Transocean Proxy Statement and 2010 Annual Report

TRANSOCEAN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
Credit risk—Financial instruments that potentially subject us to concentrations of credit risk are primarily cash and cash
equivalents, short-term investments and trade receivables. It is our practice to place our cash and cash equivalents in time deposits at
commercial banks with high credit ratings or mutual funds, which invest exclusively in high quality money market instruments. We limit the
amount of exposure to any one institution and do not believe we are exposed to any significant credit risk.
We derive the majority of our revenue from services to international oil companies, government-owned and
government-controlled oil companies. Receivables are dispersed in various countries (see Note 22—Segments, Geographical Analysis
and Major Customers). We maintain an allowance for doubtful accounts receivable based upon expected collectability and establish
reserves for doubtful accounts on a case-by-case basis when we believe the required payment of specific amounts owed to us is unlikely
to occur. Although we have encountered isolated credit concerns related to independent oil companies, we are not aware of any
significant credit risks related to our customer base and do not generally require collateral or other security to support customer
receivables.
Labor agreements—We require highly skilled personnel to operate our drilling units. We conduct extensive personnel
recruiting, training and safety programs. At December 31, 2010, we had approximately 18,050 employees, including approximately
1,950 persons engaged through contract labor providers. Some of our employees working in Angola, the U.K., Norway and Australia, are
represented by, and some of our contracted labor work under, collective bargaining agreements. Many of these represented individuals
are working under agreements that are subject to annual salary negotiation. These negotiations could result in higher personnel
expenses, other increased costs or increased operational restrictions as the outcome of such negotiations apply to all offshore employees
not just the union members.
Additionally, the unions in the U.K. sought an interpretation of the application of the Working Time Regulations to the offshore
sector. Although the Employment Tribunal endorsed the unions’ position that offshore workers are entitled to 28 days of annual leave, at
the subsequent appeals to date, both the Employment Appeal Tribunal and the Court of Session have reversed the Employment Tribunal’s
decision. However, the unions have intimated their intention to lodge a further appeal to the Supreme Court which may not be heard until
the fourth quarter of 2011 or 2012.
The application of the Working Time Regulations to the offshore sector could result in higher labor costs and could undermine
our ability to obtain a sufficient number of skilled workers in the U.K. Legislation has been introduced in the U.S. Congress that could
encourage additional unionization efforts in the U.S., as well as increase the chances that such efforts succeed. Additional unionization
efforts, if successful, new collective bargaining agreements or work stoppages could materially increase our labor costs and operating
restrictions.
Note 21—Supplemental Cash Flow Information
We include investments in highly liquid debt instruments with an original maturity of three months or less in cash and cash
equivalents. In September 2008, The Reserve announced that certain funds, including The Reserve Primary Fund and The Reserve
International Liquidity Fund Ltd. (together, the “Reserve Funds”), had lost the ability to maintain a net asset value of $1.00 per share due to
losses in connection with the bankruptcy of Lehman Brothers Holdings, Inc. (“Lehman Holdings”). According to its public disclosures,
The Reserve stopped processing redemption requests in order to develop an orderly plan of liquidation that would protect all of the funds’
shareholders. At the time of The Reserve’s announcements, we had an aggregate investment of $408 million in the Reserve Funds. We
collected $37 million, $296 million and $58 million from the Reserve Funds in the years ended December 31, 2010, 2009 and 2008,
respectively. As of December 31, 2010, we had collected our total expected recoveries from the Reserve Funds, having recognized losses
on impairment of $1 million and $16 million, recorded in other, net in the years ended December 31, 2010 and 2008, respectively. There
was no loss on impairment for the year ended December 31, 2009.
Net cash provided by (used in) operating activities attributable to the net change in operating assets and liabilities were
composed of the following (in millions):
Years ended December 31,
2010 2009 2008
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable $ 386 $ 504 $ (501 )
Increase in other current assets (75 ) (50 ) (118 )
Increase in other assets (40 ) (30 ) (8 )
Increase (decrease) in accounts payable and other current liabilities 227 (60 ) 75
Decrease in other long-term liabilities (52 ) (7 ) (43 )
Change in income taxes receivable / payable, net (37 ) 77 274
$ 409 $ 434 $ (321 )
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