##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 0-51582
 
 HERCULES OFFSHORE, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    56-2542838(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 9 Greenway Plaza, Suite 2200Houston, Texas
    
    77046(Address of principal executive offices)
    
    (Zip Code)
 (713) 350-5100
(Registrants telephone number, including area code)
 
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  Common Stock, par value $0.01 per share
    
    Outstanding as of April 24, 200988,029,655




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##### 



HERCULES OFFSHORE, INC.
 INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008
    
    
    3Consolidated Statements of Operations for the three months ended March 31, 2009, and March 31, 2008
    
    
    4Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and March 31, 2008
    
    
    5Consolidated Statements of Comprehensive Loss for the three months ended March 31 2009, and March 31, 2008
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4.
    
    Controls and Procedures
    
    
    34PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    35Item 1A.
    
    Risk Factors
    
    
    35Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 6.
    
    Exhibits
    
    
    35Signatures
    
    
    36EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except par value)
 (Unaudited)
 March 31,
    
    
    December 31,2009
    
    
    2008(As Adjusted)ASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    158,737
    
    
    $
    106,455Accounts Receivable, Net
    
    
    240,657
    
    
    
    293,089Prepaids
    
    
    14,578
    
    
    
    23,033Current Deferred Tax Asset
    
    
    17,598
    
    
    
    17,379Other
    
    
    20,654
    
    
    
    20,069452,224
    
    
    
    460,025Property and Equipment, Net
    
    
    2,075,412
    
    
    
    2,088,530Other Assets, Net
    
    
    47,239
    
    
    
    42,340$
    2,574,875
    
    
    $
    2,590,895LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term Debt and Current Portion of Long-term Debt
    
    $
    9,000
    
    
    $
    11,455Insurance Note Payable
    
    
    
    
    
    
    11,126Accounts Payable
    
    
    80,597
    
    
    
    99,823Accrued Liabilities
    
    
    82,239
    
    
    
    83,424Taxes Payable
    
    
    36,503
    
    
    
    32,440Other Current Liabilities
    
    
    56,093
    
    
    
    36,472264,432
    
    
    
    274,740Long-term Debt, Net of Current Portion
    
    
    1,017,079
    
    
    
    1,015,764Other Liabilities
    
    
    36,295
    
    
    
    35,529Deferred Income Taxes
    
    
    332,504
    
    
    
    339,547Commitments and ContingenciesStockholders Equity:Common Stock, $0.01 Par Value; 200,000 Shares Authorized; 89,524 and
89,459 Shares
Issued, Respectively; 88,027 and 87,976 Shares Outstanding, Respectively
    
    
    895
    
    
    
    895Capital in Excess of Par Value
    
    
    1,790,102
    
    
    
    1,785,462Treasury Stock, at Cost, 1,497 Shares and 1,483 Shares, Respectively
    
    
    (50,121
    )
    
    
    (50,081
    )Accumulated Other Comprehensive Loss
    
    
    (15,338
    )
    
    
    (14,932
    )Retained Deficit
    
    
    (800,973
    )
    
    
    (796,029
    )924,565
    
    
    
    925,315$
    2,574,875
    
    
    $
    2,590,895
  3




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Revenues
    
    $
    223,491
    
    
    $
    212,494Costs and Expenses:Operating Expenses
    
    
    149,244
    
    
    
    131,146Depreciation and Amortization
    
    
    48,846
    
    
    
    43,620General and Administrative
    
    
    16,292
    
    
    
    16,364214,382
    
    
    
    191,130Operating Income
    
    
    9,109
    
    
    
    21,364Other Income (Expense):Interest Expense
    
    
    (15,789
    )
    
    
    (15,956
    )Other, Net
    
    
    (656
    )
    
    
    2,025Income (Loss) Before Income Taxes
    
    
    (7,336
    )
    
    
    7,433Income Tax Benefit (Provision)
    
    
    2,825
    
    
    
    (2,558
    )Income (Loss) from Continuing Operations
    
    
    (4,511
    )
    
    
    4,875Loss from Discontinued Operation, Net of Taxes
    
    
    (433
    )
    
    
    (389
    )Net Income (Loss)
    
    $
    (4,944
    )
    
    $
    4,486Basic Earnings (Loss) Per Share:Income (Loss) from Continuing Operations
    
    $
    (0.05
    )
    
    $
    0.05Loss from Discontinued Operation
    
    
    (0.01
    )
    
    
    Net Income (Loss)
    
    $
    (0.06
    )
    
    $
    0.05Diluted Earnings (Loss) Per Share:Income (Loss) from Continuing Operations
    
    $
    (0.05
    )
    
    $
    0.05Loss from Discontinued Operation
    
    
    (0.01
    )
    
    
    Net Income (Loss)
    
    $
    (0.06
    )
    
    $
    0.05Weighted Average Shares Outstanding:Basic
    
    
    88,002
    
    
    
    88,859Diluted
    
    
    88,002
    
    
    
    89,572
  4




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Cash Flows from Operating Activities:Net Income (Loss)
    
    $
    (4,944
    )
    
    $
    4,486Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities:Depreciation and Amortization
    
    
    48,846
    
    
    
    43,626Stock-Based Compensation Expense
    
    
    1,965
    
    
    
    2,413Deferred Income Taxes
    
    
    (7,529
    )
    
    
    1,218Provision for Doubtful Accounts Receivable
    
    
    507
    
    
    
    137Amortization of Deferred Financing Fees
    
    
    1,058
    
    
    
    760Amortization of Original Issue Discount
    
    
    1,315
    
    
    
    Gain on Insurance Settlement
    
    
    (8,700
    )
    
    
    (Gain) Loss on Disposal of Assets
    
    
    216
    
    
    
    (45
    )Excess Tax Benefit from Stock-Based Arrangements
    
    
    (2,686
    )
    
    
    (324
    )(Increase) Decrease in Operating
Assets -Accounts Receivable
    
    
    51,925
    
    
    
    13,802Insurance Claims Receivable
    
    
    (468
    )
    
    
    (42
    )Prepaid Expenses and Other
    
    
    8,958
    
    
    
    7,020Increase (Decrease) in Operating Liabilities -Accounts Payable
    
    
    (19,226
    )
    
    
    (2,868
    )Insurance Note Payable
    
    
    (11,126
    )
    
    
    (10,110
    )Other Current Liabilities
    
    
    14,906
    
    
    
    (16,712
    )Other Liabilities
    
    
    2,953
    
    
    
    1,297Net Cash Provided by Operating Activities
    
    
    77,970
    
    
    
    44,658Cash Flows from Investing Activities:Acquisition of Assets
    
    
    
    
    
    
    (230,045
    )Additions of Property and Equipment
    
    
    (32,568
    )
    
    
    (45,813
    )Deferred Drydocking Expenditures
    
    
    (4,009
    )
    
    
    (5,546
    )Proceeds from Sale of Marketable Securities
    
    
    
    
    
    
    39,300Insurance Proceeds Received
    
    
    8,709
    
    
    
    19,355Proceeds from Sale of Assets, Net
    
    
    1,960
    
    
    
    2,047Net Cash Used in Investing Activities
    
    
    (25,908
    )
    
    
    (220,702
    )Cash Flows from Financing Activities:Short-term Debt Repayments, Net
    
    
    (2,455
    )
    
    
    Long-term Debt Repayments
    
    
    
    
    
    
    (2,250
    )Excess Tax Benefit from Stock-Based
Arrangements
    
    
    2,686
    
    
    
    324Other
    
    
    (11
    )
    
    
    Net Cash Provided by (Used in) Financing Activities
    
    
    220
    
    
    
    (1,926
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    52,282
    
    
    
    (177,970
    )Cash and Cash Equivalents at Beginning of Period
    
    
    106,455
    
    
    
    212,452Cash and Cash Equivalents at End of Period
    
    $
    158,737
    
    
    $
    34,482
  5




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 (In thousands)
 (Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Net Income (Loss)
    
    $
    (4,944
    )
    
    $
    4,486Other Comprehensive Loss, Net of Taxes:Changes Related to Hedge Transactions
    
    
    (406
    )
    
    
    (7,026
    )Comprehensive Loss
    
    $
    (5,350
    )
    
    $
    (2,540
    )
  6




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 UNAUDITED
 1. General
     Revenue Recognition
  Three Months Ended March 31,2009
    
    2008Mobilization revenue deferred
    
    $
    12,000
    
    
    $
    3,827Mobilization expense deferred
    
    
    132
    
    
    
    3,398Mobilization revenue recognized
    
    
    3,916
    
    
    
    1,970Mobilization expense recognized
    
    
    693
    
    
    
    814
 7




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
   Other Assets
   Other Intangible Assets
   Remainder of 2009
    
    $
    3,2792010
    
    
    1,8142011
    
    
    6582012
    
    
    2013
    
    
    
 Cash and Cash Equivalents and Marketable Securities
   8




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
 2. Earnings Per Share
  Three Months Ended March 31,2009
    
    
    2008Denominator:Weighted average basic shares
    
    
    88,002
    
    
    
    88,859Add effect of stock equivalents
    
    
    
    
    
    
    713Weighted average diluted shares
    
    
    88,002
    
    
    
    89,572
  3. Asset Acquisition
 Hercules 350 Hercules 261 Hercules 262
 4. Discontinued Operation
   Three Months Ended March 31,2009
    
    
    2008Revenues
    
    $
    222
    
    
    $
    892Loss Before Income Taxes
    
    $
    (666
    )
    
    $
    (599
    )Income Tax Benefit
    
    
    233
    
    
    
    210Loss from Discontinued Operation, Net of Taxes
    
    $
    (433
    )
    
    $
    (389
    )
 9




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
 5. Debt
  March 31, 2009
    
    
    December 31, 2008(As Adjusted)Term Loan Facility, due July 2013
    
    $
    886,500
    
    
    $
    886,5003.375% Convertible Senior Notes due June 2038
    
    
    136,067
    
    
    
    134,7527.375% Senior Notes, due April 2018
    
    
    3,512
    
    
    
    3,512Foreign Overdraft Facility
    
    
    
    
    
    
    2,455Total Debt
    
    
    1,026,079
    
    
    
    1,027,219Less Short-term Debt and Current Portion of Long-term Debt
    
    
    9,000
    
    
    
    11,455Total Long-term Debt, Net of Current Portion
    
    $
    1,017,079
    
    
    $
    1,015,764
 Senior secured credit agreement
       10




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
 Senior notes and other debt
 Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
       6. Derivative Instruments and Hedging
 Accounting for Derivative
Instruments and Hedging Activities, as amended
   11




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
    April 1, 2009-June 30, 2009
    
    $
    250,000July 1, 2009-September 30, 2009
    
    
    175,000October 1, 2009-December 30, 2009
    
    
    75,000
  DerivativesAs of March 31,
    
    
    As of December 31,2009
    
    

2008Balance Sheet
    
    Fair
    
    
    Balance Sheet
    
    FairClassification
    
    Value
    
    
    Classification
    
    ValueDerivatives designated as hedging:Interest rate contracts:Other
    
    $
    7
    
    
    Other
    
    $
    21Total asset derivatives
    
    $
    7
    
    
    Total asset derivatives
    
    $
    21Other Current Liabilities
    
    $
    18,501
    
    
    Other Current Liabilities
    
    $
    15,669Other Liabilities
    
    
    5,104
    
    
    Other Liabilities
    
    
    7,324Total liability derivatives
    
    $
    23,605
    
    
    Total liability derivatives
    
    $
    22,993
  Derivatives in
    
    I.
    
    
    
    
    
    III.Statement 133
    
    Three Months Ended
    
    
    
    
    
    Three Months EndedCash Flow
    
    March 31,
    
    
    
    
    
    March 31,Hedging Relationships
    
    2009
    
    2008
    
    II.
    
    2009
    
    2008Interest rate contracts
    
    $
    (3,275
    )
    
    $
    (7,383
    )
    
    Interest Expense
    
    $
    (4,414
    )
    
    $
    (549
    )
 
 I.
    
    Amount of Gain (Loss), Net of Taxes Recognized in Other Comprehensive Income on Derivative (Effective Portion)II.
    
    Classification of Gain (Loss), Net of Taxes Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)III.
    
    Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion) 12




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
  Cumulative unrealized loss, net of tax of $8,040, as of December 31, 2008
    
    $
    (14,932
    )Reclassification of losses into net income, net of tax of $1,545
    
    
    2,869Other comprehensive losses, net of tax
of 1,764
    
    
    (3,275
    )Cumulative unrealized loss,
net of tax of $8,259, as of March 31, 2009
    
    $
    (15,338
    )
  Quoted Prices inTotal
    
    Active Markets forFair Value
    
    Identical Asset or
    
    Significant Other
    
    SignificantMeasurement
    
    Liability
    
    Observable Inputs
    
    Unobservable Inputs
    ValuationMarch 31, 2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    TechniqueDerivative Assets
    
    $
    7
    
    
    $
    
    
    
    $
    7
    
    
    $
    
    
    
    ADerivative Liabilities
    
    
    23,605
    
    
    
    
    
    
    
    23,605
    
    
    
    

    
    
    A
  Level 1
    
    -
    
    Inputs are quoted prices in active markets for identical assets or liabilities.Level 2
    
    -
    
    Inputs are quoted prices for similar assets or liabilities in an active
market, quoted prices for identical or similar assets or liabilities in
markets that are not active, inputs other than quoted prices that are
observable and market-corroborated inputs which are derived principally from
or corroborated by observable market data.Level 3
    
    -
    
    Inputs are derived from valuation techniques in which one or more significant
inputs or value drivers are unobservable.
  (A)
    
    Market approach  Uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities(B)
    
    Income approach  Uses valuation techniques to convert future amounts to a single
present amount based on current market expectations about those future amounts,
including present value techniques, option-pricing models and excess earnings method(C)
    
    Cost approach  Based on the amount that currently would be required to replace
the service capacity of an asset (replacement cost)
 7. Stock-based Compensation
    13




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
  8. Supplemental Cash Flow Information
  Three Months Ended March 31,2009
    
    2008(In thousands)Cash paid during the period for:Interest, net of capitalized interest of $333 and $804, respectively
    
    $
    (64
    )
    
    $
    14,476Income taxes
    
    
    4,577
    
    
    
    22,332
 9. Income Tax
 Accounting for the Income Taxes Share Based Payment
   14




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
  10. Segments
   Domestic Offshore
 International Offshore
 Inland
 Domestic Liftboats
 International Liftboats
 Delta Towing
  15




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
  Three Months Ended March 31, 2009Income (Loss)
    
    
    Depreciation &Revenue
    
    
    from Operations
    
    
    AmortizationDomestic Offshore
    
    $
    59,181
    
    
    $
    (11,940
    )
    
    $
    15,040International Offshore
    
    
    103,452
    
    
    
    42,885
    
    
    
    15,184Inland
    
    
    12,913
    
    
    
    (16,244
    )
    
    
    7,993Domestic Liftboats
    
    
    22,610
    
    
    
    3,019
    
    
    
    5,049International Liftboats
    
    
    18,642
    
    
    
    6,860
    
    
    
    2,384Delta Towing
    
    
    6,693
    
    
    
    (4,257
    )
    
    
    2,284223,491
    
    
    
    20,323
    
    
    
    47,934Corporate
    
    
    
    
    
    
    (11,214
    )
    
    
    912Total Company
    
    $
    223,491
    
    
    $
    9,109
    
    
    $
    48,846
 Three Months Ended March 31, 2008Income (Loss)
    
    
    Depreciation &Revenue
    
    
    from Operations
    
    
    AmortizationDomestic Offshore
    
    $
    62,447
    
    
    $
    (1,890
    )
    
    $
    15,335International Offshore
    
    
    65,343
    
    
    
    34,350
    
    
    
    7,586Inland
    
    
    40,268
    
    
    
    (1,940
    )
    
    
    9,660Domestic Liftboats
    
    
    15,944
    
    
    
    (4,551
    )
    
    
    5,952International Liftboats
    
    
    18,291
    
    
    
    8,148
    
    
    
    1,984Delta Towing
    
    
    10,201
    
    
    
    (492
    )
    
    
    2,569212,494
    
    
    
    33,625
    
    
    
    43,086Corporate
    
    
    
    
    
    
    (12,261
    )
    
    
    534Total Company
    
    $
    212,494
    
    
    $
    21,364
    
    
    $
    43,620
 Total AssetsMarch 31,
    
    
    December 31,2009
    
    
    2008Domestic Offshore
    
    $
    930,269
    
    
    $
    930,988International Offshore
    
    
    977,456
    
    
    
    955,911Inland
    
    
    187,409
    
    
    
    217,477Domestic Liftboats
    
    
    141,062
    
    
    
    148,307International Liftboats
    
    
    151,259
    
    
    
    168,356Delta Towing
    
    
    78,475
    
    
    
    92,371Corporate
    
    
    108,945
    
    
    
    77,485Total Company
    
    $
    2,574,875
    
    
    $
    2,590,895
 16




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
 11. Commitments and Contingencies
 Legal Proceedings
 Accounting for Contingencies
   Robert E. Aaron et al. vs. Phillips 66 Company et al. Circuit Court, Second Judicial District,
Jones County, Mississippi.
   Insurance
  17




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
    Surety Bonds and Unsecured Letters of Credit
   12. Accounting Pronouncements
 Accounting for Assets Acquired and Liabilities Assumed in a Business Combination
That Arise from Contingencies, Business Combinations Accounting for Contingencies, Business Combinations
  18




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HERCULES OFFSHORE, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 UNAUDITED
  Disclosures about Derivative Instruments and
Hedging Activities Accounting for Derivative
Instruments and Hedging Activities
 Effective Date of FASB Statement No. 157
 13. Subsequent Event
  19




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  OVERVIEW
    Domestic Offshore
 International Offshore
 Inland
 Domestic Liftboats
 International Liftboats
 Delta Towing
   20




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21




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##### Table of Contents



RESULTS OF OPERATIONS
  Three Months EndedMarch 31,2009
    
    
    2008(Dollars in thousands)Domestic Offshore:Number of rigs (as of end of period) (a)
    
    
    23
    
    
    
    28Revenues
    
    $
    59,181
    
    
    $
    62,447Operating expenses
    
    
    54,413
    
    
    
    47,772Depreciation and amortization expense
    
    
    15,040
    
    
    
    15,335General and administrative expenses
    
    
    1,668
    
    
    
    1,230Operating loss
    
    $
    (11,940
    )
    
    $
    (1,890
    )International Offshore:Number of rigs (as of end of period)
    
    
    12
    
    
    
    11Revenues
    
    $
    103,452
    
    
    $
    65,343Operating expenses
    
    
    44,141
    
    
    
    22,792Depreciation and amortization expense
    
    
    15,184
    
    
    
    7,586General and administrative expenses
    
    
    1,242
    
    
    
    615Operating income
    
    $
    42,885
    
    
    $
    34,350Inland:Number of barges (as of end of period) (a)
    
    
    17
    
    
    
    27Revenues
    
    $
    12,913
    
    
    $
    40,268Operating expenses
    
    
    20,264
    
    
    
    31,926Depreciation and amortization expense
    
    
    7,993
    
    
    
    9,660General and administrative expenses
    
    
    900
    
    
    
    622Operating loss
    
    $
    (16,244
    )
    
    $
    (1,940
    )Domestic Liftboats:Number of liftboats (as of end of period)
    
    
    45
    
    
    
    47Revenues
    
    $
    22,610
    
    
    $
    15,944Operating expenses
    
    
    14,134
    
    
    
    13,894Depreciation and amortization expense
    
    
    5,049
    
    
    
    5,952General and administrative expenses
    
    
    408
    
    
    
    649Operating income (loss)
    
    $
    3,019
    
    
    $
    (4,551
    )International Liftboats:Number of liftboats (as of end of period)
    
    
    20
    
    
    
    18Revenues
    
    $
    18,642
    
    
    $
    18,291Operating expenses
    
    
    8,107
    
    
    
    7,220Depreciation and amortization expense
    
    
    2,384
    
    
    
    1,984General and administrative expenses
    
    
    1,291
    
    
    
    939Operating income
    
    $
    6,860
    
    
    $
    8,148
 
 (a)
    
    In January 2009, we retired four Domestic Offshore rigs and ten Inland barges. 22




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Three Months EndedMarch 31,2009
    
    
    2008Delta Towing:Revenues
    
    $
    6,693
    
    
    $
    10,201Operating expenses
    
    
    8,185
    
    
    
    7,542Depreciation and amortization expense
    
    
    2,284
    
    
    
    2,569General and administrative expenses
    
    
    481
    
    
    
    582Operating loss
    
    $
    (4,257
    )
    
    $
    (492
    )Total Company:Revenues
    
    $
    223,491
    
    
    $
    212,494Operating expenses
    
    
    149,244
    
    
    
    131,146Depreciation and amortization expense
    
    
    48,846
    
    
    
    43,620General and administrative expenses
    
    
    16,292
    
    
    
    16,364Operating income
    
    
    9,109
    
    
    
    21,364Interest expense
    
    
    (15,789
    )
    
    
    (15,956
    )Other, net
    
    
    (656
    )
    
    
    2,025Income (loss) before income taxes
    
    
    (7,336
    )
    
    
    7,433Income tax benefit (provision)
    
    
    2,825
    
    
    
    (2,558
    )Income (loss) from continuing operations
    
    
    (4,511
    )
    
    
    4,875Loss from discontinued operation, net of taxes
    
    
    (433
    )
    
    
    (389
    )Net income (loss)
    
    $
    (4,944
    )
    
    $
    4,486
  Three Months Ended March 31, 2009AverageAverage
    
    OperatingOperating
    
    Available
    
    
    
    
    
    Revenue
    
    ExpenseDays
    
    Days
    
    Utilization (1)
    
    per Day (2)
    
    per Day (3)Domestic Offshore
    
    
    864
    
    
    
    1,384
    
    
    
    62.4
    %
    
    $
    68,497
    
    
    $
    39,316International Offshore
    
    
    795
    
    
    
    847
    
    
    
    93.9
    %
    
    
    130,128
    
    
    
    52,115Inland
    
    
    298
    
    
    
    723
    
    
    
    41.2
    %
    
    
    43,332
    
    
    
    28,028Domestic Liftboats
    
    
    2,439
    
    
    
    3,870
    
    
    
    63.0
    %
    
    
    9,270
    
    
    
    3,652International Liftboats
    
    
    918
    
    
    
    1,710
    
    
    
    53.7
    %
    
    
    20,307
    
    
    
    4,741
 Three Months Ended March 31, 2008AverageAverage
    
    OperatingOperating
    
    Available
    
    
    
    
    
    Revenue
    
    ExpenseDays
    
    Days
    
    Utilization (1)
    
    per Day (2)
    
    per Day (3)Domestic Offshore
    
    
    1,098
    
    
    
    2,002
    
    
    
    54.8
    %
    
    $
    56,873
    
    
    $
    23,862International Offshore
    
    
    654
    
    
    
    709
    
    
    
    92.2
    %
    
    
    99,913
    
    
    
    32,147Inland
    
    
    938
    
    
    
    1,547
    
    
    
    60.6
    %
    
    
    42,930
    
    
    
    20,637Domestic Liftboats
    
    
    1,600
    
    
    
    4,186
    
    
    
    38.2
    %
    
    
    9,965
    
    
    
    3,319International Liftboats
    
    
    1,217
    
    
    
    1,547
    
    
    
    78.7
    %
    
    
    15,030
    
    
    
    4,667
 23




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##### Table of Contents



(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. Included in International Offshore
revenue is a total of $3.8 million and $2.0 million related to amortization of deferred
mobilization revenue and contract specific capital expenditures reimbursed by the customer
for the three months ended March 31, 2009 and 2008, respectively. Included in
International Liftboats revenue is a total of $0.1 million related to amortization of
deferred mobilization revenue for the three months ended March 31, 2009. There was no such
revenue in the three months ended March 31, 2008 for International Liftboats.(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 International Offshore
operating expense is a total of $0.7 million and $0.8 million related to amortization of
deferred mobilization expenses for the three months ended March 31, 2009 and 2008,
respectively. For the Three Months Ended March 31, 2009 and 2008
 Revenues
 Consolidated.
 Domestic Offshore .
 International Offshore . Hercules 260 Hercules 208 Hercules 261 Hercules 262 Hercules 156 Hercules
185 Hercules 260 Hercules 261 Hercules 258
 Inland.
 24




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##### Table of Contents



Domestic Liftboats.
 International Liftboats.
 Delta Towing.
 Operating Expenses
 Consolidated .
 Domestic Offshore .
 International Offshore. Hercules 258 Hercules 260
 Inland.
 Domestic Liftboats.
 International Liftboats.
 25




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Delta Towing.
 Depreciation and Amortization
 Hercules 350, Hercules 262, Hercules 261 Hercules 208 Hercules 260
 Other Income (Expense)
  Income Tax Benefit (Provision)
  CRITICAL ACCOUNTING POLICIES
    26




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OUTLOOK
 Offshore
           27




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Inland
   Liftboats
      28




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LIQUIDITY AND CAPITAL RESOURCES
 Sources and Uses of Cash
  Net Cash Provided by Operating Activities:
    
    $
    78.0Net Cash Provided by (Used in) Investing
Activities:Additions of Property and Equipment
    
    
    (32.6
    )Deferred Drydocking Expenditures
    
    
    (4.0
    )Insurance Proceeds Received
    
    
    8.7Proceeds from Sale of Assets, Net
    
    
    2.0Total
    
    
    (25.9
    )Net Cash Provided by (Used in) Financing
Activities:Short-term Debt Repayments, Net
    
    
    (2.5
    )Excess Tax Benefit from Stock-Based Arrangements
    
    
    2.7Total
    
    
    0.2Net Increase in Cash and Cash Equivalents
    
    $
    52.3
 Sources of Liquidity and Financing Arrangements
   Cash Requirements and Contractual Obligations
 Debt
   29




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30




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Capital Expenditures
      Contractual Obligations
 Accounting for Uncertainty in Income Taxes
  31




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Off-Balance Sheet Arrangements
 Guarantees
  Letters of Credit and Surety Bonds
  Accounting Pronouncements
  FORWARD-LOOKING STATEMENTS
  
    
    our ability to enter into new contracts for our rigs and liftboats and future
utilization rates for the units;
    
    the correlation between demand for our rigs and our liftboats and our earnings and
customers expectations of energy prices;
    
    future capital expenditures and refurbishment, repair and upgrade costs;
    
    expected completion times for our refurbishment and upgrade projects;
    
    sufficiency and availability of funds for required capital expenditures, working capital
and debt service;
    
    our plans regarding increased international operations;
    
    expected useful lives of our rigs and liftboats;
    
    liabilities under laws and regulations protecting the environment;
    
    expected outcomes of litigation, claims and disputes and their expected effects on our
financial condition and results of operations; and
    
    expectations regarding improvements in offshore drilling activity and dayrates, market
conditions, demand for our rigs and liftboats, operating revenues, operating and
maintenance expense, insurance expense and deductibles, interest expense, debt levels and
other matters with regard to outlook.
 :
 32




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##### Table of Contents




    
    oil and natural gas prices and industry expectations about future prices;
    
    demand for offshore jackup rigs and liftboats;
    
    our ability to enter into and the terms of future contracts;
    
    the worldwide military and political environment, uncertainty or instability resulting
from an escalation or additional outbreak of armed hostilities or other crises in the
Middle East and other oil and natural gas producing regions, or further acts of terrorism
in the United States, or elsewhere;
    
    the impact of governmental laws and regulations;
    
    the adequacy of sources of credit and liquidity;
    
    uncertainties relating to the level of activity in offshore oil and natural gas
exploration, development and production;
    
    competition and market conditions in the contract drilling and liftboat industries;
    
    the availability of skilled personnel;
    
    labor relations and work stoppages, particularly in the West African labor environments;
    
    operating hazards such as severe weather and seas, fires, cratering, blowouts, war,
terrorism and cancellation or unavailability of insurance coverage;
    
    the effect of litigation and contingencies; and
    
    our inability to achieve our plans or carry out our strategy.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Exposure
    33




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Interest Rate Swaps and Derivatives
 Liquidity and Capital Resources
   April 1, 2009-June 30, 2009
    
    $
    250,000July 1, 2009-September 30, 2009
    
    
    175,000October 1, 2009-December 30, 2009
    
    
    75,000
 
 ITEM 4. CONTROLS AND PROCEDURES
   34




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Total Number ofShares Purchased
    
    Maximum Numberas Part of a
    
    of Shares ThatTotal Number
    
    
    
    
    
    Publicly
    
    May Yet Beof Shares
    
    Average Price
    
    Announced Plan
    
    Purchased UnderPeriod
    
    Purchased (1)
    
    Paid per Share
    
    (2)
    
    Plan (2)January 1-31, 2009
    
    
    
    
    
    $
    
    
    
    
    N/A
    
    
    
    N/AFebruary 1-28, 2009
    
    
    13,451
    
    
    
    2.89
    
    
    
    N/A
    
    
    
    N/AMarch 1-31, 2009
    
    
    481
    
    
    
    1.93
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    13,932
    
    
    
    2.85
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    Represents the surrender of shares of common stock to satisfy tax withholding
obligations in connection with the vesting of restricted stock issued to employees under
our stockholder-approved long-term incentive plan.(2)
    
    We did not have at any time during the quarter, and currently do not have, a share
repurchase program in place. 
 ITEM 6. EXHIBITS10.1
    
    Form of Stock Option Award
Agreement (incorporated by reference to Exhibit 10.1 to Hercules
Current Report on Form 8-K dated March 3, 2009).31.1*
    
    Certification of Chief Executive Officer of Hercules pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer of Hercules pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of the Chief Executive Officer and the Chief Financial Officer of Hercules
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith 35




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SIGNATURES
 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 HERCULES OFFSHORE, INC.By:
    
    /s/ John T. RyndJohn T. RyndChief Executive Officer and President(Principal Executive Officer)By:
    
    /s/ Lisa W. RodriguezLisa W. RodriguezSenior Vice President and Chief Financial Officer(Principal Financial Officer)By:
    
    /s/ Troy L. CarsonTroy L. CarsonVice President and Corporate Controller(Principal Accounting Officer)
  36




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INDEX TO EXHIBITS
 ExhibitNumber
    
    Description10.1
    
    Form of Stock Option Award
Agreement (incorporated by reference to Exhibit 10.1 to Hercules
Current Report on Form 8-K dated March 3, 2009).31.1*
    
    Certification of Chief Executive Officer of Hercules pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer of Hercules pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of the Chief Executive Officer and the Chief Financial Officer of Hercules
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith