Delaware
|
75-0759420
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
2800
Post Oak Boulevard, Suite 5450 Houston,
Texas
|
77056-6189
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
|
Page
No.
|
PART
I.
|
|
|
|
|
|
Item
1.
|
|
|
|
|
|
|
2
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
Item
2.
|
14
|
|
|
|
|
Item
3.
|
27
|
|
|
|
|
Item
4.
|
27
|
|
|
|
|
PART
II.
|
|
|
|
|
|
Item
1.
|
28
|
|
|
|
|
Item
1A.
|
Risk Factors |
29
|
Item
2.
|
29
|
|
Item
6.
|
29
|
|
|
|
|
30
|
|
|
||||||
ROWAN
COMPANIES, INC. AND SUBSIDIARIES
|
|||||||
(IN
THOUSANDS, EXCEPT SHARE
AMOUNTS)
|
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
ASSETS
|
(Unaudited)
|
|||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ |
341,274
|
$ |
258,041
|
||||
Receivables
- trade and other
|
414,069
|
418,985
|
||||||
Inventories
- at cost:
|
||||||||
Raw
materials and supplies
|
338,610
|
260,319
|
||||||
Work-in-progress
|
142,708
|
84,466
|
||||||
Finished
goods
|
404
|
310
|
||||||
Prepaid
expenses
|
75,902
|
62,307
|
||||||
Deferred
tax assets - net
|
15,065
|
18,421
|
||||||
Total
current
assets
|
1,328,032
|
1,102,849
|
||||||
RESTRICTED
CASH
|
50,000
|
156,077
|
||||||
PROPERTY,
PLANT AND EQUIPMENT - at cost:
|
||||||||
Drilling
equipment
|
2,752,190
|
2,639,036
|
||||||
Manufacturing
plant and equipment
|
256,169
|
210,448
|
||||||
Construction
in progress
|
273,723
|
137,265
|
||||||
Other
property and equipment
|
121,744
|
106,642
|
||||||
Total
|
3,403,826
|
3,093,391
|
||||||
Less
accumulated depreciation and amortization
|
1,028,510
|
960,165
|
||||||
Property, plant and
equipment - net
|
2,375,316
|
2,133,226
|
||||||
GOODWILL
AND OTHER ASSETS
|
41,635
|
43,246
|
||||||
TOTAL
|
$ |
3,794,983
|
$ |
3,435,398
|
||||
See
Notes to Unaudited Consolidated Financial Statements.
|
ROWAN
COMPANIES, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(IN
THOUSANDS, EXCEPT SHARE
AMOUNTS)
|
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
(Unaudited)
|
|||||||
CURRENT
LIABILITIES:
|
||||||||
Current maturities of long-term debt
|
$ |
64,922
|
$ |
64,922
|
||||
Accounts payable - trade
|
119,899
|
141,206
|
||||||
Deferred revenues
|
154,017
|
146,230
|
||||||
Billings in excess of uncompleted contract costs and estimated
profit
|
72,776
|
71,151
|
||||||
Other current liabilities
|
122,333
|
93,197
|
||||||
Total
current liabilities
|
533,947
|
516,706
|
||||||
LONG-TERM
DEBT - less current maturities
|
434,236
|
485,404
|
||||||
OTHER
LIABILITIES
|
246,548
|
212,177
|
||||||
DEFERRED
INCOME TAXES - net
|
376,251
|
347,065
|
||||||
STOCKHOLDERS'
EQUITY:
|
||||||||
Preferred stock, $1.00 par value:
|
||||||||
Authorized
5,000,000 shares issuable in series:
|
||||||||
Series
A Preferred Stock, authorized 4,800 shares, none
outstanding
|
||||||||
Series
B Preferred Stock, authorized 4,800 shares, none
outstanding
|
||||||||
Series
C Preferred Stock, authorized 9,606 shares, none
outstanding
|
||||||||
Series
D Preferred Stock, authorized 9,600 shares, none
outstanding
|
||||||||
Series
E Preferred Stock, authorized 1,194 shares, none
outstanding
|
||||||||
Series A Junior Preferred Stock, authorized 1,500,000 shares, none issued | ||||||||
Common stock, $.125 par value:
|
||||||||
Authorized
150,000,000 shares; issued 111,270,974 shares at September
30, 2007
|
||||||||
and 110,461,531 shares at December 31, 2006
|
13,909
|
13,808
|
||||||
Additional paid-in capital
|
1,009,329
|
988,998
|
||||||
Retained earnings
|
1,292,110
|
981,610
|
||||||
Cost of 25,065 treasury shares at September 30, 2007
|
(977 | ) |
-
|
|||||
Accumulated other comprehensive loss
|
(110,370 | ) | (110,370 | ) | ||||
Total
stockholders' equity
|
2,204,001
|
1,874,046
|
||||||
TOTAL
|
$ |
3,794,983
|
$ |
3,435,398
|
||||
See
Notes to Unaudited Consolidated Financial Statements.
|
ROWAN COMPANIES,
INC. AND
SUBSIDIARIES
|
|
(IN
THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
|
For
The Three Months
|
For
The Nine Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
REVENUES:
|
||||||||||||||||
Drilling
services
|
$ |
368,821
|
$ |
289,577
|
$ |
1,010,178
|
$ |
786,789
|
||||||||
Manufacturing
sales and services
|
133,380
|
127,537
|
461,281
|
312,998
|
||||||||||||
Total
|
502,201
|
417,114
|
1,471,459
|
1,099,787
|
||||||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
Drilling
services
|
145,403
|
131,317
|
436,827
|
357,943
|
||||||||||||
Manufacturing
sales and services
|
107,471
|
114,391
|
395,386
|
260,903
|
||||||||||||
Depreciation
and amortization
|
29,812
|
23,310
|
86,270
|
65,372
|
||||||||||||
Selling,
general and administrative
|
22,510
|
18,995
|
67,798
|
57,957
|
||||||||||||
Gain
on disposals of property and equipment
|
(1,088 | ) | (2,301 | ) | (39,810 | ) | (29,277 | ) | ||||||||
Total
|
304,108
|
285,712
|
946,471
|
712,898
|
||||||||||||
INCOME
FROM OPERATIONS
|
198,093
|
131,402
|
524,988
|
386,889
|
||||||||||||
OTHER
INCOME (EXPENSE):
|
||||||||||||||||
Interest
expense
|
(6,447 | ) | (7,198 | ) | (19,662 | ) | (21,323 | ) | ||||||||
Less
interest capitalized
|
2,855
|
2,971
|
6,332
|
6,591
|
||||||||||||
Interest
income
|
5,613
|
6,490
|
16,543
|
21,767
|
||||||||||||
Other
- net
|
(305 | ) | (237 | ) |
254
|
(166 | ) | |||||||||
Other
income - net
|
1,716
|
2,026
|
3,467
|
6,869
|
||||||||||||
INCOME
BEFORE INCOME TAXES
|
199,809
|
133,428
|
528,455
|
393,758
|
||||||||||||
Provision
for income taxes
|
68,960
|
47,657
|
183,129
|
139,191
|
||||||||||||
INCOME
FROM CONTINUING OPERATIONS
|
130,849
|
85,771
|
345,326
|
254,567
|
||||||||||||
Income
from discontinued operations, net of tax
|
-
|
1,269
|
-
|
1,269
|
||||||||||||
NET
INCOME
|
$ |
130,849
|
$ |
87,040
|
$ |
345,326
|
$ |
255,836
|
||||||||
PER
SHARE AMOUNTS:
|
||||||||||||||||
Income
from continuing operations - basic
|
$ |
1.18
|
$ |
.78
|
$ |
3.12
|
$ |
2.31
|
||||||||
Income
from continuing operations - diluted
|
$ |
1.16
|
$ |
.77
|
$ |
3.08
|
$ |
2.28
|
||||||||
Income
from discontinued operations - basic
|
$ |
-
|
$ |
.01
|
$ |
-
|
$ |
.01
|
||||||||
Income
from discontinued operations - diluted
|
$ |
-
|
$ |
.01
|
$ |
-
|
$ |
.01
|
||||||||
Net
income - basic
|
$ |
1.18
|
$ |
.79
|
$ |
3.12
|
$ |
2.32
|
||||||||
Net
income - diluted
|
$ |
1.16
|
$ |
.78
|
$ |
3.08
|
$ |
2.29
|
||||||||
See
Notes to Unaudited Consolidated Financial Statements.
|
ROWAN COMPANIES,
INC. AND
SUBSIDIARIES
|
|
(IN
THOUSANDS)
|
For
The Nine Months
|
||||||||
Ended
September 30,
|
||||||||
2007
|
2006
|
|||||||
(Unaudited)
|
||||||||
CASH
PROVIDED BY (USED IN):
|
||||||||
Operations:
|
||||||||
Net
income
|
$ |
345,326
|
$ |
255,836
|
||||
Adjustments to reconcile net income to net cash provided by
operations:
|
||||||||
Depreciation
and amortization
|
86,270
|
65,372
|
||||||
Deferred income taxes
|
30,071
|
68,671
|
||||||
Provision for pension and postretirement benefits
|
23,413
|
23,238
|
||||||
Compensation expense
|
6,746
|
11,809
|
||||||
Contributions to pension plans
|
(10,633 | ) | (6,074 | ) | ||||
Postretirement benefit claims paid
|
(1,946 | ) | (2,582 | ) | ||||
Gain on disposals of property, plant and equipment
|
(39,810 | ) | (29,277 | ) | ||||
Gain on disposal of aviation operations
|
-
|
(1,269 | ) | |||||
Changes
in current assets and liabilities:
|
||||||||
Receivables- trade and other
|
4,916
|
(122,966 | ) | |||||
Inventories
|
(136,627 | ) | (87,040 | ) | ||||
Other current assets
|
(13,595 | ) | (48,367 | ) | ||||
Accounts payable
|
(36,647 | ) |
13,569
|
|||||
Income taxes payable
|
24,302
|
2,793
|
||||||
Deferred revenues
|
7,787
|
8,490
|
||||||
Billings in excess of uncompleted contract costs and estimated
profit
|
1,625
|
19,722
|
||||||
Other current liabilities
|
14,642
|
7,530
|
||||||
Net
changes in other noncurrent assets and liabilities
|
15,947
|
9,864
|
||||||
Net
cash provided by operations
|
321,787
|
189,319
|
||||||
Investing
activities:
|
||||||||
Capital expenditures
|
(318,702 | ) | (372,732 | ) | ||||
Proceeds from disposals of property, plant and equipment
|
44,941
|
36,747
|
||||||
Change in restricted cash balance
|
106,077
|
(156,077 | ) | |||||
Proceeds from sale of aviation operations
|
-
|
1,953
|
||||||
Net
cash used in investing activities
|
(167,684 | ) | (490,109 | ) | ||||
Financing
activities:
|
||||||||
Repayments of borrowings
|
(51,168 | ) | (51,168 | ) | ||||
Payment of cash dividends
|
(33,201 | ) | (49,475 | ) | ||||
Proceeds from stock option and convertible debenture plans
and
other
|
13,499
|
8,404
|
||||||
Net
cash used in financing activities
|
(70,870 | ) | (92,239 | ) | ||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
83,233
|
(393,029 | ) | |||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
258,041
|
675,903
|
||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ |
341,274
|
$ |
282,874
|
||||
See
Notes to Unaudited Consolidated Financial Statements.
|
1.
|
The
consolidated financial statements of Rowan included in
this Form 10-Q have been prepared without audit in accordance
with
accounting principles generally accepted in the United States
of America
and the rules and regulations of the Securities and Exchange
Commission. Certain information and notes have been condensed
or omitted as permitted by those rules and regulations. The
Company believes that the disclosures included herein are adequate,
but
suggests that you read these consolidated financial statements
in
conjunction with the consolidated financial statements and related
notes
included in its Annual Report on Form 10-K for the year ended
December 31,
2006.
|
2.
|
Rowan
has three principal operating segments: the contract
drilling of oil and gas wells, both onshore and offshore (“Drilling”), and
two manufacturing segments. The Drilling Products and Systems
segment provides equipment, parts and services for the drilling
industry
through two business groups: Offshore Products features jack-up
rigs, rig
kits and related components and parts; Drilling and Power Systems
includes
mud pumps, drawworks, top drives, rotary tables, other rig equipment,
variable-speed motors, drives and other electrical components
featuring
AC, DC and Switch Reluctance technologies. The Mining, Forestry
and Steel Products segment includes large-wheeled mining and
timber
equipment and related parts and carbon and alloy steel and steel
plate.
|
Total
Assets
|
Goodwill
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Drilling
|
$ |
3,066.8
|
$ |
2,803.5
|
$ |
1.5
|
$ |
1.5
|
||||||||
Manufacturing:
|
||||||||||||||||
Drilling
Products and Systems
|
508.2
|
310.7
|
10.9
|
10.9
|
||||||||||||
Mining,
Forestry and Steel Products
|
220.0
|
171.6
|
-
|
-
|
||||||||||||
Total
|
$ |
3,795.0
|
$ |
3,285.8
|
$ |
12.4
|
$ |
12.4
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Revenues:
|
||||||||||||||||
Drilling
|
$ |
368.8
|
$ |
289.6
|
$ |
1,010.2
|
$ |
786.8
|
||||||||
Manufacturing:
|
||||||||||||||||
Drilling
Products and Systems
|
83.7
|
69.7
|
316.4
|
160.9
|
||||||||||||
Mining,
Forestry and Steel Products
|
49.7
|
57.8
|
144.9
|
152.1
|
||||||||||||
Total
|
$ |
502.2
|
$ |
417.1
|
$ |
1,471.5
|
$ |
1,099.8
|
||||||||
Operating
Income:
|
||||||||||||||||
Drilling
|
$ |
183.5
|
$ |
127.0
|
$ |
491.2
|
$ |
358.2
|
||||||||
Manufacturing:
|
||||||||||||||||
Drilling
Products and Systems
|
10.6
|
1.1
|
18.5
|
16.3
|
||||||||||||
Mining,
Forestry and Steel Products
|
4.0
|
3.3
|
15.3
|
12.4
|
||||||||||||
Total
|
$ |
198.1
|
$ |
131.4
|
$ |
525.0
|
$ |
386.9
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Drilling:
|
||||||||||||||||
Middle
East
|
$ |
111.8
|
$ |
39.7
|
$ |
288.6
|
$ |
72.8
|
||||||||
Europe
|
65.7
|
29.5
|
180.7
|
87.2
|
||||||||||||
Trinidad
|
20.3
|
3.3
|
55.0
|
3.3
|
||||||||||||
Canada
|
-
|
18.6
|
(1.2 | ) |
49.4
|
|||||||||||
Mining,
Forestry & Steel Products - Australia
|
11.9
|
7.5
|
22.7
|
19.4
|
||||||||||||
Total
|
$ |
209.7
|
$ |
98.6
|
$ |
545.8
|
$ |
232.1
|
3. |
Rowan’s
computations of basic and diluted income per share
for the three and nine months ended September 30, 2007 and 2006 are
as
follows (in thousands except per share amounts):
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Average
common shares outstanding
|
111,177
|
110,405
|
110,824
|
110,226
|
||||||||||||
Dilutive
securities:
|
||||||||||||||||
Stock
options
|
1,020
|
857
|
997
|
1,179
|
||||||||||||
Convertible
debentures
|
377
|
254
|
324
|
382
|
||||||||||||
Average
shares for diluted calculations
|
112,574
|
111,516
|
112,145
|
111,787
|
||||||||||||
Income
from continuing operations
|
$ |
130,849
|
$ |
85,771
|
$ |
345,326
|
$ |
254,567
|
||||||||
Income
from continuing operations per share:
|
||||||||||||||||
Basic
|
$ |
1.18
|
$ |
.78
|
$ |
3.12
|
$ |
2.31
|
||||||||
Diluted
|
$ |
1.16
|
$ |
.77
|
$ |
3.08
|
$ |
2.28
|
||||||||
|
||||||||||||||||
Income
(loss) from discontinued operations
|
$ |
-
|
$ |
1,269
|
$ |
-
|
$ |
1,269
|
||||||||
Income
(loss) from discontinued operations per share:
|
||||||||||||||||
Basic
|
$ |
-
|
$ |
.01
|
$ |
-
|
$ |
.01
|
||||||||
Diluted
|
$ |
-
|
$ |
.01
|
$ |
-
|
$ |
.01
|
||||||||
Net
income
|
$ |
130,849
|
$ |
87,040
|
$ |
345,326
|
$ |
255,836
|
||||||||
Net
income per share:
|
||||||||||||||||
Basic
|
$ |
1.18
|
$ |
.79
|
$ |
3.12
|
$ |
2.32
|
||||||||
Diluted
|
$ |
1.16
|
$ |
.78
|
$ |
3.08
|
$ |
2.29
|
4.
|
Rowan
had no items of other comprehensive income during the three
or nine months
ended September 30, 2007 and 2006. Interest payments (net of
amounts capitalized) were $5.0 million and $5.6 million for
the three
months ended September 30, 2007 and 2006, respectively, and
$15.3 million
and $15.8 million for the nine months ended September 30, 2007
and 2006,
respectively. Tax payments (net of refunds) were $46.8 million
and $42.0 million for the three months ended September 30,
2007 and 2006,
respectively, and $104.9 million and $67.3 million for the
nine months
ended September 30, 2007 and 2006,
respectively.
|
5.
|
During
the second quarter of 2007, Rowan issued 229,438 shares of
restricted
stock to 76 key employees, with an average fair value of
$37.93 per
share. Also during May 2007, Rowan issued 27,000 restricted
stock units to its nonemployee directors, with an average
fair value of
$38.31 per unit. Additionally, during May 2007, the Company
awarded 91,068 performance shares to 6 key employees, under
which as many
as 182,136 (and as few as zero) shares of Rowan common stock
will be
issued in May 2010 based upon an equal weighting of the Company’s total
stockholder return (TSR) ranking versus a selected industry
peer group
over the three-year period then ended and return on capital
employed
(ROCE) . With respect to the TSR metric, the Company estimated
a fair value of $36.88 per share, which is being recognized
as
compensation expense over the three-year performance
period. With respect to the ROCE metric, the Company estimated
compensation expense using the $38.70 per share market value
of the common
stock on the date of the award and the target number of shares
to be
issued. Compensation expense will be re-measured annually using
the expected number of shares to be issued based upon Rowan’s relative
ROCE performance.
|
6.
|
Rowan
generally recognizes manufacturing sales and related
costs when title passes as products are shipped. Revenues from
longer-term manufacturing projects such as rigs and rig kits
are
recognized on the percentage-of-completion basis using costs
incurred
relative to total estimated costs. The Company does not
recognize any estimated profit until such projects are at
least 10%
complete, though a full provision is made immediately for
any anticipated
losses.
|
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Total
contract value of long-term projects (1)
|
$ |
222.2
|
$ |
344.4
|
||||
Payments
received
|
144.0
|
179.8
|
||||||
Revenues
recognized
|
71.2
|
114.0
|
||||||
Costs
recognized
|
47.1
|
106.7
|
||||||
Payments
received in excess of revenues recognized
|
72.8
|
65.8
|
||||||
Billings
in excess of uncompleted contract costs and estimated
profit
|
$ |
72.8
|
$ |
71.1
|
||||
Uncompleted
contract costs and estimated profit in excess
of billings (included in other current assets)
|
$ |
-
|
$ |
5.3
|
||||
(1)
Includes projects in progress and those not yet begun for
which Rowan has received advanced payments.
|
7.
|
Since
1952, Rowan has sponsored defined benefit pension
plans covering substantially all of its employees. In addition,
Rowan
provides certain health care and life insurance benefits
(Other benefits)
for retired drilling and aviation
employees.
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Service
cost
|
$ |
3,241
|
$ |
3,036
|
$ |
9,619
|
$ |
9,009
|
||||||||
Interest
cost
|
6,829
|
6,181
|
20,266
|
18,342
|
||||||||||||
Expected
return on plan assets
|
(6,695 | ) | (6,212 | ) | (19,867 | ) | (18,434 | ) | ||||||||
Recognized
actuarial loss
|
2,687
|
3,055
|
7,995
|
9,089
|
||||||||||||
Amortization
of prior service cost
|
(54 | ) |
43
|
(159 | ) |
127
|
||||||||||
Total
|
$ |
6,008
|
$ |
6,103
|
$ |
17,854
|
$ |
18,133
|
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Service
cost
|
$ |
526
|
$ |
497
|
$ |
1,562
|
$ |
1,475
|
||||||||
Interest
cost
|
1,064
|
953
|
3,157
|
2,829
|
||||||||||||
Recognized
actuarial loss
|
168
|
154
|
498
|
458
|
||||||||||||
Amortization
of transition obligation
|
167
|
167
|
495
|
495
|
||||||||||||
Amortization
of prior service cost
|
(52 | ) | (51 | ) | (153 | ) | (152 | ) | ||||||||
Total
|
$ |
1,873
|
$ |
1,720
|
$ |
5,559
|
$ |
5,105
|
|
During the first nine months of 2007,
Rowan contributed
$12.6 million toward its pension and other benefit plans. Rowan
currently expects to make additional payments totaling approximately
$1
million during the remainder of 2007 for pension plan contributions
and
other benefit claims.
|
8.
|
During
June 2007, Rowan recognized a $14.2 million gain in connection
with the
sale of its Alaska based drilling camps. In October 2005,
Rowan sold its
only semi-submersible rig for approximately $60 million
in
cash. Payment for the rig occurred over a 15-month period
ending in January 2007, at which point the title to the
rig was
transferred to the buyer. Rowan retained ownership of much of
the drilling equipment on the rig, which was sold in 2006,
and continued
to provide (through February 2007) a number of operating
personnel under a
separate services agreement. The transaction was accounted for
as a sales-type lease with the expected gain on the sale
and imputed
interest income of approximately $46 million deferred until
the net book
value of the rig had been recovered. During the first quarter
of 2007, we received all remaining payments totaling $24.0
million and
recognized a $23.4 million gain on the
sale.
|
9.
|
During
the third quarter of 2005, Rowan lost four offshore
rigs, including the Rowan-Halifax, and incurred significant
damage on a fifth as a result of Hurricanes Katrina and
Rita. Since that time, the Company has been working to locate
the lost or damaged rigs, salvage related equipment, remove debris,
wreckage and pollutants from the water, mark or clear navigational
hazards
and clear rights of way. At September 30, 2007, Rowan had
incurred $129.1 million of costs related to such efforts, of which
$80.7
million had been reimbursed through insurance, leaving $48.4 million
included in Receivables. The Company expects to incur
additional costs to fulfill its obligations to remove wreckage
and debris
in amounts that will depend on the extent and nature of work ultimately
required and the duration thereof. Previously, the Company
reported the filing of a lawsuit styled Rowan Companies, Inc. vs.
Certain Underwriters at Lloyd’s and Insurance Companies Subscribing to
Cover Note ARS 4183 in the 215th Judicial
District Court of Harris County, Texas. The lawsuit was withdrawn
following the agreement by such underwriters to reimburse the Company
for
the reasonable cost of removing wreckage and debris remaining on
the
drilling locations. Certain of Rowan’s insurance underwriters
at higher limits of liability have notified the Company that they
are
reserving their right to deny coverage for any costs incurred in
wreckage
and debris removal activities that they believe are outside the
scope of
their policy. The Company will reach these limits during the
fourth quarter of 2007. Although the Company believes that it
has adequate insurance coverage and will be reimbursed for costs
incurred
and to be incurred, it is possible that a portion of such costs
will not
be reimbursed, requiring a charge to future operations for any
shortfall.
|
10.
|
The
extent of hurricane damage sustained throughout the Gulf
Coast area in recent years has dramatically increased the cost
and reduced
the availability of insurance coverage for windstorm
losses. During the Company’s April 2006 policy renewal, it
determined that windstorm coverage meeting the requirements of
its
existing debt agreements was cost-prohibitive. As all of
Rowan’s debt is government-guaranteed through the Title XI program
of U.S.
Department of Transportation’s Maritime Administration (MARAD), the
Company obtained from MARAD a waiver of the original insurance
requirements in return for providing additional
security.
|
11.
|
As
a result of the implementation of FASB Interpretation No.
48, "Accounting for Uncertainty in Income Taxes - an interpretation
of
FASB Statement No. 109”, effective January 1, 2007, the Company recognized
a $1.6 million decrease in Retained earnings and a $5.5 million
increase
in Other liabilities as of that date.
|
12.
|
In
September 2006, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value
Measurements. This statement defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair
value measurements. SFAS No. 157 will become effective for our fiscal
year beginning January 1, 2008, and we are currently assessing
the
potential impact of this statement on our financial
statements.
|
13.
|
On
October 30, 2007, the Board of Directors of the Company
declared a cash dividend of $.10 per share of common stock payable
on
November 30, 2007 to shareholders of record on November 14,
2007.
|
Manufacturing
|
||||||||||||||||||
Drilling
Products
|
Mining,
Forestry and
|
|||||||||||||||||
Drilling
|
and
Systems
|
Steel
Products
|
Consolidated
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
2007
|
2006
|
2007
|
2006
|
|||||||||||
Revenues
|
$ 1,010.2
|
$ 786.8
|
$ 316.4
|
$ 160.9
|
$ 144.9
|
$ 152.1
|
$ 1,471.5
|
$ 1,099.8
|
||||||||||
Percent
of total
|
69%
|
72%
|
22%
|
15%
|
10%
|
14%
|
100%
|
100%
|
||||||||||
Operating
costs
|
$ 436.8
|
$ 357.9
|
$ 279.7
|
$ 133.8
|
$ 115.7
|
$ 127.1
|
$ 832.2
|
$ 618.8
|
||||||||||
Percent
of revenues
|
43%
|
45%
|
88%
|
83%
|
80%
|
84%
|
57%
|
56%
|
||||||||||
Depreciation
expense
|
$ 74.7
|
$ 56.2
|
$ 7.8
|
$ 5.8
|
$ 3.8
|
$ 3.4
|
$ 86.3
|
$ 65.4
|
||||||||||
Percent
of revenues
|
7%
|
7%
|
2%
|
4%
|
3%
|
2%
|
6%
|
6%
|
||||||||||
SG&A
expenses
|
$ 47.5
|
$ 42.6
|
$ 10.3
|
$ 5.0
|
$ 10.0
|
$ 10.4
|
$ 67.8
|
$ 58.0
|
||||||||||
Percent
of revenues
|
5%
|
5%
|
3%
|
3%
|
7%
|
7%
|
5%
|
5%
|
||||||||||
Income
from operations
|
$ 491.2
|
$ 358.2
|
$ 18.5
|
$ 16.3
|
$ 15.3
|
$ 12.4
|
$ 525.0
|
$ 386.9
|
||||||||||
Percent
of revenues
|
49%
|
46%
|
6%
|
10%
|
11%
|
8%
|
36%
|
35%
|
||||||||||
Income
from continuing operations
|
$ 345.3
|
$ 254.6
|
||||||||||||||||
Manufacturing
|
||||||||||||||||||
Drilling
Products
|
Mining,
Forestry and
|
|||||||||||||||||
Drilling
|
and
Systems
|
Steel
Products
|
Consolidated
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
2007
|
2006
|
2007
|
2006
|
|||||||||||
Revenues
|
$ 368.8
|
$ 289.6
|
$ 83.7
|
$ 69.2
|
$ 49.7
|
$ 58.3
|
$ 502.2
|
$ 417.1
|
||||||||||
Percent
of total
|
73%
|
69%
|
17%
|
17%
|
10%
|
14%
|
100%
|
100%
|
||||||||||
Operating
costs
|
$ 145.4
|
$ 131.3
|
$ 66.7
|
$ 63.0
|
$ 40.8
|
$ 51.4
|
$ 252.9
|
$ 245.7
|
||||||||||
Percent
of revenues
|
39%
|
45%
|
80%
|
91%
|
82%
|
88%
|
50%
|
59%
|
||||||||||
Depreciation
expense
|
$ 25.4
|
$ 20.2
|
$ 3.1
|
$ 1.9
|
$ 1.3
|
$ 1.2
|
$ 29.8
|
$ 23.3
|
||||||||||
Percent
of revenues
|
7%
|
7%
|
4%
|
3%
|
3%
|
2%
|
6%
|
6%
|
||||||||||
SG&A
expenses
|
$ 15.8
|
$ 13.3
|
$ 3.1
|
$ 2.0
|
$ 3.6
|
$ 3.7
|
$ 22.5
|
$ 19.0
|
||||||||||
Percent
of revenues
|
4%
|
5%
|
4%
|
3%
|
7%
|
6%
|
4%
|
5%
|
||||||||||
Income
from operations
|
$ 183.5
|
$ 127.0
|
$ 10.6
|
$ 2.4
|
$ 4.0
|
$ 2.0
|
$ 198.1
|
$ 131.4
|
||||||||||
Percent
of revenues
|
50%
|
44%
|
13%
|
3%
|
8%
|
3%
|
39%
|
32%
|
||||||||||
Income
from continuing operations
|
$ 130.8
|
$ 85.8
|
||||||||||||||||
September
30,
2007
|
December
31, 2006
|
|||||||
Cash
and cash equivalents
|
$ |
341.3
|
$ |
258.0
|
||||
Current
assets
|
$ |
1,328.0
|
$ |
1,102.8
|
||||
Current
liabilities
|
$ |
534.0
|
$ |
516.7
|
||||
Current
ratio
|
2.49
|
2.13
|
||||||
Long-term
debt – less current maturities
|
$ |
434.2
|
$ |
485.4
|
||||
Stockholders'
equity
|
$ |
2,204.0
|
$ |
1,874.0
|
||||
Long-term
debt/total capitalization
|
.16
|
.21
|
·
|
net
cash provided by operations of $321.8
million
|
·
|
decrease
in restricted cash of $106.1
million
|
·
|
proceeds
from disposals of property, plant and equipment of
$44.9 million
|
·
|
proceeds
from stock option and convertible debenture plans
of $13.5 million
|
·
|
capital
expenditures of $318.7
million
|
·
|
debt
repayments of $51.2
million
|
·
|
cash
dividend payments of $33.2
million
|
·
|
statements,
other than statements of historical fact, that
address activities, events or developments that we expect,
believe or
anticipate will or may occur in the
future;
|
·
|
statements
relating to future financial performance, future
capital sources and other matters; and
|
·
|
any
other statements preceded by, followed by or that
include the words “anticipates”, “believes”, “expects”, “plans”,
“intends”, “estimates”, “projects”, “could”, “should”, “may”, or similar
expressions.
|
·
|
oil
and natural gas prices
|
·
|
the
level of exploration and development expenditures by
energy companies
|
·
|
energy
demand
|
·
|
the
general economy, including
inflation
|
·
|
weather
conditions in our principal operating
areas
|
·
|
environmental
and other laws and
regulations
|
·
|
adverse
consequences that may be found in or result from the
DOJ investigations, including potential financial consequences
and
governmental actions, proceedings, charges or
penalties
|
ROWAN
COMPANIES, INC.
|
||
(Registrant)
|
||
Date:
November 9, 2007
|
/s/
W. H. WELLS
|
|
W.
H. Wells
|
||
Vice
President - Finance and Chief Financial
Officer
|
||
Date:
November 9, 2007
|
/s/
GREGORY M. HATFIELD
|
|
Gregory
M. Hatfield
|
||
Controller
|
||
(Chief
Accounting Officer)
|