Transocean Inc. Reports Third Quarter 2002 Results

Transocean Inc. reported net income for the three months ended September 30, 2002 of $255.2 million, or $0.78 per diluted share, on revenues of $695.2 million. During the quarter, the company recognized a tax benefit totaling $176.2 million, or $0.53 per diluted share, attributable to the restructuring of certain non-U.S. operations, which utilized a previously unrecognized loss related to certain non-U.S. subsidiaries. Quarterly results also included a $26.6 million after-tax loss, or $0.08 per diluted share, resulting from the non-cash impairment of certain long lived assets previously classified as held for sale. Excluding the impact of the tax benefit and the non-cash loss due to the impairment of assets, net income for the three months ended September 30, 2002 was $105.6 million, or $0.33 per diluted share. The company's diluted weighted average share count during the quarter increased to 334.3 million shares from 323.9 million shares during the preceding quarter in 2002 due primarily to the dilutive effect of certain convertible debentures. For the corresponding three months in 2001, net income totaled $97.6 million, or $0.30 per diluted share, on revenues of $770.2 million. Results for the prior year quarter included a net after-tax gain of $7.5 million, or $0.02 per diluted share, resulting primarily from the sale of two Nigerian-based land rigs and the disposal of an inland drilling barge and goodwill amortization of $41.7 million, or $0.13 per diluted share. Excluding the net after-tax gain and goodwill amortization, net income for the three months ended September 30, 2001 was $131.8 million, or $0.41 per diluted share.

For the nine months ended September 30, 2002, the company reported a net loss of $951.2 million, or $2.88 per diluted share, on revenues of $2,009.3 million. Results for the first nine months of 2002 included the previously discussed tax benefit and non-cash loss on the impairment of long lived assets, in addition to a non-cash charge of $1,363.7 million, or $4.15 per diluted share, pertaining to the adoption in January 2002 of Statement of Financial Accounting Standards 142 (FAS 142), Goodwill and Other Intangible Assets. Excluding the impact of the tax benefit, loss from the non-cash impairment of assets and the non-cash charge related to FAS 142, net income for the nine months ended September 30, 2002 was $262.9 million, or $0.81 per diluted share. The company's effective tax rate would have been 13.9% without the effect of the tax benefit. For the corresponding nine months in 2001, net income was $196.6 million, or $0.63 per diluted share, on revenues of $2,072.5 million. The results included a net after-tax gain from the sale of assets totaling $23.5 million, or $0.07 per diluted share, offset by a $17.3 million, or $0.06 per diluted share, net after-tax extraordinary loss relating to the early retirement of certain debt and goodwill amortization of $113.4 million, $0.36 per diluted share. Adjusting for the net after-tax gain, extraordinary loss and goodwill amortization, net income for the nine months ended September 30, 2001 was $303.8 million, or $0.98 per diluted share.

Transocean Inc. completed a merger transaction with R&B Falcon Corporation on January 31, 2001. Consequently, operating results for the nine months ended September 30, 2001 reflect only eight months of operating results of R&B Falcon Corporation.

During the three months ended September 30, 2002, revenues from the company's International and U.S. Floater Contract Drilling Services segment improved 5% to $641.2 million compared to revenues of $609.1 million reported during the three months ended June 30, 2002. Operating income, before depreciation and general and administrative expenses, rose 9% to $315.5 million from $289.0 million during the preceding three month period.

Higher average utilization and dayrates during the three months ended September 30, 2002 produced a 46% improvement in revenues within the Gulf of Mexico Shallow and Inland Water segment to $54.0 million, compared to $37.1 million during the preceding quarter in 2002. Average utilization of 40% during the three months ended September 30, 2002, up from 27% during the preceding quarter, contributed to the segment's reduced operating loss of $1.4 million, compared to the $8.4 million operating loss for the quarter ended June 30, 2002.

The company's net debt declined further during the quarter, to $3,509 million at September 30, 2002, representing a reduction of $870 million and $647 million from net debt levels at September 30, 2001 and December 31, 2001, respectively.

The company also reported that it will conduct its annual test of goodwill impairment as of October 1, 2002, as prescribed by FAS 142. As a result of the decline in the company's stock price since January 1, 2002, when the initial test under FAS 142 was performed, the test on October 1, 2002 is expected to result in a non-cash impairment to goodwill representing a significant majority of the $5.1 billion at September 30, 2002. The impairment is expected to affect both of the company's reporting units.

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