HORIZON LINES REPORTS SECOND-QUARTER FINANCIAL RESULTS

News Release Horizon Lines, Inc. (Corporate Headquarters) August 6, 2012

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Container Volume Improves
3.6% From A Year Ago 

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CHARLOTTE,
NC, August 2, 2012 - Horizon Lines, Inc. (OTCQB: HRZL) today
reported financial results for the fiscal second quarter ended June 24,
2012.
 
Financial results are
presented on a continuing operations basis, excluding the previously
discontinued trans-Pacific FSX service and logistics operations.

 
"Horizon Lines
experienced a 3.6% improvement in container volume during the second
quarter relative to the year-ago period," said Sam Woodward, President and
Chief Executive Officer. "Our overall adjusted EBITDA performance for the
quarter was better than expected, due largely to the volume gain, which in
turn improved the recovery of fuel costs. The adjusted EBITDA shortfall of
$4.5 million from a year ago was predominantly due to a $5.4 million
increase in transit and crew costs associated with dry-docking in China
certain of our vessels that serve the Puerto Rico trade. We made this
decision to facilitate extensive maintenance and high-quality enhancements
necessary to help ensure our service integrity in Puerto Rico and improve
the reliability of these vessels.  
 
"We experienced a
modest rise in revenue container rates, which partially mitigated
increased variable expenses," Mr. Woodward continued. "Non-transportation
revenue declined from a year-ago due to a reduction in terminal services
revenue.
 
"Looking at each
trade lane, Hawaii experienced continued strong volume gains during the
quarter, helped in part by improving tourism and ongoing customer support
amid an otherwise sluggish business environment," Mr. Woodward said.
"Alaska's business rebounded from the first quarter, when record cold and
snowfall exacerbated and extended the typically slow winter season.
However, volume remained just shy of the year ago level, primarily due to
a late start to the summer seafood season. Puerto Rico experienced a
modest volume increase from a year ago, characterized by an improved mix
of refrigerated cargo."
 
Second-Quarter
2012 Financial Highlights
 
<UL>
<LI style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">Volume,
Rate & Fuel Cost - Container volume for the
2012 second quarter totaled 59,768 revenue loads, up 3.6% from 57,677
loads for the same period a year ago. Unit revenue per container totaled
$4,269 in the 2012 second quarter, compared with $4,079 in 2011. Unit
revenue per container, net of fuel surcharges, was $3,174, up 1.1% from
$3,140 a year ago. Bunker fuel costs averaged $733 per metric ton in the
second quarter, 10.9% above the average price of $661 per ton in the
same quarter in 2011.  </LI></UL>
<UL>
<LI style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">Operating
Revenue - Second-quarter operating revenue from
continuing operations increased 6.8% to $270.9 million from $253.7
million a year ago. The factors driving the $17.2 million revenue
improvement were: an $11.0 million increase in fuel surcharges; a $6.6
million gain in volume; and a $2.1 million increase in revenue container
rates. These increases were partially offset by a $2.5 million decline
in other non-transportation services revenue.    
<LI style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">Operating
Income - GAAP operating income from continuing
operations for the 2012 second quarter totaled $1.0 million, compared
with $19.0 million a year ago. 2012 GAAP operating income includes costs
of $0.9 million for antitrust-related legal expenses, impairment charges
and severance, and $0.3 million in legal and tax consulting fees
associated with the company's refinancing efforts. GAAP operating income
for the 2011 second quarter includes an $18.2 million net expense
reversal related to legal settlement reductions, partially offset by
$4.8 million in charges associated with equipment impairment, antitrust
related legal expenses, refinancing costs and employee severance (see
reconciliation tables for specific line-item amounts). Adjusting for
these items, second-quarter 2012 adjusted operating income totaled $2.2
million, compared with $5.6 million a year ago.    

<LI
style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">EBITDA
- EBITDA from continuing operations totaled a negative $0.6
million for the 2012 second quarter, compared with a positive $33.1
million for the same period a year ago. Adjusted EBITDA from continuing
operations for the second quarter of 2012 was $15.2 million, compared
with $19.7 million for 2011. Among the key factors in the $4.5 million
decline in 2012 second-quarter adjusted EBITDA from a year ago was an
incremental $5.4 million of transit and crew costs associated with the
China dry-dockings, as well as a decrease of non-transportation revenue,
which together more than offset volume gains and associated improved
fuel cost recovery. EBITDA and adjusted EBITDA for the 2012 and 2011
second quarters were impacted by the same factors affecting operating
income. Additionally, 2012 adjusted EBITDA reflects the exclusion of a
primarily non-cash net loss of $14.6 million, resulting from a $47.4
million loss on the conversion of debt to equity which was partially
offset by a $32.8 million gain on marking the conversion feature in the
company's convertible debt to fair value (see reconciliation tables for
specific line item amounts).    
<LI style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">Net
Loss - On a GAAP basis, the second-quarter net
loss from continuing operations totaled $29.9 million, or $1.49 per
share on 20.1 million weighted average shares outstanding, compared with
2011 second-quarter net income from continuing operations of $4.5
million, or $3.63 per share on 1.2 million weighted
average shares outstanding. On an adjusted basis, the second-quarter net
loss from continuing operations totaled $13.6 million, or $0.68 per
share, compared with a net loss of $7.5 million, or $6.08 per share, a
year ago. The 2012 and 2011 second-quarter adjusted net losses reflect
the same items impacting adjusted EBITDA in each period. Additionally,
the adjusted net loss for both periods reflects the elimination of the
non-cash accretion of antitrust-related legal settlements, and if
applicable, the tax impact on the adjustments (see reconciliation tables
for specific line item amounts).    
<LI style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">Six-Month
Results - For the first half of fiscal 2012,
operating revenue from continuing operations increased 8.0% to $534.3
million from $494.5 million for the same period in 2011. EBITDA from
continuing operations totaled $5.1 million compared with $38.1 million a
year ago. First-half 2012 adjusted EBITDA totaled $26.0 million,
compared with adjusted EBITDA of $30.3 million for the same period in
2011. Net incremental costs for the 2012 period, including transit and
crew costs associated with vessels being dry-docked in China, negatively
impacted 2012 six-month adjusted EBITDA by approximately $5.6 million.
2012 six-month adjusted EBITDA excludes net costs totaling $21.0
million, including $2.7 million for severance, antitrust-related legal
expenses and asset impairment, $1.0 million in legal and tax consulting
fees associated with the company's refinancing efforts, and a $17.3
million primarily non-cash net loss that reflects a $36.4 million loss
on the conversion of debt to equity, partially offset by a $19.1 million
gain from marking the conversion feature in the company's convertible
debt to fair value. Adjusted EBITDA for the 2011 six-month period
excludes an $18.2 million net reversal related to legal settlement
reductions, which was partially offset by $10.4 million in charges for
antitrust-related legal expenses, equipment impairment, severance and
refinancing costs (see reconciliation tables for specific line-item
amounts). The net loss from continuing operations for the 2012 six-month
period totaled $56.7 million, or $4.89 per share on 11.6 million
weighted average shares outstanding, compared with $15.7 million, or
$12.68 per share on 1.2 million weighted average shares outstanding, for
the prior year. The adjusted net loss from continuing operations for the
2012 six-month period totaled $34.6 million, or $2.98 per share,
compared with an adjusted net loss from continuing operations of $23.4
million, or $18.85 per share, for the comparable year-ago period.  
  
<LI style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">Shares
Outstanding - The company had a weighted daily
average of 20.1 million basic and fully diluted shares outstanding for
the second quarter of 2012, and 11.6 million basic and fully diluted
shares for the first six months of the year. This compares with 1.2
million basic and fully diluted shares outstanding for corresponding
periods a year ago. Shares outstanding reflect the previously disclosed
financial restructuring and 1-for-25 reverse stock split in the fourth
quarter of 2011, a mandatory debt-for-equity exchange in the first
quarter of 2012, and a further financial restructuring in the second
quarter of 2012. As part of the second-quarter 2012 restructuring, the
company issued 28.8 million shares of common stock and warrants
convertible by U.S. citizens into 47.2 million shares of common stock.
At July 23, 2012, 34.2 million shares of the company's common stock and
warrants convertible into 57.0 million shares were outstanding.  
  
<LI style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">Liquidity,
Credit Facility Compliance & Debt Structure -
Based on accounts receivable outstanding as of June 24,
2012, the company had total liquidity of $37.0 million, consisting of
$19.7 million in cash and $17.3 million of asset-based loan ("ABL")
borrowing availability. Outstanding debt totaled $431.2 million,
consisting of: $223.9 million of 11.00% first-lien senior secured notes
due October 15, 2016; $152.3 million of second-lien senior secured notes
due October 15, 2016, bearing interest at 15.00%, being paid in kind
with additional second-lien secured notes; and $42.5 million drawn on
the ABL facility, bearing interest at a weighted average of 3.98%. Also
remaining outstanding were $3.7 million of 6.00% convertible secured
notes due April 15, 2017, $2.2 million of 4.25% convertible notes due
August 15, 2012, and a $6.6 million capital lease. The company's
weighted average interest rate for funded debt was 11.60%. Availability
under the ABL facility is based on a percentage of eligible accounts
receivable and customary reserves, with a maximum of $100.0 million.
Letters of credit issued against the ABL facility totaled $18.9 million
at June 24, 2012. </LI></UL>
 
Outlook
 
The company continues
to project that 2012 container volumes will increase modestly, in the 1%
to 2% range, and that container rates, net of fuel surcharges, will rise
slightly from 2011 levels, due to the continuing slow economic recoveries
in our markets. Fuel prices for 2012 are currently projected to average in
the $675-$680 per-ton range.
 
Based upon the
company's current level of operations, as well as the recent restructuring
and conversion of its debt and resolution of the lease obligations related
to the vessels that served the FSX service, cash flow from operations and
available cash, together with borrowings available under the ABL Facility,
are expected to be adequate to meet liquidity needs. The company expects
total liquidity during the remainder of 2012 to remain near or above the
$37.0 million as of June 24, 2012. 
 
 
Use of Non-GAAP
Measures
 
Horizon Lines reports
its financial results in accordance with U.S. generally accepted
accounting principles (GAAP). The company also believes that the
presentation of certain non-GAAP measures, i.e., EBITDA and results
excluding certain costs and expenses, provides useful information for the
understanding of its ongoing operations and enables investors to focus on
period-over-period operating performance without the impact of significant
special items. The company further feels these non-GAAP measures enhance
the user's overall understanding of the company's current financial
performance relative to past performance and provide a better baseline for
modeling future earnings expectations. Non-GAAP measures are reconciled in
the financial tables accompanying this news release. The company cautions
that non-GAAP measures should be considered in addition to, but not as a
substitute for, the company's reported GAAP results.  
 About
Horizon Lines
Horizon Lines, Inc.
is one of the nation's leading domestic ocean shipping companies and the
only ocean cargo carrier serving all three noncontiguous domestic markets
of Alaska, Hawaii and Puerto Rico from the continental United
States.  The company maintains a fleet of 15 fully Jones Act
qualified vessels and operates five port terminals in Alaska, Hawaii and
Puerto Rico.  A trusted partner for many of the nation's leading
retailers, manufacturers and U.S. government agencies, Horizon Lines
provides reliable transportation services that leverage its unique
combination of ocean transportation and inland distribution capabilities
to deliver goods that are vital to the prosperity of the markets it
serves. The company is based in Charlotte, NC, and its stock trades on the
over-the-counter market under the symbol HRZL.
 
Forward Looking
Statements
 
The information
contained in this press release should be read in conjunction with our
filings made with the Securities and Exchange Commission. This press
release contains "forward-looking statements" within the meaning of the
federal securities laws. 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," "anticipate," "plan," "targets," "projects,"
"will," "expect," "would," "could," "should," "may," and similar
expressions or phrases identify forward-looking statements. 
 
Factors that may
cause expected results or anticipated events or circumstances discussed in
this press release to not occur or to differ from expected results
include: volatility in fuel prices; decreases in shipping volumes; our
ability to maintain adequate liquidity to operate our business; our
ability to make interest payments on our outstanding
indebtedness; work stoppages, strikes and other adverse union
actions; the reaction of our customers and business partners
to our announcements and filings, including those referred to herein;
government investigations and legal proceedings;
suspension or debarment by the federal government; compliance with safety
and environmental protection and other governmental requirements; failure
to comply with the terms of our probation;
increased inspection procedures and tighter import and export
controls; repeal or substantial amendment of the coastwise laws of the
United States, also known as the Jones Act; catastrophic losses and other
liabilities; the successful start-up of any Jones-Act
competitor; failure to comply with the various ownership, citizenship,
crewing, and U.S. build requirements dictated by
the Jones Act; the arrest of our vessels by maritime claimants; severe
weather and natural disasters; and the aging of our vessels and unexpected
substantial dry-docking or repair costs for our vessels.
 
All forward-looking
statements involve risk and uncertainties. In light of these risks and
uncertainties, expected results or other anticipated events or
circumstances discussed in this press release might not occur. The
forward-looking statements included in the press release are made only as
of the date they are made and the company undertakes no obligation to
update any such statements, except as otherwise required by applicable
law. See the section entitled "Risk Factors" in our 2011
Form 10-K filed with the SEC on
April 10, 2012, for a
more complete discussion of these risks and uncertainties and for other
risks and uncertainties. Those factors and the other risk factors
described therein are not necessarily all of the important factors that
could cause actual results or developments to differ materially from those
expressed in any of our forward-looking statements. Other unknown or
unpredictable factors also could harm our results. Consequently, there can
be no assurance that actual results or developments anticipated by us will
be realized or, even if substantially realized, that they will have the
expected consequences.
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