Hercules Offshore, Inc. Announces Second Quarter 2015 Results

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

June 30,

December 31,

2015

2014

(Unaudited)

ASSETS

Current Assets:

Cash and Cash Equivalents

$

143,373

$

207,937

Accounts Receivable, Net

94,176

166,359

Prepaids

21,528

19,585

Current Deferred Tax Asset

4,009

4,461

Other

3,427

5,955

266,513

404,297

Property and Equipment, Net

1,555,954

1,574,749

Other Assets, Net

21,157

23,361

$

1,843,624

$

2,002,407

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Current Portion of Long-term Debt

$

1,211,044

$

-

Accounts Payable

45,283

52,952

Accrued Liabilities

53,987

66,090

Interest Payable

32,005

32,008

Other Current Liabilities

10,704

13,406

1,353,023

164,456

Long-term Debt

-

1,210,919

Deferred Income Taxes

3,947

4,147

Other Liabilities

14,752

7,854

Commitments and Contingencies

Stockholders' Equity

471,902

615,031

$

1,843,624

$

2,002,407

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

2015

2014

2015

2014

Revenue

$

79,249

$

242,963

$

201,868

$

499,697

Costs and Expenses:

Operating Expenses

76,991

126,725

176,590

267,477

Depreciation and Amortization

37,451

43,670

74,669

83,753

General and Administrative

24,990

22,519

40,750

40,746

139,432

192,914

292,009

391,976

Operating Income (Loss)

(60,183)

50,049

(90,141)

107,721

Other Income (Expense):

Interest Expense

(24,737)

(26,069)

(49,697)

(48,970)

Loss on Extinguishment of Debt

(1,884)

(4,767)

(1,884)

(19,925)

Other, Net

(200)

214

220

364

Income (Loss) Before Income Taxes

(87,004)

19,427

(141,502)

39,190

Income Tax Provision

(1,246)

(12,781)

(3,863)

(12,628)

Net Income (Loss)

$

(88,250)

$

6,646

$

(145,365)

$

26,562

Net Income (Loss) Per Share:

Basic

$

(0.55)

$

0.04

$

(0.90)

$

0.17

Diluted

$

(0.55)

$

0.04

$

(0.90)

$

0.16

Weighted Average Shares Outstanding:

Basic

161,523

160,713

161,290

160,392

Diluted

161,523

161,795

161,290

161,839

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,

2015

2014

Cash Flows from Operating Activities:

Net Income (Loss)

$

(145,365)

$

26,562

Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:

Depreciation and Amortization

74,669

83,753

Stock-Based Compensation Expense

2,412

4,771

Deferred Income Taxes

(396)

(5,213)

Provision (Benefit) for Doubtful Accounts Receivable

(431)

5,088

(Gain) Loss on Disposal of Assets, Net

3,083

(17,003)

Other

2,105

4,220

Net Change in Operating Assets and Liabilities

54,582

(37,208)

Net Cash Provided by (Used in) Operating Activities

(9,341)

64,970

Cash Flows from Investing Activities:

Capital Expenditures

(65,927)

(100,448)

Insurance Proceeds Received

3,543

9,067

Proceeds from Sale of Assets, Net

7,161

23,717

Net Cash Used in Investing Activities

(55,223)

(67,664)

Cash Flows from Financing Activities:

Long-term Debt Borrowings

-

300,000

Redemption of 7.125% Senior Secured Notes

-

(300,000)

Payment of Debt Issuance Costs

-

(3,914)

Other

-

107

Net Cash Used in Financing Activities

-

(3,807)

Net Decrease in Cash and Cash Equivalents

(64,564)

(6,501)

Cash and Cash Equivalents at Beginning of Period

207,937

198,406

Cash and Cash Equivalents at End of Period

$

143,373

$

191,905

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)

Three Months Ended June 30, 2015

Operating Days

Available Days

Utilization (1)

Average
Revenue per
Day (2)

Average
Operating
Expense per
Day (3)

Domestic Offshore

439

819

53.6%

$

92,538

$

32,284

International Offshore

364

728

50.0%

47,975

48,779

International Liftboats

1,041

2,093

49.7%

20,329

7,185

Three Months Ended June 30, 2014

Operating Days

Available Days

Utilization (1)

Average
Revenue per
Day (2)

Average
Operating
Expense per
Day (3)

Domestic Offshore

1,297

1,638

79.2%

$

108,237

$

38,790

International Offshore

455

728

62.5%

157,637

60,523

International Liftboats

1,277

2,093

61.0%

24,162

9,138

Six Months Ended June 30, 2015

Operating Days

Available Days

Utilization (1)

Average
Revenue per
Day (2)

Average
Operating
Expense per
Day (3)

Domestic Offshore

972

1,706

57.0%

$

96,192

$

36,581

International Offshore

709

1,448

49.0%

97,477

59,170

International Liftboats

1,829

4,163

43.9%

21,464

6,847

Six Months Ended June 30, 2014

Operating Days

Available Days

Utilization (1)

Average
Revenue per
Day (2)

Average
Operating
Expense per
Day (3)

Domestic Offshore

2,641

3,258

81.1%

$

107,402

$

41,847

International Offshore

1,050

1,403

74.8%

145,393

65,288

International Liftboats

2,476

4,163

59.5%

25,600

9,498

(1)

Utilization is defined as the total number of days our rigs or liftboats, as applicable, were under contract, known as operating days, in the period as a percentage of the total number of available days in the period.  Days during which our rigs and liftboats were undergoing major refurbishments, upgrades or construction, and days during which our rigs and liftboats are cold stacked, are not counted as available days. Days during which our liftboats are in the shipyard undergoing drydocking or inspection are considered available days for the purposes of calculating utilization.

(2)

Average revenue per rig or liftboat per day is defined as revenue earned by our rigs or liftboats, as applicable, in the period divided by the total number of operating days for our rigs or liftboats, as applicable, in the period.

(3)

Average operating expense per rig or liftboat per day is defined as operating expenses, excluding depreciation and amortization, incurred by our rigs or liftboats, as applicable, in the period divided by the total number of available days in the period.  We use available days to calculate average operating expense per rig or liftboat per day rather than operating days, which are used to calculate average revenue per rig or liftboat per day, because we incur operating expenses on our rigs and liftboats even when they are not under contract and earning a dayrate.

Hercules Offshore, Inc. and Subsidiaries

 Reconciliation of GAAP to Non-GAAP Financial Measures

 (Unaudited)

 (In thousands, except per share data)

We report our financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP performance measures and ratios may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. Non-GAAP financial measures we may present from time to time are revenue, operating income, income from continuing operations, net income or diluted earnings per share excluding certain charges or amounts. These adjusted amounts are not a measure of financial performance under GAAP. Accordingly, they should not be considered as a substitute for revenue, operating income, income from continuing operations, net income, earnings per share or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and six months ended June 30, 2015 and 2014. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. The non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure in the following table:

Three Months Ended
June 30, 

Six Months Ended
June 30,

2015

2014

2015

2014

      GAAP Revenue

$

79,249

$

242,963

$

201,868

$

499,697

      Adjustment

13,427

(a)

-

-

-

      Non-GAAP Revenue

$

92,676

$

242,963

$

201,868

$

499,697

    Operating Income (Loss):

      GAAP Operating Income (Loss)

$

(60,183)

$

50,049

$

(90,141)

$

107,721

      Adjustment

27,570

(b)

(17,879)

(d)

14,143

(f)

(17,879)

(d)

      Non-GAAP Operating Income (Loss)

$

(32,613)

$

32,170

$

(75,998)

$

89,842

    Other Expense:

      GAAP Other Expense

$

(26,821)

$

(30,622)

$

(51,361)

$

(68,531)

      Adjustment

1,884

(c)

4,767

(e)

1,884

(c)

19,925

(g)

      Non-GAAP Other Expense  

$

(24,937)

$

(25,855)

$

(49,477)

$

(48,606)

   Provision for Income Taxes:

      GAAP Provision for Income Taxes

$

(1,246)

$

(12,781)

$

(3,863)

$

(12,628)

      Tax Adjustment

(671)

-

-

-

      Non-GAAP Provision for Income Taxes

$

(1,917)

$

(12,781)

$

(3,863)

$

(12,628)

   Net Income (Loss):

      GAAP Net Income (Loss)

$

(88,250)

$

6,646

$

(145,365)

$

26,562

      Total Adjustment

28,783

(13,112)

16,027

2,046

      Non-GAAP Net Income (Loss)

$

(59,467)

$

(6,466)

$

(129,338)

$

28,608

    Diluted Earnings (Loss) per Share:

      GAAP Diluted Earnings (Loss) per Share

$

(0.55)

$

0.04

$

(0.90)

$

0.16

      Adjustment per Share

0.18

(0.08)

0.10

0.02

      Non-GAAP Diluted Earnings (Loss) per Share

$

(0.37)

$

(0.04)

$

(0.80)

$

0.18

(a) This amount represents $13.4 million related to the retroactive dayrate concessions on the Hercules 261, Hercules 262 and Hercules 266 made from their existing contracts with Saudi Aramco. On an after-tax basis, this adjustment approximated $12.8 million.

(b) This amount represents $10.6 million of costs related to financing and restructuring activities and a $3.6 million net loss on the sale of assets, including six cold stacked drilling rigs. Additionally, this amount includes a $13.4 million revenue adjustment related to the retroactive dayrate concessions on the Hercules 261, Hercules 262 and Hercules 266 made from their existing contracts with Saudi Aramco, which on an after-tax basis, this adjustment approximated $12.8 million.

(c)  This amount represents a charge of $1.9 million related to the termination of the Credit Facility. 

(d) This amount represents a $17.9 million gain on the sale of three cold stacked drilling rigs.

(e) This amount represents a charge of $4.8 million related to retirement of the remaining portion of our 7.125% senior secured notes in April 2014.

(f) This amount represents $10.6 million of costs related to financing and restructuring activities and a $3.6 million net loss on the sale of assets, including six cold stacked drilling rigs.

(g) This amount represents a charge of $19.9 million related to retirement of our 7.125% senior secured notes and issuance of our 6.75% senior notes.