 26, 2004 is derived by combining the statement of operations data for the period December 22, 2003 through July 6, 2004 with the data for the period from July 7, 2004 through December 26, 2004.

The unaudited pro forma combined and consolidated statement of operations data for the twelve months ended December 26, 2004 is derived by combining the statement of operations data for the period December 22, 2003 through July 6, 2004 with data for the period from July 7, 2004 through December 26, 2004 and gives effect to the Acquisition-Related Transactions and the Post-Acquisition Transactions, which are described in “Historical Transactions Summary,” on page          of this prospectus as well as to the Offering-Related Transactions, as if they had occurred on December 22, 2003. The unaudited pro forma balance sheet data as of December 26, 2004 is derived from the balance sheet as of that date and gives effect to the Acquisition-Related Transactions, the Post-Acquisition Transactions, and the Offering-Related Transactions, as if they had occurred on December 22, 2003. The unaudited pro forma financial data does not purport to represent what our results of operations would have been if the transactions referred to above had occurred as of such dates or what such results will be for future periods. See “Unaudited Pro Forma Condensed Consolidated Financial Statements” on page          for a description of items or events that may impact the pro forma information.

The issuer was formed in connection with the Acquisition-Related Transactions and has no independent operations. All combined and consolidated financial data for the period (or any portion thereof) from December 24, 2001 through February 26, 2003 reflect the combined company CSX Lines, LLC and its wholly owned subsidiaries, CSX Lines of Puerto Rico, Inc., and the Domestic Liner Business of SL Service, Inc. (formerly known as Sea-Land Service, Inc.), all of which were stand-alone wholly owned entities of CSX Corporation. All combined and consolidated financial data for the period (or any portion thereof) from February 27, 2003 through July 6, 2004 reflect Horizon Lines Holding on a consolidated basis. All combined and consolidated financial data for the period (or any portion thereof) from July 7, 2004 through December 26, 2004 reflect the issuer on a consolidated basis.

We have a 52 or 53 week year which ends on the Sunday before the last Friday in December. Each of the year ended December 22, 2002 and the twelve months ended December 21, 2003 consisted of 52 weeks. The twelve months ended ended December 26, 2004 consisted of 53 weeks.

Certain prior period balances have been reclassified to conform with the current period presentation.

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The information for the twelve months ended December 21, 2003 and December 26, 2004 presented below reflects financial data for us and our predecessors that has been combined and consolidated to present this information on a comparative annual basis. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page          in this prospectus for a description of the items or events that may impact the period-to-period comparability of the operating results covered by the following tables:

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RISK FACTORS

You should carefully consider the risk factors set forth below as well as the other information included in this prospectus before buying shares of common stock. The risks described below are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cash flows. In that case, you may lose all or part of your investment.

Risks Related to Our Business

Our cash flows and capital resources may be insufficient to make required payments on our substantial indebtedness and future indebtedness.

As of December 26, 2004, on a consolidated basis, we had approximately $610.2 million of outstanding long-term debt (exclusive of outstanding letters of credit with an aggregate face amount of $6.0 million), net of current portion, including capital lease obligations, and approximately $327.5 million of aggregate trade payables, accrued liabilities and other balance sheet liabilities (other than the long-term debt referred to above).

As of December 26, 2004, on a consolidated pro forma basis after giving effect to the 2005 Transactions and the Offering-Related Transactions, we would have had approximately $514.1 million of outstanding long-term debt (exclusive of outstanding letters of credit with an aggregate face amount of $6.0 million), net of current portion, including capital lease obligations, and approximately $327.5 million of aggregate trade payables, accrued liabilities and other balance sheet liabilities (other than the long-term debt referred to above).

Because we have substantial debt, we require significant amounts of cash to fund our debt service obligations. Our ability to generate cash to meet scheduled payments or to refinance our obligations with respect to our debt depends on our financial and operating performance which, in turn, is subject to prevailing economic and competitive conditions and to the following financial and business factors, some of which may be beyond our control:

In the future, our cash flow and capital resources may not be sufficient to pay the principal and interest on our indebtedness. If our cash flow and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and might be forced to reduce or

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delay capital expenditures, dispose of material assets or operations, seek to obtain additional equity capital, or restructure or refinance our indebtedness. Such alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In particular, in the event that we are required to dispose of material assets or operations to meet our debt service obligations, we cannot be sure as to the timing of such dispositions or the proceeds that we would realize therefrom. The value realized from such dispositions will depend on market conditions and the availability of buyers, and, consequently, any such disposition may not, among other things, result in sufficient cash proceeds to repay our indebtedness. Also, the senior credit facility and the indentures governing the 9% senior notes and the 11% senior discount notes contain covenants that may limit our ability to dispose of material assets or operations or to restructure or refinance our indebtedness. Further, we cannot assure you that we will be able to restructure or refinance any of our indebtedness or obtain additional financing, given the uncertainty of prevailing market conditions from time to time, our high levels of indebtedness and the various debt incurrence restrictions imposed by the senior credit facility and the indentures for the 9% senior notes and the 11% senior discount notes. If we are able to restructure or refinance our indebtedness or obtain additional financing, the economic terms on which such indebtedness is restructured, refinanced or obtained may not be favorable to us.

We may incur substantial indebtedness in the future. The terms of the senior credit facility and the indentures governing the 9% senior notes and the 11% senior discount notes permit us to incur or guarantee additional indebtedness under certain circumstances. As of December 26, 2004, Horizon Lines Holding and Horizon Lines had, and, on a pro forma basis after giving effect to the 2005 Transactions and the Offering-Related Transactions, they would have had, approximately $19.0 million of additional borrowing availability under the revolving credit facility, subject to compliance with the financial and other covenants and the other terms set forth therein. Our incurrence of additional indebtedness would intensify the risk that our future cash flow and capital resources may not be sufficient for payments of interest on and principal of our substantial indebtedness.

Financial and other covenants under our current and future indebtedness could significantly impair our ability to operate our business.

The senior credit facility contains covenants that, among other things, restrict the ability of Horizon Lines Holding and its subsidiaries to:

In addition, under the senior credit facility, Horizon Lines Holding and its subsidiaries are required to comply with financial covenants, comprised of leverage and interest coverage ratio requirements. Their ability to comply with these covenants will depend on their ongoing financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond their control, and will be substantially dependent on our financial and operating performance which, in turn, is subject to prevailing economic and competitive

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conditions and to various financial and business factors, including those discussed in the other risk factors disclosed in this prospectus, some of which may be beyond our control.

The indentures that govern the 9% senior notes and the 11% senior discount notes also contain restrictive covenants that, among other things, limit the ability of Horizon Lines Holding and its subsidiaries, in the case of the 9% senior notes, and H-Lines Finance Holding, in the case of the 11% senior discount notes, to:

The breach of any of the covenants or restrictions contained in the senior credit facility could result in a default under the indenture governing the 9% senior notes that would permit the noteholders thereunder to declare all amounts outstanding under such indenture to be due and payable, together with accrued and unpaid interest, resulting in the acceleration of the amounts outstanding under the senior credit facility as well. Similarly, the breach of any of the covenants or restrictions contained in the indenture governing the 9% senior notes would permit the lenders under the senior credit facility to declare all amounts outstanding under such facility to be due and payable, together with accrued and unpaid interest, resulting in the acceleration of the amounts outstanding under such indenture. In the event of a breach of any of the covenants or restrictions contained in the senior credit facility or the indenture governing the 9% senior notes, the noteholders under the indenture governing the 11% senior discount notes would be permitted to declare all amounts outstanding under such indenture to be due and payable, together with accrued and unpaid interest.

In any such case, Horizon Lines Holding and its subsidiaries may be unable to repay the amounts due under the senior credit facility or under the indenture governing the 9% senior notes, and H-Lines Finance Holding may not be able to repay the amounts due under the indenture governing the 11% senior discount notes. Subject to certain limited exceptions, the senior credit facility prohibits prepayment of principal under the indenture governing the 9% senior notes, whether upon acceleration or otherwise, and neither the senior credit facility nor the indenture governing the 9% senior notes permits significant distributions of cash to H-Lines Finance Holding to fund payments of principal due under the indenture governing the 11% senior discount notes, whether upon acceleration or otherwise. This could have serious consequences to our financial condition and results of operations and could cause us to become bankrupt or insolvent.

Our substantial indebtedness and future indebtedness could significantly impair our operating and financial condition.

The required payments on our substantial indebtedness and future indebtedness, as well as the restrictive covenants contained in the senior credit facility and the indentures governing the 9% senior notes and the 11% senior discount notes, could significantly impair our operating and financial condition. For example, these required payments and restrictive covenants could:

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We may incur substantial indebtedness in the future. Our incurrence of additional indebtedness would intensify the risks described above.

If we are unable to implement our business strategy, our future results could be adversely affected.

Our future results of operations will depend in significant part on the extent to which we can implement our business strategy successfully. Our business strategy includes providing complete shipping and logistics services, leveraging our capabilities to serve a broad range of customers, leveraging our brand, maintaining industry-leading information technology, and reducing operating costs. Our strategy is subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control. As a consequence, we may not be able to fully implement our strategy or realize the anticipated results of our strategy.

A decrease in shipping volume in our markets will adversely affect our business.

Demand for our shipping services depends on levels of shipping in our Jones Act markets and in the Guam market, as well as on economic and trade growth and logistics. Cyclical or other recessions in the continental U.S. or in these markets can negatively affect our operating results as customers may ship fewer containers or may ship containers only at reduced rates. We cannot predict whether or when such downturns will occur.

Our failure to renew our commercial agreements with Maersk in the future could have a material adverse effect on our business.

We have several commercial agreements with Maersk, an international shipping company, that encompass terminal services, equipment sharing, cargo space charters, sales agency services, and trucking services. For example, under these agreements, Maersk provides us with terminal services at our seven ports located in the continental U.S. (Elizabeth, New Jersey; Jacksonville, Florida; New Orleans, Louisiana; Houston, Texas; Los Angeles and Oakland, California; and Tacoma, Washington). In general, these agreements, which were renewed and amended in May 2004, are scheduled to expire at the end of 2007. If we fail to renew these agreements in the future, the requirements of our business will necessitate that we enter into substitute commercial agreements with third parties for at least some portion of the services contemplated under our existing commercial agreements with Maersk, such as terminal services at our ports located in the continental U.S. There can be no assurance that, if we fail to renew our commercial agreements with Maersk, we will be successful in negotiating and entering into substitute commercial agreements with third parties and, even if we succeed in doing so, the terms and conditions of these new agreements, individually or in the aggregate, may be significantly less favorable to us than the terms and conditions of our existing agreements with Maersk or others. Furthermore, if we do enter into substitute commercial agreements with third parties, changes in our operations to comply with the requirements of these new agreements

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(such as our use of other terminals in our existing ports in the continental U.S. or our use of other ports in the continental U.S.) may cause disruptions to our business, which could be significant, and may result in additional costs and expenses and possible losses of revenue.

Rising fuel prices may adversely affect our profits.

Fuel is a significant operating expense for our shipping operations. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. As a result, increases in the price of fuel, such as we are currently experiencing, may adversely affect profitability. There can be no assurance that our customers will agree to bear such fuel price increases via fuel surcharges without a reduction in their volumes of business with us nor any assurance that our future fuel hedging efforts (if any) will be successful.

Our industry is unionized and strikes by our union employees or others in the industry may disrupt our services and adversely affect our operations.

As of December 26, 2004, we had 1,742 employees, of which 1,172 were unionized employees represented by seven different labor unions. Our industry is susceptible to work stoppages and other adverse employee actions due to the strong influence of maritime trade unions. We may be adversely affected by future industrial action against efforts by our management or the management of other companies in our industry to reduce labor costs, restrain wage increases or modify work practices. In addition, in the future, we may not be able to negotiate, on terms and conditions favorable to us, renewals of our collective bargaining agreements with unions in our industry and strikes and disruptions may occur as a result of our failure or the failure of other companies in our industry to negotiate collective bargaining agreements with such unions successfully. Our collective bargaining agreements with our unions are scheduled to expire as follows—International Brotherhood of Teamsters: 2005, 2008 and 2010; Seafarers International Union: 2006; Office & Professional Employees International Union: 2007; International Longshore and Warehouseman’s Union: 2007 and 2008; International Longshoremen’s Association: 2010; Marine Engineers Beneficial Association: 2012; and International Organization of Masters, Mates & Pilots: 2012.

Our employees are covered by federal laws that may subject us to job-related claims in addition to those provided by state laws.

Some of our employees are covered by several maritime statutes, including provisions of the Jones Act, the Death on the High Seas Act, the Seamen’s Wage Act and general maritime law. These laws typically operate to make liability limits established by state workers’ compensation laws inapplicable to these employees and to permit these employees and their representatives to pursue actions against employers for job-related injuries in federal courts. Because we are not generally protected by the limits imposed by state workers’ compensation statutes for these employees, we may have greater exposure for any claims made by these employees than is customary in the United States.

Due to our participation in multi-employer pension plans, we may have exposure under those plans that extends beyond what our obligations would be with respect to our employees.

We contribute to fourteen (14) multi-employer pension plans. In the event of a partial or complete withdrawal by us from any plan which is underfunded, we would be liable for a proportionate share of such plan’s unfunded vested benefits. Based on the limited information available from plan administrators, which we cannot independently validate, we believe that our portion of the contingent liability in the case of a full withdrawal or termination would be material to our financial position and results of operations. In the event that any other contributing employer withdraws from any plan which

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is underfunded, and such employer (or any member in its controlled group) cannot satisfy its obligations under the plan at the time of withdrawal, then we, along with the other remaining contributing employers, would be liable for our proportionate share of such plan’s unfunded vested benefits. We have no current intention of taking any action that would subject us to any withdrawal liability and cannot assure you that no other contributing employer will take such action.

In addition, if a multi-employer plan fails to satisfy the minimum funding requirements, the Internal Revenue Service, pursuant to Section 4971 of the Internal Revenue Code of 1986, as amended, referred to herein as the Code, will impose an excise tax of five (5%) percent on the amount of the accumulated funding deficiency. Under Section 413(c)(5) of the Code, the liability of each contributing employer, including us, will be determined in part by each employer’s respective delinquency in meeting the required employer contributions under the plan. The Code also requires contributing employers to make additional contributions in order to reduce the deficiency to zero, which may, along with the payment of the excise tax, have a material adverse impact on our financial results.

Compliance with safety and environmental protection and other governmental requirements may adversely affect our operations.

The shipping industry in general, and, our business and the operation of our vessels and terminals in particular, are affected by extensive and changing safety, environmental protection and other international, national, state and local governmental laws and regulations. For example, our vessels, as U.S.-flagged vessels, generally must be maintained “in class” and are subject to periodic inspections by the American Bureau of Shipping or similar classification certification groups, and must be periodically inspected by, or on behalf of, the U.S. Coast Guard. In addition, the United States Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation & Liability Act requires us, as vessel operators, to post bonds or certificates of financial responsibility and to adopt procedures for oil or hazardous substance spill prevention, response and clean up. In complying with these laws, we have incurred expenses and may incur future expenses for ship modifications and changes in operating procedures. Changes in enforcement policies for existing requirements and additional laws and regulations adopted in the future could limit our ability to do business or further increase the cost of our doing business.

We believe our vessels are maintained in good condition in compliance with present regulatory requirements, are operated in compliance in all material respects with applicable safety/environmental laws and regulations and are insured against the usual risks for such amounts as our management deems appropriate. Our vessels’ operating certificates and licenses are renewed periodically during the required annual surveys of the vessels. However, there can be no assurance that such certificates and licenses will be renewed. Also, in the future, we may have to alter existing equipment, add new equipment to, or change operating procedures for, our vessels to comply with changes in governmental regulations, safety or other equipment standards or to meet our customers’ changing needs. If any such costs are material, they could adversely affect our financial condition.

We are subject to new statutory and regulatory directives in the United States addressing homeland security concerns.

Various government agencies within the Department of Homeland Security (referred to in this prospectus as “DHS”), including the Transportation Security Administration, the U.S. Coast Guard, and U.S. Bureau of Customs and Border Protection, have adopted, and may adopt in the future, new rules, policies or regulations or changes in the interpretation or application of existing laws, rules, policies or regulations, compliance with which could increase our costs or result in loss of revenue.

The Coast Guard’s new maritime security regulations, issued pursuant to the Maritime Transportation Security Act of 2002, require us to operate our vessels and facilities pursuant to both

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the maritime security regulations and approved security plans. Our vessels and facilities are subject to periodic security compliance verification examinations by the Coast Guard. A failure to operate in accordance with the maritime security regulations or the approved security plan may result in the imposition of a fine or control and compliance measures, including the suspension or revocation of the security plan, thereby making the vessel or facility ineligible to operate. We are also required to audit these security plans on an annual basis and, if necessary, submit amendments to the Coast Guard for their review and approval. Failure to timely submit the necessary amendments may lead to the imposition of the fines and control and compliance measures mentioned above. Failure to meet the requirements of the maritime security regulations could have a material adverse effect on our results of operations.

DHS may adopt additional security-related regulations, including new requirements for screening of cargo and our reimbursement to the agency for the cost of security services. These new security-related regulations could have an adverse impact on our ability to efficiently process cargo or could increase our costs. In particular, our customers typically need quick shipping of their cargos and rely on our on-time shipping capabilities. If these regulations disrupt or impede the timing of our shipments, we may fail to meet the needs of our customers, or may increase expenses to do so.

Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.

Domestic and international container shipping is subject to various security and customs inspection and related procedures, referred to herein as inspection procedures, in countries of origin and destination as well as in countries in which transshipment points are located. Inspection procedures can result in the seizure of containers or their contents, delays in the loading, offloading, transshipment or delivery of containers and the levying of customs duties, fines or other penalties against exporters or importers (and, in some cases, shipping and logistics companies such as us). Failure to comply with these procedures may result in the imposition of fines and/or the taking of control or compliance measures by the applicable governmental agency, including the denial of entry into U.S. waters.

We understand that, currently, only a small proportion of all containers delivered to the United States are physically inspected by U.S., state or local authorities prior to delivery to their destinations. The U.S. government, foreign governments, international organizations, and industry associations have been considering ways to improve and expand inspection procedures. It is unclear what changes, if any, to the existing inspection procedures will be proposed or implemented, or how any such changes will affect shipping and logistics companies such as us. It is possible, however, that such changes could impose additional financial and legal obligations on us, including additional responsibility for physically inspecting and recording the contents of containers we are shipping. In addition, changes to inspection procedures could impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo by container uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, financial condition and results of operations.

Restrictions on foreign ownership of our vessels could limit our ability to sell off any portion of our business or result in the forfeiture of our vessels.

U.S. law requires that, to be eligible to operate a vessel in any of the non-contiguous Jones Act markets, the company that owns and operates the vessel must be at least 75% owned and controlled by U.S. citizens at each tier of ownership. The Jones Act, therefore, restricts, directly or indirectly, the foreign ownership interests in the entities that directly or indirectly own the vessels which we operate in the non-contiguous Jones Act markets. If we were to seek to sell any portion of our business that owns

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any of these vessels, we would have fewer potential purchasers, since some potential purchasers might be unable or unwilling to satisfy the foreign ownership restrictions described above. As a result, the sales price for that portion of our business may not attain the amount that could be obtained in an unregulated market. Furthermore, at any point Horizon Lines ceases to be 75% owned and controlled by U.S. citizens, we may become subject to penalties and risk forfeiture of our vessels or become unable to operate in our current markets.

Repeal or substantial amendment of the Jones Act or its application could have a material adverse effect on our business.

The Jones Act provides that all vessels operating between any two U.S. ports must be built in the U.S. and owned, operated and crewed substantially by U.S. citizens. However, the Jones Act may be repealed or amended in the future. If the Jones Act were to be repealed or substantially amended and, as a consequence, competition were to increase in any of our Jones Act markets, our business would be materially adversely affected. In addition, our advantage as a U.S.-citizen operator of Jones Act vessels could be eroded by periodic efforts and attempts by foreign interests to circumvent certain aspects of the Jones Act. If maritime cabotage services were included in the General Agreement on Trade in Services, the North American Free Trade Agreement or other international trade agreements, or if the restrictions contained in the Jones Act were otherwise altered, the shipping of maritime cargo between U.S. ports could be opened to foreign-flag or foreign-built vessels.

No assurance can be given that our insurance costs will not escalate.

Our protection and indemnity insurance, referred to as P&I, is provided by a mutual P&I club which is a member of the International Group Association of P&I Clubs. As a mutual club, it relies on member premiums, investment reserves and income, and reinsurance to manage liability risks on behalf of its members. Increased investment losses, underwriting losses, or reinsurance costs could cause international marine insurance clubs to substantially raise the cost of premiums, resulting not only in higher premium costs but also higher levels of deductibles and self-insurance retentions.

Catastrophic losses and other liabilities could adversely affect our results of operations and such losses and liability may be beyond insurance coverage.

The operation of any oceangoing vessel carries with it an inherent risk of catastrophic maritime disaster, mechanical failure, collision, and loss of or damage to cargo. Also, in the course of the operation of our vessels, marine disasters, such as oil spills and other environmental mishaps, cargo loss or damage, and business interruption due to political or other developments, as well as maritime disasters not involving us, labor disputes, strikes and adverse weather conditions, could result in loss of revenue, liabilities or increased costs, personal injury, loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage and suspension of operations. Damage arising from such occurrences may result in lawsuits asserting large claims.

Although we maintain insurance, including retentions and deductibles, at levels that we believe are consistent with industry norms against the risks described above, including loss of life, there can be no assurance that this insurance would be sufficient to cover the cost of damages suffered by us from the occurrence of all of the risks described above or the loss of income resulting from one or more of our vessels being removed from operation. We also cannot assure you that a claim will be paid or that we will be able to obtain insurance at commercially reasonable rates in the future. Further, if we are negligent or otherwise responsible in connection with any such event, our insurance may not cover our claim.

In the event that any of the claims arising from any of the foregoing possible events were assessed against us, all of our assets could be subject to attachment and other judicial process.

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As a result of the significant insurance losses incurred in the September 11, 2001 attack and related concern regarding terrorist attacks, global insurance markets increased premiums and reduced or restricted coverage for terrorist losses generally. Accordingly, premiums payable for terrorist coverage have increased substantially and the level of terrorist coverage has been significantly reduced.

Additionally, new and stricter environmental regulations have led to higher costs for insurance covering environmental damage or pollution, and new regulations could lead to similar increases or even make this type of insurance unavailable.

Our spare vessel reserved for relief may be inadequate under extreme circumstances.

We generally keep a spare vessel in reserve available for relief if one of our vessels in active service suffers a maritime disaster or must be unexpectedly removed from service for repairs. However, this spare vessel may require several days of sailing before it can replace the other vessel, resulting in service disruptions and loss of revenue. If more than one of our vessels in active service suffers a maritime disaster or must be unexpectedly removed from service, we may have to redeploy vessels from our other trade routes, or lease one or more vessels from third parties. As there is a relatively limited supply of U.S.-built, U.S.-owned and U.S.-flagged container vessels available for short- or long-term lease, especially on short notice, we may be unable to lease any such vessels or be faced with prohibitively high lease rates. In any such case, we may suffer a material adverse effect on our business, our operating results and our financial condition.

Interruption or failure of our information technology and communications systems could impair our ability to effectively provide our shipping and logistics services, especially HITS, which could damage our reputation and harm our operating results.

Our provision of our shipping and logistics services depends on the continuing operation of our information technology and communications systems, especially HITS. We have experienced brief system failures in the past and may experience brief or substantial failures in the future. Any failure of our systems could result in interruptions in our service reducing our revenue and profits and damaging our brand. Some of our systems are not fully redundant, and our disaster recovery planning does not account for all eventualities. The occurrence of a natural disaster, or other unanticipated problems at our facilities at which we maintain and operate our systems could result in lengthy interruptions or delays in our shipping and logistics services, especially HITS. We are in the process of migrating our information technology systems from a mainframe to a client/server model. This transition may result in unanticipated service disruptions or higher operating costs that could also harm our operating results or damage our reputation.

Our vessels could be arrested by maritime claimants, which could result in significant loss of earnings and cash flow.

Crew members, suppliers of goods and services to a vessel, shippers of cargo, lenders and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a claimant may enforce its lien by either arresting or attaching a vessel through foreclosure proceedings. Moreover, crew members may place liens for unpaid wages that can include significant statutory penalty wages if the unpaid wages remain overdue (e.g., double wages for every day during which the unpaid wages remain overdue). The arrest or attachment of one or more of our vessels could result in a significant loss of earnings and cash flow for the period during which the arrest or attachment is continuing.

In addition, international vessel arrest conventions and certain national jurisdictions allow so-called sister-ship arrests, which allow the arrest of vessels that are within the same legal ownership as the vessel which is subject to the claim or lien. Certain jurisdictions go further, permitting not only the arrest of vessels within the same legal ownership, but also any associated vessel. In nations with

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these laws, an association may be recognized when two vessels are owned by companies controlled by the same party. Consequently, a claim may be asserted against us or any of our vessels for the liability of one or more of the other vessels that we own.

We are susceptible to severe weather and natural disasters.

Our operations are vulnerable to disruption as a result of weather and natural disasters such as bad weather at sea, hurricanes, typhoons and earthquakes. Such events will interfere with our ability to provide the on-time scheduled service our customers demand resulting in increased expenses and potential loss of business associated with such events. In addition, severe weather and natural disasters can result in interference with our terminal operations, and may cause serious damage to our vessels, loss or damage to containers, cargo and other equipment and loss of life or physical injury to our employees. Terminals in the South Pacific Ocean, particularly in Guam, and terminals on the east coast of the continental U.S. and in the Caribbean are particularly susceptible to hurricanes and typhoons. In the recent past, the terminal at our port in Guam was seriously damaged by a typhoon and our terminal in Puerto Rico was seriously damaged by a hurricane. These storms resulted in damage to cranes and other equipment and closure of these facilities. Earthquakes in Anchorage and in Guam have also damaged our terminal facilities resulting in delay in terminal operations and increased expenses. Any such damage will not be fully covered by insurance.

We may face new competitors.

Other established or start-up shipping operators may enter our markets to compete with us for business.

Existing non-Jones Act qualified shipping operators whose container ships sail between ports in Asia and the U.S. west coast could add Hawaii, Guam or Alaska as additional stops on their sailing routes for non-U.S. originated or destined cargo. Shipping operators could also add Puerto Rico as a new stop on sailings of their vessels between the continental U.S. and ports in Europe, the Caribbean, and Latin America for non-U.S. originated or destined cargo. Further, shipping operators could introduce U.S.-flagged vessels into service sailing between Guam and U.S. ports, including ports on the U.S. west coast or in Hawaii. On these routes to and from Guam no limits would apply as to the origin or destination of the cargo dropped off or picked up. In addition, current or new U.S. citizen shipping operators may purchase or charter vessels currently being built in U.S. shipyards or order the building of new vessels by U.S. shipyards and may introduce these U.S.-built vessels into Jones Act qualified service on one or more of our trade routes. These potential competitors may have access to financial resources substantially greater than our own. The entry of a new competitor on any of our trade routes could result in a significant increase in available shipping capacity that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Pasha Hawaii Transport Lines, a joint venture between The Pasha Group, a California-based automobile handling and logistics company, and Strong Vessel Operators LLC, a Connecticut-based operator of a U.S.-flagged ship on a trade route between the U.S. east coast and the Azores, recently announced plans to start-up a Jones Act qualified shipping service between Hawaii and San Diego, beginning in 2005, utilizing one roll-on/roll-off vessel. Pasha Hawaii has also announced that its new shipping service will handle the Chrysler Group’s new car shipping requirements for Hawaii under a multi-year contract, beginning in March 2005. While we believe that Pasha Hawaii’s new service will primarily handle the shipment of automobiles, the introduction of this new service will result in a significant increase in available shipping capacity in the Hawaii market that could create downward rate pressure for us or result in our loss of business.

We may not exercise our purchase options for our chartered vessels.

We intend to exercise our purchase options for up to five of the vessels that we have chartered upon the expiration of their charters. In July 2007, charters for two of our vessels expire, and in

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January 2015, charters for three of our vessels expire. There can be no assurance that, when these options become exercisable, the price at which these vessels may be purchased will be reasonable in light of the fair market value of these vessels at such time or that we will have the funds required to make these purchases. As a result, we may not exercise our options to purchase these vessels. If we do not exercise our options, we may need to renew our existing charters for these vessels or charter replacement vessels. There can be no assurance that our existing charters will be renewed, or, if renewed, that they will be renewed at favorable rates, or, if not renewed, that we will be able to charter replacement vessels at favorable rates.

We may face significant costs as our vessels age.

We believe that our vessels each have an estimated useful economic life of 45 years from the year it was built. The average age of our vessels is approximately 28 years. We expect to expend increasing expenses to operate and maintain our vessels in good condition as they age. Eventually, these vessels will need to be replaced. We may not be able to replace these vessels with new vessels based on uncertainties related to financing, timing and shipyard availability.

We may face unexpected substantial drydocking costs for our vessels.

Our vessels are drydocked periodically for repairs and renewals. The cost of repairs and renewals at each drydocking are difficult to predict with certainty and can be substantial. Our established processes have enabled us to make 27 drydockings in the last four years with a minimal impact on schedule. In addition, our vessels may have to be drydocked in the event of accidents or other unforeseen damage. Our insurance may not cover all of these costs. Large unpredictable drydocking expenses could significantly decrease our profits.

Loss of our key management personnel could adversely affect our business.

Our future success will depend, in significant part, upon the continued services of Charles G. Raymond, our President and Chief Executive Officer, John V. Keenan, our Senior Vice President and Chief Operating Officer, and M. Mark Urbania, our Senior Vice President—Finance and Administration and Chief Financial Officer. The loss of the services of any of these executive officers could adversely affect our future operating results because of such officer’s experience and knowledge of our business and customer relationships. If key employees depart, we may have to incur significant costs to replace them and our ability to execute our business model could be impaired if we cannot replace them in a timely manner. We do not expect to maintain key person insurance on any of our executive officers.

We are subject to, and may in the future be subject to, disputes, or legal or other proceedings, that could have a material adverse effect on us.

The nature of our business exposes us to the potential for disputes, or legal or other proceedings, from time to time relating to labor and employment matters, personal injury and property damage, environmental matters and other matters, as discussed in the other risk factors disclosed in this prospectus. In addition, as a common carrier, our tariffs, rates, rules and practices in dealing with our customers are governed by extensive and complex foreign, federal, state and local regulations which are the subject of disputes or administrative and/or judicial proceedings from time to time. These disputes, individually or collectively, could harm our business by distracting our management from the operation of our business. If these disputes develop into proceedings, these proceedings, individually or collectively, could involve significant expenditures by us or result in significant changes to our tariffs, rates, rules and practices in dealing with our customers that could have a material adverse effect on our future revenue and profitability.

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We are currently subject to two actions before the Surface Transportation Board, or STB. The first action, brought by the Government of Guam in 1998 on behalf of itself and its citizens against Horizon Lines and Matson Navigation Co., seeks a ruling from the STB that Horizon Lines’ Guam shipping rates during 1996-1998 were “unreasonable” under the ICC Termination Act of 1995, and an order awarding reparations to Guam and its citizens. The second action, brought by DHX, Inc., a freight forwarder, in 1999 against Horizon Lines and Matson, challenges the reasonableness of certain rates and practices of the defendants in the Hawaii trade. DHX is seeking $11.0 million in damages. An adverse STB decision in either of these actions could also affect the rates that Horizon Lines would be permitted to charge on its routes and could have a material adverse effect on our future revenue and profitability. On December 13, 2004, the STB issued a decision favorable to us with respect to the second action. However, DHX has filed a motion for reconsideration of the STB’s order. We have filed an opposition to this motion. No assurance can be given that the final decision of the STB with respect to this matter will be favorable to us.

Integrating acquisitions may be time-consuming and create costs that could reduce our net income and cash flows.

Part of our growth strategy may include pursuing acquisitions. Any integration process may be complex and time consuming, may be disruptive to our business and may cause an interruption of, or a distraction of our management’s attention from, our business as a result of a number of obstacles, including but not limited to:

Any of the foregoing obstacles, or a combination of them, could negatively impact our net income and cash flows.

We have not completed any acquisitions to date. We may not be able to consummate acquisitions in the future on terms acceptable to us, or at all. In addition, future acquisitions are accompanied by the risk that the obligations and liabilities of an acquired company may not be adequately reflected in the historical financial statements of that company and the risk that those historical financial statements may be based on assumptions which are incorrect or inconsistent with our assumptions or approach to accounting policies. Any of such obligations, liabilities or incorrect or inconsistent assumptions could adversely impact our results of operations.

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Risks Related to this Offering

There is no existing market for our common stock, and we do not know if one will develop to provide you with adequate liquidity. If the stock price fluctuates after this offering, you could lose a significant part of your investment.

Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the New York Stock Exchange or otherwise or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The initial public offering price for the shares was determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our common stock may be influenced by many factors, some of which are beyond our control, including those set forth below:

As a result of these factors, you may not be able to resell your shares at or above the initial offering price. In addition, the stock market has recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of a particular company. These broad market fluctuations and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of publicly traded shares of a company, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, which could materially and adversely harm our financial condition and results of operations.

The Castle Harlan Group, or an affiliate, will have effective control over most matters requiring the approval of our stockholders.

Upon the consummation of the Offering-Related Transactions, The Castle Harlan Group will own approximately             % of our common stock (            % if the underwriters’ option to purchase additional shares is exercised in full), and John K. Castle, who controls a majority of the shares of our common stock held by The Castle Harlan Group, will continue to be the voting trustee, pursuant to the voting trust agreement, with respect to the shares of our common stock held by our existing stockholders (other than the funds and accounts that are members of The Castle Harlan Group), representing approximately             % of our common stock (            % if the underwriters’ option to purchase additional shares is exercised in full). As a result, John K. Castle will have             % (            % if the underwriters’ option to purchase additional shares is exercised in full) of the total voting power of the outstanding shares of our common stock on all matters submitted to a vote of our stockholders, including the election of directors.

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So long as either The Castle Harlan Group continues to own a significant portion of the outstanding shares of our common stock, or our existing stockholders continue to own a significant portion of the outstanding shares of our common stock and the voting trust remains in effect, The Castle Harlan Group, or John K. Castle, as the case may be, will continue to be able to strongly influence or effectively control the election of our directors, subject to compliance with applicable New York Stock Exchange requirements, our decisions, policies, management and affairs, and corporate actions requiring stockholder approval, including the approval of transactions involving a change in control. The interests of The Castle Harlan Group, or John K. Castle, may not coincide with the interests of our other stockholders. In particular, The Castle Harlan Group is in the business of making investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. The Castle Harlan Group may also pursue, for its own account, acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us.

Our audit committee initially will not be comprised entirely of independent directors, which may create conflicts of interest.

We intend to avail ourselves of the transition periods provided for under the applicable rules of the New York Stock Exchange for issuers listing in conjunction with their initial public offering. As such, our audit committee is not required to consist solely of independent directors until one year following the consummation of this offering. A member of our audit committee is an officer of an affiliate of CHP IV, our principal stockholder, and was nominated to our board of directors by CHP IV and therefore does not meet the independence requirement for audit committees under the requirements of the New York Stock Exchange and the SEC. As a result of his position on our audit committee, he will have the ability to exert significant influence over our activities and decisions and our internal audit function and may have goals or views that may differ from those of our other stockholders or our management and, accordingly, his substantial influence over our affairs may create conflicts of interest.

Certain provisions of our charter documents and agreements and Delaware law could discourage, delay or prevent a merger or acquisition at a premium price.

Our certificate of incorporation and bylaws, from and after the consummation of the Offering-Related Transactions, will contain provisions that:

These provisions may discourage, delay or prevent a merger or acquisition at a premium price.

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In addition, we are subject to Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which also imposes certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our common stock. Further, certain of our future incentive plans may provide, for vesting of shares of common stock and/or payments to be made to our employees in connection with a change of control, which could discourage, delay or prevent a merger or acquisition at a premium price.

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.

If our existing stockholders sell substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decrease significantly. The perception in the public market that our existing stockholders might sell shares of common stock could also depress our market price. Upon the consummation of the Offering-Related Transactions, we will have              shares of common stock outstanding (assuming no exercise of the underwriters’ option to purchase additional shares), of which              million shares will be held by our existing stockholders. Prior to this offering, the issuer and certain of our existing stockholders holding in the aggregate              million shares of our common stock will have entered into “lock-up agreements” with the underwriters whereby these stockholders will have agreed to a “lock-up” period, meaning that such parties may not, subject to certain other exceptions, sell any of their existing shares of our common stock without the prior written consent of Goldman, Sachs & Co. and UBS Securities LLC until approximately 180 days after the date of this prospectus. Goldman, Sachs & Co. and UBS Securities LLC, on behalf of the underwriters, will be able, in their sole discretion, at any time or from time to time and without notice, to waive the terms and conditions of these lock-up agreements. Also, upon the consummation of this offering, all of our existing stockholders will be subject to the Rule 144 holding period requirements, in addition to continuing to be subject to certain contractual restrictions, including rights of first offer and co-sale, set forth in the stockholders agreement, unless waived, and all of our existing stockholders (other than the funds and accounts that are members of The Castle Harlan Group), will continue to be subject to the voting trust in favor of John K. Castle under the voting trust agreement described on page      of this prospectus, until such agreement terminates. When the lock-up agreements expire, the shares previously subject thereto will become eligible for sale, in some cases subject to the requirements of Rule 144 and the stockholders agreement and the voting trust agreement. The market price for shares of our common stock may drop significantly when the restrictions on resale by our existing stockholders lapse under Rule 144 and lapse or are waived under the lock-up agreements, the stockholders agreement and the voting trust agreement. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

Our certificate of incorporation currently limits the ownership of common stock by individuals and entities that are not U.S. citizens. This may affect the liquidity of our common stock and may result in non-U.S. citizens being required to sell their shares or losing their voting, dividend and distribution rights.

Under applicable U.S. maritime laws, at least 75% of the outstanding shares of each class or series of our capital stock must be owned and controlled by U.S. citizens within the meaning of such laws. Certain related provisions of our certificate of incorporation, as in effect from and after the consummation of this offering, are intended to facilitate compliance with this requirement and may have an adverse effect on holders of shares of the common stock issued and sold pursuant to this offering.

First, under the provisions of our certificate of incorporation, any transfer, or attempted transfer, of any shares of our capital stock would be void if the effect of such transfer, or attempted transfer, would

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be to cause one or more non-U.S. citizens in the aggregate to own (of record or beneficially) shares of any class or series of our capital stock in excess of 24.99% of the outstanding shares of such class or series. As a result, the liquidity or market value of the shares of common stock issued and sold pursuant to this offering may be adversely impacted.

Second, our certificate of incorporation will provide that, if the percentage of the shares of any class or series of our capital stock owned (of record or beneficially) by non-U.S. citizens is known to us to be in excess of 24.99%, we, in our sole discretion, shall be entitled to redeem all or any portion of such shares most recently acquired by non-U.S. citizens in excess of such maximum permitted percentage at a redemption price based on a formula set forth in our certificate of incorporation. As a result, an offeree (or a purchaser from such offeree) who is a non-U.S. citizen may be required to sell its shares of common stock at an undesirable time or price and may not receive any return on its investment in such shares. Further, we may have to incur additional indebtedness, or use available cash (if any), to fund all or a portion of such redemption, in which case our financial condition may be materially weakened.

Third, our certificate of incorporation will provide that in the event the effect of the transfer of any shares of our capital stock would be to cause one or more non-U.S. citizens in the aggregate to own (of record or beneficially) in excess of 24.99% of the outstanding shares of any class or series of our capital stock, the shares so transferred, to the extent such maximum permitted percentage is exceeded, shall not be accorded any voting, dividend or distribution rights while any such excess exists.

If non-U.S. citizens own more than 24.99% of our stock, we may not have the funds or the ability to redeem any excess shares and we could be forced to suspend our Jones Act operations.

Despite our ability to redeem shares owned by non-U.S. citizens in the event such persons own more than 24.99% of any class or series of our capital stock, we may not be able to effect such a redemption because our operations may not have generated sufficient excess cash flow to fund such a redemption. If such a situation occurs, there is no guarantee that we will be able to obtain the funds necessary to effect such a redemption on terms satisfactory to us or at all. In addition, the terms of the senior credit facility under which two of our wholly owned indirect subsidiaries, Horizon Lines Holding and Horizon Lines, LLC, are co-borrowers and their respective subsidiaries are guarantors, currently prohibit upstream payments, subject to limited exceptions. The terms of the indentures of our subsidiaries also contain limitations on upstream payments and any future indebtedness of our subsidiaries may contain similar limitations. If for any of the foregoing reasons or otherwise we are unable to effect such a redemption, we will likely be unable to comply with applicable maritime laws and will likely have our Jones Act, and potentially our other U.S.-port, operations suspended by governmental authorities. Any such actions by governmental authorities would have a severely detrimental impact on our results of operations.

We may elect not to pay dividends on our common stock.

We intend to adopt a dividend policy, effective upon the consummation of the Offering-Related Transactions, which reflects an intention to distribute a portion of the cash generated by our business in excess of operating needs, interest and principal payments on our indebtedness and capital expenditures as regular dividends to our stockholders. There can be no assurance, however, as to the amount and frequency of any such dividend or that a dividend will be paid at all. We have paid no cash dividends on any of our classes of capital stock to date and we currently intend to retain a substantial portion of our future earnings, if any, to make payments of principal and interest on our substantial

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indebtedness and to fund the development and growth of our businesses. As a result, capital appreciation, if any, of our common stock may be your sole source of potential gain for the foreseeable future.

We may not have the necessary funds to pay dividends on our common stock.

We will require continuing, significant cash flow in order for us to make payments of regular dividends to our stockholders in accordance with the dividend policy that we intend to adopt. However, we have no operations of our own and have derived, and will continue to derive, all of our revenues and cash flow from our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to make funds available us. They may not have sufficient funds or assets to permit payments to us in amounts sufficient to fund our anticipated dividend payments. Also, our subsidiaries are subject to contractual restrictions (including with their secured and unsecured creditors) that may limit their ability to upstream cash indirectly or directly to us. The $275.0 million senior credit facility under which two of our wholly owned indirect subsidiaries, Horizon Lines Holding and Horizon Lines, LLC, are co-borrowers and their respective subsidiaries are guarantors, currently prohibits upstream payments to our direct wholly owned subsidiary H-Lines Finance, the direct parent of Horizon Lines Holding, unless these payments are for essential operating purposes. Prior to the consummation of this offering we intend to negotiate an amendment to this credit facility to permit the greater availability of cash for the making of such payments. However, we may not be successful in the negotiation of such amendment. In addition, the indenture governing the 9% senior notes co-issued by Horizon Lines Holding and Horizon Lines, LLC, and guaranteed by their respective subsidiaries, generally prohibits the upstreaming of funds by these co-issuers or their subsidiaries to H-Lines Finance, unless certain financial and other covenants specified therein are complied with after giving effect to such payment. The indenture governing the 11% senior discount notes issued by H-Lines Finance contains similar restrictions on the ability of H-Lines Finance to upstream to us any cash that it may receive or generate. Thus, there is a significant risk that we may not have the requisite funds to make the regular dividend payments contemplated by the dividend policy that we intend to adopt.

Rising interest rates may adversely affect the market price of our common stock.

Because we intend to adopt a dividend policy providing for the payment of regular dividends to our stockholders, interest rates may affect, at times significantly, the market price of our common stock. In general, as interest rates increase, the market price of our common stock could decline. Interest rates are currently at relatively low levels and, therefore, the value of our common stock may decline if interest rates rise in the future.

Our dividend policy may limit our ability to pursue growth opportunities.

Our adoption of a dividend policy providing for the payment of regular dividends to our stockholders from our cash flow from our operations may significantly constrain our ability to finance any material expansion of our business or to fund our operations more than if we had retained such cash flow from our operations. In addition, our ability to pursue any material expansion of our business, including through acquisitions or increased capital spending, will depend more than it otherwise would on our ability to obtain third party financing. Such financing may not be available to us at an acceptable cost, or at all.

If you purchase shares of Class A common stock sold in this offering, you will experience immediate and substantial dilution.

Prior investors have paid substantially less per share for our common stock than the assumed initial public offering price. Accordingly, if you purchase shares of our Class A common stock in this offering at the initial public offering price of $              per share, you will experience immediate and substantial dilution of $              in pro forma net tangible book value per common share

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because the price that you pay will be substantially greater than the net tangible book value per common share of the shares you acquire, based on the net tangible book value per common share as of December 26, 2004, and after giving effect to the 2005 Transactions as of December 26, 2004.

We may be exposed to potential risks resulting from new requirements that we evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act.

After this offering, we will be required to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent auditors addressing these assessments. We may not be able to assess our current internal controls and comply with these requirements in due time. If we are able to proceed with a complete assessment in a timely manner, we may identify deficiencies which we may not be able to remediate, may identify deficiencies which will demand significant resources to remediate or may be unable to identify deficiencies at all. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such regulations are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information and the trading price of the common stock offered hereby could drop significantly. Our compliance with the Sarbanes-Oxley Act may require significant expenses and management resources that would need to be diverted from our other operations and could require a restructuring of our internal financial reporting. Any such expenses, time reallocations or restructuring could have a material adverse effect on our operations. The applicability of the Sarbanes-Oxley Act to us after the consummation of this offering could make it more difficult and more expensive for us to obtain director and officer liability insurance, and also make it more difficult for us to attract and retain qualified individuals to serve on our board of directors (and, particularly, our audit committee), or to serve as executive officers.

We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, you will not have the protection afforded by certain corporate governance requirements.

Upon the consummation of the Offering-Related Transactions, The Castle Harlan Group will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of The New York Stock Exchange corporate governance standards. Under the New York Stock Exchange rules, a company of which more than 50% of the voting power is held by another company is a “controlled company” and need not comply with certain requirements, including (1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, (3) the requirement that the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, and (4) the requirement that an annual performance evaluation be performed of the nominating/corporate governance and compensation committees. We intend to utilize these exemptions as long as permitted. As a result, we will not have a majority of independent directors on our board of directors (or on our executive committee) and neither our compensation committee nor our nominating and corporate governance committee will consist entirely of independent directors. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.

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If the net proceeds from the Offering-Related Transactions are less than $             million, we will repay a smaller portion of our indebtedness.

We intend to apply the net proceeds from the Offering-Related Transactions to our voluntary redemption of all of the outstanding shares of our Series A preferred stock, which has an aggregate stated value of $60.7 million, from our existing stockholders and the payment of a dividend in the approximate aggregate amount of $70.8 million to our existing stockholders, in their capacities as holders of our Class B common stock, before we apply the remainder of such net proceeds to our voluntary redemption of approximately $39.3 million in accreted value of the $160.0 million of aggregate principal amount at maturity of the 11% senior discount notes due 2013 and approximately $56.8 million of the $250.0 million of the aggregate principal amount of the 9% senior notes due 2012. As a result, if we do not receive net proceeds from the Offering-Related Transactions of at least $             million, we will have less funds available than anticipated to redeem such indebtedness.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes “forward-looking statements,” as defined by federal securities laws, with respect to our financial condition, results of operations and business. 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 risks 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; decreases in shipping volumes; our failure to renew our commercial agreements with Maersk; rising 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; 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 controlling stockholder; and legal or other proceedings to which we are or may become subject.

All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. 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. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur.

See the section entitled “Risk Factors,” beginning on page     , for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. These factors and the other risk factors described in this prospectus 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.

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TRADEMARKS AND SERVICE MARKS

We own or have rights to trademarks, service marks, copyrights and trade names that we use in conjunction with the operation of our business including, without limitation, Horizon Lines^®. This prospectus also includes trademarks, service marks and trade names of other companies. Our use or display of other companies’ trademarks, service marks, trade names or products is not intended to and does not imply, except as indicated, a relationship with, or endorsement or sponsorship of us by, these companies.

INDUSTRY AND MARKET DATA

Industry and market data used throughout this prospectus, including information relating to our relative position in the shipping and logistics industry are approximations based on the good faith estimates of our management, using internal surveys and sources, our own and other publicly available financial information, independent industry publications, reports or other publicly available information, including local port information. Although we believe that these sources are reliable, we do not guarantee the accuracy or completeness of this information, and we have not otherwise independently verified this information. Unless otherwise noted, financial data and industry and market data presented herein are for 2004.

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USE OF PROCEEDS

The net proceeds from this offering will be approximately $             million (approximately $             million if the underwriters exercise in full their option to purchase up to              additional shares of common stock).

We intend to

(i)     apply a portion of the net proceeds of this offering, within 180 days of the consummation of this offering, to the voluntary redemption of approximately $39.3 million in accreted value of the $160.0 million of aggregate principal amount at maturity 11% senior discount notes, and to the payment of a related redemption premium thereon;

(ii)     apply a portion of the net proceeds of this offering, within 180 days of the consummation of this offering, to the voluntary redemption of approximately $56.8 million of the $250.0 million aggregate principal amount of the 9% senior notes, and to the payment of accrued interest and a related redemption premium thereon;

(iii)     apply approximately $60.7 million of the net proceeds of this offering to redeem all of our outstanding shares of Series A preferred stock, at their stated value, on July 8, 2005; and

(iv)     apply approximately $70.8 million of the net proceeds of this offering to pay the Special Class B Dividend, in the approximate amount of $84.12 per share, to the holders of the Class B common stock, on July 8, 2005.

In the event that the net proceeds from this offering are less than $             million, we will reduce the amount of the net proceeds from this offering applied to redeem the 9% senior notes and/or the 11% senior discount notes.

The existing stockholders will be the only holders of our Class B common stock as of July 8, 2005, and, therefore, the only persons entitled to receive the Special Class B Dividend to be paid in full on such date.

Immediately prior to the consummation of this offering, members of our management team (and their family members) will enter into agreements with us requiring them to purchase, from the proceeds of the Special Class B Dividend, an aggregate amount of approximately $6.4 million of shares of our Class A common stock at the initial public offering price per share.

If the underwriters exercise, in full or in part, their option to purchase additional shares, all of the net proceeds of such exercise will be used to increase, on a dollar-for-dollar basis, the amount of the Special Class B Dividend paid on July 8, 2005.

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DILUTION

As of the date of this prospectus, we have one class of common stock. As described in “Basis of Presentation”, on page      of this prospectus, immediately before the consummation of this offering, we will complete a recapitalization in which we will create two classes of common stock, Class A common stock, which will be offered and sold in this offering, and Class B common stock, into which the shares of our existing common stock will be exchanged on the basis that each issued and outstanding share of common stock will be reclassified as        issued and outstanding shares of Class B common stock. All options or other contractual rights to receive our existing common stock will become rights to receive our Class B common stock based on such reclassification ratio. The Class B common stock will automatically convert into Class A common stock immediately following the payment in full of the Special Class B Dividend on July 8, 2005 and, prior to such automatic conversion, may be converted into Class A common stock on a one-for-one basis at any time at the option of the holder. Shares of Class A common stock and shares of Class B common stock will be identical (including with respect to voting rights), except for (i) the Special Class B Dividend, (ii) the convertibility of Class B common stock into Class A common stock prior to July 8, 2005 as described herein and (iii) the right of the holders of the Class B common stock to consent to any changes to our governing documents that would adversely affect the Class B common stock.

Our net tangible book value as of December 26, 2004 was $             million, or $             per share of common stock, and after giving effect to the 2005 Transactions as of December 26, 2004, was $             million, or $             per share of common stock, representing an immediate decrease of $             million, or $             per share of common stock, in net tangible book value to existing common stockholders. Net tangible book value represents the amount of our total tangible assets less total liabilities less the aggregate stated value of the shares of preferred stock outstanding. Net tangible book value per common share represents net tangible book value, divided by the total number of shares of common stock outstanding.

After giving effect, as of December 26, 2004, to the 2005 Transactions and the Offering-Related Transactions, our net tangible book value, as adjusted, as of December 26, 2004 would have been $             million, or $             per share of common stock. Assuming the occurrence of the 2005 Transactions and the Offering-Related Transactions as of December 26, 2004, this represents an immediate increase in net tangible book value of $             per common share to existing Class B common stockholders and an immediate dilution of $             per common share to new investors purchasing our Class A common stock in this offering. The following table illustrates this per share dilution to the latter investors:

Assuming the occurrence of the 2005 Transactions as of December 26, 2004, if the underwriters exercise in full their option to purchase additional shares of our Class A common stock in this offering, the as adjusted net tangible book value per common share after giving effect to the Offering-Related

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Transactions would be $             per common share, the increase in net tangible book value per common share to existing Class B common stockholders would be $             per common share and the dilution to new investors purchasing our Class A common stock in this offering would be $             per common share.

The following table summarizes, on an as adjusted basis as of December 26, 2004, the differences between the numbers of shares of common stock purchased from us, and the total consideration and the average price per share paid, by the existing common stockholders and by the new investors, based on the initial public offering price of $             per common share, before deducting the estimated underwriting discount and estimated offering expenses payable by us:

If the underwriters exercise in full their option to purchase additional shares of our Class A common stock in this offering, the number of Class A common shares held by new investors will increase to             , or         % of the total number of shares of our common stock outstanding after giving effect to the Offering-Related Transactions.

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DIVIDEND POLICY

We do not currently pay dividends on our outstanding stock. However, upon the consummation of this offering, we will declare a dividend payable on July 8, 2005 to the holders of record of our Class B common stock on such date, in the amount of $             per share (subject to increase as discussed below), referred to in this prospectus as the “Special Class B Dividend.” The amount of the Special Class B Dividend payable on July 8, 2005 will be increased, on a dollar-for-dollar basis, by all of the net proceeds of the exercise, in full or in part, by the underwriters of their option to purchase additional shares. The existing stockholders will be the only holders of our Class B common stock as of July 8, 2005, and, therefore, the only persons entitled to receive the payment of the Special Class B Dividend on such date.

Immediately after the payment of the Special Class B Dividend, the members of our management team (and their family members) will reinvest, as required by their respective agreements with us that they will have entered into immediately prior to the consummation of this offering, an aggregate amount of approximately $6.4 million in shares of our Class A common stock at the initial public offering price per share.

In addition, upon the consummation of this offering, we will adopt a dividend policy, effective upon the consummation of the Offering-Related Transactions, which reflects an intention to designate a portion of the cash generated by our business in excess of operating needs, interest and principal payments on our indebtedness and capital expenditures as regular dividends to our common stockholders.

The declaration of any future dividends and, if declared, the amount of any such dividends, will be subject to our actual future earnings, capital requirements, regulatory restrictions and to the discretion of our board of directors. Our board may take into account such matters as general business conditions, our financial results, our capital requirements, our debt service requirements, our contractual restrictions (including those imposed by our creditors), and our legal and regulatory restrictions on the payment of dividends by us to our stockholders, or by our subsidiaries to us, and such other factors as our board may deem relevant.

In connection with the consummation of this offering, we intend to amend the $275.0 million senior credit facility under which certain of our subsidiaries are borrowers or guarantors to, among other things, provide for the greater availability of cash for the payment of dividends under the facility’s restricted payment covenant.

For a discussion of the reinvestment agreements, see “Certain Relationships and Related Party Transactions—Reinvestment Agreements,” on page         .

For a discussion of some of the risks and uncertainties associated with our adoption and maintenance of a dividend policy providing for the payment of regular dividend payments to our stockholders, and the risks and uncertainties associated with reliance thereon, see “Risk Factors—Risks Related to this Offering—We may not pay dividends on our common stock”, on page          of this prospectus, “—We may not have the necessary funds to pay dividends on our common stock,” on page         , “—Rising interest rates may adversely affect the market price of our common stock,” on page         , and “—Our dividend policy may limit our ability to pursue growth opportunities,” on page         .

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CAPITALIZATION

The following table sets forth the capitalization, as of December 26, 2004, on an actual consolidated basis and as adjusted to give effect to (i) the 2005 Transactions and (ii) the consummation of the Offering-Related Transactions, as if, in each case, such transactions had occurred as of December 26, 2004.

You should read this table together with the information in this prospectus under the captions “Use of Proceeds,” “Selected Consolidated and Combined Financial Data,” “Unaudited Pro Forma Condensed Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Capital Stock” and together with the consolidated financial statements of Horizon Lines and its Predecessor and related notes included elsewhere in this prospectus.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements have been derived by the application of pro forma adjustments to the historical consolidated financial statements of the issuer and its predecessors. The unaudited pro forma condensed consolidated balance sheet as of December 26, 2004 gives effect to the 2005 Transactions and the Offering-Related Transactions as if they had occurred as of December 26, 2004. The unaudited pro forma consolidated statement of operations for the twelve months ended December 26, 2004 gives effect to (i) the Acquisition-Related Transactions, (ii) the Post-Acquisition Transactions and (iii) the Offering-Related Transactions as if they had occurred as of December 22, 2003. The unaudited pro forma consolidated statement of operations for the period from December 22, 2003 through December 26, 2004 is derived by combining the statement of operations data for the period December 22, 2003 through July 6, 2004 with the date for the period from July 7, 2004 through December 26, 2004. The unaudited pro forma financial statements do not purport to represent what our results of operations or financial position would have been if the Acquisition-Related Transactions, the Post-Acquisition Transactions and the Offering-Related Transactions had occurred on the dates indicated and are not intended to project our results of operations or financial position for any future period or date. For an explanation of the Acquisition-Related Transactions and the Post-Acquisition Transactions (including the Fourth Quarter 2004 Transactions and the 2005 Transactions), see “Historical Transactions Summary” on page          of this prospectus.

The unaudited pro forma adjustments are based on preliminary estimates, available information and certain assumptions that we believe are reasonable and may be revised as additional information becomes available. The pro forma adjustments and primary assumptions are described in the accompanying notes. Other information included under this heading has been presented to provide additional analysis. The acquisition has been accounted for using the purchase method of accounting, which requires that we revalue or adjust our assets and liabilities to their fair values. Horizon Lines Holding, which was acquired in the acquisition, is currently in the process of finalizing valuations of property and equipment, intangibles, and the allocation of the purchase price. An estimated allocation, which is subject to change, has been prepared as reflected herein. Completion of the valuation and the resulting reallocation will occur within one year following the closing of the acquisition on July 7, 2004. Thus, the final allocation of the purchase price could differ materially from the pro forma allocation reflected herein. In particular, if additional value is allocated to certain tangible or definite lived intangible assets, the pro forma depreciation and amortization expense would be increased.

The issuer was formed in connection with the Acquisition-Related Transactions and has no independent operations. Consequently, financial data for the period (or any portion thereof) from February 27, 2003 through July 6, 2004 reflect Horizon Lines Holding on a consolidated basis. Financial data for the period (or any portion thereof) from July 7, 2004 through December 26, 2004 reflect the issuer on a consolidated basis. All unaudited pro forma condensed financial data for each other period (or portion thereof) reflects Horizon Lines Holding on a combined and consolidated basis with the entities reflected in the combined and consolidated financial data from which such unaudited pro forma condensed financial data was derived.

You should read our unaudited pro forma condensed consolidated financial statements and the related notes hereto in conjunction with our historical consolidated and combined financial statements and the related notes thereto and other information contained in “Capitalization,” “Selected Consolidated and Combined Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

Certain prior period balances have been reclassified to conform with the current period presentations.

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Horizon Lines, Inc.

Unaudited Pro Forma Condensed Consolidated

Balance Sheet

As of December 26, 2004

($ in thousands)