NYSE: RIG 9.45 0.06 0.63% 4:02 P.M. ET
Share Page Print Page
Back to all news articles

Transocean Ltd. Reports Fourth Quarter And Full Year 2014 Results

February 25, 2015
  • Revenues were $2.237 billion, compared with $2.270 billion in the third quarter of 2014;
  • Operating and maintenance expenses were $1.310 billion, down from $1.318 billion in the prior period;
  • Adjusted net income was $344 million, $0.95 per diluted share, which excludes net unfavorable items;
  • Net loss attributable to controlling interest was $739 million, $2.04 per diluted share, including $1.083 billion of net unfavorable items, versus the comparable third quarter net loss of $2.217 billion, $6.12 per diluted share, including $2.569 billion of net unfavorable items;
  • The Annual Effective Tax Rate(1) was 26.5 percent, up from 24.8 percent in the prior quarter;
  • Cash flows from operating activities were $566 million, down sequentially from $882 million;
  • Fleet revenue efficiency(2) was 95.3 percent, up from 92.6 percent in the third quarter. Revenue efficiency on ultra-deepwater rigs was 95.4 percent, up from 91.6 percent in the prior quarter;
  • Fleet utilization(3) was 72 percent, versus 75 percent in the third quarter; and
  • Contract backlog was $21.2 billion as of the February 17, 2015, Fleet Update Summary.


ZUG, SWITZERLAND-February 25, 2015-Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported a net loss attributable to controlling interest for the three months ended December 31, 2014 of $739 million, or $2.04 per diluted share. Fourth quarter 2014 results included net unfavorable items of $1.083 billion, $2.99 per diluted share, as follows:

  • $992 million, $2.75 per diluted share, resulting from a non-cash goodwill impairment. The impairment is due to the decline in the market valuation of the company's contract drilling services business. As the result of this impairment, the company has no goodwill remaining on its balance sheet.
  • $148 million, $0.40 per diluted share, in impairments of assets classified as held for sale; and
  • $9 million, $0.02 per diluted share, primarily associated with a loss on retirement of debt and other items.


These net unfavorable items were partially offset by:

  • $66 million, $0.18 per diluted share, of favorable discrete tax benefits.

After consideration of these net unfavorable items, fourth quarter adjusted net income was $344 million, or $0.95 per diluted share.

For the three months ended December 31, 2013, the company reported net income attributable to controlling interest of $233 million, $0.64 per diluted share, which included net unfavorable items of $27 million, or $0.07 per diluted share. After consideration of these net unfavorable items, adjusted net income was $260 million, or $0.71 per diluted share.

Revenues for the three months ended December 31, 2014 decreased $33 million sequentially to $2.237 billion. The decrease was due primarily to increased idle time on several rigs partly offset by higher revenue efficiency, lower out-of-service days, and the commencement of operations in the third quarter of the company's two newbuild ultra-deepwater drillships, Deepwater Asgard and Deepwater Invictus.

Operating and maintenance expenses decreased $8 million sequentially to $1.310 billion due primarily to lower shipyard and maintenance expenses.

General and administrative expenses increased $10 million from the prior quarter to $62 million. The increase was due primarily to costs associated with the company's cost reduction initiatives and, to a lesser extent, personnel costs associated with Transocean Partners.

Transocean's fourth quarter Effective Tax Rate(4) decreased to (1.3) percent from 0.7 percent in the third quarter of 2014. The decrease was primarily associated with the impairment of goodwill and other assets and favorable changes in estimates related to prior years' tax liabilities partly offset by the impact of foreign currency losses on deferred tax assets mainly associated with the Norwegian Krone. Transocean's Annual Effective Tax Rate for the fourth quarter of 2014 was 26.5 percent versus 24.8 percent for the prior quarter. Income tax expense included an unfavorable tax expense of $36 million, $0.10 per diluted share, to reflect the increase in the Annual Effective Tax Rate to 18.7 percent for 2014 from 16.7 percent for the nine months ended September 30, 2014.

Interest expense, net of amounts capitalized, was $123 million in the fourth quarter, generally unchanged from the prior quarter. Interest income was $8 million, compared with $6 million in the third quarter. Capitalized interest was $24 million, down sequentially from $33 million.

Cash flows from operating activities decreased $316 million from third quarter 2014 to $566 million due primarily to changes in working capital.

Capital expenditures decreased $47 million sequentially to $318 million.

Full Year 2014

For the year ended December 31, 2014, net loss attributable to controlling interest totaled $1.913 billion, or $5.29 per diluted share. Full year results included $3.716 billion, $10.23 per diluted share, of net unfavorable items as follows:

  • $3.826 billion, $10.53 per diluted share, resulting from a non-cash goodwill impairment, impairment of the Deepwater Floater asset group, and impairments of assets classified as held for sale; and
  • $28 million, $0.08 per diluted share, in net losses from discontinued operations and other miscellaneous unfavorable items.


These net unfavorable items were partially offset by:

  • $138 million, $0.38 per diluted share, in favorable discrete tax benefits.

After consideration of these net unfavorable items, adjusted net income for 2014 was $1.803 billion, or $4.94 per diluted share.

Interest expense, net of amounts capitalized, was $483 million for 2014, down from $584 million in 2013. In addition to scheduled maturities, the decrease reflects the completion of the company's $1.0 billion accelerated debt retirement program. Capitalized interest for 2014 was $133 million, compared with $78 million in 2013. Interest income was $39 million for 2014, versus $52 million in 2013.

Cash flow from operating activities totaled $2.220 billion in 2014, compared with $1.918 billion in 2013, an increase of $302 million.

For the year ended December 31, 2013, net income attributable to controlling interest totaled $1.407 billion, $3.87 per diluted share, which included net unfavorable items of $81 million, or $0.22 per diluted share. After consideration of the net unfavorable items, adjusted net income for 2013 was $1.488 billion, or $4.09 per diluted share.

Full Year 2015 Guidance Summary

The following table is a summary of the company's full year 2015 guidance for key income statement and balance sheet items. These estimates are based upon management's current expectations and assumptions and are subject to change.

     Item Range  
  Fleet Average Revenue Efficiency 95 percent  
  Other Revenues * $115 million - $130 million  
  Operating and Maintenance Expenses $4.5 billion - $4.7 billion  
  Depreciation $1.0 billion - $1.2 billion  
  General and Administrative Expenses $200 million - $215 million  
  Net Interest Expense  ** $400 million - $450 million  
  Annual Effective Tax Rate 19 percent - 21 percent  
  Capital Expenditures $1.8 billion  
     
* Other Revenues primarily includes recharges and other miscellaneous revenues.
** Net Interest Expense is net of capitalized interest of approximately $130 million and interest income of approximately $20 million.

Non-GAAP Financial Measures

All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's website at www.deepwater.com.

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. These statements contain words such as "possible," "intend," "will," "if," "expect" or other similar expressions. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in tax estimates, impairment of goodwill, impairment of the Deepwater Floater asset group, 2015 guidance on key items, 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 and other risks discussed in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2014, 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 to reflect events or circumstances that occur, or which we become aware of, after the date hereof, except as otherwise may be required by law.

This press release, or referenced documents, do not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and do 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 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.

Conference Call Information

Transocean will conduct a teleconference starting at 9:30 a.m. EST, 3:30 p.m. CET, on Thursday, February 26, 2015, to discuss the results. To participate, dial +1 913-312-0375 and refer to confirmation code 5168358 approximately 10 minutes prior to the scheduled start time.

The teleconference will be simulcast in a listen-only mode over the Internet and can be accessed at Transocean's website, www.deepwater.com, by selecting "Investor Relations/Overview." Supplemental materials that may be referenced during the teleconference will be posted to Transocean's website and can be found by selecting "Investor Relations/Financial Reports."
A replay of the conference call will be available after 12:30 p.m. EST, 6:30 p.m. CET, on February 26, 2015. The replay, which will be archived for approximately 30 days, can be accessed by dialing +1 719-457-0820 and referring to the confirmation code 5168358. The replay will also be available by on the company's website.

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 71 mobile offshore drilling units consisting of 44 high-specification floaters (ultra-deepwater, deepwater and harsh environment drilling rigs), 17 midwater floaters and 10 high-specification jackups. In addition, the company has seven ultra-deepwater drillships and five high-specification jackups under construction.

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

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 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 for continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

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

Diane Vento
+1 713-232-8015

Media Contact:
Pam Easton
+1 713-232-7647

TRANSOCEAN LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)

    Three months ended
December 31,
      Years ended
December 31,
 
    2014     2013       2014     2013  
                           
Operating revenues                                  
Contract drilling revenues   $ 2,167     $ 2,202       $ 8,952     $ 9,070  
Other revenues     70       50         222       179  
      2,237       2,252         9,174       9,249  
Costs and expenses                                  
Operating and maintenance     1,310       1,461         5,110       5,563  
Depreciation     290       275         1,139       1,109  
General and administrative     62       75         234       286  
      1,662       1,811         6,483       6,958  
Loss on impairment     (1,210 )     (27 )       (4,043 )     (81 )
Gain (loss) on disposal of assets, net     (12 )     (16 )       (26 )     7  
Operating income (loss)     (647 )     398         (1,378 )     2,217  
                                   
Other income (expense), net                                  
Interest income     8       13         39       52  
Interest expense, net of amounts capitalized     (123 )     (139 )       (483 )     (584 )
Other, net     10       (8 )       22       (29 )
      (105 )     (134 )       (422 )     (561 )
Income (loss) from continuing operations before income tax expense     (752 )     264         (1,800 )     1,656  
Income tax expense     10       44         146       258  
Income (loss) from continuing operations     (762 )     220         (1,946 )     1,398  
Income (loss) from discontinued operations, net of tax     (4 )     15         (20 )     9  
                                   
Net income (loss)     (766 )     235         (1,966 )     1,407  
Net income (loss) attributable to noncontrolling interest     (27 )     2         (53 )     -  
Net income (loss) attributable to controlling interest   $ (739 )   $ 233       $ (1,913 )   $ 1,407  
                                   
Earnings (loss) per share-basic                                  
Earnings (loss) from continuing operations   $ (2.03 )   $ 0.60       $ (5.23 )   $ 3.85  
Earnings (loss) from discontinued operations     (0.01 )     0.04         (0.06 )     0.02  
Earnings (loss) per share   $ (2.04 )   $ 0.64       $ (5.29 )   $ 3.87  
                                   
Earnings (loss) per share-diluted                                  
Earnings (loss) from continuing operations   $ (2.03 )   $ 0.60       $ (5.23 )   $ 3.85  
Earnings (loss) from discontinued operations     (0.01 )     0.04         (0.06 )     0.02  
Earnings (loss) per share   $ (2.04 )   $ 0.64       $ (5.29 )   $ 3.87  
                                   
Weighted-average shares outstanding                                  
Basic     362       361         362       360  
Diluted     362       361         362       360  

TRANSOCEAN LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)

    December 31,
    2014   2013
             
Assets            
Cash and cash equivalents   $ 2,635     $ 3,243  
Accounts receivable, net                
Trade     2,084       2,112  
Other     36       50  
Materials and supplies, net     818       737  
Assets held for sale     25       148  
Deferred income taxes, net     161       151  
Other current assets     242       331  
Total current assets     6,001       6,772  
                 
Property and equipment     28,516       29,518  
Less accumulated depreciation     (6,978 )     (7,811 )
Property and equipment, net     21,538       21,707  
Goodwill     -       2,987  
Other assets     874       1,080  
Total assets   $ 28,413     $ 32,546  
                 
Liabilities and equity                
Accounts payable   $ 784     $ 1,106  
Accrued income taxes     131       53  
Debt due within one year     1,033       323  
Other current liabilities     1,822       2,072  
Total current liabilities     3,770       3,554  
                 
Long-term debt     9,059       10,379  
Deferred income taxes, net     237       374  
Other long-term liabilities     1,354       1,554  
Total long-term liabilities     10,650       12,307  
                 
Commitments and contingencies                
Redeemable noncontrolling interest     11       -  
                 
Shares, CHF 15.00 par value, 396,260,487 authorized, 167,617,649 conditionally authorized, 373,830,649 issued and 362,279,530 outstanding at December 31, 2014 and 373,830,649 authorized, 167,617,649 conditionally authorized, 373,830,649 issued and 360,764,100 outstanding at December 31, 2013     5,169       5,147  
Additional paid-in capital     5,797       6,784  
Treasury shares, at cost, 2,863,267 held at December 31, 2014 and 2013     (240 )     (240 )
Retained earnings     3,349       5,262  
Accumulated other comprehensive loss     (404 )     (262 )
Total controlling interest shareholders' equity     13,671       16,691  
Noncontrolling interest     311       (6 )
Total equity     13,982       16,685  
Total liabilities and equity   $ 28,413     $ 32,546  


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

    Three months ended
December 31,
      Years ended
December 31,
 
    2014     2013       2014     2013  
                           
Cash flows from operating activities                              
Net income (loss)   $ (766 )   $ 235       $ (1,966 )   $ 1,407  
Adjustments to reconcile to net cash provided by operating activities                                  
Amortization of drilling contract intangibles     (3 )     6         (15 )     (15 )
Depreciation     290       275         1,139       1,109  
Share-based compensation expense     23       28         98       113  
Loss on impairment     1,210       27         4,043       81  
Loss on impairment of assets in discontinued operations     -       -         -       14  
(Gain) loss on disposal of assets, net     12       16         26       (7 )
(Gain) loss on disposal of assets in discontinued operations, net     -       (5 )       10       (54 )
Deferred income taxes     (8 )     55         (142 )     (9 )
Other, net     25       22         52       99  
Changes in deferred revenue, net     26       (10 )       106       (78 )
Changes in deferred costs, net     (16 )     36         (48 )     74  
Changes in operating assets and liabilities     (227 )     88         (1,083 )     (816 )
Net cash provided by operating activities     566       773         2,220       1,918  
                                   
Cash flows from investing activities                                  
Capital expenditures     (318 )     (948 )       (2,165 )     (2,238 )
Proceeds from disposal of assets, net     12       -         215       174  
Proceeds from disposal of assets in discontinued operations, net     -       73         35       204  
Proceeds from sale of preference shares     -       -         -       185  
Proceeds from repayment of notes receivable     -       3         101       17  
Other, net     1       -         (14 )     -  
Net cash used in investing activities     (305 )     (872 )       (1,828 )     (1,658 )
                                   
Cash flows from financing activities                                  
Repayments of debt     (221 )     (19 )       (539 )     (1,692 )
Proceeds from restricted cash investments     -       15         176       298  
Deposits to restricted cash investments     -       (7 )       (20 )     (119 )
Distribution of qualifying additional paid-in capital     (272 )     (202 )       (1,018 )     (606 )
Proceeds from sale of noncontrolling interest     -       -         443       -  
Other, net     (6 )     (4 )       (42 )     (32 )
Net cash provided by (used in) financing activities     (499 )     (217 )       (1,000 )     (2,151 )
                                   
Net increase (decrease) in cash and cash equivalents     (238 )     (316 )       (608 )     (1,891 )
Cash and cash equivalents at beginning of period     2,873       3,559         3,243       5,134  
Cash and cash equivalents at end of period   $ 2,635     $ 3,243       $ 2,635     $ 3,243  

TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS

  Operating Revenues (in millions)
  Three months ended     Twelve months ended
December 31,
  December 31,
2014
    September 30,
2014
    December 31,
2013
    2014     2013
Contract drilling revenues                                    
  High-Specification Floaters:                                    
  Ultra-Deepwater Floaters: $ 997     $ 1,135   $   1,098     $ 4,495     $ 4,523
  Deepwater Floaters   277       233       255       1,021       1,142
  Harsh Environment Floaters   312       247       283       1,099       1,150
  Total High-Specification Floaters   1,586       1,615       1,636       6,615       6,815
  Midwater Floaters   428       442       429       1,723       1,658
  High-Specification Jackups   149       154       143       598       582
Contract intangible revenue   4       4       (6)       16       15
Total contract drilling revenues   2,167       2,215       2,202       8,952       9,070
                                     
Other revenues                                    
  Client reimbursable revenues   40       46       42       172       167
  Integrated services and other   30       9       8       50       12
Total other revenues   70       55       50       222       179
Total revenues $ 2,237     $ 2,270     $ 2,252     $ 9,174     $ 9,249
                                     
                                     
  Average Daily Revenue (1)
  Three months ended     Twelve months ended
December 31,
  December 31,
2014
    September 30,
 2014
    December 31,
2013
    2014     2013
  High-Specification Floaters:                                    
  Ultra-Deepwater Floaters $ 544,800     $ 527,200     $ 510,200     $ 539,300     $ 500,200
  Deepwater Floaters   391,100       357,700       370,700       378,300       353,400
  Harsh Environment Floaters   564,600       585,300       438,200       507,400       451,700
  Total High-Specification Floaters   513,100       500,600       469,400       501,100       459,800
  Midwater Floaters   338,500       353,000
11
      338,400       347,200       311,100
  High-Specification Jackups   170,200       167,800       165,600       168,500       164,400
Total $ 413,500     $ 409,900     $ 393,100     $ 411,600     $ 382,300
                                     
  1. Average daily revenue is defined as contract drilling revenues earned per operating day.  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     Twelve months ended
December 31,
  December 31,
2014
    September 30,
2014
    December 31,
2013
    2014     2013
  High-Specification Floaters:                                    
  Ultra-Deepwater Floaters 69%     83%     87%     82%     92%
  Deepwater Floaters 64%     59%     62%     62%     68%
  Harsh Environment Floaters 86%     65%     100%     85%     100%
  Total High-Specification Floaters 70%     74%     82%     77%     86%
  Midwater Floaters 65%     65%     60%     64%     61%
  High-Specification Jackups 95%     99%     79%     93%     91%
Total Drilling Fleet 72%     75%     75%     76%     79%
                                     
2. 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.

  Revenue Efficiency(3)  
  Trailing Five Quarters and Historical Data  
              
  4Q 2014 3Q 2014 2Q 2014 1Q 2014 4Q 2013  

FY 2014
 

FY 2013
FY 2012
Ultra-Deepwater 95.4% 91.6% 94.0% 96.4% 90.0% 94.3% 89.4% 93.2%
Deepwater 96.3% 93.3% 94.5% 100.5% 95.0% 96.2% 91.0% 91.4%
Harsh Environment Floaters 96.0% 94.7% 95.7% 96.3% 92.1% 95.7% 96.9% 97.1%
Midwater Floaters 93.0% 92.2% 97.0% 91.1% 92.3% 93.3% 93.5% 90.9%
High-Specification Jackups 99.0% 97.0% 97.3% 94.5% 97.2% 97.0% 97.8% 95.0%
Total 95.3% 92.6% 95.0% 95.7% 91.7% 94.7% 91.7% 93.0%
              
3.   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     Years ended  
  December 31,     September 30,     December 31,     December 31,     December 31,  
  2014     2014     2013     2014     2013  
Income from continuing operations before income taxes $ (752 )   $ (2,278 )   $ 264     $ (1,800 )   $ 1,656  
  Add back (subtract):                                      
  Litigation matters   -       (21 )     17       (18 )     120  
  One-time termination benefits   1       4       6       10       32  
  Loss on early lease termination   -       -       3       -       3  
  Loss on impairment of goodwill and other assets   1,210       2,768       27       4,043       64  
   (Gain) loss on disposal of assets, net   (6 )     3       1       (4 )     (33 )
  Loss on financial instruments   -       -       -       -       19  
  Loss on retirement of debt   8       -       -       13       2  
Adjusted income from continuing operations before income taxes   461       476       318       2,244       1,863  
                                       
Income tax expense (benefit) from continuing operations   10       (16 )     44       146       258  
  Add back (subtract):                                      
  Litigation matters   -       (7 )     6       (6 )     42  
  One-time termination benefits   -       1       1       1       5  
  Loss on impairment of goodwill and other assets   48       95       -       143       -  
  (Gain) loss on disposal of assets, net   (2 )     -       -       (2 )     (12 )
  Changes in estimates (1)   66       45       5       138       82  
Adjusted income tax expense from continuing operations (2) $ 122     $ 118     $ 56     $ 420     $ 375  
                                       
Effective Tax Rate (3)   (1.3) %     0.7 %     16.7 %     (8.1) %     15.6 %
                                       
Annual Effective Tax Rate (4)   26.5 %     24.8 %     17.6 %     18.7 %     20.1 %
                                       
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.
2. The three months and year ended December 31, 2014 includes $36 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.
3. Effective Tax Rate is income tax expense for continuing operations, divided by income from continuing operations before income taxes.
4. Annual Effective Tax Rate is income tax expense for continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income from continuing operations before income tax expense 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 Adjusted Diluted Earnings Per Share
(in US$ millions, except per share data)

  YTD QTD YTD QTD YTD QTD QTD
  12/31/14 12/31/14 09/30/14 09/30/14 06/30/14 06/30/14 03/31/14
Adjusted Net Income        
Net income (loss) attributable to controlling interest, as reported $(1,913) $(739) $(1,174) $(2,217) $1,043 $587 $456
Add back (subtract):        
Litigation matters (12) - (12) (14) 2 - 2
One-time termination benefits 9 1 8 3 5 4 1
Loss on impairment of goodwill and other assets 3,826 1,140 2,686 2,621 65 - 65
(Gain) loss on disposal of assets, net (2) (4) 2 3 (1) (1) -
Loss on retirement of debt 13 8 5 - 5 4 1
Loss on disposal of assets in discontinued operations 10 - 10 - 10 - 10
Loss (income) from discontinued operations 10 4 6 1 5 7 (2)
Discrete tax items and other, net (138) (66) (72) (45) (27) (14) (13)
Net income, as adjusted $1,803 $344 $1,459 $352 $1,107 $587 $520
        
Adjusted Diluted Earnings Per Share:        
Diluted earnings (loss) per share, as reported $(5.29) $(2.04) $(3.24) $(6.12) $2.86 $1.61 $1.25
Add back (subtract):        
Litigation matters (0.03) - (0.03) (0.04) 0.01 - 0.01
One-time termination benefits 0.02 - 0.02 0.01 0.01 0.01 -
Loss on impairment of goodwill and other assets 10.53 3.15 7.39 7.22 0.19 - 0.19
(Gain) loss on disposal of assets, net (0.01) (0.01) 0.01 0.01 - - -
Loss on retirement of debt 0.04 0.02 0.01 - 0.01 0.01 -
Loss on disposal of assets in discontinued operations 0.03 - 0.03 - 0.03 - 0.03
Loss (income) from discontinued operations 0.03 0.01 0.02 - 0.01 0.02 (0.01)
Discrete tax items and other, net (0.38) (0.18) (0.21) (0.12) (0.08) (0.04) (0.04)
Diluted earnings per share, as adjusted $4.94 $0.95 $4.00 $0.96 $3.04 $1.61 $1.43

   

 

YTD
QTD YTD QTD YTD QTD QTD
  12/31/13 12/31/13 09/30/13 09/30/13 06/30/13 06/30/13 03/31/13
Adjusted Net Income        
Net income attributable to controlling interest, as reported $1,407 $233 $1,174 $546 $628 $307 $321
Add back (subtract):        
Litigation matters 78 11 67 19 48 - 48
One-time termination benefits 27 5 22 15 7 7 -
Loss on early lease termination 3 3 - - - - -
Loss on impairment of assets 64 27 37 - 37 37 -
Gain on disposal of assets, net (22) - (22) (22) - - -
Loss on retirement of debt 2 - 2 - 2 1 1
Loss on financial instruments 19 - 19 - 19 19 -
Loss on impairment of assets in discontinued operations 14 - 14 14 - - -
Gain on disposal of assets in discontinued operations (54) (5) (49) (31) (18) (3) (15)
Loss (income) from discontinued operations 32 (9) 41 9 32 15 17
Discrete tax items and other, net (82) (5) (77) (55) (22) 11 (33)
Net income, as adjusted $1,488 $260 $1,228 $495 $733 $394 $339
        
Adjusted Diluted Earnings Per Share:        
Diluted earnings per share, as reported $3.87 $0.64 $3.23 $1.50 $1.73 $0.84 $0.88
Add back (subtract):        
Litigation matters 0.21 0.03 0.19 0.05 0.13 - 0.13
One-time termination benefits 0.07 0.01 0.06 0.04 0.02 0.02 -
Loss on early lease termination 0.01 0.01 - - - - -
Loss on impairment of assets 0.17 0.07 0.10 - 0.10 0.10 -
Gain on disposal of assets, net (0.06) - (0.06) (0.06) - - -
Loss on retirement of debt 0.01 - 0.01 - 0.01 - -
Loss on financial instruments 0.05 - 0.05 - 0.05 0.05 -
Loss on impairment of assets in discontinued operations 0.04 - 0.04 0.04 - - -
Gain on disposal of assets in discontinued operations (0.15) (0.01) (0.14) (0.09) (0.05) (0.01) (0.04)
Loss (income) from discontinued operations 0.09 (0.03) 0.11 0.02 0.09 0.04 0.05
Discrete tax items and other, net (0.22) (0.01) (0.21) (0.14) (0.06) 0.04 (0.09)
Diluted earnings per share, as adjusted $4.09 $0.71 $3.38 $1.36 $2.02 $1.08 $0.93

HUG#1897496