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): July 27, 2004 TRANSOCEAN INC. (Exact name of registrant as specified in its charter)
ITEM 12. Results of Operations and Financial Condition. Our press release dated July 27, 2004, concerning second 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, after adjustment for the sale of the semisubmersible rig Sedco 602, on a total and per share basis for the quarter ended June 30, 2004. We also discuss net loss, after adjustment for early retirement of debt, asset impairment charges and the favorable resolution of an existing tax liability, on a total and per share basis for the quarter ended June 30, 2003. In addition, we discuss net income, after adjustment for the sale of the semisubmersible rig Sedco 602, the early retirement of debt and TODCO initial public offering (IPO)-related items, on a total and per share basis for the six months ended June 30, 2004. We also discuss net income, after adjustment for the impact of early retirement of debt, asset impairment charges and the favorable resolution of an existing tax liability, on a total and per share basis for the six months ended June 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 each of our business segments for the quarters ended June 30, 2003 and 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 June 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 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, -1-
or that investors should consider this information before making an investment decision with respect to any security of Transocean Inc. -2-
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: July 27, 2004 By: /s/ Gregory L. Cauthen --------------------------- Gregory L. Cauthen Senior Vice President and Chief Financial Officer -3-
INDEX TO EXHIBITS The following exhibit is furnished pursuant to Item 12:
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 MEDIA CONTACT: Guy A. Cantwell FOR RELEASE: July 27, 2004 713 232 7647 TRANSOCEAN INC. REPORTS SECOND QUARTER 2004 RESULTS HOUSTON--Transocean Inc. (NYSE: RIG) today reported net income for the three months ended June 30, 2004 of $48.0 million, or $0.15 per diluted share, on revenues of $633.2 million. The results compare to a net loss of $44.5 million, or $0.14 per diluted share, on revenues of $603.9 million for the corresponding three months in 2003. Net income adjusted (1) for the sale of the semisubmersible rig Sedco 602 was $26.4 million, or $0.08 per diluted share, for the three months ended June 30, 2004. This compares to a net loss of $19.7 million, or $0.06 per diluted share, for the corresponding three months in 2003, after adjustment for early retirement of debt, asset impairment charges and the favorable resolution of an existing tax liability. For the six months ended June 30, 2004, net income totaled $70.7 million, or $0.22 per diluted share, on revenues of $1,285.2 million, compared to net income of $2.7 million, or $0.01 per diluted share, on revenues of $1,219.9 million for the six months ended June 30, 2003. Net income adjusted for the sale of the semisubmersible rig Sedco 602, the early retirement of debt and TODCO initial public offering (IPO)-related items, was $75.9 million, or $0.23 per diluted share, for the six months ended June 30, 2004. For the six months ended June 30, 2003, net income was $28.5 million, or $0.09 per diluted share, after adjustment for early retirement of debt, asset impairment charges and the favorable resolution of an existing tax liability. Transocean Drilling Segment - Revenues for the three months ended June 30, 2004 declined 4% to $552.5 million, compared to revenues of $578.2 million during the three months ended March 31, 2004. The decline was due in part to a reduction in integrated services revenue and lower average utilization among the company's High Specification Floaters. The lower utilization was most pronounced in the company's Other Deepwater Floaters where five units experienced fewer days on contract compared to the previous three months in 2004, due chiefly to planned shipyard programs and idle time between contracts. Operating income before general and administrative expense (2) was $127.2 million and field operating income (2) (defined as revenues less operating and maintenance expenses) was $214.4 million for the three months ended June 30, 2004. Both figures declined relative to levels for the three months ended March 31, 2004 of $178.2 million and $245.0 million, respectively, due primarily to lower revenues and, in the case of operating income before general and administrative expenses, the absence of the gain recorded in the first quarter in connection with the TODCO IPO. Average fleet utilization and dayrates for the three months ended June 30, 2004 were 68% and $89,100, respectively, compared to 69% and $90,200, respectively, for the three months ended March 31, 2004. The company also provided an update on the labor strike in Norway and the fire on jackup rig Trident 20, two previously reported events that occurred early in the third quarter of 2004. A labor strike in Norway, which was called on July 1 by one of three unions representing offshore workers in the country, has disrupted operations
on Transocean's active Norwegian fleet, comprised of the semisubmersibles Polar Pioneer, Transocean Leader and Transocean Searcher. The three rigs are expected to complete the process of securing well operations during the week and rig headcounts will be reduced to a minimum safe level. The company has a contract for the semisubmersible rig Transocean Arctic with Statoil which was expected to commence by August 15, 2004, but could now also be affected by the strike. The company cannot currently estimate the possible length of the strike nor its financial impact. In addition, an engine room fire aboard the jackup rig Trident 20, which occurred on July 3, is now expected to idle the rig for approximately four months. The rig has a three-well contract providing drilling services offshore Turkmenistan. The contract has been suspended by the customer to allow time for rig repairs and the company expects to resume operations upon completion of the repairs. The company is in the process of completing an estimate of the expected costs to repair the rig. These events, coupled with expected downtime due to rig mobilizations, including the drillship Deepwater Discovery to West Africa, the semisubmersible rigs Jack Bates and Actinia to Australia and India, respectively, and jackup rigs Trident VI and J.T. Angel to Southeast Asia, as well as planned shipyard programs on the semisubmersible rigs Polar Pioneer and Sedco 709, will have a negative impact on revenues and profitability in the third quarter of 2004 relative to revenue and profitability levels in the second quarter of 2004. While third quarter financial performance will decline for the reasons stated, there are encouraging indications of growing customer interest and an improving offshore drilling environment. This improving level of interest is supported by recent contract signings involving the company's High Specification Floaters, including a two-year contract on the semisubmersible rig P.B. Loyd, Jr. in the UK-sector of the North Sea, an estimated 210-day program for the semisubmersible rig Cajun Express in the U.S. Gulf of Mexico, an estimated 120-day contract for the drillship Deepwater Discovery in West Africa and the reactivation of the semisubmersible rig Sovereign Explorer for an estimated 320-day contract in Trinidad and Venezuela. In addition, customers have recently issued two tenders for deepwater rigs in India and the Black Sea. Although customer interest for High Specification rigs appears to be building, the timing of some drilling programs remains uncertain, leaving some rigs at risk of downtime. The company's Other Floaters are experiencing relatively stable business conditions, although the sector remains underutilized in most regions. Improving conditions are evident in the North Sea region, where the company currently has contracts in place on four units to work through the traditionally weak winter period, and expects further improvement in the region during 2005. Finally, customer demand for the company's Jackup Rig fleet remains strong, particularly in Southeast Asia and the Middle East. The company plans to mobilize two jackup rigs currently located in West Africa and another jackup rig in India to Southeast Asia during the third quarter of 2004. Two of the three units are expected to begin drilling assignments during the fourth quarter of 2004. Currently, 60% of the company's remaining fleet days in 2004 are committed to contracts, including 71% of the remaining High Specification Floater fleet days. In 2005, 34% of the fleet days are currently committed to contracts, with 48% of the High Specification Floater fleet committed. TODCO Segment - Revenues for the three months ended June 30, 2004 totaled $80.7 million. The segment reported an operating loss before general and administrative expenses (2) of $9.4 million and field operating income (2) of $12.6 million for the three months ended June 30, 2004. Effective Tax Rate -The increase in the company's effective tax rate (3) to 34.7% for the six months ended June 30, 2004 from 27.3% in the first quarter was primarily due to an increase in the tax valuation allowance established at the time of the TODCO IPO (a 2.6 percentage point increase), international tax dispute developments (a one percentage point increase), and changes in the expected amount and geographical concentration of taxable income for the remainder of 2004 (which accounts for the remainder of the increase). The company currently estimates its effective tax rate for the year to be 34.7%. The final effective tax rate for the year could vary significantly from current expectations.
Liquidity - Cash flow from operations totaled $280.6 million for the six months ended June 30, 2004. Net debt (4) declined 13% to $2,754.8 million at June 30, 2004 compared to $3,184.1 million at December 31, 2003. Conference Call Information Transocean will conduct a teleconference call at 10:00 a.m. ET on July 27, 2004. To participate, dial 303-275-2170 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 July 27 and can be accessed by dialing 303-590-3000 and referring to the passcode 11002859. 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 interest, will also conduct a teleconference call at 9:00 a.m. ET on July 27, 2004. To participate, dial 877-692-2086 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, involving dayrates, contract duration, rig utilization, drilling activity, contract opportunities, revenues, profitability, the duration and financial impact of a labor strike in Norway, rig mobilizations, the Trident 20 repair time 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 95 mobile offshore drilling units, excluding the 70-rig fleet of TODCO, a publicly traded drilling company in which Transocean Inc. owns a majority 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 $8 billion, Transocean Inc.'s ordinary shares are traded on the New York Stock Exchange under the symbol "RIG." ### 04-26 (1) Net income adjusted for certain items, a non-GAAP measure, is computed by subtracting from or adding to net income, a GAAP measure, items that occurred during the three months ended June 30, 2004 and are considered by management to be outside the normal course of operations. A reconciliation for the periods reported may be found in the accompanying schedule titled Non-GAAP Financial Measures and Reconciliations - Adjusted Net Income and Diluted Earnings Per Share. (2) For a reconciliation of segment operating income before general and administrative expense to field operating income, see the accompanying schedule titled Non-GAAP Financial Measures and Reconciliations - Operating Income (Loss) Before General and Administrative Expense to Field Operating Income (Loss) by Segment. (3) For the analysis of the effective tax rate, see the accompanying schedule titled Effective Tax Rate Analysis. (4) Net Debt is a non-GAAP measure defined as total debt less cash and cash equivalents.
TRANSOCEAN INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited)
TRANSOCEAN INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share data)
TRANSOCEAN INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited)
Transocean Inc. Fleet Operating Statistics
(TRANSOCEAN LOGO) TRANSOCEAN INC. AND SUBSIDIARIES EFFECTIVE TAX RATE ANALYSIS (IN US$ 000'S)
(TRANSOCEAN LOGO) TRANSOCEAN INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS ADJUSTED NET INCOME AND DILUTED EARNINGS 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)