1321650--3/6/2006--H-Lines_Finance_Holding

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If we are unable to implement our business strategy, our future results could be adversely affected. Repeal or substantial amendment of the Jones Act or its application could have a material adverse effect on our business. A decrease in shipping volume in our markets will adversely affect our business. Our failure to renew our commercial agreements with Maersk in the future could have a material adverse effect on our business. Rising fuel prices may adversely affect our profits. Our industry is unionized and strikes by our union employees or others in the industry may disrupt our services and adversely affect our operations. We may face significant costs as our vessels age. Our employees are covered by federal laws that may subject us to job-related claims in addition to those provided by state laws. Due to our participation in multiemployer pension plans, we may have exposure under those plans that extends beyond what our obligations would be with respect to our employees. Compliance with safety and environmental protection and other governmental requirements may adversely affect our operations. We are subject to new statutory and regulatory directives in the United States addressing homeland security concerns that may increase our costs and adversely affect our operations. Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business. 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. No assurance can be given that our insurance costs will not escalate. Catastrophic losses and other liabilities could adversely affect our results of operations and such losses and liability may be beyond insurance coverage. Our spare vessel reserved for relief may be inadequate under extreme circumstances. 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 vessels could be arrested by maritime claimants, which could result in significant loss of earnings and cash flow. We are susceptible to severe weather and natural disasters. We may face new competitors. We may not exercise our purchase options for our chartered vessels. We may face unexpected substantial drydocking costs for our vessels. Loss of our key management personnel could adversely affect our business. 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. Our cash flows and capital resources may be insufficient to make required payments on our substantial indebtedness and future indebtedness. The Senior Credit Facility, the 9% senior notes indenture, and the 11% senior discount notes indenture allow certain upstream payments to the Parent, which may impact our ability to service our debt obligations. Financial and other covenants under our current and future indebtedness could significantly impair our ability to operate our business. The senior credit facility and the indentures that govern the 9% senior notes and the 11% senior discount notes contain cross-default provisions that may result in nearly all of our indebtedness coming due simultaneously. Our substantial indebtedness and future indebtedness could significantly impair our operating and financial condition. The senior credit facility exposes us to the variability of interest rates. The Company, a holding company, is the sole obligor under the 11% senior discount notes and neither the Parent nor any of the Parent s subsidiaries are a guarantor of the Company s obligations under the 11% senior discount notes or have any obligation with respect to the 11% senior discount notes. We may be unable to raise funds necessary to finance the change of control repurchase offers required by the indentures governing the 11% senior discount notes and the 9% senior notes and the senior credit facility prohibits dividends to the Company to fund its obligations under the indenture governing the 11% senior discount notes upon a change of control. The senior credit facility currently prohibits dividends to the Company to make payments under the 11% senior discount notes, including principal and interest payments. Our indirect stockholders may take actions that conflict with your interests. The 11% senior discount notes are unsecured and structurally subordinated to our secured obligations and to the obligations of the our subsidiaries, including obligations of our subsidiaries under the senior credit facility and the 9% senior notes. We are subject to certain fraudulent transfer and conveyance statutes that may have adverse implications for the holders of the 11% senior discount notes. Integrating acquisitions may be time-consuming and create costs that could reduce our net income and cash flows. We may be exposed to potential risks resulting from new requirements that we evaluate our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act.

Full 10-K form ▸

1321650--3/6/2006--H-Lines_Finance_Holding_Corp.