<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
[ ] 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.
---------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-5491 75-0759420
- ------------------------------------------- -------------------------- --------------------------
(State or other jurisdiction of Commission File (I.R.S. Employer
incorporation or organization) Number Identification No.)
</TABLE>
<TABLE>
<S> <C>
5450 Transco Tower, 2800 Post Oak Boulevard, Houston, Texas 77056-6196
- ----------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
(713) 621-7800
-------------------------------------------------------
Registrant's telephone number, including area code
Inapplicable
-------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 number of shares of common stock, $.125 par value, outstanding at April 30,
1996 was 85,149,285.
<PAGE> 2
ROWAN COMPANIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. Financial Information:
Consolidated Balance Sheet --
March 31, 1996 and December 31, 1995 . . . . . . . . . . 2
Consolidated Statement of Operations --
Three Months Ended March 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows --
Three Months Ended March 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . 6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . . . . . 8
PART II. Other Information:
Submission of Matters to a Vote
of Security Holders . . . . . . . . . . . . . . . . . . 11
Exhibits and Reports on Form 8-K . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 85,101 $ 90,338
Receivables - trade and other .................... 91,171 87,811
Inventories - at cost:
Raw materials and supplies ..................... 53,505 51,898
Work-in-progress ............................... 26,141 23,015
Finished goods ................................. 688 708
Prepaid expenses ................................. 12,626 11,430
Cost of turnkey drilling contracts in progress ... 9,739 8,259
---------- ----------
Total current assets ................ 279,571 273,459
---------- ----------
INVESTMENT IN AND ADVANCES TO 49% OWNED COMPANIES .. 29,121 29,770
---------- ----------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Drilling equipment................................ 945,651 944,021
Aircraft and related equipment ................... 186,953 189,954
Manufacturing plant and equipment ................ 24,638 25,037
Other property and equipment ..................... 93,441 91,089
Construction in progress ......................... 11,476
---------- ----------
Total ............................... 1,262,159 1,250,101
Less accumulated depreciation and amortization ... 774,199 763,062
---------- ----------
Property, plant and equipment - net.. 487,960 487,039
---------- ----------
OTHER ASSETS AND DEFERRED CHARGES .................. 11,776 12,220
---------- ----------
TOTAL ............................... $ 808,428 $ 802,488
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-2-
<PAGE> 4
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable and current maturities of long-term
debt ........................................... $ 4,216 $ 7,039
Accounts payable - trade ......................... 24,167 21,774
Other current liabilities ........................ 52,750 44,058
---------- ----------
Total current liabilities ........... 81,133 72,781
---------- ----------
LONG-TERM DEBT - less current maturities ........... 247,664 247,744
---------- ----------
OTHER LIABILITIES .................................. 30,544 36,227
---------- ----------
DEFERRED CREDITS:
Income taxes ..................................... 4,566 4,146
Gain on sale/leaseback transactions .............. 11,557 12,345
---------- ----------
Total deferred credits .............. 16,123 16,491
---------- ----------
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 III Preferred Stock, authorized
10,300 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 86,489,954
shares at March 31, 1996 and 86,353,792 shares
at December 31, 1995 ........................... 10,811 10,794
Additional paid-in capital ......................... 397,527 396,092
Retained earnings .................................. 27,111 24,754
Less cost of 1,457,919 treasury shares ............. 2,485 2,485
---------- ----------
Total stockholders' equity .......... 432,964 429,155
---------- ----------
TOTAL ............................... $ 808,428 $ 802,488
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE> 5
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For The Three Months
Ended March 31,
------------------------
1996 1995
--------- ---------
(Unaudited)
<S> <C> <C>
REVENUES:
Drilling services.................................................... $ 71,051 $ 46,870
Manufacturing sales and services..................................... 35,948 29,975
Aircraft services.................................................... 19,809 15,952
-------- --------
Total.............................................. 126,808 92,797
-------- --------
COSTS AND EXPENSES:
Drilling services.................................................... 52,764 47,758
Manufacturing sales and services..................................... 32,472 27,801
Aircraft services.................................................... 19,210 18,140
Depreciation and amortization........................................ 12,047 12,735
General and administrative........................................... 4,021 3,589
-------- --------
Total.............................................. 120,514 110,023
-------- --------
INCOME (LOSS) FROM OPERATIONS................................................. 6,294 (17,226)
-------- --------
OTHER INCOME (EXPENSE):
Interest expense..................................................... (6,907) (6,912)
Less: interest capitalized........................................... 207
Gain on disposals of property, plant and equipment................... 1,595 741
Interest income...................................................... 1,209 1,493
Other - net.......................................................... 84 102
-------- --------
Other income (expense) - net....................... (3,812) (4,576)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES............................................. 2,482 (21,802)
Provision (credit) for income taxes.................................. 125 (67)
-------- --------
NET INCOME (LOSS)............................................................. $ 2,357 $(21,735)
======== ========
EARNINGS (LOSS) PER COMMON SHARE (Note 4)........................................$ .03 $ (.26)
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE> 6
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For The Three Months
Ended March 31,
------------------------
1996 1995
---------- ---------
(Unaudited)
<S> <C> <C>
CASH PROVIDED BY (USED IN):
Operations:
Net income (loss)........................................... $ 2,357 $(21,735)
Noncash charges (credits) to net income (loss):
Depreciation and amortization............................. 12,047 12,735
Gain on disposals of property, plant and equipment........ (1,595) (741)
Compensation expense...................................... 1,103 1,038
Change in sale/leaseback payable.......................... (4,101) (3,898)
Amortization of sale/leaseback gain....................... (788) (789)
Provision for pension and postretirement benefits......... 2,110 1,701
Other - net............................................... 1,182 41
Changes in current assets and liabilities:
Receivables-trade and other............................... (3,960) 10,909
Inventories............................................... (4,713) (10,190)
Other current assets...................................... (3,364) (5,971)
Current liabilities....................................... 7,521 9,123
Net changes in other noncurrent assets and liabilities...... 1,073 1,313
-------- --------
Net cash provided by (used in) operations..................... 8,872 (6,464)
-------- --------
Investing activities:
Property, plant and equipment additions..................... (16,605) (7,058)
Repayments from affiliates.................................. 535
Proceeds from disposals of property, plant and equipment.... 2,471 1,015
-------- --------
Net cash used in investing activities......................... (14,134) (5,508)
-------- --------
Financing activities:
Repayments of borrowings.................................... (74) (70)
Other - net................................................. 99 40
-------- --------
Net cash provided by (used in) financing activities........... 25 (30)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS........................... (5,237) (12,002)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................. 90,338 111,070
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................ $ 85,101 $ 99,068
======== ========
</TABLE>
See Notes to Consolidated to Financial Statements.
-5-
<PAGE> 7
ROWAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements of the Company included herein have
been prepared without audit pursuant to generally accepted accounting
principles and the rules and regulations of the Securities and Exchange
Commission. Certain information and notes have been condensed or omitted
pursuant to such rules and regulations and the Company believes that the
disclosures included herein are adequate. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and related notes included in the Company's 1995 Annual Report
to Stockholders incorporated by reference in the Form 10-K for the year
ended December 31, 1995.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments and reclassifications, which
are of a normal recurring nature, necessary to present fairly its financial
position as of March 31, 1996 and December 31, 1995, and the results of
its operations and its cash flows for the three months ended March 31, 1996
and 1995.
3. The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
-6-
<PAGE> 8
4. Computation of primary and fully diluted earnings (loss) per share is as
follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
For The
Three Months Ended
March 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Weighted average shares of common
stock outstanding ............................... 84,984 84,301
Stock options and related (treasury stock method) . 1,847 (A) 266 (A)
------- --------
Weighted average shares for primary
earnings (loss) per share calculation ........... 86,831 84,567
Stock options and related (treasury stock method) . 306 (A) 235 (A)
Shares issuable from assumed conversion
of the Series II Convertible Subordinated
Debenture ...................................... 400 (A) 400 (A)
------- --------
Weighted average shares for fully diluted
earnings (loss) per share calculation ........... 87,537 85,202
======= ========
Net income (loss) for primary calculation ......... $ 2,357 $(21,735)
Subordinated debenture interest, net of income
tax effect....................................... 82 91
------- --------
Net income (loss) for fully diluted calculation.... $ 2,439 $(21,644)
======= ========
Earnings (loss) per share:
Primary ......................................... $ .03 $ (.26)
======= ========
Fully diluted ................................... $ .03 $ (.25)(B)
======= ========
</TABLE>
(A) Included in accordance with Regulation S-K Item 601 (b)(11) although not
required to be provided by Accounting Principles Board ("APB") 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.
-7-
<PAGE> 9
ROWAN COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to
Three Months Ended March 31, 1995
The Company achieved net income of $2.4 million in the first quarter
of 1996 compared to a net loss of $21.7 million in the same period of 1995.
The improved results were primarily attained through increased drilling
activity, continued strengthening of offshore drilling day rates and favorable
manufacturing and aviation operations.
A comparison of the revenues and operating profit (loss) from
drilling, manufacturing, aviation and consolidated operations for the first
quarters of 1996 and 1995, respectively, is reflected below (dollars in
thousands):
<TABLE>
<Captaion>
Drilling Manufacturing Aviation Consolidated
-------------------- -------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 71,051 $ 46,870 $ 35,948 $ 29,975 $ 19,809 $ 15,952 $126,808 $ 92,797
Percent of Consolidated
Revenues 56% 51% 28% 32% 16% 17% 100% 100%
Operating Profit (loss)(1) $ 9,552 $(10,292) $ 2,990 $ 1,792 $ (2,227) $ (5,137) $ 10,315 $(13,637)
</TABLE>
________________________________________________________________________________
(1) Income (loss) from operations before deducting general and administrative
expenses.
As reflected above, the Company's consolidated operating results
improved by $24.0 million when the first quarter of 1996 is compared to the
first quarter of 1995. Day rate drilling revenues increased by $27.0 million
as the Company's offshore drilling rigs achieved 95% utilization during the
first quarter of 1996, compared to 75% utilization in the first quarter of
1995, and a 23% increase in average day rates between periods. Turnkey
drilling generated first quarter 1996 revenues of $8.2 million and an
incremental operating loss of $1.6 million, compared to $11.0 million in
revenues and an incremental operating loss of $.7 million in the year-earlier
period.
The Company's manufacturing operations have consistently yielded
positive operating results since their acquisition in early 1994. The
improvements in manufacturing revenues and operating profit noted above
resulted primarily from increased heavy equipment sales volume between periods,
particularly for the mining and timber industries.
The aviation operating results in both quarters reflect the normal
seasonal slowdown in flying activity in Alaska, although the 1996 results were
improved as demand for the Company's flying services increased in all markets.
-8-
<PAGE> 10
Perceptible trends in the offshore drilling markets in which the
Company is currently operating and the number of Company-operated rigs in each
of those markets are as follows:
<TABLE>
<CAPTION>
AREA RIGS PERCEPTIBLE INDUSTRY TRENDS
---- ---- ---------------------------
<S> <C> <C>
Gulf of Mexico 15 Continuing high levels of exploration and development activity
North Sea 4 Continuing high levels of drilling activity for jack-up rigs
Eastern Canada 2 Improving demand
</TABLE>
The preceding table reflects the relocation of Rowan Gorilla IV to
eastern Canada from the Gulf of Mexico and Rowan Gorilla II to the Gulf of
Mexico from Trinidad, both in April 1996.
Perceptible trends in the aviation markets in which the Company is
currently operating and the number of Company aircraft based in each of those
markets are as follows:
<TABLE>
<CAPTION>
COMPANY-OWNED
AREA AIRCRAFT (1) PERCEPTIBLE INDUSTRY TRENDS
---- ------------ ---------------------------
<S> <C> <C>
Alaska 68 Normal seasonal improvement
Gulf of Mexico 40 Moderately improving market conditions
China 2 Generally stable flight support activity
North Sea (Dutch) 10 Generally stable flight support activity
North Sea (U. K.) 5 Improving flight support activity
</TABLE>
- ----------------------------
(1) Includes 13 units which are 49% owned.
The drilling and aviation markets in which the Company competes
frequently experience significant changes in supply and demand. Drilling
utilization and day rates achievable in offshore markets are a function of the
demand for drilling services, as measured by the level of exploration and
development expenditures, and the supply of capable drilling equipment. These
expenditures, in turn, are affected by many factors such as existing and newly
discovered oil and natural gas reserves, political and regulatory policies,
seasonal weather patterns, contractual requirements under leases or concessions
and, probably most influential, oil and natural gas prices. The Company's
aviation operations are also affected by such factors, as flying in support of
offshore energy operations remains a major source of business and Alaska
operations are hampered each winter. The volatile nature of such factors
prevents the Company from being able to predict whether existing market
conditions or the perceptible market trends reflected in the preceding tables
will continue. Assuming such conditions and trends prevail, however, the
Company should remain profitable throughout 1996. The Company can, as it has
done in the past, relocate its drilling rigs and aircraft from one geographic
area to another in response to such changing market fundamentals, but only when
these moves are economically justified.
The Company's manufacturing operations are considerably less volatile
than its drilling and aviation operations and, given current backlog levels and
barring unforeseen circumstances, should continue to contribute positive
operating results throughout the remainder of 1996.
-9-
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
A comparison of key balance sheet figures and ratios as of March 31,
1996 and December 31, 1995 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Cash and cash equivalents $85,101 $90,338
Current assets $279,571 $273,459
Current liabilities $81,133 $72,871
Current ratio 3.45 3.75
Note payable and current maturities of long-term debt $4,216 $7,039
Long-term debt $247,664 $247,744
Stockholders' equity $432,964 $429,155
Long-term debt/total capitalization .36 .37
</TABLE>
Reflected in the comparison above are the effects in the first quarter
of 1996 of net cash provided by operations of $8.9 million, proceeds from sales
of primarily aviation equipment of $2.5 million and capital expenditures of
$16.6 million.
During the first quarter of 1996, the Company completed the design and
began the construction of Rowan Gorilla V, an enhanced version of the
Company's Gorilla Class jack-ups, which will be the world's largest bottom
supported mobile offshore drilling unit. The rig is being constructed at the
Company's Vicksburg, Mississippi shipyard and should be completed by mid-1998
at an estimated cost of $170 million. The Company expects to finance a
significant portion of the construction cost and is currently evaluating credit
alternatives. The reactivation of the Company's marine construction
capability, principally through rebuilding of the Vicksburg shipyard, is
expected to cost approximately $20 million.
Capital expenditures during the first quarter were primarily related
to construction of Gorilla V and the reactivation of the Vicksburg shipyard.
The Company estimates remaining 1996 capital expenditures will be between $70
million and $75 million, including approximately $35 million and $15 million,
respectively, for Gorilla V and the Vicksburg shipyard. The Company may also
spend amounts to acquire additional aircraft as market conditions justify and
to upgrade existing offshore rigs.
Based upon current operating levels and the previously discussed
market trends, management believes that remaining 1996 operations, together
with existing working capital, will generate sufficient cash flow to sustain
planned capital expenditures and debt service requirements for the remainder of
1996. The Company does not currently have any unused lines of credit.
Under the terms of its 11 7/8% Senior Notes, the Company is prohibited
from paying a cash dividend on its common stock.
-10-
<PAGE> 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders on April 26, 1996, stockholders
elected the three nominees for Class II Director as set forth in the
Company's Proxy Statement relating to the meeting. With respect to
such election, proxies were solicited pursuant to Regulation 14 under
the Securities Exchange Act of 1934 and there was no solicitation in
opposition to such nominees. The following numbers of votes were cast
as to the Class II Director nominees: Ralph E. Bailey, 51,010,610 votes
for and 4,786,302 votes against; Honorable Colin B. Moynihan,
50,996,777 votes for and 4,800,135 votes against; and C. W. Yeargain,
51,005,541 votes for and 4,791,371 votes against.
Also at the meeting, stockholders approved, for consideration by the
Board of Directors, the following proposals, as set forth in the
Company's Proxy Statement relating to the meeting:
The proposal pertinent to declassifying the Company's Board of
Directors received 33,779,484 votes in the affirmative, or
39.7% of the 85,017,535 shares of record. Shares voted against
the proposal aggregated 20,534,057, including 7,016,883 of
non-votes, and 1,483,371 shares abstained from voting.
The proposal pertinent to matters associated with the Company's
Stockholders Rights Agreement received 38,552,087 votes in the
affirmative, or 45.3% of the 85,017,535 shares of record.
Shares voted against the proposal aggregated 16,996,247,
including 7,016,883 of non-votes, and 248,578 shares abstained
from voting.
The Board of Directors considered both proposals at its meeting on
April 26, 1996, but determined not to propose amendments to the
Company's Certificate of Incorporation and Bylaws at this time.
The Company's Proxy Statement relating to the 1996 Annual Meeting of
Stockholders dated March 11, 1996 is filed as an exhibit to this Form
10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) The following is a list of Exhibits filed with this Form 10-Q:
3(a) - Amendment dated April 26, 1996 to the Bylaws, as
Amended
3(b) - Bylaws, as Amended, as of April 26, 1996
27 - Financial Data Schedule
99 - Proxy Statement dated March 11, 1996
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
first quarter of fiscal year 1996.
-11-
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date: May 13, 1996 /s/ E. E. THIELE
--------------------------------------
E. E. Thiele
Senior Vice President- Finance,
Administration and Treasurer
(Chief Financial Officer)
Date: May 13, 1996 /s/ W. H. WELLS
--------------------------------------
W. H. Wells
Controller
(Chief Accounting Officer)
-12-
<PAGE> 14
EXHIBIT INDEX
3a - Amendment dated April 26, 1996 to the Bylaws, as
Amended
3b - Bylaws, as Amended, as of April 26, 1996
27 - Financial Data Schedule
99 - Proxy Statement dated March 11, 1996
<PAGE> 1
EXHIBIT 3a
ROWAN COMPANIES, INC.
Amendment Dated
April 26, 1996 to the
Bylaws of the Company,
as Amended
Section 2. Classes of Directors and Term of Office. As provided in
the Certificate of Incorporation, the Board of Directors shall be and is
divided into three classes, Class I, Class II and Class III, which shall be as
nearly equal in number as possible. Each director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such class of directors of which he is a member was elected. Effective
as of April 26, 1996 each class of directors, Class I, Class II and Class III,
shall have three directors. Each director shall serve until his successor is
elected and qualified or until his death, retirement, resignation or removal
for cause.
<PAGE> 1
EXHIBIT 3b
BYLAWS
OF
ROWAN COMPANIES, INC.
AS AMENDED
Article I
Offices
Section 1. Principal Office. The principal office of the
Corporation shall be in the City of Houston, County of Harris, State of Texas.
Section 2. Registered Office. Until the Board of Directors
otherwise determines, the registered office of the Corporation required by law
(meaning, here and hereinafter, as required from time to time by the General
Corporation Law of the State of Delaware) to be maintained in the State of
Delaware, shall be in the City of Wilmington, County of New Castle, State of
Delaware, and the name of the resident agent in charge thereof is The
Corporation Trust Company, or such other office and agent as may be designated
from time to time by the Board of Directors in the manner provided by law. Such
registered office need not be identical to the principal place of business of
the Corporation.
Section 3. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
Article II
Meetings of Stockholders
Section 1. Place of Meetings. All meetings of the stockholders
shall be held in the City of Houston at the principal offices of the
Corporation or at such other places as may be designated by the Board of
Directors or Executive Committee and shall be specified or fixed in the notices
or waivers of notices thereof.
Section 2. Notice of Meetings. Written or printed notice stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman
of the Board, the President, the Secretary, or the officer or person calling
the meeting, to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the stockholder at his address as it appears on
the records of the Corporation, with postage thereon prepaid.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date, and time
thereof are announced at the
<PAGE> 2
meeting at which the adjournment is taken; provided, however, that if the date
of any adjourned meeting is more than thirty (30) days after the date for the
original meeting, or if after the adjournment a new record date is fixed for
the adjourned meeting, written notice of the place, date, and time of the
adjourned meeting shall be given in conformity herewith. At any adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting.
Section 3. Quorum. The holders of at least a majority of the
outstanding shares entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of stockholders for the
transaction of business, except as otherwise provided by law, by the
Certificate of Incorporation or by these Bylaws. If, however, such quorum
shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting of the time and place to which
the meeting is being adjourned, to a time when a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally called. A holder of a share shall be treated as
being present at a meeting if the holder of such share is (i) present in person
at the meeting or (ii) represented at the meeting by a valid proxy, whether the
proxy card granting such proxy is marked as casting a vote or abstaining or is
left blank.
Section 4. Annual Meetings; Election of Directors. An annual
meeting of the stockholders, for the election of directors to succeed those
whose terms expire and for the transaction of such other business as may
properly come before the meeting, shall be held on the fourth Friday in April
of each year, at 9:00 a.m., local time, if not a legal holiday, at the
principal offices of the Corporation in Houston, Texas or at such other place,
date, and time as the Board of Directors or Executive Committee shall designate
each year. Any business may be transacted at the annual meeting, except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws.
Section 5. Special Meetings. In addition to any condition that may
be provided for in the Certificate of Incorporation, special meetings of the
stockholders for any purpose or purposes may be called at any time in the
interval between annual meetings by the Chairman of the Board, the President,
the Board of Directors, or the Executive Committee. Special meetings of the
Stockholders may not be called by any other person or persons.
Section 6. Voting; Elections; Inspectors; Votes by Ballot. Unless
otherwise provided in the Certificate of Incorporation, at all meetings of
stockholders, every stockholder of record of any class entitled to vote thereat
shall have one vote for each share of stock standing in his name on the books
of the Corporation on the date for the determination of stockholders entitled
to vote at such meeting, either in person or by proxy appointed by instrument
in writing subscribed by such stockholder or his duly authorized attorney, and
bearing a date not more than three years prior to said meeting unless said
instrument provides for a longer period.
If a quorum exists, action on a matter (including the election of
directors) shall be approved if the votes cast in favor of the matter or
election of the director exceed the votes cast opposing the matter or election
of such director. In determining the number of votes cast, shares abstaining
from voting on a matter (including elections) will not be treated as votes
cast. The provisions of this paragraph will govern with respect to all votes
of stockholders except as otherwise provided for in these Bylaws or in the
Certificate of Incorporation or by some specific
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statutory provision superseding the provisions contained in these Bylaws or the
Certificate of Incorporation.
At any meeting of stockholders, the chairman of the meeting may, and
upon the request of the holders of 10% of the stock present in person or
represented by proxy and entitled to vote at such meeting, shall appoint two
inspectors of election who shall subscribe an oath or affirmation to execute
faithfully the duties of inspectors at such election with strict impartiality
and according to the best of their ability shall canvass the votes and make and
sign a certificate of the results thereof. No candidate for the office of
director shall be appointed as such inspector.
As provided in the Certificate of Incorporation of the Corporation,
all elections of directors shall be viva voce unless one or more stockholders
present at the meeting at which directors are elected shall request in writing
that such election be by ballot. The chairman of the meeting may cause a vote
by ballot to be taken upon any other matter, and such vote by ballot shall be
taken upon the request of the holders of 10% of the stock present and entitled
to vote on such other matter.
Section 7. Conduct of Stockholders' Meetings. The meetings of the
stockholders shall be presided over by the Chairman of the Board, or if he is
not present, by the President, or if he is not present, by a Vice President, or
if neither the Chairman of the Board, President nor a Vice President is
present, by a chairman elected at the meeting. The Secretary of the
Corporation, if present, an Assistant Secretary shall so act; if neither the
Secretary nor an Assistant Secretary is present, then a secretary shall be
appointed by the chairman of the meeting.
The chairman of any meeting of stockholders shall determine the order
of business and the procedures at the meeting, including such regulation of the
manner of voting which is not otherwise prescribed by law, the Certificate of
Incorporation or these Bylaws.
Section 8. Validity of Proxies; Ballots, etc. At every meeting of
the stockholders, all proxies shall be received and taken charge of, and all
ballots shall be received and canvassed by, the secretary of the meeting who
shall decide all questions touching the qualification of voters, the validity
of the proxies, and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed by the chairman of the meeting, in which
event such inspectors of election shall decide all such questions.
Section 9. Stock List. At least ten (10) days before every meeting
of stockholders, the Secretary shall prepare (or cause to be prepared) a
complete list of stockholders entitled to vote at any meeting of stockholders,
arranged in alphabetical order for each class of stock and showing the address
of each such stockholder and the number of shares registered in his name. Such
list shall be open to the examination of any such stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
Article III
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Board of Directors
Section 1. Number and Qualification. The business and property of
the Corporation shall be managed by the Board of Directors, and subject to the
restrictions imposed by law, the Certificate of Incorporation or these Bylaws,
they may exercise all the powers of the Corporation. Directors need not be
stockholders or residents of Delaware.
The Board of Directors shall consist of not less than one nor more
than thirty directors, as so determined from time to time by resolution of the
Board of Directors. If the Board of Directors makes no such determination, the
number of directors shall be the number set forth in the Certificate of
Incorporation. Within the above limits, the number of directors may be
increased or decreased (provided such decrease does not shorten the term of any
incumbent director) from time to time by resolution of the Board of Directors.
Section 2. Classes of Directors and Term of Office. As provided in
the Certificate of Incorporation, the Board of Directors shall be and is
divided into three classes, Class I, Class II and Class III, which shall be as
nearly equal in number as possible. Each director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such class of directors of which he is a member was elected. Effective
as of April 26, 1996, each class of directors, Class I, Class II and Class III,
shall have three directors. Each director shall serve until his successor is
elected and qualified or until death, retirement, resignation or removal for
cause.
Section 3. Newly Created Directorships. In the event of any
increase or decrease in the authorized number of directors, (i) each director
then serving as such shall nevertheless continue as a director of the class of
which he is a member until the expiration of his current term, or his prior
death, retirement, resignation, or removal for cause, and (ii) the newly
created or eliminated directorships resulting from such increase or decrease
shall be apportioned by the Board of Directors among the three classes of
directors so as to maintain such classes as nearly equal as possible.
Section 4. Vacancies. Should a vacancy occur or be created, whether
arising through death, resignation or removal of a director for cause, or
through an increase in the number of directors of any class, such vacancy shall
be filled by a majority vote of the remaining directors of the class in which
such vacancy occurs, or by the sole remaining director of that class if only
one such director remains, or by the majority vote of the remaining director of
the other two classes if there be no remaining member of the class in which the
vacancy occurs. A director so elected to fill a vacancy shall serve for the
remainder of the then present term of office of the class to which he was
elected.
Section 5. Compensation. The Board of Directors shall have the
authority to fix the compensation of directors.
Article IV
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Meetings of the Board of Directors
Section 1. Meetings of Directors. The directors may hold their
meetings and may have an office and keep the books of the corporation, except
as otherwise provided by the Certificate of Incorporation or Bylaws, in such
place or places in the State of Delaware, or outside the State of Delaware, as
the Board of Directors may from time to time determine.
Section 2. First Meeting. Each newly elected Board of Directors may
hold its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of the stockholders, and no notice of such meeting shall be
necessary.
Section 3. Election of Officers. At the first meeting of the Board
of Directors in each year at which a quorum shall be present, held next after
the annual meeting of stockholders, the Board of Directors shall proceed to the
election of the officers of the Corporation.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by resolution of the Board of Directors. Notice of such regular
meetings shall not be required.
Section 5. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, the
President, or by a majority of the directors in office at the time. Each such
special meeting shall be held at such time and place as shall be designated by
the officer or directors calling such meeting.
Section 6. Notice. The Secretary shall give notice of each special
meeting in person, or by mail or telegraph to each director at least
twenty-four (24) hours before the time of such meeting. The attendance of a
director at any meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business on the grounds that the meeting is not
lawfully called or convened. Notice may also be waived in writing as provided
in Article IX, Section 3 of these Bylaws. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in any written waiver of notice of such meeting.
Section 7. Quorum. Unless the Certificate of Incorporation or these
Bylaws otherwise require, a majority of the total number of directors then in
office shall constitute a quorum for the transaction of business, but if at any
meeting of the Board of Directors there is less than a quorum present, a
majority of those present or any director solely present may adjourn the
meeting from time to time without further notice. The act of a majority of the
directors present at a meeting at which a quorum is in attendance shall be the
act of the Board of Directors, unless the act of a greater number is required
by the Certificate of Incorporation or by these Bylaws.
Section 8. Order of Business. At meetings of the Board of
Directors, business shall be transacted in such order as from time to time the
Board of Directors may determine and the Chairman of the Board shall preside.
In the absence of the Chairman of the Board, the President, the President shall
preside, and in the absence of the President a chairman shall be chosen by the
Board of Directors from among the directors present. The Secretary of the
Corporation shall act as secretary of the meetings of the Board of Directors,
but in the absence of the Secretary, the presiding officer may appoint any
person to act as secretary of the meeting.
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Section 9. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
Section 10. Action Without a Meeting or Telephone Conference Meeting.
Any action permitted or required by law, the Certificate of Incorporation or
these Bylaws, to be taken at a meeting of the Board of Directors (or any
committee designated by the Board of Directors) may be taken without a meeting
if a consent in writing, setting forth the action to be taken is signed by all
the members of the Board of Directors or committee, as the case may be. Such
consent shall have the same force and effect as a unanimous vote at a meeting,
and may be stated as such in any document or instrument filed with the
Secretary of State. Subject to the requirement for notice of meetings, members
of the Board of Directors (or members of any committee designated by the Board
of Directors), may participate in and hold a meeting of such Board of Directors
or committee, as the case may be, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Article V
Committees
Section 1. Executive Committee and Other Committees. The Board of
Directors, by resolution adopted by a majority of the whole Board of Directors,
may designate from among its members an Executive Committee and one or more
other committees, each of which, to the extent provided in such resolution,
shall have and may exercise all of the authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority of the
Board of Directors in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors pursuant to Article Fourth of the Restated Certificate of
Incorporation of the Corporation, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending, altering or repealing the bylaws of
the Corporation or adopting new bylaws for the Corporation, filling vacancies
in the Board of Directors or any such committee, electing or removing officers
or members of any such committee, fixing the compensation of any member of such
committee or altering or repealing any resolution of the
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Board of Directors which by its terms provided that it shall not be so
amendable or repealable and, unless such resolution expressly so provides, no
such committee shall have the power or authority to declare a dividend, to
authorize the issuance of shares of the Corporation or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law. The designation of such committee and the delegation thereto
of authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed by law.
All action by any committee shall be reported to the Board of
Directors at its meeting next succeeding such action, and shall be subject to
revision or alteration by the Board of Directors; provided that no rights of
third parties shall be affected by any such revision or alteration.
Section 2. Procedure; Meetings; Quorum. The Board of Directors
shall designate the Chairman and Secretary of each committee appointed by the
Board of Directors. Each such committee shall fix its own rules or procedure,
and shall meet at such times and at such place or places as may be provided by
such rules, or by resolution of the Executive Committee or of the Board of
Directors. A majority of all the then members of a committee shall be
necessary to constitute a quorum and the affirmative vote of a majority of the
members present shall be necessary for the adoption by it of any resolution.
The Board of Directors shall have power at any time to change the number,
subject as aforesaid, and members of any such committee, to fill vacancies, and
to discharge any such committee.
Article VI
Officers
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary, a Treasurer, and such other officers as the Board of
Directors may from time to time elect or appoint. Each officer shall hold
office until his successor shall have been duly elected and qualified or until
his death or until he shall resign or shall have been removed in the manner
hereinafter provided. Any two offices may be held by the same person. None of
the officers need be a director, except that the Chairman of the Board and the
President shall be directors.
Section 2. Salaries. The salaries or other compensation of the
officers shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a director of the Corporation.
Section 3. Removal of Officers. Any officer or agent elected or
appointed by the Board of Directors may be removed, either with or without
cause, by the Board of Directors whenever in its judgment the best interests of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself create contract
rights.
Section 4. The Chairman of the Board. The Chairman of the Board
shall preside at all meetings of stockholders and directors and shall have such
other powers and duties as from time to time may be assigned to him by the
Board of Directors.
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Section 5. Powers and Duties of the President. The President shall
be the chief executive and administrative officer of the Corporation and,
subject to the Board of Directors, he shall be in charge of, and manage the
properties and operations of the Corporation in the ordinary course of its
business with all such powers with respect to such properties and operations as
may be reasonably incident to such responsibilities; in the absence of the
Chairman of the Board, he shall preside at all meetings of stockholders and
directors; he may agree upon and execute all division and transfer orders,
bonds, agreements, contracts and other obligations in the name of the
Corporation; and he shall have such other powers and duties as designated in
these Bylaws and as from time to time may be assigned to him by the Board of
Directors.
Section 6. Vice Presidents. Each Vice President shall have such
powers and duties as may be assigned to him by the Board of Directors and shall
exercise the powers of Chairman of the Board or President during their absence,
refusal or inability to act. Any action taken by a Vice President in the
performance of the duties of the Chairman of the Board or the President shall
be conclusive evidence of the absence, refusal or inability of the Chairman of
the Board or the President to act at the time such action was taken.
Section 7. Treasurer. The Treasurer shall have custody of all the
funds and securities of the Corporation which come into his hands. When
necessary or proper, he may endorse, on behalf of the Corporation, for
collection, checks, notes and other obligations and shall deposit the same to
the credit of the Corporation in such bank or banks or depositaries as shall be
designated by, and in the manner prescribed by, the Board of Directors; he may
sign all receipts and vouchers for payments made to the Corporation, either
alone or jointly with such other officer as is designated by the Board of
Directors; he shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements.
Whenever required by the Board of Directors, he shall render a statement of his
cash account; he shall enter or cause to be entered regularly in the books of
the Corporation to be kept by him for that purpose full and accurate accounts
of all monies received and paid out on account of the Corporation; and he shall
perform all acts incident to the position of Treasurer subject to the control
of the Board of Directors; he shall, if required by the Board of Directors,
give such bond for the faithful discharge of his duties in such form as the
Board of Directors may require.
Section 8. Assistant Treasurer. Each Assistant Treasurer shall have
the usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors. The
Assistant Treasurer shall exercise the powers of the Treasurer during the
officer's absence, refusal or inability to act.
Section 9. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and the minutes of all meetings of the
stockholders, in books provided for that purpose; he shall attend to the giving
and serving of all notices; he may sign with the Chairman of the Board or the
President in the name of the Corporation all contracts of the Corporation and
affix the seal of the Corporation thereto; he may affix and attest the seal of
the Corporation to such instruments and documents as may be properly executed
by the Corporation; and he shall have charge of the certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of
Directors may direct, all of which shall at all reasonable times be open to the
inspection of any director upon application at the office of the Corporation
during ordinary business hours, and he shall in general perform all duties
incident to the office of Secretary subject to the control of the Board of
Directors.
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Section 10. Assistant Secretaries. Each Assistant Secretary shall
have the usual powers and duties pertaining to his office, together with such
other powers and duties as may be assigned to him by the Board of Directors or
the Secretary. The Assistant Secretaries shall exercise the powers of the
Secretary during the officer's absence, refusal or inability to act.
Article VII
Indemnification of Directors,
Officers, Employees and Agents
Section 1. Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is the legal
representative, is or was or has agreed to become a director or officer of the
Corporation or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving or having agreed to serve as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) against all expense, liability and loss (including without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith and such indemnification shall continue
as to a person who has ceased to serve in the capacity which initially entitled
such person to indemnity hereunder and shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Article VII shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law requires, the
payment of such expenses incurred by a current, former or proposed director or
officer in his or her capacity as a director or officer or proposed director or
officer (and not in any other capacity in which service was or is or has been
agreed to be rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such indemnified person, to
repay all amounts so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this Section or
otherwise.
Section 2. Indemnification of Employees and Agents. The Corporation
may, by action of its Board of Directors, provide indemnification to employees
and agents of the Corporation, individually or as a group, with the same scope
and effect as the indemnification of directors and officers provided for in
this Article.
Section 3. Right of Claimant to Bring Suit. If a written claim
received by the Corporation from or on behalf of an indemnified party under
this Article VII is not paid in full by
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the Corporation within ninety days after such receipt, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 4. Nonexclusivity of Rights. The right to indemnification
and the advancement and payment of expenses conferred in this Article VII shall
not be exclusive of any other right which any person may have or hereafter
acquire under any law (common or statutory), provision of the Certificate of
Incorporation of the Corporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain insurance, at
its expense, to protect itself and any person who is or was serving as a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
Section 6. Savings Clause. If this Article VII or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify and hold
harmless each director and officer of the Corporation, as to costs, charges and
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent permitted by any
applicable portion of this Article VII that shall not have been invalidated and
to the fullest extent permitted by applicable law.
Section 7. Definitions. For purposes of this Article, reference to
the "Corporation" shall include, in addition to the Corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger prior to (or, in the case of an entity
specifically designated in a resolution of the Board of Directors, after) the
adoption hereof and which, if its separate existence had continued, would have
had the power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
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Article VIII
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of
the capital stock of the Corporation shall be in such form, not inconsistent
with statutory provisions and the Certificate of Incorporation, as shall be
approved by the Board of Directors. The Chairman of the Board, President or a
Vice President shall cause to be issued to each stockholder one or more
certificates under the seal of the Corporation and signed by the Chairman of
the Board, President or Vice President and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer certifying the number of
shares (and, if the stock of the Corporation shall be divided into classes or
series, the class and series of such shares) owned by such stockholder in the
Corporation; provided, however, that any or all of the signatures on the
certificate may be facsimile. The stock record books and the blank stock
certificate books shall be kept by the Secretary, or at the office of such
transfer agent or transfer agents as the Board of Directors or the Executive
Committee may from time to time by resolution determine. In case any officer,
transfer agent or registrar who shall have signed or whose facsimile signature
or signatures shall have been used on, any such certificate or certificates
shall cease to be such officer, transfer agent or registrar, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been issued by the Corporation, such certificate or certificates may
nevertheless be issued and delivered by the Corporation as though the officer,
transfer agent or registrar who signed such certificate or certificates or
whose facsimile signature or signatures shall have been used thereon had not
ceased to be such officer, transfer agent or registrar.
Section 2. Transfer of Shares. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. Ownership of Shares. The Corporation shall be entitled
to treat the holder of record of any share or shares as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Delaware.
Section 4. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purpose, the
Board of Directors of the Corporation may fix, in advance, a date as record
date for any such determination of stockholders, such date in any case not to
be more than sixty (60) days (unless a shorter period is provided for in the
Certificate of Incorporation) and, in case of a meeting of stockholders, not
less than ten (10) days prior to the date on which the particular action
requiring such determination of stockholders is to be taken. If no record date
is fixed for the determination of stockholders entitled to notice of or to vote
at a meeting of stockholders or either (a) to notice of or to vote at a meeting
of stockholders or (b) to receive payment of a dividend, the close of business
on the day next preceding the date on which the notice of the meeting is mailed
or on the date on which the resolution of the Board of Directors
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<PAGE> 12
declaring such dividend is adopted, as the case may be, shall be the record
date for such determination of stockholders.
Section 5. Regulations Regarding Certificates. The Board of
Directors shall have the power and authority to make all such rules and
regulations as they may deem expedient concerning the issue, transfer and
registration or the replacement of certificates for shares of capital stock of
the Corporation.
Section 6. Dividends. The Board of Directors may, from time to
time, declare, and the Corporation may pay, dividends on its outstanding shares
in the manner and upon the terms and conditions provided by law and the
Certificate of Incorporation.
Section 7. Lost or Destroyed Certificates. The Board of Directors
or the Executive Committee may determine the conditions upon which a new
certificate of stock may be issued in place of a certificate which is alleged
to have been lost or destroyed; and may, in their discretion, require the owner
of such certificate or his legal representative to give bond, with sufficient
surety, to indemnify the Corporation and each transfer agent against any and
all losses or claims which may arise by reason of the issue of a new
certificate in the place of the one so lost or destroyed.
Article IX
Miscellaneous Provisions
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
the calendar year or such other period as shall be established by the Board of
Directors from time to time.
Section 2. Seal. The seal of the Corporation shall be such as from
time to time may be approved by the Board of Directors.
Section 3. Notice and Waiver of Notice. Whenever any notice
whatever is required to be given under the provisions of these Bylaws, said
notice shall be deemed to be sufficient if given by depositing the same in a
post office box in a sealed postpaid wrapper addressed to the person entitled
thereto at his post office address, as it appears on the books of the
Corporation, and such notice shall be deemed to have been given on the day of
such mailing. A waiver of notice, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Section 4. Resignations. Any director or officer may resign at any
time. Such resignations shall be made in writing and shall take effect at the
time specified therein, or, if no time be specified, at the time of its receipt
by the Chairman of the Board, the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
Article X
Amendments
As provided in the Certificate of Incorporation of the Corporation,
the Board of Directors shall have the power to make, adopt, alter, amend and
repeal from time to time bylaws of the Corporation, subject to the right of the
stockholders entitled to vote with respect thereto to adopt, alter, amend and
repeal such bylaws as adopted, altered or amended by the Board of
-12-
<PAGE> 13
Directors; provided, however, that bylaws shall not be adopted, altered,
amended or repealed by the stockholders of the Corporation except by the vote
of the holders of not less than eighty percent (80%) of the outstanding shares
of capital stock of the Corporation normally entitled to vote in the election
of directors.
Amendment No. 1 herein: Article III Section 2. Classes of
Directors and Term of Office, October 26, 1984.
Amendment No. 2 herein: Article II Section 4. Annual Meetings;
Election of Directors, July 26, 1985.
Amendment No. 3 herein: Article V Section 1. Executive Committee
and Other Committees, June 30, 1986.
Amendment No. 4 herein: Article VII (in entirety) Indemnification of
Directors, Officers, Employees and Agents, April 23, 1987.
Amendment No. 5 herein: Article III Section 2. Classes of
Directors and Term of Office, October 23, 1987.
Amendment No. 6 herein: Article III Section 2. Classes of
Directors and Term of Office, April 28, 1989.
Amendment No. 7 herein: Article III Section 2. Classes of
Directors and Term of Office, January 25, 1990.
Amendment No. 8 herein: Article II Section 5. Special Meetings,
February 25, 1992.
Amendment No. 9 herein: Article III Section 2. Classes of
Directors and Terms of Office, April 24, 1992.
Amendment No. 10 herein: Article II Section 3. Quorum and
Section 6. Voting; Elections; Inspectors; Votes by Ballot, December 21, 1992.
Amendment No. 11 herein: Article III Section 2. Classes of
Directors and Terms of Office, April 23, 1993.
Amendment No. 12 herein: Article III Section 2. Classes of
Directors and Terms of Office, April 26, 1996.
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ROWAN COMPANIES, INC. FOR THREE MONTHS
ENDED MARCH 31, 1996 INCLUDED IN ITS FORM 10-Q FOR THE QUARTERLY PERIOD THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 85,101
<SECURITIES> 0
<RECEIVABLES> 91,771
<ALLOWANCES> 0
<INVENTORY> 80,334
<CURRENT-ASSETS> 279,571
<PP&E> 1,262,159
<DEPRECIATION> 774,199
<TOTAL-ASSETS> 808,428
<CURRENT-LIABILITIES> 81,133
<BONDS> 247,664
<COMMON> 10,811
0
0
<OTHER-SE> 422,153
<TOTAL-LIABILITY-AND-EQUITY> 808,428
<SALES> 34,195
<TOTAL-REVENUES> 126,808
<CGS> 27,732
<TOTAL-COSTS> 120,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,700
<INCOME-PRETAX> 2,482
<INCOME-TAX> 125
<INCOME-CONTINUING> 2,357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,357
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
<PAGE> 1
EXHIBIT 99
ROWAN COMPANIES, INC.
5450 TRANSCO TOWER
2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056-6196
(713) 621-7800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, APRIL 26, 1996
To the Stockholders:
The Annual Meeting of the Stockholders of Rowan Companies, Inc., a Delaware
corporation (the "Company"), will be held in the Transco Auditorium located on
Level 2 of the Transco Tower, 2800 Post Oak Boulevard, Houston, Texas, on
Friday, April 26, 1996 at 9:00 A.M., Houston time, for the following purposes:
1. To elect three Class II Directors to serve until the third succeeding
annual meeting and until their respective successors are duly elected
and qualified.
2. To consider and vote upon Stockholder Proposal No. 1 pertinent to
declassifying the Company's Board of Directors.
3. To consider and vote upon Stockholder Proposal No. 2 pertinent to
matters associated with the Company's Stockholders Rights Agreement.
4. To transact such other business as may properly come before such
meeting or any adjournment thereof.
February 28, 1996 has been fixed as the date of record for determining
stockholders entitled to receive notice of and to vote at the Annual Meeting of
Stockholders. A list of all stockholders entitled to vote is on file at the
principal executive offices of the Company, 5450 Transco Tower, 2800 Post Oak
Boulevard, Houston, Texas, 77056-6196.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MARK H. HAY
Secretary
March 11, 1996
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND MAIL BACK THE
ACCOMPANYING PROXY IN THE ENCLOSED RETURN ENVELOPE AT YOUR EARLIEST CONVENIENCE.
<PAGE> 2
ROWAN COMPANIES, INC.
5450 TRANSCO TOWER
2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056-6196
---------------------------------------
PROXY STATEMENT
---------------------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Rowan Companies, Inc. for use at the Annual Meeting of Stockholders to be
held on April 26, 1996 in the Transco Auditorium located on Level 2 of the
Transco Tower, 2800 Post Oak Boulevard, Houston, Texas, or any adjournment
thereof. The cost of solicitation will be paid by the Company. In addition to
solicitation by mail, solicitation of proxies may be made personally or by
telephone or telecopy by the Company's employees, and arrangements may be made
with brokerage houses or other custodians, nominees and fiduciaries to send
proxies and proxy material to their principals.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by either (i) attending the meeting
and voting in person or (ii) giving written notice of such revocation to Mr.
Mark H. Hay, Secretary of the Company, at Rowan Companies, Inc., 5450 Transco
Tower, 2800 Post Oak Boulevard, Houston, Texas 77056-6196. The enclosed proxy
may also be revoked by a subsequently dated proxy received by the Company prior
to the voting of the previously dated proxy.
The Proxy Statement and the related form of proxy are being first mailed or
delivered to stockholders on or about March 11, 1996.
VOTING SECURITIES OUTSTANDING
At the close of business on February 28, 1996, the record date for
determining those stockholders entitled to notice of and to vote at the Annual
Meeting of Stockholders, there were outstanding 85,017,535 shares of $.125 par
value Common Stock of the Company ("Common Stock"), each share of which is
entitled to one vote on the matters to be presented at the meeting.
1
<PAGE> 3
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
MANAGEMENT
The table below sets forth the number of shares of Common Stock of the
Company owned as of February 28, 1996 by continuing directors (including Mr.
Palmer who is Chief Executive Officer), nominees for director, the four other
most highly compensated executive officers of the Company and all directors and
executive officers as a group:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME BENEFICIALLY OWNED(1)(2)
-------------------------------------------------------- ------------------------
<S> <C>
Directors:
Ralph E. Bailey 30,000
Henry O. Boswell 25,000(3)
H. E. Lentz 25,200(4)
C. R. Palmer 809,308
Wilfred P. Schmoe 5,000
Charles P. Siess, Jr. 6,000
Peter Simonis 5,000
C. W. Yeargain 253,202
Nominee for Director:
Hon. Colin B. Moynihan -0-
Executive Officers (not Directors):
R. G. Croyle 91,787(5)
D. F. McNease 63,042
E. E. Thiele 127,787
J. Earl Beckman 12,500
All Directors and Executive Officers as a group (23 in
number) 1,767,437
</TABLE>
- ---------------
(1) Except as noted otherwise, the persons and the group listed have sole voting
and sole dispositive power with respect to the shares shown herein.
(2) All directors and executive officers as a group beneficially owned 2.08% of
the outstanding shares of Common Stock; no continuing director, nominee or
executive officer owned more than .95% of the Common Stock. Included herein
are shares of Common Stock that may be acquired prior to April 28, 1996
through the conversion of the Series II Floating Rate Convertible
Subordinated Debenture (the "Series II Debenture"), the Series III Floating
Rate Convertible Subordinated Debentures (the "Series III Debentures") and
the exercise of Nonqualified Stock Options (the "Options") as follows: C.
R. Palmer -- Series II Debenture, Series III Debentures and
Options -- 400,000 shares, 162,963 shares and 240,000 shares, respectively;
R. G. Croyle -- Series III Debentures and Options -- 37,037 shares and
53,750 shares, respectively; D. F. McNease -- Series III Debentures and
Options -- 37,037 and 25,000 shares, respectively; E. E. Thiele -- Series
III Debentures and Options -- 37,037 shares and 25,000 shares,
respectively; J. Earl Beckman -- Options -- 12,500 shares; and all
directors and executive officers as a group -- the Series II Debenture, the
Series III Debentures and Options -- 400,000 shares, 311,111 shares and
485,000 shares, respectively.
(3) Includes 11,000 shares owned by Mr. Boswell's wife. Mr. Boswell disclaims
beneficial ownership of such shares.
(4) Mr. Lentz's shares are owned jointly with his wife. The total includes 200
shares held in the names of Mr. Lentz's two minor children with respect to
which Mr. Lentz's wife serves as custodian. Mr. Lentz disclaims beneficial
ownership of such shares.
(5) Includes 1,000 shares owned by Mr. Croyle's children. Mr. Croyle disclaims
beneficial ownership of such shares.
2
<PAGE> 4
PRINCIPAL STOCKHOLDERS
The table below sets forth, as of February 28, 1996, certain information as
to those persons who, to the knowledge of the Company, beneficially owned more
than five percent of the Company's outstanding Common Stock:
<TABLE>
<CAPTION>
TITLE NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF CLASS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OF CLASS
--------------------- ------------------------------------- ------------------ --------
<S> <C> <C> <C>
Common Stock The Equitable Companies Incorporated 10,127,650(2) 11.9%(2)
787 Seventh Avenue
New York, New York 10019;
AXA
23, Avenue Matignon
75008 Paris, France;
The Mutuelles AXA Group
detailed in (2) below
Common Stock State of Wisconsin 5,430,900(3) 6.41%(3)
Investment Board
P.O. Box 7842
Madison, Wisconsin 53707
</TABLE>
- ---------------
(1) To the knowledge of the Company, no other person owns more than 5% of the
outstanding shares of Common Stock.
(2) Based on information contained in the named stockholders' Amendment No. 5
dated February 9, 1996 to its Schedule 13G dated the same date, filed
pursuant to the Securities Exchange Act of 1934. Such amended Schedule 13G
also stated that The Equitable Companies Incorporated and the AXA Companies
described below as a group had sole voting power with respect to 10,072,050
shares and sole dispositive power with respect to 10,127,650 shares.
Furthermore, based on information also contained in that amended Schedule
13G, 3,828,400 shares and 6,299,250 shares of the shares shown above were
beneficially owned by The Equitable Companies Incorporated's subsidiaries,
The Equitable Life Assurance Society of the United States ("Equitable U.S.")
and Alliance Capital Management L.P. ("Alliance Capital"), respectively, and
that Equitable U.S. had sole voting power and sole dispositive power with
respect to 3,828,400 shares, while Alliance Capital had sole voting power
and sole dispositive power with respect to 6,243,650 shares and 6,299,250,
respectively. AXA and the five mutual insurance companies comprising The
Mutuelles Group, namely Alpha Assurances I.A.R.D. Mutuelle and Alpha
Assurances Vie Mutuelle, both located at 101-100 Terrasse Boieldieu, 92042
Paris La Defense France, and AXA Assurances I.A.R.D. Mutuelle and AXA
Assurances Vie Mutuelle, both located at La Grande Arche, Pardi Nord, 92044
Paris La Defense France, and Uni Europe Assurance Mutuelle, 24 Rue Drouot,
75009 Paris France, disclaim any beneficial interest in and disclaim any
deemed voting power or dispositive power with respect to any of the shares
shown above.
(3) Based on information contained in the named stockholder's Schedule 13G dated
February 1996, filed pursuant to the Securities Exchange Act of 1934. The
State of Wisconsin Investment Board is a government agency which manages
public pension funds.
All of the Company's directors, executive officers and any greater than ten
percent stockholders are required by Section 16(a) of the Securities Exchange
Act of 1934 to file with the Securities and Exchange Commission and the New York
Stock Exchange initial reports of ownership and reports of changes in ownership
of the Company's Common Stock and to furnish the Company with copies of such
reports. Based on a review of those reports and written representations that no
other reports were required, the Company believes that all applicable Section
16(a) filing requirements were complied with except that one executive officer,
Daniel F. McNease, a Senior Vice President, had one report covering one
transaction that he inadvertently failed to report on a timely basis.
3
<PAGE> 5
QUORUM AND OTHER MATTERS
The presence at the Annual Meeting of Stockholders, in person or by proxy,
of the holders of at least a majority of the outstanding shares of Common Stock
at the close of business on February 28, 1996 is necessary to constitute a
quorum. In accordance with Delaware law and pursuant to the provisions of the
Company's Bylaws, holders of shares shall be treated as being present at the
Annual Meeting of Stockholders if the holders of such shares are present in
person or are represented by valid proxies, whether the proxy cards granting
such proxies are marked as casting a vote or abstaining or are left blank.
If a quorum is present at the Annual Meeting of Stockholders, the election
of each nominee for Class II Director will be approved if the votes cast in
favor of the election of such nominee exceed the votes cast opposing the
election of such nominee. Unless otherwise directed thereon, a validly executed
proxy will be treated as a vote cast in favor of the election of the Class II
Director nominees on page 5.
The two stockholder proposals or actions on any other matters to come
before the Annual Meeting of Stockholders will be approved if a quorum is
present and the votes cast in favor of the proposals or matters exceed the votes
cast opposing same. Unless otherwise directed thereon, a validly executed proxy
will be treated as votes cast against the two stockholder proposals.
In determining the number of votes cast, shares abstaining from voting and
shares held in street name that are indicated as not being voted on by brokers
due to lack of discretionary authority will not be treated as votes cast.
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes.
Classes I and III consist of three directors each and Class II currently
consists of two directors. Each director holds office for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected. Class II Directors are to be elected at the 1996 Annual
Meeting of Stockholders.
After giving due consideration to the Board-approved policies governing the
designation of nominees for directorships, the Nominating Committee has
determined that it would be in the best interest of the stockholders and the
Company that both of the current Class II Directors, Mr. Ralph E. Bailey and Mr.
C. W. Yeargain, be selected to stand for re-election. Hon. Colin B. Moynihan,
who has not heretofore served on the Board, has also been selected to be a Class
II Director nominee. Accordingly, a Board-approved amendment to the Bylaws
increasing the number of directors from eight to nine (with the Board to be
comprised of three members in each class) will become effective on April 26,
1996, the date of the 1996 Annual Meeting of Stockholders.
The persons named in the enclosed proxy have been selected as a proxy
committee by the directors of the Company and valid proxies will be voted in the
manner directed thereon. If no direction is made, the proxies will be voted for
the election of the Class II Director nominees listed below. Although the Board
of Directors of the Company does not contemplate that any of the nominees will
be unable to serve, if such a situation arises prior to the meeting, the proxy
committee will vote for a replacement nominee in accordance with its best
judgment.
4
<PAGE> 6
The table below sets forth certain information regarding the nominees for
director and continuing directors as of February 28, 1996.
NOMINEES AND CONTINUING DIRECTORS
--------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION YEAR FIRST
FOR THE PAST BECAME
NAME(1)(2) FIVE YEARS AGE DIRECTOR
- ------------------------- -------------------------------------------------- --- ----------
<S> <C> <C> <C>
NOMINEES CLASS II (TERM EXPIRES IN 1999)
- ------------------------- --------------------------------------------------
Ralph E. Bailey Chairman of the Board and, until February 1996, 71 1993
(b)(e) Chairman of the Board and Chief Executive Officer
of American Bailey Corporation (manufacturing and
energy investments); and, until May 1995, Chairman
of the Board and, until February 1992, Chairman of
the Board and Chief Executive Officer of United
Meridian Corporation (oil and gas exploration and
production).
Hon. Colin B. Moynihan Senior Partner of London-based Colin Moynihan 40 --
Associates (CMA) (energy advisors) since 1993;
Member of Parliament in the United Kingdom (1983-
1992); additionally, Minister for Energy as
Parliamentary Undersecretary of State at the UK
Department of Energy (1990-1992).
C. W. Yeargain Chairman of the Board, LeTourneau, Inc.; Executive 70 1975
(c) Vice President of the Company until retiring in
March 1991.(3)
CONTINUING DIRECTORS CLASS III (TERM EXPIRES IN 1997)
- ------------------------- --------------------------------------------------
Henry O. Boswell Retired; formerly President (1983-1987) of Amoco 66 1988
(a)(b)(c)(d)(e) Production Company (oil and gas production).
C. R. Palmer Chairman of the Board, President and Chief 61 1969
(c)(d) Executive Officer of the Company.(3)
Peter Simonis Chairman of the Board, British American Offshore 69 1985
(d) Limited (Company-owned U.K. drilling contractor)
since March 1987; Chairman of the Board
(1979-1987) of Haden Group plc (London-based
international engineering contractors).
CONTINUING DIRECTORS CLASS I (TERM EXPIRES IN 1998)
- ------------------------- --------------------------------------------------
H. E. Lentz Managing Director, Lehman Brothers Inc. 51 1990
(d) (investment bankers) since March 1993; Investment
Banker, Wasserstein Perella & Co., Inc. (March
1988 through February 1993).
Wilfred P. Schmoe Retired; formerly Executive Vice President, 68 1992
(a)(b)(d)(e) Director and member of the Executive Committee
(May 1984 to November 1988) of E.I. DuPont de
Nemours & Co. (diversified chemical/energy
conglomerate).
</TABLE>
(Table continued on the following page)
5
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION YEAR FIRST
FOR THE PAST BECAME
NAME(1)(2) FIVE YEARS AGE DIRECTOR
- ------------------------- -------------------------------------------------- --- ----------
<S> <C> <C> <C>
Charles P. Siess, Jr. Chairman of the Board and Chief Executive Officer, 69 1991
(a)(b)(c)(d)(e) Cabot Oil & Gas Corporation since May 1995 and
from January 1990 to December 1992; Vice Chairman
of the Board, Marathon Manufacturing Company
(August 1986 until retiring in February 1987).
</TABLE>
- ---------------
(1) Directorships other than those listed in the table are as follows: Ralph E.
Bailey remains a director of United Meridian Corporation and is also a
director of General Signal Corporation and The Williams Companies, Inc.;
Henry O. Boswell is a director of Service Master Management Corporation,
the general partner of Service Master Limited Partnership, and Cabot Oil &
Gas Corporation; H. E. Lentz is a director of Imperial Holly Corporation;
and Charles P. Siess, Jr. is a director of Cabot Corporation and Camco,
Inc. Hon. Colin B. Moynihan, a nominee for Class II Director, is a director
of Ranger Oil Limited.
(2) Committee memberships are indicated by (a) for Audit Committee, (b) for
Compensation Committee, (c) for Executive Committee, (d) for Nominating
Committee and (e) for 1986 Debenture Plan Committee. See "Committees of the
Board of Directors" below for information on functions performed by the
Committees. The Board of Directors held five meetings during 1995. All
directors attended at least 75% of the 1995 meetings of the Board of
Directors and Committees on which they served.
(3) In addition to his Board membership, Mr. Yeargain continues to serve the
Company in a consulting capacity. See "Compensation Committee Interlocks
and Insider Participation; Certain Transactions" on page 19. Information
regarding Mr. Palmer's compensation is disclosed in the Summary
Compensation Table under "Executive Compensation" on page 7.
COMMITTEES OF THE
BOARD OF DIRECTORS
The functions performed by the committees of the Board of Directors are as
follows:
The Audit Committee has as its principal functions to recommend to the
Board of Directors each year the firm of independent auditors to be selected by
the Company and its subsidiaries, to review the reports to be rendered and the
fees to be charged by the independent auditors and to review with the
independent auditors the principal accounting policies of the Company and its
subsidiaries and other pertinent matters either at the initiative of the
Committee or at the request of the independent auditors. The Audit Committee
held one meeting in 1995.
The Compensation Committee recommends to the Board of Directors from time
to time the compensation to be paid to the executive and other officers of the
Company and its subsidiaries and any plan for additional compensation that it
deems appropriate. The Compensation Committee held one meeting in 1995.
The Nominating Committee generally designates, on behalf of the Board of
Directors, candidates for the directors of the class to be elected at the next
meeting of stockholders. The Nominating Committee will consider for election to
the Board qualified nominees recommended by stockholders. To make such a
recommendation, stockholders should submit to the Company's Secretary a
biographical sketch of the prospective candidate, which should include age,
principal occupation and business experience and other directorships, including
positions previously held or now held. The Nominating Committee held one meeting
in 1995.
The Executive Committee has, except for certain qualifications noted in the
Company's Bylaws, the authority to exercise all of the powers of the Board in
the management of the business and affairs of the Company. The Executive
Committee did not hold any meetings in 1995.
6
<PAGE> 8
The 1986 Debenture Plan Committee administers the Company's 1986
Convertible Debenture Incentive Plan. The 1986 Debenture Plan Committee has
broad authority to interpret, amend, suspend or terminate such Plan and to make
all determinations necessary or advisable for the administration of the Plan.
The 1986 Debenture Plan Committee held one meeting in 1995.
EXECUTIVE COMPENSATION
The following tabulation sets forth for the fiscal years ended December 31,
1995, 1994 and 1993 annual compensation of the Chief Executive Officer and the
other four most highly compensated executive officers of the Company (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------
ANNUAL COMPENSATION SHARES UNDERLYING
---------------------- DEBENTURES AND ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION($)
- --------------------------------- ---- --------- -------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
C. R. Palmer 1995 $ 800,000 -0- 150,000 $ 3,375(3)
Chairman of the Board, 1994 766,667 -0- 791,111 -0-
President 1993 700,000 $900,000 -0- -0-
and Chief Executive Officer
R. G. Croyle 1995 216,667 -0- 30,000 3,375(3)
Executive Vice President 1994 200,000 -0- 187,963 -0-
1993 170,000 100,000 25,000 -0-
D. F. McNease 1995 191,667 -0- 25,000 1,687(3)
Senior Vice 1994 175,000 -0- 187,963 -0-
President -- Drilling 1993 153,333 100,000 25,000 -0-
E. E. Thiele 1995 181,667 -0- 25,000 3,375(3)
Senior Vice 1994 166,667 -0- 187,963 -0-
President -- Finance, 1993 145,000 75,000 25,000 -0-
Administration and Treasurer
J. Earl Beckman 1995 218,333 -0- 25,000 3,987(3)
Vice President -- Manufacturing; 1994 215,000(2) -0- 187,963 4,873(3)
President and Chief Executive 1993 N/A N/A N/A N/A
Officer of LeTourneau, Inc.
</TABLE>
- ---------------
(1) The 1993 and 1995 amounts are shares of Common Stock that may be acquired
through the exercise of Options, which were granted on April 23, 1993 and
April 28, 1995, respectively. The 1994 amounts are comprised of shares of
Common Stock that may be acquired through the conversion of Series III
Floating Rate Convertible Subordinated Debentures (the "Series III
Debentures"), which were offered and issued on November 30, 1994, and the
exercise of Options, which were granted on April 22, 1994, as follows: C. R.
Palmer -- Series III Debentures and Options -- 711,111 shares and 80,000
shares, respectively; R. G. Croyle, D. F. McNease, E. E. Thiele and J. Earl
Beckman -- Series III Debentures and Options -- in each case, 162,963 and
25,000, respectively.
(2) Represents the base salary paid to Mr. Beckman in the calendar year that he
became an employee by way of the Company's purchase of the net assets of his
former employer, Marathon LeTourneau Company. Mr. Beckman was elected
President and Chief Executive Officer of LeTourneau, Inc. ("LeTourneau") and
Vice President of the Company on February 18, 1994 and April 22, 1994,
respectively.
(3) Represents the amount of the Company's contribution on behalf of the Named
Executive Officer to either of two 401(k) plans, specifically, the Rowan
Companies, Inc. Savings and Investment Plan in the case of Messrs. Palmer,
Croyle, McNease and Thiele, and the LeTourneau, Inc. Savings and Investment
Plan in the case of Mr. Beckman. The Rowan plan was approved in late 1994
and became operational in April 1995.
7
<PAGE> 9
No executive officer received any non-cash compensation during fiscal years
1995, 1994, and 1993 having an aggregate incremental cost to the Company in
excess of the lesser of $50,000 or 10% of his or her total annual salary and
bonus as reported in this table.
OPTION GRANTS IN LAST FISCAL YEAR
The table below sets forth information pertinent to stock options granted
under the Company's 1988 Nonqualified Stock Option Plan (the "1988 Plan") to the
Named Executive Officers during 1995:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------------------- REALIZABLE VALUE
PERCENT MARKET AT ASSUMED ANNUAL
NUMBER OF OF TOTAL PRICE OF RATES OF STOCK
SHARES OPTIONS STOCK ON PRICE APPRECIATION
UNDERLYING GRANTED TO DATE OF EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN GRANT(1) BASE PRICE EXPIRATION ----------------------------------
NAME GRANTED(#) FISCAL 1995 ($/SHARE) ($/SHARE) DATE(2) 0%(3) 5% 10%
- ------------------- ---------- ------------ -------- ----------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. R. Palmer 150,000 16.2% $ 6.87 $1.00 4-28-05 $881,250 $1,435,464 2,285,736
R. G. Croyle 30,000 3.2% 6.87 1.00 4-28-05 176,250 287,093 457,147
D. F. McNease 25,000 2.7% 6.87 1.00 4-28-05 146,875 239,244 380,956
E. E. Thiele 25,000 2.7% 6.87 1.00 4-28-05 146,875 239,244 380,956
J. Earl Beckman 25,000 2.7% 6.87 1.00 4-28-05 146,875 239,244 380,956
</TABLE>
- ---------------
(1) Last reported sales price of the Common Stock on the New York Stock Exchange
on April 28, 1995, the date of grant.
(2) Options become exercisable in 25% increments over a four-year period with
the options being 100% exercisable four years after the date of grant.
Exercisability may accelerate upon the occurrence of certain events such as
corporate reorganizations, death or disability (as set forth in the option
agreement or the plan).
(3) Value represents the difference between the per share market price (see
footnote (1) above) and the per share exercise price on the date of grant
times the number of underlying shares.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
For each of the Named Executive Officers, the information set forth below
reflects, for the fiscal year ended December 31, 1995, options under the
Company's 1980 Nonqualified Stock Option Plan (the "1980 Plan") and 1988 Plan
which were exercised and the value realized thereon as well as exercisable and
unexercisable options at year-end 1995 and the realizable value thereon at such
date:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(1)
EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. R. Palmer -0- -0- 182,500 210,000 $1,574,062 $1,811,250
R. G. Croyle 10,000 $ 61,250 27,500 67,500 237,187 582,188
D. F. McNease 18,750 113,281 12,500 62,500 107,812 539,062
E. E. Thiele 18,750 112,500 -0- 62,500 -0- 539,062
J. Earl Beckman 6,250 37,500 -0- 43,750 -0- 377,344
</TABLE>
- ---------------
(1) Represents the difference between $9.63, which was the last reported per
share sales price of the Company's Common Stock on the New York Stock
Exchange in 1995, and the per share exercise price of $1.00 times the
number of underlying shares.
8
<PAGE> 10
OPTION PLANS
As amended by the stockholders at the Annual Meeting of Stockholders in
April 1992, the 1988 Plan permits the grant to key employees of the Company and
its subsidiaries prior to January 21, 2003 of options to purchase 7,000,000
shares, of which options to purchase 4,388,179 shares (net of forfeitures) of
the Company's Common Stock had been granted at an option exercise price of $1.00
per share as of February 28, 1996. Outstanding options under the 1988 Plan
expire between April 1999 and April 2005. Options granted under the 1988 Plan
are nonqualified options and expire ten years after the date of grant.
The authority of the Board of Directors to grant additional options under
the 1980 Plan expired on January 25, 1990. The 1980 Plan provided for the grant
of options to key employees of the Company and its subsidiaries, and the
exercise prices and terms of options granted under the 1980 Plan were determined
by the Compensation Committee. As of February 28, 1996, options to purchase a
total of 971,500 shares (net of forfeitures) of the Company's Common Stock had
been granted under the 1980 Plan at an option exercise price of $1.00 per share.
Outstanding options under the 1980 Plan are nonqualified options and expire
between April 1998 and April 1999.
Options granted under the 1980 and 1988 Plans become exercisable in 25%
increments over a four-year period with the options being 25% exercisable one
year after the date of grant and 100% exercisable four years after the date of
grant.
CONVERTIBLE DEBENTURE INCENTIVE PLAN
The Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan (the
"Plan") was approved at the Company's 1986 Annual Meeting of Stockholders. The
Plan provides for the issuance to key employees of the Company and its
subsidiaries of up to $20,000,000 in aggregate principal amount of the Company's
floating rate convertible subordinated debentures (the "Debentures"). The
Debentures are convertible into fully paid and nonassessable shares of preferred
stock, which are immediately convertible into fully paid and nonassessable
shares of Common Stock of the Company. The ultimate conversion price for each
issue is the closing price of the Company's Common Stock on the day prior to the
issuance of the Debentures.
The Plan is administered by the 1986 Debenture Plan Committee of the Board
of Directors (the "Debenture Committee"). The Debenture Committee has the
authority to select key employees of the Company or any subsidiary who may
purchase Debentures. The Debenture Committee also determines with respect to
each series of Debentures, the interest rate, conversion price and other terms
and conditions of the Debentures, all consistent with the provisions of the
Plan. After November 30, 1994, no more Debentures may be offered under the Plan.
The $5,125,000 aggregate principal amount of Series I Debentures issued in
June 1986 was ultimately convertible into 891,304 shares of Common Stock at
$5.75 per share until June 1996. In 1995, the remaining $450,000 aggregate
principal amount outstanding was converted into 78,261 shares of Common Stock.
The $4,500,000 aggregate principal amount of the Series II Debenture issued
in September 1987 is ultimately convertible into 500,000 shares of Common Stock
at $9.00 per share until September 1997. The one employee participating in the
Series II Debenture offering has borrowed the Debenture purchase price from an
unaffiliated third party. The promissory note bears interest at the same rate as
the Debenture and is secured by a pledge of the Debenture purchased. The Company
has guaranteed such outstanding employee's indebtedness. No conversions occurred
in 1995. The aggregate principal amount of the Debenture outstanding at February
28, 1996 was $3,600,000 which is convertible into 400,000 shares of Common
Stock.
The $10,300,000 aggregate principal amount of Series III Debentures issued
in November 1994 is ultimately convertible into 1,525,926 shares of Common Stock
at $6.75 per share in specified amounts and intervals until November 30, 2004 as
follows: beginning November 30, 1995 -- $2,350,000 convertible into 348,148
shares; beginning November 30, 1996 -- $2,450,000 convertible into 362,963
shares; beginning November 30, 1997 -- $2,700,000 convertible into 399,998
shares; and beginning November 30, 1998 -- $2,800,000 convertible into 414,817
shares. All employees participating in the Series III Debenture offering have
borrowed the Debenture purchase price from the Company. Promissory notes
evidencing the borrowings
9
<PAGE> 11
bear interest at the same rate as the Debentures and are secured by a pledge of
the Debentures purchased. No conversions occurred in 1995. Subsequent to
year-end 1995, a portion of a Debenture in the amount of $250,000 was converted
into 37,037 shares of Common Stock. The aggregate principal amount of Series III
Debentures outstanding at February 28, 1996 was $10,050,000 which is convertible
into 1,488,889 shares of Common Stock.
PENSION PLAN
The Company offers to eligible drilling and aviation employees
participation in a non-contributory, defined benefit pension plan. All salaried
and hourly employees (including executive officers but excluding non-US.
citizens) of the Company who have completed one year of employment (as defined
in the plan) are eligible to participate in the pension plan. Pursuant to the
terms of the pension plan, the cost of which is borne by the Company, an
eligible employee generally will receive a pension at age 60 pursuant to a
formula which is based upon the employee's number of years of credited service
and his average annual compensation during the highest five consecutive years of
his final ten years of service. Compensation for this purpose is based on
salary, excluding discretionary bonuses. Because applicable provisions of the
Internal Revenue Code, as amended, currently limit the annual benefits payable
to any individual from the pension plan to $120,000, the pension plan provides
that benefits of a plan retiree which are limited by the provisions of the
Internal Revenue Code shall be increased each year that adjustments to such
provisions permit a benefit increase. As of January 31, 1996, the Company had
approximately 1,800 employees eligible to participate in such pension plan.
The Company offers to eligible manufacturing employees participation in a
separate non-contributory, defined benefit pension plan. This plan is
substantially similar to the Company's drilling and aviation pension plan except
that: an eligible employee generally will receive a pension at age 65 rather
than at age 60; the benefits are subject to reduction for Social Security
benefits; and no provision has been made for increasing the annual benefits
payable to any individual under this plan for the purpose of tracking an upward
adjustment in the limitation imposed by the Internal Revenue Code. As of January
31, 1996, the Company had approximately 850 employees eligible to participate in
this pension plan.
The Company also sponsors pension restoration plans which provide for the
restoration of any retirement income that is lost under its pension plans
because of the previously mentioned Internal Revenue Code limitations on
benefits payable or the compensation level on which they are based. Both pension
restoration plans are unfunded and benefits thereunder are paid directly by the
Company. To date, three employees, C. R. Palmer, J. Earl Beckman and C. W.
Yeargain (now retired), have been selected to be participants under the pension
restoration plans.
10
<PAGE> 12
The following table illustrates, for representative average earnings and
years of credited service levels, the annual retirement benefit payable to
eligible drilling and aviation employees under the Company's pension and pension
restoration plans computed on the basis of a life annuity with 60 payments
guaranteed.
PENSION PLAN TABLE(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)
-------------------------------------------------------------------------
COMPENSATION(3) 15 20 25 30 35 40
- --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 125,000 $ 32,812 $ 43,750 $ 54,687 $ 65,625 $ 76,562 $ 87,500
150,000 39,375 52,500 65,625 78,750 91,875 105,000
175,000 45,937 61,250 76,562 91,875 107,187 122,500
200,000 52,500 70,000 87,500 105,000 122,500 140,000
225,000 59,062 78,750 98,437 118,125 137,812 157,500
250,000 65,625 87,500 109,375 131,250 153,125 175,000
300,000 78,750 105,000 131,250 157,500 183,750 210,000
400,000 105,000 140,000 175,000 210,000 245,000 280,000
500,000 131,250 175,000 218,750 262,500 306,250 350,000
600,000 157,500 210,000 262,500 315,000 367,500 420,000
700,000 183,750 245,000 306,250 367,500 428,750 490,000
800,000 210,000 280,000 350,000 420,000 490,000 560,000
900,000 236,250 315,000 393,750 472,500 551,250 630,000
1,000,000 262,500 350,000 437,500 525,000 612,500 700,000
</TABLE>
- ---------------
(1) The benefits listed in the table are not subject to reduction for Social
Security benefits or other offset amounts.
(2) As of December 31, 1995, the Named Executive Officers (excluding J. Earl
Beckman) were credited under either or both the pension and pension
restoration plans for the drilling and aviation employees of the Company
with years of service as follows: C. R. Palmer -- 35; R. G. Croyle -- 22;
D. F. McNease -- 22; and E. E. Thiele -- 26.
(3) The annual benefit amount payable to Mr. C. W. Yeargain, who retired as an
executive officer in March 1991, is $161,599. The estimated annual benefit
amount payable upon retirement to Mr. C. R. Palmer is $450,232. The other
executive officers named in "Executive Compensation" above (but excluding
J. Earl Beckman) will basically be entitled to receive the annual benefits
amounts based upon their 1995 salary amount set forth under "Salary" in the
table on page 7 and their credited years of service under the pension plan
(see Footnote (2) above).
Based upon his 1995 salary as set forth under "Salary" in the table on page
7, the estimated annual benefit payable upon retirement to Mr. J. Earl Beckman
is approximately $46,215, such benefit being based upon 15 projected years of
service at age 65 under the pension and pension restoration plans covering the
Company's manufacturing employees and six years under a plan of a company
previously owning the assets of LeTourneau.
DIRECTOR COMPENSATION
Each director who is not a salaried officer of the Company or a subsidiary
receives $20,000 annually for serving as a director, $500 for attending a
regular or special Board meeting and $250 or $500 for attending a meeting of
each committee on which he serves, depending on the length of the meeting. In
addition, directors are reimbursed for reasonable travel expenses.
11
<PAGE> 13
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION POLICY FOR EXECUTIVE OFFICERS
Under the supervision of the Compensation Committee (the "Committee") of
the Board of Directors, the Company has developed and implemented compensation
policies and programs that seek to retain and motivate employees of the Company
and its subsidiaries whose performance contributes to the Company's goal of
maximizing stockholder value in an unstable industry that has suffered a
prolonged downturn. In addition, these compensation policies attempt to align
the executive officers' interests with those of the stockholders by providing
incentive compensation related to the value of the Company's Common Stock.
Compensation decisions are made by the Committee after reviewing recommendations
prepared by the Company's Chief Executive Officer, with the assistance of other
Company personnel. The Company has combined salaries with stock option grants,
convertible debenture offerings and selected cash bonuses to provide a
compensation balance. The balance established by the Committee is designed to
reward past performance, retain key employees and encourage future performance.
In approving and establishing compensation for an executive officer,
several factors are considered by the Committee. Performance criteria include
individual performance, overall Company performance versus that of its
competitors and performance of the price of the Company's Common Stock in
comparison to prior levels and to the relative stock prices of its competitors.
Since the contract drilling industry has been in a prolonged downturn, overall
corporate performance has included factors such as maintaining equipment and
personnel and protecting the strength of the Company's balance sheet during a
period of heightened instability. When evaluating individual performance,
particular emphasis has been placed on the executive officers' success in
enabling the Company to increase its market share, their ability to develop
innovative ways to obtain better returns on the Company's assets and their
maintenance of the Company's ability to respond to upturns in the drilling
industry. Emphasis is placed upon an individual's integrity, loyalty and
competence in his areas of responsibility. When evaluating the foregoing
performance criteria in setting executive compensation, the Committee gives
greatest weight to those factors it believes have or will contribute the most
towards maximizing stockholder value and increasing the Company's financial
viability. The factors that contribute the most towards these goals vary
depending on the state of the industry in which the Company operates.
Based upon the Committee's determination, all of the executives named
above, excluding Mr. Palmer (see "Chief Executive Officer Compensation" below),
received a salary increase in 1995. As discussed above, factors considered by
the Committee in setting compensation included each individual's past
contributions and performance, as well as the Company's operating results and
the performance of the Company's stock in comparison to its competitors,
management of its assets and debts and implementing and maintaining effective
cost controls. Additionally, setting salaries which are both externally
competitive relative to the industry and internally equitable when considering
performance and responsibility levels were pursued objectives. Competitor
comparisons for purposes of determining executive officer compensation consisted
of a comparison to the competitors in the Company's peer group described below
under "Stockholder Return Performance Presentation" along with comparison to
certain additional public companies in the energy service industry. Although no
specific target has been established, the Committee generally seeks to set
salaries at the median to high end of the range in comparison to peer group
companies. Measurement of each individual's performance is to some extent
subjective, and the Company does not make compensation awards based on the
degree to which an individual achieves predetermined objective criteria.
In addition to regular salary payments to executive officers in 1995, the
Committee determined to make stock option grants to all of the Company's
executive officers, including Mr. Palmer, at an exercise price of $1.00 per
share. The primary basis for these stock option grants was management's
performance in keeping the Company's organization intact and maintaining a
strong balance sheet under continuing unstable market conditions in its drilling
and aviation segments, as well as the positive earnings contributions by the
Company's manufacturing segment and the Committee's evaluation of the individual
performance of each officer. The criteria used in evaluating individual
performance for purposes of these grants were the same as the criteria discussed
above that are considered when setting regular compensation. Previous option
grants and debenture
12
<PAGE> 14
offerings to and held by executive officers were taken into account when
determining the amount of new option and convertible debenture awards.
Although the Committee chose to revise the compensation of the Named
Executive Officers for the fiscal year just ended, it attempts to avoid treating
salaries, stock option grants and debenture offerings as entitlements and
recommends compensation revisions only when it believes such changes are
warranted.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee's determination for establishing Mr. Palmer's remuneration
for 1995 was based on the facts that (i) the Company had survived a severe
industry downturn when many of its competitors had failed, merged or ceased to
exist, (ii) the Company had been able to maintain a relatively strong balance
sheet throughout the past five year period, which was a period of unprecedented
difficulty and instability, enabling it to maintain its employees and equipment
at competitive levels, and (iii) the Company had increased its market share,
leaving it well positioned to capitalize on any significant increase in offshore
drilling activity. No specific quantitative measure of the Company's performance
was used for this purpose. Emphasis was also placed on evaluating the Company's
performance versus the performance of the competitors in the Company's peer
group described below under "Stockholder Return Performance Presentation", as
well as certain additional public companies in the energy service industry. The
Committee believed, and believes, that the Company's relatively strong position
in the contract drilling industry has been in large part attributable to Mr.
Palmer's abilities and contributions.
In 1995, the Committee's deliberations with respect to Mr. Palmer's
remuneration centered on the ongoing strong position that the Company has
maintained in the contract drilling industry during a period of heightened
instability. Given this fact, and the Committee's continuing belief that tying a
significant portion of the chief executive officer's remuneration to the
interests of the Company's stockholders while foregoing on a selective year
basis the use of additional cash for salary increases and cash bonuses is a
prudent remuneration policy, it determined to grant to Mr. Palmer stock options
for 150,000 shares of Common Stock having a value on the date of grant of
$881,250. Such award was determined to be in lieu of an increase in salary or a
cash bonus award.
The Committee has also discussed and considered a recent amendment to the
tax code that will generally limit the Company's ability to deduct compensation
in excess of $1 million to a particular executive. The Committee intends to
consider the deductibility of the compensation paid to its executive officers in
the future. However, given the current level of the Company's net operating
losses and investment tax credit carryforwards, deductibility of compensation is
not an immediate concern.
This report has been provided by the following members of the Committee:
Charles P. Siess, Jr., Chairman
Ralph E. Bailey
Henry O. Boswell
Wilfred P. Schmoe
The foregoing report of the Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
13
<PAGE> 15
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparison of the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock, the
cumulative total return of the Standard & Poor's Composite 500 Stock Index and
the cumulative total return of a company-selected peer group for the period of
five calendar years commencing January 1, 1991 and ending December 31, 1995.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK, S&P 500 INDEX &
COMPANY-SELECTED PEER GROUP**
(ASSUMES $100 INVESTED
ON DECEMBER 31, 1990)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ROWAN S&P 500 PEER GROUP**
<S> <C> <C> <C>
1990 100 100 100
1991 51 130 56
1992 70 140 45
1993 80 155 91
1994 56 157 77
1995 86 215 159
</TABLE>
Fiscal Year Ended December 31
* Total return assumes reinvestment of dividends.
** ENSCO International Incorporated, Global Marine, Inc., Noble Drilling Corp.,
and Reading & Bates Corp.
14
<PAGE> 16
The previous line graph is presented pursuant to, and has been prepared in
accordance with, specific SEC rules which prescribe, among other
characteristics, a five-year measurement period. Such rules also require the
inclusion of a graph line reflecting a broad stock market benchmark, as
reflected in the Standard & Poor's Composite 500 Index. The Company believes the
contract drilling industry moves in very long cycles, significantly greater than
five years, and that such cycles encompass extended periods of growth as well as
extended periods of contraction and during much of the past thirteen-year
period, the Company and the industry as a whole have generally experienced
conditions more closely associated with the latter. For that reason, the Company
does not believe a five-year presentation of stockholder return is especially
meaningful, but rather believes a comparison covering the period since the
industry last peaked is more informative. Furthermore, the Company believes the
breadth of the S&P 500 Index yields an unsuitable barometer for measuring
stockholder return in an industry as volatile as that in which the Company
operates. A line graph comparison is set forth below which reflects the yearly
percentage change in the cumulative total stockholder return on the Company's
Common Stock and the cumulative total return of the same Company-selected peer
group for the period of thirteen calendar years commencing January 1, 1983 and
ending December 31, 1995.
COMPARISON OF THIRTEEN-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK & COMPANY-SELECTED PEER GROUP**
(ASSUMES $100 INVESTED
ON DECEMBER 31, 1982)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ROWAN PEER GROUP**
<S> <C> <C>
1982 100 100
1983 112 89
1984 87 57
1985 76 29
1986 39 18
1987 51 31
1988 56 22
1989 109 46
1990 109 36
1991 56 20
1992 76 16
1993 87 33
1994 61 28
1995 93 58
</TABLE>
Fiscal Year Ended December 31
* Total return assumes reinvestment of dividends.
** ENSCO International Incorporated, Global Marine, Inc., Noble Drilling Corp.,
and Reading & Bates Corp.
15
<PAGE> 17
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL NO. 1 PERTINENT
TO DECLASSIFYING THE COMPANY'S BOARD OF DIRECTORS
The New York City Employees' Retirement System ("NYCERS"), owner of 259,100
shares of the Company's Common Stock, has informed the Company through its
investment adviser and Trustee, Mr. Alan G. Hevesi, Comptroller of the City of
New York, of its intention to offer the following proposal which, along with its
supporting statement, are reprinted herein exactly as submitted.
BE IT RESOLVED, that the stockholders of Rowan Companies request that the
Board of Directors take the necessary steps to declassify the Board of Directors
and establish annual elections of directors, whereby directors would be elected
annually and not by classes. This policy would take effect immediately, and be
applicable to the re-election of any incumbent director whose term, under the
current classified system, subsequently expires.
SUPPORTING STATEMENT
We believe that the ability to elect directors is the single most important
use of the shareholder franchise. Accordingly, directors should be accountable
to shareholders on an annual basis. The election of directors by classes, for
three-year terms, in our opinion, minimizes accountability and precludes the
full exercise of the rights of shareholders to approve or disapprove annually
the performance of a director or directors.
In addition, since only one-third of the Board of Directors is elected
annually, we believe that classified boards could frustrate, to the detriment of
long-term shareholder interest, the efforts of a bidder to acquire control or a
challenger to engage successfully in a proxy contest.
We urge your support for the proposal which requests the Board of Directors
to take the necessary steps to repeal the classified board and establish that
all directors be elected annually.
STATEMENT OF THE BOARD OF DIRECTORS AND
MANAGEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL NO. 1
The proponent's proposal urges the Corporation's Board of Directors to
declassify the Board and establish annual elections for all directors. The Board
believes declassification of the Board of Directors would negatively affect the
continuity and stability of the Corporation's governance and have a negative
impact on its long term policies.
One of the more important attributes of corporate governance is its
continuity. The classification of the Board strengthens continuity by requiring
that a majority of the Board has some prior experience overseeing the
Corporation's operations.
In addition, the Board believes that the proposal might prevent it from
protecting the interests of all stockholders in a variety of situations,
especially in addressing proposals or actions by a substantial stockholder or
stockholder group interested solely in short term interests that may not be in
the best interest of the Corporation as a whole in the long run.
PURPOSE AND EFFECT OF THE CLASSIFIED BOARD
The classified Board is designed primarily to discourage in advance hostile
tender offers and to promote arms-length negotiations in connection with any
proposed business combination or takeover. This would be accomplished by
extending the time required to change a majority of the Board of Directors from
one to two annual elections (assuming no death, resignations or removals for
cause) and prohibiting the summary removal by a majority stockholder of all
directors elected by the public. The Board believes that the ability to delay an
outsider seizing control of the Board gives the Directors, at a minimum,
additional bargaining power to force negotiations. In addition, it serves as an
incentive for a possible tenderor to acquire eighty percent of
16
<PAGE> 18
the outstanding voting shares (rather than a controlling minority or a simple
majority) in order to eliminate the staggered board and obtain immediate control
of the Board.
By making it more difficult for a dissident stockholder to gain control of
the Board without its consent, the classified Board increases the likelihood of
continuity in the policies and business strategy of the Corporation and provides
the Board with sufficient time to review any proposal and appropriate
alternatives thereto to maximize stockholder value.
Under Delaware corporate law, members of the Board must perform their
duties in good faith, with due care and prudently in the best interest of the
Corporation and its stockholders. The classified structure does not alter the
Board's legal duties. Directors may be removed at any time for cause for
breaching their fiduciary duties.
ROWAN'S CLASSIFIED BOARD
Pursuant to the Corporation's Certificate of Incorporation, the
Corporation's Board of Directors is divided into three classes of directors to
serve three-year terms. Each class of directors is elected once every three
years by a majority of the stockholders.
The attributes of classified governance are recognized by Delaware
corporation law, which specifically set forth for Delaware corporations the
parameters for classification of the board into a maximum of three classes.
RECOMMENDATION OF THE BOARD
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST APPROVAL OF STOCKHOLDER
PROPOSAL NO. 1 ON REPEAL OF THE CLASSIFIED BOARD.
STOCKHOLDER PROPOSAL NO. 2 PERTINENT
TO MATTERS ASSOCIATED WITH THE STOCKHOLDER RIGHTS AGREEMENT
The State of Wisconsin Investment Board, owner of 5,430,900 shares of the
Company's Common Stock, has submitted the following proposal which, along with
its supporting statement, are reprinted herein exactly as submitted.
WHEREAS, the Rowan Companies Board (the "Board") unilaterally adopted a
shareholder rights plan commonly referred to as a "poison pill" which
discriminates against certain shareholders; and
WHEREAS, the Board has refused to voluntarily submit either the "pill"
itself, or any amendments, to a shareholder vote, and we believe that it is in
the shareholders' best interests that the Board refrain from unilaterally
adopting or amending such plans in the future;
NOW THEREFORE, BE IT RESOLVED, that the Board is hereby requested to amend
the Bylaws of the corporation by adding the following new section:
Prior to issuing or amending any rights plan, similar or identical to
that adopted in 1992, or any other type of rights plan, the Board shall
submit such plan or amendment to a binding vote of the shareholders. Any
such plan thereafter in effect shall be submitted to a binding vote
every three years.
SUPPORTING STATEMENT
Rowan's "pill" provides that, when triggered by anyone (or a group)
acquiring the applicable percentage of its common stock (the "Acquiring Person")
such shareholder's stock will be greatly diluted both in net asset value per
share and in voting rights by, in effect, multiplying the voting and economic
rights of all other shareholders. The plan gives the Board discretion to achieve
this dilution in a number of ways.
We believe that these discriminatory provisions, which permit the Board, in
its sole discretion, to discriminate against given shareholders, solely because
of their opposition to management or accumulated
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holdings, violate fundamental principles of fairness and classical principles of
corporate law requiring all shares of the same class to be treated identically.
We believe the ability of management, to unilaterally treat shareholders
unequally will inevitably undermine public confidence in the stock markets.
We do not oppose all "poison pills". However, we believe that Rowan's
"pill" so materially affects the rights of shareholders that further amendment
of it, or the creation of new "pills", should require shareholder consent.
Because Rowan's Board refuses to agree to any limitation on their discretion to
issue new versions of the "pill", no matter how egregious such versions may be,
we believe that a By-Law amendment requiring shareholder consent to the terms of
the "pill" is necessary.
STATEMENT OF THE BOARD OF DIRECTORS AND
MANAGEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL NO. 2
This proponent's proposal urges the Corporation's Board of Directors to
amend the Corporation's Bylaws to provide for (i) stockholder approval of any
amendment to Rowan's Rights Plan (the "Rights Plan") or a new issuance of any
rights plan and (ii) periodic reapproval of any stockholder rights plan by the
stockholders every three years. The Board believes such modifications to the
Bylaws of the Corporation could ultimately remove the Board's ability to
exercise an important protection -- the ability of the Board to timely and
definitively respond to and potentially maximize takeover bids -- that was
designed to protect the interest of stockholders. These modifications could
potentially deprive stockholders of substantial economic benefits in the future.
In addition, the Board believes that the proponent's assertions that the Rights
Plan discriminates against certain stockholders, that the Board refuses to limit
its discretion in adopting new versions of the plan and that the sole effect of
the plan is to dilute stockholder interest are incorrect and unsupported.
JUSTIFICATION FOR STOCKHOLDER RIGHTS PLANS
Approximately 70% of the 200 largest companies on the Fortune 500 list have
adopted stockholder rights plans, which were developed in the 1980s to counter a
wide range of coercive tactics which had become common in hostile takeovers. The
principal function of a rights plan is to encourage potential bidders to
negotiate with the board of a target corporation and to provide the board with
the ability to prevent abusive and coercive takeover tactics that may minimize
the value of stockholder interest in the corporation. Rights plans give boards
time to evaluate offers, investigate alternatives and take steps necessary to
maximize value for all stockholders.
A consensus has gradually emerged among major U.S. corporations that
stockholder rights plans do achieve their designed purpose and assist directors
in fulfilling their fiduciary duty to all stockholders. Many of these
corporations apparently found adoption of a stockholder rights plan to be a
prudent step to take to protect stockholder interests even though they were not
the subject of takeover bids. The Securities and Exchange Commission has also
stated in a 1988 release that one of the reasons corporations adopt stockholder
rights plans is to "encourage the development of an auction for the Corporation
resulting in shareholders receiving a higher price for their stock."
ADDRESSING IMPLICATIONS RAISED BY THE PROPONENT
Contrary to implications in the proponent's supporting statement, Rowan's
Rights Plan is typical of the plans adopted by U.S. corporations. The plan is
designed to deter a bidder from acquiring control of the Corporation without
first negotiating with the Board as well as to deter abusive takeover tactics
that do not treat all stockholders fairly and equally, such as market
accumulations that do not offer a premium to all stockholders and partial and
two-tier tender offers. A bidder who chooses to bypass the Board may be pursuing
its own interests and may not be concerned with the interests of the other
stockholders. The Rights Plan allows the Board an opportunity to assess the
adequacy and fairness of any offer and protect stockholders against potential
abuses during the takeover process. It is not intended to prevent a takeover of
the Corporation on terms that are fair and equitable to all stockholders. The
Board may, pursuant to the terms of the Rights Plan, redeem the rights to permit
an acquisition that it deems adequately reflects the value of the Corporation
and to be in the best interests of all stockholders. The Company believes that
requiring stockholder approval of any
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amendments to the Rights Plan (which would require several weeks to obtain)
would render the Board unable to react in time to the rapidly developing
challenges typical of hostile takeover attempts. The Board believes that to tie
its hands in this way would be very unwise in that it would deprive stockholders
of an important protection against unfair takeover attempts and, ultimately,
reduce the long-term value for all stockholders.
In conclusion, the Board believes that it has been proven in the
marketplace over and over again that Rights Plans are in the best interest of
stockholders. Rowan's Board believes the Rights Plan it has adopted is in the
best interest of Rowan's stockholders.
The Board of Directors believes that it has assembled a qualified and
competent management team that is responsive to stockholders' interests. The
Board of Directors further believes the existence of the Rights Plan has helped
encourage management to focus its energies on satisfactory long-term performance
to increase existing stockholder value in the Corporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST APPROVAL OF STOCKHOLDER
PROPOSAL NO. 2 REGARDING STOCKHOLDER RIGHTS PLANS.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION; CERTAIN TRANSACTIONS
Between April and June 1995, the Company recorded revenues of approximately
$2,755,000 attributable principally to contract drilling services performed by
the Company in the Gulf of Mexico for a subsidiary of United Meridian
Corporation ("United Meridian"). Mr. Ralph E. Bailey who is a Class II Director
standing for re-election and who served on the Compensation Committee during
1995, currently serves on the boards of both United Meridian and such subsidiary
and, until May 1995, served as Chairman of the Board of United Meridian. The
Company's rig providing such service was under contract to drill a well operated
by and on behalf of the United Meridian subsidiary's exploration program. The
Company believes that the terms of such drilling contract provided for rates
comparable to those then being received by the Company from third parties for
similar rigs in the area.
Mr. Peter Simonis, a Class III Director of the Company, received in 1995
1,000 Pound Sterling for services as Chairman of the Board of British American
Offshore Limited. In addition, an annual fee of 14,000 Pound Sterling was paid
in 1995 by British American Offshore Limited to Kismire Limited, a management
consulting company of which Mr. Simonis is a director. British American is a
wholly owned subsidiary of the Company organized to perform contract drilling
services in the U.K. sector of the North Sea utilizing rigs owned by the Company
or others.
Mr. C. W. Yeargain, a Class II Director standing for re-election and an
Executive Vice President of the Company until his retirement in March 1991,
earned and was paid by the Company $87,500 in consulting fees in 1995.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has been selected as principal auditors
for the Company for the year ending December 31, 1995. A representative of
Deloitte & Touche is expected to be present at the Annual Meeting of
Stockholders on April 26, 1996 and will be offered the opportunity to make a
statement if he desires to do so. He will also be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the
1997 Annual Meeting of Stockholders must forward such proposal to the Secretary
of the Company, at the address indicated on the cover page of this proxy
statement, so that the Secretary receives it no later than November 11, 1996.
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FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND ANY FINANCIAL STATEMENT SCHEDULES THERETO. THE COMPANY WILL FURNISH TO ANY
SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE FORM 10-K, UPON
THE PAYMENT, IN ADVANCE, OF REASONABLE FEES RELATED TO THE COMPANY'S FURNISHING
SUCH EXHIBIT(S). REQUESTS FOR COPIES OF SUCH REPORT AND/OR EXHIBIT(S) SHOULD BE
DIRECTED TO MR. MARK H. HAY, SECRETARY OF THE COMPANY, AT THE COMPANY'S
PRINCIPAL ADDRESS AS SHOWN ON THE COVER PAGE HEREOF.
OTHER BUSINESS
Management of the Company does not know of any other matters which are to
be presented for action at the meeting. However, if any other matters properly
come before the meeting, it is intended that the enclosed proxy will be voted in
accordance with the discretion of the persons voting the proxy unless otherwise
designated thereon.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ C.R. PALMER
Chairman
March 11, 1996
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[ROWAN COMPANIES, INC. LOGO]
<PAGE> 23
PROXY
ROWAN COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. R. Palmer and Mark H. Hay proxies, each
with power to act without the other and with full power of substitution, and
hereby authorizes each of them to represent and vote, as designated below, all
the shares of stock of Rowan Companies, Inc. ("Company") standing in the name of
the undersigned with all powers which the undersigned would possess if present
at the Annual Meeting of Stockholders of the Company to be held April 26, 1996
or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF CLASS II DIRECTORS
/ / FOR all nominees listed below / / AGAINST all nominees listed below / / ABSTAIN
(except as marked to the
contrary below)
</TABLE>
(INSTRUCTION: To vote against any individual nominee strike a line
through the nominee's name in the list below.)
Ralph E. Bailey Hon. Colin Moynihan C. W. Yeargain
2. SHAREHOLDER PROPOSAL NO. 1 PERTINENT TO DECLASSIFYING THE BOARD OF
DIRECTORS:
/ / FOR / / AGAINST / / ABSTAIN
3. SHAREHOLDER PROPOSAL NO. 2 PERTINENT TO THE SHAREHOLDER RIGHTS AGREEMENT:
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED, AND TO BE DATED AND SIGNED, ON THE OTHER SIDE)
<PAGE> 24
(CONTINUED FROM OTHER SIDE)
4. With discretionary authority on any other matter which may properly come
before the meeting.
IF CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED AS INDICATED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES AND AGAINST BOTH
SHAREHOLDER PROPOSALS AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSONS
VOTING THE PROXY WITH RESPECT TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE MEETING. ALL PRIOR PROXIES ARE HEREBY REVOKED.
---------------------------------
SIGNATURE
---------------------------------
SIGNATURE
Dated , 1996
---------------------
Please complete, date, sign and return this proxy promptly in the enclosed
envelope. Sign exactly as name appears hereon. Executors, administrators,
trustees, etc. should so indicate when signing. If the signature is for a
corporation, please sign full corporate name by authorized officer. If shares
are registered in more than one name, all holders must sign.
