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): April 27, 2004
TRANSOCEAN INC.
(Exact name of registrant as specified in its charter)
CAYMAN ISLANDS 333-75899 66-0587307
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or File Number) Identification No.)
organization)
4 GREENWAY PLAZA
HOUSTON, TEXAS 77046
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (713) 232-7500
ITEM 12. Results of Operations and Financial Condition.
The following information is furnished under Item 12 of Form 8-K (Results of
Operations and Financial Condition) in accordance with Securities and Exchange
Commission Release No. 33-8216.
Our press release dated April 27, 2004, concerning first 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, on a total and per share
basis, for the three months ended March 31, 2004 adjusted for early debt
retirement and TODCO initial public offering related items. We also discuss net
income, on a total and per share basis, for the quarter ended March 31, 2003
adjusted for an impairment loss on long-lived assets. In addition, we include
in the press release net income, on a total and per share basis, for the three
months ended December 31, 2003 excluding the impact of the restructuring of
benefit plans in Nigeria. 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, 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 March 31, 2004 and December 31 and
March 31, 2003. 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.
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, or that
investors should consider this information before making an investment decision
with respect to any security of Transocean Inc.
-1-
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: April 27, 2004 By:
---------------------------
Eric B. Brown
Senior Vice President,
General Counsel and
Corporate Secretary
-2-
INDEX TO EXHIBITS
The following exhibit is furnished pursuant to Item 12:
Exhibit Number Description
- -------------- -----------
99.1 Transocean Inc. Press Release Dated April 27, 2004
-1-
Exhibit 99.1
NEWS RELEASE
FOR RELEASE: April 27, 2004
TRANSOCEAN INC. REPORTS FIRST QUARTER 2004 RESULTS
HOUSTON--Transocean Inc. (NYSE: RIG) today reported net income for the
three months ended March 31, 2004 of $22.7 million, or $0.07 per diluted share,
on revenues of $652.0 million, compared to net income of $47.2 million, or $0.15
per diluted share, on revenues of $616.0 million for the three months ended
March 31, 2003. Net income adjusted1 for early debt retirement and TODCO
initial public offering (IPO)-related items for the three months ended March 31,
2004 totaled $49.5 million, or $0.15 per diluted share, compared to net income
adjusted for an asset impairment for the three months ended March 31, 2003 of
$48.2 million, or $0.15 per diluted share.
Transocean Drilling Segment - Revenues for the three months ended March 31,
2004 of $578.2 million were 9% greater than revenues reported during the three
months ended December 31, 2003 due chiefly to integrated services revenue
generated from a North Sea drilling program, increased activity in Asia and the
buyout of the remaining interest in the Deepwater Drilling L.L.C. joint venture,
which owns the drillship Deepwater Pathfinder. Segment operating income before
general and administrative expense of $178.2 million and field operating income2
(defined as revenues less operating and maintenance expenses) of $245.0 million
for the three months ended March 31, 2004 improved from levels experienced in
the preceding three months ended December 31, 2003 due to the higher revenues in
the quarter and lower operating and maintenance costs aided by the absence of
Nigeria restructuring charges. Segment fleet utilization during the three
months ended March 31, 2004 improved slightly to 69% from 68% for the three
months ended December 31, 2003 due principally to higher utilization of the
company's High Specification Floaters, especially in Asia and the Gulf of
Mexico.
The company has seen improving demand for its High-Specification Floaters
in the Norwegian North Sea market sector and expects to see improvement in other
market sectors as the year progresses. Since the commencement of 2004, five of
the company's High-Specification rigs have received new contracts with durations
of 12 to 36 months. Development drilling projects in West Africa and
exploration opportunities in the Gulf of Mexico continue to support prospects
for deepwater rig demand improvement over the long-term, although the risk of
project delays remains, especially in Nigeria and Angola. The company currently
has 64% of its remaining High-Specification Floater fleet days in 2004 committed
to firm contracts, up from 55% in late 2003, but remains concerned regarding the
risk of intermittent idle time on these units. Expected idle time on some
High-Specification rigs in Brazil, Norway and West Africa, following the
completion of projects and planned shipyard time, together with the mobilization
of a drillship for a drilling program offshore Pakistan will contribute to an
expected reduction in revenues from the High-Specification Floater fleet during
the second quarter of 2004.
Prospects for the company's Jackup Rig fleet are currently strengthening
with near-term incremental jackup rig demand expected in Southeast Asia and the
Middle East, followed by anticipated improving demand in India beginning in the
fourth quarter of the year. The excess jackup rig capacity present in West
Africa since the second half of 2003 is continuing, but some of these idle units
could be mobilized to other regions during the year.
The company's Other Floaters remain significantly underutilized, especially
in the U.K. sector of the North Sea and the Gulf of Mexico where approximately
40% of the industry's capacity resides. Seasonal improvement in the U.K. sector
of the North Sea has begun and should support higher utilization in the region
into the third quarter of 2004, while utilization in the Gulf of Mexico
continues to be hindered by competition from higher specification rigs. Other
regions are generally balanced or modestly oversupplied, offering few
opportunities for mobilizing units to more robust market sectors. A reduction
in activity for integrated services programs in the North Sea should result in
lower revenues for this segment of the company's fleet during the second quarter
of 2004.
TODCO Segment - Revenues for the three months ended March 31, 2004 were
$73.8 million. The segment reported an operating loss before general and
administrative expense of $26.9 million and a field operating loss2 of $5.4
million during the same three month period.
Liquidity - Cash flow from operations totaled $192.2 million for the three
months ended March 31, 2004, while total debt was reduced by $411.7 million.
During the quarter, the company received net proceeds of $155.7 million from the
TODCO IPO.
Conference Call Information
-----------------------------
Transocean will conduct a teleconference call at 10:00 a.m. ET on April 27,
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 April 27 and can be accessed by dialing 303-590-3000 and referring to
the passcode 575769. Also, a replay will be available through the Internet and
can be accessed by visiting either of the above-referenced Worldwide Web
addresses.
TODCO will also conduct a teleconference call at 9:00 a.m. ET on April 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 and
the company's Transocean Drilling business segment and fleet categories,
dayrates, rig utilization, drilling activity, contract opportunities, idle time,
rig mobilizations, integrated service projects, 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, 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 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, including industry-leading
positions in high-specification deepwater and harsh environment drilling units.
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."
### 04-19
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 March 31, 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 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.
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended March 31,
2004 2003
-------------- -----------------
Operating Revenues
Contract drilling revenues $ 583.9 $ 587.5
Other revenues 68.1 28.5
652.0 616.0
Costs and Expenses
Operating and maintenance 412.4 374.1
Depreciation 131.5 126.8
General and administrative 15.1 13.9
Impairment loss on long-lived assets - 1.0
Gain from sale of assets, net (3.8) (1.4)
Gain from sale of TODCO initial public offering (39.4) -
515.8 514.4
Operating Income 136.2 101.6
Other Income (Expense), net
Equity in earnings of joint ventures 2.3 3.6
Interest income 2.1 6.9
Interest expense (47.4) (52.6)
Loss on retirement of debt (28.1) -
Other, net 1.4 (0.6)
(69.7) (42.7)
Income Before Income Taxes and Minority Interest 66.5 58.9
Income Tax Expense 48.0 11.8
Minority Interest (4.2) (0.1)
Net Income $ 22.7 $ 47.2
Earnings Per Share
Basic $ 0.07 $ 0.15
Diluted $ 0.07 $ 0.15
Weighted Average Shares Outstanding
Basic 320.6 319.7
Diluted 324.3 321.6
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
March 31, December 31,
------------ --------------
2004 2003
------------ --------------
(Unaudited)
ASSETS
Cash and Cash Equivalents $ 397.9 $ 474.0
Accounts Receivable, net
Trade 418.7 435.3
Other 31.8 45.0
Materials and Supplies, net 151.8 152.0
Deferred Income Taxes 25.3 41.0
Other Current Assets 56.3 31.6
Total Current Assets 1,081.8 1,178.9
Property and Equipment 10,644.2 10,673.0
Less Accumulated Depreciation 2,765.6 2,663.4
Property and Equipment, net 7,878.6 8,009.6
Goodwill 2,230.8 2,230.8
Investments in and Advances to Joint Ventures 6.2 5.5
Deferred Income Taxes, net 28.2 28.2
Other Assets 216.8 209.6
Total Assets $ 11,442.4 $ 11,662.6
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $ 144.6 $ 146.1
Accrued Income Taxes 52.5 57.2
Debt Due Within One Year 47.2 45.8
Other Current Liabilities 280.8 262.0
Total Current Liabilities 525.1 511.1
Long-Term Debt 3,199.2 3,612.3
Deferred Income Taxes 58.3 42.8
Other Long-Term Liabilities 304.2 299.4
Total Long-Term Liabilities 3,561.7 3,954.5
Commitments and Contingencies
Minority Interest 121.5 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,
320,759,263 and 319,926,500 shares issued and outstanding at
March 31, 2004 and December 31, 2003, respectively 3.2 3.2
Additional Paid-in Capital 10,662.7 10,643.8
============
Accumulated Other Comprehensive Loss (20.3) (20.2)
============
Retained Deficit (3,411.5) (3,434.2)
============
Total Shareholders' Equity 7,234.1 7,192.6
============
Total Liabilities and Shareholders' Equity $ 11,442.4 $ 11,662.6
============
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended March 31,
---------------------------------
2004 2003
-------------- -----------------
Cash Flows from Operating Activities
Net income $ 22.7 $ 47.2
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 131.5 126.8
Deferred income taxes 31.3 27.6
Equity in earnings of joint ventures (2.3) (3.6)
Net gain from disposal of assets (1.9) (0.7)
Gain on sale of TODCO initial public offering (39.4) -
Loss on retirement of debt 28.1 -
Impairment loss on long-lived assets - 1.0
Amortization of debt-related discounts/premiums, fair value adjustments and issue
costs, net (7.6) (1.8)
Deferred income, net (3.3) 6.4
Deferred expenses, net (1.9) (4.8)
Other long-term liabilities 2.3 6.9
Other, net 6.2 0.7
Changes in operating assets and liabilities
Accounts receivable 29.8 17.6
Accounts payable and other current liabilities 23.6 42.4
Income taxes receivable/payable, net (2.4) (40.7)
Other current assets (24.5) (34.5)
Net Cash Provided by Operating Activities 192.2 190.5
Cash Flows from Investing Activities
Capital expenditures (18.5) (24.4)
Proceeds from disposal of assets, net 10.5 2.2
Proceeds from TODCO initial public offering 155.7 -
Joint ventures and other investments, net 1.5 1.4
Net Cash Provided by (Used in) Investing Activities 149.2 (20.8)
Cash Flows from Financing Activities
Repayments on revolving credit agreements (50.0) -
Net borrowings from issuance of debt 1.1 -
Repayments on other debt instruments (381.6) (47.8)
Cash from termination of interest rate swaps - 173.5
Net proceeds from issuance of ordinary shares under stock-based compensation plans 14.0 10.9
Other, net (1.0) (0.1)
Net Cash Provided by (Used in) Financing Activities (417.5) 136.5
Net Increase (Decrease) in Cash and Cash Equivalents (76.1) 306.2
Cash and Cash Equivalents at Beginning of Period 474.0 1,214.2
Cash and Cash Equivalents at End of Period $ 397.9 $ 1,520.4
Transocean Inc.
Fleet Operating Statistics
OPERATING REVENUES ($ MILLIONS) (1)
-------------------------------------------
Three Months Ended
-------------------------------------------
March 31, December 31, March 31,
TRANSOCEAN DRILLING SEGMENT: 2004 2003 2003
-------------- -------------- -----------
Contract Drilling Revenues
High-Specification Floaters:
Fifth-Generation Deepwater Floaters $ 194.9 $ 187.5 $ 175.7
Other Deepwater Floaters $ 108.1 $ 96.9 $ 116.2
Other High-Specification Floaters $ 30.6 $ 31.9 $ 33.3
Total High-Specification Floaters $ 333.6 $ 316.3 $ 325.2
Other Floaters $ 62.7 $ 67.9 $ 81.8
Jackups $ 101.5 $ 104.6 $ 115.3
Other Rigs $ 24.1 $ 24.4 $ 16.7
Subtotal $ 521.9 $ 513.2 $ 539.0
Client Reimbursable Revenues $ 16.6 $ 18.1 $ 21.6
Integrated Services and Other $ 39.7 $ (0.2) $ 2.1
Segment Total $ 578.2 $ 531.1 $ 562.7
TODCO SEGMENT $ 73.8 $ 60.4 $ 53.3
Total Company $ 652.0 $ 591.5 $ 616.0
AVERAGE DAYRATES (1) (2)
-------------------------------------------
Three Months Ended
-------------------------------------------
March 31, December 31, March 31,
-------------------------------------------
TRANSOCEAN DRILLING SEGMENT: 2004 2003 2003
-------------- -------------- -----------
High-Specification Floaters:
Fifth-Generation Deepwater Floaters $ 179,200 $ 186,500 $ 183,800
Other Deepwater Floaters $ 101,300 $ 101,400 $ 113,600
Other High-Specification Floaters $ 115,200 $ 117,900 $ 123,300
Total High-Specification Floaters $ 137,800 $ 141,800 $ 144,600
Other Floaters $ 62,800 $ 60,600 $ 67,000
Jackups $ 51,400 $ 53,700 $ 56,900
Other Rigs $ 44,200 $ 45,200 $ 43,200
Segment Total $ 87,900 $ 87,900 $ 91,600
TODCO SEGMENT $ 25,700 $ 21,500 $ 18,500
Total Drilling Fleet $ 69,900 $ 67,400 $ 69,100
UTILIZATION (1) (2)
-------------------------------------------
Three Months Ended
-------------------------------------------
March 31, December 31, March 31,
-------------------------------------------
TRANSOCEAN DRILLING SEGMENT: 2004 2003 2003
-------------- -------------- -----------
High-Specification Floaters:
Fifth-Generation Deepwater Floaters 92% 91% 97%
Other Deepwater Floaters 78% 69% 76%
Other High-Specification Floaters 73% 74% 75%
Total High-Specification Floaters 83% 78% 83%
Other Floaters 42% 47% 50%
Jackups 83% 81% 87%
Other Rigs 54% 53% 36%
Segment Total 69% 68% 69%
TODCO SEGMENT 38% 40% 38%
Total Drilling Fleet 56% 56% 55%
(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.
TRANSOCEAN [LOGO]
TRANSOCEAN INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
ADJUSTED NET INCOME AND DILUTED EARNINGS PER SHARE
(IN US$ MILLIONS)
FOR THE QUARTER ENDED
--------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2004 2003 2003
----------- ------------- ----------
ADJUSTED NET INCOME
Net income as reported $ 22.7 $ 5.5 $ 47.2
Add back:
After-tax gain from sale of IPO of TODCO shares (39.4) - -
Tax valuation allowance related to TODCO IPO 31.0 - -
After-tax loss on early retirement of debt 28.1 - -
Stock option vesting resulting from the TODCO IPO 7.1 - -
After-tax restructuring of Nigeria benefit plans - 17.4 -
After-tax loss on impairment of certain long-lived assets - - 1.0
----------- ------------- ----------
Net income as adjusted $ 49.5 $ 22.9 $ 48.2
----------- ------------- ----------
DILUTED EARNINGS PER SHARE:
Net income as reported $ 0.07 $ 0.02 $ 0.15
Add back:
After-tax gain from sale of IPO of TODCO shares (0.12) - -
Tax valuation allowance related to TODCO IPO 0.09 - -
After-tax loss on early retirement of debt 0.09 - -
Stock option vesting resulting from the TODCO IPO 0.02 - -
After-tax restructuring of Nigeria benefit plans - 0.05 -
----------- ------------- ----------
Net income as adjusted $ 0.15 $ 0.07 $ 0.15
----------- ------------- ----------
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)
FOR THE QUARTER ENDED
----------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
2004 2003 2003
----------- -------------- -----------
Transocean Drilling Segment
Operating revenue $ 578.2 $ 531.1 $ 562.7
Operating and maintenance expense 333.2 354.1 315.5
Depreciation 107.3 104.1 103.6
Impairment loss on long-lived assets - - 1.0
Gain from sale of assets, net (40.5) (2.5) (1.4)
----------- -------------- -----------
Operating income before general and administrative expense 178.2 75.4 144.0
Add back: Depreciation 107.3 104.1 103.6
Impairment loss on long-lived assets - - 1.0
Gain from sale of assets, net (40.5) (2.5) (1.4)
----------- -------------- -----------
Field operating income $ 245.0 $ 177.0 $ 247.2
----------- -------------- -----------
TODCO Segment
Operating revenue $ 73.8 $ 60.4 $ 53.3
Operating and maintenance expense * 79.2 52.7 58.6
Depreciation 24.2 23.0 23.2
Impairment loss on long-lived assets - (0.3) -
Gain from sale of assets, net (2.7) (0.4) -
----------- -------------- -----------
Operating loss before general and administrative expense (26.9) (14.6) (28.5)
Add back: Depreciation 24.2 23.0 23.2
Impairment loss on long-lived assets - (0.3) -
Gain from sale of assets, net (2.7) (0.4) -
----------- -------------- -----------
Field operating income (loss) $ (5.4) $ 7.7 $ (5.3)
----------- -------------- -----------
* Q1 04, Q4 03 and Q1 03 include $12.4 million, $3.7 million and $4.6 million, respectively, of
operating and maintenance expense that TODCO classifies as general and administrative expense.