##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission File Number 001-16857
 HORIZON OFFSHORE, INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction 
of incorporation or organization)
    
    76-0487309(I.R.S. Employer
Identification No.)2500 CityWest Boulevard, Suite 2200
Houston, Texas(Address of principal executive offices)
    
    77042(Zip Code)
 (713) 361-2600  (Registrants telephone number, including area code)
 þ o
  o þ o
 o þ




---



##### 



HORIZON OFFSHORE, INC. AND SUBSIDIARIES
 QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2007
 Description
    
    
    
    PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    3Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    23Item 4.
    
    Controls and Procedures
    
    23PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    23Item 1A.
    
    Risk Factors
    
    24Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    24Item 6.
    
    Exhibits
    
    25Signatures
    
    26Certification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 HORIZON OFFSHORE, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)(In thousands, except share data)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    81,860
    
    
    $
    96,890Short-term investments
    
    
    19,125
    
    
    
    Restricted cash
    
    
    9,543
    
    
    
    9,325Accounts receivable Contract receivables
    
    
    102,735
    
    
    
    72,231Costs in excess of billings
    
    
    100,914
    
    
    
    112,836Other
    
    
    3,244
    
    
    
    2,773Income tax receivable
    
    
    1,040
    
    
    
    5,040Other current assets
    
    
    3,462
    
    
    
    8,140Total current assets
    
    
    321,923
    
    
    
    307,235PROPERTY AND EQUIPMENT, net
    
    
    199,260
    
    
    
    197,409CONTRACT RECEIVABLES, long-term
    
    
    13,851
    
    
    
    OTHER ASSETS, net
    
    
    16,198
    
    
    
    18,375$
    551,232
    
    
    $
    523,019LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    17,975
    
    
    $
    15,160Accrued liabilities
    
    
    13,877
    
    
    
    8,130Accrued job costs
    
    
    77,713
    
    
    
    56,782Billings in excess of costs
    
    
    19,559
    
    
    
    2,632Current maturities of long-term debt
    
    
    13,837
    
    
    
    14,813Current taxes payable
    
    
    7,155
    
    
    
    5,195Total current liabilities
    
    
    150,116
    
    
    
    102,712LONG-TERM DEBT, net of current maturities
    
    
    78,817
    
    
    
    85,495SUBORDINATED NOTES
    
    
    14,466
    
    
    
    13,904OTHER LIABILITIES
    
    
    436
    
    
    
    924DEFERRED INCOME TAXES
    
    
    12,429
    
    
    
    22,649Total liabilities
    
    
    256,264
    
    
    
    225,684COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $0.00001 par value, 5,000,000 shares authorized, none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.00001 par value, 100,000,000 shares authorized, 32,697,655 and 32,395,258
shares issued and outstanding, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    420,812
    
    
    
    419,392Accumulated deficit
    
    
    (125,732
    )
    
    
    (121,766
    )Accumulated other comprehensive loss
    
    
    (112
    )
    
    
    (291
    )Total stockholders equity
    
    
    294,968
    
    
    
    297,335$
    551,232
    
    
    $
    523,019
  3




---



##### Table of Contents



HORIZON OFFSHORE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)(In thousands, except share and per share data)CONTRACT REVENUES
    
    $
    117,351
    
    
    $
    156,940
    
    
    $
    204,066
    
    
    $
    286,885COST OF CONTRACT REVENUES
    
    
    116,429
    
    
    
    117,654
    
    
    
    189,958
    
    
    
    209,208Gross profit
    
    
    922
    
    
    
    39,286
    
    
    
    14,108
    
    
    
    77,677SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    8,267
    
    
    
    9,065
    
    
    
    16,096
    
    
    
    17,323GAIN ON INSURANCE SETTLEMENT
    
    
    
    
    
    
    (14,300
    )
    
    
    
    
    
    
    (14,300
    )RESERVE FOR CLAIMS AND RECEIVABLES
    
    
    
    
    
    
    18,458
    
    
    
    
    
    
    
    18,458Operating income (loss)
    
    
    (7,345
    )
    
    
    26,063
    
    
    
    (1,988
    )
    
    
    56,196OTHER:Interest expense
    
    
    (3,009
    )
    
    
    (3,540
    )
    
    
    (5,705
    )
    
    
    (7,625
    )Interest income
    
    
    882
    
    
    
    399
    
    
    
    1,768
    
    
    
    792Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,402
    )Other income (expense), net
    
    
    274
    
    
    
    (12
    )
    
    
    15
    
    
    
    (37
    )INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (9,198
    )
    
    
    22,910
    
    
    
    (5,910
    )
    
    
    46,924INCOME TAX PROVISION (BENEFIT)
    
    
    (2,963
    )
    
    
    6,040
    
    
    
    (1,944
    )
    
    
    14,583NET INCOME (LOSS)
    
    $
    (6,235
    )
    
    $
    16,870
    
    
    $
    (3,966
    )
    
    $
    32,341EARNINGS (LOSS) PER SHARE  BASIC AND DILUTED:Net income (loss) per share  basic
    
    $
    (0.19
    )
    
    $
    0.57
    
    
    $
    (0.12
    )
    
    $
    1.09Net income (loss) per share  diluted
    
    $
    (0.19
    )
    
    $
    0.55
    
    
    $
    (0.12
    )
    
    $
    1.06WEIGHTED AVERAGE SHARES USED IN COMPUTING
EARNINGS (LOSS) PER SHARE:BASIC
    
    
    31,981,449
    
    
    
    29,604,003
    
    
    
    31,919,522
    
    
    
    29,582,058DILUTED
    
    
    31,981,449
    
    
    
    30,419,709
    
    
    
    31,919,522
    
    
    
    30,397,567
  4




---



##### Table of Contents



HORIZON OFFSHORE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30,2007
    
    
    2006(Unaudited)(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (3,966
    )
    
    $
    32,341Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization
    
    
    11,629
    
    
    
    13,034Gain on insurance settlement
    
    
    
    
    
    
    (14,300
    )Net gain on sale of assets
    
    
    
    
    
    
    (25
    )Reserve for claims and receivables
    
    
    
    
    
    
    18,458Deferred income taxes
    
    
    (10,326
    )
    
    
    4,863Paid in-kind interest on subordinated notes and related party term debt
    
    
    562
    
    
    
    842Amortization of deferred loan fees recorded as interest expense
    
    
    281
    
    
    
    518Stock-based compensation expense
    
    
    2,105
    
    
    
    4,430Loss on debt extinguishment
    
    
    
    
    
    
    2,402Changes in operating assets and liabilities Restricted cash
    
    
    (218
    )
    
    
    2,280Accounts receivable
    
    
    (40,826
    )
    
    
    (24,791
    )Costs in excess of billings
    
    
    11,922
    
    
    
    (35,933
    )Billings in excess of costs
    
    
    16,927
    
    
    
    (4,671
    )Other assets
    
    
    2,779
    
    
    
    447Accounts payable
    
    
    2,815
    
    
    
    (1,983
    )Accrued and other liabilities
    
    
    4,543
    
    
    
    278Accrued job costs
    
    
    20,931
    
    
    
    5,042Current taxes payable
    
    
    1,960
    
    
    
    1,697Net cash provided by operating activities
    
    
    21,118
    
    
    
    4,929CASH FLOWS FROM INVESTING ACTIVITIES:Purchases and additions to property and equipment
    
    
    (9,869
    )
    
    
    (15,750
    )Proceeds from sale of assets
    
    
    500
    
    
    
    25Purchases of
short-term investments
    
    
    (39,150
    )
    
    
    Sales of short-term investments
    
    
    20,025
    
    
    
    Net cash used in investing activities
    
    
    (28,494
    )
    
    
    (15,725
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on term debt
    
    
    (7,654
    )
    
    
    (12,730
    )Principal payments under related party term debt
    
    
    
    
    
    
    (548
    )Deferred loan fees
    
    
    
    
    
    
    (403
    )Proceeds from issuance of common and preferred stock, net
    
    
    
    
    
    
    38,561Stock option transactions
    
    
    
    
    
    
    8Net cash provided by (used in) financing activities
    
    
    (7,654
    )
    
    
    24,888NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (15,030
    )
    
    
    14,092CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    96,890
    
    
    
    42,960CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    81,860
    
    
    $
    57,052SUPPLEMENTAL DISCLOSURES:Cash paid for interest
    
    $
    4,979
    
    
    $
    6,381Cash paid for income taxes
    
    $
    6,423
    
    
    $
    8,023Cash refund for income taxes
    
    $
    4,000
    
    
    $
    NON-CASH INVESTING AND FINANCING ACTIVITIES:Capital expenditures for property and equipment included in accrued liabilities
    
    $
    1,183
    
    
    $
    3,507Repayment of debt and accrued interest with proceeds of additional debt
    
    $
    
    
    
    $
    74,679Purchase of vessel with long-term debt
    
    $
    
    
    
    $
    11,000Payment of deferred loan fees, closing costs and fees through issuance of term debt
    
    $
    
    
    
    $
    2,721
  5




---



##### Table of Contents



HORIZON OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. ORGANIZATION AND BASIS OF PRESENTATION:
     Use of Estimates
  Proposed Merger
  6




---



##### Table of Contents



2. PEMEX CONTRACTS:
  
    
    We experienced a number of operating inefficiencies including
delays in mobilization of the Texas Horizon(due in large part to delays
in certifications of diving subcontractor equipment), mechanical downtime
and repair of a pipeline valve. These delays resulted in extended
commitments to several contractors causing additional third
party costs. Also, Pemex reduced the original scope of work under our
second contract during the second quarter of 2007.
    
    Unusually adverse weather conditions during the summer
construction season offshore Mexico in the Bay of Campeche prevented us
from performing weather sensitive operations for much of the latter half
of the quarter. These adverse weather conditions did not result in
official port closures and do not qualify for weather-related downtime
compensation.
    
    Poor productivity of diving subcontractors and excessive
mechanical downtime of a subcontracted diving support vessel have also
caused substantial delays. The standby time incurred by the diving
subcontractors that resulted in extended schedules and the standby time
incurred by our equipment spread while these subcontractors were delayed
resulted in increased costs. Although we have not included any estimated
recovery in the second quarter results, we intend to exercise our
contractual rights against these subcontractors.
    
    Pemex has evaluated certain extra work claims and disputed a
verbally approved change order, resulting in reductions to previously
recognized revenue. We believe the disputed extra work claims are valid
under the Pemex contracts, and we intend to pursue collection from Pemex.
Also, in July 2007, Pemex formally disputed several claims related to
weather and interference delays that had been recognized in prior
periods. As a result, we revised our estimated recovery on these claims.
We believe our claims are valid and intend to continue to pursue
collection. Additionally, we are currently working outside the scheduled
completion dates under the Pemex contracts and are potentially subject to
late completion penalties unless contract extensions are obtained
covering out-of-contract periods. Although several formal extensions
have been obtained and others are pending, we reduced our revenue to
reserve for estimated potential penalties. Some penalties have already
been assessed but could be recovered as a result of approved extensions.
We believe that we will receive contract extensions and additional
penalties will not be assessed. See Note 9.
 3. ACCOUNTS RECEIVABLE:
  7




---



##### Table of Contents



4. NOTES PAYABLE:
  June 30,
    
    
    December 31,2007
    
    
    2006Term loan payable to the CIT Group Equipment/Financing Inc., due March 9, 2011
    
    $
    58,904
    
    
    $
    64,304Term loan payable to General Electric Credit Corporation of Tennessee, due January 1, 2011
    
    
    23,920
    
    
    
    25,000Term loan payable to GE Capital Corporation, due January 1, 2012
    
    
    5,678
    
    
    
    6,246Term loan
payable to GE Capital Corporation, due June 29, 2011
    
    
    4,152
    
    
    
    4,7588% Subordinated Notes, due on March 31, 2010
    
    
    14,466
    
    
    
    13,904$30 million revolving credit facility with PNC Bank, N.A., maturing April 28, 2011
    
    
    
    
    
    
    Total debt
    
    $
    107,120
    
    
    $
    114,212Current maturities of long-term debt
    
    $
    13,837
    
    
    $
    14,813Long-term debt, net of current maturities
    
    $
    78,817
    
    
    $
    85,495Subordinated notes
    
    $
    14,466
    
    
    $
    13,904
    8




---



##### Table of Contents



5. STOCKHOLDERS EQUITY:
 Earnings Per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income (loss)
    
    $
    (6,235
    )
    
    $
    16,870
    
    
    $
    (3,966
    )
    
    $
    32,341Average common shares outstanding
    
    
    31,981
    
    
    
    29,604
    
    
    
    31,920
    
    
    
    29,582Basic earnings (loss) per share
    
    $
    (0.19
    )
    
    $
    0.57
    
    
    $
    (0.12
    )
    
    $
    1.09Average common and dilutive potential common shares outstanding:Average common shares outstanding
    
    
    31,981
    
    
    
    29,604
    
    
    
    31,920
    
    
    
    29,582Unvested restricted stock and assumed exercise of stock options
    
    
    
    
    
    
    816
    
    
    
    
    
    
    
    81631,981
    
    
    
    30,420
    
    
    
    31,920
    
    
    
    30,398Diluted earnings (loss) per share
    
    $
    (0.19
    )
    
    $
    0.55
    
    
    $
    (0.12
    )
    
    $
    1.06
  Stock Plans
   Stock-Based Compensation
  9




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Cost of contract revenues
    
    $
    
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    0.5Selling, general and administrative expenses
    
    
    1.0
    
    
    
    2.0
    
    
    
    2.1
    
    
    
    3.9$
    1.0
    
    
    $
    2.3
    
    
    $
    2.1
    
    
    $
    4.4
   6. GAIN ON INSURANCE SETTLEMENT:
 Gulf Horizon
 7. INCOME TAXES:
 Gulf Horizon
  Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109
 8. RELATED PARTY TRANSACTIONS:
    10




---



##### Table of Contents



9. COMMITMENTS AND CONTINGENCIES:
 Litigation
 Edward Fritsche ex rel. Horizon Offshore, Inc. v. John T. Mills, et al. st Edith Olanoff ex rel. Horizon Offshore, Inc. v. John T.
Mills, et al. th Fritsche
  Contractual Disputes  Unasserted Claims for Penalties Resulting from Contract Delays
   Tax Assessment
  Letters of Credit
  11




---



##### Table of Contents



Capital Expenditures
  Warranties
  10. RECENT ACCOUNTING PRONOUNCEMENTS:
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment of FASB Statement No. 115
 11. GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS:
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Domestic
    
    $
    85.6
    
    
    $
    66.6
    
    
    $
    108.9
    
    
    $
    139.8Latin America
    
    
    5.8
    
    
    
    70.0
    
    
    
    57.7
    
    
    
    80.2West Africa
    
    
    15.7
    
    
    
    19.5
    
    
    
    21.9
    
    
    
    62.2Southeast Asia/Mediterranean
    
    
    10.3
    
    
    
    0.8
    
    
    
    15.6
    
    
    
    4.7Total
    
    $
    117.4
    
    
    $
    156.9
    
    
    $
    204.1
    
    
    $
    286.9Gross Profit:Domestic
    
    $
    19.8
    
    
    $
    26.4
    
    
    $
    24.3
    
    
    $
    53.8Latin America
    
    
    (25.1
    )
    
    
    19.9
    
    
    
    (9.5
    )
    
    
    19.9West Africa
    
    
    (0.1
    )
    
    
    (6.8
    )
    
    
    (8.8
    )
    
    
    1.8Southeast Asia/Mediterranean
    
    
    6.3
    
    
    
    (0.2
    )
    
    
    8.1
    
    
    
    2.2Total
    
    $
    0.9
    
    
    $
    39.3
    
    
    $
    14.1
    
    
    $
    77.7
 As ofJune 30,
    
    
    December 31,2007
    
    
    2006Property and Equipment(1):Domestic
    
    $
    138.6
    
    
    $
    121.1Latin America
    
    
    25.0
    
    
    
    39.4West Africa
    
    
    0.3
    
    
    
    0.3Southeast Asia/Mediterranean
    
    
    35.4
    
    
    
    36.6Total
    
    $
    199.3
    
    
    $
    197.4
 
 (1)
    
    Property and equipment includes vessels, property and related marine equipment. Amounts
reflect the location of the assets at June 30, 2007 and December 31, 2006. Equipment location
changes as necessary to meet working requirements. Other identifiable assets include inventory
and other long-term assets, and are primarily located in the domestic region. 12




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Customer
    
    2007
    
    2006
    
    2007
    
    2006Customer A
    
    
    49
    %
    
    
    
    
    
    
    29
    %
    
    
    Customer B
    
    
    (2
    )%
    
    
    35
    %
    
    
    21
    %
    
    
    23
    %Customer C
    
    
    13
    %
    
    
    12
    %
    
    
    11
    %
    
    
    22
    %Customer D
    
    
    10
    %
    
    
    
    
    
    
    6
    %
    
    
    Customer E
    
    
    1
    %
    
    
    17
    %
    
    
    1
    %
    
    
    15
    %Customer F
    
    
    
    
    
    
    4
    %
    
    
    
    
    
    
    10
    %
  13




---



##### Table of Contents



Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
  General
   
    
    laying, burying or repairing marine pipelines;
    
    providing hook-up and commissioning services;
    
    installing production platforms and other structures; and
    
    disassembling and salvaging production platforms and other structures.
  
    
    expectations and perception about future demand and the price of oil and gas;
    
    the ability of the oil and gas industry to access capital;
    
    the cost of exploring for, producing and developing oil and gas reserves;
    
    discovery rates of new oil and gas reserves in offshore areas;
    
    sale and expiration dates of offshore leases in the United States and abroad;
    
    local and international political and economic conditions;
    
    governmental regulations;
    
    the availability and cost of capital; and
    
    damage to structures and pipelines caused by hurricanes and severe weather
conditions in the U.S. Gulf of Mexico and other areas.
    14




---



##### Table of Contents



Proposed Merger
    Overview
  (dollars in millions)
    
    We experienced a number of operating
inefficiencies including delays in mobilization of the
Texas Horizon(due in large part to delays in
certifications of diving subcontractor equipment),
mechanical downtime and repair of a pipeline valve.
These delays resulted in extended commitments to several
contractors causing additional third party
costs. Also, Pemex reduced the original scope of work under our
second contract during the
second quarter of 2007.
    
    $
    (5.4
    )
    
    Unusually adverse weather conditions during the
summer construction season offshore Mexico in the Bay of
Campeche prevented us from performing weather sensitive
operations for much of the latter half of the quarter.
These adverse weather conditions did not result in
official port closures and do not qualify for
weather-related downtime compensation.
    
    
    (6.6
    )
    
    Poor productivity of diving subcontractors and
excessive mechanical downtime of a subcontracted diving
support vessel have also caused substantial delays. The
standby time incurred by the diving subcontractors that
resulted in extended schedules and the standby time
incurred by our equipment spread while these
subcontractors were delayed resulted in increased costs.
Although we have not included any estimated
 15




---



##### Table of Contents



(dollars in millions)recovery in
the second quarter results, we intend to exercise our
contractual rights against these subcontractors.
    
    
    (8.4
    )
    
    Pemex has evaluated certain extra work claims
and disputed a verbally approved change order, resulting
in reductions to previously recognized revenue of $(5.5)
million. We believe the disputed extra work claims are
valid under the Pemex contracts, and we intend to pursue
collection from Pemex. Also, in July 2007, Pemex
formally disputed several claims related to weather and
interference delays that had been recognized in prior
periods. As a result, we revised our estimated recovery
on these claims by $(6.0) million. We believe our
claims are valid and intend to continue to pursue
collection. Additionally, we are currently working
outside the scheduled completion dates under the Pemex
contracts and are potentially subject to late completion
penalties unless contract extensions are obtained
covering out-of-contract periods. Although several
formal extensions have been obtained and others are
pending, we reduced our revenue by $(3.3) million to
reserve for estimated potential penalties. Some
penalties have already been assessed but could be
recovered as a result of approved extensions. We
believe that we will receive contract extensions and
additional penalties will not be assessed.
    
    
    (14.8
    )
 Results of Operations
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Domestic
    
    $
    85.6
    
    
    $
    66.6
    
    
    $
    108.9
    
    
    $
    139.8Latin America
    
    
    5.8
    
    
    
    70.0
    
    
    
    57.7
    
    
    
    80.2West Africa
    
    
    15.7
    
    
    
    19.5
    
    
    
    21.9
    
    
    
    62.2Southeast Asia/Mediterranean
    
    
    10.3
    
    
    
    0.8
    
    
    
    15.6
    
    
    
    4.7Total
    
    $
    117.4
    
    
    $
    156.9
    
    
    $
    204.1
    
    
    $
    286.9Gross Profit:Domestic
    
    $
    19.8
    
    
    $
    26.4
    
    
    $
    24.3
    
    
    $
    53.8Latin America
    
    
    (25.1
    )
    
    
    19.9
    
    
    
    (9.5
    )
    
    
    19.9West Africa
    
    
    (0.1
    )
    
    
    (6.8
    )
    
    
    (8.8
    )
    
    
    1.8Southeast Asia/Mediterranean
    
    
    6.3
    
    
    
    (0.2
    )
    
    
    8.1
    
    
    
    2.2Total
    
    $
    0.9
    
    
    $
    39.3
    
    
    $
    14.1
    
    
    $
    77.7
 Quarter Ended June 30, 2007 Compared to the Quarter Ended June 30, 2006
 Contract Revenues.
  16




---



##### Table of Contents



Sea Horizon Sea Horizon
 Gross Profit.
   Sea
Horizon
 Selling, General and Administrative Expenses.
 Gain on Insurance Settlement. Gulf Horizon
 Reserves for claims and receivables.
 Interest Expense.
 17




---



##### Table of Contents



Three monthsEnded June 30,2007
    
    
    2006Cash paid for interest
    
    $
    2.5
    
    
    $
    2.9Interest paid in-kind
    
    
    0.4
    
    
    
    0.3Other non-cash charges, net
    
    
    0.1
    
    
    
    0.3$
    3.0
    
    
    $
    3.5
  Interest Income.
 Other Income (Expense), Net.
 Income Taxes. Gulf Horizon
 Six Months Ended June 30, 2007 Compared to the Six Months Ended June 30, 2006
 Contract Revenues. Sea Horizon
 Gross Profit.
 Selling, General and Administrative Expenses.
 Gain on Insurance Settlement. Gulf Horizon
 18




---



##### Table of Contents



Reserves for claims and receivables.
 Interest Expense.
 Six MonthsEnded June 30,2007
    
    
    2006Cash paid for interest
    
    $
    5.0
    
    
    $
    6.4Interest paid in-kind
    
    
    0.6
    
    
    
    0.8Other non-cash charges, net
    
    
    0.1
    
    
    
    0.4$
    5.7
    
    
    $
    7.6
  Interest Income.
 Loss on Debt Extinguishment.
 Other Income (Expense), Net.
 Income Taxes. Gulf Horizon
 Liquidity and Capital Resources
 General
   19




---



##### Table of Contents



Working Capital
  Indebtedness
    Cash Flows
  Texas Horizon
 20




---



##### Table of Contents



Contractual Disputes  Unasserted Claims for Penalties Resulting from Contract Delays
   Off-Balance Sheet Arrangements
   21




---



##### Table of Contents



Contractual Obligations and Capital Expenditures
  Remainderof 2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalPrincipal and interest payments on debt
    
    $
    13,088
    
    
    $
    19,609
    
    
    $
    18,177
    
    
    $
    35,354
    
    
    $
    48,170
    
    
    $
    654
    
    
    $
    135,052Operating leases
    
    
    1,338
    
    
    
    2,361
    
    
    
    769
    
    
    
    1,879
    
    
    
    1,838
    
    
    
    7,017
    
    
    
    15,202$
    14,426
    
    
    $
    21,970
    
    
    $
    18,946
    
    
    $
    37,233
    
    
    $
    50,008
    
    
    $
    7,671
    
    
    $
    150,254
  New Accounting Pronouncements
  Critical Accounting Policies and Estimates
  Forward-Looking Statements
  
    
    our business is highly cyclical;
    
    oil and gas prices are volatile and price declines may affect us;
    
    the highly competitive nature of the marine construction business;
    
    seasonality of the offshore construction industry in the U.S. Gulf of Mexico;
    
    operating hazards, including the unpredictable effect of natural occurrences on operations, such as hurricanes and
other hazards associated with maritime activities, and the significant possibility of accidents resulting in
personal injury and property damage;
    
    risks involved in the expansion of our operations into international offshore oil and gas producing areas;
    
    our ability to obtain and retain highly skilled personnel;
    
    extreme weather conditions may adversely impact our operations;
    
    contract bidding risks, including those involved in performing projects on a fixed-price basis and extra work
performed outside the original scope of work, and the successful negotiation and collection of contract claims for
such extra work;
 22




---



##### Table of Contents




    
    our dependence on continued strong working relationships with significant customers operating in the Gulf of Mexico;
    
    percentage-of-completion accounting;
    
    estimates and assumptions that we use to prepare our financial statements;
    
    the continued active participation of our executive officers and key operating personnel;
    
    the effect on our performance from regulatory programs and environmental matters;
    
    our international operations are subject to the U.S. Foreign Corrupt Practices Act;
    
    our ability to fund working capital requirements;
    
    limitations on our operating and financial flexibility because of restrictive covenants in our debt instruments;
    
    our ability to obtain performance bonds and letters of credit if required to secure our performance under new
international contracts;
    
    the potential impairment of our assets in the future; and
    
    a possible terrorist attack or armed conflict.
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Edward Fritsche ex rel. Horizon Offshore, Inc. v. John T. Mills, et al. st Edith Olanoff ex rel. Horizon Offshore, Inc. v. John T.
Mills, et al. th Fritsche
 23




---



##### Table of Contents



Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
  (a)
    
    Each of the following persons was elected as a director of the company:
 For
    
    Withhold AuthorityJohn T. Mills
    
    
    22,617,098
    
    
    
    1,483,183Charles O. Buckner
    
    
    23,651,882
    
    
    
    448,399Ken R. LeSuer
    
    
    23,651,682
    
    
    
    448,599Raymond L. Steele
    
    
    23,651,702
    
    
    
    448,579David W. Sharp
    
    
    23,651,962
    
    
    
    448,319
 (b)
    
    The stockholders approved the amendment to the Horizon Offshore, Inc. 2005 Stock Incentive Plan:
 For
    
    Against
    
    Abstentions
    
    Broker Non-Votes14,566,069
    
    2,159,270
    
    1,593,908
    
    5,781,034
 24




---



##### Table of Contents



(c)
    
    The stockholders ratified the selection of Grant Thornton LLP as our independent
registered public accounting firm for 2007:
 For
    
    Against
    
    Abstentions22,527,871
    
    11,609
    
    1,560,801
 
 Item 6. Exhibits
 Exhibits3.1
    
    Amended and Restated Certificate of Incorporation of the Company (Incorporated by
reference to the Companys Current Report on Form 8-K filed September 19, 2005)3.2
    
    Certificate of Amendment to the Amended and Restated Certificate of Incorporation of
the Company (Incorporated by reference to the Companys Current Report on Form 8-K
filed April 18, 2006)3.3
    
    Bylaws of the Company (Incorporated by reference to the Companys Current Report on
Form 8-K filed September 19, 2005)4.1
    
    Specimen of Common Stock Certificate (Incorporated by reference to the Companys
Current Report on Form 8-K filed April 18, 2006)10.1
    
    Horizon Offshore, Inc. 2005 Stock Incentive Plan, as amended and restated as of May 23,
2007 (Incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form
8-K filed May 24, 2007)*10.2
    
    Agreement and Plan of Merger, dated as of June 11, 2007, by and among Cal Dive
International, Inc., Cal Dive Acquisition, LLC and Horizon Offshore, Inc. (Incorporated
by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K filed June 12,
2007)31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)32.2
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
 
 *
    
    Management Contract or Compensatory Plan/Agreement 25




---



##### Table of Contents



SIGNATURES
  HORIZON OFFSHORE, INC.By:
    /s/ Ronald D. MogelRonald D. MogelVice President and Chief Financial Officer  26




---



##### Table of Contents



INDEX TO EXHIBITS
 Exhibit
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of the Company (Incorporated by
reference to the Companys Current Report on Form 8-K filed September 19, 2005)3.2
    
    Certificate of Amendment to the Amended and Restated Certificate of Incorporation of
the Company (Incorporated by reference to the Companys Current Report on Form 8-K
filed April 18, 2006)3.3
    
    Bylaws of the Company (Incorporated by reference to the Companys Current Report on
Form 8-K filed September 19, 2005)4.1
    
    Specimen of Common Stock Certificate (Incorporated by reference to the Companys
Current Report on Form 8-K filed April 18, 2006)10.1
    
    Horizon Offshore, Inc. 2005 Stock Incentive Plan, as amended and restated as of May 23,
2007 (Incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form
8-K filed May 24, 2007)*10.2
    
    Agreement and Plan of Merger, dated as of June 11, 2007, by and among Cal Dive
International, Inc., Cal Dive Acquisition, LLC and Horizon Offshore, Inc. (Incorporated
by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K filed June 12,
2007)31.1
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)31.2
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)32.1
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)32.2
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
 
 *
    
    Management Contract or Compensatory Plan/Agreement 27