UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): February 15, 2005 TRANSOCEAN INC. (Exact name of registrant as specified in its charter) CAYMAN ISLANDS 333-75899 66-0582307 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 4 GREENWAY PLAZA HOUSTON, TEXAS 77046 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (713) 232-7500 (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 Results of Operations and Financial Condition. Our press release dated February 15, 2005, concerning fourth quarter and full year 2004 financial results, furnished as Exhibit 99.1 to this report, is incorporated by reference herein. The press release contains certain measures (discussed below) which may be deemed "non-GAAP financial measures" as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended. In the attached press release, we discuss net income, adjusted for the December 2004 TODCO secondary offering, the non-cash charge from the deconsolidation of TODCO relating to the tax sharing agreement between Transocean and TODCO and losses on early retirements of debt on a total and per share basis for the quarter ended December 31, 2004. We also discuss net income adjusted for the gains from the TODCO offerings, the gain on the sale of the semisubmersible SEDCO 602, the non-cash charge from the deconsolidation of TODCO relating to the tax sharing agreement between Transocean and TODCO, losses on early retirements of debt and TODCO IPO-related costs, on a total and per share basis for the twelve months ended December 31, 2004. In addition, we discuss net income, after adjusting for the effect of the restructuring of certain benefit plans in Nigeria on a total and per share basis for the quarter ended December 31, 2003. We also discuss net income, adjusted for the restructuring of certain benefit plans in Nigeria, non-cash charges for impairment of certain assets, losses on early retirements of debt, TODCO IPO related costs and the favorable resolution of a non-U.S. income tax liability, on a total and per share basis for the twelve months ended December 31, 2003. This information is provided because management believes exclusion of these items will help investors compare results between periods and identify operating trends that could otherwise be masked by these items. The most directly comparable GAAP financial measure, net income (loss), and information reconciling the GAAP and non-GAAP measures are included in the press release. In the press release, we also discuss field operating income for our Transocean Drilling business segment for the quarters ended September 30, 2004 and December 31, 2004. We also discuss field operating income for our TODCO business segment from October 1, 2004 to December 17, 2004. Management believes field operating income is a useful measure of the operating results of a particular segment since the measure only deducts expenses directly related to a segment's operations from that segment's revenues. The most directly comparable GAAP financial measure, operating income before general and administrative expenses, and information reconciling the GAAP and non-GAAP measures are included in the press release. In the press release, we also discuss net debt at December 31, 2003 and at December 31, 2004. This information is provided because management believes net debt provides useful information regarding the level of our indebtedness by reflecting the amount of indebtedness assuming cash and investments were used to repay debt. The most directly comparable GAAP financial measure, total debt, and the information reconciling the GAAP and the non-GAAP measures are included in the press release. -1-
The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, nor will it be incorporated by reference into any registration statement filed by Transocean Inc. under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. The furnishing of the information in this report is not intended to, and does not, constitute a determination or admission by Transocean Inc. that the information in this report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of Transocean Inc. -2-
ITEM 9.01 Financial Statements and Exhibits (c) Exhibits. The following exhibit is furnished pursuant to Item 2.02: Exhibit Number Description 99.1 Transocean Inc. Press Release Reporting Fourth Quarter and Full Year 2004 Financial Results. -3-
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. TRANSOCEAN INC. Date: February 15, 2005 By: /s/ William E. Turcotte ----------------------------------- William E. Turcotte Associate General Counsel -4-
INDEX TO EXHIBITS The following exhibit is furnished pursuant to Item 2.02: Exhibit Number Description 99.1 Transocean Inc. Press Release Reporting Fourth Quarter and Full Year 2004 Financial Results. -5-
Exhibit 99.1 (TRANSOCEAN LOGO) TRANSOCEAN INC. Post Office Box 2765 Houston TX 77252 2765 ANALYST CONTACT: Jeffrey L. Chastain NEWS RELEASE 713 232 7551 FOR RELEASE: February 15, 2005 MEDIA CONTACT: Guy A. Cantwell 713 232 7647 TRANSOCEAN INC. REPORTS FOURTH QUARTER AND FULL-YEAR 2004 RESULTS HOUSTON--Transocean Inc. (NYSE: RIG) today reported a net loss for the three months ended December 31, 2004 of $73.4 million, or $0.23 per diluted share, on revenues of $676.9 million. The results compare to net income of $5.5 million, or $0.02 per diluted share, on revenues of $591.5 million, for the corresponding three months in 2003. Net income adjusted(1) for the gain from the December 2004 TODCO secondary offering, the non-cash charge from the deconsolidation of TODCO relating to the tax sharing agreement between Transocean and TODCO, and losses on early retirements of debt was $2.1 million, or $0.01 per diluted share. This result compares to net income(1) of $22.9 million, or $0.07 per diluted share for the three months ended December 31, 2003, after adjusting for the effect of the restructuring of certain benefit plans in Nigeria. For the 12 months ended December 31, 2004, net income totaled $152.2 million, or $0.47 per diluted share, on revenues of $2,613.9 million, compared to net income of $19.2 million or $0.06 per diluted share, on revenues of $2,434.3 million for the 12 months ended December 31, 2003. Net income adjusted(1) for the gains from the TODCO offerings, a gain on the sale of the semisubmersible rig Sedco 602, the non-cash charge from the deconsolidation of TODCO relating to the tax sharing agreement between Transocean and TODCO, losses on early retirements of debt and TODCO initial public offering (IPO)-related costs was $103.4 million, or $0.32 per diluted share for the 12 months ended December 31, 2004. For the 12 months ended December 31, 2003, net income adjusted(1) for the restructuring of certain benefit plans in Nigeria, non-cash charges for impairment of certain assets, losses on early retirements of debt, costs related to the planned IPO of TODCO and a favorable resolution of a non-U.S. income tax liability, was $71.0 million, or $0.22 per diluted share. Robert L. Long, President and Chief Executive Officer of Transocean Inc., stated, "The fourth quarter of 2004 was a challenging time as we concentrated our efforts on completing repairs on the jackup rig Trident 20 and semisubmersible rig Jim Cunningham, commenced reactivation efforts on four semisubmersible rigs that had been idle for extended periods and completed the mobilization of three High-Specification Floaters and three Jackup Rigs between market sectors. At the same time, we had success with our fleet marketing efforts as we finalized negotiations leading to term contracts on three Fifth-Generation rigs at dayrates ranging from $190,000 to $240,000.
The successful efforts have continued into 2005 as evidenced by the recent contracts for the drillship Discoverer Spirit and semisubmersible rig Deepwater Nautilus at dayrates of $270,000 and $220,000, respectively, that are expected to commence by the end of September 2005. In our fleet of Other Floaters, we obtained contracts on four previously stacked rigs and have subsequently secured additional contracts on two of these units at improved dayrates that exceed $100,000. In addition, our Jackup Rig fleet, which operates internationally, is experiencing a continued rise in dayrates with contracts on two rigs signed during late 2004 above $70,000, an improvement from dayrates of $55,000 to $60,000 seen earlier in the year." In closing, Mr. Long stated, "We begin 2005 with an improving outlook for all segments of our fleet, especially among our 13 Fifth-Generation rigs, where capacity constraints are evident for the next 12 to 24 months. As a result, the prospect for improving utilization and dayrates among our fleet of drillships, semisubmersibles and jackups is excellent. However, our industry will experience higher costs in 2005 relative to levels seen in the recent past, due in part to higher personnel costs required to support the increased level of offshore drilling activity." TODCO Deconsolidation - In December 2004, Transocean Inc. completed a public offering of TODCO common stock, bringing the company's ownership interest in TODCO, comprised entirely of Class A common stock, to approximately 22% of total TODCO shares outstanding. Transocean received $258.0 million in net proceeds from this offering and recognized a gain of $140.0 million. In conjunction with the offering, Transocean converted its remaining shares of Class B common stock, which had five votes per share, into shares of Class A common stock, which have one vote per share, reducing its voting interest in TODCO to a level proportionate to its ownership interest. As a result, Transocean deconsolidated TODCO from its financial statements effective December 17, 2004 and will account for its remaining investment under the equity method of accounting. Due to the deconsolidation of TODCO, the company recorded a non-cash charge of $167.1 million related to contingent amounts due from TODCO under the tax sharing agreement between Transocean and TODCO. As TODCO generates income and utilizes its pre-IPO tax assets, TODCO is required to pay Transocean for the benefit received in accordance with the provisions of the tax sharing agreement. Transocean will recognize those amounts as other income. Transocean Drilling Segment - Revenues for the three months ended December 31, 2004 improved 6% to $591.0 million, compared to revenues of $558.7 million during the three months ended September 30, 2004. The revenue improvement was due principally to higher average dayrates and activity. The effects of the higher average dayrates and activity were partially offset by idle time on the drillship Deepwater Millennium, as the unit transitioned between contracts in the Gulf of Mexico, mobilizations of the drillship Deepwater Pathfinder to Nigeria and the semisubmersible rig Transocean Rather to the North Sea, and the warm stacking of the semisubmersible rig M.G. Hulme, Jr. in Nigeria.
Operating income before general and administrative expenses(2) was $73.9 million and field operating income(2) (defined as revenues less operating and maintenance expense) was $177.7 million for the three months ended December 31, 2004. These amounts compared to operating income before general and administrative expenses and field operating income of $88.7 million and $198.2 million, respectively, for the three months ended September 30, 2004. The fourth quarter 2004 results were negatively impacted by a 15% increase in operating and maintenance expenses, to $413.3 million, compared to third quarter 2004 levels. The increase was due primarily to an estimated $20 million related to increased offshore activity, approximately $9 million of higher costs to complete repairs on two previously damaged rigs, the jackup rig Trident 20 and semisubmersible rig Jim Cunningham, as well as costs totaling approximately $14 million for a periodic survey on the semisubmersible rig Polar Pioneer and maintenance to the jackup rig J.T. Angel prior to commencing new term contracts. Repair and maintenance programs performed on the Trident 20, Polar Pioneer and J.T. Angel were completed during the fourth quarter of 2004 and each rig has returned to service. Repairs to the Jim Cunningham were completed in February 2005 and the rig has recommenced a drilling program in the eastern Mediterranean. Operating and maintenance expenses in the fourth quarter of 2004 were further increased by the impact of a weakening dollar and higher personnel costs. Fleet utilization averaged 69% during the three months ended December 31, 2004, including 80% average utilization for the company's 32 High-Specification Floaters, compared to average utilization of 67% and 81%, respectively, during the preceding quarter in 2004. The segment's average dayrate improved to $93,900 during the fourth quarter of 2004 compared to $91,100 in the preceding quarter of 2004, with the average dayrate for the High-Specification Floaters improving to $149,000 during the fourth quarter of 2004 from $142,200 during the preceding quarter of the year. TODCO Segment - Revenues from October 1, 2004 to December 17, 2004, the deconsolidation date, were $85.9 million, while operating income before general and administrative expenses (2) was $5.0 million and field operating income(2) was $24.4 million. Effective Tax Rate - The company's effective tax rate(3) for the 12 months ended December 31, 2004 was 49.7%, based on adjusted income before taxes as previously mentioned. Included in the company's income tax expense are additional taxes related to a valuation allowance, which resulted from the TODCO IPO, partially offset by other adjustments to tax liabilities. The company's effective tax rate fluctuates in part because many of the jurisdictions in which the company operates have revenue-based tax regimes. This volatility is particularly evident when earnings are low. Similarly, the company expects the rate to decrease significantly as earnings improve. Liquidity - Cash flow from operations totaled $598.5 million for the 12 months ended December 31, 2004. During this period, Transocean recognized losses of $76.5 million in conjunction with the early retirements of debt with an aggregate principal amount of $774.8 million. The company funded the retirements primarily with cash from operations and cash received from the TODCO offerings. Net debt(4) declined 36% over the 12 months of 2004 to $2,030.2 million from $3,184.1 million at December 31, 2003.
Conference Call Information Transocean will conduct a teleconference call at 10:00 a.m. ET on February 15. To participate, dial 303-262-2075 approximately five to 10 minutes prior to the scheduled start time of the call. In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto the company's website at www.deepwater.com and selecting "Investor Relations." It may also be accessed via the Internet at www.CompanyBoardroom.com by typing in the company's New York Stock Exchange trading symbol, "RIG." A telephonic replay of the conference call should be available after 1:00 p.m. ET on February 15 and can be accessed by dialing 303-590-3000 and referring to the passcode 11021711. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Monthly Fleet Update Information Drilling rig status and contract information on Transocean Inc.'s offshore drilling fleet has been condensed into a report titled "Monthly Fleet Update," which is available through the company's website at www.deepwater.com. The report is located in the "Investor Relations/Financial Reports" section of the website. By subscribing to the Transocean Financial Report Alert, you will be immediately notified when new postings are made to this page by an automated e-mail that will provide a link directly to the page that has been updated. Shareholders and other interested parties are invited to sign up for this service. Forward-Looking Disclaimer Statements regarding realization of amounts due under the tax sharing agreement with TODCO, opportunities and outlook for the company, including the company's Transocean Drilling business segment, dayrates, utilization, rig capacity constraints, contract commencement dates, 2005 cost levels, the effective tax rate, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to operating hazards and delays, risks associated with international operations, effect of strike and other labor relations issues, effect of fire, future financial results, actions by customers and other third parties, the future price of oil and gas and other factors detailed in the company's most recent Form 10-K and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.
Transocean Inc. is the world's largest offshore drilling contractor with a fleet of 93 mobile offshore drilling units. The company's mobile offshore drilling fleet, consisting of a large number of high-specification deepwater and harsh environment drilling units, is considered one of the most modern and versatile in the world due to its emphasis on technically demanding sectors of the offshore drilling business. The company's fleet consists of 32 High-Specification Floaters (semisubmersibles and drillships), 24 Other Floaters, 26 Jackup Rigs and other assets utilized in the support of offshore drilling activities worldwide. With a current equity market capitalization in excess of $14 billion, Transocean Inc.'s ordinary shares are traded on the New York Stock Exchange under the symbol "RIG." (1) Net income adjusted for certain items, a non-GAAP measure, is computed by subtracting from or adding to net income, a GAAP measure, items that occurred during the periods reported and are considered by management to be outside the normal course of operations. A reconciliation for the periods reported may be found in the accompanying schedule titled Non-GAAP Financial Measures and Reconciliations - Adjusted Net Income (Loss) and Diluted Earnings (Loss) Per Share. (2) For a reconciliation of segment operating income before general and administrative expense to field operating income, see the accompanying schedule titled Non-GAAP Financial Measures and Reconciliations - Operating Income (Loss) Before General and Administrative Expense to Field Operating Income (Loss) by Segment. (3) For the analysis of the effective tax rate, see the accompanying schedule titled Effective Tax Rate Analysis. (4) Net Debt is a non-GAAP measure defined as total debt less cash and cash equivalents. ### 05-___
TRANSOCEAN INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data)
TRANSOCEAN INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except share data)
TRANSOCEAN INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
Transocean Inc. Fleet Operating Statistics
(TRANSOCEAN LOGO) TRANSOCEAN INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS ADJUSTED NET INCOME (LOSS) AND DILUTED EARNINGS (LOSS) PER SHARE (IN US$ MILLIONS)
(TRANSOCEAN LOGO) TRANSOCEAN INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS OPERATING INCOME (LOSS) BEFORE GENERAL AND ADMINISTRATIVE EXPENSE TO FIELD OPERATING INCOME (LOSS) BY SEGMENT (IN US$ MILLIONS)
(TRANSOCEAN LOGO) TRANSOCEAN INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS TOTAL DEBT TO NET DEBT RECONCILIATIONS (IN US$ MILLIONS)
(TRANSOCEAN LOGO) TRANSOCEAN INC. AND SUBSIDIARIES EFFECTIVE TAX RATE ANALYSIS (IN US$ MILLIONS)