HERCULES OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In US$ thousands)
(Unaudited)
December 31, December 31,
2006 2005
ASSETS
CURRENT ASSETS
Cash and cash equivalents $72,772 $47,575
Restricted cash 250 -
Accounts receivable, net 89,136 38,484
Deposits 39 33
Assets held for sale - 2,040
Insurance claims receivable - 5,919
Prepaid expenses and other 18,026 6,160
Total current assets 180,223 100,211
PROPERTY AND EQUIPMENT, net 415,864 247,443
OTHER ASSETS 9,494 7,171
Total assets $605,581 $354,825
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $1,400 $1,400
Insurance note payable 6,058 2,401
Accounts payable 29,123 13,281
Accrued liabilities 16,262 11,165
Taxes payable 8,745 122
Interest payable 2,105 1,759
Other current liabilities 5,633 -
Total current liabilities 69,326 30,128
LONG-TERM DEBT, net of current portion 91,850 93,250
DEFERRED INCOME TAXES 42,854 15,504
OTHER LIABILITIES 6,700 -
STOCKHOLDERS' EQUITY 394,851 215,943
Total liabilities and stockholders'
equity $605,581 $354,825
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In US$ thousands, except share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
REVENUES
Contract drilling
services $67,359 $23,995 $191,221 $103,422
Marine services 47,311 24,024 153,091 57,912
114,670 48,019 344,312 161,334
COSTS AND EXPENSES
Operating expenses for
contract drilling
services, excluding
depreciation and
amortization 21,983 10,951 65,239 48,330
Operating expenses for
marine services,
excluding depreciation
and amortization 20,762 11,300 58,899 29,484
Depreciation and
amortization 9,728 4,715 32,310 13,790
General and
administrative,
excluding depreciation
and amortization 9,411 4,735 29,807 13,871
61,884 31,701 186,255 105,475
OPERATING INCOME 52,786 16,318 158,057 55,859
OTHER INCOME (EXPENSE)
Interest expense (2,454) (2,308) (9,278) (9,880)
Gain on disposal of
assets - - 30,690 -
Loss on early
retirement of debt - (1,292) - (4,078)
Other, net 1,341 445 4,038 924
INCOME BEFORE INCOME TAXES 51,673 13,163 183,507 42,825
INCOME TAX PROVISION
Current income tax (16,599) (122) (37,257) (122)
Deferred income tax 452 (15,247) (27,200) (15,247)
NET INCOME $35,526 $(2,206) $119,050 $27,456
EARNINGS PER SHARE:
Basic $1.11 $(0.08) $3.80 $1.10
Diluted $1.09 $(0.08) $3.70 $1.08
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 31,871,601 28,113,285 31,327,420 24,919,273
Diluted 32,674,388 28,113,285 32,203,446 25,431,822
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In US$ thousands)
(Unaudited)
Twelve Months Ended December 31,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $119,050 $27,456
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization 32,310 13,790
Stock-based compensation expense 3,098 78
Deferred income taxes 27,200 15,247
Amortization of deferred financing fees 686 890
Provision for bad debts 160 (519)
Loss on early retirement of debt - 4,078
Gain on disposal of assets (30,690) -
Gain on sale of assets (89) -
Excess tax benefit from stock-based
arrangements (1,271) -
(Increase) decrease in operating assets
Increase in accounts receivable (50,813) (12,545)
Increase in insurance claims
receivable (7,914) (5,919)
Increase in prepaid expenses and
other (12,611) (9,720)
Increase (decrease) in operating
liabilities
Increase in accounts payable 15,842 11,443
Increase in insurance note payable 3,657 1,718
Increase in other current liabilities 26,232 6,766
Increase in other liabilities 6,700 -
Net cash provided by operating
activities 131,547 52,763
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (211,756) (168,038)
Deferred drydocking expenditures (12,544) (7,369)
Insurance proceeds received 61,278 -
Proceeds received from sale of assets,
net of commissions 5,989 455
Increase in restricted cash (250) -
Decrease (increase) in deposits (6) 1,999
Net cash used in investing activities (157,289) (172,953)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings - 185,000
Payment of debt (1,400) (146,350)
Proceeds from issuance of common stock 54,198 116,249
Proceeds from exercise of stock options 1,232 -
Excess tax benefit from stock-based
arrangements 1,271 -
Payment of debt issuance costs (630) (5,923)
(Distributions to) contributions from
members (3,732) 4,329
Net cash provided by financing activities 50,939 153,305
NET INCREASE IN CASH AND CASH EQUIVALENTS 25,197 33,115
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 47,575 14,460
CASH AND CASH EQUIVALENTS AT END OF PERIOD $72,772 $47,575
HERCULES OFFSHORE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING DATA
(Dollars in US$ thousands, except per day amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Domestic Contract Drilling Services
Segment:
Number of rigs (as of end of period) 6 9 6 9
Operating days 549 409 1,973 2,192
Available days 552 460 2,078 2,309
Utilization (1) 99.5% 88.9% 94.9% 94.9%
Average revenue per rig
per day (2) $89,359 $58,611 $81,480 $47,177
Average operating expense per
rig per day (3) $25,824 $23,808 $24,957 $20,932
Revenues $49,058 $23,995 $160,761 $103,422
Operating expenses, excluding
depreciation and amortization $14,256 $10,951 $51,862 $48,330
Depreciation and amortization $2,603 $1,527 $8,88 $5,547
General and administrative
expenses, excluding
depreciation and amortization $1,761 $2,023 $6,980 $5,486
Operating income $30,438 $9,494 $93,037 $44,059
International Contract Drilling
Services Segment:
Number of rigs (as of end of
period) 3 - 3 -
Operating days 172 - 305 -
Available days 184 - 321 -
Utilization (1) 93.5% - 95.0% -
Average revenue per rig
per day(2) $106,403 - $99,868 -
Average operating expense per
rig per day (3) $41,999 - $41,673 -
Revenues $18,301 - $30,460 -
Operating expenses, excluding
depreciation and amortization $7,727 - $13,377 -
Depreciation and amortization $1,361 - $2,547 -
General and administrative
expenses, excluding depreciation
and amortization $657 - $1,606 -
Operating income $8,556 - $12,930 -
Domestic Marine Services Segment:
Number of liftboats (as of end
of period) 47 42 47 42
Operating days 3,072 2,787 11,895 8,571
Available days 4,140 3,379 15,416 10,971
Utilization (1) 74.2% 82.5% 77.2% 78.1%
Average revenue per liftboat per
day (2) $12,398 $7,840 $11,259 $6,503
Average operating expense per
liftboat per day (3) $3,777 $3,027 $3,180 $2,590
Revenues $38,087 $21,852 $133,929 $55,740
Operating expenses, excluding
depreciation and amortization $15,636 $10,229 $49,025 $28,413
Depreciation and amortization $4,795 $2,996 $18,854 $8,031
General and administrative
expenses, excluding depreciation
and amortization $479 $655 $2,259 $1,888
Operating income $17,177 $7,972 $63,79 $17,408
International Marine Services
Segment:
Number of liftboats (as of end
of period) 17 4 17 4
Operating days 818 212 1,765 212
Available days 917 212 2,009 212
Utilization (1) 89.2% 100.0% 87.9% 100.0%
Average revenue per liftboat per
day (2) $11,277 $10,243 $10,857 $10,243
Average operating expense per
liftboat per day (3) $5,590 $5,052 $4,915 $5,052
Revenues $9,224 $2,172 $19,162 $2,172
Operating expenses, excluding
depreciation and amortization $5,126 $1,071 $9,874 $1,071
Depreciation and amortization $944 $176 $1,923 $176
General and administrative
expenses, excluding depreciation
and amortization $981 $336 $3,056 $336
Operating income $2,173 $589 $4,309 $589
Total Company:
Revenues $114,670 $48,019 $344,312 $161,334
Operating expenses, excluding
depreciation and amortization $42,745 $22,251 $124,138 $77,814
Depreciation and amortization $9,728 $4,715 $32,310 $13,790
General and administrative
expenses, excluding depreciation
and amortization $9,411 $4,735 $29,807 $13,871
Operating income $52,786 $16,318 $158,057 $55,859
Interest expense $2,454 $2,308 $9,278 $9,880
Loss on early retirement of debt $- $1,292 $- $4,078
Gain on disposal of asset $- $- $30,690 $-
Other income $1,341 $445 $4,038 $924
Income before income taxes $51,673 $13,163 $183,507 $42,825
Income tax expense $16,147 $15,369 $64,457 $15,369
Net income $35,526 $(2,206) $119,050 $27,456
(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, which
included Rig 16, Rig 21, Rig 26 and Rig 31, or cold-stacked units,
which included three of our liftboats, 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. Included in revenue is a total of
US$1,792,692 and US$2,640,255 related to amortization of deferred
mobilization revenue and contract specific capital expenditures
reimbursed by the customer for the three and twelve months ended
December 31, 2006, respectively. Included in revenue for our
International Contract Drilling Services segment for the twelve
months ended December 31, 2006 is US$2,010,000 earned for a timely
departure of Rig 16 from the shipyard in the second quarter of 2006.
(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. In addition, the operating expenses
we incur on our rigs and liftboats per day when they are not under
contract are typically lower than the per-day expenses we incur when
they are under contract. Included in operating expense is a total of
US$1,170,955 and US$1,600,271 related to amortization of deferred
mobilization expenses for the three and twelve months ended
December 31, 2006, respectively.
Hercules Offshore, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(In thousands, except per share data)
The Company is providing 2006 net income before the gain on the insurance settlement of Rig 25 and 2005 net income before the deferred income tax charge because management believes that these measures better reflect the normal operations of the Company, as these measures exclude significant, one-time items that materially affect period-to-period comparability. The adjusted net income and earnings per share amounts are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles ("GAAP"). In order to fully assess the Company's financial operation results, management believes that the adjusted net income figures included in this release are appropriate measures of the Company's continuing and normal operations. However, these measures should be considered in addition to, and not as a substitute, or superior to, net income, operating income, cash flows from operations, or other measures of financial performance prepared in accordance with GAAP.
The non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure in the following table:
(all currency in US$)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Operating Income:
GAAP Operating
Income $52,786 $16,318 $158,057 $55,859
Other Income (Expense):
GAAP Other
Income
(Expense) $51,673 $13,163 $183,507 $42,825
Gain on Disposal
of Assets - - (29,580)(a) -
Non-GAAP Other
Income
(Expense) $51,673 $13,163 $153,927 $42,825
Provision for
Income Taxes:
GAAP Provision
for Income
Taxes $(16,147) $(15,369) $(64,457) $(15,369)
Tax Impact of
Gain on
Disposal of
Assets - - 10, 5 Feb. (a) - -
Other Charge - 12,145 (b) - 12,145(b)
Non-GAAP
Provision for
Income Taxes $(16,147) $(3,224) $(53,512) $(3,224)
Net Income (Loss):
GAAP Net Income
(Loss) $35,526 $(2,206) $119,050 $27,456
Total Charges
(Gains), net of
tax - 12,145 (18,635) 12,145
Non-GAAP Net
Income $35,526 $9,939 $100,415 $39,601
Diluted Earnings
per Share:
GAAP Diluted
Earnings per
Share $1.09 $(0.08) $3.70 $1.08
Charges (Gains)
per Share - 0.42(b)(c) (0.58)(a) 0.48(b)
Non-GAAP Diluted
Earnings per
Share $1.09 $0.34(b)(c) $3.12 $1.56
(a) Represents a gain on an after-tax basis of US$18.6 million related to
an insurance claim settlement on the loss of Rig 25.
(b) This amount represents the deferred income tax charge of US$12.1
million resulting from the conversion from a limited liability
company to a corporation in connection with the Company's initial
public offering.
(c) Non-GAAP diluted weighted average shares for the three months ended
December 31, 2005 were 29,135,533, which includes 1,022,248 common
stock equivalents that were anti-dilutive on a GAAP basis as the
Company recorded a loss.
Web site: http://www.herculesoffshore.com
Stephen M. Butz, Vice President and Treasurer of Hercules Offshore, Inc., +1-713-979-9832/ Photo: http://www.newscom.com/cgi-bin/prnh/20050601/DAW092LOGO
