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Marine Log

October 19, 2006

Tax change boost for Horizon Lines

Horizon Lines, Inc. (NYSE: HRZ) says it is increasing its earnings guidance for the third quarter and full year 2006. The increase reflects the company's election to adopt the tonnage tax in lieu of the regular federal corporate income tax.

The American Jobs Creation Act of 2004 instituted an elective tonnage tax regime whereby a corporation may elect to pay a tonnage tax based upon the net tonnage of its qualifying vessels that operate in the U.S. foreign trade rather than the regular U.S. corporate income tax on the taxable income from such vessels.

Horizon Lines has elected to apply the tonnage tax effective with the filing of its 2005 tax return during the third quarter of 2006, and for the 2006 and future tax years.

The cumulative impact of this election on the third quarter and nine months 2006 is a reduction in income tax expense of approximately $39.4 million and an increase in earnings per share of $1.17. The projected 2006 full year impact of the tonnage tax election is a reduction of income tax expense of approximately $42.6 million and an increase in earnings per share of $1.28.

Horizon Lines' previous earnings guidance for earnings per share was $.40 - $.42 for the third quarter and $.85 - $.90 for the full year 2006. Earnings per share guidance is being increased for the third quarter to $1.57 - $1.59 to include the tonnage tax election. Earnings per share guidance for 2006 is being increased to $2.13 - $2.18 to include the tonnage tax election.

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