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Transocean Ltd. Reports Second Quarter 2013 Earnings Results

August 7, 2013

ZUG, SWITZERLAND, Aug. 7, 2013 -- Transocean Ltd. (NYSE: RIG) (SIX: RIGN)

  • Second quarter 2013 revenues were $2.397 billion, compared with $2.197 billion in the first quarter of 2013; 

  • Operating and maintenance expenses for the second quarter were $1.393 billion, compared with $1.375 billion in the first quarter of 2013; 

  • Second quarter 2013 net income attributable to controlling interest was $307 million, which included $85 million of net unfavorable items. This compares with the first quarter 2013 net income attributable to controlling interest of $321 million, which included $16 million of net unfavorable items; 

  • Second quarter Annual Effective Tax Rate(1) was 23.5 percent, compared with 19.2 percent in the first quarter of 2013; 

  • Second quarter 2013 net income attributable to controlling interest was $0.84 per diluted share.  After adjusting for net unfavorable items, adjusted earnings from continuing operations were $392 million, or $1.08 per diluted share; 

  • Cash flows from operating activities were $416 million in the second quarter, compared with $106 million in the first quarter of 2013; 

  • Revenue efficiency(2) was 93.1 percent in the second quarter, compared with 88.0 percent, in the first quarter of 2013. Ultra-deepwater revenue efficiency was 91.1 percent, compared with 83.8 percent in the prior quarter;  

  • Total fleet rig utilization(3) was 80 percent in the second quarter, unchanged from the first quarter of 2013; and 

  • Contract backlog was $27.3 billion as of the July 17, 2013 Fleet Status Report.  Since July 17, 2013, additional contracts totaling $460 million were secured. 

ZUG, SWITZERLAND - Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of $307 million, or $0.84 per diluted share, for the three months ended June 30, 2013. Second quarter 2013 results included net unfavorable items, after tax, of $85 million, or $0.24 per diluted share, as follows:

  • $37 million, or $0.10 per diluted share, in impairments of long-lived assets classified as held-for-sale; 

  • $20 million, or $0.05 per diluted share, primarily associated with losses on the early termination of derivative instruments and the sale of Shelf Drilling preference shares; 

  • $11 million, or $0.04 per diluted share, in discrete tax expense; 

  • $10 million, or $0.03 per diluted share, in losses associated with discontinued operations; and 

  • $7 million, or $0.02 per diluted share, of costs associated with severance plans established for the company's previously announced shore-based organizational efficiency initiative. 

After consideration of these net unfavorable items, second quarter 2013 adjusted earnings from continuing operations were $392 million, or $1.08 per diluted share. A reconciliation of the non-GAAP adjusted net income and diluted earnings per share is included in the accompanying schedules.

In addition to the items above, second quarter 2013 results also included approximately $9 million, net of tax, or $0.03 per diluted share, in charges primarily related to accelerated recognition of existing compensation plans associated with the implementation of the company's shore-based organizational efficiency initiative.

The second quarter 2013 results compare with a net loss attributable to controlling interest of $304 million, or $0.86 per diluted share, for the three months ended June 30, 2012, which included net unfavorable items of $622 million, or $1.75 per diluted share. The net unfavorable items were primarily due to estimated loss contingencies of $750 million, or $2.11 per diluted share, associated with the Macondo well incident, partly offset by $141 million, or $0.40 per diluted share, of favorable discrete tax items. After consideration of these net unfavorable items, second quarter 2012 adjusted earnings from continuing operations were $318 million, or $0.89 per diluted share.

Operations Quarterly Review

Revenues for the three months ended June 30, 2013 were $2.397 billion, compared with revenues of $2.197 billion during the quarter ended March 31, 2013.  Contract drilling revenues increased $176 million primarily due to higher revenue efficiency on high-specification floaters and the contribution from Transocean Siam Driller and Transocean Andaman, two recently-delivered high-specification jackups.  Total fleet revenue efficiency was 93.1 percent in the second quarter, compared with 88.0 percent in the first quarter of 2013.  Other revenues increased $24 million to $76 million for the second quarter of 2013, compared with $52 million in the prior quarter primarily due to increased drilling management services activity.

Operating and maintenance expenses increased $18 million to $1.393 billion for the second quarter of 2013, compared with $1.375 billion for the prior quarter. First quarter 2013 operating and maintenance expenses included $74 million of charges related to crew claim loss contingencies associated with the Macondo well incident that were not repeated in the second quarter.  Excluding these charges, the sequential increase in operating and maintenance expenses was primarily due to higher maintenance and shipyard expenses for the reactivation of the Sedco 712 and expenses related to several other rigs undergoing contract preparation, periodic surveys, and other projects; as well as increased drilling management services activity.

General and administrative expenses were $77 million for the second quarter of 2013, compared with $67 million in the previous quarter. The increase was attributable to restructuring expenses and professional fees for the proxy campaign associated with the 2013 Annual General Meeting.

Second quarter 2013 results included approximately $20 million in costs associated with severance and the accelerated recognition of existing compensation plans due to the implementation of the shore-based organizational efficiency initiative.  Approximately $15 million of this cost was included in operating and maintenance expenses and $5 million was included in general and administrative expenses.

Annual Effective Tax Rate

Transocean's second quarter Effective Tax Rate(4) was 28.8 percent, compared with 5.7 percent in the first quarter of 2013.  The increase in the Effective Tax Rate was due to changes in estimates, primarily related to prior years' tax liabilities.  Transocean's Annual Effective Tax Ratefrom continuing operations for the second quarter of 2013 was 23.5 percent. This compares with 19.2 percent for the prior quarter.  The increase was primarily due to changes in the blend of income that is taxed based on gross revenues versus pre-tax income, rig movements between taxing jurisdictions and foreign currency impact, among other things.  Second quarter 2013 income tax expense included additional tax expense of $10 million, or $0.03 per diluted share, to reflect the increase in the Annual Effective Tax Rate to 21.6 percent for the six months ended June 30, 2013, from 19.2 percent for the first quarter of 2013.

Other Items

Interest expense, net of amounts capitalized, was $146 million in the second quarter of 2013, compared with $157 million in the prior quarter. Capitalized interest for the second quarter was $16 million, compared with $21 million in the first quarter of 2013.  Interest income was $11 million in the second quarter of 2013, compared with $17 million in the prior quarter. The decline in interest expense, net of amounts capitalized, reflects the company's continued focus on reducing gross long-term debt.

Cash flows from operating activities were $416 million for the second quarter, compared with $106 million for the first quarter of 2013.  Capital expenditures were $352 million for the second quarter, compared with $488 million in the first quarter of 2013.

Forward-Looking Statements

The statements described in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements which could be made include, but are not limited to, changes in tax estimates, statements involving anticipated reduction in costs, timing of costs savings or expectations of the onshore organizational efficiency initiative and the offshore operations initiative, or the company's competitiveness.  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 prices of oil and gas and other factors, including those discussed in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2012, Quarterly Report on Form10-Q for the quarter ended March 31, 2013 and in the company's other filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the company or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's web site at www.deepwater.com.

This press release or referenced documents does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and it does not constitute an offering prospectus within the meaning of article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange. Investors must rely on their own evaluation of Transocean Ltd. and its securities, including the merits and risks involved. Nothing contained herein is, or shall be relied on as, a promise or representation as to the future performance of Transocean Ltd.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. EDT, 4:00 p.m. CEST, on Thursday, August 8, 2013.  To participate, dial +1 913-312-1399 and refer to confirmation code 1039580 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 Transocean's website at www.deepwater.com and selecting "Investor Relations." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean's New York Stock Exchange trading symbol, "RIG."  Supplemental materials that may be referenced during the conference call have been posted to Transocean's website and can be found by selecting "Investor Relations/Quarterly Toolkit."  

A telephonic replay of the conference call should be available after 1:00 p.m. EDT, 7:00 p.m. CEST, on August 8, 2013, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 1039580.  Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced internet addresses. Both replay options will be available for approximately 30 days.

About Transocean

Transocean is a leading international provider of offshore contract drilling services for oil and gas wells. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services, and believes that it operates one of the most versatile offshore drilling fleets in the world. 

Transocean owns or has partial ownership interests in, and operates a fleet of, 80 mobile offshore drilling units consisting of 46 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh Environment drilling rigs), 23 Midwater Floaters and 11 High-Specification Jackups. In addition, we have six Ultra-Deepwater Drillships and one High-Specification Jackup under construction.

For more information about Transocean, please visit the website www.deepwater.com.

Analyst Contacts:
Thad Vayda       
+1 713-232-7551                                  

Diane Vento
+1 713-232-8015

Media Contact:
Guy A. Cantwell                                       
+1 713-232-7647

Notes

(1) Annual Effective Tax Rate is defined as income tax expense from continuing operations excluding various discrete items (such as changes in estimates and tax on items excluded from income before income tax expense) divided by income from continuing operations before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

(2) Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions.   See the accompanying schedule entitled "Revenue Efficiency."

(3) Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the measurement period, expressed as a percentage.  See the accompanying schedule entitled "Utilization."

 (4) Effective Tax Rate is defined as income tax expense from continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)
(Unaudited)

Three months ended
June 30,
Six months ended
June 30,
2013 2012 2013 2012
Operating revenues
Contract drilling revenues $ 2,321 $ 2,174 $ 4,466 $ 4,188
Other revenues 76 155 128 251
2,397 2,329 4,594 4,439
Costs and expenses
Operating and maintenance 1,393 2,105 2,768 3,347
Depreciation 286 280 561 565
General and administrative 77 79 144 148
1,756 2,464 3,473 4,060
Loss on impairment (37 ) - (37 ) (140 )
Loss on disposal of assets, net (2 ) (7 ) (9 ) (10 )
Operating income (loss) 602 (142 ) 1,075 229
Other income (expense), net
Interest income 11 13 28 28
Interest expense, net of amounts capitalized (146 ) (183 ) (303 ) (363 )
Other, net (16 ) (6 ) (17 ) (24 )
(151 ) (176 ) (292 ) (359 )
Income (loss) from continuing operations before income tax expense 451 (318 ) 783 (130 )
Income tax (benefit) expense 130 (15 ) 149 19
Income (loss) from continuing operations 321 (303 ) 634 (149 )
Loss from discontinued operations, net of tax (10 ) - (10 ) (136 )
Net income (loss) 311 (303 ) 624 (285 )
Net income (loss) attributable to noncontrolling interest 4 1 (4 ) 9
Net income (loss) attributable to controlling interest $ 307 $ (304 ) $ 628 $ (294 )
Earnings (loss) per share-basic
Earnings (loss) from continuing operations $ 0.87 $ (0.86 ) $ 1.76 $ (0.45 )
Loss from discontinued operations (0.03 ) - (0.03 ) (0.39 )
Earnings (loss) per share $ 0.84 $ (0.86 ) $ 1.73 $ (0.84 )
Earnings (loss) per share-diluted
Earnings (loss) from continuing operations $ 0.87 $ (0.86 ) $ 1.76 $ (0.45 )
Loss from discontinued operations (0.03 ) - (0.03 ) (0.39 )
Earnings (loss) per share $ 0.84 $ (0.86 ) $ 1.73 $ (0.84 )
Weighted-average shares outstanding
Basic 360 353 360 352
Diluted 360 353 360 352

TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)
(Unaudited)

June 30,
2013
December 31,
2012
Assets
Cash and cash equivalents $ 3,357 $ 5,134
Accounts receivable, net of allowance for doubtful accounts
of $20 at June 30, 2013 and December 31, 2012
2,105 2,200
Materials and supplies, net of allowance for obsolescence
of $70 and $66 at June 30, 2013 and December 31, 2012, respectively
680 610
Assets held for sale 143 179
Deferred income taxes, net 167 142
Other current assets 414 382
Total current assets 6,866 8,647
Property and equipment 27,525 26,967
Less accumulated depreciation (7,461 ) (7,118 )
Property and equipment of consolidated variable interest entities, net of accumulated depreciation 992 1,031
Property and equipment, net 21,056 20,880
Goodwill 2,987 2,987
Other assets 1,306 1,741
Total assets $ 32,215 $ 34,255
Liabilities and equity
Accounts payable $ 921 $ 1,047
Accrued income taxes 131 116
Debt due within one year 161 1,339
Debt of consolidated variable interest entities due within one year 30 28
Other current liabilities 2,552 2,933
Total current liabilities 3,795 5,463
Long-term debt 10,460 10,929
Long-term debt of consolidated variable interest entities 148 163
Deferred income taxes, net 361 366
Other long-term liabilities 1,787 1,604
Total long-term liabilities 12,756 13,062
Commitments and contingencies
Shares, CHF 15.00 par value, 373,830,649 authorized, 167,617,649 conditionally authorized, 373,830,649 issued and 360,384,335 outstanding at June 30, 2013 and 402,282,355 authorized, 167,617,649 conditionally authorized, 373,830,649 issued and 359,505,251 outstanding at December 31, 2012 5,142 5,130
Additional paid-in capital 6,731 7,521
Treasury shares, at cost, 2,863,267 held at June 30, 2013 and December 31, 2012 (240 ) (240 )
Retained earnings 4,483 3,855
Accumulated other comprehensive loss (434 ) (521 )
Total controlling interest shareholders' equity 15,682 15,745
Noncontrolling interest (18 ) (15 )
Total equity 15,664 15,730
Total liabilities and equity $ 32,215 $ 34,255

TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

Three months ended
June 30,
Six months ended
June 30,
2013 2012 2013 2012
Cash flows from operating activities
Net income (loss) $ 311 $ (303 ) $ 624 $ (285 )
Adjustments to reconcile to net cash provided by operating activities
Amortization of drilling contract intangibles (7 ) (12 ) (16 ) (23 )
Depreciation 286 280 561 565
Depreciation and amortization of assets in discontinued operations - 65 - 135
Share-based compensation expense 28 25 49 48
Loss on impairment 37 - 37 140
Loss on impairment of assets in discontinued operations - 12 - 105
Loss on disposal of assets, net 2 7 9 10
Gain on disposal of assets in discontinued operations, net (3 ) (72 ) (18 ) (71 )
Amortization of debt issue costs, discounts and premiums, net 2 17 2 35
Deferred income taxes (8 ) (26 ) (36 ) (43 )
Other, net 33 20 48 35
Changes in deferred revenue, net (29 ) 7 (35 ) (5 )
Changes in deferred expenses, net (9 ) 28 8 (21 )
Changes in operating assets and liabilities (227 ) 411 (711 ) 374
Net cash provided by operating activities 416 459 522 999
Cash flows from investing activities
Capital expenditures (352 ) (207 ) (840 ) (445 )
Capital expenditures for discontinued operations - (29 ) - (51 )
Proceeds from disposal of assets, net 3 1 4 8
Proceeds from disposal of assets in discontinued operations, net - 160 63 194
Proceeds from sale of preference shares 185 - 185 -
Other, net 3 13 12 25
Net cash used in investing activities (161 ) (62 ) (576 ) (269 )
Cash flows from financing activities
Changes in short-term borrowings, net - (260 ) - (260 )
Repayments of debt (406 ) (173 ) (1,596 ) (320 )
Proceeds from restricted cash investments 78 84 206 192
Deposits to restricted cash investments (45 ) (74 ) (104 ) (116 )
Distribution of qualifying additional paid-in capital (204 ) - (204 ) (278 )
Other, net (10 ) 8 (25 ) (1 )
Net cash used in financing activities (587 ) (415 ) (1,723 ) (783 )
Net decrease in cash and cash equivalents (332 ) (18 ) (1,777 ) (53 )
Cash and cash equivalents at beginning of period 3,689 3,982 5,134 4,017
Cash and cash equivalents at end of period $ 3,357 $ 3,964 $ 3,357 $ 3,964

TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS

Operating Revenues (in millions)
Three months ended Six months ended
June 30,
June 30,
2013
March 31,
2013
June 30,
2012
2013 2012
Contract drilling revenues
        High-Specification Floaters:
                Ultra Deepwater Floaters: $ 1,201 $ 1,047 $ 1,141 $ 2,248 $ 2,233
    Deepwater Floaters 289   254   328 543 570
    Harsh Environment Floaters 285 282 263 567 518
        Total High-Specification Floaters 1,775 1,583 1,732 3,358 3,321
  Midwater Floaters 381 429 337 810 684
        High-Specification Jackups 158 124 93 282 160
Contract intangible revenue 7 9 12 16 23
Total contract drilling revenues 2,321 2,145 2,174 4,466 4,188
Other revenues
        Client reimbursable revenues 41 39 33 80 76
        Integrated services and other 2 - 7 2 7
        Drilling management services - non US 33 13 115 46 168
Total other revenues 76 52 155 128 251
Total revenues 2,397 2,197 2,329 4,594 4,439
Average Daily Revenue (1)
Three months ended Six months ended
June 30,
June 30,
2013
March 31, 2013 June 30,
2012
2013 2012
        High-Specification Floaters:
    Ultra Deepwater Floaters $ 507,600 $ 457,800 $ 493,200 $ 483,200 $ 485,700
    Deepwater Floaters 351,800 327,600 353,300 340,000 329,700
    Harsh Environment Floaters 447,500 454,400 424,500 450,900 443,800
        Total High-Specification Floaters 464,200 429,900 448,600 447,300 443,200
  Midwater Floaters 301,100 291,800 265,700 296,100 260,800
        High-Specification Jackups 165,800 163,000 132,900 164,500 123,300
Total $ 382,900 361,200 $ 371,000 $ 372,200 $ 364,900
  1. Average daily revenue is defined as contract drilling revenues earned per operating day in the period. An operating day is defined as a calendar day during which a rig is contracted to earn a dayrate during the firm contract period after commencement of operations.  

TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS (continued)

Utilization (2)
Three months ended Six months ended
June 30,
June 30,
2013
March 31,
2013
June 30,
2012
2013 2012
        High-Specification Floaters:
    Ultra Deepwater Floaters 96% 94% 94% 95% 94%
    Deepwater Floaters 64% 62% 64% 63% 59%
    Harsh Environment Floaters 100% 99% 98% 99% 92%
        Total High-Specification Floaters 88% 86% 85% 86% 82%
  Midwater Floaters 56% 65% 58% 61% 59%
        High-Specification Jackups 100% 92% 88% 96% 86%
Total Drilling Fleet 80% 80% 77% 80% 76%
  1. Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the measurement, expressed as a percentage. 


Revenue Efficiency(3)
Trailing Five Quarters and Historical Data
2Q 2013 1Q 2013 4Q 2012 3Q 2012 2Q 2012 FY 2012 FY 2011
Ultra-Deepwater 91.1% 83.8% 95.5% 95.9% 92.4% 93.2% 87.9%
Deepwater 91.8% 86.4% 90.9% 96.1% 94.5% 91.4% 90.7%
Harsh Environment Floaters 98.3% 97.6% 97.3% 95.4% 97.9% 97.1% 97.4%
Midwater Floaters 94.5% 92.1% 93.9% 90.4% 88.2% 90.9% 93.4%
High Specification Jackups 98.6% 96.4% 95.2% 97.2% 94.3% 95.0% 94.8%
Total 93.1% 88.0% 94.7% 94.9% 92.7% 93.0% 90.5%
  1. Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculation for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions. 


Transocean Ltd. and Subsidiaries
Supplemental Effective Tax Rate Analysis
(In US$ millions)
Three months ended Six months ended
June 30, March 31, June 30, June 30, June 30,
2013 2013 2012 2013 2012
Income (loss) from continuing operations before income taxes $ 451 $ 332 $ (318) $ 783 $ (130)
     Add back (subtract):
          Litigation matters - 74 750 74 750
          One-time termination benefits 10 - - 10 -
          Acquisition costs - - - - 1
          Loss on financial instruments 19 - - 19 -
          Loss on retirement of debt 1 1 - 2 -
          Loss on impairment of goodwill and other assets 37 - - 37 140
          Loss on redeemed noncontrolling interest - - 14 - 25
Adjusted income from continuing operations before income taxes 518 407 446 925 786
Income tax (benefit) expense from continuing operations 130 19 (15) 149 19
     Add back (subtract):
          Litigation matters - 26 - 26 -
          One-time termination benefits 3 - - 3 -
          Loss on impairment of goodwill and other assets - - - - 6
          Changes in estimates (1) (11) 33 141 22 168
          Other, net - - - - -
Adjusted income tax expense from continuing operations (2) $ 122 $ 78 $ 126 $ 200 $ 193

Effective Tax Rate (3)
28.8 % 5.7 % 4.7 % 19.0 % -14.6 %
Annual Effective Tax Rate (4) 23.5 % 19.2 % 28.3 % 21.6 % 24.6 %
  1. Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in (a) deferred taxes, (b) valuation of allowances on deferred taxes and (c) other tax liabilities. 

  1. The three months and six months ended June 30, 2013 includes $10 million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate from the previous quarter estimate. 

  1. Effective Tax Rate is income tax expense divided by income before income taxes. 

  1. Annual Effective Tax Rate is income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate. 


Transocean Ltd. and Subsidiaries
Non-GAAP Financial Measures and Reconciliations
Adjusted Net Income and Diluted Earnings Per Share
(in US$ millions, except per share data)
YTD QTD QTD
06/30/13 06/30/13 03/31/13
Adjusted Net Income
Net income attributable to controlling interest, as reported $628 $307 $321
Add back (subtract):
Litigation matters                48                -                  48
One-time termination benefits                  7                  7                -  
Loss on impairment of assets                37                37                -  
Loss on retirement of debt                  2                  1                  1
Loss on financial instruments                19                19                -  
Gain on sale of assets in discontinued operations              (18)                (3)              (15)
Loss from discontinued operations                28                13                15
Discrete tax items and other, net              (22)                11              (33)
Net income, as adjusted $729 $392 $337
Diluted Earnings Per Share:
Diluted earnings per share, as reported $1.73 $0.84 $0.88
Add back (subtract):
Litigation matters             0.13                -               0.15
One-time termination benefits             0.02             0.02                -  
Loss on impairment of assets             0.10             0.10                -  
Loss on retirement of debt             0.01                -                  -  
Loss on financial instruments             0.05             0.05                -  
Gain on sale of assets in discontinued operations           (0.05)           (0.01)           (0.05)
Loss from discontinued operations             0.08             0.04             0.05
Discrete tax items and other, net           (0.06)             0.04           (0.10)
Diluted earnings per share, as adjusted $2.01 $1.08 $0.93
YTD QTD YTD QTD YTD QTD QTD
12/31/12 12/31/12 09/30/12 09/30/12 06/30/12 06/30/12 03/31/12
Adjusted Net Income
Net income (loss) attributable to controlling interest, as reported ($219) $456 ($675) ($381) ($294) ($304) $10
Add back (subtract):
Litigation matters              756                -                756                  6              750                 750                -  
Loss on impairment of goodwill and other assets              135                -                135                -                135                   -                135
Gain on disposal of assets, net              (48)                -                (48)              (48)                -                     -                  -  
Gain on retirement of debt                (2)                -                  (2)                (2)                -                     -                  -  
Loss on redeemed noncontrolling interest                25                -                  25                -                  25                   14                11
Loss on impairment of assets in discontinued operations              961                  2              959              881                78                   12                66
(Gain) loss on disposal of assets in discontinued operations              (69)                (1)              (68)                  2              (70)                 (72)                  2
(Gain) loss from discontinued operations              135              (26)              161                33              128                   59                69
Discrete tax items and other, net            (255)            (101)            (154)                15            (169)               (141)              (28)
Net income, as adjusted $1,419 $330 $1,089 $506 $583 $318 $265
Diluted Earnings Per Share:
Diluted earnings (loss) per share, as reported ($0.62) $1.26 ($1.90) ($1.06) ($0.84) ($0.86) $0.03
Add back (subtract):
Litigation matters             2.11                -               2.12             0.02             2.12                2.11                -  
Loss on impairment of goodwill and other assets             0.38                -               0.38                -               0.38                   -               0.38
Gain on disposal of assets, net           (0.13)                -             (0.13)           (0.13)                -                     -                  -  
Gain on retirement of debt           (0.01)                -             (0.01)           (0.01)                -                     -                  -  
Loss on redeemed noncontrolling interest             0.07                -               0.07                -               0.07                0.04             0.03
Loss on impairment of assets in discontinued operations             2.70                -               2.70             2.45             0.23                0.03             0.19
(Gain) loss on disposal of assets in discontinued operations           (0.19)                -             (0.19)             0.01           (0.20)              (0.20)             0.01
(Gain) loss from discontinued operations             0.38           (0.07)             0.45             0.09             0.36                0.17             0.19
Discrete tax items and other, net           (0.73)           (0.28)           (0.44)             0.03           (0.48)              (0.40)           (0.08)
Diluted earnings per share, as adjusted $3.96 $0.91 $3.05 $1.40 $1.64 $0.89 $0.75

HUG#1721845