##### 



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, 2003

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)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 76-0487309                          
|(State or other jurisdiction
of incorporation or organization) |  | (I.R.S. employer
identification no.)

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 [   ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [   ]

The number of shares of the registrants common stock, $1.00 par value per
share, outstanding as of May 9, 2003 was 26,417,904.





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TABLE OF CONTENTS



|                                                                         |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                                          
|                                                                         | Item 1. Financial Statements                                                                 
|                                                                         |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                                                         |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                                                         |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                                         |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                                                         | Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
|                                                                         | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                                         | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION                                             
|                                                                         | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                                               
|CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
|Amendment No. 8 to Loan Agreement                                       
|Certification Pursuant to Section 906                                   
|Certification Pursuant to Section 906                                   

HORIZON OFFSHORE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

|                                                                                     |                                                                                               |                                                                                          |       |       |      | 
|------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ----- | ----- | ---- | 
|Description                                                                          |                                                                                               | Page                                                                                    
|                                                                                     |                                                                                               |                                                                                         
|Part I. Financial Information                                                        |                                                                                               |                                                                                          |       |      
|                                                                                     | Item 1. Financial Statements                                                                  |                                                                                          |       | 3     |     
|                                                                                     |                                                                                               | Consolidated Balance Sheets as of March 31, 2003 and
December 31, 2002                   |       |       | 3    | 
|                                                                                     |                                                                                               | Consolidated Statements of Operations for the Three Months
Ended March 31, 2003 and 2002 |       |       | 4    | 
|                                                                                     |                                                                                               | Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2003 and 2002 |       |       | 5    | 
|                                                                                     |                                                                                               | Notes to Consolidated Financial
Statements                                               |       |       | 6-11 | 
|                                                                                     | Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                                                          |       | 12-20 |     
|                                                                                     | Item 3. Quantitative and Qualitative Disclosures About Market
Risk                            |                                                                                          |       | 20    |     
|                                                                                     | Item 4. Controls and
Procedures                                                               |                                                                                          |       | 21    |     
|Part II. Other Information                                                           |                                                                                               |                                                                                          |       |      
|                                                                                     | Item 6. Exhibits and Reports on Form
8-K                                                      |                                                                                          |       | 21    |     
|Signature                                                                            |                                                                                               |                                                                                          | 23    |      
|Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002             |                                                                                               |                                                                                          | 24-25 |      
|Exhibit 10.1
Amendment
No. 8 to Loan Agreement                                       |                                                                                               |                                                                                          |       |      
|Exhibit 99.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |                                                                                               |                                                                                          |       |      
|Exhibit 99.2 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |                                                                                               |                                                                                          |       |      

2



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PART I  FINANCIAL INFORMATION




Item 1. Financial Statements




HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

|                                          |                                                                                         |                             |                           |                            |        |             |         |              |        |         |         | 
|----------------------------------------- | --------------------------------------------------------------------------------------- | --------------------------- | ------------------------- | -------------------------- | ------ | ----------- | ------- | ------------ | ------ | ------- | ------- | 
|                                          |                                                                                         |                             |                           |                            |        | March 31,   |         | December 31,
|                                          |                                                                                         |                             |                           |                            |        | 2003        |         | 2002        
|                                          |                                                                                         |                             |                           |                            |        |             |         |             
|                                          |                                                                                         |                             |                           |                            |        | (unaudited) |         |              |        |        
|ASSETS                                    |                                                                                         |                             |                           |                           
|CURRENT ASSETS:                           |                                                                                         |                             |                           |                            |        |             |         |             
|                                          | Cash and cash equivalents                                                               |                             | $                         | 2,665                      |        |             | $       | 6,073        |       
|                                          | Accounts receivable-                                                                    |                             |                           |                            |        |             |         |              |       
|                                          |                                                                                         | Contract receivables        |                           |                            | 44,310 |             |         |              | 52,362 |        
|                                          |                                                                                         | Costs in excess of billings |                           |                            | 86,200 |             |         |              | 78,494 |        
|                                          |                                                                                         | Affiliated parties          |                           |                            | 170    |             |         |              | 170    |        
|                                          | Other current assets                                                                    |                             |                           | 2,884                      |        |             |         | 3,010        |       
|                                          |                                                                                         |                             |                           |                            |        |             |         |             
|                                          |                                                                                         |                             | Total current assets      |                            |        | 136,229     |         |              |        | 140,109 |        
|PROPERTY AND EQUIPMENT, net               |                                                                                         |                             | 264,419                   |                            |        |             | 257,847 |             
|INVENTORY                                 |                                                                                         |                             | 7,944                     |                            |        |             | 7,816   |             
|OTHER ASSETS                              |                                                                                         |                             | 13,897                    |                            |        |             | 14,761  |             
|                                          |                                                                                         |                             |                           |                            |        |             |         |             
|                                          |                                                                                         | $                           | 422,489                   |                            |        | $           | 420,533 |             
|                                          |                                                                                         |                             |                           |                            |        |             |         |             
|LIABILITIES AND STOCKHOLDERS EQUITY      |                                                                                         |                             |                           |                           
|CURRENT LIABILITIES:                      |                                                                                         |                             |                           |                            |        |             |         |             
|                                          | Accounts payable                                                                        |                             | $                         | 34,955                     |        |             | $       | 34,930       |       
|                                          | Accrued liabilities                                                                     |                             |                           | 10,295                     |        |             |         | 10,641       |       
|                                          | Accrued job costs                                                                       |                             |                           | 45,052                     |        |             |         | 54,866       |       
|                                          | Billings in excess of costs                                                             |                             |                           | 604                        |        |             |         | 602          |       
|                                          | Current maturities of long-term debt                                                    |                             |                           | 8,322                      |        |             |         | 8,262        |       
|                                          | Current taxes payable                                                                   |                             |                           | 423                        |        |             |         | 423          |       
|                                          |                                                                                         |                             |                           |                            |        |             |         |             
|                                          |                                                                                         |                             | Total current liabilities |                            |        | 99,651      |         |              |        | 109,724 |        
|LONG-TERM DEBT, net of current maturities |                                                                                         |                             | 106,430                   |                            |        |             | 90,062  |             
|DEFERRED INCOME TAXES                     |                                                                                         |                             | 7,509                     |                            |        |             | 9,072   |             
|                                          |                                                                                         |                             |                           |                            |        |             |         |             
|                                          |                                                                                         |                             | Total liabilities         |                            |        | 213,590     |         |              |        | 208,858 |        
|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,
27,290,582 shares issued      |                             |                           | 16,583                     |        |             |         | 16,583       |       
|                                          | Additional paid-in capital                                                              |                             |                           | 182,700                    |        |             |         | 182,722      |       
|                                          | Retained earnings                                                                       |                             |                           | 15,405                     |        |             |         | 18,353       |       
|                                          | Treasury stock, 882,658 and 912,207 shares, respectively                                |                             |                           | (5,789                     | )      |             |         | (5,983       | )     
|                                          |                                                                                         |                             |                           |                            |        |             |         |             
|                                          |                                                                                         |                             |                           | Total stockholders equity |        |             | 208,899 |              |        |         | 211,675 | 
|                                          |                                                                                         |                             |                           |                            |        |             |         |             
|                                          |                                                                                         | $                           | 422,489                   |                            |        | $           | 420,533 |             
|                                          |                                                                                         |                             |                           |                            |        |             |         |             

The accompanying notes are an integral part of these consolidated financial statements.

3



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HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)

|                                                                       |         |                                             |        |                    |        |      |        |            |        |  
|---------------------------------------------------------------------- | ------- | ------------------------------------------- | ------ | ------------------ | ------ | ---- | ------ | ---------- | ------ | -
|                                                                       |         |                                             |        | Three Months Ended
|                                                                       |         |                                             |        | March 31,         
|                                                                       |         |                                             |        |                   
|                                                                       |         |                                             |        | 2003               |        | 2002
|                                                                       |         |                                             |        |                    |        |     
|CONTRACT REVENUES                                                      |         | $                                           | 67,061 |                    |        | $    | 66,103 |           
|COST OF CONTRACT REVENUES                                              |         |                                             | 64,527 |                    |        |      | 61,056 |           
|                                                                       |         |                                             |        |                    |        |      |        |           
|                                                                       |         | Gross profit                                |        |                    | 2,534  |      |        |            | 5,047  |  
|SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES                           |         |                                             | 5,418  |                    |        |      | 3,501  |           
|                                                                       |         |                                             |        |                    |        |      |        |           
|                                                                       |         | Operating income (loss)                     |        |                    | (2,884 | )    |        |            | 1,546  |  
|OTHER:                                                                 |         |                                             |        |                    |        |      |        |           
|                                                                       |         | Interest expense, net of amount capitalized |        |                    | (1,543 | )    |        |            | (1,023 | )
|                                                                       |         | Interest income                             |        |                    | 11     |      |        |            | 25     |  
|                                                                       |         | Other income (expense), net                 |        |                    | (42    | )    |        |            | (2     | )
|                                                                       |         |                                             |        |                    |        |      |        |           
|NET INCOME (LOSS) BEFORE INCOME TAXES                                  |         |                                             | (4,458 | )                  |        |      | 546    |           
|INCOME TAX PROVISION (BENEFIT)                                         |         |                                             | (1,510 | )                  |        |      | 169    |           
|                                                                       |         |                                             |        |                    |        |      |        |           
|NET INCOME (LOSS)                                                      |         | $                                           | (2,948 | )                  |        | $    | 377    |           
|                                                                       |         |                                             |        |                    |        |      |        |           
|EARNINGS PER SHARE:                                                    |         |                                             |        |                    |        |      |        |           
|Net income (loss) per share  BASIC                                    |         | $                                           | (0.11  | )                  |        | $    | 0.02   |           
|                                                                       |         |                                             |        |                    |        |      |        |           
|Net income (loss) per share  DILUTED                                  |         | $                                           | (0.11  | )                  |        | $    | 0.02   |           
|                                                                       |         |                                             |        |                    |        |      |        |           
|WEIGHTED AVERAGE SHARES USED IN COMPUTING
NET INCOME (LOSS) PER SHARE: |         |                                             |        |                    |        |      |        |           
|                                                                       | BASIC   |                                             |        | 26,387,565         |        |      |        | 23,278,637 |       
|                                                                       | DILUTED |                                             |        | 26,387,565         |        |      |        | 23,582,382 |       

The accompanying notes are an integral part of these consolidated financial statements.

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HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |         |       |         |         |  
|------------------------------------------------ | -------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | --------------------------- | --------------------------------------------------- | ------ | ------------------ | ------- | ------- | ----- | ------- | ------- | -
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        | Three Months Ended
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        | March 31,         
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                   
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        | 2003               |         | 2002   
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |        
|CASH FLOWS FROM OPERATING ACTIVITIES:            |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |        
|                                                 | Net income (loss)                                                                                  |                                                                                 | $                           | (2,948                                              | )      |                    | $       | 377     |      
|                                                 | Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities- |                                                                                 |                             |                                                     |        |                    |         |         |      
|                                                 |                                                                                                    | Depreciation and amortization                                                   |                             |                                                     | 4,135  |                    |         |         | 3,229 |        
|                                                 |                                                                                                    | Deferred income tax expense (benefit)                                           |                             |                                                     | (1,563 | )                  |         |         | 169   |        
|                                                 |                                                                                                    | Expense recognized for issuance of treasury stock for 401(k) plan contributions |                             |                                                     | 116    |                    |         |         | 97    |        
|                                                 |                                                                                                    | Stock compensation
expense                                                      |                             |                                                     | 56     |                    |         |         |      |        
|                                                 |                                                                                                    | Changes in operating assets and liabilities-                                    |                             |                                                     |        |                    |         |         |       |        
|                                                 |                                                                                                    |                                                                                 | Accounts receivable         |                                                     |        | 8,052              |         |         |       | 11,925  |        
|                                                 |                                                                                                    |                                                                                 | Costs in excess of billings |                                                     |        | (7,706             | )       |         |       | (14,436 | )      
|                                                 |                                                                                                    |                                                                                 | Billings in excess of costs |                                                     |        | 2                  |         |         |       | 2,872   |        
|                                                 |                                                                                                    |                                                                                 | Inventory                   |                                                     |        | (128               | )       |         |       |        |        
|                                                 |                                                                                                    |                                                                                 | Other assets                |                                                     |        | (412               | )       |         |       | (2,814  | )      
|                                                 |                                                                                                    |                                                                                 | Accounts payable            |                                                     |        | 25                 |         |         |       | 6,033   |        
|                                                 |                                                                                                    |                                                                                 | Accrued liabilities         |                                                     |        | (1,864             | )       |         |       | (419    | )      
|                                                 |                                                                                                    |                                                                                 | Accrued job costs           |                                                     |        | (9,814             | )       |         |       | 4,647   |        
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |         |      
|                                                 |                                                                                                    |                                                                                 |                             | Net cash provided by (used in) operating activities |        |                    | (12,049 | )       |       |         | 11,680  |  
|CASH FLOWS FROM INVESTING ACTIVITIES:            |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |        
|                                                 | Purchases and additions to property and equipment                                                  |                                                                                 |                             | (7,787                                              | )      |                    |         | (12,922 | )    
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |         |      
|                                                 |                                                                                                    |                                                                                 |                             | Net cash used in investing activities               |        |                    | (7,787  | )       |       |         | (12,922 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:            |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |        
|                                                 | Borrowings under term debt                                                                         |                                                                                 |                             |                                                    |        |                    |         | 4,045   |      
|                                                 | Principal payments on term debt                                                                    |                                                                                 |                             | (2,072                                              | )      |                    |         | (1,909  | )    
|                                                 | Borrowings on revolving credit facilities                                                          |                                                                                 |                             | 42,000                                              |        |                    |         | 14,000  |      
|                                                 | Payments on revolving credit facilities                                                            |                                                                                 |                             | (23,500                                             | )      |                    |         | (20,000 | )    
|                                                 | Stock option transactions and other                                                                |                                                                                 |                             |                                                    |        |                    |         | 152     |      
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |         |      
|                                                 |                                                                                                    |                                                                                 |                             | Net cash provided by (used in) financing activities |        |                    | 16,428  |         |       |         | (3,712  | )
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |         |      
|NET DECREASE IN CASH AND CASH EQUIVALENTS        |                                                                                                    |                                                                                 | (3,408                      | )                                                   |        |                    | (4,954  | )      
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |                                                                                                    |                                                                                 | 6,073                       |                                                     |        |                    | 7,864   |        
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |         |      
|CASH AND CASH EQUIVALENTS AT END OF PERIOD       |                                                                                                    | $                                                                               | 2,665                       |                                                     |        | $                  | 2,910   |        
|                                                 |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |         |      
|SUPPLEMENTAL DISCLOSURES:                        |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |        
|                                                 | Cash paid for interest                                                                             |                                                                                 | $                           | 1,329                                               |        |                    | $       | 1,434   |      
|                                                 | Cash paid for income taxes                                                                         |                                                                                 | $                           | 53                                                  |        |                    | $       |        |      
|NON-CASH INVESTING ACTIVITIES:                   |                                                                                                    |                                                                                 |                             |                                                     |        |                    |         |        
|                                                 | Purchases and additions to property and equipment included in accrued
liabilities                  |                                                                                 | $                           | 1,518                                               |        |                    | $       | 247     |      

The accompanying notes are an integral part of these consolidated financial statements.

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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 (references to Horizon, we or us are intended to refer to Horizon
Offshore, Inc. and its subsidiaries), and are unaudited, except for the balance
sheet at December 31, 2002, which has been prepared from the audited
consolidated financial statements. In the opinion of management, the unaudited
consolidated interim financial statements include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial position as of March 31, 2003, the statements of operations for the
three months ended March 31, 2003 and 2002, and the statements of cash flows
for the three months ended March 31, 2003 and 2002. 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, 2003 are not necessarily indicative of the
results to be expected for the entire year ending December 31, 2003. The
consolidated interim financial statements included herein should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in our 2002 Annual Report on Form 10-K.

Organization

Horizon provides marine construction services for the offshore oil and gas
industry. These services generally consist of laying, burying or repairing
marine pipelines for the transportation of oil and gas; installing and
salvaging production platforms and other marine structures; and performing pipe
spooling services. Work is performed primarily on a fixed-price or day-rate
basis or a combination thereof.

Significant Customers

We have domestic and international operations in one industry segment, the
marine construction service industry for offshore oil and gas companies.
Iroquois Gas Transmission System LP accounted for 58.8% of our consolidated
revenues for the quarter ended March 31, 2003. We completed two major projects
for Pemex in 2002, and completed another project during the first quarter of
2003. Pemex accounted for 5.3% of our consolidated revenues for the three
months ended March 31, 2003 compared to 40.0% of our consolidated revenues for
the three months ended March 31, 2002.

Chevron Nigeria, Ltd. accounted for 10.2% of consolidated revenues for the
three months ended March 31, 2003. In late March 2003, Chevron Nigeria Ltd.
temporarily suspended operations, including our services to them in Nigeria,
due to ethnic unrest in the Niger Delta. We expected to be temporarily
suspended from operations for approximately two weeks. However, due to the
extended ethnic unrest and the approaching adverse weather season, we
anticipate that our work will resume in mid-August 2003. There were no other
customers accounting for more than 10% of consolidated revenues for the three
months ended March 31, 2003.

The level of construction services required by a customer depends on the
size of their capital expenditure budget for construction for the year.
Consequently, customers that account for a significant portion of contract
revenues in one year may represent an immaterial portion of contract revenues
in subsequent years.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses
during the reporting period.

6



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Management must apply significant judgments in this process. Among the
factors, but not fully inclusive of all factors, that may be considered by
management in these processes are: the range of accounting policies permitted
by accounting principles generally accepted in the United States; managements
understanding of our business; expected rates of business and operational
change; sensitivity and volatility associated with the assumptions used in
developing estimates; and whether historical trends are expected to be
representative of future trends. Among the most subjective judgments employed
in the preparation of these financial statements are estimates of expected
costs to complete construction projects, the collectibility of contract
receivables and claims, the fair value of salvage inventory, the depreciable
lives of and future cash flows to be provided by our equipment, the period and
extent of maintenance and repairs of dry-docking activity and certain judgments
regarding the nature of income and expenditures for tax purposes. We review
all significant estimates on a recurring basis and record the effect of any
necessary adjustments prior to publication of our financial statements.
Adjustments made with respect to the use of estimates often relate to improved
information not previously available. Because of the inherent uncertainties in
this process, actual future results could differ from those expected at the
reporting date.

Revenue Recognition

Construction contract revenues are recognized on the
percentage-of-completion method, measured by the percentage of costs incurred
to date to the total estimated costs for each construction contract. We
consider the percentage-of-completion method to be the best available measure
of progress on these contracts. We follow the guidance of American Institute of
Certified Public Accountants (AICPA) Statement of Position (SOP) 81-1,
Accounting for Performance of Construction-Type and Certain Production-Type
Contracts, for our accounting policy relating to the use of the
percentage-of-completion method, estimated costs and claim recognition for
construction contracts. Contract revenue reflects the original contract price
adjusted for agreed upon change orders and unapproved claims. We recognize
unapproved claims only when the collection is deemed probable and if the amount
can be reasonably estimated for purposes of calculating total profit or loss on
long-term contracts. We record revenue and the unbilled receivable for claims
to the extent of costs incurred and include no profit on claims recorded.
Changes in job performance, job conditions and estimated profitability,
including those arising from final contract settlements, may result in
revisions to costs and revenues and are recognized in the period in which the
revisions are determined. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. The asset
Costs in excess of billings represents revenues recognized in excess of
amounts billed as determined on an individual contract basis. The liability
Billings in excess of costs represents amounts billed in excess of revenues
recognized on an individual contract basis.

For service contracts, revenues are recognized under SEC Staff Accounting
Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, when all
of the following criteria are met; persuasive evidence of an arrangement
exists; delivery has occurred or services have been rendered; the sellers
price is fixed or determinable; and collectability is reasonably assured.

Cost Recognition

Cost of contract revenues includes all direct material and labor costs and
certain indirect costs, which are allocated to contracts based on utilization,
such as supplies, tools, repairs and depreciation. Selling, general and
administrative costs are charged to expense as incurred.

Interest Capitalization

Interest is capitalized on the average amount of accumulated expenditures
for equipment that is undergoing major modifications 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 was net of $110,000 and $523,000 of capitalized interest for the three
months ended March 31, 2003 and 2002, respectively.

7



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Inventory

Inventory consists of production platforms and other marine structures
received from time to time as partial consideration from salvage projects
performed in the U.S. Gulf of Mexico. No significant non-cash consideration
was received during the three months ended March 31, 2003 and 2002. These
structures are held for resale. The inventory is valued at amounts not in
excess of the fair value of services provided. Horizon assesses the net
realizable value of its inventory items at each balance sheet date. Inventory
is classified as long-term due to the uncertain timing of its sale.

Stock-Based Compensation

At March 31, 2003, we had two stock-based compensation plans. Pursuant to
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, we have elected to account for stock-based employee
compensation under the recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation
cost is reflected in net income (loss), as all options granted under those
plans had an exercise price equal to the market value of the underlying common
stock on the date of grant. Additionally, for stock-based compensation grants
to consultants, we recognize as compensation expense the fair market value of
such grants as calculated pursuant to SFAS No. 123, amortized ratably over the
lesser of the vesting period of the respective option or the individuals
expected service period. The following table illustrates the effect on net
income (loss) and earnings per share if we had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee compensation.

|                                                                                                                                            |                       |   |                              |       |      |   |      |       |  
|------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ---------------------------- | ----- | ---- | - | ---- | ----- | -
|                                                                                                                                            |                       |   | Three Months Ended March 31,
|                                                                                                                                            |                       |   |                             
|                                                                                                                                            |                       |   | 2003                         |       | 2002
|                                                                                                                                            |                       |   |                              |       |     
|Net income (loss), as
reported                                                                                                              |                       | $ | (2,948                       | )     |      | $ | 377  |      
|Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects |                       |   | (482                         | )     |      |   | (782 | )    
|                                                                                                                                            |                       |   |                              |       |      |   |      |      
|Pro forma net income
(loss)                                                                                                                 |                       | $ | (3,430                       | )     |      | $ | (405 | )    
|                                                                                                                                            |                       |   |                              |       |      |   |      |      
|Earnings per share:                                                                                                                         |                       |   |                              |       |      |   |      |      
|                                                                                                                                            | Basic  as
reported   |   | $                            | (0.11 | )    |   | $    | 0.02  |  
|                                                                                                                                            | Basic  pro
forma     |   | $                            | (0.13 | )    |   | $    | (0.02 | )
|                                                                                                                                            | Diluted  as
reported |   | $                            | (0.11 | )    |   | $    | 0.02  |  
|                                                                                                                                            | Diluted  pro
forma   |   | $                            | (0.13 | )    |   | $    | (0.02 | )

To determine pro forma information as if we had accounted for the employee
stock options under the fair-value method as defined by SFAS No. 123, we used
the Black-Scholes method and assumed no dividends, as well as the following
additional weighted average assumptions included in the following table.

|                        |  |      |      |      |  |  |      |  
|----------------------- |  | ---- | ---- | ---- |  |  | ---- | -
|                        |  | 2003 |      | 2002
|                        |  |      |      |     
|Option life (in years)  |  |      | 7    |      |  |  | 7    |  
|Volatility              |  |      | 77.5 | %    |  |  | 77.8 | %
|Risk-free interest rate |  |      | 3.52 | %    |  |  | 4.77 | %

In January 2003, we granted options to three former directors to purchase
15,320 shares of common stock at an exercise price equal to the market price of
the common stock on the date of grant. These options vested immediately, and
$56,000 was recorded as compensation expense in the statement of operations for
the three months ended March 31, 2003.

8



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Reclassifications

Certain prior period amounts have been reclassified to conform to the
presentation shown in the consolidated interim financial statements as of March
31, 2003.

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

|                                       |  |           |         |              |  |   |         |  
|-------------------------------------- |  | --------- | ------- | ------------ |  | - | ------- | -
|                                       |  | March 31, |         | December 31,
|                                       |  | 2003      |         | 2002        
|                                       |  |           |         |             
|Barges, vessels, and related equipment |  | $         | 277,311 |              |  | $ | 268,770 |  
|Land and buildings                     |  |           | 19,748  |              |  |   | 19,726  |  
|Machinery and equipment                |  |           | 245     |              |  |   | 245     |  
|Office furniture and equipment         |  |           | 5,794   |              |  |   | 5,554   |  
|Leasehold improvements                 |  |           | 3,942   |              |  |   | 3,440   |  
|                                       |  |           |         |              |  |   |         |  
|                                       |  |           | 307,040 |              |  |   | 297,735 |  
|Less  accumulated depreciation        |  |           | (42,621 | )            |  |   | (39,888 | )
|                                       |  |           |         |              |  |   |         |  
|Property and equipment, net            |  | $         | 264,419 |              |  | $ | 257,847 |  
|                                       |  |           |         |              |  |   |         |  

During the three months ended March 31, 2003, we incurred $9.3 million of
capital expenditures, including capitalized interest, primarily related to the
upgrades of the Sea Horizonslift capacity to 1,200 tons and the design and
fabrication of a 110-ton plow for the pipeline installation and burial project
in Long Island Sound, New York.

We use the units-of-production method to calculate depreciation on our
major barges, vessels and related equipment to accurately reflect the wear and
tear of normal use. The useful lives of our major barges and vessels range
from 15 years to 18 years. Depreciation expense calculated under the
units-of-production method may be different than depreciation expense
calculated under the straight-line method in any period. The annual
depreciation based on utilization of each vessel will not be less than 25% of
annual straight-line depreciation, and the cumulative depreciation based on
utilization of each vessel will not be less than 50% of cumulative
straight-line depreciation.

As of March 31, 2003, fixed assets totaling $7.8 million, excluding land,
are not being depreciated as these assets are under construction and have not
been placed into service.

3. STOCKHOLDERS EQUITY

Stock Offering

In April 2002, we sold 3,000,000 shares of common stock in a public
offering. We received $30.8 million after deducting the underwriting discount
and expenses. We used $20.0 million to reduce indebtedness under our revolving
credit facilities and the remainder was used for general corporate purposes.

Earnings Per Share

Earnings per share data for all periods presented has been computed
pursuant to 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. As of March 31, 2003, we
had outstanding options covering an aggregate of 3,483,070 shares of common
stock, of which 2,173,462 shares were exercisable. Excluded from the
computation of diluted EPS are options to purchase 3,483,070 shares of common
stock as of March 31, 2003 at a weighted average price of $7.42 per share and
755,145

9



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shares of common stock as of March 31, 2002 at a weighted average price of
$13.93 per share, as they would be anti-dilutive.

Treasury Stock

During the three months ended March 31, 2003, we contributed 29,549 shares
of treasury stock to our 401(k) Plan. As of March 31, 2003, our treasury stock
consisted of 882,658 shares at a cost of $5.8 million.

4. RELATED PARTY TRANSACTIONS

In August 1998, we entered into a master services agreement with Odyssea
Marine, Inc. (Odyssea), an entity wholly-owned by Elliott Associates, L.P. and
Elliott International, L.P., collectively our largest stockholder, to charter
certain marine vessels from Odyssea. As of March 31, 2003, we owed Odyssea $3.9
million for charter services compared to $1.0 million at March 31, 2002.
Odyssea billed Horizon and Horizon paid Odyssea for services rendered under the
agreement as follows (in millions).

|                         |  |                              |     |      |  |   |     | 
|------------------------ |  | ---------------------------- | --- | ---- |  | - | --- | 
|                         |  | Three Months Ended March 31,
|                         |  |                             
|                         |  | 2003                         |     | 2002
|                         |  |                              |     |     
|Amount billed to Horizon |  | $                            | 5.3 |      |  | $ | 4.4 | 
|Amount paid to Odyssea   |  | $                            | 5.6 |      |  | $ | 3.9 | 

5. NOTES PAYABLE

As of March 31, 2003, we had approximately $114.8 million of total
outstanding debt. This represents an approximate net increase of $16.4 million
from December 31, 2002. Of the $114.8 million of outstanding debt, $49.4
million represents borrowings on our three revolving credit facilities and
$65.4 million represents borrowings on seven term-debt facilities. At March
31, 2003, we had $13.3 million available under our three revolving credit
facilities. Interest rates vary from Libor plus 2.5% to prime plus 1.0%. Our
weighted average interest rate was 4.3% at March 31, 2003, and our term-debt
borrowings currently require $690,000 in monthly principal payments.

Our loans require that certain conditions be met in order for us to obtain
advances. Our loans are collateralized by mortgages on our vessels and by
accounts receivable. Advances under our revolving credit facilities may be
obtained in accordance with a borrowing base defined as a percentage of
accounts receivable balances and costs in excess of billings. The loans
contain customary default provisions and some require us to maintain certain
financial ratios. The loan agreements also contain certain covenants that
limit our ability to incur additional debt, pay dividends, create certain
liens, sell assets and make capital expenditures.

As a result of the depressed demand for marine construction services in
the U.S. Gulf of Mexico and the estimated timing of the collection of our Pemex
receivables, we have obtained amendments on our revolving credit
facilities to provide additional financial flexibility by making our financial
covenants related to our financial leverage less restrictive. We amended our revolving credit facilities to increase the financial ratio related to our
financial leverage of debt to EBITDA (earnings before interest, taxes,
depreciation, amortization) and to decrease the EBITDA to fixed charges ratio. We were in compliance with all of our amended debt
covenants at March 31, 2003.

During 2003, we have closely managed our cash position and borrowed funds
to meet working capital requirements due to the delayed timing of the
collection of our Pemex receivables and claims. We expect that our working
capital and cash requirements will be largely influenced by the volume of our
contract revenues. Our cash requirements are greatest at the start-up of a new
project since we are required to incur mobilization expenses and complete all
or a substantial portion of the project before receiving payment from the
customer. We will require additional funds to supply the working capital needed
to support any increase in contract revenues as long as we have significant
amounts of working capital devoted to supporting our Pemex receivables and
claims. We continue to explore financing options including

10



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additional asset based debt financings and private placements of debt. Based
upon current and projected demand for our services and reduction in EBITDA, we
anticipate that we will need to further amend our debt covenants in subsequent
quarters during 2003. Our lenders could limit or restrict our access to future
borrowings. We are currently in discussions with our lenders regarding our
revolving credit facilities and any necessary amendments. Although there can
be no assurance, we believe that we will be able to borrow additional funds in
order to maintain necessary levels of operating liquidity.

6. CASUALTY LOSS

On September 20, 2002, the pipelay barge, Lone Star Horizon, sustained
electrical damage due to a fire while at anchor off Ciudad Del Carmen, Mexico.
We have incurred costs totaling $5.6 million to repair the Lone Star Horizon.
We maintain hull and machinery insurance to cover physical damage to our
vessels. This insurance coverage provides for both a $0.5 million occurrence
deductible and a $1.5 million annual aggregate deductible. During the third
quarter of 2002, we recorded this $2.0 million loss as other expense, and we
believe the insurance will cover the cost of the repairs. We collected an
initial reimbursement of $1.3 million and included the $2.3 million remaining
insurance claim in current assets as of March 31, 2003.

7. GEOGRAPHIC INFORMATION

Horizon operates in the marine construction services industry. Geographic
information relating to Horizons operations follows (in millions):

|              |                       |       |   |                              |      |      |   |      |      | 
|------------- | --------------------- | ----- | - | ---------------------------- | ---- | ---- | - | ---- | ---- | 
|              |                       |       |   | Three Months Ended March 31,
|              |                       |       |   |                             
|              |                       |       |   | 2003                         |      | 2002
|              |                       |       |   |                              |      |     
|Revenues:     |                       |       |   |                              |      |      |   |     
|              | Domestic              |       | $ | 52.1                         |      |      | $ | 25.8 |     
|              | Latin America         |       |   | 3.6                          |      |      |   | 37.3 |     
|              | West Africa           |       |   | 6.9                          |      |      |   |     |     
|              | Southeast Asia        |       |   | 4.1                          |      |      |   | 2.8  |     
|              | Other                 |       |   | 0.4                          |      |      |   | 0.2  |     
|              |                       |       |   |                              |      |      |   |     
|              |                       | Total |   | $                            | 67.1 |      |   | $    | 66.1 | 
|              |                       |       |   |                              |      |      |   |     
|Gross Profit: |                       |       |   |                              |      |      |   |     
|              | Domestic              |       | $ | 1.0                          |      |      | $ | 4.0  |     
|              | Latin America         |       |   | (0.3                         | )    |      |   | 3.4  |     
|              | West Africa           |       |   | 1.5                          |      |      |   |     |     
|              | Southeast Asia        |       |   | 0.1                          |      |      |   | 0.3  |     
|              | Other                 |       |   | 0.2                          |      |      |   | 0.1  |     
|              | Unallocated costs (1) |       |   |                             |      |      |   | (2.8 | )   
|              |                       |       |   |                              |      |      |   |     
|              |                       | Total |   | $                            | 2.5  |      |   | $    | 5.0  | 
|              |                       |       |   |                              |      |      |   |     

|                       |                |       |   |           |       |              |   |       |       | 
|---------------------- | -------------- | ----- | - | --------- | ----- | ------------ | - | ----- | ----- | 
|                       |                |       |   | As of    
|                       |                |       |   |          
|                       |                |       |   | March 31, |       | December 31,
|                       |                |       |   | 2003      |       | 2002        
|                       |                |       |   |           |       |             
|Long-lived assets (2): |                |       |   |           |       |              |   |      
|                       | Domestic       |       | $ | 190.2     |       |              | $ | 168.4 |      
|                       | Latin America  |       |   | 0.2       |       |              |   | 21.5  |      
|                       | West Africa    |       |   | 19.8      |       |              |   | 19.6  |      
|                       | Southeast Asia |       |   | 40.3      |       |              |   | 34.3  |      
|                       | Other          |       |   | 13.9      |       |              |   | 14.0  |      
|                       |                |       |   |           |       |              |   |      
|                       |                | Total |   | $         | 264.4 |              |   | $     | 257.8 | 
|                       |                |       |   |           |       |              |   |      



---

|(1) |  | Unallocated costs include support costs and operational overhead costs
included in cost of contract revenues.                                                                                                                                                                                                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Long-lived assets include vessels, property and related marine equipment.
Amounts reflect the location of the assets at March 31, 2003 and December 31,
2002. 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 geographic segment. Goodwill is included in
the Latin America geographic segment.

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Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations

You should read the following discussion and analysis together with our
consolidated financial statements and notes thereto and the discussion
Managements Discussion and Analysis of Financial Condition and Results of
Operation included in our 2002 Annual Report on Form 10K. 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

We provide marine construction services for the offshore oil and gas
industry in the U.S. Gulf of Mexico, Latin America, Southeast Asia and West
Africa. We have twelve vessels in our marine fleet that are currently
operational.

The primary services we provide include:



| |  |  | installing pipelines;                                                     
| | - |  | --------------------------------------------------------------------------
|
| |  |  | providing pipebury, hook-up and commissioning services;                   
|
| |  |  | installing production platforms and other structures;                     
|
| |  |  | disassembling and salvaging production platforms and other structures; and
|
| |  |  | performing pipe spooling services.                                        

The demand for offshore construction services 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.
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 our profitability include
competition, equipment and labor productivity, contract estimating, weather
conditions and other risks inherent in marine construction. The marine
construction industry in the U.S. Gulf of Mexico 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.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses
during the reporting period. Management must apply significant judgments in
this process. Among the factors, but not fully inclusive of all factors, that
may be considered by management in these processes are: the range of
accounting policies permitted by accounting principles generally accepted in
the United States; managements understanding of our business; expected rates
of business and operational change; sensitivity and volatility associated with
the assumptions used in developing estimates; and whether historical trends

12



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are expected to be representative of future trends. Among the most subjective
judgments employed in the preparation of these financial statements are
estimates of expected costs to complete construction projects, the
collectibility of contract receivables and claims, the fair value of salvage
inventory, the depreciable lives of and future cash flows to be provided by our
equipment, the period and extent of maintenance and repairs for dry-docking
activity and certain judgments regarding the nature of income and expenditures
for tax purposes. We review all significant estimates on a recurring basis and
record the effect of any necessary adjustments prior to publication of our
financial statements. Adjustments made with respect to the use of estimates
often relate to improved information not previously available. Because of the
inherent uncertainties in this process, actual future results could differ from
those expected at the reporting date.

We consider certain accounting policies to be critical policies due to the
significant judgments, estimation processes and uncertainties involved for each
in the preparation of our consolidated financial statements. We believe the
following represent our critical accounting policies.

Revenue Recognition

Contract revenues for construction contracts are recognized on the
percentage-of-completion method, measured by the percentage of costs incurred
to date to the total estimated costs at completion for each contract. This
percentage is applied to the estimated revenue at completion to calculate
revenues earned to date. We consider the percentage-of-completion method to be
the best available measure of progress on these contracts. Changes in job
performance, job conditions and estimated profitability, including those
arising from claims and final contract settlements, may result in revisions to
estimated costs and revenues and are recognized in the period in which the
revisions are determined. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Revenue
also includes amounts earned upon the completion of salvage services. Revenues
from salvage projects include non-cash values assigned to structures that are
received from time to time as partial consideration.

We follow the guidance of AICPA SOP 81-1,
Accounting for Performance of Construction-Type and Certain Production-Type
Contracts relating to the use of the percentage-of-completion method,
estimating costs and claim recognition for construction contracts. Contract
revenue reflects the original contract price adjusted for agreed upon change
orders and unapproved claims. We recognize unapproved claims only when the
collection is deemed probable and if the amount can be reasonably estimated for
purposes of calculating total profit or loss on long-term contracts. We record
revenue for claims to the extent of costs incurred and include no profit on
claims recorded.

For service contracts, revenues are recognized under SEC Staff Accounting
Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, when all
of the following criteria are met; persuasive evidence of an arrangement
exists; delivery has occurred or services have been rendered; the sellers
price is fixed or determinable; and collectability is reasonably assured.

Cost Recognition

Cost of contract
revenues includes all direct material and labor costs and
certain indirect costs, such as supplies, tools, repairs and depreciation,
which are allocated to contracts based on asset utilization. Selling, general
and administrative costs are charged to expense as incurred.

Accounts Receivable

We have significant investments in billed and unbilled receivables as of
March 31, 2003. At March 31, 2003, we had $9.3 million in contract receivables
and $63.1 million in costs in excess of billings from Pemex, including $55.0
million in claims related to weather and other delays, totaling $72.4 million.
We believe our receivables are realizable; however, any changes will be
recognized in the period in which they are determined. We have historically
not experienced any significant losses on receivables, but significant losses
would adversely affect our financial position and results of operations.

Property and Equipment

We use the units-of-production method to calculate depreciation on our
major barges and vessels to accurately reflect the wear and tear of normal use.
The annual depreciation based on utilization of each vessel will not be less
than 25% of annual straight-line depreciation, and the cumulative depreciation
based on utilization of each vessel will not be less than 50% of cumulative
straight-line depreciation. The useful lives of our major barges and vessels
range from 15 years to 18 years. Major additions and improvements to barges,
boats and related equipment are capitalized and depreciated over the useful
life of the vessel. Maintenance and repairs are expensed as incurred. When
equipment is sold or otherwise disposed of, the

13



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cost of the equipment and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in income.

We review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of any such asset may not be
recoverable. Based on our analysis of the estimated future cash flows for our
long-term assets, we recognized a $9.9 million impairment loss related to the
Phoenix Horizonunder SFAS No. 144 for the year ended December 31, 2002. Our
planned use of the Phoenix Horizonchanged during the fourth quarter of 2002
based on capital requirements and the projected utilization of our operating
fleet to meet current market demands, which we expect to continue for at least
the first half of 2003. During the fourth quarter, management determined not
to invest in the improvements required to place the Phoenix Horizoninto
service due to the availability of other operational assets to address current
market demands. No impairments were recognized for the quarters ended March
31, 2003 and 2002.

Other Assets

Dry-dock costs are direct costs associated with scheduled major
maintenance on the marine construction vessels. Costs incurred in connection
with dry-dockings are deferred and amortized over the five-year cycle to the
next scheduled dry-docking. On June 29, 2001, AICPA issued an exposure draft
of a proposed SOP, Accounting for Certain Costs and Activities Related to
Property, Plant, and Equipment. If adopted, we would be required to expense
regulatory maintenance cost on our vessels as incurred. We incurred and
capitalized dry-dock costs of $0.2 million and $3.1 million for the three
months ended March 31, 2003 and 2002, respectively. As of March 31, 2003,
deferred dry-dock costs totaled $12.1 million. Expensing dry-dock costs would
likely result in greater variability of our quarterly operating results as a
substantial portion of our dry-dock activities take place during the first and
fourth quarters.

Stock-Based Compensation

Pursuant to Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, we have elected the method that
requires disclosure of stock-based compensation. Because of this election, we
account for stock-based employee compensation under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation
cost is reflected in net income (loss), as all options granted under those
plans had an exercise price equal to the market value of the underlying common
stock on the date of grant. Additionally, for stock-based compensation grants
to consultants, we recognize as compensation expense the fair market value of
such grants as calculated pursuant to SFAS No. 123, amortized ratably over the
lesser of the vesting period of the respective option or the individuals
expected service period.

In January 2003, we granted options to three former directors to purchase
15,320 shares of common stock at an exercise price equal to the market price of
the common stock on the date of grant. These options vested immediately, and
$56,000 was recorded as compensation expense in the statement of operations for
the three months ended March 31, 2003.

It is expected in the future that the FASB will require expensing of stock
options issued based upon their fair values. Should this rule be implemented,
we may be subject to significant stock compensation expense each quarter.

Inventory

Inventory consists of production platforms and other marine structures
received from time to time as partial consideration from salvage projects
performed in the U.S. Gulf of Mexico. These structures are held for resale.
The inventory is valued at amounts not in excess of the fair value of services
provided. Horizon assesses the net realizable value of its inventory items at
each balance sheet date. Inventory is classified as long-term due to the
uncertain timing of the sale of inventory.

14



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Recent Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of SFAS No.
123. SFAS No. 148 amends SFAS No. 123 to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. SFAS No. 148 does not permit the use of the original SFAS No. 123
prospective method of transition for changes to the fair value based method
made in fiscal years beginning after December 15, 2003. The adoption of this
standard will not have a significant impact on our consolidated financial
statements.

On June 29, 2001, the AICPA issued an exposure draft of a proposed SOP,
Accounting for Certain Costs and Activities Related to Property, Plant, and
Equipment. This proposed SOP would change, among other things, the method by
which companies would account for normal, recurring or periodic repairs and
maintenance costs related to in service fixed assets. It would require that
these types of expenses be recognized when incurred rather than recognizing
expense for these costs while the asset is productive. We are assessing the
impact of the change should this SOP be adopted. If adopted, we would be
required to expense regulatory maintenance cost on our vessels as incurred. We
currently capitalize a significant portion of these costs and amortize them
over the future periods they are expected to benefit. We incurred and
capitalized dry-dock costs of $0.2 million and $3.1 million for the three
months ended March 31, 2003 and 2002, respectively. As of March 31, 2003,
deferred dry-dock costs totaled $12.1 million. Expensing dry-dock costs would
likely result in greater variability of our quarterly operating results as a
substantial portion of our dry-dock activities take place during the first and
fourth quarters.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. We are currently
evaluating the impact of the adoption of FIN 46 and do not anticipate that it
will have a material effect on our results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under
Statement 133. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003, and should be applied prospectively. The provisions of SFAS No.
149 that relate to Statement 133 Implementation Issues that have been effective
for fiscal quarters that began prior to June 15, 2003, should continue to be
applied in accordance with their respective effective dates. We do not expect
the impact of adoption of SFAS No. 149 to have a material effect on our results
of operations or financial position.

Results of Operations

The discussion below describes our results of operations. During the first
quarter of 2003, revenues related to the pipeline installation and burial
project in Long Island Sound, New York for Iroquois Gas Transmission System LP
accounted for 58.8% of our consolidated revenues. We were awarded the contract
to install 35 miles of 24-inch diameter pipe to transport natural gas from
Northport, Long Island to Hunts Point, New York via the Long Island Sound and
East River. We mobilized the Gulf Horizonto begin construction of this
pipeline in May 2002. Preparations for the project included the extensive
environmental training of personnel. The Gulf Horizonwas upgraded for
inclement weather conditions and for the addition of automatic welding
equipment. This pipeline installation also included the design, fabrication and
use of a 110-ton plow to bury the 24-inch pipeline below the seabed and
riverbed.

15



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Construction activities commenced in November 2002, and we expect to
substantially complete the project during the second quarter of 2003.

Lower profit margins on the Long Island Sound project and reduced vessel
utilization contributed to a decrease in gross profit for the first quarter of
2003. In addition, our profit margins in the U.S. Gulf of Mexico remained
under competitive pressure during the quarter due to reduced industry demand
for our services. We also experienced lower margins on vessels operating in
the northern U.S. Gulf of Mexico because of downtime due to unusually adverse
weather conditions. We believe our expansion into Southeast Asia and West
Africa will provide some measure of counter-seasonal balance to the effect of
adverse winter weather conditions in the U.S. Gulf of Mexico and Latin America.
We will continue to pursue international construction projects in Mexico,
Latin America, Southeast Asia and West Africa.

The Brazos Horizonbegan work on a major portion of Chevron Nigeria Ltd.s
Escravos Offshore Pipeline and Structural Installation two-year program in
January 2003. Chevron Nigeria, Ltd. accounted for 10.2% of our consolidated
revenues for the first quarter of 2003. In late March 2003, Chevron Nigeria,
Ltd. temporarily suspended operations in Nigeria, including construction on
this project, due to ethnic unrest in the Niger Delta. We expected to be
temporarily suspended from operations for approximately two weeks. However,
due to the extended ethnic unrest and the approaching adverse weather season,
we anticipate that our work will resume in mid-August 2003. We expect the
suspension of operations to adversely affect our operating results for the
second quarter of 2003.

During 2002, we completed two projects for Pemex utilizing the Atlantic
Horizon, Lone Star Horizonand Pearl Horizon. We began another project for
Pemex in May 2002 which we completed during the first quarter of 2003. Pemex
accounted for 5.3% of consolidated revenues for the first quarter of 2003,
compared with 40.0% for the first quarter of 2002. Our receivables from Pemex
continue to impact our liquidity and operating cash flows. As of March 31,
2003, we had $72.4 million of Pemex receivables, consisting of contract
receivables of $9.3 million and costs in excess of billings of $63.1 million.

Cumulative revenues recognized from 2000 through March 2003 on all Pemex
projects in Mexico total $290.4 million, including $57.0 million of claims made
under three Pemex contracts for extra work related to interferences,
interruptions and other delays. Of the $57.0 million of claims, $54.2 million
related to our second major project for Pemex, EPC 64, which was completed
during the fourth quarter of 2002. The remaining $2.8 million of claims
relates to two more recent projects for Pemex. Our claims related to the Pemex
projects are not unusual and arise primarily from client delays and changes in
the initial scope of work.

A summary of the balance of our Pemex claims that are reflected as costs
in excess of billings on our balance sheet are as follows (in millions):

|                                |                                                                     |   |      |      | 
|------------------------------- | ------------------------------------------------------------------- | - | ---- | ---- | 
|Claims included in 2001 revenue |                                                                     | $ | 42.8 |     
|Claims included in 2002 revenue |                                                                     |   | 14.2 |     
|                                |                                                                     |   |      |     
|                                | Total claims                                                        |   |      | 57.0 | 
|Claims billed to Pemex          |                                                                     |   | (4.0 | )   
|                                |                                                                     |   |      |     
|                                | Claims included in costs in excess
of billings as of March 31, 2003 |   | $    | 53.0 | 
|                                |                                                                     |   |      |     

There were no claims related to Pemex included in revenues for the three
months ended March 31, 2003.

During November 2002, we engaged a consulting firm in Mexico to assist us
in the administration of our Pemex claims. After considering the time
necessary for the consultants to comply with Pemexs requirements and
communication with new Pemex management, we believe that it will take longer to
process and collect these claims than previously expected. We now expect to
formally submit these claims in accordance with Pemexs requirements through
the second quarter of 2003, with collections expected by the end of the third
quarter of 2003. The unapproved claims we have included as revenue through
December 31, 2002 are expected to be substantially less than the actual claims
to be presented to Pemex, and we believe we will collect more than the claim
amounts recorded. However, there is a risk that the unapproved claims we have
recognized as revenue may not be collected in full. Should these unapproved
claims become uncollectible based upon subsequent events, we will recognize a
loss in our financial

16



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statements at that time. There may be factors other than the submission,
review and approval of our claims which are outside our control that may impact
the ultimate collectibility of these amounts. We have considered these factors
including changes that have occurred related to Pemex employees involved in the
project, the operating structure of Pemex, and the political and economic
conditions in Mexico in assessing the collectibility of these amounts.

As of April 30, 2003, our backlog totaled approximately $111.8 million
compared to our backlog at December 31, 2002 of approximately $123.6 million.
This change is attributable to our execution of contract activity during that
period.

Quarter Ended March 31, 2003 Compared to the Quarter Ended March 31, 2002

Contract Revenues. Contract revenues were $67.1 million for the quarter
ended March 31, 2003, compared to $66.1 million for the quarter ended March 31,
2002. The decline in revenues from the projects in Mexico was offset by
revenues from the pipeline installation and burial project in Long Island Sound
and by the project in Nigeria.

Gross Profit. Gross profit was $2.5 million (3.8% of contract revenues)
for the quarter ended March 31, 2003, compared to gross profit of $5.0 million
(7.6% of contract revenues) for 2002. Lower profit margins on the pipeline
installation and burial project in Long Island Sound and reduced vessel
utilization during the first quarter of 2003 contributed to the decrease in
gross profit. In addition, unusually adverse weather conditions during the
first quarter of 2003, and resulting downtime and revenues recorded for such
events, lowered the overall profit margins. Gross profit for the first quarter
of 2003 was benefited by certain repair work related to Builders Risk
insurance claims on our behalf and certain of our customers. The profit
margins on the Pemex projects, which accounted for a greater percentage of
revenues in 2002, were higher than profit margins on other contracts in 2003.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $5.4 million (8.1% of contract revenues) for the
three months ended March 31, 2003, compared with $3.5 million (5.3% of contract
revenues) for the first quarter of 2002. The increase primarily relates to
costs associated with international operations of $1.6 million for 2003
compared to $0.4 million for 2002, and additional depreciation expense for
corporate fixed assets placed into service during the second half of 2002 and
first quarter of 2003.

Interest Expense. Interest expense was $1.5 million for the three months
ended March 31, 2003, net of $0.1 million interest capitalized, and $1.0
million for the same period last year, net of $0.5 million interest
capitalized. Our total outstanding debt was $114.8 million at March 31, 2003,
compared to $115.2 million at March 31, 2002. Interest expense increased due
to higher average outstanding balances on revolving credit facilities,
additional amortization of prepaid loan fees and a decrease in interest
capitalization in 2003.

Interest Income. Interest income on cash investments for the three months
ended March 31, 2003 was $11,000 compared to $25,000 for the three months ended
March 31, 2002.

Other Income (Expense), Net. Other income (expense) for the three months
ended March 31, 2003, primarily consisted of approximately $47,000 of foreign
currency loss due to activity in Mexico denominated in Mexican pesos and a
decline of the U.S. dollar compared to the Mexican peso, and approximately
$5,000 of miscellaneous income.

Other income (expense) for the quarter ended March 31, 2002 primarily
consisted of approximately $3,000 of foreign currency gain, other expense of
approximately $32,000 related to our Cal Dive joint venture and approximately
$27,000 other income related to administrative fees related to our Cal Dive
joint venture.

Income Taxes.We use the liability method of accounting for income taxes.
For the quarter ended March 31, 2003, we recorded a federal income tax benefit
of $(1.5) million, at a net effective rate of 33.9% on pre-tax net loss of
$(4.5) million. For the quarter ended March 31, 2002, we recorded a federal
income tax provision of $0.2 million, at a net effective rate of 31.0% on
pre-tax net income of $0.5 million. The difference from the statutory rate is
due to the application of the extraterritorial income exclusion for

17



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income earned primarily in Mexico and parts of Southeast Asia. The exclusion
allows us to exclude a qualifying portion of income earned outside the United
States for tax purposes. The impact of this exclusion on future periods will
vary depending upon the amount of qualifying income earned outside the United
States and changes in tax rules.

Net Income (Loss). Net loss for the quarter ended March 31, 2003 was
$(2.9) million, or $(0.11) per share-diluted. This compares with net income of
$0.4 million, or $0.02 per share-diluted for the quarter ended March 31, 2002.

Liquidity and Capital Resources

Our primary liquidity needs are to provide working capital to support our
projects and other operations and to fund acquisitions and improvements to the
fleet necessary to expand operations. We had $36.6 million of working capital
at March 31, 2003 compared to $30.4 million of working capital at December 31,
2002. The increase in working capital was primarily attributable to a decrease
in accrued job costs primarily due to the substantial completion of contracts
and the decline in vessel utilization.

Our receivables from Pemex continue to impact our liquidity and operating
cash flows. As of March 31, 2003, we had contract receivables of $9.3 million
and costs in excess of billings of $63.1 million from Pemex totaling $72.4
million. The significant delays between the completion of the work and when it
is billed and collected are caused by Pemexs rigid requirements on the
submission, review and approval of invoices and documentation prior to their
payment of contract claims and change orders. As of March 31, 2003, there were
$57.0 million of claims made under three current Pemex contracts for extra work
related to interferences, interruptions and other delays.

Of the $57.0 million of claims, $54.2 million of claims relate to our most
significant contract with Pemex, the EPC 64 contract in the Cantarell field.
Pemex extended the EPC 64 contract, which had an original value of $41.0
million, and substantially increased the scope of our operations in the
Cantarell field. As a result, this project was subject to greater
interruptions due to weather conditions and standby time as other contractors
completed their work. From 2000 through March 31, 2003, cumulative revenues
recognized related to the EPC 64 contract totaled $194.4 million. The claims
on the EPC 64 contract could not be submitted in accordance with Pemex
requirements until all work was completed in the fourth quarter of 2002.

Cash used in operations was $12.0 million for the first quarter of 2003
compared to cash provided by operations of $11.7 million for the first quarter
of 2002. The increase in funds used in operating activities is primarily
attributable to the decrease in accrued job costs and the net loss before
income tax benefit of $4.5 million for the three months ended March 31, 2003.

At March 31, 2003, we had approximately $114.8 million of total
outstanding debt. This represents an approximate net increase of $16.4 million
from December 31, 2002 primarily due to additional borrowings to meet working
capital needs during the first quarter of 2003. Of the $114.8 million of
outstanding debt, $49.4 million represents borrowings on our three revolving
credit facilities and $65.4 million represents borrowings on seven term-debt
facilities. At March 31, 2003, we had $13.3 million available under our three
revolving credit facilities, which we have subsequently borrowed. Interest rates vary from Libor plus 2.5% to prime
plus 1.0%. Our weighted average interest rate was 4.3% at March 31, 2003, and
our term-debt borrowings currently require $690,000 in monthly principal
payments. Current maturities of long-term debt were $8.3 million as of March
31, 2003.

Our loans require that certain conditions be met in order for us to obtain
advances. Our loans are collateralized by mortgages on our vessels and accounts
receivable. Advances under our revolving credit facilities may be obtained in
accordance with a borrowing base defined as a percentage of accounts receivable
balances and costs in excess of billings. The loans contain customary defaults
and some require us to maintain certain financial ratios. The loan agreements
also contain certain covenants that limit our ability to incur additional debt,
pay dividends, create certain liens, sell assets and make capital expenditures.

As a result of the depressed demand for marine construction services in
the U.S. Gulf of Mexico and the estimated timing of the collection of our Pemex
receivables, we have obtained amendments on

18



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our revolving credit facilities to provide additional financial
flexibility by making our financial covenants related to our financial leverage
less restrictive. We amended our revolving credit facilities to increase
the financial ratio related to our financial leverage of debt to EBITDA
(earnings before interest, taxes, depreciation, amortization) and to decrease
the EBITDA to fixed charges ratio. We were in compliance with all of our
amended debt covenants at March 31, 2003.

During 2003, we have closely managed our cash position and borrowed funds
to meet working capital requirements due to the delayed timing of the
collection of our Pemex receivables and claims. We expect that our working
capital and cash requirements will be largely influenced by the volume of our
contract revenues. Our cash requirements are greatest at the start-up of a new
project since we are required to incur mobilization expenses and complete all
or a substantial portion of the project before receiving payment from the
customer. We will require additional funds to supply the working capital needed
to support any increase in contract revenues as long as we have significant
amounts of working capital devoted to supporting our Pemex receivables and
claims. We continue to explore financing options including additional asset
based debt financings and private placements of debt. Based upon current and
projected demand for our services and reduction in EBITDA, we anticipate that
we will need to further amend our debt covenants in subsequent quarters during
2003. Our lenders could limit or restrict our access to future borrowings. We
are currently in discussions with our lenders regarding our revolving credit
facilities and any necessary amendments. Although there can be no assurance,
we believe that we will be able to borrow additional funds in order to maintain
necessary levels of operating liquidity.

We have fixed debt service and lease payment obligations under notes
payable and operating leases for which we have material contractual cash
obligations. Interest rates on our debt vary from Libor plus 2.5% to prime
plus 1.0%. The following table summarizes our long-term material contractual
cash obligations (in millions):

|                                        |  |                   |        |      |  |      |        |      |  |      |        |            |  |   |        |  |  |   |       |  |  |   |        | 
|--------------------------------------- |  | ----------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | - | ------ |  |  | - | ----- |  |  | - | ------ | 
|                                        |  | Remainder of 2003 |        | 2004 |  | 2005 |        | 2006 |  | 2007 |        | Thereafter
|                                        |  |                   |        |      |  |      |        |      |  |      |        |           
|Principal and
interest payments
on debt |  | $                 | 9,926  |      |  | $    | 60,786 |      |  | $    | 25,128 |            |  | $ | 15,009 |  |  | $ | 3,309 |  |  | $ | 11,207 | 
|Operating
leases                        |  |                   | 2,010  |      |  |      | 2,510  |      |  |      | 2,504  |            |  |   | 2,341  |  |  |   | 2,347 |  |  |   | 2,489  | 
|                                        |  |                   |        |      |  |      |        |      |  |      |        |            |  |   |        |  |  |   |       |  |  |   |        | 
|                                        |  | $                 | 11,936 |      |  | $    | 63,296 |      |  | $    | 27,632 |            |  | $ | 17,350 |  |  | $ | 5,656 |  |  | $ | 13,696 | 
|                                        |  |                   |        |      |  |      |        |      |  |      |        |            |  |   |        |  |  |   |       |  |  |   |        | 

We completed the construction of a spooling facility at our marine base in
Port Arthur, Texas in the first quarter of 2002. The facility can be used to
provide pipe spooling services to other contractors and to our joint venture
with Cal Dive. We successfully completed two spooling projects in 2002 and
commenced a third spool job in December 2002 that was successfully completed in
the first quarter of 2003. The joint venture, which has not commenced
operations, was formed to charter from Cal Dive the Intrepid, a 374-foot
dynamically positioned multi-service vessel, with reel pipelaying equipment.
If both Cal Dive and Horizon decide to commence joint venture operations, the
joint venture would be jointly managed and staffed, and we would be required to
contribute approximately $8 million for the design, construction and
installation of reel pipelaying equipment on the Intrepidthat was completed in
2002. Based on current market conditions, we do not know when, or if, the
joint venture will become operational.

Planned capital expenditures for the remainder of 2003 are estimated to
range from approximately $10 million to $12 million largely related to vessel
improvements. These expenditures will depend upon available funds, work
awarded and future operating activity. Our strategy, however, is to make other
acquisitions, to expand our operating capabilities and to expand into
additional selected international areas. To the extent we are successful in
identifying acquisition and expansion opportunities and have expanded our
market share in those areas, we may require additional equity or debt financing
depending on the size of any transaction.

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 our future operating results and financial position. Some important
factors that could

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cause actual results to differ materially from the anticipated results or other
expectations expressed in our forward-looking statements include the following:



| |  |  | Pemexs approval of claims and the outcome of these claims,
and our ability to manage our liquidity needs pending the timing of
collection of our receivables and claims from Pemex;     
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | expected loan covenant noncompliance and the need for
additional financing;                                                                                                              
|
| |  |  | industry volatility, including the level of capital
expenditures by oil and gas companies due to fluctuations in the
price and perceptions of the future 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;                                                                                                                       
|
| |  |  | dependence on the continued strong working relationships with
significant customers operating in the U.S. Gulf of Mexico;                                                                
|
| |  |  | seasonality of the offshore construction industry in the U.S. Gulf of Mexico;                                                                                                            
|
| |  |  | ability to realize carrying values of salvaged structures;                                                                                                                               
|
| |  |  | contract bidding risks;                                                                                                                                                                  
|
| |  |  | percentage-of-completion accounting;                                                                                                                                                     
|
| |  |  | successful negotiation and collection of contract claims;                                                                                                                                
|
| |  |  | continued active participation of our executive officers and key operating personnel;                                                                                                    
|
| |  |  | the effect on our performance of regulatory programs and environmental matters;                                                                                                          
|
| |  |  | risks involved in the expansion of our operations into
international offshore oil and gas producing areas;                                                                               
|
| |  |  | risks involved in joint venture operations, including
difficulty in resolving disputes with present partners or reaching
agreements with future partners; and                            
|
| |  |  | a terrorist attack and future wars.                                                                                                                                                      

Many of these factors are beyond our ability to control or predict. We
caution investors not to place undue reliance on forward-looking statements.
We disclaim any intent or obligation to update the forward-looking statements
contained in this report, whether as a result of receiving new information, the
occurrence of future events or otherwise.

These and other uncertainties related to the business are described in
detail under the heading Cautionary Statements in our 2002 Annual Report on
Form 10-K.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risk exposures primarily include interest rate and exchange
rate fluctuation on financial instruments as detailed below. Our market risk
sensitive instruments are classified as other than trading. The following
sections address the significant market risks associated with our financial
activities during the three months ended March 31, 2003. Our exposure to market
risk as discussed below includes

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forward-looking statements and represents estimates of possible changes in
fair values, future earnings or cash flows that would occur assuming
hypothetical future movements in foreign currency exchange rates or interest
rates.

As of March 31, 2003, the carrying value of our debt, including $0.1
million of accrued interest, was approximately $114.9 million. The fair value
of this debt approximates the carrying value because the interest rates are
based on floating rates identified by reference to market rates. A
hypothetical 1% increase in the applicable interest rates as of March 31, 2003
would increase annual interest expense by approximately $1.1 million.

We collect revenues and pay local expenses in foreign currency. We manage
foreign currency risk by attempting to contract as much foreign revenue as
possible in U.S. dollars. We monitor the exchange rate of our foreign
currencies in order to mitigate the risk from foreign currency fluctuations.
Additional exposure could occur as we expand internationally. Approximately
80% of our current contracts with Pemex is denominated in U.S. dollars. We
receive payment in Mexican pesos equivalent to the U.S. dollars billed, which
is converted to U.S. dollars that day or the following day. Our contracts in
Mexico also typically provide some protection from declining exchange rates on
the portion of the contract revenues denominated in foreign currency. We
recognized a $47,000 foreign currency loss due to activity in Mexico
denominated in Mexican pesos and a decline of the U.S. dollar compared to the
Mexican peso for the three months ended March 31, 2003.

The level of construction services required by a customer depends on the
size of its capital expenditure budget for construction for the year.
Consequently, customers that account for a significant portion of contract
revenues in one year may represent an immaterial portion of contract revenues
in subsequent years.




Item 4. Controls and Procedures

Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation and assurances of
management, including the President and Chief Executive Officer along with our
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.
Based upon that evaluation, the President and Chief Executive Officer along
with the Chief Financial Officer concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
relating to us and our consolidated subsidiaries required to be included in our
periodic SEC filings.

There have been no significant changes in Horizons internal controls or
in other factors, which could significantly affect internal controls subsequent
to the date we carried out our evaluation. There were no significant
deficiencies of material weaknesses identified in the evaluation and therefore,
no corrective actions were taken.




PART II  OTHER INFORMATION




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)                                                                                                                                                                                                                         
|
| | 10.1 |  | Amendment No. 8 to Loan
Agreement dated as of May 13, 2003, among Horizon Vessels, Inc.,
Horizon Offshore Contractors, Inc., Horizon Offshore, Inc., The CIT
Group/Equipment Financing Inc., as agent, and the other lenders
specified therein (2)
|
| | 99.1 |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (2)                                                                                                                                                                       
|
| | 99.2 |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (2)                                                                                                                                                                       

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| | (b) |  | Reports on Form 8-K:                                                                                                                                                                     
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On January 6, 2003, we filed a report on Form 8-K, reporting under
item 7, announcing changes to our board of directors.                                                                 
|
| |     |  | On January 13, 2003, we filed a report on Form 8-K, reporting under
item 7, announcing the election of Phil D. Wedemeyer to our board of
directors.                                      
|
| |     |  | On January 22, 2003, we filed a report on Form 8-K, reporting under
item 7, announcing the election of Ken R. LeSuer to our board of
directors.                                          
|
| |     |  | On March 7, 2003, we filed a report on Form 8-K, reporting under
item 7, announcing earnings guidance for the quarter ending December
31, 2002, and for the first quarter of fiscal 2003.



---

| |  | 1 Incorporated by reference to our Registration Statement on Form S-1
(Registration Statement No. 333-43965).
| |  | -------------------------------------------------------------------------------------------------------------
|
| |  | 2 Filed herewith.                                                                                            

22



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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.                              
|                   |  |  |  |                                                     
|Date: May 14, 2003 |  |  |  | /s/ David W. Sharp                                  
|                   |  |  |  |                                                     
|                   |  |  |  | David W. Sharp                                      
|                   |  |  |  | Executive Vice President and
Chief Financial Officer

23



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HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bill J. Lam, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Horizon Offshore,
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |  | (a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the  Evaluation Date ); and                                                                                                
|
| |  | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |  | (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                   |  |                                                                    
|------------------ |  | -------------------------------------------------------------------
|Date: May 14, 2003 |  | /s/ Bill J. Lam                                                    
|                   |  |                                                                    
|                   |  | Bill J. Lam                                                        
|                   |  | President and Chief Executive Officer
(Principal Executive Officer)

24



---



##### 



HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David W. Sharp, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Horizon Offshore,
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |  | (a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the  Evaluation Date); and                                                                                                 
|
| |  | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |  | (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                   |  |                                                                                                  
|------------------ |  | -------------------------------------------------------------------------------------------------
|Date: May 14, 2003 |  | /s/ David W. Sharp                                                                               
|                   |  |                                                                                                  
|                   |  | David W. Sharp
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

25



---



##### 





| | Index to
Exhibits |  |                                                                            
| | ----------------- |  | ---------------------------------------------------------------------------
|
| | 3.1               |  | Amended and Restated Certificate of Incorporation of the Company (1)       
|
| | 3.2               |  | Bylaws of the Company (1)                                                  
|
| | 10.1              |  | Amendment No. 8 to Loan
Agreement(2)                                       
|
| | 99.1              |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (2)
|
| | 99.2              |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (2)



---

| |  | 1 Incorporated by reference to our Registration Statement on Form S-1
(Registration Statement No. 333-43965).
| |  | -------------------------------------------------------------------------------------------------------------
|
| |  | 2 Filed herewith.