S-1/A 1 ds1a.htm AMENDMENT NO. 1 TO FORM S-1 Amendment No. 1 to Form S-1
Table of Contents

As filed with the Securities and Exchange Commission on August 31, 2006

Registration No. 333-136558

 


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


Amendment No. 1

to

Form S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 


HORIZON LINES, INC.

(Exact name of registrant as specified in Its Charter)

 

Delaware    4400    74-3123672

(State or other jurisdiction of

incorporation or organization)

   (Primary Standard Industrial Classification Bankruptcy Code Number)   

(I.R.S. Employer

Identification Number)

 


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:

 

André Weiss, Esq.

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

Ph: (212) 756-2000

Fax: (212) 593-5955

 

William M. Hartnett, Esq.

Richard E. Farley, Esq.

Cahill Gordon & Reindel LLP

80 Pine Street

New York, NY 10005

Ph: (212) 701-3000

Fax: (212) 269-5420

 

Robert S. Zuckerman, Esq.

General Counsel

Horizon Lines, Inc.

4064 Colony Road, Suite 200

Charlotte, NC 28211

Ph: (704) 973-7000

Fax: (704) 973-7010

 


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 to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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 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(d) 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.  ¨

 


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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Subject to Completion. Dated August 31, 2006.

 

5,300,000 Shares

 

LOGO

 

Horizon Lines, Inc.

 

Common Stock

 

The selling stockholders identified in this prospectus are offering 5,300,000 shares of common stock. Horizon Lines, Inc. will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.

 

Our common stock is quoted on The New York Stock Exchange under the symbol “HRZ”. The last reported sale price of our common stock on August 31, 2006 was $15.93 per share.

 

Before buying shares, you should carefully consider the risk factors described in “ Risk Factors” beginning on page 14.

 

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.

 

     Per Share

   Total

Public offering price

   $             $                

Underwriting discount

   $             $                

Proceeds, before expenses, to the selling stockholders

   $             $                

 

The underwriters may also purchase up to an additional 795,000 shares of common stock from the selling stockholders at the public offering price less the underwriting discounts and commissions within 30 days from the date of this prospectus.

 

The underwriters expect to deliver the shares against payment in New York, New York on or about                         , 2006.

 

Deutsche Bank Securities

JPMorgan

 


 

Goldman, Sachs & Co.

 

The date of this prospectus is                      , 2006.

 

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 does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.


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LOGO

Horizon Enterprise, one of our container vessels, underway to the port of Tacoma, Washington.


Table of Contents

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY

   1

RISK FACTORS

   14

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

   35

TRADEMARKS AND SERVICE MARKS

   35

INDUSTRY AND MARKET DATA

   36

USE OF PROCEEDS

   37

PRICE RANGE OF COMMON STOCK

   38

DIVIDEND POLICY

   39

CAPITALIZATION

   40

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

   41

SELECTED CONSOLIDATED AND COMBINED FINANCIAL DATA

   45

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   51

BUSINESS

   80

MANAGEMENT

   106

PRINCIPAL AND SELLING STOCKHOLDERS

   125

HISTORICAL TRANSACTIONS

   129

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   135

DESCRIPTION OF CAPITAL STOCK

   139

SHARES ELIGIBLE FOR FUTURE SALE

   147

DESCRIPTION OF CERTAIN INDEBTEDNESS

   149

MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES FOR NON-U.S. HOLDERS

   158

UNDERWRITING

   161

VALIDITY OF COMMON STOCK

   164

EXPERTS

   164

WHERE CAN YOU FIND MORE INFORMATION

   164

INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

   F-1

We and the selling stockholders have not authorized anyone to provide you any information other than the information contained in this prospectus. The selling stockholders 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.

 

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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.

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

Our Company

We believe that we are the nation’s leading Jones Act container shipping and integrated logistics company, accounting for approximately 36% 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. We are the only Jones Act container shipping and logistics company with an integrated organization operating in all three non-contiguous Jones Act markets. Our operating history dates back to 1956, when Sea-Land Service, Inc. pioneered the marine container shipping industry and established our business.

With 16 vessels and approximately 23,900 cargo containers, we operate the largest Jones Act containership fleet, providing comprehensive shipping and sophisticated logistics services to 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 extensive inland cargo trucking and logistics for our customers through our relationships with third-party truckers, railroads and barge operators in our markets, and our own trucking operations on the U.S. West Coast. 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.

For the fiscal year ended December 25, 2005, we generated revenue of $1,096.2 million, EBITDA of $100.4 million, and net loss available to common stockholders of $23.4 million. For the six months ended June 25, 2006, we generated revenue of $564.8 million, EBITDA of $71.5 million, and net income available to common stockholders of $8.8 million. For the twelve months ended December 25, 2005, we generated pro forma EBITDA of $130.8 million and pro forma net income available to common stockholders of $12.8 million, after giving effect to certain adjustments, and based upon certain assumptions, as more fully described in “Unaudited Pro Forma Condensed Consolidated Financial Statements,” beginning on page 41 of this prospectus. For the definition of EBITDA and its reconciliation to net income, see footnote 4 to the table under “—Summary Consolidated, Combined and Unaudited Pro Forma Financial Data,” beginning on page 9 of this prospectus.

On April 11, 2006, we concluded a series of agreements to charter, for an initial period of twelve years, five newly built U.S.-flag container vessels, each with a capacity of 2,824 twenty-

 

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foot equivalent units, or TEUs, and a potential service speed of 23 knots. These five container vessels of the same class are currently being built in South Korea and are scheduled to be delivered over a seven-month period starting in the fourth quarter of 2006. Upon the delivery of these five vessels by the end of the first half of 2007, the average age of our active vessels will be reduced from 31 years to 20 years.

This initiative will allow us to use the new vessels for our non-Jones Act routes between the U.S. West Coast and Guam and Asia in a very capital efficient manner, at approximately one third the cost of comparable U.S.-built vessels. The deployment of these new vessels will enable us to provide Maersk Line (“Maersk”) with additional capacity on the transpacific route where we currently provide vessel container space to Maersk on a take or pay basis. In addition, our larger Jones Act vessels currently operating in the transpacific service will be redeployed to our Hawaii and Puerto Rico markets resulting in additional capacity to meet market growth requirements and an improved network cost structure.

Our vessels are maintained according to our own strict maintenance procedures, which meet or exceed U.S. government requirements. We also offer extensive 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. We book and monitor all of our shipping and logistics services with our customers through the Horizon Information Technology System, or HITS, our industry-leading ocean shipping and logistics information technology system, which is a key feature of our complete shipping logistics solutions. Our focus is 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.

We transport a wide spectrum of consumer and industrial items used everyday in the markets we serve, 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. We have approximately two thousand customers and have many long-standing customer relationships, including large consumer and industrial products companies and several agencies of the U.S. government. Our customer base is broad and diversified, with our top ten customers accounting for approximately 32% of revenue and our largest customer accounting for approximately 7% of revenue in 2005. Approximately 51% of our revenue in 2005 was derived from customers shipping with us in more than one of our geographic markets and approximately 29% of our revenue in 2005 was derived from customers shipping with us in all of our geographic markets.

The Jones Act

Under the coastwise laws of the United States, also known as the Jones Act, all vessels transporting cargo between U.S. ports must, subject to limited exceptions, be built in the U.S., registered under the U.S. flag, manned by predominantly U.S. crews, and owned and operated by U.S.-organized companies that are controlled and 75% owned by U.S. citizens. 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

 

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predominantly U.S.-crewed, but not U.S.-built. The Jones Act and these other maritime laws enjoy broad support from both major political parties. We believe that there are no Jones Act qualified container vessels or roll-on/roll-off vessels currently under construction in the United States or on order. Given the limited uncommitted capacity of shipyards in the United States and the long lead time required for the construction of such vessels, we believe that no new Jones Act qualified container vessels or roll-on/roll-off vessels will become available for use in our Jones Act markets for at least three years.

Market Overview

The Jones Act distinguishes the U.S. domestic shipping market from international shipping markets by making the U.S. domestic shipping market the exclusive domain of Jones Act qualified vessels. 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 prone to overcapacity and volatility than international shipping markets. Since 1995, Alaska, Hawaii and Guam and Puerto Rico have experienced low average rate volatility of 0.4%, 1.7% and 3.8% per annum while the major transpacific and transatlantic trade routes have experienced average rate volatility of 23.7% and 9.4% per annum.

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, including 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. Pasha Hawaii Transport Lines LLC operates a vessel with roll-on/roll-off vessel service shipping vehicles between the U.S. West Coast and Hawaii. 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 the Puerto Rico market.

The U.S. container shipping industry as a whole is experiencing rising customer expectations for real-time shipment status information and 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. 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.

Our Competitive Strengths

We believe that our competitive strengths include:

Leading Jones Act container shipping and logistics company. 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. We are one of only two major marine container shipping operators currently serving the Alaska

 

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market, one of two marine container shipping companies currently serving the Hawaii and Guam markets and the largest of four marine container shipping companies currently serving the Puerto Rico market. 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. Approximately 51% of our revenue in 2005 was derived from customers shipping with us in more than one of our geographic markets and approximately 29% of our revenue in 2005 was derived from customers shipping with us in all of our geographic markets.

Favorable industry dynamics. Given the requirements of the Jones Act, the level of services already provided by us and 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. 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 that may adversely affect any one of our markets. In addition, our use of non-exclusive customer contracts, with durations ranging from one to six years, generates most of our revenue and provides us with stable revenue streams.

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., 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 28 years. In addition, during 2005, we experienced a retention rate of approximately 99% with respect to customers who generated more than $100,000 in revenue during such year. For 2005, no customer accounted for more than approximately 7% of total revenue and nearly all of our customer relationships are based on non-exclusive contracts.

Customer-oriented sales and marketing presence. Our approximately 120-person national and regional sales and marketing presence enables us to forge and maintain close customer relationships. Our sales headquarters is based in Charlotte, North Carolina and 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. Our national and regional presence, combined with our operational excellence, results in high levels of repeat business from our diverse customer base.

Operational excellence. As the leading Jones Act shipping and integrated logistics company, we pride ourselves on our operational excellence and our ability to provide consistent, high quality service. The quality of our vessels as well as the expertise of our vessel crews and engineering resources help us to maintain highly reliable and consistent dock-to-dock on-time arrival performance. Our track record of service and operational excellence continues to

 

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be widely recognized by some of the most demanding customers in the world. Wal-Mart named us as its 2005 Jones Act Carrier of the Year (the fifth time we have received this award over the last six years for which the award has been given), Lowe’s awarded us with its 2005 Gold Carrier Award for the fifth straight year, and Toyota recognized us with its Logistics Excellence for On Time Performance award for the seventh consecutive year and with its Logistics Excellence Award for Customer Service for 2005.

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 25 years of experience in the industry. Our senior management has a long history of working together as a team, with four of our eight most senior managers having worked together at Horizon Lines or our predecessors for over 22 years. Furthermore, as of the date hereof, after giving effect to this offering, our management team, including family members, continues to own approximately 11% of our common equity on a fully diluted basis.

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 while pursuing continued strong revenue and earnings growth both in our core markets and in selected non-Jones Act shipping markets through the principal strategies outlined below. There are many uncertainties associated with the risks of the implementation of our business strategy. These uncertainties relate to economic, competitive, energy cost, operational, regulation, catastrophic loss and other factors that are discussed on pages 14 - 28, many of which are beyond our control.

Continue to organically grow our revenue. We intend to achieve ongoing revenue growth in each of our markets by focusing our national and regional sales force on acquiring business from new customers, growing business with existing customers, continuing to focus on increasing the share of our revenue that is derived from our customers’ higher margin cargo and through the continued economic growth within our geographic markets.

Expand our services and logistics solutions. We seek to build on our market-leading logistics platform and operational expertise by providing new services and integrated logistics solutions. These services and solutions include delivery planning and comprehensive shipping and logistics. By offering a wider range of services and logistics solutions, we believe that we can 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 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.

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. In May, 2006, we formed a dedicated team of employees to develop and implement a

 

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program, referred to as “Horizon Edge,” over the next two and a half years, with the combined goals of reducing operating costs and enhancing customer focus and service efficiency. With the assistance of outside advisors, we are targeting improvements in maintenance management, marine productivity, supply chain management and information technology.

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. We believe that Horizon’s brand Always There. Always Delivering.® is synonymous with quality and operational excellence and we intend to continue to build and leverage our brand in order to further enhance our business.

Maintain leading information technology. We are focused on maintaining 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. Since the launch of HITS in 2000, we have migrated our customers to the on-line interfaces of HITS, with on-line bookings via HITS totaling approximately 50% of our total bookings. We routinely incorporate additional enhancements into HITS to meet the changing needs of our business and further differentiate us from our competitors. We believe that HITS’ functionality and cost savings potential for our customers produce strong loyalty.

Our Growth Initiatives

Our management team has a demonstrated track record of delivering revenue and earnings growth to our stockholders. Going forward, we intend to actively pursue new business opportunities as well as grow our core business by improving our cargo mix and operating margins in each of our core markets. In order to achieve this growth in our business, we plan to execute the following initiatives:

Optimize fleet deployment. In April 2006, we entered into a series of agreements to charter five new U.S.-flag container vessels, each with a capacity of 2,824 TEUs, over an initial period of 12 years beginning in the fourth quarter of 2006. We plan to deploy these new U.S.-flag, non-Jones Act vessels, beginning in the first quarter of 2007, on our non-Jones Act trade routes between the U.S. West Coast and Guam and Asia. The new vessels will increase our weekly effective capacity on this route by approximately 20%, allowing us to expand our service to Guam and to offer additional space to Maersk on a take or pay basis eastbound from Asia. We will redeploy the Jones Act vessels currently serving on this route into Hawaii and Puerto Rico, thereby increasing our effective weekly capacity to Hawaii to satisfy growing market demand, and allowing us to serve Puerto Rico with a more cost efficient fleet configuration. We expect that these vessels will enhance our service quality as a result of faster service speeds and enhanced reliability and will operate more cost efficiently with lower fuel consumption and maintenance costs than the current vessels serving these markets.

Upside revenue potential for inactive Jones Act vessels. As a result of our initiative to optimize our fleet deployment, we will have four inactive Jones Act vessels available to provide us with surge capacity during peak shipping volume seasons as well as to serve as relief vessels during drydockings of active vessels. These vessels will also enable us to pursue other Jones Act trade routes, new contracts and vessel charter opportunities.

 

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Additional government and military business. We plan to increase our U.S. government and military cargo business. In 2004, we secured a contract to manage seven oceanographic vessels for the U.S. government. The recent addition to our senior management team of General John W. Handy, a retired four-star Air Force general who most recently served as head of air, land and sea transportation for the U.S. Department of Defense, will further position us to pursue additional government and military cargo opportunities.

Expand Operating Platform. We believe that there are significant new and expansion opportunities available for us within the overall shipping and logistics markets under the Jones Act or other U.S. maritime laws. We intend to identify and pursue strategic acquisitions within these markets on a financially disciplined basis with the goal of expanding our operating platform to increase our penetration of these markets.

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

 

Company

Horizon Lines, Inc.

 

Common stock offered by the selling stockholders

5,300,000 shares of common stock.

 

Underwriters’ option to purchase additional common stock from the selling stockholders

795,000 shares of common stock.

 

Common stock outstanding

33,614,170 shares of our common stock.

 

Use of proceeds

We will not receive any proceeds from the sale of shares by the selling stockholders.

 

New York Stock Exchange symbol

“HRZ”

Except as otherwise indicated, we have presented information in this prospectus based on the assumption that the underwriters do not exercise their option (described on the front cover page of this prospectus) to purchase additional shares from the selling stockholders.

Common Stock Subject to Issuance

Except as otherwise indicated in this prospectus, the number of shares of our common stock that are outstanding excludes a total of 3,327,534 shares issuable as follows:

 

    308,866 shares of our common stock that will be issuable to our eligible employees pursuant to our employee stock purchase plan;

 

    1,657,993 shares of our common stock that will be issuable to our eligible directors, officers or employees (or upon the exercise of options that will be granted to such persons) pursuant to our equity incentive plan, as amended, referred to in this prospectus as our equity incentive plan; and

 

    1,360,675 shares of our common stock that will be issuable upon the exercise of outstanding options granted to our directors, officers and employees pursuant to the equity incentive plan.

We refer to Castle Harlan, a New York-based private equity investment firm, and its affiliates and associates (other than us), including Castle Harlan Partners IV, L.P. (“CHP IV”), in this prospectus as the “Castle Harlan Group.”

Unless we specifically state otherwise, we use the term “pre-IPO stockholders” in this prospectus to refer to the owners of our common stock immediately prior to the consummation of our Initial Public Offering who consisted of CHP IV and its affiliates and associates, Stockwell Fund, L.P., our directors and certain members of our management team (and their family members).

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 14, prior to purchasing the common shares offered hereby.

 

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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,” beginning on page 51 of this prospectus, and our consolidated and combined financial statements and the related notes appearing elsewhere in this prospectus.

The consolidated balance sheet data and combined and consolidated statement of operations data as of and for the year ended December 25, 2005, and as of and for the twelve months ended December 26, 2004 and December 21, 2003, presented below have been derived from the audited financial statements contained in this prospectus. The consolidated statement of operations data for the six months ended June 25, 2006 and June 26, 2005 and the consolidated balance sheet data as of June 25, 2006 and June 26, 2005 presented below have been derived from the unaudited 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 consolidated statement of operations data for the fiscal year ended December 25, 2005 gives effect to the Initial Public Offering and related transactions, which are described in “Historical Transactions,” beginning on page 129 of this prospectus, as if they had occurred on December 27, 2004. 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” beginning on page 41 of this prospectus 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, which are described in “Historical Transactions,” and has no independent operations. All combined and consolidated financial data for the period (or any portion thereof) from December 22, 2002 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 June 25, 2006 reflect the issuer on a consolidated basis.

We have a 52- or 53-week fiscal year (every sixth or seventh year) that ends on the Sunday before the last Friday in December. The fiscal year ended December 22, 2002 and the twelve months ended December 21, 2003 and December 25, 2005 each consisted of 52 weeks. The twelve months 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,” beginning on page 51 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:

 

   

Twelve

Months Ended
December 21,

2003

   

Twelve

Months Ended 
December 26,

2004

  Year Ended
December 25,
2005
   

Pro Forma

Year Ended

December 25,

2005

  Six Months
Ended
June 26,
2005
    Six Months
Ended
June 25,
2006
 
    ($ in thousands, except per share data)  

Statement of Operations Data:

           

Operating revenue

  $    885,978     $    980,328   $ 1,096,156     $ 1,096,156   $    528,106     $    564,781  

Operating expense

    718,231       780,343     867,307       867,307     422,469       444,347  

Depreciation and amortization

    29,954       45,570     51,141       51,141     25,441       25,095  

Amortization of vessel drydocking

    16,343       15,861     15,766       15,766     8,544       7,971  

Selling, general and administrative

    80,064       84,805     114,639       84,245     54,634       47,694  

Miscellaneous expense, net(1)

    3,173       2,160     649       649     1,220       1,383  
                                           

Total operating expenses

    847,765       928,739     1,049,502       1,019,108     512,308       526,490  
                                           

Operating income

    38,213       51,589     46,654       77,048     15,798       38,291  

Interest expense, net(2)

    8,940       26,881     51,357       42,577     26,238       24,024  

Interest expense—preferred units of subsidiary

    4,477       2,686     —         —       —         —    

Loss on early extinguishment of debt

    —         —       13,154       13,154     —         —    

Other expense, net

    68       22     26       26     1       (186 )
                                           

Income (loss) before income taxes

    24,728       22,000     (17,883 )     21,291     (10,441 )     14,453  

Income tax expense (benefit)

    9,615       8,439     438       8,524     226       5,686  
                                           

Net income (loss)

    15,113       13,561     (18,321 )     12,767     (10,667 )     8,767  

Less: accretion of preferred stock

    —         6,756     5,073       —       3,122       —    
                                           

Net income (loss) available to common stockholders

  $ 15,113     $ 6,805   $ (23,394 )   $ 12,767   $ (13,789 )   $ 8,767  
                                           

Net income (loss) per share:

           

Basic

    *       *   $ (1.05 )   $ 0.38   $ (0.73 )   $ 0.26  

Diluted

    *       *   $ (1.05 )   $ 0.38   $ (0.73 )   $ 0.26  

Number of shares used in calculations:

           

Basic

    *       *     22,376,797       33,544,170     18,912,639       33,544,170  

Diluted

    *       *     22,381,756       33,570,364     18,912,639       33,586,992  

Dividends declared per common share

    —         —     $ 0.11     $ 0.44     —       $ 0.22  

*   The twelve months ended December 21, 2003 and December 26, 2004 are derived by combining data from different entities and thus no net income per share has been calculated.

 

10


Table of Contents
    

December 21,

2003

    December 26,
2004
   December 25,
2005
  

June 26,
2005

  

June 25,
2006

     ($ in thousands)

Balance Sheet Data:

             

Cash and ca