<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
ROWAN COMPANIES, INC.
Incorporated in Delaware Commission File I. R. S. Employer
Number 1-5491 Identification: 75-0759420
5450 Transco Tower
2800 Post Oak Boulevard, Houston, Texas 77056-6196
Registrant's telephone number, including area code: (713) 621-7800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------------------ ---------------------
Common Stock, $.125 Par Value New York Stock Exchange
Pacific Stock Exchange
11-7/8% Senior Notes due 2001 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The aggregate market value as of February 23, 1994 of the Common Stock
held by non-affiliates of the registrant was approximately $612 million.
The number of shares of Common Stock, $.125 par value, outstanding at
February 23, 1994 was 83,897,987.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
-------- -----------------
Annual Report to Stockholders for
fiscal year ended December 31, 1993 Parts I, II and IV
Proxy Statement for the 1994 Annual
Meeting of Stockholders Part III
<PAGE> 2
TABLE OF CONTENTS
PART I Page
Item 1. Business ............................................ 1
Contract Drilling .......................................... 2
Offshore Operations ..................................... 2
Onshore Operations ...................................... 3
Contracts ............................................... 4
Competition ............................................. 5
Regulations and Hazards ................................. 6
Aircraft Operations ........................................ 7
Contracts ............................................... 9
Competition ............................................. 9
Regulations and Hazards ................................. 9
Manufacturing Operations.................................... 10
Raw Materials............................................ 11
Competition.............................................. 12
Regulations and Hazards.................................. 12
Employees .................................................. 13
Item 2. Properties .......................................... 14
Drilling Rigs .............................................. 14
Aircraft ................................................... 17
Manufacturing Facilities.................................... 17
Item 3. Legal Proceedings ................................... 18
Item 4. Submission of Matters to a Vote of Security Holder... 18
Additional Item. Executive Officers of the Registrant ........ 18
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters ............................... 20
Item 6. Selected Financial Data ............................. 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............... 20
Item 8. Financial Statements and Supplementary Data ......... 20
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ............... 20
PART III
Item 10. Directors and Executive Officers of the Registrant... 20
Item 11. Executive Compensation .............................. 20
Item 12. Security Ownership of Certain Beneficial Owners
and Management .................................... 21
Item 13. Certain Relationships and Related Transactions ...... 21
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ............................... 21
<PAGE> 3
PART I
ITEM 1. BUSINESS
Rowan Companies, Inc.(the "Company"), organized in 1947 as a Delaware
corporation and a successor to a contract drilling business conducted since
1923 under the name Rowan Drilling Company, Inc., is engaged principally in the
contract drilling of oil and gas wells in domestic and foreign areas. As noted
below, it also provides aircraft services and, since February, 1994, has
operated a mini-steel mill, a heavy equipment manufacturing operation and a
marine rig construction yard through the purchase of the net assets of Marathon
LeTourneau Company.
Offshore operations of the Company consist primarily of contract
drilling services utilizing mobile rigs, principally a fleet of 20
self-elevating drilling platforms ("jack-up rigs"), including three heavy duty
cantilever jack-up rigs ("Gorilla Class rigs") delivered in the 1984-86 period.
Beginning in 1992, the Company has moved towards Total Project Management, an
approach to drilling operations which emphasizes drilling and completing wells
on a turnkey basis. In that same year it began providing offshore platform
installation and removal services.
The Company provides contract and charter helicopter and fixed-wing
aircraft services. In Alaska and in the Gulf of Mexico, services provided are
primarily to support oil and gas related operations, with the Company's fleet
consisting on March 1, 1994 of 94 helicopters and 15 fixed-wing aircraft.
Since 1991, the Company has owned a 49% interest in a Dutch-based joint venture
company, KLM ERA Helicopters B.V. ("KLM ERA"), which owns a fleet consisting of
10 helicopters in the Dutch and British sectors of the North Sea and one
helicopter in Canada.
On February 11, 1994, the Company purchased through its wholly-owned
subsidiary, LeTourneau, Inc., the net assets of Marathon LeTourneau Company for
$52.1 million with $10.4 million cash paid at the time of the purchase and the
balance being seller-financed by promissory notes bearing interest at 7% and
payable at the end of five years. LeTourneau, Inc. operates a mini-steel mill
that recycles scrap and produces alloy steel and steel plate; a manufacturing
facility that produces heavy equipment for the mining, timber and material
handling industries including, among other things, front-end loaders up to 50
ton-capacity and trucks under the registered trademark, Titan, up to 240 ton
capacity; and a marine division that has built over one-third of all mobile
offshore jack-up drilling rigs, including all 20 operated by Rowan.
Information regarding revenues, operating profit, identifiable assets
and export sales of the Company's industry segments and foreign and domestic
operations for each of the three years in the period ended December 31, 1993,
is incorporated by reference herein and provided in Footnote 10 of the Notes to
Consolidated Financial Statements on page 25 of the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1993 ("Annual Report"),
incorporated portions of which are filed as Exhibit 13 hereto. Information on
the Company's manufacturing segment is not provided since the purchase occurred
after year-end 1993.
In the years 1991, 1992 and 1993, the Company had revenues from
individual customers representing more than 10% of consolidated revenues as
follows: Conoco, Inc. - 23% and 11% for 1991 and 1992, respectively; and Shell
Oil Company - 12% for 1991 and Phillips Petroleum Company - 17% for 1993. Such
revenues were primarily from drilling operations.
For a discussion of the Company's availability of funds for future
operations and estimated capital expenditures for 1994 which would be in
addition to the $52.1 million purchase of the net assets of Marathon
LeTourneau, see "Liquidity and Capital Resources" under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 14 of the Annual Report, which information is incorporated herein by
reference.
-1-
<PAGE> 4
CONTRACT DRILLING
In 1993, drilling operations generated an operating profit (income from
operations before deducting general and administrative expenses) of $19.1
million.
Offshore Operations
At December 31, 1993, the Company's drilling fleet consisted of 20
deep-water jack-up rigs (eight conventional and twelve cantilever, including
three Gorilla Class rigs in the latter category), one semi-submersible rig and
three submersible barge rigs. The Company owns all of the rigs comprising its
fleet except for two cantilever jack-up rigs leased under sale/leaseback
arrangements expiring in 1999 and 2000.
Since completing a major drilling rig expansion program conducted in
the early to mid-1980s, the Company's capital expenditures have been primarily
for improvements to existing drilling rigs and the purchase of aircraft.
Adding to these capital expenditures was the November 1991 acquisition of the
49% interest in KLM ERA and the February 1994 purchase of the net assets of
Marathon LeTourneau. See ITEM 2. PROPERTIES on page 14 of this Form 10-K for
additional information with respect to the operating status of the Company's
rigs.
The Gorilla Class rigs are a heavier class of jack-up rig, intended to
drill up to 30,000 feet in water depths up to 328 feet in extreme hostile
environments (winds up to 100 miles per hour and seas up to 90 feet). Each
Gorilla Class rig is equipped with a "top drive", a drilling system costing
approximately $1.25 million which assists in faster drilling while reducing the
hazard of the drill string sticking, and is particularly advantageous in the
case of horizontal drilling.
Of the Company's other jack-up rigs, six Class 116-C rigs and one Class
116 rig have been modified to provide (but to a lesser extent than Gorilla
Class rigs) the capability of operating in hostile environments. The Company's
nine Class 116-C jack-up rigs, two Class 116 jack-up rigs, two Class 84
jack-up rigs and one Class 52 jack-up rig have been equipped with top drive
drilling systems.
In 1989, the Company acquired a patent (U. S. patent No. 4,103,503)
applicable to the transfer of a drilling rig substructure from a jack-up type
drilling unit to a fixed platform. In conjunction with technology contained in
the patent, the Company has developed additional substructure transfer or "skid
base" technology which has allowed the Company's conventional jack-up rigs to
work over wells on a production platform that heretofore required a cantilever
jack-up or platform rig. At March 31, 1994, two Class 116 jack-up rigs, two
Class 84 jack-up rigs and one Class 52 jack-up rig have each been equipped with
a skid base unit.
In 1992,the Company purchased a 550-ton ABS certified crane and formed
a new subsidiary for conducting offshore platform installation and removal
services. Utilizing the skid base technology discussed above, the drilling
package on a jack-up rig can be skidded off to allow the heavy-lift crane to be
skidded on thereby transforming the unit into a crane barge or, reversing the
process, transforming the unit back into a drilling rig. The Company has
applied for a patent to cover such technology. At March 31, 1994, one Class 52
jack-up rig had been modified to provide this dual purpose capability and is
able to operate in water depths up to 225 feet.
In the last three years, the Company's rigs located in the North Sea
have undergone modifications in order to meet new offshore safety standards
being implemented in the United Kingdom. Modifications remaining to be made to
the Company's four Class 116-C jack-ups and one Gorilla Class jack-up presently
in the North Sea are being deferred pending the finalization of the United
Kingdom safety standards. Some of the safety standards under government
consideration, many of which the Company has already modified its North Sea
rigs to meet, are as follows: a minimum of two independent sources of sea water
for firefighting;
-2-
<PAGE> 5
a temporary safe refuge for personnel near the escape capsules which will
provide a high degree of protection from fire, smoke and gas inhalation and
will contain additional safety, communication and survival gear; additional
enclosed motorized escape capsules; and expanded smoke and gas protection in
the crew quarters. Because of continued market weakness in the North Sea, the
Company moved one Gorilla Class jack-up, one Class 116-C jack-up and one Class
116 jack-up to other drilling markets in 1992.
Since 1970, the Company has pursued a policy of concentrating on
jack-up rigs. Jack-ups are utilized for both offshore exploratory and
development drilling and, in certain areas, for well workover operations. The
Company operates larger deep-water type jack-up rigs capable of drilling to
depths of 20,000 to 30,000 feet in maximum water depths ranging from 225 to 450
feet, depending on the size of the rig and its location. A jack-up rig
consists of a floating hull with three independently elevated legs. The
Company's rigs are equipped with propulsion thrusters to assist in towing. The
entire drilling unit, consisting of the drilling rig, supplies, crew quarters,
loading and unloading facilities, helicopter landing deck and other related
equipment, is mounted on the hull. At the drilling site, the legs are lowered
until they penetrate the ocean floor, and the platform hull is jacked up on the
legs to the desired elevation above the water. The platform hull then serves
as a drilling platform until the well is completed and the operation is
reversed by lowering the platform hull to the water and towing it to the next
drilling site. The cantilever feature contained on the Company's newer
jack-ups provides for the extension of the portion of the drilling platform
containing the drilling rig over fixed production platforms so that the
drilling rig may be utilized to perform development or workover operations on
the platforms with a minimum of interruption to production.
The Company's semi-submersible rig is utilized principally for offshore
exploratory drilling from a floating position in waters to depths of 1,000
feet. A semi-submersible drilling rig consists of a drilling platform raised
above multiple hulls by columns. The hulls are flooded so as to be submerged
beneath the surface, in which position the rig is anchored during drilling
operations. The same type of equipment which is contained on a jack-up rig is
mounted on the drilling platform. After completion of the well, the submerged
hull is deballasted to reduce vessel draft and facilitate towing, assisted by
its own thrusters, to another drilling location.
The Company's submersible barge rigs are used in shallow coastal and
inland waters in depths up to 26 feet for exploratory, development and workover
drilling. A submersible barge rig consists of a drilling rig with crew
quarters mounted on an elevated platform on top of a floating hull. At the
drilling site the hull is flooded so that it rests on the bottom and the
elevated platform protruding above the water serves as a stationary drilling
platform.
Onshore Operations
The Company has drilling equipment, personnel and camps available on a
contract basis for exploration and development of onshore areas. It currently
owns 17 land rigs located as follows: seven deep-well rigs in the Anadarko and
Permian basins of Oklahoma and Texas, five winterized rigs in Alaska, three
smaller rigs in Venezuela and two deep-well rigs previously located in
Venezuela which are currently being transported back to the United States. See
page 16 of this Form 10-K for information included under ITEM 2. PROPERTIES
concerning drilling depth ranges of the Company's land rigs.
In early 1991, the Company located five land rigs in Venezuela to work
on a three-year contract. It is anticipated that all of these rigs will be
returned to the United States during the first half of 1994. Except for one
winterized land rig in Alaska that worked in the first quarter of 1992, another
that worked in the first quarter of 1993 and another that began work in January
1994, the deep-well land rigs located in Texas, Oklahoma and Alaska have been
idle since mid-1988 due to inadequate rates. Accordingly, the Company has
"mothballed" 10 of these 12 rigs. The cost of maintaining these rigs is modest
-3-
<PAGE> 6
and the remaining investment in the rigs is not significant.
The drilling equipment comprising an onshore rig consists basically of
engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid,
drill pipe and drilling bits. The type of rig required by a customer depends
upon the anticipated well depth, terrain and conditions in the drilling area.
Contracts
The Company's policy with regard to day rates and contract durations
depends upon the prevailing strength or weakness of the market. During periods
when the offshore rig markets are weak and declining rates prevail, the Company
generally pursues a policy of entering into lower rate contracts to remain in a
competitive position and to offset the substantial cost of maintaining stacked
rigs. During those times when the markets are strong and increasing rates
prevail, the Company's policy is generally one of negotiating short rather than
long-term contracts for its offshore rigs because such policy allows the
Company to maximize its ability to obtain the benefit of rate increases and to
pass through cost increases to customers.
The Company's drilling contracts are obtained either through
competitive bidding or individual negotiations. Rates obtained depend upon the
type of equipment used, its availability and its location, as well as the type
of operations involved. Both offshore and onshore contracts for use of the
Company's drilling equipment are "well-to-well", "multiple well" or, except for
work done on a turnkey basis, for a fixed term generally ranging from four to
twelve months. Well-to-well contracts are cancelable at the option of either
party upon completion of drilling at any one site, and fixed-term contracts
customarily provide for termination by either party if drilling operations are
suspended for extended periods by events of force majeure. While most current
fixed-term contracts are for relatively short periods, some fixed-term and
well-to-well contracts continue for a longer period than the original term or
for a specific series of wells. Contracts, particularly those for offshore
operations, generally contain renewal or extension provisions exercisable at
the option of the customer at prices mutually agreeable to the Company and the
customer and, in some cases, provide for additional payments for mobilization
and demobilization. Most of the Company's current drilling contracts in the
North Sea are well-to-well contracts lasting 60-90 days, while most of the
Company's current contracts in the Gulf of Mexico are well-to-well contracts
lasting 30-45 days.
The Company's drilling contracts, other than those for work done on a
turnkey basis, provide for drilling compensation on a day rate basis with lower
rates prevailing when the equipment is not actually engaged in drilling
operations. In the case of contracts for work done on a turnkey basis, the
Company's compensation is contingent on the Company successfully drilling a
well to a specified depth for a fixed price. In the event certain operational
problems occur which cause the Company to be unable to reach the specified
turnkey depth, the Company may not be entitled to any portion of the turnkey
price thereby causing it to absorb substantial out-of-pocket expenses. For
this reason, wells drilled on a turnkey basis generally involve greater
economic risk to the Company than wells drilled on a day rate basis. Contracts
for work in foreign countries generally provide for payment in United States
dollars except for minimal amounts required to meet local expenses.
Contracts for platform installation and removal services typically
contain the same types of provisions and features described herein for drilling
contracts.
The Company believes that the contract status of its onshore and
offshore rigs is more informative than backlog calculations, and that backlog
information is neither calculable nor meaningful given the cancellation options
contained in, and the short duration of, fixed-term contracts and the
indeterminable duration of well-to-well and multiple well contracts. See ITEM
2. PROPERTIES on page 14 of this Form 10-K for the contract status of rigs as
of March 31, 1994.
-4-
<PAGE> 7
Competition
The Company encounters continual competition in securing domestic and
foreign drilling contracts from approximately 31 offshore drilling contractors
operating or having available to operate about 596 mobile rigs, approximately
17 major domestic drilling contractors operating or having available to operate
about 60 land rigs in the deep-well market of the Permian and Anadarko Basins,
and seven domestic drilling contractors operating or having available to operate
about 30 winterized land rigs on the Alaskan North Slope. The Venezuelan land
rig market is currently in a state of expansion, thereby causing the numbers of
contractors and rigs to be indeterminable. Some of the Company's competitors
with greater financial and other resources may be in a better position than the
Company to make the continuous capital investments required to make
technological improvements to existing equipment or to replace equipment that
becomes obsolete. Furthermore, a few of the Company's competitors have been
substantially relieved of debt burdens by bankruptcy proceedings.
Technological advances in equipment, particularly offshore equipment,
may cause older equipment having lower capital costs to be less suitable for
some proposed drilling operations. As a result, the Company carried out over
the 1980-1986 period a drilling rig expansion program and over the 1987-1993
period a drilling rig modification program, both designed to provide the
Company's fleet with jack-ups reflecting recent technological advancements and
which generally meet known government-imposed safety and pollution control
requirements.
The offshore markets in which the Company competes are chosen on the
basis of those which offer the greatest market potential and are generally
located in the more politically stable areas of the world. Accordingly, since
1989 the Company has moved drilling rigs from one offshore market to another as
follows: one Class 116-C jack-up rig from the North Sea to Southeast Asia in
1990 and then to Alaska in 1993; one Gorilla Class rig from the Gulf of Mexico
to offshore eastern Canada in 1990; one submersible barge rig from the Gulf of
Mexico to Gabon, West Africa in 1991 and back to the Gulf of Mexico in 1992;
one Class 116 jack-up rig from the Gulf of Mexico to the North Sea and back to
the Gulf of Mexico, both in 1992; one Class 116-C jack-up rig from the North
Sea to the Gulf of Mexico in 1992; one Gorilla Class rig from the North Sea to
Trinidad in 1992; one Class 52 jack-up rig from the Gulf of Mexico to Colombia
in 1992 and back to the Gulf of Mexico in 1993; and two submersible barges from
Southeast Asia to the Gulf of Mexico in 1993. The one class 116-C rig in
Alaska is now being relocated to the Gulf of Mexico. Relocation of drilling
rigs from one geographic location to another is dependent upon changing market
dynamics with moves occurring only when the likelihood of higher returns makes
such action economical. At March 30, 1994, 12 jack-ups were located in the
Gulf of Mexico, five jack-ups were located in the North Sea, one jack-up was
located offshore eastern Canada, one jack-up was located offshore Trinidad, one
semi-submersible rig was located in the Gulf of Mexico and three submersible
barges were located in the Gulf of Mexico. Additionally, one jack-up rig was
under tow from Alaska to the Gulf of Mexico.
A number of factors affect a drilling contractor's ability both onshore
and offshore to obtain contracts at a profitable rate within an area. Such
factors include the location and availability of equipment, its suitability for
the project, the comparative cost of the equipment, the competence of personnel
and the reputation of the contractor. The ability to obtain a profitable rate
of return is also dependent upon receiving adequate rates to compensate for
the added cost of moving equipment to drilling locations. See "Contracts"
beginning on page 4 of this Form 10-K concerning the pricing policies pursued
by the Company under various market conditions.
The Company markets its drilling services by directly contacting
present and potential customers, including large international energy
companies, many smaller energy companies and foreign government-owned or
controlled energy companies. Downsizings by major energy companies, coupled
with the significant reductions of exploration by such companies in offshore
U.S. waters, have resulted in the Company adapting its marketing efforts such
that increasing
-5-
<PAGE> 8
emphasis is placed on targeting small independent operators. Because the
exploration activities of the Company's present and potential customers are
impacted by state, federal and foreign regulations associated with the
production and transportation of oil and gas, the demand for the Company's
drilling services is impacted accordingly.
In the case of offshore platform installation and removal services, the
Company competes against approximately 12 contractors operating or having
available to operate about 21 mobile derrick barges in the Gulf of Mexico
market. The Company is the only provider of such services offering a crane
mounted on a jack-up rig as opposed to a barge. Because the Company is a
relatively new entrant in this field, many of the Company's competitors have
the advantage of having offered these services for a longer period of time,
including the benefits of established technological know-how and more extensive
customer bases.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 12 through 14 of the Annual Report, the
information under which caption is incorporated herein by reference, for a
discussion of current industry conditions and their impact on operations.
Regulations and Hazards
The offshore and onshore operations of the Company are subject to many
hazards. In the drilling business, inherent hazards include blowouts and well
fires, which could cause personal injury, suspend drilling operations,
seriously damage or destroy the equipment involved and cause substantial
damage to producing formations and the surrounding areas. Offshore drilling
operations and platform installation and removal operations are also subject to
the hazards incident to marine operations, either on site or while under tow,
such as capsizing, collision or grounding. Raising and lowering the legs of
jack-up rigs into the ocean bottom and ballasting semi-submersible units
require skillful handling to avoid capsizing or other serious damage. Drilling
deviated holes into high pressure formations is a complex process and problems
frequently occur. The process of removing platforms and caissons using
underwater explosives involves substantial risks and requires a significant
amount of skillfulness in order to confine the resulting destruction to the
intended areas.
The Company believes that it is adequately insured for physical damage
to its rigs and aircraft, and for marine and aviation liabilities, workers
compensation, Maritime Employees Liability, automobile liability and for
various other types of exposures customarily encountered in providing the
Company's services. Certain of the Company's liability insurance policies
specifically exclude coverage for fines, penalties and punitive or exemplary
damages. Under current conditions, the Company anticipates that its present
insurance coverage will be maintained, but no assurance can be given that
insurance coverage will continue to be available at rates considered
reasonable, that self-insured amounts or deductibles will not increase or that
certain types of coverage will be available at any cost.
Foreign operations are subject to certain political, economic and other
uncertainties not encountered in domestic operations, including risks of
expropriation of equipment as well as expropriation of a particular energy
company operator's property and drilling rights, taxation policies, foreign
exchange restrictions, currency rate fluctuations and the general hazards
associated with foreign sovereignty over certain areas in which operations are
conducted. The Company attempts to minimize the risk of currency rate
fluctuations by generally denominating contract payment terms in United States
dollars.
Many aspects of the operations of the Company are subject to government
regulation, including those relating to equipping and operating vessels,
drilling practices and methods and the level of taxation. In addition, various
countries (including the United States) have regulations relating to
environmental protection and pollution control affecting drilling operations.
Recent events have also increased the sensitivity of the oil and gas industry
to environmental
-6-
<PAGE> 9
matters. The Company may be liable for damages resulting from pollution of
offshore waters and, under United States regulations, must establish financial
responsibility. Generally, the Company is substantially indemnified under
drilling contracts compensated on a day rate basis from pollution damages,
except in certain cases of pollution emanating above the surface of land or
water from spills of pollutants, or in the case of pollutants emanating from
the Company's drilling rigs, but no assurance can be given regarding the
enforceability of such indemnification provisions.
Energy taxation policies by governments can have direct and indirect
effects on the Company operations in the countries involved. In the United
Kingdom, changes in the Petroleum Revenue Tax that would reduce energy company
deductions for exploratory drilling but reduce taxes on production from
development drilling has contributed to a decline in the North Sea drilling
market. In the United States, energy tax legislation proposed by the Clinton
Administration in mid-1993 could possibly cause a reduction in demand for oil
and gas and, therefore, for the Company's services depending upon the final
terms of such legislation, if passed.
In performing a contract for work done on a turnkey basis, the Company
is normally responsible for certain risks that would customarily be assumed by
the customer under a contract compensated on a day rate basis. These risks
include liability for pollution resulting from a blowout or uncontrolled flow
from the well bore, an underground blowout, the cost of controlling a wild well
and the expense to redrill a well which has blown out. The Company carries
insurance to cover such risks and generally obtains an indemnity from its
customers with respect to liabilities exceeding the amount of insurance carried
by the Company.
The Company believes that it complies with all material legislation and
regulations affecting its operations in the drilling of oil and gas wells, and
in controlling the discharge of wastes. To date the Company has made
significant modifications to its rigs located in the Gulf of Mexico in order to
reduce waste and rain water discharge from such rigs and believes that it could
operate those rigs at "zero discharge" without material additional
expenditures. Other than these expenditures and those relating to the
previously discussed United Kingdom safety standards, compliance has not, to
date, materially affected the capital expenditures, earnings or competitive
position of the Company, although these measures add to the costs of operating
drilling equipment in some instances, and in others they may operate to reduce
drilling activity. Further legislation or regulation may reasonably be
anticipated, but the effects thereof on operations cannot be predicted.
The Company is subject to the requirements of the federal Occupational
Safety and Health Act ("OSHA") and comparable state statutes. The OSHA hazard
communication standard, the Environmental Protection Agency "community
right-to-know" regulations under Title III of the Federal Superfund Amendment
and Reauthorization Act and comparable state statutes require the Company to
organize and report certain information about the hazardous materials used in
its operations to employees, state and local government authorities, and local
citizens.
AIRCRAFT OPERATIONS
The Company provides charter and contract helicopter and fixed-wing
aircraft services principally in Alaska, the coastal areas of Louisiana and
Texas, and the western United States. In Alaska, a diversified range of
services has been developed to include tourism, commercial fishing crew changes
and medical evacuation as well as support for wildfire suppression, mining
operations and seismic testing. Additionally, the fixed-wing division of the
Company conducts scheduled airline service between several cities from a hub in
Anchorage and to 18 villages from a hub in Bethel Alaska. Services provided
offshore Louisiana and Texas are primarily to oil and gas related industries.
In the western United States, the majority of helicopter services are provided
to governmental agencies in support of wildfire suppression and to a lesser
extent support of construction, seismic testing and onshore and offshore oil
field
-7-
<PAGE> 10
support. The Company also provides airborne environmental survey services.
In 1991, the Company acquired a 49% interest in KLM Helikopters B.V., a
wholly-owned subsidiary of KLM Royal Dutch Airlines, as a means of gaining
access to the North Sea aviation market. The joint venture company, renamed
KLM ERA Helicopters B.V., currently owns 11 helicopters and leases two others.
Operating locations and the numbers of helicopters deployed at March 1, 1994
were as follows: nine in the Dutch sector of the North Sea, two in Croatia, one
in Canada and one in the British sector of the North Sea, which helicopter is
leased to a wholly-owned subsidiary of KLM ERA. KLM ERA serves principally
the offshore oil and gas drilling, production and service companies operating
in the Dutch Sector of the North Sea.
Based on the number of helicopters operating, the Company is the
largest helicopter operator in Alaska. It provides charter services from bases
at Anchorage, Deadhorse (on the North Slope), Fairbanks, Juneau, Kenai and
Valdez. The Company's charter and contract services are provided throughout
Alaska with particular emphasis in the oil and mining regions within the state.
Helicopters and fixed-wing aircraft are usually operated on a seasonal
basis in Alaska because of the prevalent climatic conditions. The peak
utilization period in Alaska is May through September, with the winter months
comprising the least active period. The seasonal nature of the Alaska
business has been ameliorated in prior years by moving helicopters on a limited
basis to the Gulf of Mexico area and, more recently, moving helicopters to the
West and Northwest regions of the United States and various overseas locations.
Since 1983, the Company has operated a scheduled commuter airline
service in Alaska encompassing the movement of passengers, mail and cargo. The
Company currently serves Valdez, Kenai, Homer, Kodiak, Iliamna and Cordova
from its base hub in Anchorage. In addition, it services 18 remote villages
from its hub in Bethel, Alaska. The Company operates under a code sharing
agreement with Alaska Airlines which is the largest carrier of passengers from
the contiguous United States to Alaska. The Company's commuter airline is the
largest airline operation of that type within the state of Alaska and is the
5th largest carrier of passengers into and out of the Anchorage International
Airport, including the large jet carriers.
Since 1979, the Company has been providing charter and contract
helicopter services in the Gulf of Mexico area primarily to the offshore oil
and gas industry. Operations are conducted from the division office in Lake
Charles, Louisiana and from bases in the Louisiana cities of Morgan City,
Cameron, New Iberia, Intracoastal City, Venice, Fourchon and Houma and the
Texas cities of Sabine Pass and Houston. Based upon the number of helicopters
operating, the Company is the third largest helicopter operator in the Gulf of
Mexico.
In 1987, upon receiving FAA certification, the Company began
manufacturing and marketing, from its Gulf Coast Division facility at Lake
Charles, Louisiana, a composite external auxiliary fuel tank for use on Bell
205, 212 and 412 helicopters and the military "Huey" helicopter. The tank
system provides enhanced range with nominal drag while increasing the passenger
seats available. Sales to date have been to both military and civilian
customers. Other aircraft accessories are also manufactured at the facility.
In June 1990, the Company expanded its airborne environmental service
capabilities by acquiring the patents, rights and equipment relating to two
unique airborne remote sensing technologies - an Airborne Ground Penetrating
Radar ("AGPR") and an Airborne Cathodic Monitoring System ("ACMS"). The AGPR
system is used primarily for the detection of subsurface contaminants,
including free hydrocarbons. In addition, the system can be used for finding
subsurface coal veins, water tables and tunnels, drums, tanks and other
man-made objects. The ACMS system is used to provide an early warning of
potential corrosion failure of underground pipelines. Mounted on a helicopter,
this system can survey up to 300 miles of pipeline per day and provides a
substantial cost savings compared to conventional techniques. Both services
are marketed from the
-8-
<PAGE> 11
Company's Santa Maria, California facility.
As previously noted, the Company has operated helicopters in various
overseas locations,including Croatia and Macedonia where the company had six
owned and two 49%-owned helicopters working for the United Nations at year-end
1993.
In 1993, aviation operations generated an operating profit(income from
operations before deducting general and administrative expenses) of $2.2
million.
Contracts
The Company's flight services generally are engaged by customers by
entering into master service agreements, term contracts or day-to-day charter
arrangements. Master service agreements provide for incremental payments based
on usage, in some instances with fixed terms ranging from one month to one
year, and are cancelable upon notice by either party in 30 days or less. Some
contracts are not cancelable by either party and generally provide for
payments, depending upon the term, as follows: less than one month - either
incremental payments based on usage or incremental payments based on usage plus
a base daily rental; and one month to one year - incremental payments based on
usage plus a base monthly rental. Under day-to-day charters, the compensation
arrangement is the same as that of term contracts having a term of less than
one month. Payment, duration and cancellation features of the agreements,
contracts and charter arrangements used by KLM ERA are similar in nature and in
principle to those used in the Company's domestic operations. Because master
service agreements and day-to-day charters are the most common types of
engagements for its flight services, the Company believes that the contract
status of its aircraft as discussed in the following paragraph is more
informative than backlog information, which it believes is neither calculable
nor meaningful.
Company owned aircraft available for contract use and day charters on
March 1, 1994 consisted of 94 helicopters (of which 54 were based in Alaska and
40 in the Gulf of Mexico area) and 16 fixed-wing aircraft that were based in
Alaska. The contract status as of March 1, 1994 consisted of: 27 master
helicopter service agreements and 26 aircraft term contracts (23 helicopters
and 3 fixed-wing aircraft). The remaining aircraft were being operated under
day charters or were available for operation under day charter or contract
arrangements.
KLM ERA owned aircraft available for contract use and day charters on
March 1, 1994 consisted of 9 helicopters based in The Netherlands, one in Great
Britain and one in Canada. The contract status of such aircraft as of March 1,
1994 consisted of: five master service agreements and six term contracts.
Competition
Although the Company maintains the largest helicopter operation in
Alaska in terms of numbers of aircraft and revenues, it encounters intense
competition from several other companies which furnish similar services.
Approximately six other operators compete directly with the Company in Alaska
on a contract or charter basis. The Company competes over its scheduled
airline routes with up to four other carriers. In the Gulf of Mexico area, the
Company competes directly with five other operators and ranks third in the
number of helicopters operating with approximately 6% of the market. A number
of other helicopter operators compete with the Company in the West and
Northwest regions of the United States and in overseas locations.
At present, KLM ERA has only one competitor in the Dutch sector of the
North Sea. KLM ERA's share of this helicopter market is estimated to be in
excess of 65%.
Regulations and Hazards
The operation of scheduled airline services in the United States requires
-9-
<PAGE> 12
a certificate under the Federal Aviation Act of 1958, as presently
administered by the Department of Transportation. The granting of a
certificate is conditioned upon a showing of financial ability and operational
expertise. A similar certificate authorizing the right to operate a charter
service is not required by any jurisdiction in the Company's operating areas.
KLM ERA holds the necessary certificates for operating aircraft in The
Netherlands and, since June 1993, in the U.K sector of the North Sea. Other
operating certificates will be obtained on a case by case basis depending upon
the contracts to be awarded.
Operation of helicopters and fixed-wing aircraft, particularly under
weather conditions prevailing in Alaska, is considered potentially hazardous,
although the Company conducts rigorous safety training programs to minimize
these hazards. The Company believes that it is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment, but carries no insurance against loss of earnings.
Although the area of Croatia in which the Company's helicopters are
flying for the United Nations is not a combat area at present, the region is
highly unstable.
The Company believes that KLM ERA is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment.
MANUFACTURING OPERATIONS
As previously noted, LeTourneau, Inc. ("LeTourneau"), a wholly-owned
subsidiary of the Company, completed on February 11, 1994 the acquisition of
the net assets of Marathon LeTourneau Company, which is headquartered in
Longview, Texas. As more fully detailed below, LeTourneau operates a
manufacturing facility that produces heavy equipment, a mini-steel mill that
recycles scrap and produces alloy steel and steel plate and a marine division
that has built over one-third of all mobile offshore jack-up drilling rigs,
including all 20 operated by the Company. The company holds a number of
patents on its inventions and the "LeTourneau" name is considered to be
significant to LeTourneau's manufacturing operation.
The mining equipment product line of LeTourneau includes off-road
trucks under the registered trademark Titan with capacities of 190, 200 and 240
tons and loaders with bucket capacities of 17,22 and 33 cubic yards.
LeTourneau's loaders and Titan trucks are generally used in coal, gold, copper,
iron ore and other mines. Both the loaders and the trucks utilize the
LeTourneau diesel electric-drive systems and solid state controls. The primary
benefit of the diesel electric-drive system is to allow large, mobile equipment
to stop, start and reverse without gear shifting and high maintenance braking.
LeTourneau loaders can load Marathon LeTourneau Titan rear-dump trucks and
competitive trucks in the 85 ton to 240 ton size range. LeTourneau's mining
equipment and parts are distributed through a world-wide network of independent
distributors and a captive distribution company serving the Western United
States.
The timber equipment product line includes diesel electric powered
log-stackers available in two or four wheel drive with capabilities from 40 to
65 tons. LeTourneau is the only heavy equipment manufacturer that manufactures
and sells a diesel electric jib crane that is available in capacities from
25,000 to 52,000 lbs. with a 360 degree rotating arm possessing a reach
capability from 100 to 150 feet. The forestry products line also includes a
harvester, which is a small machine which strips the limbs and slices them into
predetermined lengths and a prehauler, which is used behind the harvester to
load and carry up to four tons of cut logs on its frame. Forestry equipment is
marketed through independent distributors in North America and a captive
distribution company in the Northwestern United States.
LeTourneau's material handling equipment line includes the manufacture and
-10-
<PAGE> 13
sale of 50 ton capacity, diesel electric, single beam cranes and large forklift
type vehicles called side porters used for lifting, moving or stacking large
shipping containers at ports worldwide and North American rail yards that have
converted terminals for the handling of containers. Cranes equipped with a
spreader can lift containers from the top and also have retractable arms which
are used in loading and unloading piggyback trailers. Cranes not having a
spreader can span up to seven rows plus a truck aisle and stack 9 ft. 6 in.
containers up to five high. Container handling equipment are also marketed
through independent distributors in North America and a captive distribution
company in the Northwestern United States.
LeTourneau also sells parts and components to repair or retrofit
mining, timber and material handling equipment previously sold to others.
Sales include parts and components which are common, such as bearings, and
those which are unique to the LeTourneau electric drive and electronic control
systems. Equipment parts are marketed through seven dealers in the United
States with over 20 parts stocking branches, three dealers in Canada with over
15 parts stocking branches, and 24 international dealers with over 25 parts
stocking locations.
LeTourneau's mini-steel mill located in Longview, Texas produces carbon
and alloy plate products. The company concentrates on the alloy markets due to
its capability to service "niche" markets that require alloy, specialty steel
grades, or "exotic" versions of carbon steel products which include mold
steels, tool steels, aircraft quality steels, stainless steel and Hydrogen
Induced Cracking steels. External steel sales, which are garnered through a
direct sales force of company employees, consist primarily of steel plate, but
also include forging ingots and value-added fabrication of steel products.
Steel products are generally sold to steel service centers, fabricators,
manufacturers, forge shops and brokers. The market for carbon steel plate
products and fabricated products is regional and encompasses Texas, Oklahoma,
Louisiana, Mississippi and Arkansas. The Steel Group ships alloy and specialty
grades of plate products nationally and exports quantities to Mexico and
Canada. The forging ingot market is concentrated in the Gulf Coast region of
Texas. Carbon and alloy plate products are also used internally in the
production of heavy equipment and parts.
LeTourneau's marine division has a shipyard in Vicksburg, Mississippi
for the construction of mobile self-elevating offshore drilling platforms.
LeTourneau has built over one-third of all mobile offshore jack-up drilling
rigs, including all 20 operated by the Company utilizing this and other
shipyards. The marine division has the capability of providing engineering
support and spare parts to the drilling industry. This facility is currently
closed, and the ongoing rig component manufacturing and marine repair service
businesses, as well as a marine design engineering business, have been
relocated to the Longview, Texas facility.
LeTourneau's firm backlog for all of its product lines at February 11,
1994, the date of the acquisition, was approximately $14 million.
Marathon LeTourneau, the company whose net assets were acquired,
engaged in a limited amount of research and product development, primarily to
develop larger capacity trucks and loaders used in the mining industry. The
Company is currently evaluating the LeTourneau product and service lines with
the intention of making enhancements.
Raw Materials
The principal raw material utilized in LeTourneau's manufacturing
operations is steel plate, most of which is supplied at favorable rates by
LeTourneau's mini -teel-mill. Other required materials are generally available
in sufficient quantities through purchases in the open market to meet the
manufacturing needs of the Company. LeTourneau does not believe that it is
dependent on any single supplier.
-11-
<PAGE> 14
Competition
LeTourneau's large trucks and loaders compete on a worldwide basis with
several competitors. The company believes it is probably the third or fourth
largest supplier of this type of equipment in the world. The loader market
also includes vigorous competition from smaller-sized equipment. Large loaders
compete against four manufacturers and the electric mining shovels compete
against three manufacturers.
The market for LeTourneau's forestry products and its container and
handling equipment are also characterized by vigorous competition. The numbers
of competitors by type of forestry product are as follows: Log stackers -
nine, and harvesters and forwarders - two. Even though the Company's jib crane
is unique, it does encounter competition from four other equipment
manufacturers that offer products having essentially similar capabilities. In
the case of the material handling equipment line, LeTourneau competes with nine
other manufacturers for supplying cranes to seaports and rail yards.
LeTourneau's mini-steel mill encounters competition from a total of
seven competitors, with the breakdown by product line being as follows: plate
products - three; fabricated products - two and forging ingots - two.
The competition LeTourneau encounters in the parts business is
extremely fragmented with only three other companies being considered to be
competitors. Vendors supplying parts directly to end-users and well-fitters
who obtain parts and copy them to supply less expensive and lower quality
substitutes represent more intense competition than that of direct competitors.
In order to be competitive in the mining and forestry heavy equipment
markets, LeTourneau offers warranties at the time of purchase as well as parts
guarantees. Warranties, which are based upon stipulated years of ownership or
hours of usage, whichever occurs first, generally cover the drive train and, in
the case of Titan trucks, covers the frame. Parts consumption guaranties and
maintenance and repair contracts are also made on the same basis. LeTourneau
pursues a parts return policy, which provides that returned parts must be in
new usable condition, be in current production and be readily resalable.
There are no other significantly active competitors in the marine rig
construction and support industry due to the current low demand. However, if
demand for marine rigs increases, new competitors could be expected to enter
the market.
Historically, the make up of LeTourneau's customer base has been such
that none of the product lines have been dependent upon any one customer or
small group of customers.
Regulations and Hazards
LeTourneau's manufacturing operations and facilities are subject to
regulation by a variety of local, state and federal agencies which regulate
safety and the discharge of materials into the environment, including the
Environmental Protection Agency (EPA), the Texas Natural Resources Conservation
Commission (TNRCC) and the Mississippi Department of Environmental quality.
LeTourneau's manufacturing facilities are also subject to the requirements of
the Occupational Safety Health Act and comparable state statutes.
Hazardous materials are generated at LeTourneau's Longview plant in
association with the steel making process. Industrial waste water generated at
the mini-steel mill facility for cooling operations is recirculated and quality
tests are conducted regularly. The facility has permits for waste water
discharges, solid waste disposal and air emissions. Waste products considered
hazardous by the EPA are disposed of by shipment to an EPA or state permitted
waste disposal facility.
-12-
<PAGE> 15
LeTourneau jack-up designs are subject to regulatory approvals by
various agencies depending upon the customer's selection of geographic areas
where the rig will qualify for drilling. The rules vary by location and are
subject to frequent change. These rules primarily relate to safety and
environmental issues in addition to those which classify the jack-up as a
vessel.
LeTourneau may be liable for damages resulting from pollution of air,
land and inland waters associated with its manufacturing operations.
LeTourneau believes that compliance with environmental protection laws
and regulations will have no material effect on its capital expenditures,
earnings or competitive position during 1994. Although further legislation or
regulation pertaining to the protection of the environment may reasonably be
anticipated, the effects thereof on LeTourneau's manufacturing operations
cannot be accurately predicted.
As a manufacturing company, LeTourneau may be responsible for certain
risks associated with the use of its products. These risks include product
liability claims for personal injury and/or death, property damage, loss of use
of product, business interruption and necessary legal expenses to defend
LeTourneau against such claims. LeTourneau carries insurance which it believes
adequately covers such risks. LeTourneau did not assume liabilities of
Marathon LeTourneau Company, such as product liability and tort claims,
associated with all products manufactured, produced, marketed or distributed
prior to the date of the acquisition.
LeTourneau anticipates incurring expenses associated with the warranty
of its products, including those existing at the date of the acquisition. In
the non-marine business segments, dealers of LeTourneau's products perform the
warranty work for the manufacturer, and in the marine segment, LeTourneau
generally performs warranty work directly.
Employees
The total number of employees assigned to all of the Company's segments
at March 1, 1994 and to the Company's contract drilling and aircraft operations
segments at December 31, 1993, 1992 and 1991 were as follows:
<TABLE>
<CAPTION>
March 1, December 31,
-------- -------------------------------
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Contract Drilling Operations 1,750 1,756 1,546 1,673
Aircraft Operations 765 804 787 900
Manufacturing Operations 942 - - -
----- ----- ----- -----
Total 3,457 2,560 2,333 2,573
===== ===== ===== =====
</TABLE>
The number shown for Manufacturing Operations basically reflects those
former Marathon LeTourneau Company employees the Company at February 11, 1994,
the date that the purchase of the net assets of Marathon LeTourneau was
consummated.
Some of the employees included in the figures shown in the table above
are not United States citizens. None of the Company's employees are covered by
collective bargaining agreements with labor unions. The Company considers
relations with its employees to be satisfactory.
-13-
<PAGE> 16
ITEM 2. PROPERTIES
The Company leases as its corporate headquarters 57,800 square feet of
space in an office tower located at 2800 Post Oak Boulevard in Houston, Texas.
DRILLING RIGS
The following is a summary of the principal drilling equipment owned or
operated by the Company and in service at March 31, 1994. See "Liquidity and
Capital Resources" as appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 14 in the Annual Report
which page is incorporated herein by reference.
OFFSHORE
<TABLE>
<CAPTION>
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- -------------- ------------- ------- ------------- --------------------------
<S> <C> <C> <C> <C>
Cantilever Jack-up Rigs:
Rowan Gorilla IV 328'/30,000' 1986 Trinidad Amoco Trinidad Oil Company
200-C (d) (e) (l) Term (m) April 1995
Rowan Gorilla III 328'/30,000' 1984 Eastern Canada LASMO Nova Scotia Limited
200-C (d) (e) (l) Term (m) November 1995
Rowan Gorilla II 328'/30,000' 1984 North Sea Hamilton Oil Company Ltd.
200-C (d) (e) (l) Single Well (m) May 1994
Rowan-California 225'/30,000' 1983 North Sea Shell U.K. Exploration & Production
116-C (c) (e) (l) Term (m) May 1995
Rowan-Halifax 225'/30,000' 1982 North Sea Phillips Petroleum U.K. Limited
116-C (c) (e) (i) (l) Multiple Well (m) April 1994
Cecil Provine 225'/30,000' 1982 North Sea Mobil North Sea Limited
116-C (c) (e) (j) (l) Multiple Well (m) October 1994
Arch Rowan 225'/30,000' 1981 North Sea Hamilton Oil Company Ltd.
116-C (c) (e) (l) Multiple Well (m) August 1994
Gilbert Rowe 350'/30,000' 1981 En Route (n)
116-C (c) (e) (h)
Charles Rowan 350'/30,000' 1981 Gulf of Mexico Amoco Production Company
116-C (c) (e) (h) (l) Multiple Well (m) November 1994
Rowan-Paris 350'/30,000' 1980 Gulf of Mexico Walter Oil & Gas Corporation
116-C (e) (h) (l) Multiple Well (m) December 1994
Rowan-Middletown 350'/30,000' 1980 Gulf of Mexico Amoco Production Company
116-C (e) (h) (l) Multiple Well (m) December 1994
Rowan-Fort Worth 350'/30,000' 1978 Gulf of Mexico Coastal Oil & Gas Corporation
116-C (e) (h) (l) Multiple Well (m) April 1994;
Kerr McGee Corporation
(l) Multiple Well (m) July 1994
</TABLE>
-14-
<PAGE> 17
ITEM 2. PROPERTIES
OFFSHORE(Continued)
<TABLE>
<CAPTION>
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- -------------- ------------- ------- ------------- --------------------------
<S> <C> <C> <C> <C>
Conventional Jack-up Rigs:
Rowan-Juneau 350'/30,000' 1977 Gulf of Mexico Union Oil Company of California
116 (c) (e) (f) (h) (l) Single Well (m) June 1994
Rowan-Odessa 350'/30,000' 1977 Gulf of Mexico Pennzoil Exploration and Production Co.
116 (e) (f) (h) (l) Term (m) April 1994
Rowan-Louisiana 350'/30,000' 1975 Gulf of Mexico Torch Operating Company
84 (e) (f) (h) (l) Multiple Well (m) March 1994;
Pacific Gas & Electric
(l) Single Well (Turnkey) (m) May 1994
Rowan-Alaska 350'/30,000' 1975 Gulf of Mexico Pennzoil Exploration & Production Co.
84 (e) (f) (h) (l) Term (m) July 1994
Rowan-Texas 250'/20,000' 1973 Gulf of Mexico King Ranch Oil and Gas
52 (l) Single Well (m) May 1994
Rowan-Anchorage 250'/20,000' 1972 Gulf of Mexico Pennzoil Exploration and Production Co.
52 (e) (l) Term (m) May 1994
Rowan-New Orleans 250'/20,000' 1971 Gulf of Mexico Samedan Oil Company
52 (f) (g) (l) Multiple Well (m) June 1994
Rowan-Houston 250'/20,000' 1970 Gulf of Mexico Pennzoil Exploration and Production Co.
52 (l) Term (m) August 1994
Semi-Submersible Rig:
Rowan-Midland 1,000'/25,000' 1976 Gulf of Mexico Phillips Petroleum Company
(l) Multiple Well (m) May 1994
Submersible Barges:
Rowan-Fourchon 24'/30,000' 1970 Gulf of Mexico Pennzoil Exploration and Production Co.
(l) Multiple Well (m) March 30, 1994;
Hall Houston Oil Company
(l) Single Well (m) April 1994;
Davis Petroleum Corporation
(l) Single Well (Turnkey) (m) May 1994
Rowan-Fairbanks 26'/25,000' 1975 Gulf of Mexico Cold Stacked
Rowan-Morgan City 26'/25,000' 1973 Gulf of Mexico Davis Petroleum Corporation
(l) Single Well (m) May 1994
</TABLE>
-15-
<PAGE> 18
ITEM 2. PROPERTIES
(Continued)
<TABLE>
<CAPTION>
ONSHORE (k) Contracting Party/
Maximum (l) Type of Contract
Description Drilling Depth Location (m) Estimated Release Date
- ----------- ---------------- -------- -------------------------------
<S> <C> <C> <C>
Two Rigs 18,000'- 30,000' Venezuela (o) Not Committed
Three Rigs 10,000' Venezuela Lagoven
(l) Term (m) April 1994
Seven Rigs 18,000'-30,000' Oklahoma & Texas Not Committed
One Winterized Rig 20,000' Alaska Arco Alaska, Inc.
(l) Multiple Well (m) May 1994
Four Winterized Rigs 20,000' Alaska Not Committed
</TABLE>
______________________
(a) Classes 200-C ("Gorilla"), 116-C, 116, 84 and 52 are nomenclature
assigned by LeTourneau, Inc. to jack-ups of its design and construction.
(b) Indicates rated water depth in current location and rated drilling depth,
respectively.
(c) Unit modified to increase operating capability in hostile environments.
(d) Gorilla Class unit designed for hostile environment capability.
(e) Unit equipped with a "top drive" drilling system.
(f) Unit equipped with a "skid base" unit.
(g) Unit equipped with drilling/heavy-lift crane option.
(h) Unit equipped with leg extensions.
(i) Rig sold December 1984 and leased back for 15 years.
(j) Rig sold December 1985 and leased back for 15 years.
(k) Onshore rigs, including the three used rigs purchased in 1991, were
constructed at various dates between 1960 and 1982, utilizing, in some
instances, new as well as used equipment. Most of the older rigs have
been substantially rebuilt subsequent to their respective dates of
construction.
(l) Refer to "Contracts" on page 4 of this Form 10-K for definition of types
of contracts.
(m) Indicates estimated completion date of work to be performed.
(n) Currently under tow from Alaska.
(o) Rigs currently being shipped to the United States.
The Company's Drilling Division leases and, in some cases, owns various
operating and administrative facilities generally consisting of office,
maintenance and storage space in the states of Alaska, Texas and Louisiana and,
on a foreign basis, in the countries of Canada, Venezuela, England, Scotland,
The Netherlands, and Trinidad.
-16-
<PAGE> 19
AIRCRAFT
At March 1, 1994 the U.S.-based Company-owned helicopter fleet
consisted of 14 twin-engine turbine IFR rated Bell 212 helicopters (14
passenger), 16 twin-engine turbine IFR rated Bell 412 helicopters (14
passenger), 31 twin-engine turbine MBB BO-105CBS helicopters (five passenger),
two Aerospatiale 332L Super Puma helicopters (19 passenger) and 31 various
single-engine turbine helicopters (four to six passenger). The U.S.-based
fixed-wing fleet of Company-owned aircraft consisted of four Convair 580s (44
passenger), nine DeHavilland Twin Otters (9-19 passenger), one DeHavilland Dash
8 (37 passenger), one Lear Jet 35A (six passenger) and one Beechcraft King Air
200C (six passenger).
Helicopters owned by KLM ERA on March 1, 1994 consisted of six
twin-engine turbine IFR rated Sikorsky S-61N helicopters (26 passenger) and
five twin-engine turbine IFR rated Sikorsky S-76B helicopters (13 passenger).
The Company's principal aircraft bases in Alaska, all located on leased
property, are a fixed-wing air service center (57,000 square feet of hangar,
repair and office facilities) at Anchorage International Airport, with an
adjacent helicopter hangar facility (14,800 square feet) and hangar, office and
repair facilities at Fairbanks International Airport (13,000 square feet). The
Company also maintains similar, smaller helicopter facilities in Alaska at
Deadhorse, Juneau, Valdez and Yakutat.
The Company's principal facilities to accommodate its Gulf of Mexico
operations are located on leased property at Lake Charles Regional Airport.The
facilities, comprising 53,000 square feet, include helicopter hangars, a repair
facility and an operations and administrative building. The Company also
operates a helicopter facility (20,700 square feet of hangar, repair and office
facilities) located on leased property at the Terrebonne Airport in Houma,
Louisiana and a helicopter facility (5,700 square feet of hangar, repair and
office facilities) located on leased property in New Iberia, Louisiana.
KLM ERA's principal facilities to accommodate its operations in the
Dutch sector of the North Sea include bases in Amsterdam and Den Helder. The
Amsterdam facility, comprising 149,000 square feet leased and 17,000 square
feet subleased, includes helicopter hangars, a repair facility, an
operations/administrative building and a passenger waiting area. The Den
Helder facility, comprising 35,000 square feet, includes a helicopter hangar, a
repair facility and an operations/administrative building. The Amsterdam
operations are scheduled for shutdown and consolidation with the Den Helder
operations by the fourth quarter of 1994.
Manufacturing Facilities
LeTourneau's principal manufacturing facility and headquarters are
located in Longview, Texas on approximately 2,400 acres with approximately 1.2
million square feet under roof. Included within the facility are: A mini-steel
mill having approximately 330,000 square feet of covered work space and housing
two 25-ton electric arc furnaces having an aggregate 120,000 tons per year
capacity; a fabrication shop having approximately 300,000 square feet of
covered work space and housing a 3,000 ton vertical bender for making roll-ups
or flattening materials up to 2 1/2 inches thick by 11 feet wide; a machine
shop having approximately 140,000 square feel of covered work space and housing
various types of machinery; and an assembly shop have approximately 124,000
square feel and housing various types of machinery.
The marine division's facility located in Vicksburg, Mississippi is
located on 1,850 acres of land and has approximately 476,000 square feet of
covered work space. This facility is currently closed and the businesses
formerly carried on at this location have been relocated to the Longview, Texas
facility.
The LeTourneau Portland Division's distributor for forest products in
the Northwestern United States, is located on a six acre site in Troutdale,
Oregon
-17-
<PAGE> 20
with approximately 22,000 square feet of building space.
The Western Mining Division of LeTourneau located in Tucson, Arizona is
housed in a 20,000 square foot leased facility. It functions as the
distributor for LeTourneau's mining equipment products in the Western United
States.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising out of
the conduct of the Company's operations and other matters, not all the
potential liabilities with respect to which are covered by the terms of the
Company's insurance policies. While the Company is unable to predict the
ultimate liabilities which may result from such litigation, the Company
believes that no such litigation in which the Company was involved as of March
31, 1994 will have a material adverse effect on the financial position or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's common
stockholders during the fourth quarter of the fiscal year ended December 31,
1993.
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions, years of accredited service and ages of the officers
of the Company and certain officers of the Company's wholly-owned subsidiary,
Era Aviation, Inc., as of March 24, 1994 are listed below. Officers of both
entities are normally appointed annually by the entities' Board of Directors at
the bylaws prescribed meetings held in the spring and serve at the discretion
of the Board of Directors. There are no family relationships among these
officers, nor any arrangements or understandings between any officer and any
other person pursuant to which the officer was selected.
Years of
Accredited
Name Position Service Age
- -------------------- -------------------------------- ---------- -----
Executive Officers of the Registrant:
C. R. Palmer Chairman of the Board, President 34 59
and Chief Executive Officer
R. G. Croyle Executive Vice President 20 51
D. F. McNease Senior Vice President, Drilling 19 42
John L. Buvens Vice President, Legal 13 38
James B. Davis Vice President, Engineering 20 43
Paul L. Kelly Vice President, Special Projects 11 54
Bill S. Person Vice President, Industrial Relations 26 45
William C. Provine Vice President, Investor Relations 7 47
E. E. Thiele Vice President, Finance, Adminis- 24 54
tration and Treasurer
Other Officers of the Registrant:
Mark H. Hay Secretary and Assistant Treasurer 15 49
P. G. Wheeler Assistant Treasurer 19 46
Lynda A. Aycock Assistant Treasurer 22 47
Certain Officers of Era Aviation, Inc.:
C. W. Johnson President and Chief Operating Officer 16 50
James Vande Voorde Vice President 20 54
Each of the executive officers and other officers of the Company and the
two officers of Era Aviation, Inc. listed above continuously served in the
position
-18-
<PAGE> 21
shown above for more than the past five years except as noted in the following
paragraphs.
Since October 1993, Mr. Croyle's principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Croyle
served as Vice President, Legal of the Company.
Since October 1993, Mr. McNease's principal occupation has been in the
position set forth. From April 1991 to October 1993, Mr. McNease served as
Vice President, Drilling of the Company. For more than five years prior to
that time, he served as Vice President of Rowandrill, Inc., a subsidiary of the
Company.
Since October 1993, Mr. Buvens' principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Buvens
served as an Attorney for the Company.
Since October 1993, Mr. Davis' principal occupation has been in the
position set forth. From January 1990 to October 1993, Mr. Davis served as
Manager of Engineering/Purchasing & Chief Engineer of the Company. From June
1989 to January 1990, he served as, he served as an Engineer for the Company.
For more than five years prior to that time, he served as a Tool Pusher for the
Company.
Since October 1993, Mr. Person's principal occupation has been in the
position set forth. From April 1990 to October 1993, Mr. Person served as
Director of British American Offshore Limited, a subsidiary of the Company.
For more than five years prior to that time, he served as Manager of Industrial
Relations of the Company.
Since October 1993, Mr. Provine's principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Provine
served as Vice President of Rowandrill, Inc., a subsidiary of the Company.
Since January 1994, Mr. Thiele's principal occupation has been in the
position set forth. From February 1989 to January 1994, Mr. Thiele served as
Vice President, Administration and Finance.
Since October 1993, Ms. Aycock's principal position has been in the
position set forth. For more than five years prior to that time, Ms. Aycock
served as an Accountant for the Company.
Since December 1993, Mr. Johnson's principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Johnson
served as Executive Vice President of Era Aviation, Inc., a subsidiary of the
Company.
In addition to serving in the position shown above, Mr. Wheeler has
also served as Corporate Tax Director of the Company for more than five years.
-19-
<PAGE> 22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required hereunder regarding the Common Stock price range
and cash dividend information for 1993 and 1992 and the number of holders of
Common Stock is set forth on page 26 of the Company's Annual Report under the
title "Common Stock Price Range, Cash Dividends and Stock Splits", and is
incorporated herein by reference, except for the final two paragraphs under
such title. Also incorporated herein by reference to the Annual Report is the
first paragraph in the right hand column appearing on page 14 within
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", such paragraph providing information pertinent to the Company's
ability to pay cash dividends subject to certain restrictions. The Company's
Common Stock is listed on the New York Stock Exchange and the Pacific Stock
Exchange.
ITEM 6. SELECTED FINANCIAL DATA
The information required hereunder is set forth on pages 10 and 11 of the
Company's Annual Report under the title "Twelve Year Financial Review" and is
incorporated herein by reference except for the information for the years 1988,
1987, 1986, 1985, 1984, 1983, and 1982.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required hereunder is set forth on pages 12, 13 and 14
under the title "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report and is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K on page 21 of this Form 10-K for a listing of financial statements of
the registrant and its subsidiaries, all of which financial statements are
incorporated by reference under this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information provided under the columns entitled Name, Principal
Occupation for the Past Five Years, Age and Year First Became Director in the
table on pages 5 and 6, in footnotes (1) and (3) on page 6 and in the paragraph
following footnote (5) on page 4 of the Proxy Statement for the Company's 1994
Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein
by reference. There are no family relationships among the directors or
nominees for directors and the executive officers of the Company, nor any
arrangements or understandings between any director or nominee for director and
any other person pursuant to which such director or nominee for director was
selected. Except as otherwise indicated, each director or nominee for director
of the Company has been employed or engaged for the past five years in the
principal occupation set forth opposite his name in the information
incorporated by reference. See ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE
REGISTRANT on pages 18 and 19 of this Form 10-K for information relating to
executive officers.
ITEM 11. EXECUTIVE COMPENSATION
The standard arrangement for compensating directors described in footnote (2)
-20-
<PAGE> 23
on page 6 of the Proxy Statement and the information appearing under the titles
"Summary Compensation Table", "Option Grants in Last Fiscal Year", Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values",
"Option Plans", "Convertible Debenture Incentive Plan" and "Pension Plans" on
pages 8 through 11 of the Proxy Statement are incorporated herein by reference.
In accordance with the instructions to Item 402 of Regulation S-K, the
information contained in the Proxy Statement under the titles "Board
Compensation Committee Report on Executive Compensation" and "Stockholder
Return Performance Presentation" shall not be deemed to be filed as part of
this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding security ownership of certain beneficial owners
and management of the Company set forth under the headings "Voting Securities
Outstanding" appearing on page 2 and "Security Ownership of Management and
Principal Stockholders" appearing on pages 2 through 4 of the Proxy Statement
is incorporated herein by reference.
The business address of all directors is the principal executive offices
of the Company as set forth on the facing page of this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain business relationships and transactions
between the Company and certain of the directors of the Company under the
heading "Certain Transactions" appearing on page 14 of the Proxy Statement is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following financial statements and independent auditors'
report, included in the Annual Report, are incorporated herein
by reference:
Page of 1993
Annual Report
-------------
Independent Auditors' Report............................. 15
Consolidated Balance Sheet,
December 31, 1993 and 1992.............................. 16
Consolidated Statement of Operations for the
Years Ended December 31, 1993, 1992 and 1991............ 17
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1993, 1992
and 1991................................................ 18
Consolidated Statement of Cash Flows for
the Years Ended December 31, 1993, 1992 and 1991........ 19
Notes to Consolidated Financial Statements............... 20
Selected Quarterly Financial Data (Unaudited) for
the Quarters Ended March 31, June 30, September 30
and December 31, 1993 and 1992.......................... 26
2. Financial Statement Schedules
Page of
This Report
-----------
Independent Auditors' Report.............................. 27
V - Property and Equipment for the Years Ended
December 31, 1993, 1992 and 1991.................... 28
VI - Accumulated Depreciation and Amortization
-21-
<PAGE> 24
of Property and Equipment for the Years
Ended December 31, 1993, 1992 and 1991.............. 30
IX - Short-Term Borrowings for the Years Ended
December 31, 1993, 1992 and 1991.................... 31
Financial Statement Schedules I, II, III, IV, VII, VIII, X, XI, XII, XIII
and XIV have been omitted as not required, not significant or because the
required information is shown in Notes to the Consolidated Financial
Statements of the Company's Annual Report.
3. Exhibits:
Unless otherwise indicated below as being incorporated by reference to
another filing of the Company with the Securities and Exchange
Commission, each of the following exhibits is filed herewith:
3a Restated Certificate of Incorporation of the Company, dated
February 17, 1984, incorporated by reference to: Exhibit 3a to
the Company's Form 10-K for the fiscal year ended December 31,
1983 (File No. 1-5491); Exhibit 4.2 to the Company's
Registration Statement on Form S-3 (Registration No.
33-13544); and Exhibits 4a, 4b, 4c and 4d below.
3b Bylaws of the Company amended as of April 23, 1993,
incorporated by reference to Exhibit 3 to the Company's Form
10Q for the quarter ended March 31, 1993 (File No. 1-5491).
4a Certificate of Designation of the Company's $2.125 Convertible
Exchangeable Preferred Stock incorporated by reference to
Exhibit 4.2 to the Company's Registration Statement on Form
S-3 (Registration No. 33-6476).
4b Certificate of Designation of the Company's Series I Preferred
Stock incorporated by reference to Exhibit 4b to the Company's
Form 10-K for the fiscal year ended December 31, 1986 (File
No.1-5491).
4c Certificate of Designation of the Company's Series II
Preferred Stock incorporated by reference to Exhibit 4c to the
Company's Form 10-K for the fiscal year ended December 31,
1987 (File No.1-5491).
4d Certificate of Designation of the Company's Series A Junior
Preferred Stock dated March 2, 1992 incorporated by reference
to Exhibit 4d to the Company's Form 10-K for the fiscal year
ended December 31, 1991 (File No. 1-5491).
4e Rights Agreement dated as of February 25, 1992 between the
Company and Citibank, N.A. as Rights Agent incorporated by
reference to Exhibit 1 to the Company's Current Report on Form
8-K dated March 2, 1992 (File No. 1-5491).
4f Indenture dated December 1, 1991 between the Company and
Bankers Trust Company, as Trustee, relating to the Company's
11-7/8% Senior Notes due 2001 incorporated by reference to
Exhibit 28.1 to the Company's Current Report on Form 8-K dated
December 12, 1991 (File No. 1-5491).
4g Specimen Common Stock certificate, incorporated by reference
to Exhibit 4g to the Company's Form 10-K for the fiscal year
ended December 31, 1992 (File No. 1-5491).
10a 1980 Nonqualified Stock Option Plan of the Company together
with form of Stock Option Agreement related thereto
incorporated by reference to Exhibit 5.10 to the Company's
Registration Statement on Form S-7 (Registration No. 2-68622).
10b 1988 Nonqualified Stock Option Plan of the Company as amended
together
-22-
<PAGE> 25
with form of Stock Option Agreement related thereto
incorporated by reference to Exhibit 10b of the Company's Form
10-K for the fiscal year ended December 31, 1992 (File No.
1-5491).
10c Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the 1980
Nonqualified Stock Option Plan of the Company incorporated by
reference to Exhibit 10c to the Company's Form 10-K for the
fiscal year ended December 31, 1990 (File No. 1-5491).
10d Amendment No. 2 dated May 23, 1991, to all then outstanding
Stock Option Agreements related to the 1980 Nonqualified Stock
Option Plan of the Company incorporated by reference to
Exhibit 10d to the Company's Form 10-K for the fiscal year
ended December 31, 1991 (File No. 1-5491).
10e Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the 1988
Nonqualified Stock Option Plan of the Company incorporated by
reference to Exhibit 10d to the Company's Form 10-K for the
fiscal year ended December 31, 1990 (File No. 1-5491).
10f Amendment No. 2 dated May 23, 1991, to all then outstanding
Stock Option Agreements related to the 1988 Nonqualified Stock
Option Plan of the Company incorporated by reference to
Exhibit 10f to the Company's Form 10-K for the fiscal year
ended December 31, 1991 (File No. 1-5491).
10g 1986 Convertible Debenture Incentive Plan of the Company
incorporated by reference to Exhibit 10b to the Company's Form
10-K for the fiscal year ended December 31, 1986 (File
No.1-5491).
10h Pension Restoration Plan of the Company incorporated by
reference to Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1992 (File No. 1-5491).
10i Credit Agreement dated September 22, 1986 (including
amendatory letter dated March 25, 1987) and First Preferred
Ship Mortgage dated November 7, 1986 between the Company and
Marathon LeTourneau Company incorporated by reference to
Exhibit 10c to the Company's Form 10-K for the fiscal year
ended December 31, 1986 and amendatory letter dated February
21, 1992 incorporated by reference to Exhibit 10h to the
Company's Form 10-K for the fiscal year ended December 31,
1991 (File No. 1-5491).
10j Participation Agreement dated December 1, 1984 between the
Company and Textron Financial Corporation et al. and Bareboat
Charter dated December 1, 1984 between the Company and Textron
Financial Corporation et al. incorporated by reference to
Exhibit 10c to the Company's Form 10-K for the fiscal year
ended December 31, 1985 (File No. 1-5491).
10k Participation Agreement dated December 1, 1985 between the
Company and Eaton Leasing Corporation et. al. and Bareboat
Charter dated December 1, 1985 between the Company and Eaton
Leasing Corporation et. al. incorporated by reference to
Exhibit 10d to the Company's Form 10-K for the fiscal year
ended December 31, 1985 (File No.1-5491).
10l Corporate Continuing Guaranty dated December 31, 1986 between
Shearson Lehman Brothers Holdings Inc. and the Company
incorporated by reference to Exhibit 10h to the Company's Form
10-K for the fiscal year ended December 31, 1986 (File
No.1-5491).
10m Corporate Continuing Guaranty dated September 10, 1987 between
Shearson Lehman Brothers Holdings Inc. and the Company
incorporated by reference to Exhibit 10i to the Company's Form
10-K for the fiscal year ended December 31, 1987 (File
No.1-5491).
10n Cross-Border Corporate Continuing Guaranty dated May 29, 1991
between Citicorp and the Company's wholly-owned subsidiary,
Rowan International,
-23-
<PAGE> 26
Inc. incorporated by reference to Exhibit 10o to the Company's
Form 10-K for the fiscal year ended December 31, 1991 (File
No. 1-5491).
10o Consulting Agreement dated March 1, 1991 between the Company
and C. W. Yeargain incorporated by reference to Exhibit 10K to
the Company's Form 10-K for the fiscal year ended December 31,
1990 (File No. 1-5491).
10p Acquisition Agreement dated as of November 7, 1991, among KLM
Royal Dutch Airlines, Blue Yonder I B.V., KLM Helikopters B.V.
and Rowan Aviation (Netherlands) B.V. incorporated by
reference to Exhibit 28.1 to the Company's Current Report on
Form 8-K dated November 7, 1991 (File No. 1-5491).
10q Business Loan Agreement dated January 27, 1993 between Key
Bank of Alaska and the Company's wholly-owned subsidiary, Era
Aviation, Inc. incorporated by reference to Exhibit 10s to the
Company's Form 10-K for the fiscal year ended December 31,
1992 (File No. 1-5491).
10r Asset Purchase Agreement dated as of November 12, 1993, among
Rowan Companies, Inc., Rowan Equipment, Inc., General Cable
Corporation, Marathon LeTourneau Company, Marathon LeTourneau
Sales & Service Company and Marathon LeTourneau Australia Pty.
Ltd. incorporated by reference to the Company's Current Report
on Form 8-K dated February 11, 1994 (File No. 1-5491).
11 Computation of Primary and Fully Diluted Earnings (Loss) Per
Share for the years ended December 31, 1993, 1992 and 1991
appearing on page 32 in this Form 10-K.
*13 Annual Report to Stockholders for fiscal year ended December
31, 1993.
21 Subsidiaries of the Registrant as of March 31, 1994.
23 Independent Auditors' Consent.
24 Powers of Attorney pursuant to which names were affixed to
this Form 10-K for the fiscal year ended December 31, 1993.
The Company agrees to furnish to the Commission upon request a copy of
all instruments defining the rights of holders of long-term debt of the Company
and its subsidiaries.
________________________________
* Only portions specifically incorporated herein are deemed to be filed.
EXECUTIVE COMPENSATION PLANS
AND ARRANGEMENTS
Compensatory plans in which directors and executive officers of the
Company participate are listed as follows:
. 1980 Nonqualified Stock Option Plan of the Company together with form
of Stock Option Agreement related thereto incorporated by reference to
Exhibit 5.10 to the Company's Registration Statement on Form S-7
(Registration No. 2-68622); Amendment No. 1 dated October 25, 1990, to
all then outstanding Stock Option Agreements related to such Plan
incorporated by reference to Exhibit 10c to the Company's Form 10-K for
the fiscal year ended December 31, 1990 (File No. 1-5491); and
Amendment No. 2 dated May 23, 1991, to all then outstanding Stock
Option Agreements related to such Plan incorporated by reference to
Exhibit 10d to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
. 1988 Nonqualified Stock Option Plan of the Company as amended together
with form of Stock Option Agreement related thereto incorporated by
reference to Exhibit 10b to the Company's Form 10-K for the fiscal year
ended December 31,
-24-
<PAGE> 27
1992 (File No. 1-5491; Amendment No. 1 dated October 25, 1990, to all
then outstanding Stock Option Agreements related to such Plan
incorporated by reference to Exhibit 10d to the Company's Form 10-K for
the fiscal year ended December 31, 1990 (File No. 1-5491); and
Amendment No. 2 dated May 23, 1991, to all then outstanding Stock
Option Agreements related to such Plan incorporated by reference to
Exhibit 10f to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
. 1986 Convertible Debenture Incentive Plan of the Company incorporated
by reference to Exhibit 10b to the Company's Form 10-K for the fiscal
year ended December 31, 1986 (File No. 1-5491).
. Pension Restoration Plan of the Company incorporated by reference to
Exhibit 10h to the Company's Form 10-K for the fiscal year ended
December 31, 1992 (File 1-5491).
(b) Reports on Form 8-K:
. No reports on Form 8-K were filed by the Registrant during the
fourth quarter of fiscal year 1993.
. Subsequent to December 31, 1993, the Company filed a Current
Report on Form 8-K as follows:
A report dated February 21, 1994 under ITEM 2. ACQUISITION OR
DISPOSITION OF ASSETS in which the Company reported the
acquisition of substantially all of the assets, and assumption
of certain related liabilities, of Marathon LeTourneau Company
and two of its subsidiaries. Marathon LeTourneau is a
wholly-owned subsidiary of General Cable Corporation. Filed by
amendment on Form 8-K/A dated March 31, 1994 were related
financial statements of the Company on a pro forma basis
and financial statements of Marathon LeTourneau Company
on a historical basis.
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933,
the undersigned registrant hereby undertakes as follows, which undertaking
shall be incorporated by reference into registrant Registration Statements on
Form S-8 Nos. 2-67866 (filed May 22, 1980), 2-58700, as amended by
Post-Effective Amendment No. 4 (June 11, 1980), 33-33755, as amended by
Amendment No. 1 (filed March 29, 1990), 33-61444 (filed April 23, 1993),
33-51103 (filed November 18, 1993) 33-51105 (filed November 18, 1993)
and 33-51109 (filed November 18, 1993):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the act and will be
governed by the final adjudication of such issue.
-25-
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ROWAN COMPANIES, INC.
By: C. R. PALMER
(C. R. Palmer, Chairman of
the Board, President and
Chief Executive Officer)
Date: March 31, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
C. R. PALMER Chairman of the Board, President March 31, 1994
(C. R. Palmer) and Chief Executive Officer
E. E. THIELE Principal Financial Officer and March 31, 1994
(E. E. Thiele) Principal Accounting Officer
Director
- ------------------------
(Ralph E. Bailey)
* HENRY O. BOSWELL Director March 31, 1994
(Henry O. Boswell)
* H. E. LENTZ Director March 31, 1994
(H. E. Lentz)
* WILFRED P. SCHMOE Director March 31, 1994
(Wilfred P. Schmoe)
* CHARLES P. SIESS, JR. Director March 31, 1994
(Charles P. Siess, Jr.)
* PETER SIMONIS Director March 31, 1994
(Peter Simonis)
* C. W. YEARGAIN Director March 31, 1994
(C. W. Yeargain)
* BY C. R. PALMER March 31, 1994
(C. R. Palmer, Attorney-in-fact)
-26-
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
Rowan Companies, Inc. and Subsidiaries:
We have audited the consolidated financial statements of Rowan Companies,
Inc. and Subsidiaries as of December 31, 1993 and 1992, and for each of the
three years in the period ended December 31, 1993, and have issued our report
thereon dated March 7, 1994; such financial statements and report are included
in your 1993 Annual Report to Stockholders and are incorporated herein by
reference. Our audits also included the financial statement schedules of Rowan
Companies, Inc. and Subsidiaries, listed in Item 14. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our
opinion,such financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE
DELOITTE & TOUCHE
Houston, Texas
March 7, 1994
-27-
<PAGE> 30
ROWAN COMPANIES, INC. AND SUBSIDIARIES SCHEDULE V
PROPERTY AND EQUIPMENT
(In Thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Beginning Additions Retirements Close
Classification of Period at Cost or Sales Other of Period
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1993:
Drilling equipment $ 892,441 $ 9,489 $ 116 $ 901,814
Drill pipe and tubular equipment 47,175 2,489 1,140 48,524
Other drilling equipment 177 23 200
---------- ---------- ---------- ---------- ----------
Total drilling equipment 939,793 12,001 1,256 950,538
---------- ---------- ---------- ---------- ----------
Aircraft and related equipment 162,001 7,780 2,990 166,791
---------- ---------- ---------- ---------- ----------
Transportation equipment 20,122 371 255 20,238
Leasehold, building and yard improvements 34,657 548 95 35,110
Furniture, fixtures and office equipment 5,005 262 16 5,251
Land 3,868 806 4,674
Shop tools and equipment 8,319 221 7 8,533
---------- ---------- ---------- ---------- ----------
Total other property and equipment 71,971 2,208 373 73,806
---------- ---------- ---------- ---------- ----------
Oil, gas and mineral properties 7,830 7,830
---------- ---------- ---------- ---------- ----------
TOTAL $1,181,595 $ 21,989 $ 4,619 $1,198,965
========== ========== ========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 1992:
Drilling equipment $ 869,409 $ 23,363 $ 331 $ 892,441
Drill pipe and tubular equipment 43,793 5,094 1,712 47,175
Other drilling equipment 177 177
---------- ---------- ---------- ---------- ----------
Total drilling equipment 913,379 28,457 2,043 939,793
---------- ---------- ---------- ---------- ----------
Aircraft and related equipment 158,361 7,201 3,561 162,001
---------- ---------- ---------- ---------- ----------
Transportation equipment 19,016 1,255 265 $ 116 20,122
Leasehold, building and yard improvements 32,813 1,844 34,657
Furniture, fixtures and office equipment 4,912 257 48 (116) 5,005
Land 3,868 3,868
Shop tools and equipment 7,812 514 7 8,319
---------- ---------- ---------- ---------- ----------
Total other property and equipment 68,421 3,870 320 0 71,971
---------- ---------- ---------- ---------- ----------
Oil, gas and mineral properties 7,830 7,830
---------- ---------- ---------- ---------- ----------
TOTAL $1,147,991 $ 39,528 $ 5,924 $ 0 $1,181,595
========== ========== ========== ========== ==========
</TABLE>
-28-
<PAGE> 31
ROWAN COMPANIES, INC. AND SUBSIDIARIES SCHEDULE V
PROPERTY AND EQUIPMENT
(In Thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Beginning Additions Retirements Close
Classification of Period at Cost or Sales Other of Period
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1991:
Drilling equipment $ 843,780 $ 26,586 $ 957 $ 869,409
Drill pipe and tubular equipment 41,312 4,341 1,860 43,793
Other drilling equipment 172 5 177
---------- ---------- ---------- ---------- ----------
Total drilling equipment 885,264 30,932 2,817 913,379
---------- ---------- ---------- ---------- ----------
Aircraft and related equipment 138,327 20,855 821 158,361
---------- ---------- ---------- ---------- ----------
Transportation equipment 18,381 1,155 520 19,016
Leasehold, building and yard improvements 31,524 2,023 734 32,813
Furniture, fixtures and office equipment 4,322 1,235 645 4,912
Land 3,868 3,868
Shop tools and equipment 6,421 1,433 42 7,812
Lease and well equipment 2 2 0
---------- ---------- ---------- ---------- ----------
Total other property and equipment 64,518 5,846 1,943 68,421
---------- ---------- ---------- ---------- ----------
Oil, gas and mineral properties 8,986 (14) 1,142 7,830
---------- ---------- ---------- ---------- ----------
TOTAL $1,097,095 $ 57,619 $ 6,723 $1,147,991
========== ========== ========== ========== ==========
</TABLE>
-29-
<PAGE> 32
SCHEDULE VI
ROWAN COMPANIES, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
(In Thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Deductions Balance at
Beginning Costs and Retirements Close
Classification of Period Expenses or Sales Other of Period
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1993:
Drilling equipment $ 480,206 $ 37,032 $ 94 $ 517,144
Drill pipe and tubular equipment 29,703 2,148 960 30,891
Other drilling equipment 172 172
Aircraft and related equipment 90,047 8,982 2,316 96,713
Transportation equipment 13,753 916 241 14,428
Leasehold, building and yard improvements 13,785 1,345 20 15,110
Furniture, fixtures and office equipment 2,702 338 7 3,033
Shop tools and equipment 5,578 880 7 6,451
Oil, gas and mineral properties 7,830 7,830
---------- ---------- ---------- ---------- ----------
TOTAL $ 643,776 $ 51,641 $ 3,645 $ 691,772
========== ========== ========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 1992:
Drilling equipment $ 444,240 $ 36,105 $ 139 $ 480,206
Drill pipe and tubular equipment 29,467 1,584 1,348 29,703
Other drilling equipment 172 172
Aircraft and related equipment 81,647 9,494 1,094 90,047
Transportation equipment 12,649 1,326 226 $ 4 13,753
Leasehold, building and yard improvements 12,444 1,341 13,785
Furniture, fixtures and office equipment 2,340 376 10 (4) 2,702
Shop tools and equipment 4,721 864 7 5,578
Oil, gas and mineral properties 7,830 7,830
---------- ---------- ---------- ---------- ----------
TOTAL $ 595,510 $ 51,090 $ 2,824 $ 0 $ 643,776
========== ========== ========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 1991:
Drilling equipment $ 407,506 $ 37,509 $ 775 $ 444,240
Drill pipe and tubular equipment 29,690 1,155 1,378 29,467
Other drilling equipment 172 172
Aircraft and related equipment 72,002 10,371 726 81,647
Transportation equipment 11,765 1,307 423 12,649
Leasehold, building and yard improvements 11,912 1,229 697 12,444
Furniture, fixtures and office equipment 2,591 362 613 2,340
Shop tools and equipment 4,087 676 42 4,721
Oil, gas and mineral properties 7,762 68 7,830
---------- ---------- ---------- ---------- ----------
TOTAL $ 547,487 $ 52,677 $ 4,654 $ 595,510
========== ========== ========== ========== ==========
</TABLE>
-30-
<PAGE> 33
SCHEDULE IX
ROWAN COMPANIES, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
(In thousands)
<TABLE>
<CAPTION>
Maximum Amount Average Amount Weighted
Category of Balance Weighted Outstanding Outstanding Average Interes
Aggregate Short-term at End Average at Any During the Rate During
Borrowings of Period Interest Rate Month End Period the Period
- ----------------------------- ----------- --------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Note payable to bank (A) $10,000
Year ended December 31, 1992
None
Year ended December 31, 1991
Note payable to bank (B) $15,000
</TABLE>
(A) The only borrowing during the period was for $10,000,000. The
proceeds were received on March 31, 1993, and the loan was repaid on
June 18, 1993. The borrowing carried a weighted average interest rate
of 4.67%.
(B) The only borrowing during the period was for $15,000,000. The
proceeds were received on November 27, 1991, and the loan was repaid
on December 17, 1991. The borrowing carried a fixed interest rate of
6.31%.
-31-
<PAGE> 34
EXHIBIT 11
ROWAN COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY
DILUTED EARNINGS (LOSS) PER SHARE
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended December 31
----------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Weighted average shares of common stock
outstanding 78,924 73,021 72,728
Stock options (treasury stock method) 1,377 (A) 1,305 (A) 1,306 (A)
-------- -------- --------
Weighted average shares for primary
earnings (loss) per share calculation 80,301 74,326 74,034
Stock options (treasury stock method) 30 (A)
Shares issuable from assumed conversion
of floating rate subordinated
convertible debentures 516 (A) 652 (A) 652 (A)
-------- -------- --------
Weighted average shares for fully diluted
earnings (loss) per share calcultion 80,817 75,008 74,686
======== ======== ========
Income (loss) before extraordinary charge $(13,259) $(73,753) $(38,741)
Extraordinary charge (5,627)
Net income (loss) for primary calculation (13,259) (73,753) (44,368)
Subordinated debenture interest 282 353 480
-------- -------- --------
Net income (loss) for fully diluted
calculation $(12,977) $(73,400) $(43,888)
======== ======== ========
Primary earnings (loss) per share:
Income (loss) before extraordinary charge $ (0.17) $ (0.99) $ (0.52)
Extraordinary charge (0.08)
-------- -------- --------
Net income (loss) $ (0.17) $ (0.99) $ (0.60)
======== ======== ========
Fully diluted earnings (loss) per share:
Income (loss) before extraordinary charge $ (0.16)(B) $ (0.98)(B) $ (0.51)(B)
Extraordinary charge (0.08)
-------- -------- --------
Net income (loss) $ (0.16)(B) $ (0.98)(B) $ (0.59)(B)
======== ======== ========
</TABLE>
Note: Reference is made to Note 1 to Consolidated Financial Statements
regarding computation of per share amounts.
(A) Included in accordance with Regulation S-K Item 601 (b)(11)
although not required to be provided for by Accounting Principles
Board Opinion No. 15 because the effect is insignificant.
(B) This calculation is submitted in accordance with regulation S-K
Item 601(b)(11) although it is contrary to paragraph 40 of APB
Opinion No. 15 because it produces an antidilutive result.
-32-
<PAGE> 35
EXHIBIT INDEX
Page 1 of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ----------- -------------------------------------------------
<S> <C> <C>
(1) 3a Restated Certificate of Incorporation of the Company, dated
February 17, 1984, incorporated by reference to: Exhibit 3a
to the Company's Form 10-K for the fiscal year ended
December 31, 1983 (File No. 1-5491); Exhibit 4.2 to the
Company's Registration Statement on Form S-3 (Registration
No. 33-13544); and Exhibits 4a, 4b, 4c and 4d below.
(1) 3b Bylaws of the Company amended as of April 23, 1993
incorporated by reference to Exhibit 3 to the Company's
Form 10Q for the quarter ended March 31, 1993 (File No. 1-
5491).
(1) 4a Certificate of Designation of the Company's $2.125
Convertible Exchangeable Preferred Stock incorporated by
reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-3( Registration No. 33-6476).
(1) 4b Certificate of Designation of the Company's Series I
Preferred Stock incorporated by reference to Exhibit 4b to
the Company's Form 10-K for the fiscal year ended December
31, 1986 (File No.1-5491).
(1) 4c Certificate of Designation of the Company's Series II
Preferred Stock incorporated by reference to Exhibit 4c to
the Company's Form 10-K for the fiscal year ended December
31, 1987 (File No.1-5491).
(1) 4d Certificate of Designation of the Company's Series A Junior
Preferred Stock dated March 2, 1992 incorporated by
reference to Exhibit 4d to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-5491).
(1) 4e Rights Agreement dated as of February 25, 1992 between the
Company and Citibank, N.A. as Rights Agent incorporated by
reference to Exhibit 1 to the Company's Current Report on
Form 8-K dated March 2, 1992 (File No. 1-5491).
(1) 4f Indenture dated December 1, 1991 between the Company and
Bankers Trust Company, as Trustee, relating to the
Company's 11-7/8% Senior Notes due 2001 incorporated by
reference to Exhibit 28.1 to the Company's Current Report
on Form 8-K dated December 12, 1991 (File No. 1-5491).
(1) 4g Specimen Common Stock certificate, incorporated by
reference to Exhibit 4g to the Company's Form 10-K for the
fiscal year ended December 31, 1992 (File No. 1-5491).
(1) 10a 1980 Nonqualified Stock Option Plan of the Company together
with form of Stock Option Agreement related thereto
incorporated by reference to Exhibit 5.10 to the Company's
Registration Statement on Form S-7 (Registration No.
2-68622).
</TABLE>
<PAGE> 36
EXHIBIT INDEX
Page 2 of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ----------- ------------------------------------------------
<S> <C> <C>
(1) 10b 1988 Nonqualified Stock Option Plan of the Company as
amended together with form of Stock Option Agreement
related thereto incorporated by reference to Exhibit 10b of
the Company's Form 10-K for the fiscal year ended December
31, 1992 (File No. 1-5491).
(1) 10c Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the 1980
Nonqualified Stock Option Plan of the Company incorporated
by reference to Exhibit 10c to the Company's Form 10-K for
the fiscal year ended December 31, 1990 (File No. 1-5491).
(1) 10d Amendment No. 2 dated May 23, 1991, to all then outstanding
Stock Option Agreements related to the 1980 Nonqualified
Stock Option Plan of the Company incorporated by reference
to Exhibit 10d to the Company's Form 10-K for the fiscal
year ended December 31, 1991 (File No. 1-5491).
(1) 10e Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the 1988
Nonqualified Stock Option Plan of the Company incorporated
by reference to Exhibit 10d to the Company's Form 10-K for
the fiscal year ended December 31, 1990 (File No. 1-5491).
(1) 10f Amendment No. 2 dated May 23, 1991, to all then outstanding
Stock Option Agreements related to the 1988 Nonqualified
Stock Option Plan of the Company incorporated by reference
to Exhibit 10f to the Company's Form 10-K for the fiscal
year ended December 31, 1991 (File No. 1-5491).
(1) 10g 1986 Convertible Debenture Incentive Plan of the Company
incorporated by reference to Exhibit 10b to the Company's
Form 10-K for the fiscal year ended December 31, 1986 (File
No.1-5491).
(1) 10h Pension Restoration Plan of the Company incorporated by
reference to Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1992 (File No. 1-5491).
(1) 10i Credit Agreement dated September 22, 1986 (including
amendatory letter dated March 25, 1987) and First Preferred
Ship Mortgage dated November 7, 1986 between the Company
and Marathon LeTourneau Company incorporated by reference
to Exhibit 10c to the Company's Form 10-K for the fiscal
year ended December 31, 1986 and amendatory letter dated
February 21, 1992 incorporated by reference to Exhibit 10h
to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(1) 10j Participation Agreement dated December 1, 1984 between the
Company and Textron Financial Corporation et al. and
Bareboat Charter dated December 1, 1984 between the Company
and Textron Financial Corporation et al. incorporated by
reference to Exhibit 10c to the Company's Form 10-K for the
fiscal year ended December 31, 1985 (File No. 1-5491).
</TABLE>
<PAGE> 37
EXHIBIT INDEX
Page 3 of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ----------- ------------------------------------------------
<S> <C> <C>
(1) 10k Participation Agreement dated December 1, 1985 between the
Company and Eaton Leasing Corporation et. al. and Bareboat
Charter dated December 1, 1985 between the Company and
Eaton Leasing Corporation et. al. incorporated by reference
to Exhibit 10d to the Company's Form 10-K for the fiscal
year ended December 31, 1985 (File No.1-5491).
(1) 10l Corporate Continuing Guaranty dated December 31, 1986
between Shearson Lehman Brothers Holdings Inc. and the
Company incorporated by reference to Exhibit 10h to the
Company's Form 10-K for the fiscal year ended December 31,
1986 (File No.1-5491).
(1) 10m Corporate Continuing Guaranty dated September 10, 1987
between Shearson Lehman Brothers Holdings Inc. and the
Company incorporated by reference to Exhibit 10i to the
Company's Form 10-K for the fiscal year ended December 31,
1987 (File No.1-5491).
(1) 10n Cross-Border Corporate Continuing Guaranty dated May 29,
1991 between Citicorp and the Company's wholly-owned
subsidiary, Rowan International, Inc. incorporated by
reference to Exhibit 10o to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-5491).
(1) 10o Consulting Agreement dated March 1, 1991 between the
Company and C. W. Yeargain incorporated by reference to
Exhibit 10K to the Company's Form 10-K for the fiscal year
ended December 31, 1990 (File No. 1-5491).
(1) 10p Acquisition Agreement dated as of November 7, 1991, among
KLM Royal Dutch Airlines, Blue Yonder I B.V., KLM
Helikopters B.V. and Rowan Aviation (Netherlands) B.V.
incorporated by reference to Exhibit 28.1 to the Company's
Current Report on Form 8-K dated November 7, 1991 (File No.
1-5491).
(1) 10q Business Loan Agreement dated January 27, 1993 between Key
Bank of Alaska and the Company's wholly-owned subsidiary,
Era Aviation, Inc. incorporated by reference to Exhibit 10s
to the Company's Form 10-K for the fiscal year ended
December 31, 1992 (File No. 1-5491).
(1) 10r Asset Purchase Agreement dated as of November 12, 1993,
among Rowan Companies, Inc., Rowan Equipment, Inc., General
Cable Corporation, Marathon LeTourneau Company, Marathon
LeTourneau Sales & Service Company and Marathon LeTourneau
Australia Pty. Ltd. incorporated by reference to the
Company's Form Current Report on 8-K dated February 11,
1994 (File No. 1-5491).
(3) 11 Computation of Primary and Fully Diluted Earnings (Loss)
Per Share for the years ended December 31, 1993, 1992 and
1991 appearing on page 32 in this Form 10-K.
</TABLE>
<PAGE> 38
EXHIBIT INDEX
Page 4 of 4
<TABLE>
<CAPTION>
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ----------- ------------------------------------------------
<S> <C> <C>
(4) *13 Annual Report to Stockholders for fiscal year ended
December 31, 1993.
(2) 21 Subsidiaries of the Registrant as of March 31, 1994.
(2) 23 Independent Auditors' Consent.
(2) 24 Powers of Attorney pursuant to which names were affixed to
this Form 10-K for the fiscal year ended December 31, 1993.
</TABLE>
________________________________________________
(1) Incorporated herein by reference to another filing of the Company with
the Securities and Exchange Commission as indicated.
(2) Included herein.
(3) Included in Form 10-K on page 32.
(4) Included herein. See Item 1, Items 5-8 and Subpart (a)1. of ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on page
20 and page 21, respectively, on Form 10-K for specific portions
incorporated herein by reference.
<PAGE> 1
EXHIBIT 13
Rowan Companies, Inc. and Subsidiaries
TWELVE YEAR FINANCIAL REVIEW
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS) 1993 1992 1991 1990
- -------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS
Revenues:
Drilling $ 271,022 $ 162,121 $ 170,739 $ 180,118
Aircraft operations 82,174 87,877 101,433 111,992
---------- ---------- ---------- ----------
Total 353,196 249,998 272,172 292,110
---------- ---------- ---------- ----------
Costs and expenses:
Drilling operations 211,095 162,816 147,853 130,845
Aircraft operations 68,882 74,347 82,364 88,182
Depreciation, depletion and amortization 51,918 51,367 52,954 50,702
General and administrative 13,940 12,092 11,739 9,549
---------- ---------- ---------- ----------
Total 345,835 300,622 294,910 279,278
---------- ---------- ---------- ----------
Income (loss) from operations 7,361 (50,624) (22,738) 12,832
---------- ---------- ---------- ----------
Other income (expense):
Interest expense (25,361) (26,254) (21,379) (21,601)
Less interest capitalized
Gain on disposals of property and equipment 1,955 731 1,660 3,996
Interest income 2,348 2,658 4,763 8,635
Other-net 150 165 127 178
---------- ---------- ---------- ----------
Other income (expense)-net (20,908) (22,700) (14,829) (8,792)
---------- ---------- ---------- ----------
Income (loss) before income taxes (13,547) (73,324) (37,567) 4,040
Provision (credit) for income taxes (288) 429 1,174 2,081
---------- ---------- ---------- ----------
Income (loss) before extraordinary charge (13,259) (73,753) (38,741) 1,959
Extraordinary charge from redemption of debt (5,627)
---------- ---------- ---------- ----------
Net income (loss) $ (13,259) $ (73,753) $ (44,368) $ 1,959
---------- ---------- ---------- ----------
Per share of common stock:
Net income (loss):
Primary $ (.17) $ (1.01) $ (.61)* $ .03
---------- ---------- ---------- ----------
Fully diluted $ (.17) $ (1.01) $ (.61)* $ .03
---------- ---------- ---------- ----------
Cash dividends $ - $ - $ - $ -
---------- ---------- ---------- ----------
FINANCIAL POSITION
Working capital $ 172,117 $ 61,397 $ 125,996 $ 134,393
---------- ---------- ---------- ----------
Property and equipment-at cost:
Drilling equipment 950,538 939,793 913,379 885,264
Aircraft and related equipment 166,791 162,001 158,361 138,327
Other 81,636 79,801 76,251 73,504
Construction in progress
---------- ---------- ---------- ----------
Total 1,198,965 1,181,595 1,147,991 1,097,095
---------- ---------- ---------- ----------
Property and equipment-net 507,193 537,819 552,481 549,608
Total assets 765,263 684,301 895,889 739,133
Capital expenditures 21,989 39,528 85,618 59,905
Long-term debt 207,137 212,907 220,764 153,621
Common stockholders' equity 460,300 375,754 445,368 485,748
---------- ---------- ---------- ----------
STATISTICAL INFORMATION
Current ratio 4.90 2.47 1.71** 4.00
Long-term debt/common stockholders' equity .45 .57 .50 .32
Book value per share of common stock $ 5.49 $ 5.13 $ 6.11 $ 6.69
---------- ---------- ---------- ----------
</TABLE>
* Includes $.08 per share effect of extraordinary charge.
** At December 31, 1991, the $125,000,000 principal amount of the
Company's 133 3/4% Senior Notes had been called for redemption and
appeared as a current liability. If redemption had occurred prior to
year-end, the current ratio would have been 3.61.
<PAGE> 2
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS) 1989 1988 1987 1986
- -------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS
Revenues:
Drilling $ 128,818 $ 144,018 $ 90,145 $ 113,651
Aircraft operations 97,446 72,667 52,984 53,512
---------- ---------- ---------- ----------
Total 226,264 216,685 143,129 167,163
---------- ---------- ---------- ----------
Costs and expenses:
Drilling operations 119,182 126,288 113,348 139,177
Aircraft operations 75,943 62,571 48,996 52,846
Depreciation, depletion and amortization 52,062 60,324 61,312 62,525
General and administrative 7,690 7,313 6,766 7,100
---------- ---------- ---------- ----------
Total 254,877 256,496 230,422 261,648
---------- ---------- ---------- ----------
Income (loss) from operations (28,613) (39,811) (87,293) (94,485)
---------- ---------- ---------- ----------
Other income (expense):
Interest expense (23,682) (23,920) (23,463) (17,208)
Less interest capitalized 237 319 2,013
Gain on disposals of property and equipment 2,320 27,578 1,814 962
Interest income 12,709 4,002 4,917 6,786
Other-net 161 345 407 399
---------- ---------- ---------- ----------
Other income (expense)-net (8,492) 8,242 (16,006) (7,048)
---------- ---------- ---------- ----------
Income (loss) before income taxes (37,105) (31,569) (103,299) (101,533)
Provision (credit) for income taxes 672 32 (34,009) (53,002)
---------- ---------- ---------- ----------
Income (loss) before extraordinary charge (37,777) (31,601) (69,290) (48,531)
Extraordinary charge from redemption of debt
---------- ---------- ---------- ----------
Net income (loss) $ (37,777) $ (31,601) $ (69,290) $ (48,531)
---------- ---------- ---------- ----------
Per share of common stock:
Net income (loss):
Primary $ (.52) $ (.44) $ (1.12) $ (.93)
---------- ---------- ---------- ----------
Fully diluted $ (.52) $ (.44) $ (1.12) $ (.93)
---------- ---------- ---------- ----------
Cash dividends $ - $ - $ - $ .06
---------- ---------- ---------- ----------
FINANCIAL POSITION
Working capital $ 143,963 $ 152,335 $ 76,779 $ 77,265
---------- ---------- ---------- ----------
Property and equipment-at cost:
Drilling equipment 867,540 863,450 946,127 941,726
Aircraft and related equipment 107,985 97,500 98,860 100,339
Other 70,598 88,039 88,113 90,795
Construction in progress
---------- ---------- ---------- ----------
Total 1,046,123 1,048,989 1,133,100 1,132,860
---------- ---------- ---------- ----------
Property and equipment-net 542,995 585,365 697,144 751,225
Total assets 737,826 800,684 827,785 875,004
Capital expenditures 22,945 18,318 14,123 102,094
Long-term debt 163,473 181,330 184,187 200,125
Common stockholders' equity 479,287 515,491 546,078 505,115
---------- ---------- ---------- ----------
STATISTICAL INFORMATION
Current ratio 4.55 4.07 2.88 3.46
Long-term debt/common stockholders' equity .34 .35 .34 .40
Book value per share of common stock $ 6.64 $ 7.16 $ 7.59 $ 9.28
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS) 1985 1984 1983 1982
- -------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS
Revenues:
Drilling $ 198,937 $ 143,094 $ 161,204 $ 354,482
Aircraft operations 73,581 55,281 45,273 47,151
---------- ---------- ---------- ----------
Total 272,518 198,375 206,477 401,633
---------- ---------- ---------- ----------
Costs and expenses:
Drilling operations 151,878 109,489 118,922 146,054
Aircraft operations 57,583 46,093 31,499 34,636
Depreciation, depletion and amortization 60,504 53,750 46,394 40,448
General and administrative 8,157 8,279 8,987 7,903
---------- ---------- ---------- ----------
Total 278,122 217,611 205,802 229,041
---------- ---------- ---------- ----------
Income (loss) from operations (5,604) (19,236) 675 172,592
---------- ---------- ---------- ----------
Other income (expense):
Interest expense (19,242) (24,443) (11,032) (15,174)
Less interest capitalized 410 13,239 10,830 8,615
Gain on disposals of property and equipment 4,857 2,026 1,798 11,273
Interest income 5,501 4,201 3,998 11,019
Other-net 192 294 280 301
---------- ---------- ---------- ----------
Other income (expense)-net (8,282) (4,683) 5,874 16,034
---------- ---------- ---------- ----------
Income (loss) before income taxes (13,886) (23,919) 6,549 188,626
Provision (credit) for income taxes (10,189) (27,149) (9,980) 70,683
---------- ---------- ---------- ----------
Income (loss) before extraordinary charge (3,697) 3,230 16,529 117,943
Extraordinary charge from redemption of debt
---------- ---------- ---------- ----------
Net income (loss) $ (3,697) $ 3,230 $ 16,529 $ 117,943
---------- ---------- ---------- ----------
Per share of common stock:
Net income (loss):
Primary $ (.07) $ .06 $ .27 $ 2.33
---------- ---------- ---------- ----------
Fully diluted $ (.07) $ .06 $ .27 $ 2.18
---------- ---------- ---------- ----------
Cash dividends $ .11 $ .08 $ .08 $ .08
---------- ---------- ---------- ----------
FINANCIAL POSITION
Working capital $ 109,805 $ 77,750 $ 88,423 $ 67,934
---------- ---------- --------- ----------
Property and equipment-at cost:
Drilling equipment 857,862 879,561 744,088 606,551
Aircraft and related equipment 98,568 99,946 96,159 94,788
Other 89,493 80,491 71,452 70,900
Construction in progress 2,075 54,443 47,852
---------- ---------- --------- ----------
Total 1,047,998 1,059,998 966,142 820,091
---------- ---------- --------- ----------
Property and equipment-net 726,366 786,071 740,939 638,760
Total assets 916,885 928,985 888,748 788,832
Capital expenditures 53,039 152,034 158,988 185,577
Long-term debt 143,750 186,549 157,766 71,536
Common stockholders' equity 561,569 569,176 576,305 506,723
---------- ---------- --------- ----------
STATISTICAL INFORMATION
Current ratio 2.60 2.46 2.96 2.06
Long-term debt/common stockholders' equity .26 .33 .28 .14
Book value per share of common stock $ 10.28 $ 10.46 $ 10.48 $ 10.48
---------- ---------- --------- ----------
</TABLE>
* Includes $.08 per share effect of extraordinary charge.
** At December 31, 1991, the $125,000,000 principal amount of the
Company's 133 3/4% Senior Notes had been called for redemption and
appeared as a current liability. If redemption had occurred prior to
year-end, the current ratio would have been 3.61.
<PAGE> 3
Rowan Companies, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following analysis highlights the Company's operating results for the years
indicated (in millions):
<TABLE>
<CAPTION>
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Revenues:
Drilling $ 271.0 $ 162.1 $ 170.8
Aviation 82.2 87.9 101.4
-------- ------- -------
Total $ 353.2 $ 250.0 $ 272.2
-------- ------- -------
Operating Profit
(Loss)*:
Drilling $ 19.1 $ (40.4) $ (17.7)
Aviation 2.2 1.9 6.7
------- ------- -------
Total $ 21.3 $ (38.5) $ (11.0)
------- ------- -------
Net Income (Loss) $ (13.3) $ (73.8) $ (44.4)
======= ======= =======
</TABLE>
* Income (loss) from operations before deducting general and administrative
expenses.
The state of fluctuation and continuing depressed conditions
prevailing in the drilling and aviation markets is reflected in all three
categories of financial data shown above. Factors adversely affecting the
drilling and aviation markets in which the Company operates, thereby depressing
its operating results during the three year period, included corporate
reorganizations and downsizings by major energy companies, increasing
regulations and drilling moratoriums by governments and volatile energy prices.
The decrease in the Company's net loss in 1993 in comparison to 1992 resulted
primarily from a significant increase in drilling revenues, spurred by improved
natural gas prices, which more than offset the increase in drilling expenses.
Also positively affecting the bottom line results were the $90.0 million in
revenues and $9.7 in incremental operating profit contributed by Total Project
Management, principally turnkey drilling. Operating results for 1992 were worse
than 1991 primarily because of the previously mentioned corporate
reorganizations and downsizings, increasing regulations and drilling
moratoriums and unusually low natural gas prices. The negative impact of these
factors in 1992, was partially offset by turnkey drilling, which generated
$15.5 million in revenues and an incremental operating profit of $2.9 million
in that year.
DRILLING OPERATIONS. The Company's drilling operating results are dependent on
rig rates and the level of utilization in its offshore drilling business
conducted primarily in the Gulf of Mexico and the North Sea. In turn, the rates
for and utilization of the Company's offshore rigs are impacted by the level of
offshore expenditures by energy companies.
The offshore drilling industry experienced a series of fluctuations
during the 1991-1993 period. In 1991, demand weakened in the two primary
markets in which the Company operates due to depressed energy prices. In the
Gulf of Mexico, curtailed drilling activity by energy companies as a result of
low natural gas prices significantly reduced utilization and day rates
beginning in the first quarter of 1991. In the North Sea, energy prices
remained more stable and, as a result, utilization and day rates were not
affected to the same extent during 1991 and early 1992. In late 1992,
conditions in the two markets moved in opposite directions. An improvement in
natural gas prices brought about an improvement in utilization levels and day
rates in the Gulf of Mexico, which has continued into the first quarter of
1994. Meanwhile, utilization and day rates declined in the North Sea due to
energy companies downsizing their drilling programs because of uncertainty
created by the changes in energy policies in the United Kingdom.
The effects of fluctuations in utilization and drilling rates are
reflected in the following analysis of contract drilling revenue changes (in
millions):
<TABLE>
<CAPTION>
1992 to 1993 1991 to 1992
------------ ------------
<S> <C> <C>
Utilization $ 25.4 $ (9.1)
Drilling Rates 9.3 (11.2)
------ ------
</TABLE>
These fluctuations combined with the growth of Total Project
Management operations resulted in a 67% increase in 1993 drilling revenues
compared to 1992. The effect of these fluctuations in 1992 more than offset
Total Project Management operations resulting in a 5% decrease in drilling
revenues compared to 1991.
The percentage changes in drilling operations expenses were a 30% and
10% increase in 1993 and 1992, respectively, primarily due to growth in Total
Project Management operations.
The number of marine rigs operated by the Company at the end of each
year in the 1991-1993 period and the rig utilization percentages (number of
days under contract as a percent of days the rig was available for service) for
each of those years are reflected in the schedule below:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Jack-ups:
Number 20 20 20
Utilization 85% 70% 67%
Semi-submersible:
Number 1 1 1
Utilization 94% 37% 73%
Submersible Barges:
Number 3 3 3
Utilization 30% 22% 30%
</TABLE>
In the Gulf Of Mexico drilling market, where the Company currently has
16 of its 24 marine rigs, three notable changes have been occurring. First, the
Gulf of Mexico is now the only domestic market in which large scale drilling
activity is occurring, because the U.S. government has imposed moratoriums on
drilling in most other domestic offshore areas. Second, many major
<PAGE> 4
energy companies have downsized their domestic drilling organizations and have
generally exited the United States market for international markets,
notwithstanding improved domestic natural gas prices. Third, a growing number
of independent energy companies have become operators in this market, in part
because the Minerals Management Service of the U.S. government has modified the
process by which such companies are permitted to farm-in on existing leases. As
a result of the these changing conditions, the Company has moved towards Total
Project Management, an approach to drilling operations which emphasizes
drilling and completing wells on a turnkey basis.
Perceptible trends existing in the offshore drilling markets in which
the Company operates are shown below:
- --------------------------------------------------------------------------------
GULF OF MEXICO-Improving levels of exploration and development activity due to
generally stable natural gas prices remaining above $2.00 per Mcf
NORTH SEA-Generally stable drilling activity for jack-up rigs used in the
exploration and development of natural gas
EASTERN CANADA-Generally stable demand
TRINIDAD-Generally stable demand
- --------------------------------------------------------------------------------
The volatile nature of the various factors affecting the level of
offshore expenditures by major energy companies and shifts of such expenditures
between domestic and international markets prevent the Company from being able
to predict whether these market trends will continue, or their impact on the
results of drilling operations for 1994.
The drilling markets in which the Company competes frequently
experience significant changes in supply and demand. Drilling utilization and
day rates achievable in offshore markets are affected by changes in overall
exploration and development expenditures, as well as by shifts of such
expenditures between markets. These expenditures, in turn, are driven by
discoveries of oil and natural gas reserves, shifts in the political climate,
regulatory changes, seasonal weather patterns, contractual requirements under
leases or concessions and changes in oil and natural gas prices, the last being
perhaps the most disruptive of all. The Company can, as it has done in the
past, relocate its drilling rigs from one geographic area to another in
response to such changing market dynamics, but only when these moves are
economically justified.
Five of the Company's land rigs were under contract in northeast
Venezuela during all of 1993. One of the Company's arctic land rigs in Alaska
worked during the first quarter of 1993. The remaining four arctic land rigs
and the seven rigs in western Texas and Oklahoma were idle in 1993. The cost of
maintaining the idle land rigs is modest and the remaining investment in the
rigs is not significant.
AVIATION OPERATIONS. Although the Company continues to offer a diversity of
flight services, such as forest fire control, crew changes for commercial
fishing, flightseeing, airborne environmental surveys, commuter airline
services, medivac services, etc., the aviation division's operating results are
still heavily dependent upon helicopter activity associated with oil and
natural gas exploration and production, principally in Alaska and the Gulf of
Mexico. Thus, like the drilling division, the aviation division's level of
activity and rates for its services depend largely upon the level of
expenditures by energy companies.
Aviation revenues declined $5.7 million or 6% in 1993 compared to 1992
and $13.6 million or 13% in 1992 compared to 1991. Activity associated with
support for production facilities in the Gulf of Mexico declined during the
1991-1993 period due to depressed drilling activity, resulting from
reorganizations and downsizing of major energy companies coupled with their
concentration of drilling activities outside the United States.
Aviation division expenses declined 7% in 1993 compared to 1992 and
10% in 1992 compared to 1991. These changes are consistent with the decline in
revenues during the periods. The division has not been significantly impacted
by fluctuating fuel costs because its contracts generally provide for fuel cost
adjustments.
The number of aircraft operated by the aviation division of the
Company at the end of each year in the 1991-1993 period and the revenue hours
for each of those years are reflected in the schedule below:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Twin Engine
Helicopters:
Number 63 64 67
Revenue Hours 29,715 31,370 45,262
Single Engine
Helicopters:
Number 31 30 26
Revenue Hours 10,150 10,700 8,773
Fixed-Wing
Aircraft:
Number 15 13 16
Revenue Hours 22,728 21,426 20,098
------ ------ ------
</TABLE>
Excluded above are twin engine helicopters owned by the Company's
Dutch affiliate. The comparable statistics for those helicopters are: 1993-11
helicopters recording 8,420 revenue hours; 1992-11 helicopters recording 9,800
revenue hours and 1991-12 helicopters recording 1,750 revenue hours over the
last two months of that year.
Perceptible trends existing in the aviation markets in which the
Company operates are shown below:
- --------------------------------------------------------------------------------
ALASKA-Generally stable market conditions
GULF OF MEXICO-Moderately improving market conditions
NORTH SEA-Moderately reduced flight support activity
- --------------------------------------------------------------------------------
The Company cannot predict whether these market trends will continue.
Increases or decreases in energy company exploration and production activities,
as well as shifts of such activities from one market to another, can result in
changes in demand for flight services in the aviation markets in which the
Company competes. Seasonal weather patterns can also affect demand. To address
these market fluctuations, the Company can, as it has done in the past, move
aircraft from one market to another, but only when the likelihood of higher
returns makes such action economical.
<PAGE> 5
MANUFACTURING OPERATIONS. In February 1994, the Company purchased the net
assets of Marathon LeTourneau Company for $52.1 million with $10.4 million cash
paid at the time of the purchase and the balance being seller-financed by
promissory notes bearing interest at 7% and payable at the end of five years.
The company operates a mini-steel mill that recycles scrap and produces alloy
steel and steel plate; a manufacturing facility that produces heavy equipment
for the mining and timber industries including, among other things, front-end
loaders up to 50 ton capacity and trucks under the registered trademark, Titan,
up to 240 ton capacity; and a marine division that has built over one-third of
all mobile offshore jack-up drilling rigs, including all twenty operated by
Rowan.
With revenues in excess of $95 million in 1993, LeTourneau was
profitable and generated a positive cash flow from operations. Management is
currently evaluating the product and service lines with the intention of
enhancing operating results in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Key balance sheet amounts and ratios for 1993 and 1992 were as follows (dollars
in millions):
<TABLE>
<CAPTION>
December 31, 1993 1992
- ------------ ------- -------
<S> <C> <C>
Cash and cash equivalents $ 116.8 $ 29.6
Current assets $ 216.3 $ 103.1
Current liabilities $ 44.2 $ 41.7
Current ratio 4.90 2.47
Current maturities of
long-term debt $ 8.1 $ 7.9
Long-term debt $ 207.1 $ 212.9
Stockholders' equity $ 460.3 $ 375.8
Long-term debt/
stockholders' equity .45 .57
------- -------
</TABLE>
In 1991, the Company entered into several financial transactions as
follows: the issuance of $200 million of 117-8% Senior Notes due 2001, the
obtaining of a $35 million unsecured revolving line of credit, the call for
redemption in January 1992 of $125 million of 133-4% Senior Notes due 1996 and
the purchase of a 49% interest in KLM Helikopters for approximately $26
million. See Note 2 of the Notes to Consolidated Financial Statements for
additional information pertinent to the redemption of the 133-4% Senior Notes.
In 1993, the Company sold 10 million shares of common stock using the
$92 million of net proceeds to expand the Company's turnkey drilling operations
and increase working capital. Also during 1993, the Company repaid $10 million
outstanding under the $35 million unsecured revolving line of credit, canceling
the line at the time of such repayment, and entered into a $3.6 million
nonrecourse bank loan agreement to finance the purchase of two fixed-wing
aircraft in conjunction with a five-year medivac service contract requiring the
use of three aircraft.
The Company estimates 1994 capital expenditures will be between $25
million and $35 million. These expenditures are in addition to the $52.1
million purchase of the net assets of Marathon LeTourneau. The Company may also
spend amounts to acquire additional aircraft as market conditions justify and
to upgrade existing offshore rigs.
Cash flow from operations has fluctuated during the three years ended
December 31, 1993 as a result of the operational fluctuations discussed
previously. Net cash provided by (used in) operations was $18.4 million in
1993, ($29.9 million) in 1992 and $26.3 million in 1991. Based on the current
level of operations and the previously discussed operational trends, it is
management's opinion that cash provided by operations and existing working
capital will be adequate to sustain planned capital expenditures and debt
service requirements for the foreseeable future. At January 31, 1994, the
Company had working capital of approximately $170 million.
At December 31, 1993, the provisions of the Company's existing
indebtedness would allow the Company to enter into sale/leaseback transactions
with a maximum value of approximately $72.2 million.
In 1991, 1992 and through the first five months of 1993, the Company
was prohibited from paying dividends on its common stock under the terms of its
Senior Notes. With the addition of the proceeds from the public offering of 10
million shares of common stock in June 1993, the Company's ability to pay cash
dividends was restored, although no dividends were paid. Furthermore, the
Company does not intend to pay dividends on its common stock until it achieves
and sustains a suitable level of profitability. See Note 5 of the Notes to
Consolidated Financial Statements.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employer's Accounting for Postretirement
Benefits Other Than Pensions," which requires accrual of the cost of retiree
health care and other postretirement benefits during the years an employee
provides services. Prior to 1993, the Company recognized the cost of these
benefits as they were paid. The effect of adopting the statement for the year
ended December 31, 1993 was to increase net periodic postretirement benefit
cost and the net loss by approximately $3 million. See Note 6 of the Notes to
Consolidated Financial Statements.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," under which
deferred income tax assets and liabilities reflect the future tax consequences
of differences between the financial statement and tax bases of assets and
liabilities. The effect of adopting the statement on the Company's 1993
consolidated financial statements was not significant due to the expected
realization of sufficient tax loss carryforwards and other future deductible
amounts to offset future taxable amounts, based on the projected reversal of
such differences. See Note 7 of the Notes to Consolidated Financial Statements.
<PAGE> 6
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS INDEPENDENT AUDITORS' REPORT
<S> <C> <C>
15 INDEPENDENT Rowan Companies, Inc. and Subsidiaries:
AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of Rowan Companies,
16 CONSOLIDATED Inc. and Subsidiaries (the "Company") as of December 31, 1993 and 1992, and the
BALANCE SHEET related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
17 CONSOLIDATED STATEMENT 1993. These financial statements are the responsibility of the Company's
OF OPERATIONS management. Our responsibility is to express an opinion on these financial
statements based on our audits.
18 CONSOLIDATED STATEMENT
OF CHANGES IN We conducted our audits in accordance with generally accepted auditing
STOCKHOLDERS' EQUITY standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
19 CONSOLIDATED STATEMENT material misstatement. An audit includes examining, on a test basis, evidence
OF CASH FLOWS supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
20 NOTES TO CONSOLIDATED estimates made by management, as well as evaluating the overall financial
FINANCIAL STATEMENTS statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December
31, 1993 and 1992, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1993 in conformity
with generally accepted accounting principles.
As described in Notes 1 and 6 to the Consolidated Financial Statements,
the Company changed its methods of accounting for income taxes and the cost of
retiree health care effective January 1, 1993 to conform with the provisions of
Statements of Financial Accounting Standards Nos. 109 and 106, respectively.
DELOITTE & TOUCHE
Deloitte & Touche
Houston, Texas
March 7, 1994
</TABLE>
<PAGE> 7
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
--------------------------
(In thousands except share amounts) 1993 1992
- ----------------------------------- --------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 116,778 $ 29,550
Receivables-trade and other 83,429 54,562
Materials and supplies-at cost 14,002 14,672
Prepaid expenses 1,312 980
Costs of turnkey drilling contracts in progress 785 3,374
---------- ----------
Total current assets 216,306 103,138
---------- ----------
Investment In and Advances To 49% Owned Companies 33,569 33,596
---------- ----------
Property and Equipment-at cost:
Drilling equipment 950,538 939,793
Aircraft and related equipment 166,791 162,001
Other property and equipment 81,636 79,801
---------- ----------
Total 1,198,965 1,181,595
Less accumulated depreciation and amortization 691,772 643,776
---------- ----------
Property and equipment-net 507,193 537,819
---------- ----------
Other Assets and Deferred Charges 8,195 9,748
---------- ----------
Total $ 765,263 $ 684,301
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt (Note 2) $ 8,127 $ 7,857
Accounts payable-trade 15,887 13,012
Other current liabilities (Note 4) 20,175 20,872
---------- ----------
Total current liabilities 44,189 41,741
---------- ----------
Long-Term Debt-less current maturities (Note 2) 207,137 212,907
---------- ----------
Other Liabilities (Notes 6 and 9) 30,409 26,449
---------- ----------
Deferred Credits:
Income taxes (Note 7) 4,314 5,117
Gain on sale/leaseback transactions (Note 9) 18,742 21,941
Other 172 392
---------- ----------
Total deferred credits 23,228 27,450
---------- ----------
Commitments and Contingent Liabilities (Note 9)
Stockholders' Equity:
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series I Preferred Stock, authorized 6,500 shares, none issued
Series II Preferred Stock, authorized 6,000 shares, none issued
Series A Junior Preferred Stock, authorized 1,500,000 shares, none issued
Common stock, $.125 par value; authorized 150,000,000 shares; issued 85,349,906
shares at December 31, 1993 and 74,645,344 shares at December 31, 1992 (Note 3) 10,669 9,331
Additional paid-in capital 385,937 289,470
Retained earnings (Note 5) 66,179 79,438
Less cost of treasury stock-1,457,919 shares in 1993 and 1992 2,485 2,485
Total stockholders' equity 460,300 375,754
---------- ----------
Total $ 765,263 $ 684,301
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 8
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------
(In thousands except per share amounts) 1993 1992 1991
- --------------------------------------- ---------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Drilling operations $ 271,022 $ 162,121 $ 170,739
Aircraft operations 82,174 87,877 101,433
---------- ----------- -----------
Total 353,196 249,998 272,172
---------- ----------- -----------
Costs and Expenses:
Drilling operations 211,095 162,816 147,853
Aircraft operations 68,882 74,347 82,364
Depreciation and amortization 51,918 51,367 52,954
General and administrative 13,940 12,092 11,739
---------- ----------- -----------
Total 345,835 300,622 294,910
---------- ----------- -----------
Income (Loss) From Operations 7,361 (50,624) (22,738)
---------- ----------- -----------
Other Income (Expense):
Interest expense (25,361) (26,254) (21,379)
Gain on disposals of property and equipment 1,955 731 1,660
Interest income 2,348 2,658 4,763
Other-net 150 165 127
---------- ----------- -----------
Other income (expense)-net (20,908) (22,700) (14,829)
---------- ----------- -----------
Income (Loss) Before Income Taxes (13,547) (73,324) (37,567)
Provision (credit) for income taxes (Note 7) (288) 429 1,174
---------- ----------- -----------
Income (Loss) Before Extraordinary Charge (13,259) (73,753) (38,741)
Extraordinary charge from redemption of debt (Note 2) (5,627)
---------- ----------- -----------
Net Income (Loss) $ (13,259) $ (73,753) $ (44,368)
---------- ----------- -----------
Earnings (Loss) Per Share of Common Stock (Note 1):
Income (loss) before extraordinary charge $ (.17) $ (1.01) $ (.53)
Extraordinary charge (.08)
---------- ----------- -----------
Net Income (Loss) $ (.17) $ (1.01) $ (.61)
---------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 9
Rowan Companies, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
For the Years Ended December 31, 1993, 1992 and 1991
------------------------------------------------------------------------
Common Stock
------------------------------------------
Issued In Treasury Additional
---------------- -------------------- Paid-in Retained
(In thousands) Shares Amount Shares Amount Capital Earnings
- -------------- ------ ------ ------ ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991 74,087 $ 9,261 1,458 $ 2,485 $ 281,413 $197,559
Exercise of stock options 240 30 209
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 3,749
Net loss (44,368)
------ ------- ----- ------- --------- --------
Balance, December 31, 1991 74,327 9,291 1,458 2,485 285,371 153,191
Exercise of stock options 318 40 279
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 3,820
Net loss (73,753)
------ ------- ----- ------- --------- --------
Balance, December 31, 1992 74,645 9,331 1,458 2,485 289,470 79,438
Exercise of stock options 531 66 464
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 4,282
Conversion of subordinated debentures 174 22 978
Sale of common stock (Note 3) 10,000 1,250 90,743
Net loss (13,259)
------ ------- ----- ------- --------- --------
Balance, December 31, 1993 (Notes 3 and 5) 85,350 $10,669 1,458 $ 2,485 $ 385,937 $ 66,179
------ ------- ----- ------- --------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 10
Rowan Companies, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------
(In thousands) 1993 1992 1991
- -------------- ----------- ----------- -----------
<S> <C> <C> <C>
Cash Provided By (Used In):
Operations:
Net income (loss) $ (13,259) $ (73,753) $ (44,368)
Noncash charges (credits) to net income (loss):
Depreciation and amortization 51,918 51,367 52,954
Gain on disposals of property and equipment (1,955) (731) (1,660)
Compensation expense 4,282 3,820 3,749
Change in sale/leaseback payable (273) 1,668 1,360
Amortization of sale/leaseback gain (3,198) (3,207) (3,198)
Provision for pension and postretirement benefits 5,637 2,881 1,907
Other-net (785) (1,936) 2,545
Changes in current assets and liabilities:
Receivables-trade and other (28,867) (3,815) 2,789
Other current assets 2,927 (1,410) (365)
Current liabilities 774 (6,457) 7,093
Net changes in other noncurrent assets and liabilities 1,165 1,628 3,450
---------- ----------- -----------
Net cash provided by (used in) operations 18,366 (29,945) 26,256
---------- ----------- -----------
Investing activities:
Capital expenditures:
Property and equipment additions (21,989) (39,528) (57,619)
Investment in subsidiaries and affiliates (27,999)
Advances to affiliates (100) (1,956) (5,074)
Proceeds from disposals of property and equipment 2,929 2,686 2,602
---------- ----------- -----------
Net cash provided by (used in) investing activities (19,160) (38,798) (88,090)
---------- ----------- -----------
Financing activities:
Proceeds from issuance of 117-8% Senior Notes,
net of issue costs 195,572
Proceeds from common stock offering, net of issue costs 91,993
Proceeds from revolving credit arrangements 10,000 15,000
Payments on revolving credit arrangements (10,000) (15,000)
Proceeds from other borrowings 3,560
Repayments of other borrowings (8,061) (132,857) (7,857)
Premium on redemption of debt (3,750)
Other-net 530 319 239
---------- ----------- -----------
Net cash provided by (used in) financing activities 88,022 (136,288) 187,954
---------- ----------- -----------
Increase (Decrease) in Cash and Cash Equivalents 87,228 (205,031) 126,120
Cash and Cash Equivalents, Beginning of Year 29,550 234,581 108,461
---------- ----------- -----------
Cash and Cash Equivalents, End of Year $ 116,778 $ 29,550 $ 234,581
---------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 11
Rowan Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Rowan Companies, Inc. and all of its wholly and majority owned
subsidiaries (the "Company").
The Company accounts for its investment in less-than-50% owned
companies using the equity method.
The excess of cost over the net assets of subsidiaries at dates of
acquisitions ($8,452,000) is being amortized over a thirty-year period. At
Decem-ber 31, 1993, the unamortized excess cost was $3,521,000.
Material intercompany transactions are eliminated in consolidation.
REVENUE RECOGNITION. Most drilling contracts are on a day rate basis, and
revenues and expenses are recognized as the work progresses. The Company also
utilizes turnkey contracts for certain of its drilling operations. Under these
short-term, fixed price arrangements, revenues and expenses are recognized on a
completed contract basis.
The Company's aviation services generally are provided under master
service agreements (which provide for incremental payments based on usage),
term contracts, or day-to-day charter arrangements. Aviation revenues and
expenses are recognized as services are rendered.
RECLASSIFICATIONS. Certain reclassifications have been made in the 1992 and
1991 amounts to conform with 1993 presentations.
STATEMENT OF CASH FLOWS. The Company generally considers all highly liquid
instruments with a maturity of three months or less when purchased to be cash
equivalents.
Noncash financing activities consisted of the conversion of $1,000,000
princi-pal amount of Series I Floating Rate Convertible Subordinated Debentures
into 173,913 shares of common stock in 1993. See Notes 2 and 3.
PROPERTY AND DEPRECIATION. For financial reporting purposes, the Company
computes depreciation using the straight-line method over the estimated useful
lives of the related assets as follows:
<TABLE>
<CAPTION>
Salvage
Years Value
- ---------------------------------------------------------
<S> <C> <C>
Marine drilling equipment:
Semi-submersible 15 20%
Cantilever jack-ups 15 20%
Conventional jack-ups 12 20%
Barges 12 20%
Land drilling equipment 8 to 12 20%
Drill pipe and
tubular equipment 4 10%
Aviation equipment:
Aircraft 7 to 10 15% to 25%
Other 2 to 10 various
Other property and equipment 3 to 40 various
- ---------------------------------------------------------
</TABLE>
The Company depreciates its equipment from the date placed in service
until the equipment is sold or becomes fully depreciated.
The Company capitalizes, during the construction period, an allocation
of the interest cost incurred during the period required to complete the asset.
Engineering salaries and other expenses related to the construction of drilling
equipment are also capitalized.
Expenditures for betterments are capitalized. Costs of assets sold or
retired and related amounts of accumulated depreciation and amortization are
eliminated from the accounts and the resulting gains or losses on disposal of
the assets are recorded in operations. Expenditures for maintenance and repairs
are charged to operations as incurred. Maintenance and repairs for 1993, 1992
and 1991 amounted to $32,326,000, $33,233,000 and $38,310,000, respectively.
INCOME TAXES. Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109")under which deferred income tax assets and liabilities reflect the future
tax consequences of differences between the financial statement and tax bases
of assets and liabilities. The cumulative effect of adopting SFAS 109 on the
Company's 1993 consolidated financial statements was not significant. In 1992
and 1991, the Company provided for income taxes based upon timing differences
between financial and taxable income under Accounting Principles Board Opinion
No. 11, which was superseded by SFAS 109.
EARNINGS (LOSS) PER COMMON SHARE. Earnings (loss) per share amounts are
computed by dividing net income (loss) by the weighted average number of common
shares outstanding during the year. Shares issuable upon conversion of the
Series I and Series II Floating Rate Convertible Subordinated Debentures are
excluded from the average number of shares for the computation of per share
amounts because their effect is antidilutive. Additionally, shares issuable
upon the exercise of stock options are excluded because their effect is
insignificant.
2. LONG-TERM DEBT
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1993 1992
- ------------ --------- --------
<S> <C> <C>
117-8% Senior Notes due 2001 $ 200,000 $200,000
Nonrecourse note payable in
quarterly installments
through 1994 at various rates
collateralized by the drilling
rig Rowan Gorilla IV costing
approximately $81,500,000 7,857 15,714
Nonrecourse note payable
in quarterly installments
through 1998 with a final
balloon payment due at
maturity; bearing interest
at 7% and collateralized
by two aircraft costing
approximately 3,600,000 3,357
Series I subordinated
convertible debentures
due 1996 bearing interest
at 1-2% above prime rate 450 1,450
Series II subordinated
convertible debenture
due 1997 bearing interest
at 1-2% above prime rate 3,600 3,600
--------- --------
Total 215,264 220,764
Less current maturities 8,127 7,857
--------- --------
Remainder $ 207,137 $212,907
--------- --------
</TABLE>
<PAGE> 12
Maturities of long-term debt for the five years ending December 31,
1998 are as follows: 1994--$8,127,000, 1995--$289,000, 1996--$759,000,
1997--$3,932,000 and 1998--$2,157,000.
In December 1991, the Company concurrently issued $200,000,000
principal amount of 11 7/8% Senior Notes maturing in December 2001 (the "11
7/8% Notes") and called its outstanding 13 3/4% Senior Notes due 1996 (the "13
3/4% Notes"). The 13 3/4% Notes were redeemed in January 1992 at an aggregate
redemption price of $128,750,000 from the net proceeds from the sale of the 11
7/8% Notes. This redemption of the 13 3/4% Notes resulted in an extraordinary
charge of $5,627,000, or $.08 per share, comprised of a $3,750,000 call premium
and unamortized issue costs of $1,877,000.
The 11 7/8% Notes may be redeemed early, in whole or in part from time
to time at the Company's option, beginning December 1, 1996, upon payment of a
premium of 6% and descending 2% annually from that date to December 1, 1999,
when the Company may redeem them at the principal amount.
The nonrecourse note payable collateralized by the drilling rig, Rowan
Gorilla IV, bears interest at the following rates, depending on the Company's
election: a) 3/8% above the London Interbank offered rate, b) 5/8% to 7/8%
above the New York certificate of deposit dealer rate, or c) 1-4% above the
prime rate. At December 31, 1993, the interest rate was 3 3/4%.
In January 1993, the Company entered into a five-year nonrecourse loan
agreement with a bank to finance the purchase of two fixed-wing aircraft for
$3,560,000. The resulting notes payable are collateralized by the aircraft and
bear a fixed interest rate of 7%. The notes will be repaid in quarterly
installments through 1998, with a final balloon payment due at maturity.
The $450,000 principal amount of Series I Floating Rate Convertible
Subordinated Debentures is convertible into $450,000 Series I Preferred Stock,
which may be converted into an aggregate of 78,260 shares of the Company's
common stock at an initial conversion price of $5.75 per share. At December 31,
1993 the interest rate was 61-2%. See Note 3 for further information.
The $3,600,000 principal amount of the Series II Floating Rate
Convertible Subordinated Debenture is convertible into $3,600,000 Series II
Preferred Stock, which may be converted into an aggregate of 400,000 shares of
the Company's common stock at an initial conversion price of $9.00 per share.
At December 31, 1993, the interest rate was 61-2%. See Note 3 for further
information.
In May 1991, the Company guaranteed the indebtedness of an
unconsolidated affiliate under a $3,000,000 revolving credit agreement. At
December 31, 1993, $500,000 was outstanding under this agreement. Subsequent to
year-end, the $500,000 was repaid and the revolving credit agreement and
guarantee were canceled.
Interest payments for 1993, 1992 and 1991, were $24,867,000,
$32,965,000 and $19,780,000, respectively.
Certain debt agreements of the Company contain various provisions that
require an excess of current assets over current liabilities, require an excess
of stockholders' equity over consolidated funded indebtedness, and restrict
investments, sale/leaseback transactions, mergers, consolidations, sales of
assets, borrowings, creation of liens, purchases of the Company's capital
stock, and present and future common stock dividend payments. See Note 5 for
further information.
3. STOCKHOLDERS' EQUITY
The Company has two nonqualified stock option plans through which options have
been granted to certain key employees.
Under the terms of the Company's 1980 Nonqualified Stock Option Plan
(the "1980 Plan"), the Board of Directors granted options to purchase a total
of 1,000,000 shares of the Company's common stock. The Board of Director's
authority to grant additional options under the 1980 Plan expired on January
25, 1990.
Under the original terms of the 1988 Nonqualified Stock Option Plan
(the "1988 Plan"), the Board of Directors could grant before January 21, 1998
options to purchase a total of 2,000,000 shares of the Company's common stock.
Subsequently, at the April 1992 Annual Stockholders Meeting, the stockholders
of the Company approved an amendment to extend the term of the 1988 Plan to
January 21, 2003 and to increase to 7,000,000 the number of shares of common
stock that could be issued pursuant to options granted thereunder. At December
31, 1993, options for 3,816,504 shares had been granted at an exercise price of
$1.00 per share.
At December 31, 1993, 254 active, key employees had been granted
options. Options are exercisable to the extent of 25% after one year from date
of grant, 50% after two years, 75% after three years and 100% after four years.
For both the 1980 Plan and the 1988 Plan, all options not exercised expire ten
years after the date of grant.
For financial accounting purposes, the Company recognizes compensation
expense with respect to any given nonqualified option in an amount equal to the
difference between the market price per share and the option price per share on
the date of grant, multiplied by the number of shares granted. The compensation
is recorded as expense to the Company over the period of time during which the
employee performs services to earn the right to exercise the option and an
equal amount is credited to additional paid-in capital. The income tax effect
related to this compensation is recorded as an increase or decrease to the
provision for income taxes in the same period the compensation is recorded as
expense.
<PAGE> 13
Stock option activity during 1993, 1992 and 1991 was as follows:
<TABLE>
<CAPTION>
Number of Shares
----------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Stock options
outstanding,
beginning of year,
at $1.00 per share 1,490,475 1,492,900 1,357,375
Changes during
the year:
Granted,
at $1.00
per share 707,250 344,750 444,000
Exercised (530,650) (318,675) (239,225)
Expired (50,750) (28,500) (69,250)
---------- ---------- ---------
Stock options
outstanding,
end of year 1,616,325 1,490,475 1,492,900
--------- --------- ---------
Stock options
exercisable,
end of year 317,137 389,975 263,900
--------- --------- ---------
Stock options
available for grant,
end of year:
1988 Plan 4,417,821 5,074,321 393,571
--------- --------- ---------
</TABLE>
The Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan
(the "Plan") provides for the issuance to key employees of up to $20,000,000 in
aggregate principal amount of the Company's floating rate convertible
subordinated debentures. The debentures are initially convertible into
preferred stock which has no voting rights (except as required by law or the
Company's charter), no dividend and a nominal liquidation preference. The
preferred stock is immediately convertible into common stock.
Since inception of the plan, debentures in the aggregate principal
amount of $9,625,000 have been issued by the Company. Out of the initial issue
of $5,125,000 principal amount of debentures in 1986, $450,000 were outstanding
at December 31, 1993 and are ultimately convertible into common stock at $5.75
per share for each $1,000 principal amount of debenture at any time through
June 13, 1996, unless earlier redeemed or the conversion privilege is
terminated. In 1987, the Company issued a debenture in the principal amount of
$4,500,000, of which $3,600,000 was outstanding at December 31, 1993. This
residual amount is ultimately convertible into common stock at $9.00 per share
for each $1,000 principal amount of the debenture at any time through September
10, 1997, unless earlier redeemed or the conversion privilege is terminated.
On February 25, 1992, the Company adopted a Stockholders Rights
Agreement to protect against coercive takeover tactics. The agreement provides
for the distribution to the Company's stockholders of one Right for each
outstanding share of common stock. Each Right entitles the holder to purchase
from the Company one one-hundredth of a share of new Series A Junior Preferred
Stock of the Company at an exercise price of $30. In addition, under certain
circumstances, each Right will entitle the holder to purchase securities of the
Company or an acquiring entity at 1/2 market value. The Rights are exercisable
only if a person or group acquires 15% or more of the Company's outstanding
common stock or makes a tender offer for 30% or more of the Company's
outstanding common stock. The Rights will expire on February 25, 2002. The
Company may generally redeem the Rights at a price of $.01 per Right at any
time until the 10th day following public announcement that a 15% position has
been acquired. One million five hundred thousand shares of the Company's
preferred stock have been designated Series A Junior Preferred Stock and
reserved for issuance upon exercise of the Rights.
In June 1993, the Company sold 10,000,000 shares of its common stock
in a public offering. Net proceeds from the sale were $91,993,000 after
deducting underwriting commissions of $3,850,000 and direct offering costs of
$407,000.
4. OTHER CURRENT LIABILITIES
Other current liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1993 1992
- ------------ -------- -------
<S> <C> <C>
Gain on sale/leaseback
transactions $ 3,198 $ 3,198
Customer advances 1,039
Accrued liabilities:
Income taxes 596 802
Compensation and related
employee costs 9,082 9,507
Interest 2,018 1,979
Taxes and other 5,281 4,347
-------- --------
Total $ 20,175 $ 20,872
======== ========
</TABLE>
5. RESTRICTIONS ON RETAINED EARNINGS
Under the terms of certain debt agreements, the Company has agreed not to
declare dividends or make any distribution on its common stock unless the total
dividends or distributions subsequent to December 31, 1991 are less than the
sum of a) $20,000,000, plus b) 50% of cumulative consolidated net income, if
positive, subsequent to December 31, 1991, plus c) the net proceeds from the
sale of any class of capital stock after December 31, 1991, less d) 100% of
cumulative consolidated net income, if negative, subsequent to December 31,
1991. Under this dividend restriction, the Company had a computed positive
balance of $24,981,000 at December 31, 1993. Subject to these restrictions,
the Board of Directors will determine payment, if any, of future dividends or
distributions, in light of conditions then existing, including the Company's
earnings, financial condition and requirements, opportunities for reinvesting
earnings, business conditions and other factors.
6. BENEFIT PLANS
Since 1952, the Company has sponsored a defined benefit pension plan covering
substantially all of its employees. The benefits are based on an employee's
years of service and average earnings for the five highest consecutive calendar
years of compensation during the ten years immediately preceding retirement.
The Company's policy is to fund the minimum amount required by the Internal
Revenue Code. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future.
<PAGE> 14
The following table sets forth the plan's status and the amounts
recognized in the Company's consolidated balance sheet (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Actuarial present
value of benefit
obligations:
Accumulated
benefit
obligation,
Vested benefits $ 76,974 $ 65,519 $ 56,954
-------- -------- --------
Total benefits $ 83,960 $ 68,556 $ 61,296
-------- -------- --------
Plan assets at
fair value $ 89,843 $ 85,183 $ 78,883
Projected benefit
obligation for
service rendered
to date 98,263 83,889 74,778
-------- -------- --------
Plan assets in excess
of (less than)
projected benefit
obligation (8,420) 1,294 4,105
Unrecognized
net (gain) loss 4,091 (2,351) (1,759)
Unrecognized net
benefits being
recognized over
15 years (7,268) (8,479) (9,691)
Unrecognized prior
service cost 892 1,024 1,156
Accrued pension cost
included in
Other Liabilities $(10,705) $ (8,512) $ (6,189)
-------- -------- --------
</TABLE>
Plan assets consist primarily of equity securities and U.S. Treasury
bonds and notes. At December 31, 1993, equity securities included 1,500,000
shares of the Company's common stock at an average cost of $4.81 per share.
At December 31, 1993, $14,200,000 of plan assets were invested in a
dedicated bond fund. The plan had a basis in these assets of $11,100,000
yielding approximately 5.6% to maturity.
Net pension costs included the following components (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits
earned during
the period $ 3,982 $ 3,632 $ 3,743
Interest cost on
projected benefit
obligation 6,796 6,334 6,007
Actual return on
plan assets (8,580) (9,590) 157
Net amortization
and deferral (5) 1,948 (8,153)
------- ------- -------
Net periodic
pension cost $ 2,193 $ 2,324 $ 1,754
======= ======= =======
</TABLE>
Assumptions used in calculations were:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.5% 8.5% 9.0%
Rate of compensation
increase 4.5% 4.5% 6.0%
Expected rate of return
on plan assets 9.0% 9.0% 8.5%
--- --- ---
</TABLE>
In 1991 the Company established the Rowan Companies, Inc. Pension
Restoration Plan for certain key executives. This plan supplements the benefits
that are otherwise limited by section 415 of the Internal Revenue Code. The
plan is unfunded and had a projected benefit obligation at December 31, 1993 of
$2,246,000. The net pension liability as of that date was $1,118,000. Net
pension cost was $408,000 in 1993, $557,000 in 1992 and $153,000 in 1991.
In addition to providing pension benefits, the Company provides
certain health care and life insurance benefits for retired employees.
Substantially all of the Company's employees may become eligible for those
benefits if they reach normal retirement age while working for the Company.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employer's Accounting for Postretirement Benefits
Other Than Pensions," which requires accrual of the cost of retiree health care
and other postretirement benefits during the years an employee provides
services. Prior to 1993, the Company recognized the cost of these benefits as
they were paid. The effect of adopting the statement for the year ended
December 31, 1993 was to increase net periodic postretirement benefit cost and
the net loss by approximately $3,000,000 ($.04 per share).
The following table sets forth the plan's status and the amount
recognized in the Company's consolidated balance sheet at December 31, 1993 (in
thousands):
<TABLE>
<S> <C>
Accumulated postretirement
benefit obligations:
Retirees $ 8,980
Fully eligible active plan participants 5,880
Other active plan participants 9,464
--------
Total benefits 24,324
Unrecognized transition obligation
being recognized over 20 years (17,967)
Unrecognized net loss (3,321)
--------
Accrued postretirement benefit cost
included in Other Liabilities $ 3,036
========
</TABLE>
The actuarially determined accumulated postretirement benefit
obligation reflects health care cost trend rates of 14% for 1993 and decreasing
by 1% annually through 2001 and a discount rate of 7.5%. A one percentage point
increase in the assumed health care cost trend rate would increase net periodic
postretirement benefit cost by approximately $700,000 and increase the
accumulated postretirement benefit obligation by approximately $3,250,000.
Net postretirement benefit cost for 1993 included the following
components (in thousands):
<TABLE>
<S> <C>
Service cost $ 1,039
Interest cost 1,537
Net amortization and deferral 946
-------
Net periodic postretirement benefit cost $ 3,522
=======
</TABLE>
Postretirement benefit costs recognized in 1992 and 1991 on a
pay-as-you-go basis were $856,000 and $1,143,000, respectively. Cash payments
for postretirement benefits in 1993 were approximately $500,000.
7. INCOME TAXES
The detail of income tax provisions (credits) is presented below (in
thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 123 $ (82) $ 40
Foreign 501 707 1,100
State 7 3
----- ----- ------
Total current
provision 624 632 1,143
Deferred-foreign (912) (203) 31
----- ----- ------
Total $(288) $ 429 $1,174
===== ===== ======
</TABLE>
Total income tax expense (credit) shown in the consolidated statement
of operations differs from the amount that would be computed if the income
(loss) before income taxes was multiplied by the federal income tax rate
(statutory
<PAGE> 15
rate) applicable in each year. The reasons for this difference are as follows
(in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory rate 35% 34% 34%
Tax at statutory rate $(4,742) $(24,930) $(12,773)
Increase (decrease)
in taxes resulting
from:
Limitation on
utilization of
tax benefits 3,679 24,214 12,108
Additional taxes
on foreign
source income 551 505 1,131
Nondeductible
compensation
expense 28 609 655
Alternative
minimum tax 123
Other-net 73 31 53
------- -------- --------
Total $ (288) $ 429 $ 1,174
======= ======== ========
</TABLE>
Temporary differences and carryforwards which gave rise to deferred
tax assets and liabilities at December 31, 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
Deferred Deferred
Tax Tax
Assets Liabilities
-------- -----------
<S> <C> <C>
Property $ 104,974
Deferred sale/leaseback
gain $ 7,682
Accrued pension and
postretirement
benefit costs 5,109
ESOP/PAYSOP
contributions 1,836
Net operating loss
carryforward 91,869
Investment tax credit
carryforward 58,256
Foreign income taxes
payable 2,644
Other-net 1,629 1,412
Subtotal 166,381 109,030
-------- --------
Valuation allowance (61,665)
-------- --------
Total $104,716 $109,030
======== ========
</TABLE>
The deferred tax liabilities in excess of deferred tax assets
represents the amount of deferred income tax liability shown in the
consolidated balance sheet. The valuation allowance consists of investment tax
credit carryforwards and a portion of the net operating loss carryovers which
are forecast as not being utilized prior to their statutory expiration dates.
The sources of significant timing differences which gave rise to deferred
income tax expense and their effects were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Property and
equipment $(5,728) $(6,916) $(9,270)
Oil and gas
exploration costs 57 (389)
Deferred gain on
sale/leaseback of
drilling rigs 1,120 1,090 1,080
Net operating loss
carryforward 4,758 6,611 9,591
Pension and
postretirement
benefit provisions (1,792) (841) (645)
Other-net 730 (204) (336)
------- ------- -------
Total deferred
taxes $ (912) $ (203) $ 31
======= ======= =======
</TABLE>
At December 31, 1993 the Company had $53,011,000 of regular investment
tax credits and $5,246,000 of ESOP (Employee Stock Ownership Plan) tax credits
available for application against future federal taxes payable. Total credits,
if not utilized, will expire as follows: 1994-$1,807,000, 1995-$6,954,000,
1996-$12,772,000, 1997-$11,069,000, 1998-$8,027,000, 1999-$10,110,000, 2000-
$2,017,000 and 2001-$5,501,000.
At December 31, 1993, the Company had for federal income tax purposes,
net operating loss carryforwards of approximately $262,483,000 which will
expire, if not utilized, as follows: 2001-$87,148,000, 2002-$129,123,000 and
2007-$46,212,000.
Deferred income taxes not provided for undistributed earnings of
foreign subsidiaries, because such earnings are considered permanently invested
abroad, amounted to approximately $3,700,000 at December 31, 1993.
Loss before income taxes and the extraordinary charge consisted of
$(10,346,000), $(64,158,000) and $(28,608,000) of domestic income (loss), and
$(3,201,000), $(9,166,000), and $(8,959,000) of foreign losses for 1993, 1992
and 1991, respectively.
Income tax payments exceeded refunds by $248,000 in 1993, $1,493,000
in 1992 and $1,518,000 in 1991.
8. FAIR VALUES OF FINANCIAL INSTRUMENTS
Except for the 11 7/8% Notes discussed below, at December 31, 1993,
the carrying amounts approximate fair values for the Company's cash, cash
equivalents and long-term debt. For cash and cash equivalents, this is due to
the short maturity of the instruments. For long-term debt other than the 11
7/8% Notes, the fair value is estimated based on the quoted market prices for
similar issues.
The 11 7/8% Notes had a carrying amount of $200,000,000 on December
31, 1993 and a fair value of $220,250,000 as of that date. This value is based
on its quoted price on the New York Stock Exchange.
9. COMMITMENTS AND
CONTINGENT LIABILITIES
During 1984, the Company entered into a sale/leaseback transaction whereby the
Company sold the Rowan-Halifax, a cantilever jack-up, for $66,500,000 in cash
and leased the rig back under a 15-year operating lease at an effective
interest rate of about 9.3%. In 1985, the Company sold a similar jack-up, the
Cecil Provine, for $60,000,000 in cash and entered into a 15-year operating
lease at an effective interest rate of about 8.0%. Under each lease agreement,
at the end of the basic 15-year lease, the Company has an option to purchase
the rig at the then fair market value, terminate the lease, or renew the lease
at the lesser of a) a fixed rental renewal of 50% of the weighted average
amount of the semi-annual installments during the basic term, or b) a fair
market rental renewal. Each transaction has resulted in a gain which has been
deferred for financial statement purposes and is being recognized over its
respective lease term.
Total payments to be made under the sale/leaseback agreements are
being expensed on a straight-line basis. However, the payments themselves are
variable and generally increase over the respective lease terms. The excess of
inception-to-date expenses over related payments is included among Other
Liabilities on the consolidated balance sheet. At December 31, this amount was
$15,549,000 and $17,226,000 for 1993 and 1992, respectively.
The Company has operating leases covering aircraft, related hangers,
offices and computer equipment and the sale/leaseback rigs. Net rental expense
under all operating leases was $17,633,000 in 1993, $18,746,000 in 1992,
<PAGE> 16
and $19,797,000 in 1991. As of December 31, 1993, the future minimum payments
to be made under noncancelable operating leases were (in thousands):
<TABLE>
<S> <C>
1994 $ 21,158
1995 20,483
1996 19,330
1997 21,850
1998 18,165
Later Years 38,475
--------
Total $139,461
========
</TABLE>
The Company estimates 1994 capital expenditures at between $25,000,000
and $35,000,000. These expenditures are in addition to the $52,100,000 purchase
of the net assets of Marathon LeTourneau. See Note 12.
In the Company's opinion, at December 31, 1993, there were no
contingencies, claims or lawsuits against the Company which could have a
significant effect on its financial position or results of operations.
10. SEGMENTS OF BUSINESS
In 1993 and earlier years, the Company has had two principal segments of
business: drilling of oil and gas wells, both offshore and onshore
("Drilling"), and charter helicopter and fixed-wing aircraft services
("Aviation"). The first segment includes contract and turnkey drilling,
utilizing mobile drilling rigs. Beginning in 1994 the Company will have a third
segment, Manufacturing. See Note 12. Contract drilling activities are performed
in both domestic and foreign areas. Aviation operations relate primarily to oil
and gas related activities in Alaska and the Gulf of Mexico. Total revenues
reported by industry segments consist principally of revenues from unaffiliated
customers, as reported in the Company's consolidated statement of operations.
The Company had revenues, primarily from drilling operations, in
excess of 10% of consolidated revenues from one customer (17%) in 1993, from
one customer (11%) in 1992 and from two customers (23% and 12%) in 1991.
The Company believes that it has no significant concentrations of
credit risk. Its revenues are derived primarily by contracting with large
energy companies and governmental bodies, with whom the Company has never
experienced any significant credit losses. Historically, the Company has been
able to relocate its assets over significant distances on a timely basis in
response to changing market conditions.
Certain financial information for drilling and aviation operations is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Depreciation and
amortization:
Drilling $40,874 $39,719 $40,612
Aviation 11,044 11,648 12,342
Capital expenditures:
Drilling 12,741 31,014 36,686
Aviation 9,248 8,514 48,932
------- ------- -------
</TABLE>
Assets are identified to a segment by their direct use. The Company
classifies its drilling rigs for segment purposes as domestic or foreign based
upon the drilling rig's country of registry. Accordingly, drilling rigs
registered in the United States are classified with domestic operations, and
revenues generated from foreign operations of these rigs are considered export
revenues. Revenues generated by foreign-registered drilling rigs from
operations offshore the United States are classified as foreign revenues.
Assuming revenues derived from all operations within the United States, onshore
and offshore, were treated as domestic revenues and export revenues were
treated as foreign revenues, revenues from foreign operations would have been
$82,125,000 in 1993.
Domestic drilling operations included export revenues of $80,515,000
in 1993, $91,563,000 in 1992 and $118,839,000 in 1991. Except for $38,434,000
in 1993, $30,552,000 in 1992 and $39,761,000 in 1991 from other foreign areas,
the export revenues were generated from North Sea operations.
At December 31, 1993, 29 drilling rigs, 17 of which were marine rigs,
with a net book value of $187,462,000 were located in the United States, and 12
drilling rigs, 7 of which were marine rigs, having a net book value of
$215,041,000 were located in foreign jurisdictions.
Information concerning the Company's operations is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Revenues:
Drilling operations:
Domestic $ 244,360 $ 143,818 $ 163,456
Foreign 26,662 18,303 7,283
Aviation operations 82,174 87,877 101,433
--------- --------- ---------
Consolidated $ 353,196 $ 249,998 $ 272,172
========= ========= =========
Operating profit (loss):
Drilling operations:
Domestic $ 15,888 $ (36,726) $ (7,101)
Foreign 3,165 (3,688) (10,625)
Aviation operations 2,248 1,882 6,727
--------- --------- ---------
Consolidated 21,301 (38,532) (10,999)
Gain on disposals
of property
and equipment 1,955 731 1,660
Interest and other
income 2,498 2,823 4,890
General and
administrative (13,940) (12,092) (11,739)
Interest expense (25,361) (26,254) (21,379)
--------- --------- ---------
Income (loss) before
income taxes $ (13,547) $ (73,324) $ (37,567)
========= ========= =========
Identifiable assets at
December 31:
Drilling operations:
Domestic $ 584,583 $ 491,456 $ 677,947
Foreign 41,687 50,061 67,887
Aviation operations 138,993 142,784 150,055
--------- --------- ---------
Total assets at
December 31 $ 765,263 $ 684,301 $ 895,889
========= ========= =========
</TABLE>
11. RELATED PARTY TRANSACTIONS
A director of the Company, who did not stand for reelection to the Company's
board in 1993, is also chairman of the board of one of the Company's drilling
customers. Transactions with this customer involved dayrates and operating
costs which were comparable to those experienced in connection with third party
contracts for similar rigs. Because of the aforementioned relationship, each
drilling contract between the Company and the customer was reviewed and
ratified by the Board of Directors of the Company. Related revenues were
$3,469,000 in 1993, $5,284,000 in 1992, and $2,369,000 in 1991. In addition,
amounts included in trade receivables at December 31 were $216,000 and $1,627,
000 for 1993 and 1992, respectively.
<PAGE> 17
In 1993, a director of the Company was an investment banker with one
of the underwriters of the Company's 10,000,000 share common stock offering
which raised $96,250,000. That underwriter received $2,876,000 in commissions
from the sale.
In 1991, a director of the Company was an investment banker with one
of the underwriters of the Company's 11 7/8% Notes. That underwriter received
$1,333,000 on commissions from the Company in connection with the sale of its
11 7/8% Notes.
12. SUBSEQUENT EVENT
On February 11, 1994, LeTourneau, Inc. ("LeTourneau"), a wholly owned
subsidiary of the Company, completed the acquisition of the net assets of
Marathon LeTourneau Company. The aquisition, which will be accounted for using
the purchase method, was financed by $10,400,000 in cash and $41,700,000 in
promissory notes bearing interest at 7% and payable at the end of five years.
Assuming LeTourneau had been acquired on January 1, 1993, the
Company's unaudited pro forma results of operations including LeTourneau from
that date would have been as follows: revenues-$449,400,000, net
loss-$10,300,000 and net loss per share of common stock-$0.13.
This unaudited pro forma information is not necessarily indicative of
the consolidated results that would have occurred had the acquisition taken
place January 1, 1993, nor are they necessarily indicative of results that may
occur in the future. LeTourneau, headquartered in Longview, Texas,
manufactures and sells three primary product lines.
LeTourneau operates a mini-steel mill that recycles scrap and produces
alloy steel and steel plate; a manufacturing facility that produces heavy
equipment for the mining and timber industries including, among other things,
front-end loaders up to 50 ton capacity and, under the registered trademark,
Titan, trucks up to 240 ton capacity; and a marine division that has built over
one-third of all mobile offshore jack-up drilling rigs, including all twenty
operated by the Company.
SELECTED QUARTERLY
FINANCIAL DATA (UNAUDITED)
The following unaudited information for the quarters ended March 31, June 30,
September 30 and December 31, 1992 and 1993 includes, in the Company's opinion,
all adjustments (which comprise only normal recurring accruals) necessary for a
fair presentation of such amounts (in thousands except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1992:
Revenues $ 53,646 $ 58,336 $ 70,564 $ 67,452
Operating
profit (loss) (13,123) (5,616) (5,467) (14,326)
Net income
(loss) (21,809) (14,237) (14,156) (23,551)
Earnings (loss)
per common
share (.30) (.20) (.19) (.32)
-------- -------- -------- --------
1993:
Revenues $ 73,540 $ 82,093 $106,629 $ 90,934
Operating
profit (loss) (4,093) 1,195 16,385 7,814
Net income
(loss) (13,509) (8,197) 8,175 272
Earnings (loss)
per common
share (.18) (.11) .10 .00
-------- -------- -------- --------
</TABLE>
The sum of the per share amounts for the quarters may not equal the
per share amounts for the full years since the quarterly and full year per
share computations are made independently.
COMMON STOCK PRICE RANGE,
CASH DIVIDENDS AND STOCK SPLITS
The price range below is as reported by the New York Stock Exchange on the
Composite Tape. On February 23, 1994 there were approximately 4,000 holders of
record.
<TABLE>
<CAPTION>
Quarter 1993 1992
- ------- ---- ----
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First $10.00 $6.63 $6.75 $4.63
Second 10.75 8.63 7.63 5.25
Third 10.38 7.63 8.38 5.75
Fourth 10.63 7.50 9.38 7.25
----- ---- ---- ----
</TABLE>
The Company did not pay any dividends on its common stock during 1993
and 1992. See Note 5 of the Notes to Consolidated Financial Statements for
restrictions on dividends.
Stock splits and stock dividends since the Company became publicly
owned in 1967 have been as follows: 2 for 1 stock splits on January 25, 1973,
December 16, 1976 and May 13, 1980; 2 for 1 stock splits effected in the form
of a stock dividend February 6, 1978 and January 20, 1981; and a 5% stock
dividend May 21, 1975.
On the basis of these splits and dividends, each share acquired prior
to January 25, 1973 would be represented by 33.6 shares if still owned at
present.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of subsidiaries of the Registrant:
Registrant and Parent:
Rowan Companies, Inc.
Wholly-Owned Subsidiaries of Registrant:
Era Aviation, Inc., a Washington corporation
Rowan International, Inc., a Panamanian corporation
Rowandrill, Inc., a Texas corporation
Atlantic Maritime Services, Inc., a Texas corporation
Rowan Petroleum, Inc., a Texas corporation
LeTourneau, Inc., a Texas corporation
Note: Certain subsidiaries have been omitted from this listing
because such subsidiaries, when considered in the aggregate
as a single subsidiary, would not constitute a significant
subsidiary.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Rowan Companies, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 4
to Registration Statement No. 2-58700, Amendment No. 1 to Registration
Statement No. 33-33755, Registration Statement No. 33-61444, Registration
Statement No. 33-51103, Registration Statement No. 33-51105 and Registration
Statement No. 33-51109, each on Form S-8, and to the incorporation by reference
in Amendment No. 1 to Registration Statement No 33-15721, Amendment No. 2 to
Registration Statement No. 33-30057 and Amendment No. 2 to Registration
Statement No. 33-61696, each on Form S-3, of our reports dated March 7, 1994,
appearing in and incorporated by reference in this Annual Report on Form 10-K
of Rowan Companies, Inc., for the year ended December 31, 1993.
DELOITTE & TOUCHE
DELOITTE & TOUCHE
Houston, Texas
March 31, 1994
<PAGE> 1
EXHIBIT 24
Form 10-K for the Year Ended December 31, 1993
The Exchange Act of 1934
__________________
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. R. Palmer or E. E. Thiele, or either
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign to the Company's Form 10-K for the year ended
December 31, 1993 and any or all amendments, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
____________________
Pursuant to the requirement of the Exchange Act of 1934, the Company's
Form 10-K for the year ended December 31, 1993 or amendment has been signed
below by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
......................... President, Chairman of the
(C.R. Palmer) Board and Chief Executive Office
......................... Director
(Ralph E. Bailey)
HENRY O. BOSWELL Director March 31, 1994
(Henry O. Boswell)
H. E. LENTZ Director March 31, 1994
(H. E. Lentz)
WILFRED P. SCHMOE Director March 31, 1994
(Wilfred P. Schmoe)
CHARLES P. SIESS, JR. Director March 31, 1994
(Charles P. Siess, Jr.)
PETER SIMONIS Director March 31, 1994
(Peter Simonis)
C. W. YEARGAIN Director March 31, 1994
(C. W. Yeargain)
....................... Principal Financial Officer and
(E. E. Thiele) Principal Accounting Officer
</TABLE>
