Delaware
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75-0759420
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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2800 Post Oak
Boulevard, Suite 5450 Houston, Texas
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77056-6189
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(Address of principal executive offices)
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(Zip Code)
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Page
No.
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PART
I.
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Item
1.
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1
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3
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4
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5
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Item
2.
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11
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Item
3.
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22
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Item
4.
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22
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PART
II.
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Item
1.
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23
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Item
1A.
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Risk Factors |
24
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Item
2.
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30
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Item 4. | Submission of Matters to a Vote of Security Holders |
30
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Item
6.
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31
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31
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||||||
ROWAN COMPANIES, INC. AND
SUBSIDIARIES
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|||||||
(IN THOUSANDS, EXCEPT SHARE
AMOUNTS)
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March
31,
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December
31,
|
|||||||
2009
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2008
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|||||||
ASSETS
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(Unaudited)
|
|||||||
CURRENT
ASSETS:
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||||||||
Cash
and cash equivalents
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$ | 192,792 | $ | 222,428 | ||||
Receivables
- trade and other
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443,081 | 484,962 | ||||||
Inventories
- at cost:
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||||||||
Raw
materials and supplies
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351,800 | 337,503 | ||||||
Work-in-progress
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212,324 | 213,177 | ||||||
Finished
goods
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715 | 749 | ||||||
Prepaid
expenses and other current assets
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48,927 | 59,466 | ||||||
Deferred
tax assets - net
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48,163 | 50,902 | ||||||
Total
current assets
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1,297,802 | 1,369,187 | ||||||
PROPERTY,
PLANT AND EQUIPMENT - at cost:
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||||||||
Drilling
equipment
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3,554,124 | 3,503,590 | ||||||
Manufacturing
plant and equipment
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250,371 | 249,725 | ||||||
Construction
in progress
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499,253 | 425,182 | ||||||
Other
property and equipment
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136,087 | 126,915 | ||||||
Total
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4,439,835 | 4,305,412 | ||||||
Less
accumulated depreciation and amortization
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1,197,377 | 1,157,884 | ||||||
Property, plant and
equipment - net
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3,242,458 | 3,147,528 | ||||||
OTHER
ASSETS
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28,346 | 32,177 | ||||||
TOTAL
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$ | 4,568,606 | $ | 4,548,892 | ||||
See
Notes to Unaudited Consolidated Financial Statements.
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ROWAN COMPANIES, INC. AND
SUBSIDIARIES
|
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CONSOLIDATED BALANCE SHEETS
(continued)
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(IN THOUSANDS, EXCEPT SHARE
AMOUNTS)
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March
31,
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December
31,
|
|||||||
2009
|
2008
|
|||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
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(Unaudited)
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|||||||
CURRENT
LIABILITIES:
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||||||||
Current maturities of long-term debt
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$ | 64,922 | $ | 64,922 | ||||
Accounts payable - trade
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157,746 | 235,048 | ||||||
Deferred revenues
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176,751 | 174,086 | ||||||
Billings in excess of uncompleted contract costs and estimated
profit
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59,179 | 57,119 | ||||||
Accrued compensation and related employee costs
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80,269 | 108,060 | ||||||
Other current liabilities
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81,450 | 105,407 | ||||||
Total
current liabilities
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620,317 | 744,642 | ||||||
LONG-TERM
DEBT - less current maturities
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336,853 | 355,560 | ||||||
OTHER
LIABILITIES
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368,050 | 362,026 | ||||||
DEFERRED
INCOME TAXES - net
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449,073 | 426,848 | ||||||
STOCKHOLDERS'
EQUITY:
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||||||||
Preferred
stock, $1.00 par value:
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||||||||
Authorized
5,000,000 shares issuable in series:
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||||||||
Series A Preferred Stock, authorized 4,800 shares, none
outstanding
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||||||||
Series B Preferred Stock, authorized 4,800 shares, none
outstanding
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||||||||
Series C Preferred Stock, authorized 9,606 shares, none
outstanding
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||||||||
Series D Preferred Stock, authorized 9,600 shares, none
outstanding
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||||||||
Series E Preferred Stock, authorized 1,194 shares, none
outstanding
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||||||||
Series A Junior Preferred Stock, authorized 1,500,000 shares, none
issued
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||||||||
Common
stock, $.125 par value:
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||||||||
Authorized 150,000,000 shares; issued 113,146,968 shares
at
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||||||||
March 31, 2009 and 113,115,830 shares at December 31, 2008
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14,144 | 14,141 | ||||||
Additional paid-in capital
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1,066,001 | 1,063,202 | ||||||
Retained earnings
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1,933,722 | 1,802,022 | ||||||
Cost
of 80,452 and 79,948 treasury shares, respectively
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(2,538 | ) | (2,533 | ) | ||||
Accumulated
other comprehensive loss
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(217,016 | ) | (217,016 | ) | ||||
Total
stockholders' equity
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2,794,313 | 2,659,816 | ||||||
TOTAL
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$ | 4,568,606 | $ | 4,548,892 | ||||
See
Notes to Unaudited Consolidated Financial Statements.
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ROWAN COMPANIES, INC. AND SUBSIDIARIES
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(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
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For
The Three Months
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||||||||
Ended
March 31,
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||||||||
2009
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2008
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|||||||
(Unaudited)
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||||||||
REVENUES:
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||||||||
Drilling services
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$ | 380,370 | $ | 340,421 | ||||
Manufacturing sales and services
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114,438 | 145,068 | ||||||
Total
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494,808 | 485,489 | ||||||
COSTS
AND EXPENSES:
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||||||||
Drilling
operations (excluding items shown below)
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145,381 | 156,539 | ||||||
Manufacturing
operations (excluding items shown below)
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90,808 | 126,164 | ||||||
Depreciation and amortization
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40,499 | 33,091 | ||||||
Selling, general and administrative
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24,576 | 27,399 | ||||||
Gain on disposals of property and equipment
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(4,701 | ) | (5,375 | ) | ||||
Total
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296,563 | 337,818 | ||||||
INCOME
FROM OPERATIONS
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198,245 | 147,671 | ||||||
OTHER
INCOME (EXPENSE):
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||||||||
Interest expense
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(3,143 | ) | (5,566 | ) | ||||
Less interest capitalized
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2,764 | 4,839 | ||||||
Interest income
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331 | 3,175 | ||||||
Other - net
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1,414 | 335 | ||||||
Other
income - net
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1,366 | 2,783 | ||||||
INCOME
BEFORE INCOME TAXES
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199,611 | 150,454 | ||||||
Provision for income taxes
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67,911 | 51,829 | ||||||
NET
INCOME
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$ | 131,700 | $ | 98,625 | ||||
PER
SHARE AMOUNTS:
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||||||||
Net
income - basic
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$ | 1.16 | $ | .88 | ||||
Net
income - diluted
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$ | 1.16 | $ | .88 | ||||
See
Notes to Unaudited Consolidated Financial Statements.
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ROWAN COMPANIES, INC. AND SUBSIDIARIES
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(IN
THOUSANDS)
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For
The Three Months
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||||||||
Ended
March 31,
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||||||||
2009
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2008
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|||||||
(Unaudited)
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||||||||
CASH
PROVIDED BY (USED IN):
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||||||||
Operations:
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Net income
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$ | 131,700 | $ | 98,625 | ||||
Adjustments
to reconcile net income to net cash provided by
operations:
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Depreciation
and amortization
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40,499 | 33,091 | ||||||
Deferred
income taxes
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24,964 | 9,474 | ||||||
Provision
for pension and postretirement benefits
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11,662 | 7,972 | ||||||
Stock-based
compensation expense
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2,969 | 2,731 | ||||||
Postretirement
benefit claims paid
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(817 | ) | (712 | ) | ||||
Gain
on disposals of property, plant and equipment
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(4,701 | ) | (5,375 | ) | ||||
Contributions
to pension plans
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(7,324 | ) | (221 | ) | ||||
Changes
in current assets and liabilities:
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||||||||
Receivables
- trade and other
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36,157 | 39,600 | ||||||
Inventories
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(13,410 | ) | (56,135 | ) | ||||
Prepaid
expenses and other current assets
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10,539 | 18,067 | ||||||
Accounts
payable
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(114,241 | ) | (24,814 | ) | ||||
Income
taxes payable
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(13,575 | ) | 15,194 | |||||
Deferred
revenues
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2,665 | (3,602 | ) | |||||
Billings
in excess of uncompleted contract costs and estimated
profit
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2,060 | (15,631 | ) | |||||
Other
current liabilities
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(31,049 | ) | (1,528 | ) | ||||
Net
changes in other noncurrent assets and liabilities
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(822 | ) | (8,090 | ) | ||||
Net
cash provided by operations
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77,276 | 108,646 | ||||||
Investing
activities:
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Capital
expenditures
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(93,631 | ) | (156,156 | ) | ||||
Proceeds
from disposals of property, plant and equipment
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5,310 | 16,656 | ||||||
Change
in restricted cash balance
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- | 50,000 | ||||||
Net
cash used in investing activities
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(88,321 | ) | (89,500 | ) | ||||
Financing
activities:
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Repayments
of borrowings
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(18,707 | ) | (18,707 | ) | ||||
Payment
of cash dividends
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- | (11,095 | ) | |||||
Proceeds
from stock option and convertible debenture plans and
other
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116 | 15,124 | ||||||
Net
cash used in financing activities
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(18,591 | ) | (14,678 | ) | ||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
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(29,636 | ) | 4,468 | |||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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222,428 | 284,458 | ||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
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$ | 192,792 | $ | 288,926 | ||||
See
Notes to Unaudited Consolidated Financial Statements.
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1.
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The
consolidated financial statements of Rowan Companies, Inc. (“Rowan” or
“the Company”) 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. Rowan 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 the Company’s Annual Report on
Form 10-K for the year ended December 31,
2008.
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2.
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Rowan
has three principal operating segments: the contract drilling of oil and
gas wells, both onshore and offshore (“Drilling”), and two manufacturing
segments operating under LeTourneau Technologies, Inc.
(“LTI”). The Drilling Products and Systems segment provides
equipment, parts and services for the drilling industry featuring jack-up
rigs, rig kits and related components and parts, mud pumps, drawworks, top
drives, rotary tables, other rig equipment, variable-speed motors, drives
and other electrical components. 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.
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March
31,
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December
31,
|
|||||||
2009
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2008
|
|||||||
Drilling
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$ | 3,749.0 | $ | 3,714.3 | ||||
Manufacturing:
|
||||||||
Drilling
Products and Systems
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592.0 | 583.1 | ||||||
Mining,
Forestry and Steel Products
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227.6 | 251.5 | ||||||
Total Manufacturing
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819.6 | 834.6 | ||||||
Total
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$ | 4,568.6 | $ | 4,548.9 |
2009
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2008
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|||||||
Revenues:
|
||||||||
Drilling
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$ | 380.4 | $ | 340.4 | ||||
Manufacturing:
|
||||||||
Drilling
Products and Systems
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144.6 | 170.1 | ||||||
Mining,
Forestry and Steel Products
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43.3 | 54.0 | ||||||
Eliminations
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(73.5 | ) | (79.0 | ) | ||||
Total
manufacturing
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114.4 | 145.1 | ||||||
Total
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$ | 494.8 | $ | 485.5 | ||||
Income
from operations:
|
||||||||
Drilling
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$ | 187.1 | $ | 143.6 | ||||
Manufacturing:
|
||||||||
Drilling
Products and Systems
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26.5 | 14.7 | ||||||
Mining,
Forestry and Steel Products
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5.1 | 2.4 | ||||||
Eliminations
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(20.5 | ) | (13.0 | ) | ||||
Total
manufacturing
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11.1 | 4.1 | ||||||
Total
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$ | 198.2 | $ | 147.7 |
2009
|
2008
|
|||||||
Drilling:
|
||||||||
Middle
East
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$ | 120.5 | $ | 109.6 | ||||
Europe
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50.1 | 44.4 | ||||||
West
Africa
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30.9 | 25.6 | ||||||
Trinidad
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- | 24.0 | ||||||
Mining,
Forestry and Steel Products - Australia and other
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12.1 | 8.2 | ||||||
Total
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$ | 213.6 | $ | 211.8 |
3.
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Rowan
generally recognizes manufacturing sales and related costs when title
passes as products are shipped. Revenues from longer-term
manufacturing projects such as offshore rigs and rig kits are recognized
on the percentage-of-completion basis using costs incurred relative to
total estimated costs. Costs are recorded separately for each
project and by significant activity or component within each project, and
include materials issued to the project, labor expenses that are incurred
directly for the project and overhead expenses that are allocated across
all projects at consistent rates per labor hour. Incurred costs
include only those that measure project work
performed. Material costs incurred, for example, do not include
materials purchased but remaining in inventory. Only when such
materials have been used in production on a project are they included in
incurred project costs. The determination of total estimated
project costs is performed monthly based upon then current
information. This process involves an evaluation of progress
towards project milestones and an assessment of work left to complete each
project activity or component, and is based on physical observations by
project managers and engineers. An estimate of project costs is
then developed for each significant activity or component based upon the
assessment of project status, actual costs incurred to date, and
outstanding commitments for project materials and services. 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.
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March
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Total
contract value of long-term projects in process (or not yet
begun)
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$ | 199.2 | $ | 290.7 | ||||
Payments
received
|
119.0 | 168.6 | ||||||
Revenues
recognized
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61.6 | 119.7 | ||||||
Costs
recognized
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39.7 | 74.5 | ||||||
Payments
received in excess of revenues recognized
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57.4 | 48.9 | ||||||
Billings
in excess of uncompleted contract costs
|
||||||||
and
estimated profit
|
$ | 59.2 | $ | 57.1 | ||||
Uncompleted
contract costs and estimated profit
|
||||||||
in
excess of billings (included in other current assets)
|
$ | 1.8 | $ | 8.2 |
4.
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Rowan’s
computations of basic and diluted income per share for the three months
ended March 31, 2009 and 2008 are as follows (in thousands except per
share amounts):
|
2009
|
2008
|
|||||||
Average
common shares outstanding
|
113,126 | 111,463 | ||||||
Dilutive
securities:
|
||||||||
Stock
options
|
46 | 892 | ||||||
Convertible
debentures
|
- | 221 | ||||||
Average
shares for diluted calculations
|
113,172 | 112,576 | ||||||
Net
income
|
$ | 131,700 | $ | 98,625 | ||||
Net
income per share:
|
||||||||
Basic
|
$ | 1.16 | $ | .88 | ||||
Diluted
|
$ | 1.16 | $ | .88 |
5.
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Rowan
had no items of other comprehensive income during the three months ended
March 31, 2009 or 2008. Interest payments (net of amounts
capitalized) were $1.8 million and $2.5 million for the three months ended
March 31, 2009 and 2008, respectively. Tax payments (net of
refunds) were $56.6 million and $69.1 million for the three months ended
March 31, 2009 and 2008, respectively. Accrued capital
expenditures were $36.7 million and $27.4 million at March 31, 2009 and
2008, respectively.
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6.
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Rowan
sponsors defined benefit pension plans covering substantially all of its
employees, and provides health care and life insurance benefits for
certain retired employees.
|
2009
|
2008
|
|||||||
Service
cost
|
$ | 4,428 | $ | 3,370 | ||||
Interest
cost
|
8,313 | 7,650 | ||||||
Expected
return on plan assets
|
(7,154 | ) | (7,281 | ) | ||||
Recognized
actuarial loss
|
4,016 | 2,499 | ||||||
Amortization
of prior service cost
|
(62 | ) | (63 | ) | ||||
Total
|
$ | 9,541 | $ | 6,175 |
2009
|
2008
|
|||||||
Service
cost
|
$ | 623 | $ | 509 | ||||
Interest
cost
|
1,230 | 1,104 | ||||||
Recognized
actuarial loss
|
155 | 70 | ||||||
Amortization
of transition obligation
|
163 | 165 | ||||||
Amortization
of prior service cost
|
(50 | ) | (51 | ) | ||||
Total
|
$ | 2,121 | $ | 1,797 |
7.
|
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, the Company 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. On March 31, 2008, in connection
with Rowan’s policy renewal, the additional security provisions were
modified. The Company’s minimum restricted cash balance was
eliminated, and its unrestricted cash requirement was reduced from $31
million to $25 million. Rowan remains subject to restrictions
on the use of certain insurance proceeds should the Company experience
further losses. Each of these security provisions will be
released by MARAD should Rowan be able to obtain windstorm coverage that
satisfies the original terms of its debt
agreements.
|
8.
|
During
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. The Company leased the Rowan-Halifax
under a charter agreement that commenced in 1984 and was scheduled to
expire in March 2008. The rig was insured for $43.4 million, a
value that Rowan believes to be more than sufficient to satisfy its
obligations under the charter agreement, and by a margin sufficient to
cover the $6.3 million carrying value of Rowan equipment installed on the
rig. However, the parties holding interests in the rig under
the charter claimed that the rig should have been insured for its fair
market value and sought recovery from Rowan for compensation above the
insured value.
|
The
construction of Rowan’s fourth Tarzan
Class jack-up rig, the J.P.
Bussell, was originally subcontracted to an outside Gulf of Mexico
shipyard, Signal International LLC (“Signal”), and scheduled for delivery
in the third quarter of 2007 at a total cost of approximately $145
million. As a result of various problems encountered on the
project, Rowan exercised its right to take over the rig construction
pursuant to the terms of the construction contract, and Signal turned the
rig over to the Company in March 2008. The rig was later
completed by Rowan’s Drilling Products and Systems segment more than one
year behind schedule, and its final cost was approximately 40% over the
original estimate. Accordingly, Rowan has declared Signal in
breach of contract and initiated court proceedings styled Rowan
Companies, Inc. and LeTourneau Technologies, Inc. vs. Signal International
LLC in the 269th
Judicial District Court of Harris County, Texas, to
recover the cost to complete the rig over and above the agreed contract
price, plus interest. Signal filed a separate counterclaim
against Rowan styled Signal
International LLC vs. LeTourneau, Inc., in the U.S. District Court,
Southern District of Texas, Houston Division, alleging breach of contract
and claiming unspecified damages for cost overruns. That case
has been administratively stayed in favor of the State Court proceeding
filed by the Company. Rowan expects that Signal will claim
damages for amounts owed and additional costs incurred, totaling in excess
of $20 million. The Company intends to vigorously defend its
rights under the contract. The Company does not believe that it
is probable that Rowan has incurred a loss, nor one that is estimable, and
has made no accrual for such at March 31,
2009.
|
9.
|
In
late 2007, Rowan announced plans to construct its third and fourth 240C
class jack-up rigs, the Joe
Douglas and Rig
240C #4, to be financed from available cash flows and delivered in
2010 and 2011, respectively. (These two rigs were in addition
to the Rowan-Mississippi,
the Company’s first 240C
class jack-up, which was delivered and commenced operations in November
2008, and the Ralph
Coffman, which is currently under construction and is expected to
be delivered near year-end 2009.) With the prospect of reduced
operating cash flows and uncertain access to additional capital, the
Company announced in January 2009 that it was cancelling Rig
240C #4 and suspending construction of the Joe
Douglas until at least mid-year 2009. A portion of
amounts expended toward Rig
240C #4 were applied to other projects. In the fourth
quarter of 2008, Rowan recorded an $11.8 million impairment charge for the
estimated unrecoverable cost of amounts committed toward Rig
240C #4. The Company has commitments outstanding and is
subject to cancellation fees on the Joe
Douglas totaling approximately $18 million. Should the
Company’s cash flows and available borrowing capacity be insufficient, if
the Company is unable to obtain alternative financing, or if market
conditions continue to deteriorate, the Company may elect to cancel
construction of the Joe
Douglas. Rowan expects to make a decision regarding the
rig by early July. Should the Company elect to cancel
construction of the Joe
Douglas, it would probably incur an impairment charge for a
substantial portion of the approximately $85 million of expenditures made
and to be made. Pending the decision on the Joe
Douglas, the Company may decide to close the Vicksburg shipyard,
which could result in up to a $26 million charge at that
time.
In
late 2007, Rowan signed contracts with Keppel AmFELS, Inc. (“Keppel”) to
have four EXL
(formerly Super
116E) class
jack-up rigs constructed at its Brownsville, Texas, shipyard, to be
financed from available cash flows and delivered in 2010 and
2011. Each rig is expected to cost from $185 to $190 million,
with more than one-third of the amount attributable to the design, kit
components, and drilling equipment to be provided by Rowan’s Manufacturing
division. With the prospect of reduced operating cash flows and
uncertain access to additional capital, the Company has suspended activity
on the fourth rig pending a decision in the coming months about whether to
go forward with that rig. Rowan has commitments outstanding of
about $9 million and is subject to a $21 million cancellation fee on the
fourth rig. Should the Company’s cash flows be insufficient, it
could be forced to accept unfavorable financing terms in order to complete
construction of and avoid penalties on the first three EXL
rigs. Should the Company cancel construction of the fourth
EXL
rig, it would probably incur an impairment charge for a significant
portion of the $60 million of expenditures made and to be
made.
|
10.
|
Rowan
periodically employs letters of credit or other bank-issued guarantees in
the normal course of its businesses, and was contingently liable for
performance under such agreements to the extent of approximately $58
million at March 31, 2009.
|
Increase
(decrease)
|
||||||||||||||||
2009
|
2008
|
Amount
|
%
|
|||||||||||||
Revenues:
|
||||||||||||||||
Drilling
|
$ | 380.4 | $ | 340.4 | $ | 40.0 | 12 | % | ||||||||
Manufacturing:
|
||||||||||||||||
Drilling
Products and Systems
|
71.1 | 91.1 | (20.0 | ) | -22 | % | ||||||||||
Mining,
Forestry and Steel Products
|
43.3 | 54.0 | (10.7 | ) | -20 | % | ||||||||||
Total
Manufacturing
|
114.4 | 145.1 | (30.7 | ) | -21 | % | ||||||||||
Total
revenues
|
$ | 494.8 | $ | 485.5 | $ | 9.3 | 2 | % | ||||||||
Costs
and expenses:
|
||||||||||||||||
Drilling
|
$ | 193.3 | $ | 196.8 | $ | (3.5 | ) | -2 | % | |||||||
Manufacturing:
|
||||||||||||||||
Drilling
Products and Systems
|
65.1 | 89.4 | (24.3 | ) | -27 | % | ||||||||||
Mining,
Forestry and Steel Products
|
38.2 | 51.6 | (13.4 | ) | -26 | % | ||||||||||
Total
Manufacturing
|
103.3 | 141.0 | (37.7 | ) | -27 | % | ||||||||||
Total
costs and expenses
|
$ | 296.6 | $ | 337.8 | $ | (41.2 | ) | -12 | % | |||||||
Operating
income:
|
||||||||||||||||
Drilling
|
$ | 187.1 | $ | 143.6 | $ | 43.5 | 30 | % | ||||||||
Manufacturing:
|
||||||||||||||||
Drilling
Products and Systems
|
6.0 | 1.7 | 4.3 | 253 | % | |||||||||||
Mining,
Forestry and Steel Products
|
5.1 | 2.4 | 2.7 | 113 | % | |||||||||||
Total
Manufacturing
|
11.1 | 4.1 | 7.0 | 171 | % | |||||||||||
Total
operating income
|
$ | 198.2 | $ | 147.7 | $ | 50.5 | 34 | % | ||||||||
Net
income
|
$ | 131.7 | $ | 98.6 | $ | 33.1 | 34 | % |
2009
|
2008
|
|||||||||||||||
Amount
|
%
of Revenues
|
Amount
|
%
of Revenues
|
|||||||||||||
Revenues
|
$ | 380.4 | 100 | % | $ | 340.4 | 100 | % | ||||||||
Operating
costs
|
(145.4 | ) | -38 | % | (156.5 | ) | -46 | % | ||||||||
Depreciation
expense
|
(36.8 | ) | -10 | % | (29.2 | ) | -9 | % | ||||||||
Selling,
general and administrative expenses
|
(15.8 | ) | -4 | % | (16.5 | ) | -5 | % | ||||||||
Net
gain on property disposals
|
4.7 | 1 | % | 5.4 | 2 | % | ||||||||||
Operating
income
|
$ | 187.1 | 49 | % | $ | 143.6 | 42 | % |
2009
|
2008
|
|||||||||||||||
Amount
|
%
of Revenues
|
Amount
|
%
of Revenues
|
|||||||||||||
Revenues
|
$ | 71.1 | 100 | % | $ | 91.1 | 100 | % | ||||||||
Operating
costs
|
(58.8 | ) | -83 | % | (80.8 | ) | -89 | % | ||||||||
Depreciation
expense
|
(2.2 | ) | -3 | % | (2.4 | ) | -3 | % | ||||||||
Selling,
general and administrative expenses
|
(4.1 | ) | -6 | % | (6.2 | ) | -7 | % | ||||||||
Operating
income
|
$ | 6.0 | 8 | % | $ | 1.7 | 2 | % |
·
|
A
decrease of $16.5 million attributable to $26.1 million of revenues
recognized on three offshore rig kit projects in 2009, as compared to
$42.6 million recognized on six projects in
2008;
|
·
|
A
decrease of $14.1 million attributable to $5.6 million recognized on
shipments of land rigs and component packages in 2009, down from $19.7
million in 2008;
|
·
|
An
increase of $9.0 million attributable to $14.9 million recognized on 18
mud pumps shipped in 2009, up from $5.9 million on nine pumps in
2008.
|
2009
|
2008
|
|||||||||||||||
Amount
|
%
of Revenues
|
Amount
|
%
of Revenues
|
|||||||||||||
Revenues
|
$ | 43.3 | 100 | % | $ | 54.0 | 100 | % | ||||||||
Operating
costs
|
(32.0 | ) | -74 | % | (45.4 | ) | -84 | % | ||||||||
Depreciation
expense
|
(1.5 | ) | -3 | % | (1.5 | ) | -3 | % | ||||||||
Selling,
general and administrative expenses
|
(4.7 | ) | -11 | % | (4.7 | ) | -9 | % | ||||||||
Operating
income
|
$ | 5.1 | 12 | % | $ | 2.4 | 4 | % |
·
|
Worldwide
jack-up utilization is currently 81%, down from about 90% at year-end
2008;
|
·
|
Total
jack-up demand is currently at 358 rigs, off 9% from the September 2008
peak;
|
·
|
Premium
jack-up demand is currently at 259, off 5% from the peak set in December
2008;
|
·
|
There
are 71 jack-ups currently under construction or on order for completion by
2011, most of which do not have drilling contracts in
place.
|
March
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Cash
and cash equivalents
|
$ | 192.8 | $ | 222.4 | ||||
Current
assets
|
$ | 1,297.8 | $ | 1,369.2 | ||||
Current
liabilities
|
$ | 620.3 | $ | 744.6 | ||||
Current
ratio
|
2.09 | 1.84 | ||||||
Current
maturities of long-term debt
|
$ | 64.9 | $ | 64.9 | ||||
Long-term
debt
|
$ | 336.9 | $ | 355.6 | ||||
Stockholders'
equity
|
$ | 2,794.3 | $ | 2,659.8 | ||||
Long-term
debt/total capitalization
|
0.11 | 0.12 |
2009
|
2008
|
|||||||
Net
operating cash flows
|
$ | 77.3 | $ | 108.6 | ||||
Net
change in restricted cash balance
|
- | 50.0 | ||||||
Net
proceeds from asset disposals
|
5.3 | 16.7 | ||||||
Proceeds
from equity compensation and debenture plans and other
|
0.1 | 15.1 | ||||||
Capital
expenditures
|
(93.6 | ) | (156.2 | ) | ||||
Debt
repayments
|
(18.7 | ) | (18.7 | ) | ||||
Cash
dividend payments
|
- | (11.1 | ) | |||||
Total
sources (uses)
|
$ | (29.6 | ) | $ | 4.4 |
·
|
$47.4
million towards construction of four EXL class rigs (see
discussion below)
|
·
|
$19.2
million towards construction of two 240C class rigs,
comprised of $15.6 million for the Ralph Coffman and $3.6
million for the Joe
Douglas (see discussion
below)
|
·
|
$10.3
million for improvements to the existing offshore
fleet
|
·
|
$3.8
million related to construction of two land rigs, one of which was
completed in the first quarter of 2009 with the other expected to be
delivered in late May 2009
|
·
|
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.
|
·
|
demand
for drilling services in the United States and
abroad
|
·
|
demand
for oil, natural gas and other
commodities
|
·
|
oil
and natural gas prices
|
·
|
the
level of exploration and development expenditures by energy
companies
|
·
|
the
willingness and ability of the Organization of Petroleum Exporting
Countries, or OPEC, to limit production levels and influence
prices
|
·
|
the
level of production in non-OPEC
countries
|
·
|
the
general economy, including
inflation
|
·
|
the
condition of the capital markets and global credit
markets
|
·
|
weather
conditions in our principal operating areas, including possible disruption
of exploration and development activities due to hurricanes and other
severe weather conditions
|
·
|
environmental
and other laws and regulations
|
·
|
policies
of various governments regarding exploration and development of their oil
and natural gas reserves
|
·
|
domestic
and international tax policies
|
·
|
political
and military conflicts in oil-producing areas and the effects of
terrorism
|
·
|
advances
in exploration and development
technology
|
·
|
further
consolidation of our customer base
|
|
•
|
costly
delays or cancellations of drilling
operations;
|
|
•
|
serious
damage to or destruction of
equipment;
|
|
•
|
personal
injury or death;
|
|
•
|
significant
impairment of producing wells, leased properties or underground geological
formations; and
|
|
•
|
major
environmental damage.
|
|
•
|
shortages
of equipment, materials or skilled
labor;
|
|
•
|
unscheduled
delays in the delivery of ordered materials and equipment or shipyard
construction;
|
|
•
|
failure
of equipment to meet quality and/or performance
standards;
|
|
•
|
financial
or operating difficulties of equipment vendors or the
shipyard;
|
|
•
|
unanticipated
actual or purported change orders,
|
|
•
|
inability
to obtain required permits or
approvals;
|
|
•
|
unanticipated
cost increases between order and delivery, which can be up to two
years;
|
|
•
|
adverse
weather conditions and other events of force
majeure;
|
|
•
|
design
or engineering changes; and
|
|
•
|
work
stoppages and other labor disputes.
|
|
•
|
The
affirmative vote of 80% of the outstanding shares of our capital stock is
required to approve business combinations with any related person that has
not been approved by our board of directors. We are also subject to a
provision of Delaware corporate law that prohibits us from engaging in a
business combination with any interested stockholder for three years from
the date that person became an interested stockholder unless specified
conditions are met.
|
|
•
|
Special
meetings of stockholders may not be called by anyone other than our board
of directors, our chairman, our executive committee or our president or
chief executive officer.
|
|
•
|
Our
board of directors is divided into three classes whose terms end in
successive years, so that less than a majority of our board comes up for
election at any annual meeting.
|
|
•
|
Our
board of directors has the authority to issue up to 5,000,000 shares
of preferred stock and to determine the voting rights and other privileges
of these shares without any vote or action by our
stockholders.
|
|
•
|
We
have adopted a stockholder rights plan that provides our stockholders
rights to purchase junior preferred stock in certain circumstances,
whereby the ownership of Rowan shares by a potential acquirer can be
significantly diluted by the sale at a significant discount of additional
Rowan shares to all other stockholders, which could discourage unsolicited
acquisition proposals.
|
|
For
|
|
Authority Withheld
|
|
Thomas
R. Hix
|
|
97,399,703
|
1,146,877
|
|
|
||||
Robert
E. Kramek
|
|
96,866,552
|
1,681,027
|
|
|
||||
Frederick
R. Lausen
|
|
97,245,080
|
1,302,500
|
|
|
||||
Lawrence
J. Ruisi
|
|
97,087,617
|
1,459,963
|
|
|
For
|
Against
|
Abstained
|
Broker Non-Vote
|
|||
51,886,011
|
29,639,596
|
2,798,495
|
For
|
Against
|
Abstained
|
Broker Non-Vote
|
|||
96,277,667
|
2,194,896
|
75,016
|
ROWAN
COMPANIES, INC.
|
||
(Registrant)
|
||
Date: May
11, 2009
|
/s/
W. H. WELLS
|
|
W.
H. Wells
|
||
Vice
President - Finance
|
||
and
Chief Financial Officer
|
||
Date: May
11, 2009
|
/s/
GREGORY M. HATFIELD
|
|
Gregory
M. Hatfield
|
||
Controller
|
||
(Chief
Accounting
Officer)
|