UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-23653
------------------------
HORIZON OFFSHORE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 76-0487309
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
2500 CITYWEST BOULEVARD, SUITE 2200
HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(713) 361-2600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
The number of shares of the registrant's Common Stock outstanding as of May
12, 1999 was 18,800,980.
================================================================================
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......... $ 12,004 $ 9,649
Accounts receivable --
Contract receivables.......... 14,050 25,631
Costs in excess of billings... 6,061 9,546
Income taxes receivable............ 481 481
Other current assets............... 607 642
----------- ------------
Total current assets.......... 33,203 45,949
PROPERTY AND EQUIPMENT, net............. 151,731 145,680
OTHER ASSETS............................ 3,543 2,040
----------- ------------
$ 188,477 $193,669
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................... $ 6,626 $ 7,654
Accrued liabilities................ 3,997 5,086
Accrued job costs.................. 6,151 10,334
Billings in excess of costs........ 1,620 2,608
Current maturities of long-term
debt.............................. 7,606 7,606
----------- ------------
Total current liabilities..... 26,000 33,288
LONG-TERM DEBT, net of current
maturities............................ 65,276 62,268
DUE TO RELATED PARTIES.................. 59 20
DEFERRED INCOME TAXES................... 3,305 3,633
----------- ------------
Total liabilities............. 94,640 99,209
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value,
5,000,000 shares authorized,
none issued and outstanding...... -- --
Common stock, $1 par value,
35,000,000 shares authorized,
19,826,480 shares issued at March
31, 1999 and
December 31, 1998................ 9,119 9,119
Additional paid-in capital......... 87,767 87,767
Retained earnings.................. 4,551 5,156
Treasury stock, 1,158,800 shares at
March 31, 1999 and
1,155,000 shares at December 31,
1998.............................. (7,600) (7,582)
----------- ------------
Total stockholders' equity.... 93,837 94,460
----------- ------------
$ 188,477 $193,669
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 1998
------------ --------------
<S> <C> <C>
CONTRACT REVENUES.................... $ 12,357 $ 18,611
COST OF CONTRACT REVENUES............ 10,091 13,227
------------ --------------
Gross profit.................... 2,266 5,384
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,342 1,939
------------ --------------
Operating income (loss)......... (76) 3,445
OTHER INCOME (EXPENSE):
Interest expense................ (959) (801)
Interest income and other....... 102 --
------------ --------------
NET INCOME (LOSS) BEFORE INCOME
TAXES.............................. (933) 2,644
PROVISION (BENEFIT) FOR INCOME TAX... (328) --
------------ --------------
NET INCOME (LOSS).................... $ (605) $ 2,644
============ ==============
NET INCOME (LOSS) PER SHARE -- BASIC
AND DILUTED........................ (0.03) $ 0.19
============ ==============
SHARES USED IN COMPUTING NET INCOME
(LOSS)
PER SHARE-BASIC AND DILUTED........ 18,669,793 14,076,480
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1999 1998
--------- ----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss).................. $ (605) $ 2,644
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities --
Depreciation and amortization... 1,502 432
Deferred income taxes........... (328) (180)
Changes in operating assets and
liabilities --
Accounts receivable........... 11,581 1,656
Costs in excess of billings... 3,485 (5,121)
Billings in excess of costs... (988) (43)
Other current assets.......... 35 (1)
Accounts payable.............. (1,028) (1,881)
Accrued liabilities........... (1,089) 2,825
Accrued job costs............. (4,183) 2,442
Accrued interest.............. -- 454
Due to related parties........ 39 --
Income taxes payable.......... -- 109
--------- ----------
Net cash provided by
operating activities.... 8,421 3,336
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases and additions to
equipment....................... (7,444) (14,975)
Drydock costs...................... (1,618) --
--------- ----------
Net cash used in investing
activities.............. (9,062) (14,975)
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings under notes payable and
long-term debt.................. 5,000 8,903
Loan fees.......................... -- (421)
Principal payments on long-term
debt............................ (1,986) --
Issuance of common stock........... -- 950
Purchase of treasury stock......... (18) (505)
--------- ----------
Net cash provided by
financing activities.... 2,996 8,927
--------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................... 2,355 (2,712)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD................ 9,649 2,846
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................. $ 12,004 $ 134
========= ==========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest............. $ 1,387 $ 379
Cash paid for income taxes......... $ -- $ 71
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The consolidated interim financial statements included herein have been
prepared by Horizon Offshore, Inc. (a Delaware corporation) and its subsidiaries
(Horizon or the Company), and are unaudited, except for the balance sheet at
December 31, 1998, which has been prepared from the audited financial
statements. In the opinion of management, the unaudited consolidated interim
financial statements include all adjustments necessary for a fair presentation
of the financial position as of March 31, 1999, the statements of operations and
the statements of cash flows for the three months ended March 31, 1999 and 1998.
Although management believes the unaudited interim related disclosures in these
consolidated interim financial statements are adequate to make the information
presented not misleading, certain information and footnote disclosures normally
included in annual audited financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to the rules of the Securities and Exchange Commission. The results of
operations for the three months ended March 31, 1999 are not necessarily
indicative of the result to be expected for the entire year ending December 31,
1999. The consolidated interim financial statements included herein should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's 1998 Annual Report on Form 10-K.
ORGANIZATION
Horizon provides offshore construction services to the oil and gas
industry. These services generally consist of laying and burying marine
pipelines for the transportation of oil and gas, and installing and salvaging
production platforms and other marine structures. Work is performed primarily on
a fixed-price or day-rate basis or a combination of these.
In April 1998, the Company completed its initial public offering (the
Offering) of 5,750,000 shares of its common stock at $13.00 per share and
received $68.6 million in net proceeds. The Company used the net proceeds of the
Offering to repay $23.8 million of indebtedness and to acquire the Stephaniturm,
a 230-foot diving support vessel, for $18.3 million. The remaining Offering
proceeds were used to upgrade and expand the Company's fleet and operating
capabilities.
INTEREST CAPITALIZATION
Interest is capitalized on the average amount of accumulated expenditures
for equipment that has been purchased and is undergoing major modification and
refurbishment prior to being placed into service. Interest is capitalized using
an effective rate based on related debt until the equipment is placed into
service. Interest expense for the three-month period ended March 31, 1999 is net
of $563,000 interest capitalized. Interest capitalized during the three-month
period ended March 31, 1998 was $148,000.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Barges, boats and related
equipment.......................... $ 148,840 $141,436
Land and buildings................... 7,131 7,084
Machinery and equipment.............. 245 245
Office furniture and equipment....... 1,180 1,121
Leasehold improvements............... 1,330 1,330
---------- ------------
158,726 151,216
Less -- Accumulated depreciation..... (6,995) (5,536)
---------- ------------
Property and equipment, net.......... $ 151,731 $145,680
========== ============
</TABLE>
5
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the three months ended March 31, 1999, the Company expended $7.4
million for vessel acquisitions, improvements and refurbishments and for
improvements to its marine base.
During April 1999, the Company purchased the Brazos Horizon, a
pipelay/pipebury barge for $5.8 million, which consisted of $4.8 million in cash
and 133,300 shares of the Company's common stock with a fair value of $1.0
million. The Company reissued treasury stock for this transaction.
3. STOCKHOLDERS' EQUITY
EARNINGS PER SHARE
Earnings per share data for all periods presented has been computed
pursuant to Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share" that requires a presentation of basic earnings per share
(basic EPS) and diluted earnings per share (diluted EPS). Basic EPS excludes
dilution and is determined by dividing income available to common stockholders
by the weighted average number of common shares outstanding during the period.
Diluted EPS reflects the potential dilution that could occur if securities and
other contracts to issue common stock were exercised or converted into common
stock. No options to purchase common stock were granted prior to April 1998. The
Company had outstanding options covering an aggregate of 1.1 million shares of
common stock and no shares were exercisable as of March 31, 1999. There are no
differences in basic EPS and diluted EPS for all periods presented.
TREASURY STOCK
In July 1998, the board of directors approved the repurchase of up to $10
million of the Company's outstanding common stock. The shares have been
purchased from time to time, subject to market conditions, in the open market or
in privately negotiated transactions. As of March 31, 1999, the Company had
repurchased 1,158,800 shares of common stock for a total cost of $7.6 million,
of which 3,800 shares were purchased during the quarter ended March 31, 1999.
4. RELATED PARTY TRANSACTIONS
The Company has chartered the Stephaniturm to Det Sondenfjelds-Norske
Dampskibsselskab ASA (DSND) until December 31, 1999, with a cancellation
provision at September 30, 1999 upon payment by DSND of a $250,000 cancellation
fee. The Company recognized $0.7 million in revenues and $0.4 million in gross
profit during the quarter ended March 31, 1999 related to this charter.
In August 1998, the Company entered into a master services agreement with
Odyssea Marine, Inc. (Odyssea), an entity wholly-owned by Elliott Associates,
L.P. and Westgate International, L.P., Principal Stockholders, to charter
certain marine vessels from Odyssea. As of March 31, 1999, the Company owed
Odyssea $85,000, compared to $1.1 million owed to Odyssea at December 31, 1998.
During the quarter ended March 31, 1999, Odyssea billed Horizon $1.1 million and
Horizon paid Odyssea $2.1 million for services rendered under the agreement.
In August 1998, the Company entered into an agreement with Prime Natural
Resources, Inc. (Prime), an entity that is 99.5% owned by one of the Principal
Stockholders, to perform marine construction work. Prime awards contracts to
Horizon on the basis of a competitive bid process. As of March 31, 1999, the
outstanding receivable balance from Prime was $2.9 million compared to $1.3
million at December 31, 1998. As of May 12, 1999, the Company has collected $1.0
million of the $2.9 million outstanding at March 31, 1999. The Company billed
Prime $1.6 million for services rendered under the agreement during the first
quarter of 1999.
In the opinion of management of the Company, all of the transactions
described above were effected on terms at least as favorable to the Company as
those which could have been obtained from unaffiliated third parties.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND THE
DISCUSSION UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" INCLUDED IN THE COMPANY'S 1998 ANNUAL REPORT ON FORM
10-K. THE FOLLOWING INFORMATION CONTAINS FORWARD-LOOKING STATEMENTS, WHICH ARE
SUBJECT TO RISKS AND UNCERTAINTIES. SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, ACTUAL RESULTS MAY DIFFER FROM THOSE EXPRESSED OR
IMPLIED BY THE FORWARD-LOOKING STATEMENTS.
GENERAL
Horizon provides marine construction services to the oil and gas industry
primarily in the Gulf of Mexico. The Company's marine fleet is used to perform a
wide range of marine construction activities, including installation of marine
pipelines to transport oil and gas from newly installed production platforms and
other subsea production systems, and the installation and abandonment of
production platforms.
The Company's management team has aggressively expanded Horizon's
operations. This management team has assembled a fleet of eleven vessels capable
of providing a full range of pipeline and derrick services in varying water
depths. Horizon operated nine of these vessels during the first quarter,
consisting of four pipelay/pipebury barges, a dedicated pipebury barge, two
derrick barges and two diving support vessels. The Company purchased the Brazos
Horizon, a pipelay/pipebury barge, in April 1999 for $5.8 million, which
consisted of $4.8 million of cash and 133,300 shares of the Company's treasury
stock with a fair value of $1.0 million. The Company's expanded fleet competes
in the Gulf for substantially all pipeline installation projects in shallow
water depths of 200 feet and less and projects in intermediate water depths
between 200 and 800 feet. The Company also competes for projects in selected
international markets. Horizon has two derrick barges with lift capacities up to
800 tons deployed, and a derrick/pipelay barge undergoing refurbishment.
The demand for offshore construction services in the Gulf depends largely
on the condition of the oil and gas industry and, in particular, the level of
capital expenditures by oil and gas companies for developmental construction.
These expenditures are influenced by prevailing oil and gas prices, expectations
about future demand and prices, the cost of exploring for, producing and
developing oil and gas reserves, the discovery rates of new oil and gas
reserves, sale and expiration dates of offshore leases in the United States and
abroad, political and economic conditions, governmental regulations and the
availability and cost of capital. Historically, oil and gas prices and the level
of exploration and development activity have fluctuated substantially, impacting
the demand for pipeline and marine construction services.
Factors affecting the Company's profitability include competition,
equipment and labor productivity, contract estimating, weather conditions and
the other risks inherent in marine construction. The marine construction
industry in the Gulf is highly seasonal as a result of weather conditions with
the greatest demand for these services occurring during the second and third
calendar quarters of the year. Full year results are not a direct multiple of
any quarter or combination of quarters because of this seasonality.
RESULTS OF OPERATIONS
The discussion below describes the Company's results of operations.
Revenues and profits declined in the first quarter of 1999 compared to 1998 as
offshore construction activity in the Gulf has slowed primarily in response to
lower oil and gas prices. Reduced demand for construction and lower margins bid
on jobs impacted results for the first quarter of 1999. Historically, the
greatest demand for marine construction services has been during the period from
May to September due to weather conditions in the Gulf. Horizon began 1999 with
a backlog of $19.0 million and ended the first quarter with a backlog of $32.5
million.
The Company's vessel acquisitions have expanded its operating capabilities
and increased its operating cost structure. The aggregate amount of selling,
general and administrative expenses has increased to support this growth. The
Company operated four vessels during the first quarter of 1998 compared to nine
vessels in operation during the first quarter of 1999. The Company's fleet
expansion, along with reduced offshore construction demand resulted in a
significant decrease in fleet utilization during the first quarter of 1999
compared to the first quarter last year.
7
<PAGE>
Recently, the Company formed an alliance with Cal Dive International to
jointly provide services, positioning Horizon to competitively participate in a
wider range of projects in the Gulf of Mexico. This alliance gives Cal Dive
access to Horizon's expanded derrick and heavy lift capabilities as well as
pipelay/pipebury services during 1999 and provides Horizon with Cal Dive's
diving services.
Horizon has continued its expansion efforts into selected international
markets during the first quarter of 1999. The Company currently has ongoing
business development efforts in West Africa and Latin and South America.
A continued weakness in energy prices and a prolonged decline in offshore
drilling and exploration could adversely affect the Company's future revenues
and profitability. In late 1998 and early 1999, the Company experienced a
decline in demand for its marine construction services in the Gulf as oil and
gas companies reduced their levels of capital expenditures. The Company expects
reduced demand for its services to impact its results of operations for 1999.
QUARTER ENDED MARCH 31, 1999 COMPARED TO THE QUARTER ENDED MARCH 31, 1998
CONTRACT REVENUES. Contract revenues were $12.4 million for the quarter
ended March 31, 1999 compared to $18.6 million for the quarter ended March 31,
1998. Revenues for the first quarter of 1999 declined as a result of reduced
demand for offshore construction in the Gulf of Mexico and the weakness in
energy prices. The Company recognized $0.7 million in revenues in the first
quarter of 1999 for the Stephaniturm charter to DSND.
GROSS PROFIT. Gross profit was $2.3 million (18.3% of contract revenues)
for the quarter ended March 31, 1999 compared to a gross profit of $5.4 million
(28.9% of contract revenues) for the quarter ended March 31, 1998. The impact of
reduced demand for marine construction in the Gulf and lower margins bid on jobs
resulted in decreased revenues and gross profit for the first quarter of 1999.
The Company's increased operating cost structure associated with its fleet
expansion has also decreased gross profit. The Company recognized $0.4 million
in gross profit from the Stephaniturm charter to DSND in the first quarter of
1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $2.3 million (19.0% of contract revenues)
for 1999 from $1.9 million (10.4% of contract revenues) for 1998 primarily due
to the addition of personnel and other expenses associated with the growth of
the Company and the fleet expansion. The decrease in revenues and the increase
in the operating cost structure caused selling, general and administrative
expenses to increase substantially as a percent of contract revenues.
INTEREST EXPENSE. Interest expense was $1.0 million for the three months
ended March 31, 1999, net of $0.6 million interest capitalized, and $0.8 million
for the same period last year, net of $0.1 million interest capitalized. The
Company's total outstanding debt was $72.9 million at March 31, 1999 compared to
$48.3 million at March 31, 1998. The outstanding debt increased significantly as
a result of the vessel acquisitions and improvements made to expand the
capabilities of the Company's fleet.
OTHER INCOME. Included in other income for 1999 is $0.1 million of
interest income on cash investments.
INCOME TAXES. The Company uses the liability method of accounting for
income taxes. The Company recorded a federal income tax benefit of $0.3 million,
at a net effective rate of 35% on a pre-tax loss of $0.9 million. For the
quarter ended March 31, 1998, both pre-tax and net income were $2.6 million, as
no income tax expense was recorded due to net operating loss carryforwards. A
valuation allowance was previously established to offset the Company's net
deferred tax assets, including those related to carryforwards, to the extent
they were not realizable through the sale of appreciated assets at March 31,
1998.
NET INCOME. Net loss was $0.6 million or $0.03 per share (computed based
upon 18,669,793 shares) for the quarter ended March 31, 1999 compared to a net
income for the quarter ended March 31, 1998 of $2.6 million or $0.19 per share
(computed based upon 14,076,480 shares). The decrease in net income is due to
the decline in revenues and gross profit.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In December 1998, Horizon entered into a loan agreement with The CIT Group
providing for a $60 million term loan (the CIT Term Loan) at a rate of LIBOR
plus 2.65%. The CIT Term Loan is due in 84 monthly installments of $0.5 million
and matures January 30, 2006. Initially, the Company borrowed $50 million in
December 1998. The Company borrowed an additional $5 million in March 1999 upon
the completion of the Pacific Horizon. The CIT Term Loan provides for additional
borrowings of $5 million upon completion of the Phoenix Horizon. The outstanding
balance at March 31, 1999 was $53.6 million. The balance of the $30 million
revolving note payable to Den norske Bank (the DNB Revolver) was zero at March
31, 1999, and the Company had $1.9 million in available borrowings, pursuant to
the borrowing base calculation. In 1997, one of the Principal Stockholders
issued letters of credit and provided guarantees to secure Horizon's notes
payable to two foreign marine companies pursuant to a settlement agreement.
During 1998, Den norske Bank issued two letters of credit on behalf of the
Company to secure any obligation paid by the Principal Stockholder under their
letters of credit. These letters of credit are deducted from the Company's
borrowing base calculation under the DNB Revolver. There are no outstanding
amounts on the Company's letters of credit.
Both the CIT Term Loan and the DNB Revolver require that certain conditions
be met in order for the Company to obtain advances under the loans. These loans
are secured by substantially all assets of the Company, including mortgages on
all vessels owned by the Company, as well as accounts receivable. Both loan
facilities require the Company to maintain certain financial ratios and contain
certain covenants that limit the Company's ability to incur additional
indebtedness, pay dividends, create certain liens, sell assets and make capital
expenditures. Horizon was in compliance with all loan covenants at March 31,
1999.
In July 1998, the board of directors approved the repurchase of up to $10
million of the Company's outstanding common stock. As of March 31, 1999, the
Company had repurchased 1,158,800 shares of common stock for a total cost of
$7.6 million through debt borrowings, of which 3,800 shares were purchased in
the first quarter of 1999. In April 1999, the Company reissued 133,300 shares of
treasury stock in connection with the purchase of the Brazos Horizon.
Horizon had working capital of $7.2 million at March 31, 1999 compared to
working capital of $12.7 million at December 31, 1998. The first quarter decline
in contract revenues has resulted in a decrease in contract receivables and
accrued job costs.
Cash provided by operations was $8.4 million for the quarter ended March
31, 1999, compared to $3.3 million for the quarter ended March 31, 1998. The
Company has used borrowings to fund capital expenditures. Cash used for capital
expenditures during the quarter ended March 31, 1999 totaled $7.4 million
compared to $15.0 million for the first quarter ended March 31, 1998.
Planned capital expenditures for the remainder of 1999 are estimated to
total approximately $15.0 million, which includes $4.8 million in cash paid for
the purchase of the Brazos Horizon and estimated expenditures to complete
improvements to the Company's existing fleet. Management believes that cash
generated from operations, together with available borrowings under its loan
facilities, will be sufficient to fund the Company's currently planned capital
projects and working capital requirements for 1999. The Company's strategy,
however, is to make other acquisitions to expand its operating capabilities and
expand into selected international markets. To the extent the Company is
successful in identifying acquisition opportunities, it most likely will require
additional equity or debt financing depending on the size of any transaction.
YEAR 2000
The Company has implemented a Year 2000 project plan to identify and assess
its risks associated with Year 2000 issues. Under the plan, the Company assessed
its major information and computing systems and has updated or replaced
applications that were not Year 2000 compliant. The Company has also contacted
its key vendors and customers to assess their efforts and progress with Year
2000 issues. The Company does not anticipate any material affects on its
business, operations or financial condition. Despite efforts to address Year
2000 issues in advance, there can be no assurance that the Company will not
experience unanticipated disruption, negative consequences or costs caused by
undetected errors in the technology used in its internal systems.
9
<PAGE>
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 16, 1999, the Company issued 133,300 shares of common stock to
Terry Offshore, L.L.C. in partial consideration of the purchase of a pipelay
barge in reliance on Section 4(2) and 4(6) under the Securities Act of 1933, as
amended, and the rules promulgated thereunder.
ITEM 5. OTHER INFORMATION
Forward-Looking Statements
In addition to historical information, Management's Discussion and Analysis
of Financial Condition and Results of Operations includes certain
forward-looking statements regarding events and financial trends that may affect
the Company's future operating results and financial position. Such
forward-looking statements are subject to uncertainties that could cause the
Company's actual results to differ materially from such statements. Such
uncertainties include but are not limited to: industry conditions and
volatility; prices of oil and gas; the Company's ability to obtain and the
timing of new projects, and changes in competitive factors, 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; seasonality of the offshore construction
industry in 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 management and key personnel;
the effect on the Company's performance of regulatory programs and environmental
matters; risks involved in the Company's operations expansion 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. These and other uncertainties related
to the business are described in detail under the heading "Risk Factors" in
the Company's 1998 Annual Report on Form 10-K. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to update any of its
forward-looking statements for any reason.
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation of the Company(1)
3.2 Bylaws of the Company(1)
27.1 Financial Data Schedule
- ------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration Statement No. 333-43965).
(b) Reports on Form 8-K:
None.
11
<PAGE>
SIGNATURE
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 THEREUNTO DULY AUTHORIZED.
HORIZON OFFSHORE, INC.
By: /s/ DAVID W. SHARP
DAVID W. SHARP
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: May 12, 1999
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF HORIZON
OFFSHORE, INC. AND SUBSIDIARIES AS OF MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,004
<SECURITIES> 0
<RECEIVABLES> 14,050
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,203
<PP&E> 158,726
<DEPRECIATION> (6,995)
<TOTAL-ASSETS> 188,477
<CURRENT-LIABILITIES> 26,000
<BONDS> 0
0
0
<COMMON> 9,119
<OTHER-SE> 84,718
<TOTAL-LIABILITY-AND-EQUITY> 188,477
<SALES> 12,357
<TOTAL-REVENUES> 12,357
<CGS> 10,091
<TOTAL-COSTS> 10,091
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 959
<INCOME-PRETAX> (933)
<INCOME-TAX> (328)
<INCOME-CONTINUING> (605)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (605)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
