Hercules Offshore, Inc. Announces Third Quarter 2015 Results

Three Months Ended

September 30, 2015

Nine Months Ended

September 30, 2015

Reorganization Items:

      Costs related to financing and restructuring activities (post Bankruptcy Petition)

$

2,774

$

2,774

      Non-cash charge related to write-off of unamortized debt issuance costs

11,535

11,535

            Total Reorganization Items

$

14,309

$

14,309

Professional fees related to the Reorganization:

      Costs incurred prior to Bankruptcy Petition (General and Administrative Expense)

$

8,300

$

18,879

      Costs incurred post Bankruptcy Petition (Reorganization Items)

2,774

2,774

            Total Professional fees related to Reorganization

$

11,074

$

21,653

HERCULES OFFSHORE, INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
(In thousands)

September 30,

December 31,

2015

2014

(Unaudited)

ASSETS

Current Assets:

Cash and Cash Equivalents

$

126,375

$

207,937

Accounts Receivable, Net

67,842

166,359

Prepaids

17,242

19,585

Current Deferred Tax Asset

6,520

4,461

Other

4,111

5,955

222,090

404,297

Property and Equipment, Net

1,526,336

1,574,749

Other Assets, Net

9,331

23,361

$

1,757,757

$

2,002,407

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts Payable

$

36,377

$

52,952

Accrued Liabilities

58,494

66,090

Interest Payable

-

32,008

Other Current Liabilities

8,320

13,406

103,191

164,456

Long-term Debt

-

1,210,919

Deferred Income Taxes

6,459

4,147

Other Liabilities

15,963

7,854

Liabilities Subject to Compromise

1,254,845

-

Commitments and Contingencies

Stockholders' Equity

377,299

615,031

$

1,757,757

$

2,002,407

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 Three Months Ended
September 30,

Nine Months Ended
September 30,

2015

2014

2015

2014

Revenue

$

73,804

$

221,884

$

275,672

$

721,581

Costs and Expenses:

Operating Expenses

72,970

146,297

249,560

413,774

Asset Impairment

-

82,507

-

82,507

Depreciation and Amortization

37,529

44,319

112,198

128,072

General and Administrative

31,839

19,659

72,589

60,405

142,338

292,782

434,347

684,758

Operating Income (Loss)

(68,534)

(70,898)

(158,675)

36,823

Other Income (Expense):

Interest Expense

(11,476)

(25,194)

(61,173)

(74,164)

Loss on Extinguishment of Debt

-

-

(1,884)

(19,925)

Reorganization Items

(14,309)

-

(14,309)

-

Other, Net

51

(168)

271

196

Loss Before Income Taxes

(94,268)

(96,260)

(235,770)

(57,070)

Income Tax Benefit (Provision)

(1,083)

7,707

(4,946)

(4,921)

Net Loss

$

(95,351)

$

(88,553)

$

(240,716)

$

(61,991)

Net Loss Per Share - Basic and Diluted

$

(0.59)

$

(0.55)

$

(1.49)

$

(0.39)

Weighted Average Shares Outstanding - Basic and Diluted

161,639

160,794

161,406

160,526

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended September 30,

2015

2014

Cash Flows from Operating Activities:

Net  Loss

$

(240,716)

$

(61,991)

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

Depreciation and Amortization

112,198

128,072

Stock-Based Compensation Expense

3,162

7,153

Deferred Income Taxes

(324)

(5,573)

Provision for Doubtful Accounts Receivable

7,665

6,319

(Gain) Loss on Disposal of Assets, Net

2,902

(22,623)

Asset Impairment

-

82,507

Reorganization Item, Debt Issuance Costs Write-off

11,535

-

Other

2,146

4,858

Net Change in Operating Assets and Liabilities

83,210

(52,017)

Net Cash Provided by (Used in) Operating Activities

(18,222)

86,705

Cash Flows from Investing Activities:

Capital Expenditures

(74,750)

(134,610)

Insurance Proceeds Received

3,543

9,067

Proceeds from Sale of Assets, Net

7,640

35,109

Other

227

1,145

Net Cash Used in Investing Activities

(63,340)

(89,289)

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

-

145

Net Cash Used in Financing Activities

-

Net Decrease in Cash and Cash Equivalents

(81,562)

(6,353)

Cash and Cash Equivalents at Beginning of Period

207,937

198,406

Cash and Cash Equivalents at End of Period

$

126,375

$

192,053

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

SELECTED FINANCIAL AND OPERATING DATA

(Dollars in thousands, except per day amounts)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2015

2014

2015

2014

Domestic Offshore:

Number of rigs (as of end of period)

18

24

18

24

Revenue

$

27,462

$

123,320

$

120,961

$

406,968

Operating expenses

27,464

65,757

89,871

202,095

Asset impairment

-

82,507

-

82,507

Depreciation and amortization expense

11,207

18,599

34,565

53,948

General and administrative expenses

2,458

1,692

4,978

4,824

Operating income (loss)

$

(13,667)

$

(45,235)

$

(8,453)

$

63,594

International Offshore:

Number of rigs (as of end of period)

9

9

9

9

Revenue

$

31,933

$

74,217

$

101,044

$

226,880

Operating expenses

32,362

61,578

118,040

153,177

Depreciation and amortization expense

21,225

19,586

62,523

55,287

General and administrative expenses

1,792

3,161

5,255

7,157

Operating income (loss)

$

(23,446)

$

(10,108)

$

(84,774)

$

11,259

International Liftboats:

Number of liftboats (as of end of period)

19

24

19

24

Revenue

$

14,409

$

24,347

$

53,667

$

87,733

Operating expenses

13,144

18,962

41,649

58,502

Depreciation and amortization expense

4,462

5,126

13,060

15,868

General and administrative expenses

9,001

1,614

10,690

9,867

Operating income (loss)

$

(12,198)

$

(1,355)

$

(11,732)

$

3,496

Total Company:

Revenue

$

73,804

$

221,884

$

275,672

$

721,581

Operating expenses

72,970

146,297

249,560

413,774

Asset impairment

-

82,507

-

82,507

Depreciation and amortization expense

37,529

44,319

112,198

128,072

General and administrative expenses

31,839

19,659

72,589

60,405

Operating income (loss)

(68,534)

(70,898)

(158,675)

36,823

     Interest expense

(11,476)

(25,194)

(61,173)

(74,164)

     Loss on extinguishment of debt

-

-

(1,884)

(19,925)

     Reorganization Items

(14,309)

-

(14,309)

-

     Other, net

51

(168)

271

196

Loss before income taxes

(94,268)

(96,260)

(235,770)

(57,070)

     Income tax benefit (provision)

(1,083)

7,707

(4,946)

(4,921)

Net loss

$

(95,351)

$

(88,553)

$

(240,716)

$

(61,991)

HERCULES OFFSHORE, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

SELECTED FINANCIAL AND OPERATING DATA - (Continued)

(Dollars in thousands, except per day amounts)

(Unaudited)

Three Months Ended September 30, 2015

Operating Days

Available Days

Utilization (1)

Average
Revenue per
Day (2)

Average
Operating
Expense per
Day (3)

Domestic Offshore

361

828

43.6%

$

76,072

$

33,169

International Offshore

365

736

49.6%

87,488

43,970

International Liftboats

703

1,857

37.9%

20,496

7,078

Three Months Ended September 30, 2014

Operating Days

Available Days

Utilization (1)

Average
Revenue per
Day (2)

Average
Operating
Expense per
Day (3)

Domestic Offshore

1,133

1,656

68.4%

$

108,844

$

39,708

International Offshore

485

736

65.9%

153,025

83,666

International Liftboats

997

2,116

47.1%

24,420

8,961

Nine Months Ended September 30, 2015

Operating Days

Available Days

Utilization (1)

Average
Revenue per
Day (2)

Average
Operating
Expense per
Day (3)

Domestic Offshore

1,333

2,534

52.6%

$

90,743

$

35,466

International Offshore

1,074

2,184

49.2%

94,082

54,048

International Liftboats

2,532

6,020

42.1%

21,195

6,918

Nine Months Ended September 30, 2014

Operating Days

Available Days

Utilization (1)

Average
Revenue per
Day (2)

Average
Operating
Expense per
Day (3)

Domestic Offshore

3,774

4,914

76.8%

$

107,835

$

41,126

International Offshore

1,535

2,139

71.8%

147,805

71,612

International Liftboats

3,473

6,279

55.3%

25,261

9,317

(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

(DEBTOR-IN-POSSESSION)

 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 nine months ended September 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
September 30, 

Nine Months Ended
September 30,

2015

2014

2015

2014

    Operating Income (Loss):

      GAAP Operating Income (Loss)

$

(68,534)

$

(70,898)

$

(158,675)

$

36,823

      Adjustment

8,300

(a)

77,766

(c)

22,443

(d)

59,887

(f)

      Non-GAAP Operating Income (Loss)

$

(60,234)

$

6,868

$

(136,232)

$

96,710

    Other Expense:

      GAAP Other Expense

$

(25,734)

$

(25,362)

$

(77,095)

$

(93,893)

      Adjustment

14,309

(b)

-

16,193

(e)

19,925

(g)

      Non-GAAP Other Expense  

$

(11,425)

$

(25,362)

$

(60,902)

$

(73,968)

   Benefit (Provision) for Income Taxes:

      GAAP Benefit (Provision) for Income Taxes

$

(1,083)

$

7,707

$

(4,946)

$

(4,921)

      Tax Adjustment

-

-

-

-

      Non-GAAP Benefit (Provision) for Income Taxes

$

(1,083)

$

7,707

$

(4,946)

$

(4,921)

   Net Income (Loss):

      GAAP Net Loss

$

(95,351)

$

(88,553)

$

(240,716)

$

(61,991)

      Total Adjustment

22,609

77,766

38,636

79,812

      Non-GAAP Net Income (Loss)

$

(72,742)

$

(10,787)

$

(202,080)

$

17,821

    Diluted Earnings (Loss) per Share:

      GAAP Diluted Loss per Share

$

(0.59)

$

(0.55)

$

(1.49)

$

(0.39)

      Adjustment per Share

0.14

0.48

0.24

0.50

      Non-GAAP Diluted Earnings (Loss) per Share

$

(0.45)

$

(0.07)

$

(1.25)

$

0.11

(a) This amount represents $8.3 million of costs related to financing and restructuring activities.

(b) This amount represents $14.3 million of costs related to post-petition reorganization items, including $2.8 million of professional fees and a non-cash charge of $11.5 million to write off unamortized debt issuance costs related to our debt as those costs are not expected to be included in the allowed claims.

(c) This amount represents a $82.5 million non-cash impairment charge of property and equipment and a $4.7 million net gain on the sale of three cold stacked drilling rigs.

(d) This amount represents $18.9 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.

(e) This amount represents $14.3 million of costs related to post-petition reorganization items, including $2.8 million of professional fees and a non-cash charge of $11.5 million to write off unamortized debt issuance costs related to our debt as those costs are not expected to be included in the allowed claims. Additionally, this amount includes a charge of $1.9 million related to the termination of the Credit Facility. 

(f) This amount represents a $82.5 million non-cash impairment charge of property and equipment and a $22.6 million net gain on the sale of 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.