For the second quarter of 2004, gross profit was a $(1.0) million loss on revenues of $44.9 million, compared to a $(0.8) million loss on revenues of $57.9 million for the second quarter of 2003. Pre-tax loss was $(15.7) million, with income tax expense of $0.5 million for the second quarter of 2004, compared with pre-tax loss of $(10.3) million and an income tax benefit of $(6.2) million for the same quarter last year. The tax provision for 2004 relates to foreign taxes on income generated from international operations. Included in the tax benefit for the second quarter of 2003 is a research and development tax credit of $(3.0) million.
The Company reported a net loss of $(26.9) million, or $(1.00) per share-diluted for the six months ended June 30, 2004 compared to a net loss of $(7.0) million, or $(0.27) per share-diluted for the six months ended June 30, 2003.
The loss for the second quarter of 2004 is attributable to a number of factors. Horizon's domestic operations generated losses due to low utilization levels caused by the continuing competitive market conditions and unusually adverse weather in the U.S. Gulf of Mexico during the first half of 2004. During the second quarter of 2004, management committed to a plan to sell three marine construction vessels and a cargo barge in response to the lower levels of utilization. Discussions with potential buyers have indicated a decline in market value of two of the marine vessels held for sale, and the Company recorded a $2.6 million impairment loss on assets held for sale during the quarter ended June 30, 2004.
A fire on the Gulf Horizon on May 18, 2004, while on tow from the U.S. Gulf of Mexico to Israel, also contributed to the increased operating loss. The diversion of the Sea Horizon from its scheduled work in Southeast Asia to replace the Gulf Horizon on the Israel Electric Corporation (IEC) contract, and the loss of this scheduled work in June 2004 adversely affected the Company's operations in this geographic area. The Sea Horizon is expected to return to Southeast Asia after completion of the IEC project.
Losses from domestic and Southeast Asia operations were partially offset by profits from the Mediterranean and Latin America operations as work began on the contracts for IEC and Pemex. However, project delays on the Pemex project caused some revenues to be deferred from the second quarter into the last half of 2004. Both of these projects are estimated to be substantially complete during the fourth quarter of 2004.
The Company continues to negotiate collection of significant outstanding receivables, and the lack of settlement from Pemex, Iroquois and Williams has continued to impact its liquidity. Horizon met its cash needs through the second quarter of 2004 with proceeds of $59.9 million from the issuance of 16% and 18% Subordinated Notes in March and May 2004, respectively. It is critical for the Company to stay on budget and meet its cash flow forecasts for projects in order to provide sufficient cash from operations to meet its liquidity needs for the remainder of 2004.
"Our corporate efforts will focus on strengthening our financial position through debt refinancing and an equity offering. We have begun discussions with potential lenders and with the holders of our subordinated notes regarding a refinancing and the terms and structure of this transaction. Operationally, we must execute our current projects efficiently and maximize cash generated from operations. We also are actively bidding new projects in order to increase the utilization level and profitability of our vessels while continuing to reduce our operating cost structure." said Bill J. Lam, President and Chief Executive Officer.
Horizon and its subsidiaries provide marine construction services for the offshore oil and gas and energy industries in the U.S. Gulf of Mexico, West Africa, Southeast Asia, Latin America, and the Mediterranean. The Company's fleet is used to perform a wide range of marine construction activities, including installation of marine pipelines to transport oil and gas and other sub sea production systems, and the installation and abandonment of production platforms.
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