##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to    Commission File Number
    001-16857
 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(Address of principal
    executive offices)

77042(Zip
    Code)    (713) 361-2600
 (Registrants telephone
    number, including area code)
   þ o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ




---



##### 



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  QUARTERLY
    REPORT ON
    FORM 10-Q
    For the Quarter Ended September 30, 2006
  Description



PagePART I.
    FINANCIAL INFORMATIONItem 1.


Financial
    Statements


3Consolidated
    Balance Sheets as of September 30, 2006 and
    December 31, 2005


3Consolidated
    Statements of Operations for the Three and Nine Months Ended
    September 30, 2006 and 2005


4Consolidated
    Statements of Cash Flows for the Nine Months Ended
    September 30, 2006 and 2005


5Notes to
    Consolidated Financial Statements


6Item 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


23Item 3.


Quantitative and
    Qualitative Disclosures About Market Risk


33Item 4.


Controls and
    Procedures


34PART II.
    OTHER INFORMATIONItem 1.


Legal
    Proceedings


34Item 1A.


Risk
    Factors


35Item 4.


Submission of
    Matters to a Vote of Security Holders


37Item 6.


Exhibits


37Signatures


39Certification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906   2




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS  September 30,


December 31,2006


2005(Unaudited)(In thousands, except share data)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
60,422


$
42,960Restricted cash


1,343



4,055Accounts receivable Contract receivables


104,667



43,423Costs in excess of billings, net


98,529



90,229Income tax receivable


4,883



Other


166



1,209Deferred tax asset


1,103



Other current assets


7,735



6,622Total current assets


278,848



188,498PROPERTY AND EQUIPMENT, net


201,707



186,416RESTRICTED CASH


7,967



7,967OTHER ASSETS


18,898



19,840$
507,420


$
402,721LIABILITIES AND
    STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable

$
12,725


$
15,474Accrued liabilities


11,434



6,617Accrued job costs


53,305



56,085Billings in excess of costs


6,185



7,386Current maturities of long-term
    debt


16,571



26,130Current taxes payable


4,948



2,687Total current liabilities


105,168



114,379LONG-TERM DEBT, net of current
    maturities


88,659



27,340RELATED PARTY TERM DEBT






63,794SUBORDINATED NOTES


13,631



12,845DEFERRED INCOME TAXES


17,868



OTHER LIABILITIES


1,082



877Total liabilities


226,408



219,235COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $0.00001 par
    value, 5,000,000 shares authorized, none issued and
    outstanding






Common stock, $0.00001 par
    value, 100,000,000 shares authorized,
    32,395,258 shares issued and outstanding and
    30,384,871 shares issued, respectively






Deferred compensation






(8,333
)Additional paid-in capital


417,086



382,239Accumulated deficit


(135,569
)


(188,776
)Treasury stock, none and
    10,031 shares, respectively






(1,644
)Accumulated other comprehensive
    loss


(505
)


Total stockholders equity


281,012



183,486$
507,420


$
402,721    3




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(Unaudited)(In thousands, except share and per share data)CONTRACT REVENUES

$
143,733


$
92,805


$
430,618


$
200,655COST OF CONTRACT REVENUES


104,603



71,825



313,811



167,955Gross profit


39,130



20,980



116,807



32,700SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES


8,318



9,881



25,641



22,443GAIN ON INSURANCE SETTLEMENT










(14,300
)


IMPAIRMENT LOSS ON ASSETS HELD FOR
    SALE






2,261







2,261RESERVE FOR CLAIMS AND RECEIVABLES










18,458



1,711Operating income


30,812



8,838



87,008



6,285OTHER:Interest expense


(3,146
)


(5,638
)


(10,771
)


(22,507
)Interest income


894



218



1,686



520Loss on debt extinguishment










(2,402
)


(23,138
)Other income (expense), net


395



21



358



(16
)NET INCOME (LOSS) BEFORE INCOME
    TAXES


28,955



3,439



75,879



(38,856
)INCOME TAX PROVISION


8,089



359



22,672



1,275NET INCOME (LOSS)

$
20,866


$
3,080


$
53,207


$
(40,131
)EARNINGS (LOSS) PER
    SHARE  BASIC AND DILUTED:Net income (loss) per
    share  basic

$
0.66


$
0.83


$
1.75


$
(17.63
)Net income (loss) per
    share  diluted

$
0.64


$
0.12


$
1.72


$
(17.63
)WEIGHTED AVERAGE SHARES USED
    IN COMPUTING EARNINGS (LOSS) PER SHARE:BASIC


31,814,060



3,692,926



30,334,235



2,276,170DILUTED


32,370,209



25,991,414



30,882,186



2,276,170    4




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS  Nine Months EndedSeptember 30,2006


2005(Unaudited)(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income (loss)

$
53,207


$
(40,131
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating
    activities Depreciation and amortization


20,101



14,403Gain on insurance settlement


(14,300
)


Net gain on sale of assets


(25
)


(41
)Reserve for claims and receivables


18,458



1,711Impairment loss on assets held for
    sale






2,261Deferred income taxes


11,882



Paid in-kind interest on
    subordinated notes and related party term debt


1,109



5,975Amortization of subordinated debt
    discount recorded as interest expense






3,321Amortization of deferred loan fees
    recorded as interest expense


665



2,597Adjustment of mandatorily
    redeemable preferred stock charged to interest expense






1,863Stock-based compensation expense


6,676



3,125Expense recognized for issuance of
    treasury stock for 401(k) plan contributions






98Loss on debt extinguishment


2,402



23,138Changes in operating assets and
    liabilities Restricted cash


2,712



(1,196
)Accounts receivable


(60,201
)


9,977Costs in excess of billings


(26,758
)


(14,204
)Billings in excess of costs


(1,201
)


(5,681
)Other assets


(5,758
)


(7,084
)Accounts payable


(2,749
)


(17,763
)Accrued and other liabilities


4,390



(2,822
)Accrued job costs


(2,780
)


6,603Current taxes payable


2,261



137Net cash provided by (used in)
    operating activities


10,091



(13,713
)CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchases and additions to property
    and equipment


(18,269
)


(2,011
)Proceeds from casualty insurance
    claim


14,300



Proceeds from sale of assets


25



564Net cash used in investing
    activities


(3,944
)


(1,447
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Principal payments on term debt


(25,819
)


(9,346
)Proceeds from issuance of related
    party term debt






44,233Principal payments on related party
    term debt


(548
)


(5,300
)Payments on revolving credit
    facilities






(27,299
)Principal payments on subordinated
    notes






(3,481
)Deferred loan fees


(466
)


(3,104
)Proceeds from issuance of common
    and preferred stock, net


38,140



(1,028
)Stock option and warrant
    transactions and other


8



32Net cash provided by (used in)
    financing activities


11,315



(5,293
)NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS


17,462



(20,453
)CASH AND CASH EQUIVALENTS AT
    BEGINNING OF PERIOD


42,960



37,975CASH AND CASH EQUIVALENTS AT END OF
    PERIOD

$
60,422


$
17,522SUPPLEMENTAL DISCLOSURES:Cash paid for interest

$
8,659


$
8,244Cash paid for income taxes

$
8,597


$
1,116NON-CASH INVESTING AND FINANCING
    ACTIVITIES:Repayment of debt and accrued
    interest with proceeds of additional debt

$
74,679


$
25,573Purchase of vessel with long-term
    debt

$
11,000


$
Capital expenditures for property
    and equipment included in accrued liabilities

$
3,507


$
179Payment of deferred loan fees,
    closing costs and fees through issuance of term debt

$
2,721


$
    5




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  1.
    ORGANIZATION
    AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:  Organization
    and Basis of Presentation
  hook-up
  Form 10-K Form 10-K), Form 8-K
  1-for-25 Form 10-Q 1-for-25
 6




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Significant
    Customers
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,Customer

2006


2005


2006


2005Customer A


42
%


10
%


29
%


4
%Customer B


5
%


18
%


16
%


21
%Customer C


2
%






10
%


Customer D


16
%






6
%


Customer E


13
%






8
%


Customer F






7
%


7
%


15
%Customer G






9
%






10
%Customer H






14
%






7
%   Sea Horizon
  Concentration
    of Credit Risk
    Use of
    Estimates
   7




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Principles
    of Consolidation
    Revenue
    Recognition
  percentage-of-completion percentage-of-completion Accounting for Performance of
    Construction  Type and Certain Production 
    Type Contracts, percentage-of-completion
  Interest
    Expense
     8




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Cash
    and Cash Equivalents
    Accounts
    Receivable
  percentage-of-completion
       9




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Assets
    September 30,


December 31,2006


2005Capitalized dry-dock costs

$
15,867


$
15,770Deferred loan fees


2,528



2,408Deposits


330



276Inventory


85



167Other


88



1,219$
18,898


$
19,840   Pecos Horizon, Lone Star
    Horizon American Horizon Sea Horizon Pacific Horizon
        Restricted
    Cash
   10




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock-Based
    Compensation
  Share-Based Payment, Accounting for Stock-Based
    Compensation, Accounting for Stock Issued to Employees,
  fair-value-based
      Three Months Ended


Nine Months EndedSeptember 30, 2006


September 30, 2006Operating income

$
216


$
437Net income before income taxes

$
216


$
437Net income

$
140


$
284Net income per share 
    basic

$



$
0.01Net income per share 
    diluted

$



$
0.01     out-of-the-money.
 11




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended


Nine Months EndedSeptember 30, 2005


September 30, 2005Net income (loss), as reported

$
3,080


$
(40,131
)Deduct: Total stock-based
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(42
)


(250
)Pro forma net income (loss)

$
3,038


$
(40,381
)Earnings (loss) per
    share  Basic:As reported

$
0.83


$
(17.63
)Pro forma

$
0.82


$
(17.74
)Earnings (loss) per
    share  Diluted:As reported

$
0.12


$
(17.63
)Pro forma

$
0.12


$
(17.74
)       Nine Months EndedSeptember 30, 2006Expected option life (in years)


5Expected volatility


105
%Risk-free interest rate


4.84
%   Income
    Taxes
  Accounting for Income
    Taxes,
 12




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##### Table of Contents





HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)












debt-for-equity




Other
    Comprehensive Income




Reporting Comprehensive
    Income.




Interest Rate Swap Accounting for Derivative
    Instruments and Hedging Activities


13



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##### Table of Contents





HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)








Reclassifications








Recent
    Accounting Pronouncements




, Accounting Changes and
    Error Corrections  a replacement of APB Opinion
    No. 20 and FASB Statement No. 3




Accounting for Certain Hybrid Financial
    Instruments Accounting for Derivative
    Instruments and Hedging Activities Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities.




Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109




Fair Value Measurements




Accounting for Planned Major
    Maintenance Activities Elements of Financial Statements,


14



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##### Table of Contents





HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)








Considering the Effects of
    Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements




|   |                            
|-- | ---------------------------
|2. | PROPERTY
    AND EQUIPMENT:







|                                           |  |               |         |   |              |   |         |  
|------------------------------------------ |  | ------------- | ------- | - | ------------ | - | ------- | -
|                                           |  | September 30, |         |   | December 31, |  
|                                           |  | 2006          |         |   | 2005         |  
|                                          
|Barges, vessels, and related
    equipment |  | $             | 252,316 |   |              | $ | 223,232 |  
|Land and buildings                         |  |               | 19,694  |   |              |   | 19,694  |  
|Machinery and equipment                    |  |               | 245     |   |              |   | 245     |  
|Office furniture and equipment             |  |               | 7,088   |   |              |   | 6,509   |  
|Leasehold improvements                     |  |               | 4,192   |   |              |   | 4,192   |  
|                                           |  |               |         |   |              |   |         |  
|                                           |  |               | 283,535 |   |              |   | 253,872 |  
|Less  accumulated
    depreciation        |  |               | (81,828 | ) |              |   | (67,456 | )
|                                           |  |               |         |   |              |   |         |  
|Property and equipment, net                |  | $             | 201,707 |   |              | $ | 186,416 |  
|                                           |  |               |         |   |              |   |         |  





Texas
    Horizon




units-of-production units-of-production








|                               |  |  |            | 
|------------------------------ |  |  | ---------- | 
|Buildings                      |  |  | 15 years   | 
|Machinery and equipment        |  |  | 8-15 years | 
|Office furniture and equipment |  |  | 3-5 years  | 
|Leasehold improvements         |  |  | 3-10 years | 



15



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##### Table of Contents





HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)








|                                                 |  |                    |       |  |                   |   |       |      |  |   |        |  |  |   |       | 
|------------------------------------------------ |  | ------------------ | ----- |  | ----------------- | - | ----- | ---- |  | - | ------ |  |  | - | ----- | 
|                                                 |  | Three Months Ended |       |  | Nine Months Ended |  
|                                                 |  | September 30,      |       |  | September 30,     |  
|                                                 |  | 2006               |       |  | 2005              |   |       | 2006 |  |   | 2005   | 
|                                                
|Cost of contract revenues                        |  | $                  | 4,624 |  |                   | $ | 3,475 |      |  | $ | 13,540 |  |  | $ | 7,976 | 
|Selling, general and
    administrative expenses |  |                    | 275   |  |                   |   | 305   |      |  |   | 832    |  |  |   | 952   | 
|                                                 |  |                    |       |  |                   |   |       |      |  |   |        |  |  |   |       | 
|                                                 |  | $                  | 4,899 |  |                   | $ | 3,780 |      |  | $ | 14,372 |  |  | $ | 8,928 | 
|                                                 |  |                    |       |  |                   |   |       |      |  |   |        |  |  |   |       | 





|   |                          
|-- | -------------------------
|3. | STOCKHOLDERS
    EQUITY:



Earnings
    Per Share




Earnings
    Per Share


16



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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Net income (loss)

$
20,866


$
3,080


$
53,207


$
(40,131
)Average common shares outstanding


31,814



3,693



30,334



2,276Basic earnings (loss) per share

$
0.66


$
0.83


$
1.75


$
(17.63
)Average common and dilutive
    potential common shares outstanding:Average common shares outstanding


31,814



3,693



30,334



2,276Unvested restricted stock, assumed
    exercise of stock options and assumed conversion of preferred
    stock


556



22,298



548



32,370



25,991



30,882



2,276Diluted earnings (loss) per share

$
0.64


$
0.12


$
1.72


$
(17.63
)   Stock
    Plans
           17




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Restricted
    Stock
       18




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##### Table of Contents





HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)




Public
    Offering of Common Stock












Treasury
    Stock








|   |                                
|-- | -------------------------------
|4. | RELATED
    PARTY TRANSACTIONS:







|                         |  |                   |      |  |      |   |     | 
|------------------------ |  | ----------------- | ---- |  | ---- | - | --- | 
|                         |  | Nine Months Ended |     
|                         |  | September 30,     |     
|                         |  | 2006              |      |  | 2005 |  
|                        
|Amount billed to Horizon |  | $                 | 18.2 |  |      | $ | 9.5 | 
|Amount paid to Odyssea   |  | $                 | 17.4 |  |      | $ | 7.5 | 















19



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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    5.
    DEBT:    Texas Horizon
      successor-in-interest
 20




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Texas Horizon
  6.
    GAIN ON
    INSURANCE SETTLEMENT:  Gulf
    Horizon Gulf Horizon Gulf Horizon Gulf Horizon
  7.
    LOSS ON
    DEBT EXTINGUISHMENT:    8.
    COMMITMENTS
    AND CONTINGENCIES:  Letters
    of Credit
    Operating
    Leases
   21




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Contractual
    Disputes and Litigation
      9.
    GEOGRAPHIC
    INFORMATION:    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Revenues:Domestic

$
61.3


$
64.6


$
201.1


$
127.2Latin America


66.1



8.6



146.3



8.9West Africa


6.7



16.5



68.9



43.0Southeast Asia/Mediterranean


9.6



3.1



14.3



21.6Total

$
143.7


$
92.8


$
430.6


$
200.7Gross Profit(1):Domestic

$
21.7


$
22.3


$
75.5


$
32.3Latin America


19.3



0.4



39.2



(2.7
)West Africa


(7.5
)


0.7



(5.7
)


3.7Southeast Asia/Mediterranean


5.6



(2.4
)


7.8



(0.6
)Total

$
39.1


$
21.0


$
116.8


$
32.7   As ofSeptember 30,


December 31,2006


2005Property and Equipment(2):Domestic

$
138.7


$
109.6Latin America


25.4



0.1West Africa


0.4



58.2Southeast Asia/Mediterranean


37.2



18.5Total

$
201.7


$
186.4     (1)
    
    Gross profit for each geographic segment includes costs incurred
    related to idle and stacked equipment.(2)
    
    Property and equipment includes vessels, property and related
    marine equipment. Amounts reflect the location of the assets at
    September 30, 2006 and December 31, 2005. Equipment
    location changes as necessary to meet working requirements.
    Other identifiable assets include inventory and other long-term
    assets, and are primarily located in the domestic region. 22




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##### Table of Contents



Item 2.
    Managements
    Discussion And Analysis Of Financial Condition And Results Of
    Operations  Form 10-K, one-for-twenty-five
  General
      
    laying, burying or repairing marine pipelines;
    providing
    hook-up and
    commissioning services;
    installing production platforms and other structures; and
    disassembling and salvaging production platforms and other
    structures.    
    the price of oil and gas and industry perception of future
    prices;
    expectations about future demand and prices;
    the ability of the oil and gas industry to access capital;
    the cost of exploring for, producing and developing oil and gas
    reserves;
    discovery rates of new oil and gas reserves in offshore areas;
    sale and expiration dates of offshore leases in the United
    States and abroad;
    local and international political and economic conditions;
    governmental regulations;
    the availability and cost of capital; and
    damage to structures and pipelines caused by hurricanes and
    severe weather conditions in the U.S. Gulf of Mexico.     23




---



##### Table of Contents



Overview








Gulf Horizon.






24



---



##### Table of Contents



Results
    of Operations








|                             |  |                    |       |   |                   |   |      |      |  |   |       |   |  |   |       |  
|---------------------------- |  | ------------------ | ----- | - | ----------------- | - | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                             |  | Three Months Ended |       |   | Nine Months Ended |  
|                             |  | September 30,      |       |   | September 30,     |  
|                             |  | 2006               |       |   | 2005              |   |      | 2006 |  |   | 2005  |  
|                            
|Revenues:                    |  |                    |       |   |                   |   |      |      |  |   |       |   |  |   |       |  
|Domestic                     |  | $                  | 61.3  |   |                   | $ | 64.6 |      |  | $ | 201.1 |   |  | $ | 127.2 |  
|Latin America                |  |                    | 66.1  |   |                   |   | 8.6  |      |  |   | 146.3 |   |  |   | 8.9   |  
|West Africa                  |  |                    | 6.7   |   |                   |   | 16.5 |      |  |   | 68.9  |   |  |   | 43.0  |  
|Southeast Asia/Mediterranean |  |                    | 9.6   |   |                   |   | 3.1  |      |  |   | 14.3  |   |  |   | 21.6  |  
|                             |  |                    |       |   |                   |   |      |      |  |   |       |   |  |   |       |  
|Total                        |  | $                  | 143.7 |   |                   | $ | 92.8 |      |  | $ | 430.6 |   |  | $ | 200.7 |  
|                             |  |                    |       |   |                   |   |      |      |  |   |       |   |  |   |       |  
|Gross Profit:                |  |                    |       |   |                   |   |      |      |  |   |       |   |  |   |       |  
|Domestic                     |  | $                  | 21.7  |   |                   | $ | 22.3 |      |  | $ | 75.5  |   |  | $ | 32.3  |  
|Latin America                |  |                    | 19.3  |   |                   |   | 0.4  |      |  |   | 39.2  |   |  |   | (2.7  | )
|West Africa                  |  |                    | (7.5  | ) |                   |   | 0.7  |      |  |   | (5.7  | ) |  |   | 3.7   |  
|Southeast Asia/Mediterranean |  |                    | 5.6   |   |                   |   | (2.4 | )    |  |   | 7.8   |   |  |   | (0.6  | )
|                             |  |                    |       |   |                   |   |      |      |  |   |       |   |  |   |       |  
|Total                        |  | $                  | 39.1  |   |                   | $ | 21.0 |      |  | $ | 116.8 |   |  | $ | 32.7  |  
|                             |  |                    |       |   |                   |   |      |      |  |   |       |   |  |   |       |  





Quarter
    Ended September 30, 2006 Compared to the Quarter Ended
    September 30, 2005




Contract Revenues.








Sea Horizon




Sea Horizon




Gross Profit.


25



---



##### Table of Contents







Selling, General and Administrative
    Expenses.




Interest Expense.




|                                                                |  |                    |     |  |      |   |     | 
|--------------------------------------------------------------- |  | ------------------ | --- |  | ---- | - | --- | 
|                                                                |  | Three Months Ended |    
|                                                                |  | September 30,      |    
|                                                                |  | 2006               |     |  | 2005 |  
|                                                               
|Cash paid for interest                                          |  | $                  | 2.3 |  |      | $ | 3.5 | 
|Interest paid in-kind                                           |  |                    | 0.3 |  |      |   | 1.0 | 
|Accretion in the fair value of the
    Series B Preferred Stock |  |                    |    |  |      |   | 1.0 | 
|Other non-cash charges, net                                     |  |                    | 0.5 |  |      |   | 0.1 | 
|                                                                |  |                    |     |  |      |   |     | 
|                                                                |  | $                  | 3.1 |  |      | $ | 5.6 | 
|                                                                |  |                    |     |  |      |   |     | 









Interest Income.




Other Income (Expense), Net. Cajun Horizon




Income Taxes. debt-for-equity


26



---



##### Table of Contents



Net Income (Loss).
  Nine
    Months Ended September 30, 2006 Compared to the Nine Months
    Ended September 30, 2005
  Contract Revenues. Sea Horizon Sea Horizon
  Gross Profit.
  Selling, General and Administrative
    Expenses. Gulf Horizon.
  Gain on Insurance Settlement. Gulf Horizon.
  Reserves for claims and receivables.
 27




---



##### Table of Contents







Interest Expense.




|                                                                             |  |                   |      |  |      |   |      | 
|---------------------------------------------------------------------------- |  | ----------------- | ---- |  | ---- | - | ---- | 
|                                                                             |  | Nine Months Ended |     
|                                                                             |  | September 30,     |     
|                                                                             |  | 2006              |      |  | 2005 |  
|                                                                            
|Cash paid for interest                                                       |  | $                 | 8.7  |  |      | $ | 8.2  | 
|Interest paid in-kind                                                        |  |                   | 1.1  |  |      |   | 6.0  | 
|Accretion in the fair value of the
    Series A and Series B Preferred Stock |  |                   |     |  |      |   | 1.9  | 
|Other non-cash charges, net                                                  |  |                   | 1.0  |  |      |   | 6.4  | 
|                                                                             |  |                   |      |  |      |   |      | 
|                                                                             |  | $                 | 10.8 |  |      | $ | 22.5 | 
|                                                                             |  |                   |      |  |      |   |      | 









Interest Income.




Loss on Debt Extinguishment.




Other Income (Expense), Net.




Income Taxes.


28



---



##### Table of Contents



Net Income (Loss). Gulf Horizon




Liquidity
    and Capital Resources




General








start-up start-up start-up




Recent
    Events








Cash
    Flows






29



---



##### Table of Contents



Texas Horizon Gulf Horizon.








Working
    Capital








Indebtedness








Texas Horizon


30



---



##### Table of Contents















successor-in-interest








Texas Horizon




Claims
    and Litigation










31



---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Contractual
    Obligations and Capital Expenditures
    Remainderof 2006


2007


2008


2009


2010


Thereafter


TotalPrincipal and interest payments on
    debt

$
8,869


$
24,705


$
20,377


$
18,644


$
48,348


$
33,696


$
154,639Operating leases


644



2,391



2,200



757



1,879



8,855



16,726$
9,513


$
27,096


$
22,577


$
19,401


$
50,227


$
42,551


$
171,365     Forward-Looking
    Statements
    
    our ability to finance our debt obligations and finance our
    capital requirements;
    our ability to obtain additional financing needed in the future;
    our ability to comply with our financial and other covenants in
    the future;
    the potential impairment of our assets in the future;
    our potential to incur operating losses in the future;
    oil and gas prices are volatile and price declines may affect us;
    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;
    contract bidding risks, including those involved in performing
    projects on a fixed-price basis and extra work performed outside
    the original scope of work, and the successful negotiation and
    collection of such contract claims;
    our ability to obtain performance bonds and letters of credit if
    required to secure our performance under new international
    contracts; 32




---



##### Table of Contents




    the highly competitive nature of the marine construction
    business;
    our operations in the U.S. Gulf of Mexico may be adversely
    impacted by tropical storms and hurricanes;
    operating hazards, including the unpredictable effect of natural
    occurrences on operations, such as hurricanes and other hazards
    associated with maritime activities, and the significant
    possibility of accidents resulting in personal injury and
    property damage;
    seasonality of the offshore construction industry in the
    U.S. Gulf of Mexico;
    risks involved in the expansion of our operations into
    international offshore oil and gas producing areas, where we
    have not previously been operating;
    our dependence on continued strong working relationships with
    significant customers operating in the U.S. Gulf of Mexico;
    percentage-of-completion
    accounting;
    the continued active participation of our executive officers and
    key operating personnel;
    our ability to obtain and retain highly skilled personnel;
    the effect on our performance of regulatory programs and
    environmental matters; and
    a possible terrorist attack or armed conflict.    Form 10-K, Form 10-K,
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk       33




---



##### Table of Contents



Item 4.
    Controls
    and Procedures  Rule 13a-15(b) Rule 13a-15(e)
   PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Gulf
    Horizon Gulf Horizon.
   34




---



##### Table of Contents



Item 1A.
    Risk
    Factors  Form 10-K, Form 10-K,
  Our
    business is highly cyclical.
    
    revenues, profitability and cash flows;
    the fair market value of our fleet of marine equipment;
    our ability to maintain or increase our borrowing
    capacity; and
    our ability to obtain additional capital to finance our
    business, and the cost of capital.  Oil
    and gas prices are volatile and price declines may affect
    us.
    
    the cost of exploring for, producing and delivering oil and gas;
    the discovery rate of new oil and gas reserves;
    the rate of decline of existing and new oil and gas reserves;
    available pipeline and other oil and natural gas transportation
    capacity;
    the ability of oil and natural gas companies to raise capital;
    actions by OPEC, the Organization of Petroleum Exporting
    Countries;
    political instability in the Middle East and other major oil and
    gas producing regions;
    economic conditions in the United States and elsewhere;
    governmental regulations, both domestic and foreign;
    domestic and foreign tax policy;
    weather conditions in the United States and elsewhere; 35




---



##### Table of Contents




    the pace adopted by foreign governments for the exploration,
    development and production of their oil and gas reserves;
    the price of foreign imports of oil and gas; and
    the overall supply and demand for oil and gas.  Our
    operations may be adversely impacted by extreme weather
    conditions.
    Our
    international operations subject us to the U.S. Foreign
    Corrupt Practices Act, or FCPA, and our failure to comply with
    the laws and regulations thereunder could subject us to criminal
    and civil penalties.
    Our
    ability to obtain performance bonds and letters of credit
    required to secure our performance under contracts may affect
    our ability to bid and obtain contract awards.
    Our
    future financial results could be adversely impacted by asset
    impairments or other charges.
   36




---



##### Table of Contents



We may
    be further limited in our use of net operating
    losses.
     Item 4.
    Submission
    of Matters to a Vote of Security Holders    (a)
  For


Withhold AuthorityJohn T. Mills


29,206,798



42,047Charles O. Buckner


29,206,762



42,083Ken R. LeSuer


29,206,799



42,046Raymond L. Steele


29,206,803



42,042David W. Sharp


29,206,839



42,006   (b)
  For

Against

Abstentions

Broker Non-Votes19,329,716


323,674



2,004,024



7,591,431   (c)
  For

Against

Abstentions28,991,515


6,326



251,004    Item 6.
    Exhibits  Exhibits3
.1

Amended and Restated Certificate
    of Incorporation of the Company (Incorporated by reference to
    Exhibit 3.1 of the Companys Current Report on
    Form 8-K
    filed September 19, 2005)3
.2

Certificate of Amendment to the
    Amended and Restated Certificate of Incorporation of the Company
    (Incorporated by reference to Exhibit 3.1 of the
    Companys Current Report on
    Form 8-K
    filed April 18, 2006)3
.3

Bylaws of the Company
    (Incorporated by reference to Exhibit 3.2 of the
    Companys Current Report on
    Form 8-K
    filed September 19, 2005)4
.1

Specimen of Common Stock
    Certificate (Incorporated by reference to Exhibit 4.1 of
    the Companys Current Report on
    Form 8-K
    filed April 18, 2006) 37




---



##### Table of Contents



Exhibits10
.1

Third Amendment to Amended and
    Restated Loan Agreement and Promissory Notes, effective as of
    June 29, 2006, by and among Horizon Offshore, Inc., Horizon
    Vessels, Inc., Horizon Offshore Contractors, Inc. and General
    Electric Capital Corporation,
    successor-in-interest
    to SouthTrust Bank (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed July 6, 2006)10
.2

Horizon Offshore, Inc.
    2006 Director Stock Plan (Incorporated by reference to
    Appendix A of the Companys Definitive Proxy Statement
    on Schedule 14A filed July 11, 2006)*10
.3

First Amendment to Revolving
    Credit and Security Agreement, dated and effective as of
    August 10, 2006, by and between Horizon Offshore, Inc.,
    Horizon Offshore Contractors, Inc., HOC Offshore, S. de R.L. de
    C.V., Horizon Marine Contractors (Malaysia) Sdn. Bhd., PT
    Horizon Offshore Indonesia, Horizon Marine Construction
    (Mauritius) Ltd., Horizon Marine Construction Ltd. and PNC Bank,
    National Association, as agent and lender (Incorporated by
    reference to Exhibit 10.1 of the Companys Current
    Report on
    Form 8-K
    filed August 16, 2006)10
.4

Second Amendment to Revolving
    Credit and Security Agreement, dated and effective as of
    August 16, 2006, by and between Horizon Offshore, Inc.,
    Horizon Offshore Contractors, Inc., HOC Offshore, S. de R.L. de
    C.V., Horizon Marine Contractors (Malaysia) Sdn. Bhd., PT
    Horizon Offshore Indonesia, Horizon Marine Construction
    (Mauritius) Ltd., Horizon Marine Construction Ltd. and PNC Bank,
    National Association, as agent and lender (Incorporated by
    reference to Exhibit 10.2 of the Companys Current
    Report on
    Form 8-K
    filed August 16, 2006)31
.1

Certification Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)31
.2

Certification Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)32
.1

Certification Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)32
.2

Certification Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)     *
    
    Management Contract or Compensatory Plan or Agreement. 38




---



##### Table of Contents



SIGNATURES      By:
    /s/  Ronald
    D. Mogel       39




---



##### Table of Contents



INDEX TO
    EXHIBITS
  Exhibit

Description3
.1

Amended and Restated Certificate
    of Incorporation of the Company (Incorporated by reference to
    Exhibit 3.1 of the Companys Current Report on
    Form 8-K
    filed September 19, 2005)3
.2

Certificate of Amendment to the
    Amended and Restated Certificate of Incorporation of the Company
    (Incorporated by reference to Exhibit 3.1 of the
    Companys Current Report on
    Form 8-K
    filed April 18, 2006)3
.3

Bylaws of the Company
    (Incorporated by reference to Exhibit 3.2 of the
    Companys Current Report on
    Form 8-K
    filed September 19, 2005)4
.1

Specimen of Common Stock
    Certificate (Incorporated by reference to Exhibit 4.1 of
    the Companys Current Report on
    Form 8-K
    filed April 18, 2006)10
.1

Third Amendment to Amended and
    Restated Loan Agreement and Promissory Notes, effective as of
    June 29, 2006, by and among Horizon Offshore, Inc., Horizon
    Vessels, Inc., Horizon Offshore Contractors, Inc. and General
    Electric Capital Corporation,
    successor-in-interest
    to SouthTrust Bank (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed July 6, 2006)10
.2

Horizon Offshore, Inc.
    2006 Director Stock Plan (Incorporated by reference to
    Appendix A of the Companys Definitive Proxy Statement
    on Schedule 14A filed July 11, 2006)*10
.3

First Amendment to Revolving
    Credit and Security Agreement, dated and effective as of
    August 10, 2006, by and between Horizon Offshore, Inc.,
    Horizon Offshore Contractors, Inc., HOC Offshore, S. de R.L. de
    C.V., Horizon Marine Contractors (Malaysia) Sdn. Bhd., PT
    Horizon Offshore Indonesia, Horizon Marine Construction
    (Mauritius) Ltd., Horizon Marine Construction Ltd. and PNC Bank,
    National Association, as agent and lender (Incorporated by
    reference to Exhibit 10.1 of the Companys Current
    Report on
    Form 8-K
    filed August 16, 2006)10
.4

Second Amendment to Revolving
    Credit and Security Agreement, dated and effective as of
    August 16, 2006, by and between Horizon Offshore, Inc.,
    Horizon Offshore Contractors, Inc., HOC Offshore, S. de R.L. de
    C.V., Horizon Marine Contractors (Malaysia) Sdn. Bhd., PT
    Horizon Offshore Indonesia, Horizon Marine Construction
    (Mauritius) Ltd., Horizon Marine Construction Ltd. and PNC Bank,
    National Association, as agent and lender (Incorporated by
    reference to Exhibit 10.2 of the Companys Current
    Report on
    Form 8-K
    filed August 16, 2006)31
.1

Certification Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)31
.2

Certification Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)32
.1

Certification Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)32
.2

Certification Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)     *
    
    Management Contract or Compensatory Plan or Agreement. 40