SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 21, 1998
HORIZON OFFSHORE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-23653 76-0494934
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2500 CityWest Boulevard, Suite 2200, Houston, Texas 77042
(Address of principal executive office) (Zip Code)
(713) 361-2600
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report.)
ITEM 5. OTHER EVENTS
FACTORS INFLUENCING FUTURE RESULTS AND ACCURACY OF FORWARD-LOOKING
STATEMENTS
From time to time, Horizon Offshore, Inc. (the "Company") may make certain
written and oral statements that may be deemed "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical fact, that
relate to business plans or strategies, projected or anticipated benefits
or other consequences of such plans or strategies, objectives, projected or
anticipated benefits from acquisitions made by or to be made by the Company
or projections involving anticipated capital expenditures, revenues,
earnings or other aspects of capital projects or operating results are
forward-looking statements. The words "expect," "believed," "anticipate,"
"project," "estimate" and similar expressions are intended to identify
forward looking statements. The Company cautions readers that such
statements are not guarantees of future performance or events and are
subject to a number of factors that would tend to influence the accuracy of
the statements and the projections upon which the statements are based,
including but not limited to those discussed below.
As noted elsewhere, all phases of the Company's operations are subject to
a number of uncertainties, risks and other influences, many of which are
outside the control of the Company, any one of which, or a combination,
could materially affect the results of the Company's operations and the
accuracy of forward-looking statements made by the Company. Some important
factors that could cause actual results to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements include the following: industry volatility,
including the level of capital expenditures by oil and gas companies due
to fluctuations in the price of oil and gas; risks of growth strategy,
including the risks of rapid growth; operating hazards, including the
unpredictable effect of natural occurrences on operations and the
significant possibility of accidents resulting in personal injury and
property damage; the highly competitive nature of the marine construction
business; seasonality of the offshore construction industry in the Gulf
of Mexico (the Gulf); the Company's ability to attract and retain skilled
workers; the need for additional financing; the Company's lack of
operating history; contract bidding risks; percentage-of-completion
accounting; continued active participation of the Company's executive
directors and key operating personnel; the effect on the Company's
performance of regulatory programs and environmental matters; risks
involved in the expansion of the Company's operations into international
offshore oil and gas producing areas; and risks involved in joint venture
operations,including difficulty in resolving disputes with present partners
or reaching agreements with future partners.
Many of these factors are beyond the Company's ability to control or
predict. Investors are cautioned not to place undue reliance upon
forward-looking statements. The Company disclaims any intent or obligation
to update its forward-looking statements, whether as a result of receiving
new information, the occurrence of future events or otherwise.
A more detailed discussion of certain of the foregoing factors follows:
INDUSTRY VOLATILITY
The cyclical nature of the oil and gas industry may have a significant
effect upon the Company's revenues and profitability because demand for the
Company's services depends on the level of capital expenditures by oil and
gas companies for developmental construction. Historically, prices of oil
and gas, as well as the level of exploration and developmental activity,
have fluctuated substantially. This has resulted in significant fluctuation
for pipeline and other developmental construction services. The Company's
results in recent periods have benefited from improved market conditions
for the Company's services as a result of increased oil and gas exploration
and development, but there can be no assurance that the current market
conditions will continue. The Company is unable to predict how the recent
declines in the price of oil may affect Company operations or whether these
industry conditions will continue. However, any significant decline in
the worldwide demand for oil and gas or a prolonged reduction in oil or gas
prices in the future would likely depress development activity and could
have a material adverse effect on the Company's revenues and profitability.
RISKS OF RAPID GROWTH; RISKS OF GROWTH STRATEGY
The Company has grown rapidly both through internal growth and
acquisitions of additional barges and vessels. The Company's operations
may be negatively affected if the upgrade or refurbishment of any vessel
acquired by the Company is not completed on time or at a cost substantially
in excess of that originally estimated. If the Company's executive
management team does not successfully manage the rapid growth experienced
by the Company, it may have a material adverse effect on the Company's
revenues and profitability.
Future acquisitions of other complementary businesses and marine equipment
are also key elements of the Company's future growth strategy. However,
there can be no assurances that such equipment or businesses will be
identified and acquired. These acquisitions, including possible
refurbishments, may involve potential delays and increased costs. Any
inability on the part of the Company to purchase additional equipment or
other vessels on favorable financial or other terms and to manage acquired
businesses or vessels may have a material adverse effect on the Company's
revenues and profitability.
The Company anticipates that part of its growth will come from the
installation and removal or salvaging of offshore fixed platforms. While
the Company believes that the need to salvage platforms in the Gulf will
increase and that its management team possesses the experience to compete
for this business, the Company has no prior experience in this area and
thus can make no assurances that the Company will be successful in
installing and salvaging platforms.
OPERATING HAZARDS
Offshore construction involves a high degree of operational risk. Risks
of vessels capsizing, sinking, grounding, colliding and sustaining damage
from severe weather conditions are inherent in offshore operations. These
hazards may cause significant personal injury or property damage,
environmental damage, and suspension of operations. Litigation arising
from such occurrences may cause the Company to be named as a defendant in
lawsuits involving potentially large claims. The Company maintains what it
believes is prudent insurance protection but there can be no assurance that
any such insurance will be sufficient or effective under all circumstances.
A successful claim for which the Company is not fully insured may have a
material adverse effect on the Company's revenues and profitability.
COMPETITION
The Company's business is highly competitive because construction
companies operating offshore compete vigorously for available projects,
which are awarded on a competitive bid basis. In addition, the fact that
marine construction vessels have few alternative uses and high maintenance
costs whether they are operating or not, some companies may occasionally
bid contracts at rates below those of the Company in order to cover their
variable operating expenses and contribute to their fixed operating
expenses. Also, increased activity levels in the Gulf may attract
additional competitors to the area.
SEASONALITY AND WEATHER RISKS
Historically, the greatest demand for marine construction services has
been during the period from May to September. This seasonality of the
construction industry in the Gulf is caused both by weather conditions and
by the historical timing of capital expenditures by oil and gas companies
which accompanies this. As a result, a disproportionate amount of the
Company's contract revenues are earned during the last half of each fiscal
year. Although the Company plans to offset Gulf seasonalities by pursuing
business opportunities in international areas, there are no assurances that
such expansion will offset the seasonality of the Company's operations in
the Gulf .
SHORTAGE OF SKILLED WORKERS
The Company's increased profitability depends on its ability to attract
and retain workers. As a result, management must devote significant time,
effort, and expense to hire, train, and retain qualified workers. A
significant increase in wages paid by other employers in the Company's line
of business could both result in a reduction of the Company's work force
and increases in the wages paid by the Company. If any of these events
occur for a significant period of time, the Company's profitability and
growth potential could be impaired.
NEED FOR ADDITIONAL FINANCING
The Company's acquisition strategy may require significant amounts of
additional capital and it may be required to incur substantial indebtedness
to finance future acquisitions and may issue additional equity securities
in connection with such acquisitions.
LACK OF OPERATING HISTORY
The Company, which was organized in December 1995, has limited experience
in conducting business and operations. As with any new enterprise, the
business plans and strategy of the Company are being continually evaluated
and revised and there can be no assurance that the Company's business plans
and strategies will be implemented or, if implemented, that they will be
successful.
CONTRACT BIDDING RISKS
Substantially all of the Company's projects are performed on a fixed-price
basis. Changes in offshore job conditions and variations in labor and
equipment productivity may affect the revenue and costs on a contract.
These variations may affect the gross profit realized by the Company. In
addition, during the summer construction season, the Company typically
bears the risk of delays caused by adverse weather conditions.
PERCENTAGE-OF-COMPLETION ACCOUNTING
Since the Company's contract revenues are recognized on a percentage-of-
completion basis, contract revenue and cost estimates are reviewed
periodically as the work progresses. Accordingly, adjustments are
reflected in income in the period when such revisions are determined. To
the extent that these adjustments result in a reduction of previously
reported profits, the Company would recognize a charge against current
earnings that may be significant depending on the size of the adjustment.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends on, among other things, the continued active
participation of the Company's executive officers and certain of the
Company's other key operating personnel, whom have extensive experience in
the marine construction industry, both domestic and internationally. The
loss of the services of any one of these persons could have a material
adverse effect of the Company.
REGULATORY AND ENVIRONMENTAL MATTERS
The Company's operations are subject to various governmental regulations,
violations of which may result in civil and criminal penalties,
injunctions, and cease and desist orders. In addition, some environmental
statutes may impose liability without regard to negligence or fault.
Although the Company's cost of compliance with such laws has to date been
immaterial, due to the frequency with which such laws are changed, it is
impossible to predict the cost or impact of such laws on its future
operations. Also, the loss by the Company of any license required in its
operations may have a material adverse effect on the Company's operations.
Since the Company depends on demand for its services from the oil and gas
industry, and since this demand may be affected by changing tax laws and
oil and gas regulations, the adoption of laws which curtail oil and gas
production in the Company's areas of operation may adversely affect the
Company. The Company cannot determine to what extent the Company's
operations may be affected by any new regulations or changes in existing
regulations.
EXPANSION INTO INTERNATIONAL OPERATIONS
A key element of the Company's expansion strategy is to expand its
operations into international oil and gas producing areas. These
international operations will be subject to a number of risks inherent in
any business operating in foreign countries including, but not limited to,
political, social, and economic instability; potential seizure or
nationalization of assets; increased operating costs; modification or
renegotiating of contracts; import-export quotas; and other forms of
government regulation which are beyond the control of the Company.
Additionally, the Company's competitiveness in international market areas
may be adversely affected by regulations requiring the awarding of
contracts to local contractors, employment of local citizens, and the
establishment of foreign subsidiaries with significant ownership positions
reserved by the foreign government for local citizens. The Company can make
no predictions as to what types of the above events may occur, and if such
an event should occur, it could have a material adverse effect on the
Company's operations and financial condition.
RISK OF JOINT VENTURE OPERATIONS
Many of the Company's international operations may be conducted through
joint ventures, jointly managed by the Company and the joint venture
partner. The Company's joint venture with Det Sondenfjelds-Norske
Dampskibsselskab ASA ("DSND"), owned 30% by the Company and operating
vessels made available to it by DSND, will operate in the Gulf, offshore
Mexico and Canada, and in the Caribbean. Under its terms, the Company
does not have the ability to control the business and affairs of
the joint venture. The Company anticipates entering into additional joint
ventures with other entities if it expands into other international market
areas. The Company cannot make any assurances that it will undertake such
joint ventures or, if undertaken, that such joint ventures will be
successful.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HORIZON OFFSHORE, INC.
By: /s/ David W. Sharp
________________________________
David W. Sharp
Executive Vice President and
Chief Financial Officer
Dated: July 21, 1998
