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): October 26, 2004
TRANSOCEAN INC.
(Exact name of registrant as specified in its charter)
CAYMAN ISLANDS 333-75899 66-0587307
(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 October 26, 2004, concerning third quarter 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 September
2004 TODCO secondary offering, on a total and per share basis for the quarter
ended September 30, 2004. We also discuss net income adjusted for the September
2004 TODCO secondary offering and the TODCO initial public offering (IPO), the
sale of the semisubmersible SEDCO 602, early retirement of debt and TODCO
IPO-related costs, on a total and per share basis for the nine months ended
September 30, 2004. In addition, we discuss net income, after adjusting for
TODCO IPO-related costs, on a total and per share basis for the quarter ended
September 30, 2003. We also discuss net income, adjusted for asset impairment
charges, early retirement of debt, TODCO IPO-related charges and the favorable
resolution of an existing tax liability, on a total and per share basis for the
nine months ended September 30, 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 June 30, 2004 and September
30, 2004. We also discuss field operating income for our TODCO business segment
for the quarter ended September 30, 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 September 30, 2004 and at
December 31, 2003. 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.
The information furnished pursuant to this Item 12, 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
- 1 -
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 Third Quarter
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: October 26, 2004 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 Third Quarter
2004 Financial Results.
- 5 -
-------------------------
TRANSOCEAN INC.
[LOGO OMITTED] Post Office Box 2765
TRANSOCEAN Houston TX 77252 2765
- --------------------------------------------------------------------------------
ANALYST CONTACT: Jeffrey L. Chastain NEWS RELEASE
713 232 7551
MEDIA CONTACT: Guy A. Cantwell FOR RELEASE: October 26, 2004
713 232 7647
TRANSOCEAN INC. REPORTS
THIRD QUARTER 2004 RESULTS
HOUSTON--Transocean Inc. (NYSE: RIG) today reported net income for the
three months ended September 30, 2004 of $154.9 million, or $0.48 per diluted
share, on revenues of $651.8 million. The results compare to net income of $11.0
million, or $0.03 per diluted share, on revenues of $622.9 million, for the
corresponding three months in 2003. Net income adjusted (1) for the September
2004 TODCO secondary offering was $25.5 million, or $0.08 per diluted share, for
the three months ended September 30, 2004. This result compares to net income
of $19.0 million, or $0.06 per diluted share, for the corresponding three months
in 2003, after adjusting for initial public offering (IPO)-related costs
associated with TODCO.
For the nine months ended September 30, 2004, net income totaled $225.6
million, or $0.70 per diluted share, on revenues of $1,937.0 million, compared
to net income of $13.7 million, or $0.04 per diluted share, on revenues of
$1,842.8 million during the corresponding nine months in 2003. Net income
adjusted (1) for the TODCO offerings, the sale of semisubmersible rig Sedco 602,
early retirement of debt and TODCO IPO-related costs was $101.4 million, or
$0.31 per diluted share, for the nine months ended September 30, 2004. For the
nine months ended September 30, 2003, net income adjusted (1) for asset
impairment charges, early retirement of debt, TODCO IPO-related charges and a
favorable resolution of a non-U.S. income tax liability was $47.5 million, or
$0.15 per diluted share.
Transocean Drilling Segment - Revenues for the three months ended September
30, 2004 were $558.7 million, compared to revenues of $552.5 million during the
three months ended June 30, 2004. The slight improvement was due chiefly to
improved performance of the company's High-Specification Floaters
(semisubmersibles and drillships), as both average utilization and dayrates
increased from the preceding three months, partially offset by the Trident 20
incident, which reduced revenues in the quarter by approximately $8 million.
Revenues would have been an estimated $13 million higher, absent the Norwegian
labor strike, which affected three rigs in the company's fleet. The Transocean
Arctic, which returned to work in Norway on August 30 following 30 months of
being idle, contributed to the improved utilization while higher average
dayrates were driven in part by contract signings on the deepwater
semisubmersible rig Cajun Express and drillships Deepwater Pathfinder and
Deepwater Millennium. Operating income before general and administrative
expenses, (2) including the gain on the TODCO secondary offering, was $218.1
million and field operating income (defined as revenue less operating and
maintenance expenses) was $198.2 million for the three months ended September
30, 2004. The figures compared to operating income before general and
administrative expense and field operating income of $127.2 million and $214.4
million, respectively, for the three months ended June 30, 2004. Operating and
maintenance costs during the third quarter of 2004 increased 6.6% from levels in
the preceding quarter due primarily to increased activity from semisubmersibles
Transocean Arctic, Sedco 600 and Sovereign Explorer, as well as costs of
approximately $7.0 million associated with repairs to the jackup rig Trident 20.
Utilization of the segment's 94-rig fleet for the three months ended September
30, 2004 was 67%, including 81% utilization among the High-Specification
Floaters fleet compared to utilization of 68% for the segment and 79% for the
High-Specification Floaters for the preceding three months in 2004. Average
dayrates for the segment's 94-rig fleet improved to $90,700, including an
average dayrate of $142,200 for the High-Specification Floaters for the three
months ended September 30, 2004 compared to average dayrates of $89,100 and
$141,100, respectively, for the preceding three months in 2004.
Customer demand for offshore drilling units continues to improve in several
offshore drilling regions, providing contract opportunities generally of longer
durations and increasing dayrates, a trend the company believes should continue
into 2005. This trend is most pronounced in the company's High-Specification
Floaters fleet, as customers address their 2005 deepwater exploration and
development drilling requirements with what the company believes is a preference
toward the enhanced efficiency of Fifth-Generation units. In August, the company
signed the deepwater semisubmersible rig Sedco Express to a three year contract
in Angola and has recently received a contract for the drillship Deepwater
Millennium for six months plus three, six-month options. Also, the drillship
Deepwater Pathfinder will mobilize from the U.S. Gulf of Mexico to Nigeria for
an anticipated multi-well, term project to commence during the fourth quarter of
2004. One of the company's Other Deepwater units, the semisubmersible rig
Transocean Rather, is currently en route to the North Sea from West Africa to
commence an expected drilling project during early-2005 in the North Atlantic.
Although the current outlook for the industry's 24 Fifth-Generation Floaters is
excellent, with the possibility of demand for these units exceeding supply
during 2005, certain Transocean Fifth-Generation rigs are at risk of limited
periods of downtime in the near-term, as they transition between contracts.
Presently, the drillship Deepwater Millennium is idle in the U.S. Gulf of Mexico
following completion of a contract. The rig is expected to commence its new
contract on December 1, 2004.
The company's Other Floaters fleet has experienced significant
under-utilization during 2004; however, improved business conditions are evident
in certain regions like the U.K. sector of the North Sea and U.S. Gulf of
Mexico. The company has recently received two contracts and a contract extension
on three of its semisubmersibles in the U.K. sector of the North Sea and, as a
result of increased customer demand, is in the process of reactivating two
previously stacked semisubmersibles for drilling programs that are expected to
commence during the first quarter of 2005. The two contract signings, on the
semisubmersible rigs Sedco 704 and Transocean John Shaw, are at dayrates of
$91,000 and $85,000, respectively, which are evidence of the improving drilling
environment. The company is also reviewing opportunities to reactivate one or
two of its idle semisubmersibles in the U.S. Gulf of Mexico.
Customer demand for international jackup rigs remains steady, especially in
the Far East and Middle East regions, with utilization and dayrates expected to
remain firm to modestly higher through 2005. The company has completed the
previously announced mobilizations of jackup rigs Trident VI and J.T. Angel to
India and Indonesia, respectively, with both units expected to commence new
contracts during the fourth quarter of 2004. Mobilization of the jackup rig
Shelf Explorer to Indonesia is in progress, with the rig expected to commence a
new contract by late-fourth quarter 2004.
The company remains exposed to certain events during the fourth quarter of
2004 which could reduce profitability over the final three months of the year.
These events include the Norwegian labor strike, which has entered its 16th
week, affecting the semisubmersible rigs Transocean Leader, Transocean Searcher
and Polar Pioneer, and ongoing repairs to the semisubmersible rig Jim Cunningham
and jackup rig Trident 20 following operational incidents. The two rigs are
expected to be out of service for the majority of the quarter with repair, crew
and other costs in the quarter estimated to be in a range of $20 million to $25
million. Also, downtime will be incurred on the drillship Deepwater Pathfinder
and semisubmersible rig Transocean Rather as the units mobilize to Nigeria and
the North Sea, respectively. Finally, the drillship Deepwater Millennium could
be idle for approximately 45 days as it transitions between contracts.
Effective Tax Rate (3) - Tax expense for the third quarter of 2004 totaled
$6.3 million or 3.9% of pretax income for the quarter. The company's estimated
effective tax rate for the fourth quarter and full year is expected to be
approximately 44%. This rate includes nearly 7 percentage points associated with
an increase in the valuation allowance established at the time of the TODCO IPO.
The estimated effective tax rate is subject to change and could vary
significantly from current expectations.
TODCO Segment - Revenues for the three months ended September 30, 2004 were
$93.1 million. The segment reported an operating loss before general and
administrative expenses (2) of $2.4 million and field operating income (2) of
$20.7 million for the three months ended September 30, 2004.
Liquidity - Cash flow from operations totaled $506.6 million for the nine
months ended September 30, 2004. Total debt at September 30, 2004 was $3,061.4
million. Net debt (4) was $2,285.6 million at September 30, 2004, down 28% from
$3,184.1 million at December 31, 2003. On October 25, 2004, the company
completed the redemption of its $342.3 million face value, 6.75% Senior Notes
due April 2005. A loss on redemption of $3.3 million will be recognized in the
fourth quarter of 2004.
Conference Call Information
-----------------------------
Transocean will conduct a teleconference call at 10:00 a.m. ET on October
26, 2004. 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 October 26 and can be accessed by dialing 303-590-3000 and referring
to the passcode 11011131. Also, a replay will be available through the Internet
and can be accessed by visiting either of the above-referenced Worldwide Web
addresses.
TODCO, a publicly traded company in which Transocean owns a majority voting
interest, will also conduct a teleconference call at 9:00 a.m. ET on October 26,
2004. To participate, dial 800-967-7141 approximately five to 10 minutes prior
to the scheduled start time of the call. TODCO's conference call will be
simultaneously broadcast over the Internet in a listen-only mode and can be
accessed by logging onto the TODCO website at
www.theoffshoredrillingcompany.com. For more information, see TODCO's website.
- ----------------------------------
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 future opportunities and outlook for the company,
including the company's Transocean Drilling business segment, dayrates, contract
duration, rig utilization, commencement dates, downtime, business conditions,
reactivation of rigs, drilling activity, contract opportunities, revenues,
profitability, the duration and financial impact of a labor strike in Norway,
rig mobilizations, the Jim Cunningham and Trident 20 repair time, costs and
contract status, 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 94 mobile offshore drilling units, excluding the 70-rig fleet of TODCO,
a publicly traded drilling company in which Transocean Inc. has a majority
voting interest. 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 segments of the offshore drilling
business. The company's fleet consists of 32 High-Specification Floaters
(semisubmersibles and drillships), 25 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 $11 billion, Transocean
Inc.'s ordinary shares are traded on the New York Stock Exchange under the
symbol "RIG."
### 04-42
(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 three and nine months ended September 30, 2004 and 2003 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 and Diluted Earnings 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. A reconciliation for the periods reported may be found in the
accompanying schedule titled Non-GAAP Financial Measures and Reconciliations -
Total Debt to Net Debt Reconciliations.
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Operating Revenues
Contract drilling revenues $ 607.1 $ 597.0 $ 1,789.5 $ 1,759.2
Other revenues 44.7 25.9 147.5 83.6
651.8 622.9 1,937.0 1,842.8
Costs and Expenses
Operating and maintenance 432.9 403.0 1,251.5 1,203.6
Depreciation 133.9 126.8 398.4 381.1
General and administrative 15.2 21.2 44.3 50.0
Impairment loss on long-lived assets - - - 16.8
Gain from sale of assets, net (1.3) (0.9) (28.9) (2.9)
Gain from TODCO offerings (129.4) (168.8) -
451.3 550.1 1,496.5 1,648.6
Operating Income 200.5 72.8 440.5 194.2
Other Income (Expense), net
Equity in earnings of joint ventures 1.7 1.9 7.7 7.3
Interest income 2.5 3.0 6.5 15.7
Interest expense (42.6) (49.0) (132.6) (154.4)
Loss on retirement of debt - - (28.1) (15.7)
Impairment loss on note receivable from related party - - - (21.3)
Other, net 0.1 (0.2) 0.4 (3.5)
(38.3) (44.3) (146.1) (171.9)
Income Before Income Taxes and Minority Interest 162.2 28.5 294.4 22.3
Income Tax Expense 6.3 17.3 74.2 8.3
Minority Interest 1.0 0.2 (5.4) 0.3
Net Income $ 154.9 $ 11.0 $ 225.6 $ 13.7
Earnings Per Share
Basic and Diluted $ 0.48 $ 0.03 $ 0.70 $ 0.04
Weighted Average Shares Outstanding
Basic 320.9 319.9 320.7 319.8
Diluted 325.3 321.1 324.5 321.4
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
September 30, December 31,
--------------- --------------
2004 2003
--------------- --------------
(Unaudited)
ASSETS
Cash and Cash Equivalents $ 775.8 $ 474.0
Accounts Receivable, net
Trade 483.9 435.3
Other 19.7 45.0
Materials and Supplies, net 150.1 152.0
Deferred Income Taxes 35.6 41.0
Other Current Assets 41.7 31.6
Total Current Assets 1,506.8 1,178.9
Property and Equipment 10,672.3 10,673.0
Less Accumulated Depreciation 2,988.9 2,663.4
Property and Equipment, net 7,683.4 8,009.6
Goodwill 2,257.1 2,230.8
Investments in and Advances to Joint Ventures 4.1 5.5
Deferred Income Taxes, net 30.0 28.2
Other Assets 222.6 209.6
Total Assets $ 11,704.0 $ 11,662.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $ 180.2 $ 146.1
Accrued Income Taxes 48.3 57.2
Debt Due Within One Year 386.7 45.8
Other Current Liabilities 295.8 262.0
Total Current Liabilities 911.0 511.1
Long-Term Debt 2,674.7 3,612.3
Deferred Income Taxes 85.5 42.8
Other Long-Term Liabilities 320.5 299.4
Total Long-Term Liabilities 3,080.7 3,954.5
Commitments and Contingencies
Minority Interest 263.7 4.4
Preference Shares, $0.10 par value; 50,000,000 shares authorized,
none issued and outstanding - -
Ordinary Shares, $0.01 par value; 800,000,000 shares authorized,
321,071,783 and 319,926,500 shares issued and outstanding at
September 30, 2004 and December 31, 2003, respectively 3.2 3.2
Additional Paid-in Capital 10,673.9 10,643.8
Accumulated Other Comprehensive Loss (19.9) (20.2)
Retained Deficit (3,208.6) (3,434.2)
Total Shareholders' Equity 7,448.6 7,192.6
Total Liabilities and Shareholders' Equity $ 11,704.0 $ 11,662.6
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
2004 2003 2004 2003
----------- ----------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 154.9 $ 11.0 $ 225.6 $ 13.7
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 133.9 126.8 398.4 381.1
Stock-based compensation expense 4.2 1.4 17.7 4.3
Deferred income taxes (7.6) 19.1 20.4 (40.4)
Equity in earnings of joint ventures (1.7) (1.9) (7.7) (7.3)
Net (gain)/loss from disposal of assets 1.4 4.4 (23.6) 12.2
Gain from TODCO offerings (129.4) - (168.8) -
Loss on retirement of debt - - 28.1 15.7
Impairment loss on long-lived assets - - - 16.8
Impairment loss on note receivable from related party - - - 21.3
Amortization of debt-related discounts/premiums, fair
value adjustments and issue costs, net (5.1) (8.2) (17.6) (16.1)
Deferred income, net 1.0 (5.3) 15.1 (6.9)
Deferred expenses, net (5.8) (5.1) (18.5) (2.4)
Other long-term liabilities (1.5) 0.2 5.4 13.7
Other, net 3.7 6.7 (0.6) 11.8
Changes in operating assets and liabilities
Accounts receivable 8.6 (44.0) (23.2) 7.6
Accounts payable and other current liabilities 61.0 48.2 61.1 46.6
Income taxes receivable/payable, net 3.4 (8.0) 5.4 1.6
Other current assets 5.0 14.3 (10.6) (9.0)
Net Cash Provided by Operating Activities 226.0 159.6 506.6 464.3
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (45.1) (22.4) (99.8) (72.6)
Note issued to related party, net of repayments - 1.1 - (44.2)
Proceeds from disposal of assets, net 4.3 0.9 46.3 4.1
Deepwater Drilling II L.L.C.'s cash acquired, net of cash - - - 18.1
paid
Proceeds from TODCO offerings 269.9 - 425.6 -
Joint ventures and other investments, net 4.3 0.5 9.0 2.7
Net Cash Provided by (Used in) Investing Activities 233.4 (19.9) 381.1 (91.9)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on revolving credit agreements - - (200.0) -
Repayments on other debt instruments (11.8) (48.0) (407.0) (967.2)
Cash from termination of interest rate swaps - - - 173.5
Net proceeds from issuance of ordinary shares under
stock-based compensation plans 5.0 0.6 20.0 12.3
Other, net 1.1 - 1.1 1.1
Net Cash Used in Financing Activities (5.7) (47.4) (585.9) (780.3)
Net Increase (Decrease) in Cash and Cash Equivalents 453.7 92.3 301.8 (407.9)
Cash and Cash Equivalents at Beginning of Period 322.1 714.0 474.0 1,214.2
Cash and Cash Equivalents at End of Period $ 775.8 $ 806.3 $ 775.8 $ 806.3
Transocean Inc.
Fleet Operating Statistics
Operating Revenues ($Millions) (1)
------------------------------------------------------------------
Nine Months Ended
Three Months Ended September 30,
----------------------------------------- -----------------------
September 30, June 30, September 30,
TRANSOCEAN DRILLING SEGMENT: 2004 2004 2003 2004 2003
-------------- --------- -------------- ---------- -----------
Contract Drilling Revenues
High-Specification Floaters:
Fifth-Generation Deepwater Floaters $ 192.8 $ 189.0 $ 188.7 $ 590.3 $ 532.9
Other Deepwater Floaters $ 112.5 $ 103.3 $ 113.2 $ 323.9 $ 335.4
Other High-Specification Floaters $ 34.2 $ 31.5 $ 32.1 $ 96.3 $ 96.6
Total High-Specification Floaters $ 339.5 $ 323.8 $ 334.0 $ 1,010.5 $ 964.9
Other Floaters $ 67.0 $ 66.3 $ 74.3 $ 196.0 $ 238.8
Jackups $ 101.4 $ 106.6 $ 110.4 $ 309.5 $ 342.3
Other Rigs $ 20.1 $ 19.9 $ 24.2 $ 64.1 $ 59.5
Subtotal $ 528.0 $ 516.6 $ 542.9 $ 1,580.1 $ 1,605.5
Other Revenues
Client Reimbursable Revenues $ 17.6 $ 21.4 $ 20.0 $ 55.6 $ 64.6
Integrated Services and Other $ 13.1 $ 14.5 $ 1.5 $ 53.7 $ 5.5
Subtotal $ 30.7 $ 35.9 $ 21.5 $ 109.3 $ 70.1
Segment Total $ 558.7 $ 552.5 $ 564.4 $ 1,689.4 $ 1,675.6
TODCO SEGMENT
Contract Drilling Revenues $ 79.1 $ 68.3 $ 54.1 $ 209.4 $ 153.7
Other Revenues
Client Reimbursable Revenues $ 5.6 $ 5.6 $ 4.4 $ 16.2 $ 13.5
Delta Towing and Other $ 8.4 $ 6.8 $ - $ 22.0 $ -
Subtotal $ 14.0 $ 12.4 $ 4.4 $ 38.2 $ 13.5
Segment Total $ 93.1 $ 80.7 $ 58.5 $ 247.6 $ 167.2
Total Company $ 651.8 $ 633.2 $ 622.9 $ 1,937.0 $ 1,842.8
Average Dayrates (1) (2)
------------------------------------------------------------------
Nine Months Ended
Three Months Ended September 30,
----------------------------------------- -----------------------
September 30, June 30, September 30,
TRANSOCEAN DRILLING SEGMENT: 2004 2004 2003 2004 2003
-------------- --------- -------------- ---------- -----------
High-Specification Floaters:
Fifth-Generation Deepwater Floaters $ 193,400 $ 177,800 $ 176,600 $ 187,600 $ 181,600
Other Deepwater Floaters $ 103,900 $ 107,800 $ 112,500 $ 104,200 $ 112,600
Other High-Specification Floaters $ 111,200 $ 115,500 $ 117,200 $ 113,800 $ 118,300
Total High-Specification Floaters $ 142,200 $ 141,100 $ 142,200 $ 142,300 $ 143,400
Other Floaters $ 65,400 $ 65,000 $ 60,600 $ 64,400 $ 64,100
Jackups $ 52,500 $ 52,700 $ 54,400 $ 52,200 $ 56,200
Other Rigs $ 41,900 $ 43,300 $ 48,800 $ 43,200 $ 44,700
Segment Total $ 90,700 $ 89,100 $ 89,000 $ 90,000 $ 89,800
TODCO SEGMENT $ 27,800 $ 26,200 $ 19,300 $ 26,600 $ 18,400
Total Drilling Fleet $ 70,100 $ 69,600 $ 67,000 $ 70,400 $ 67,100
Utilization (1) (2)
------------------------------------------------------------------
Nine Months Ended
Three Months Ended September 30,
----------------------------------------- -----------------------
September 30, June 30, September 30,
TRANSOCEAN DRILLING SEGMENT: 2004 2004 2003 2004 2003
-------------- --------- -------------- ---------- -----------
High-Specification Floaters:
Fifth-Generation Deepwater Floaters 83% 90% 97% 88% 94%
Other Deepwater Floaters 78% 70% 73% 76% 73%
Other High-Specification Floaters 84% 75% 74% 77% 75%
Total High-Specification Floaters 81% 79% 82% 81% 81%
Other Floaters 45% 45% 51% 44% 51%
Jackups 81% 85% 85% 83% 86%
Other Rigs 47% 46% 49% 49% 42%
Segment Total 67% 68% 71% 68% 69%
TODCO SEGMENT 44% 41% 44% 41% 41%
Total Drilling Fleet 57 % 56% 59% 56% 57%
(1) Certain reclassifications have been made to prior periods to conform
to current quarter presentation.
(2) Average dayrates are defined as contract drilling revenue earned per
revenue earning day in the period and utilization is defined as the
total actual number of revenue earning days in the period as a
percentage of the total number of calendar days in the period.
[LOGO OMITTED]
TRANSOCEAN
TRANSOCEAN INC. AND SUBSIDIARIES
EFFECTIVE TAX RATE ANALYSIS
(IN US$ MILLIONS)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------------ ----------------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2004 2003 2004 2003
-------------- --------------- -------------- --------------- -----------
Income before Income
Taxes and Minority Interest $ 162.2 $ 65.7 $ 28.5 $ 294.4 $ 22.3
Add back (subtract):
TODCO IPO date stock option vesting - - - 5.6 -
Transocean IPO date stock option vesting - - - 1.5 -
Nigeria benefit plan restructuring - - (2.0) - 0.6
Impairment loss on note
receivable from related party - - - - 21.3
Impairment loss on long-lived assets - - - - 16.8
Loss on retirement of debt - - - 28.1 15.7
IPO-related costs - - 8.0 - 8.0
Gain on sale of Sedco 602 - (21.6) - (21.6) -
Gain on TODCO offerings (129.4) - - (168.8) -
-------------- --------------- -------------- --------------- -----------
ADJUSTED INCOME BEFORE INCOME
TAXES AND MINORITY INTEREST $ 32.8 $ 44.1 $ 34.5 $ 139.2 $ 84.7
Income Tax Expense $ 6.3 $ 19.9 $ 17.3 $ 74.2 $ 8.3
Add back (subtract):
Valuation allowance related
to TODCO offerings 13.7 - - (17.3) -
Other (0.9) - - (0.9) -
Changes in estimates of prior years taxes 5.5 (1) - - 5.5 14.6
Nigeria benefit plan restructuring - - 0.1 - -
Impairment loss on note
receivable from related party - - - - 7.5
Impairment loss on long-lived assets - - - - 4.0
Loss on retirement of debt - - - - 1.9
-------------- --------------- -------------- --------------- -----------
ADJUSTED INCOME TAX EXPENSE $ 24.6 (2) $ 19.9 (2) $ 17.4 (2) $ 61.5 $ 36.3
EFFECTIVE TAX RATE 3.9% 30.3% 60.7% 25.2% 37.2%
EFFECTIVE TAX RATE ADJUSTED 75.1% 45.1% 50.4% 44.2% (3) 42.8%
(1) Our estimates of prior year taxes change as we file tax returns, settle
disputes with tax authorities or become aware of other events.
(2) The three months ended September 30, 2004, June 30, 2004 and September 30,
2003 include $10.1 million, $4.6 million and $2.6 million, respectively, of
additional tax expense reflecting the catch-up effect of the increase in
the annual effective tax rate.
(3) Includes 6.9 percentage points associated with an increase in the valuation
allowance established at the time of the TODCO IPO
[LOGO OMITTED]
TRANSOCEAN
TRANSOCEAN INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
ADJUSTED NET INCOME AND DILUTED EARNINGS PER SHARE
(IN US$ MILLIONS)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------------- -----------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2004 2003 2004 2003
--------------- ---------- -------------- ---------- -----------
ADJUSTED NET INCOME
Net income as reported $ 154.9 $ 48.0 $ 11.0 $ 225.6 $ 13.7
Add back (subtract):
After-tax gain from sale of Sedco 602 - (21.6) - (21.6) -
After-tax gain from TODCO Offerings (129.4) - - (168.8) -
Tax valuation allowance related to TODCO IPO - - - 31.0 -
After-tax loss on retirement of debt - - - 28.1 13.8
Stock option vesting resulting from the TODCO IPO - - - 7.1 -
After-tax IPO costs - - 8.0 - 8.0
After-tax impairment loss on long-lived assets - - - - 12.8
After-tax impairment loss on
note receivable from related party - - - - 13.8
Favorable resolution of a non-U.S. income tax liability - - - - (14.6)
--------------- ---------- -------------- ---------- -----------
Net income as adjusted $ 25.5 $ 26.4 $ 19.0 $ 101.4 $ 47.5
--------------- ---------- -------------- ---------- -----------
DILUTED EARNINGS PER SHARE:
Net income as reported $ 0.48 $ 0.15 $ 0.03 $ 0.70 $ 0.04
Add back (subtract):
After-tax gain from sale of Sedco 602 - (0.07) - (0.07) -
After-tax gain from TODCO Offerings (0.40) - - (0.52) -
Tax valuation allowance related to TODCO IPO - - - 0.09 -
After-tax loss on retirement of debt - - - 0.09 0.04
Stock option vesting resulting from the TODCO IPO - - - 0.02 -
After-tax IPO costs - - 0.03 - 0.03
After-tax impairment loss on long-lived assets - - - - 0.04
After-tax impairment loss on
note receivable from related party - - - - 0.04
Favorable resolution of a non-U.S. income tax liability - - - - (0.04)
--------------- ---------- -------------- ---------- -----------
Net income as adjusted $ 0.08 $ 0.08 $ 0.06 $ 0.31 $ 0.15
--------------- ---------- -------------- ---------- -----------
[LOGO OMITTED]
TRANSOCEAN
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)
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------------- -----------------------
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
2004 2004 2003 2004 2003
--------------- ---------- --------------- ---------- -----------
Transocean Drilling Segment
Operating revenue $ 558.7 $ 552.5 $ 564.4 $ 1,689.4 $ 1,675.6
Operating and maintenance expense 360.5 338.1 342.4 1,031.8 1,013.8
Depreciation 110.0 109.1 103.9 326.4 311.9
Impairment loss on long-lived assets - - - - 5.2
Gain from sale of assets, net (0.5) (21.9) (0.8) (23.5) (2.4)
Gain from TODCO Offerings (129.4) - - (168.8) -
--------------- ---------- --------------- ---------- -----------
Operating income before general
and administrative expense 218.1 127.2 118.9 523.5 347.1
Add back: Depreciation 110.0 109.1 103.9 326.4 311.9
Impairment loss on long-lived assets - - - - 5.2
Gain from sale of assets, net (0.5) (21.9) (0.8) (23.5) (2.4)
Gain from TODCO Offerings (129.4) - - (168.8) -
--------------- ---------- --------------- ---------- -----------
Field operating income $ 198.2 $ 214.4 $ 222.0 $ 657.6 $ 661.8
--------------- ---------- --------------- ---------- -----------
TODCO Segment
Operating revenue $ 93.1 $ 80.7 $ 58.5 $ 247.6 $ 167.2
Operating and maintenance expense * 72.4 68.1 60.6 219.7 189.8
Depreciation 23.9 23.9 22.9 72.0 69.2
Impairment loss on long-lived assets - - - - 11.6
Gain from sale of assets, net (0.8) (1.9) (0.1) (5.4) (0.5)
--------------- ---------- --------------- ---------- -----------
Operating loss before general
and administrative expense (2.4) (9.4) (24.9) (38.7) (102.9)
Add back: Depreciation 23.9 23.9 22.9 72.0 69.2
Impairment loss on long-lived assets - - - - 11.6
Gain from sale of assets, net (0.8) (1.9) (0.1) (5.4) (0.5)
--------------- ---------- --------------- ---------- -----------
Field operating income (loss) $ 20.7 $ 12.6 $ (2.1) $ 27.9 $ (22.6)
--------------- ---------- --------------- ---------- -----------
* Q3 04, Q2 04, Q3 03, YTD Q3 04, and YTD Q3 03 include $6.9 million, $7.1 million, $3.9 million, $26.3 million, and
$11.2 million, respectively, of operating and maintenance expense that TODCO classifies as general and administrative
expense.
TRANSOCEAN INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
TOTAL DEBT TO NET DEBT RECONCILIATIONS
(IN US$ MILLIONS)
AS OF AS OF
----------- -----------
9/30/04 12/31/03
----------- -----------
TOTAL DEBT TO NET DEBT RECONCILIATION
Total Debt $ 3,061.4 $ 3,658.1
Deduct: Cash and Cash Equivalents 775.8 474.0
----------- -----------
Net Debt $ 2,285.6 $ 3,184.1
----------- -----------