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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____
ROWAN COMPANIES, INC.
Incorporated in Delaware Commission File I. R. S. Employer
Number 1-5491 Identification:
75-0759420
5450 Transco Tower
2800 Post Oak Boulevard, Houston, Texas 77056-6196
Registrant's telephone number, including area code: (713) 621-7800
Securities registered pursuant to Section 12(b) of the act:
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Name of each exchange
Title of each class on which registered
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Common Stock, $.125 Par Value New York Stock Exchange
Pacific Stock Exchange
11-7/8% Senior Notes due 2001 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___.
The aggregate market value as of March 1, 1996 of the Common Stock
held by non-affiliates of the registrant was approximately $922 million.
The number of shares of Common Stock, $.125 par value, outstanding at
February 28, 1996 was 85,017,535.
DOCUMENTS INCORPORATED BY REFERENCE
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Document Part of Form 10-K
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Annual Report to Stockholders for
fiscal year ended December 31, 1995 Parts I, II and IV
Proxy Statement for the 1996 Annual
Meeting of Stockholders Part III
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TABLE OF CONTENTS
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PART I Page
Item 1. Business .................................................... 1
Drilling Operations................................................. 1
Offshore Operations ............................................. 2
Onshore Operations .............................................. 3
Contracts ....................................................... 4
Competition ..................................................... 4
Regulations and Hazards ......................................... 6
Manufacturing Operations............................................ 7
Raw Materials.................................................... 8
Competition...................................................... 8
Regulations and Hazards.......................................... 9
Aircraft Operations ................................................ 10
Contracts ....................................................... 11
Competition ..................................................... 11
Regulations And Hazards ......................................... 12
Employees .......................................................... 12
Item 2. Properties .................................................. 13
Drilling Rigs ...................................................... 13
Manufacturing Facilities............................................ 17
Aircraft ........................................................... 17
Item 3. Legal Proceedings ........................................... 18
Item 4. Submission of Matters to a Vote of Security Holders ......... 18
Additional Item. Executive Officers of the Registrant ................ 18
Part II
Item 5. Market For Registrant's Common Stock and Related
Stockholder Matters ....................................... 20
Item 6. Selected Financial Data ..................................... 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 20
Item 8. Financial Statements and Supplementary Data ................. 20
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ....................... 20
Part III
Item 10. Directors and Executive Officers of the Registrant .......... 20
Item 11. Executive Compensation ...................................... 20
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................................ 21
Item 13. Certain Relationships and Related Transactions .............. 21
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ....................................... 21
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PART I
ITEM 1. BUSINESS
Rowan Companies, Inc.(the "Company"), organized in 1947 as a Delaware
corporation and a successor to a contract drilling business conducted since
1923 under the name Rowan Drilling Company, Inc., is engaged principally in the
contract drilling of oil and gas wells in domestic and foreign areas. As noted
below, it also provides aircraft services and, since early 1994, has operated a
mini-steel mill, a heavy equipment manufacturing plant and a marine rig
construction yard through the purchase of the net assets of Marathon LeTourneau
Company.
Offshore operations of the Company consist primarily of contract
drilling services utilizing mobile rigs, principally a fleet of 20
self-elevating drilling platforms ("jack-up rigs"), including three heavy duty
cantilever jack-up rigs ("Gorilla Class rigs"). See "DRILLING OPERATIONS"
below for information with respect to the construction of an enhanced version
of the Company's Gorilla Class jack-ups. In 1992, the Company began providing
Total Project Management, an approach to drilling operations which emphasizes
drilling and completing wells on a turnkey basis, and offshore platform
installation and removal services.
In February 1994, the Company purchased through its wholly-owned
subsidiary, LeTourneau, Inc., the net assets of Marathon LeTourneau Company.
LeTourneau, Inc. operates a mini-steel mill that recycles scrap and produces
alloy steel and steel plate; a manufacturing facility that produces heavy
equipment for the mining, timber and transportation industries including, among
other things, front-end loaders up to 50 ton capacity and trucks up to 240 ton
capacity; and a marine group that has built over one-third of all mobile
offshore jack-up drilling rigs, including all 20 operated by the Company and,
as noted below in "DRILLING OPERATIONS," will construct an enhanced Gorilla
Class jack-up rig for the Company at its shipyard.
The Company's wholly-owned subsidiary, Era Aviation, Inc., provides
contract and charter helicopter and fixed-wing aircraft services, with its
fleet consisting on March 29, 1996 of 86 helicopters and 19 fixed-wing
aircraft. The Company's aircraft services include flightseeing, medivac
transportation, forest fire control and support for oil and gas related
operations out of its primary bases in Alaska, Louisiana and Nevada. In
addition, the Company provides airline services in Alaska using its fixed-wing
aircraft. Since 1991, the Company has owned a 49% interest in a Dutch-based
joint venture company, KLM ERA Helicopters B.V. ("KLM ERA"), which owns a fleet
consisting of 13 helicopters in the Dutch and British sectors of the North Sea.
Information regarding revenues, operating profit, identifiable assets
and export sales of the Company's industry segments and foreign and domestic
operations for each of the three years in the period ended December 31, 1995 is
incorporated by reference herein and provided in Footnote 10 of the Notes to
Consolidated Financial Statements on pages 25 and 26 of the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1995 ("Annual
Report"), incorporated portions of which are filed as Exhibit 13 hereto.
In the years 1993, 1994 and 1995, the Company had revenues from
individual customers representing 10% or more of consolidated revenues as
follows: Phillips Petroleum Company - 17% for 1993; and AMOCO Corp. - 10% and
11% for 1994 and 1995, respectively. Such revenues were primarily from
drilling operations.
DRILLING OPERATIONS
In 1995, drilling operations generated an operating profit (income
from operations before deducting general and administrative expenses) of
$5,019,000.
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Offshore Operations
At December 31, 1995, the Company's drilling fleet consisted of 20
deep-water jack-up rigs (eight conventional and twelve cantilever, including
three Gorilla Class rigs in the latter category) and one semi-submersible rig.
The Company owns all of the rigs comprising its fleet except for two cantilever
jack-up rigs leased under sale/leaseback arrangements expiring in 1999 and
2000. In the fourth quarter of 1995, the Company completed the sale of its
three submersible barge rigs.
On April 28, 1995, the Company announced plans for the design and
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 will be able to operate year-round in 400 feet
of water south of the 61st parallel, within the worst case combination of
100-year storm criteria for waves, wave periods, winds and currents. At March
29, 1996, the design was virtually complete. Construction, which is currently
underway, will be carried out at LeTourneau's Vicksburg, Mississippi shipyard
and is expected to be completed by mid-1998 at an estimated cost of $170
million. This project represents the Company's first new construction since a
major drilling rig expansion program was conducted in the early to mid-1980s.
In the intervening years, the Company's capital expenditures have been primarily
for improvements to existing drilling rigs and the purchase of aircraft. Adding
to these capital expenditures were the purchases of the 49% interest in KLM ERA
and the net assets of Marathon LeTourneau in 1991 and 1994, respectively. For a
discussion of the Company's availability of funds in 1996 for future operations
and for estimated capital expenditures, including those related to the
reactivation of the Company's marine construction capability and the initial
construction phase of Gorilla V, see "Liquidity and Capital Resources" under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 14 of the Annual Report, which information is incorporated
herein by reference. Also, see ITEM 2. PROPERTIES on page 13 of this Form 10-K
for additional information with respect to the operating status of the Company's
rigs.
The Company's existing Gorilla Class rigs are a heavier class of
jack-up rig, intended to drill up to 30,000 feet in water depths up to 328 feet
in extreme hostile environments (winds up to 100 miles per hour and seas up to
90 feet). Each Gorilla Class rig is equipped with a "top-drive", a drilling
system costing approximately $1.25 million which assists in faster drilling
while reducing the hazard of the drill string sticking, and is particularly
advantageous in the case of horizontal drilling.
Of the Company's other jack-up rigs, six Class 116-C rigs and one
Class 116 rig have been modified to provide (but to a lesser extent than
Gorilla Class rigs) the capability of operating in hostile environments. The
Company's nine Class 116-C jack-up rigs, two Class 116 jack-up rigs, two Class
84 jack-up rigs, one semi-submersible rig and two of its four Class 52 jack-up
rigs have been equipped with top-drive drilling systems.
In 1989, the Company acquired a patent (U.S. Patent No. 4,103,503)
applicable to the transfer of a drilling rig substructure from a jack-up type
drilling unit to a fixed platform. In conjunction with technology contained in
the patent, the Company has developed additional substructure transfer or "skid
base" technology which has allowed the Company's conventional jack-up rigs to
work over wells on a production platform that heretofore required a cantilever
jack-up or platform rig. At March 29, 1996, two Class 116 jack-up rigs, two
Class 84 jack-up rigs and one of its Class 52 jack-up rigs have been equipped
with skid base units.
In 1992, the Company purchased a 550-ton ABS certified crane and
formed a new subsidiary for conducting offshore platform installation and
removal services. Utilizing the skid base technology discussed above, the
drilling package on a jack-up rig can be skidded off to allow the heavy-lift
crane to be skidded on, thereby transforming the unit into a crane barge or,
reversing the process, transforming the unit back into a drilling rig. The
Company has a patent (U.S. Patent No. 5,388,930) to cover such technology. At
March 29, 1996, one Class 52 jack-up rig had been modified to provide this dual
purpose capability and is able to operate in water depths up to 250 feet.
The Company's four class 116-C rigs presently located in the North Sea
continue to undergo modifications in order to meet new offshore safety
standards being
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implemented in the United Kingdom. Some of the safety standards under
government consideration, many of which the Company has already modified its
North Sea rigs to meet, are as follows: a minimum of two independent sources of
sea water for firefighting; a temporary safe refuge for personnel near the
escape capsules which will provide a high degree of protection from fire, smoke
and gas inhalation and will contain additional safety, communication and
survival gear; additional enclosed motorized escape capsules; and expanded
smoke and gas protection in the crew quarters. Because of market weakness in
the North Sea, particularly in the years 1992-1994, the Company moved drilling
rigs to other markets during that period as follows: one Gorilla Class jack-up
in 1992 and another in 1994, one Class 116-C jack-up in 1992 and one Class 116
jack-up in 1992.
Since 1970, the Company has pursued a policy of concentrating on
jack-up rigs. Jack-ups are utilized for both offshore exploratory and
development drilling and, in certain areas, for well workover operations. The
Company operates larger deep-water type jack-up rigs capable of drilling to
depths of 20,000 to 30,000 feet in maximum water depths ranging from 225 to 450
feet, depending on the size of the rig and its location. A jack-up rig
consists of a floating hull with three independent elevating legs. The
Company's rigs are equipped with propulsion thrusters to assist in towing. The
entire drilling unit, consisting of the drilling rig, supplies, crew quarters,
loading and unloading facilities, helicopter landing deck and other related
equipment, is mounted on the hull. At the drilling site, the legs are lowered
until they penetrate the ocean floor, and the platform hull is jacked up on the
legs to the desired elevation above the water. The platform hull then serves
as a drilling platform until the well is completed and the operation is
reversed by lowering the platform hull into the water and towing it to the next
drilling site. The cantilever feature contained on the Company's newer
jack-ups provides for the extension of the portion of the drilling platform
containing the drilling rig over fixed production platforms so that the
drilling rig may be utilized to perform development or workover operations on
the platforms with a minimum of interruption to production.
The Company's semi-submersible rig is utilized principally for
offshore exploratory drilling from a floating position in waters to depths of
1,200 feet. A semi-submersible drilling rig consists of a drilling platform
raised above multiple hulls by columns. The hulls are flooded so as to be
submerged beneath the surface, in which position the rig is anchored during
drilling operations. The same type of equipment which is contained on a jack-up
rig is mounted on the drilling platform. After completion of the well, the
submerged hull is deballasted to reduce vessel draft and facilitate towing,
assisted by its own thrusters, to another drilling location.
Onshore Operations
The Company has drilling equipment, personnel and camps available on a
contract basis for exploration and development of onshore areas. It currently
owns 17 land rigs located as follows: deep-well rigs - four in the Anadarko and
Permian basins of Oklahoma and Texas, one in Southeast Texas, two in Louisiana,
and two in Argentina; winterized rigs - five in Alaska; and trailer-mounted
rigs - three in Argentina.
Over the period 1991-1995, the drilling areas providing the greatest
amount of activity for the Company's land rigs have been Venezuela and
Argentina. Between mid-1991 and mid-1994, five of the Company's rigs carried
out a three-year drilling contract in Venezuela and were then returned to the
United States where three of the five had sporadic work in the second half of
1994. Three of these rigs were moved to Argentina in March 1995 to perform a
two-year drilling contract. Two deep-well land rigs were also moved to
Argentina in 1995 - one in May and the other in August. Except for two
deep-well land rigs that have worked fairly consistently in Texas, Mississippi
and Louisiana since mid-1994, and one winterized land rig in Alaska that worked
in the first quarter of 1992, another that worked in the first quarter of 1993
and another that worked for most of the first four months of 1994, the
deep-well land rigs based in Texas, Oklahoma, Louisiana and Alaska have been
idle since mid-1988 due to inadequate rates. Accordingly, seven of the
Company's land rigs remained "mothballed" at March 29, 1996. The cost of
maintaining these rigs is modest and the remaining investment in the rigs is
not significant.
The drilling equipment comprising an onshore rig consists basically of
engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid,
drill pipe and
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drilling bits. The type of rig required by a customer depends upon the
anticipated well depth, terrain and conditions in the drilling area.
Contracts
The Company's policy with regard to day rates and contract durations
depends upon the prevailing strength or weakness of the market. During periods
when the offshore rig markets are weak and declining rates prevail, the Company
generally pursues a policy of entering into lower rate contracts to remain in a
competitive position and to offset the substantial cost of maintaining and
reactivating stacked rigs. During those times when the markets are strong and
increasing rates prevail, the Company's policy is generally one of negotiating
short rather than long-term contracts for its offshore rigs because such policy
allows the Company to maximize its ability to obtain the benefit of rate
increases and to pass through cost increases to customers.
The Company's drilling contracts are obtained either through
competitive bidding or individual negotiations. Rates obtained depend upon the
type of equipment used, its availability and its location, as well as the type
of operations involved. Both offshore and onshore contracts for use of the
Company's drilling equipment are "well-to-well", "multiple well" or, except for
work done on a turnkey basis, for a fixed term generally ranging from four to
twelve months. Well-to-well contracts are cancelable at the option of either
party upon completion of drilling at any one site, and fixed-term contracts
customarily provide for termination by either party if drilling operations are
suspended for extended periods by events of force majeure. While most current
fixed-term contracts are for relatively short periods, some fixed-term and
well-to-well contracts continue for a longer period than the original term or
for a specific series of wells. Contracts, particularly those for offshore
operations, generally contain renewal or extension provisions exercisable at
the option of the customer at prices mutually agreeable to the Company and the
customer and, in many cases, provide for additional payments for mobilization
and demobilization. Most of the Company's drilling contracts in the North Sea
are well-to-well contracts or short-term contracts of similar duration lasting
60-120 days, while most of the Company's contracts in the Gulf of Mexico are
well-to-well contracts lasting 30-45 days.
The Company's drilling contracts, other than those for work done on a
turnkey basis, provide for drilling compensation on a day rate basis. In the
case of contracts for work done on a turnkey basis, the Company's compensation
is contingent on the Company successfully drilling a well to a specified depth
for a fixed price. In the event certain operational problems occur which cause
the Company to be unable to reach the specified turnkey depth, the Company may
not be entitled to any portion of the turnkey price thereby causing it to
absorb substantial out-of-pocket expenses. For this reason, wells drilled on a
turnkey basis generally involve greater economic risk to the Company than
wells drilled on a day rate basis. Contracts for work in foreign countries
generally provide for payment in United States dollars except for minimal
amounts required to meet local expenses.
Contracts for platform installation and removal services typically
contain the same types of provisions and features described herein for drilling
contracts.
The Company believes that the contract status of its onshore and
offshore rigs is more informative than backlog calculations, and that backlog
information is neither calculable nor meaningful given the cancellation options
contained in, and the short duration of, fixed-term contracts and the
indeterminable duration of well-to-well and multiple well contracts. See ITEM
2. PROPERTIES on page 13 of this Form 10-K for the contract status of rigs as
of March 29, 1996.
Competition
The Company encounters continual competition in securing domestic and
foreign drilling contracts from approximately 36 offshore drilling contractors
operating or having available to operate about 527 mobile rigs, approximately
14 major domestic drilling contractors operating or having available to operate
about 50 land rigs in the deep-well market in the Permian and Anadarko Basins,
and five domestic drilling contractors operating or having available to operate
about 21 winterized land rigs on the Alaskan North Slope. The Argentina land
rig market is currently in a state of expansion, thereby causing the number of
contractors and rigs to be indeterminable.
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Some of the Company's competitors with greater financial and other resources
may be in a better position than the Company to make the continuous capital
investments required to make technological improvements to existing equipment
or to replace equipment that becomes obsolete. Furthermore, a few of the
Company's competitors have been substantially relieved of debt burdens by
bankruptcy proceedings.
Technological advances in equipment, particularly offshore equipment,
may cause older equipment having lower capital costs to be less suitable for
some proposed drilling operations. As a result, the Company has employed the
following strategy: over the 1980-1986 period - carried out a drilling rig
expansion program, including the development of the heavier jack-up rig class
known as the Gorilla rig; 1987 through the present - engaged in a drilling rig
modification program designed to provide the Company's fleet with jack-ups
reflecting recent technological advancements and which generally meet known
government-imposed safety and pollution control requirements; and in 1995 -
began the development of the design and the construction plans for a drilling
rig which will be an enhanced version of the Gorilla Class rig. The Company is
in the final stages of development with construction beginning in earnest in
the second quarter of 1996.
The offshore markets in which the Company competes are chosen on the
basis of those which offer the greatest market potential and are generally
located in the more politically stable areas of the world. Accordingly, since
1989 the Company has moved drilling rigs from one offshore market to another as
follows: one Class 116-C jack-up rig from the North Sea to Southeast Asia in
1990 and then to Alaska in 1993; one Gorilla Class rig from the Gulf of Mexico
to offshore eastern Canada in 1990; one Class 116 jack-up rig from the Gulf of
Mexico to the North Sea and back to the Gulf of Mexico, both in 1992; one Class
116-C jack-up rig from the North Sea to the Gulf of Mexico in 1992; one Gorilla
Class rig from the North Sea to Trinidad in 1992 and then to the Gulf of Mexico
in 1995; one Class 52 jack-up rig from the Gulf of Mexico to Colombia in 1992
and back to the Gulf of Mexico in 1993; one class 116-C rig from Alaska to the
Gulf of Mexico in 1994; and one Gorilla Class rig from the North Sea to the
Gulf of Mexico in 1994 and then to Trinidad in 1995. Relocation of drilling
rigs from one geographic location to another is dependent upon changing market
dynamics with moves occurring only when the likelihood of higher returns makes
such action economical. At March 29, 1996, 14 jack-ups were located in the
Gulf of Mexico, four jack-ups were located in the North Sea, one jack-up was
located offshore eastern Canada, one jack-up was located offshore Trinidad, and
one semi-submersible rig was located in the Gulf of Mexico.
A number of factors affect a drilling contractor's ability both
onshore and offshore to obtain contracts at a profitable rate within an area.
Such factors include the location and availability of equipment, its
suitability for the project, the comparative cost of the equipment, the
competence of personnel and the reputation of the contractor. The ability to
obtain a profitable rate of return is also dependent upon receiving adequate
rates to compensate for the added cost of moving equipment to drilling
locations. See "Contracts" beginning on page 4 of this Form 10-K concerning
the pricing policies pursued by the Company under various market conditions.
The Company markets its drilling services by directly contacting
present and potential customers, including large international energy
companies, many smaller energy companies and foreign government-owned or
controlled energy companies. Downsizings by major energy companies, coupled
with the significant reductions of exploration by such companies in offshore
U.S. waters, have resulted in the Company adapting its marketing efforts to
increase emphasis on independent operators. Because the exploration activities
of the Company's present and potential customers are impacted by state, federal
and foreign regulations associated with the production and transportation of
oil and gas, the demand for the Company's drilling services is impacted
accordingly.
In the case of offshore platform installation and removal services,
the Company competes against approximately 11 contractors operating or having
available to operate about 23 mobile derrick barges in the Gulf of Mexico
market. Because the Company is a relatively new entrant in this field, many of
the Company's competitors have the advantage of having offered these services
for a longer period of time, including the benefits of established
technological know-how and more extensive customer bases.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 12 through 14 of the Annual Report, the
information under which
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caption is incorporated herein by reference, for a discussion of current
industry conditions and their impact on operations.
Regulations and Hazards
The offshore and onshore operations of the Company are subject to many
hazards. In the drilling business, inherent hazards include blowouts and well
fires, which could cause personal injury, suspend drilling operations,
seriously damage or destroy the equipment involved and cause substantial
damage to producing formations and the surrounding areas. Offshore drilling
operations and platform installation and removal operations are also subject to
the hazards incident to marine operations, either on site or while under tow,
such as capsizing, collision or grounding. Raising and lowering the legs of
jack-up rigs into the ocean bottom and ballasting semi-submersible units
require skillful handling to avoid capsizing or other serious damage. Drilling
deviated holes into high pressure formations is a complex process and problems
frequently occur. The process of removing platforms and caissons using
underwater explosives involves substantial risks and requires a significant
amount of skill in order to confine the resulting destruction to the intended
areas.
The Company believes that it is adequately insured for physical damage
to its rigs, and for marine liabilities, workers compensation, Maritime
Employees Liability, automobile liability and for various other types of
exposures customarily encountered in providing the Company's services. Certain
of the Company's liability insurance policies specifically exclude coverage for
fines, penalties and punitive or exemplary damages. Under current conditions,
the Company anticipates that its present insurance coverage will be maintained,
but no assurance can be given that insurance coverage will continue to be
available at rates considered reasonable, that self-insured amounts or
deductibles will not increase or that certain types of coverage will be
available at any cost.
Foreign operations are subject to certain political, economic and
other uncertainties not encountered in domestic operations, including risks of
expropriation of equipment as well as expropriation of a particular energy
company operator's property and drilling rights, taxation policies, customs
restrictions, currency rate fluctuations and the general hazards associated
with foreign sovereignty over certain areas in which operations are conducted.
The Company attempts to minimize the risk of currency rate fluctuations by
generally denominating contract payment terms in United States dollars.
Many aspects of the operations of the Company are subject to
government regulation, including those relating to equipping and operating
vessels, drilling practices and methods and the level of taxation. In
addition, various countries (including the United States) have regulations
relating to environmental protection and pollution control affecting drilling
operations. Recent events have also increased the sensitivity of the oil and
gas industry to environmental matters. The Company may be liable for damages
resulting from pollution of offshore waters and, under United States
regulations, must establish financial responsibility. Generally, the Company
is substantially indemnified under drilling contracts compensated on a day rate
basis from pollution damages, except in certain cases of pollution emanating
above the surface of land or water from spills of pollutants, or in the case of
pollutants emanating from the Company's drilling rigs, but no assurance can be
given regarding the enforceability of such indemnification provisions.
In performing a contract for work done on a turnkey basis, the Company
is normally responsible for certain risks that would customarily be assumed by
the customer under a contract compensated on a day rate basis. These risks
include liability for pollution resulting from a blowout or uncontrolled flow
from the well bore, an underground blowout, the cost of controlling a wild well
and the expense to redrill a well which has blown out. The Company carries
insurance to cover such risks and generally obtains an indemnity from its
customers with respect to liabilities exceeding the amount of insurance carried
by the Company.
The Company believes that it complies with all material legislation
and regulations affecting its operations in the drilling of oil and gas wells,
and in controlling the discharge of wastes. To date the Company has made
significant modifications to its rigs located in the Gulf of Mexico in order to
reduce waste and rain water discharge from such rigs and believes that it could
operate those rigs at
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"zero discharge" without material additional expenditures. Other than these
expenditures and those relating to the previously discussed United Kingdom
safety standards, compliance has not, to date, materially affected the capital
expenditures, earnings or competitive position of the Company, although these
measures add to the costs of operating drilling equipment in some instances,
and in others they may operate to reduce drilling activity. Further
legislation or regulation may reasonably be anticipated, but the effects
thereof on operations cannot be predicted.
The Company is subject to the requirements of the Federal Occupational
Safety and Health Act ("OSHA") and comparable state statutes. The OSHA hazard
communication standard, the Environmental Protection Agency "community
right-to-know" regulations under Title III of the Federal Superfund Amendment
and Reauthorization Act and comparable state statutes require the Company to
organize and report certain information about the hazardous materials used in
its operations to employees, state and local government authorities and local
citizens.
MANUFACTURING OPERATIONS
In 1994, LeTourneau, Inc. ("LeTourneau"), a wholly-owned subsidiary of
the Company, acquired the net assets of Marathon LeTourneau Company, which is
headquartered in Longview, Texas. As more fully described below, LeTourneau
operates a manufacturing facility that produces heavy equipment, a mini-steel
mill that recycles scrap and produces steel plate and forging ingots and a
marine group that has built over one-third of all mobile offshore jack-up
drilling rigs, including all 20 operated by the Company. The Company holds a
number of patents on its inventions and the "LeTourneau" name is considered to
be significant to its manufacturing operation.
The mining equipment product line of LeTourneau includes off-road
trucks with capacities of 190, 200 and 240 tons and loaders with bucket
capacities of 17, 22, 28 and 33 cubic yards. LeTourneau's loaders and trucks
are generally used in coal, gold, copper, iron ore and other mines. Both the
loaders and the trucks utilize the LeTourneau diesel electric-drive systems
with solid state controls. The primary benefit of the diesel electric-drive
system is to allow large, mobile equipment to stop, start and reverse without
gear shifting and high maintenance braking. LeTourneau loaders can load
LeTourneau rear-dump trucks and competitive trucks in the 85 ton to 240 ton
size range. LeTourneau's mining equipment and parts are distributed through a
world-wide network of independent distributors and a Company-owned distribution
network serving the Western United States.
The forestry equipment product line includes diesel electric powered
log stackers having either two or four wheel drive configurations with load
capacities ranging from 35 to 65 tons. LeTourneau is the only manufacturer
that sells electrically powered jib cranes with ratings from 25,000 to 52,000
lbs. at a reach of 100 to 150 feet and having a 360 degree rotation. The
forestry equipment is marketed primarily in North America through independent
distributors and a Company-owned distribution network in the Northwestern
United States.
LeTourneau's material handling equipment line includes several
different types of intermodal equipment. These include 50 ton capacity, diesel
electric, gantry cranes and large forklift type vehicles, called side porters,
used for lifting, transporting and stacking large shipping containers and
trailers at ports and rail yards. Gantry cranes equipped with a spreader can
lift containers from the top and also have retractable arms which are used in
loading and unloading piggyback trailers. Gantry cranes can span up to seven
rows plus a truck aisle and stack 9 ft. 6 inch containers up to five high. The
intermodal equipment is marketed primarily in North America through independent
distributors and a Company-owned distribution network in the Northwestern
United States.
LeTourneau also sells parts and components to repair and maintain
mining, forestry and intermodal equipment. Equipment parts are marketed
through one dealer and a Company-owned distribution network in the United
States with 17 parts stocking branches, one dealer in Canada with over 19 parts
stocking branches, and 31 international dealers with over 50 parts stocking
locations.
LeTourneau's mini-steel mill located in Longview, Texas produces
carbon, alloy and specialty steel plate products. LeTourneau concentrates on
"niche" markets
-7-
<PAGE> 10
that require alloy, specialty steel grades, or "exotic" versions of carbon
steel products including mold steels, tool steels, aircraft quality steels, 400
series stainless steel and hydrogen induced crack resistant steels. External
steel sales, which are garnered through a direct sales force of LeTourneau
employees, consist primarily of steel plate, but also include forging ingots
and value-added fabrication of steel products. Steel products are generally
sold to steel service centers, fabricators, manufacturers, forge shops and
brokers. The market for carbon steel plate products and fabricated products is
regional and encompasses Texas, Oklahoma, Louisiana, Mississippi and Arkansas.
LeTourneau ships alloy and specialty grades of plate products nationally and
exports quantities to Mexico and Canada. The forging ingot market is
concentrated in the Gulf Coast region of Texas. Carbon and alloy plate
products are also used internally in the production of heavy equipment and
parts.
LeTourneau has a shipyard in Vicksburg, Mississippi for the
construction of mobile self-elevating offshore drilling platforms. LeTourneau
also has the capability of providing engineering support and spare parts to the
drilling industry. With the announcement of the construction of Rowan Gorilla
V in April 1995, the Company began a $20 million rebuilding of this facility
which had previously been closed. The yard is expected to employ about 350,
most of whom will be newly hired. Ongoing rig component manufacturing and
marine repair service businesses, as well as a marine design engineering
business, have been and continue to be located at the Company's Longview, Texas
facility.
In 1995, manufacturing operations generated an operating profit
(income from operations before deducting general and administrative expenses)
of $11,737,000 and had a firm backlog for all of its product lines at
March 1, 1996 of $51,264,000.
LeTourneau engages in a limited amount of research and product
development, primarily to increase the capacity of and provide innovative
improvements to the product lines. The Company evaluates on an ongoing basis
the LeTourneau product and service lines with the intention of making
enhancements.
Raw Materials
The principal raw material utilized in LeTourneau's manufacturing
operations is steel plate, most of which is supplied by LeTourneau's mini-steel
mill. Other required materials are generally available in sufficient
quantities through purchases in the open market to meet its manufacturing
needs. LeTourneau does not believe that it is dependent on any single
supplier.
Competition
LeTourneau's large trucks and loaders compete worldwide with several
competitors. The Company believes it is the third or fourth largest supplier of
this size and type of equipment in the world. The loader market also includes
vigorous competition from smaller-sized equipment. Large loaders compete
against four manufacturers of loaders and the electric mining shovels and
LeTourneau trucks compete against three manufacturers.
The market for LeTourneau forestry and intermodal equipment is also
characterized by vigorous competition. Even though LeTourneau's jib crane is
unique, it does encounter competition from other equipment manufacturers that
offer alternate methods for meeting the requirements. The number of major
competitors by type of equipment are as follows: log stackers - four, jib
cranes - three, side porters - six and gantry cranes - more than ten.
LeTourneau's mini-steel mill encounters competition from a total of
eight major competitors, with the breakdown by product line being as follows:
plate products - four; fabricated products - two and forging ingots - two.
The competition LeTourneau encounters in the parts business is
extremely fragmented with only three other companies being considered to be
competitors. Vendors supplying parts directly to end-users and well-fitters
who obtain parts and copy them to supply less expensive and lower quality
substitutes represent more intense competition than that of direct competitors.
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<PAGE> 11
In order to be competitive in the mining and forestry heavy equipment
markets, LeTourneau offers warranties at the time of purchase as well as parts
guarantees. Warranties, which are based upon stipulated periods of ownership or
hours of usage, whichever occurs first, generally cover the drive train and, in
the case of LeTourneau trucks, cover the frame. Parts consumption guaranties
and maintenance and repair contracts are also made on the same basis.
LeTourneau pursues a parts return policy, which provides that returned parts
must be in new, usable condition, be in current production and be readily
resalable.
There are no other significantly active competitors in the marine rig
construction and support industry due to the current low demand. However, if
demand for marine rigs increases, new competitors could be expected to enter
the market.
Historically, the make up of LeTourneau's customer base has been such
that none of the product lines have been dependent upon any one customer or
small group of customers.
Regulations and Hazards
LeTourneau's manufacturing operations and facilities are subject to
regulation by a variety of local, state and federal agencies which regulate
safety and the discharge of materials into the environment, including the
Environmental Protection Agency (EPA), the Texas Natural Resources Conservation
Commission (TNRCC) and the Mississippi Department of Environmental Quality.
LeTourneau's manufacturing facilities are also subject to the requirements of
the Occupational Safety Health Act and comparable state statutes.
Hazardous materials are generated at LeTourneau's Longview plant in
association with the steel making process. Industrial waste water generated at
the mini-steel mill facility for cooling operations is recirculated and quality
tests are conducted regularly. The facility has permits for waste water
discharges, solid waste disposal and air emissions. Waste products considered
hazardous by the EPA are disposed of by shipment to an EPA or state permitted
waste disposal facility.
As a part of the acquisition of the net assets of Marathon LeTourneau
Company, the sellers agreed to remediate certain environmental conditions at
the Longview, Texas and Vicksburg, Mississippi sites. This work will be
performed over the next 25 years. The remediation efforts include, among other
things, post-closure care for a landfill at the Longview facility closed by
Marathon LeTourneau Company prior to LeTourneau's acquisition.
LeTourneau jack-up designs are subject to regulatory approvals by
various agencies depending upon the customer's selection of geographic areas
where the rig will qualify for drilling. The rules vary by location and are
subject to frequent change. These rules primarily relate to safety and
environmental issues in addition to those which classify the jack-up as a
vessel.
LeTourneau may be liable for damages resulting from pollution of air,
land and inland waters associated with its manufacturing operations.
LeTourneau believes that compliance with environmental protection laws and
regulations will have no material effect on its capital expenditures, earnings
or competitive position during 1996. Although further legislation or
regulation pertaining to the protection of the environment may reasonably be
anticipated, the effects thereof on LeTourneau's manufacturing operations
cannot be accurately predicted.
As a manufacturing company, LeTourneau may be responsible for certain
risks associated with the use of its products. These risks include product
liability claims for personal injury and/or death, property damage, loss of use
of product, business interruption and necessary legal expenses to defend
LeTourneau against such claims. LeTourneau carries insurance which it believes
adequately covers such risks. LeTourneau did not assume certain liabilities of
Marathon LeTourneau Company, such as product liability and tort claims,
associated with all products manufactured, produced, marketed or distributed
prior to the date of the acquisition.
LeTourneau anticipates incurring expenses associated with the warranty
of its products, including those existing at the date of the acquisition. In
the non-marine business segments, dealers of LeTourneau's products perform the
warranty work for the
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<PAGE> 12
manufacturer, and in the marine segment, LeTourneau generally performs warranty
work directly.
AIRCRAFT OPERATIONS
The Company, through its wholly-owned subsidiary, Era Aviation, Inc.
("Era"), provides charter and contract helicopter and fixed-wing aircraft
services principally in Alaska, the coastal areas of Louisiana and Texas, and
the western United States. In Alaska, a diversified range of services has been
developed to include tourism, commercial fishing support and medical evacuation
as well as support for forest fire control, mining operations and seismic
testing. Additionally, the fixed-wing division of the Company conducts
scheduled airline service between six cities from a hub in Anchorage and to 18
villages from a hub in Bethel, Alaska. Services provided offshore Louisiana
and Texas are primarily to oil and gas related industries. In the western
United States, the majority of helicopter services are provided to governmental
agencies in support of forest fire control, construction, seismic testing and
onshore and offshore oil field support.
In 1991, the Company acquired a 49% interest in KLM Helikopters B.V., a
wholly-owned subsidiary of KLM Royal Dutch Airlines, as a means of gaining
access to the North Sea aviation market. The joint venture company, renamed
KLM ERA Helicopters B.V., currently owns 13 helicopters and leases two others.
Operating locations and the numbers of helicopters deployed at March 29, 1996
were as follows: ten in the Dutch Sector of the North Sea, which includes two
that are being leased from Era and five in the British Sector of the North Sea.
KLM ERA serves principally the offshore oil and gas drilling, production and
service companies operating in the Dutch and British Sectors of the North Sea.
Based on the number of helicopters operating, the Company is the
largest helicopter operator in Alaska. It provides charter services from bases
at Anchorage, Deadhorse (on the North Slope), Fairbanks, Juneau, Kenai and
Valdez. The Company's charter and contract services are provided throughout
Alaska with particular emphasis in the oil, mining and high density tourist
regions within the state.
Helicopters are usually operated on a seasonal basis in Alaska because
of the prevalent climatic conditions. The peak utilization period in Alaska is
May through September, with the winter months comprising the least active
period. The seasonal nature of the Alaska business has been ameliorated in
prior years by moving helicopters on a limited basis to the Gulf of Mexico area
and, more recently, by moving helicopters to the West and Northwest regions of
the United States and various overseas locations, the most recent being
Argentina and the Peoples Republic of China.
Since 1983, the Company has operated a scheduled commuter airline
service in Alaska encompassing the transportation of passengers, mail and
cargo. The Company currently serves Valdez, Kenai, Homer, Kodiak, Iliamna and
Cordova from its base hub in Anchorage. In addition, it services 18 remote
villages from its hub in Bethel, Alaska. The Company operates under a code
sharing agreement with Alaska Airlines which is the largest carrier of
passengers from the contiguous United States to Alaska. The Company's commuter
airline is the largest airline operation of that type within the state of
Alaska and is the third largest carrier of passengers into and out of the
Anchorage International Airport, including the large jet carriers.
In December 1995, the Company purchased certain assets of Alaska
Helicopters, Inc. consisting of 15 helicopters and one single engine fixed-wing
airplane, spare parts, equipment and a hangar and office building totaling
approximately 23,000 square feet. The building is located on leased property
contiguous to the Company's main facilities at the Anchorage International
Airport.
Since 1979, the Company has been providing charter and contract
helicopter services in the Gulf of Mexico area primarily to the offshore oil
and gas industry. Operations are conducted from the division office in Lake
Charles, Louisiana and from bases in the Louisiana cities of Morgan City,
Cameron, New Iberia, Intracoastal City, Venice, Fourchon Houma, Schriever and
Johnson Bayou and the Texas cities of Houston, Corpus Christi, Bay City and
Sabine Pass. Based upon the number of helicopters operating, the Company is
the third largest helicopter operator in the Gulf of Mexico.
-10-
<PAGE> 13
In 1987, upon receiving FAA certification, the Company began
manufacturing and marketing, from its Gulf Coast Division facility at Lake
Charles, Louisiana, a composite external auxiliary fuel tank for use on Bell
205, 212 and 412 helicopters and the military "Huey" helicopter. The tank
system provides enhanced range with nominal drag while increasing the passenger
seats available. Sales to date have been to both civilian and military
customers, including a contract awarded by the US Army in 1995 to supply
emergency float systems for UH-1 Helicopters. Other aircraft accessories are
also manufactured at the facility.
Between 1990 and 1995 the Company provided airborne environmental
service consisting of airborne ground penetrating radar technology used
primarily for the detection of subsurface contaminants, including free
hydrocarbons and for finding subsurface coal veins, water tables and tunnels,
drums, tanks and other man-made objects and airborne cathodic monitoring
technology used to provide an early warning of potential corrosion failure of
underground pipelines. In June 1995, the Company sold the patents, rights and
equipment to the management team responsible for the operation.
As previously noted, the Company has operated helicopters in various
overseas locations. From 1992 to 1995, the Company had operations in Croatia
and Macedonia flying for the United Nations.
In 1995, aviation operations generated an operating loss (loss from
operations before deducting general and administrative expenses) of $ 4,319,000.
Contracts
The Company's flight services generally are engaged by customers by
entering into master service agreements, term contracts or day-to-day charter
arrangements. Master service agreements provide for incremental payments based
on usage, in some instances with fixed terms ranging from one month to one
year, and are cancelable upon notice by either party in 30 days or less. Some
contracts are not cancelable by either party and generally provide for
payments, depending upon the term, as follows: less than one month - either
incremental payments based on usage or incremental payments based on usage plus
a base daily rental; and one month to one year - incremental payments based on
usage plus a base monthly rental. Under day-to-day charters, the compensation
arrangement is the same as that of term contracts having a term of less than
one month. Payment, duration and cancellation features of the agreements,
contracts and charter arrangements used by KLM ERA are similar in nature and in
principle to those used in the Company's domestic operations. Because master
service agreements and day-to-day charters are the most common types of
engagements for its flight services, the Company believes that the contract
status of its aircraft as discussed in the following paragraph is more
informative than backlog information, which it believes is neither calculable
nor meaningful.
Company-owned aircraft available for contract use and day charters on
March 29, 1996 consisted of 86 helicopters (of which 47 were based in Alaska
and 39 in the Gulf of Mexico area) and 19 fixed-wing aircraft that were based
in Alaska. The aircraft acquired from Alaska Helicopters, Inc. in December
1995 are excluded from this count. The contract status as of March 29, 1996
consisted of: 77 master helicopter service agreements and 18 aircraft term
contracts (12 helicopters and six fixed-wing aircraft). The remaining aircraft
were being operated under day charters or were available for operation under
day charter or contract arrangements.
KLM ERA-owned aircraft available for contract use and day charters on
March 29, 1996 consisted of eight helicopters based in The Netherlands and five
in Great Britain. The contract status of such aircraft as of March 29, 1996
consisted of five master service agreements and eight term contracts.
Competition
Although the Company maintains the largest helicopter operation in
Alaska in terms of numbers of aircraft and revenues, it encounters intense
competition from several other companies which furnish similar services.
Approximately six other operators compete directly with the Company in Alaska
on a contract or charter basis. The Company competes over its scheduled
airline routes with up to four other carriers.
-11-
<PAGE> 14
In the Gulf of Mexico area, the Company competes directly with five other
operators and ranks third in the number of helicopters operating with
approximately 6% of the market. A number of other helicopter operators compete
with the Company in the West and Northwest regions of the United States and in
overseas locations.
At present, KLM ERA has only one competitor in the Dutch sector of the
North Sea. KLM ERA's share of this helicopter market is estimated to be in
excess of 55%.
Regulations and Hazards
The operation of scheduled airline services in the United States
requires a certificate under the Federal Aviation Act of 1958, as presently
administered by the Department of Transportation. The granting of a
certificate is conditioned upon a showing of financial ability and operational
expertise. A similar certificate authorizing the right to operate a charter
service is not required by any jurisdiction in the Company's operating areas.
KLM ERA holds the necessary certificates for operating aircraft in The
Netherlands and, since June 1993, in the U.K sector of the North Sea. Other
operating certificates will be obtained on a case by case basis depending upon
the contracts to be awarded.
Operation of helicopters and fixed-wing aircraft, particularly under
weather conditions prevailing in Alaska, is considered potentially hazardous,
although the Company conducts rigorous safety training programs to minimize
these hazards. The Company believes that it is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment, but carries no insurance against loss of earnings.
The Company believes that KLM ERA is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment.
EMPLOYEES
The total numbers of employees of the Company at March 15, 1996 and at
December 31, 1995, 1994 and 1993 were as follows: 4,034, 3,930, 3,484 and
2,560, respectively. Some of the employees included in these numbers are not
United States citizens. None of the Company's employees are covered by
collective bargaining agreements with labor unions. The Company considers
relations with its employees to be satisfactory.
-12-
<PAGE> 15
ITEM 2. PROPERTIES
The Company leases as its corporate headquarters 57,800 square feet of
space in an office tower located at 2800 Post Oak Boulevard in Houston, Texas.
DRILLING RIGS
The following is a summary of the principal drilling equipment owned or
operated by the Company and in service at March 29, 1996. See "Liquidity and
Capital Resources" as appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 14 in the Annual Report
which page is incorporated herein by reference.
<TABLE>
<CAPTION>
OFFSHORE
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- -------------- ------------- ------- ------------- --------------------------
<S> <C> <C> <C> <C>
Cantilever Jack-up Rigs:
Rowan Gorilla II 450'/30,000' 1984 Trinidad Amoco Trinidad Oil Co.
200-C (d) (e) (h) (l) Single Well (m) April 1996;
Amerada Hess Corporation
(l) Multiple Well (m) September 1996
Rowan Gorilla III 328'/30,000' 1984 Eastern Canada PanCanadian Oil Company
200-C (d) (e) (l) Term (m) December 1997
Rowan Gorilla IV 450'/30,000' 1986 Gulf of Mexico Texaco Exploration & Production, Inc.
200-C (d) (e) (h) (l) Single Well (m) April 1996;
Hunt Oil Company
(l) Single Well (m) September 1996
Rowan-California 225'/30,000' 1983 North Sea Arco British Limited
116-C (c) (e) (l) Single Well (m) April 1996;
Wintershall
(l) Multiple Well (m) December 1996
Rowan-Halifax 225'/30,000' 1982 North Sea Mobil North Sea Limited
116-C (c) (e) (i) (l) Multiple Well (m) September 1996;
Premier Oil & Gas Inc.
(l) Single Well (m) November 1996
Cecil Provine 225'/30,000' 1982 North Sea Amoco (U.K.) Exploration Company
116-C (c) (e) (j) (l) Multiple Well (m) April 1996;
Elf Aquitaine Inc.
(l) Multiple Well (m) October 1996
Arch Rowan 225'/30,000' 1981 North Sea Amoco (U.K.) Exploration Company
116-C (c) (e) (l) Multiple Well (m) July 1996;
Amoco Netherlands Petroleum
(l) Multiple Well (m) December 1996
Gilbert Rowe 350'/30,000' 1981 Gulf of Mexico The Louisiana Land and Exploration Co.
116-C (c) (e) (h) (l) Single Well (m) May 1996;
</TABLE>
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<PAGE> 16
ITEM 2. PROPERTIES
<TABLE>
<CAPTION>
OFFSHORE (Continued)
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- -------------- ------------- ------- ------------- --------------------------
<S> <C> <C> <C> <C>
(Cantilever Jack-up Rigs Continued)
Charles Rowan 350'/30,000' 1981 Gulf of Mexico Amoco Production Company
116-C (c) (e) (h) (l) Single Well (m) May 1996
Rowan-Paris 350'/30,000' 1980 Gulf of Mexico Enserch Exploration, Inc.
116-C (e) (h) (l) Single Well (m) April 1996;
Linder Oil & Gas
(l) Single Well (m) May 1996;
The Louisiana Land and Exploration Co.
(l) Single Well (m) August 1996
Rowan-Middletown 350'/30,000' 1980 Gulf of Mexico Kerr-McGee Corporation
116-C (e) (h) (l) Multiple Well (m) July 1996
Rowan-Fort Worth 350'/30,000' 1978 Gulf of Mexico Texaco Exploration & Production, Inc.
116-C (e) (h) (l) Multiple Well (m) August 1996
Conventional Jack-up Rigs:
Rowan-Juneau 300'/30,000' 1977 Gulf of Mexico Pennzoil Exploration & Production Co.
116 (c) (e) (f) (l) Single Well (Turnkey) (m) June 1996
Rowan-Odessa 350'/30,000' 1977 Gulf of Mexico Oryx Energy Company
116 (e) (f) (h) (l) Single Well(m) April 1996;
Samedan Oil Co.and Vastar Co.
(l) Multiple Well (m) July 1996
Rowan-Louisiana 350'/30,000' 1975 Gulf of Mexico Conoco, Inc.
84 (e) (f) (h) (l) Multiple Well (m) October 1996
Rowan-Alaska 350'/30,000' 1975 Gulf of Mexico CXY Energy, Inc.
84 (e) (f) (h) (l) Multiple Well (m) September 1996
Rowan-Texas 250'/20,000' 1973 Gulf of Mexico American Exploration Company
52 (l) Single Well (m) April 1996;
Hall-Houston Oil Company
(l) Single Well (m) May 1996
Rowan-Anchorage 250'/20,000' 1972 Gulf of Mexico Coastal Oil & Gas Corp.
52 (e) (l) Single Well (m) May 1996;
Apache Corporation
(l) Single Well (m) July 1996
Rowan-New Orleans 250'/20,000' 1971 Gulf of Mexico Forcenergy Gas Exploration, Inc.
52 (f) (g) (l) Multiple Well (m) May 1996
</TABLE>
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<PAGE> 17
ITEM 2. PROPERTIES
<TABLE>
<CAPTION>
OFFSHORE (Continued)
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- -------------- ------------- ------- ------------- --------------------------
<S> <C> <C> <C> <C>
(Conventional Jack-up Rigs Continued)
Rowan-Houston 250'/20,000' 1970 Gulf of Mexico Enserch Exploration, Inc.
52 (e) (l) Single Well (m) May 1996;
Coastal Oil Corp.
(l) Multiple Well (m) June 1996
Semi-Submersible Rig:
Rowan-Midland (e) 1,200'/25,000' 1976 Gulf of Mexico Murphy Exploration & Production Co.
(l) Single Well (m) May 1996;
Walter Oil & Gas Corporation
(l) Multiple Well(m) August 1996;
The Louisiana Land and Exploration Co.
(l) Single Well(m) September 1996
<CAPTION>
ONSHORE (k) Contracting Party/
Maximum (l) Type of Contract
Description Drilling Depth Location (m) Estimated Release Date
- ------------ ---------------- --------- -------------------------------
Three rigs 10,000' Argentina YPF, S.A.
(l) Term (m) March 1997
Two rigs 18,000'-30,000' Argentina Not Committed
One rig 18,000'-30,000' Louisiana Chesapeake Operating, Inc.
(l) Single Well (m) May 1996
One rig 18,000'-30,000' Louisiana UPRC
(l) Multiple Well (m) June 1996
One rig 18,000'-30,000' Texas Reata Oil & Gas
(l) Multiple Well (m) July 1996;
Four rigs 18,000'-30,000' Oklahoma & Texas Not Committed
Five rigs 20,000' Alaska Not Committed
</TABLE>
_______________________________________________
(a) Classes 200-C ("Gorilla"), 116-C, 116, 84 and 52 are nomenclature
assigned by LeTourneau, Inc. to jack-ups of its design and construction.
(b) Indicates rated water depth in current location and rated drilling depth,
respectively.
(c) Unit modified to increase operating capability in hostile environments.
(d) Gorilla Class unit designed for extreme hostile environment capability.
(e) Unit equipped with a "top-drive" drilling system.
(f) Unit equipped with a "skid base" unit.
-15-
<PAGE> 18
(Footnotes continued)
(g) Unit equipped with drilling/heavy-lift crane option.
(h) Unit equipped with leg extensions.
(i) Rig sold in December 1984 and leased back for 15 years.
(j) Rig sold in December 1985 and leased back for 15 years.
(k) Onshore rigs, including the three used rigs purchased in 1991, were
constructed at various dates between 1960 and 1982, utilizing, in some
instances, new as well as used equipment. Most of the older rigs have
been substantially rebuilt subsequent to their respective dates of
construction.
(l) Refer to "Contracts" on page 4 of this Form 10-K for definition of types
of contracts.
(m) Indicates estimated completion date of work to be performed.
The Company's drilling division leases and, in some cases, owns various
operating and administrative facilities generally consisting of office,
maintenance and storage space in the states of Alaska, Texas and Louisiana and,
on a foreign basis, in the countries of Canada, Argentina, England, Scotland,
The Netherlands and Trinidad.
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<PAGE> 19
MANUFACTURING FACILITIES
LeTourneau's principal manufacturing facility and headquarters are
located in Longview, Texas on approximately 2,400 acres with about 1.2 million
square feet under roof. Included within the facility are: a mini-steel mill
having approximately 330,000 square feet of covered work space and housing two
25-ton electric arc furnaces having an aggregate 120,000 tons per year
capacity; a fabrication shop having approximately 300,000 square feet of
covered work space and housing a 3,000 ton vertical bender for making roll-ups
or flattening materials up to 2 1/2 inches thick by 11 feet wide; a machine
shop having approximately 140,000 square feet of covered work space and housing
various types of machinery; and an assembly shop having approximately 124,000
square feet and housing various types of machinery.
The marine group's facility located in Vicksburg, Mississippi is
located on 1,850 acres of land and has approximately 476,000 square feet of
covered work space. In conjunction with the announcement of the construction
of Rowan Gorilla V, this facility has now been reopened and is essentially
being rebuilt.
The LeTourneau Portland Division's distributor for forest products in
the Northwestern United States is located on a six acre site in Troutdale,
Oregon with approximately 22,000 square feet of building space.
The Western Mining Division of LeTourneau headquartered in Tucson,
Arizona is housed in a 20,000 square foot leased facility. It functions as the
distributor for LeTourneau's mining equipment products in the Western United
States.
AIRCRAFT
At March 29, 1996, the U.S.-based Company-owned helicopter fleet
consisted of 14 twin-engine turbine IFR rated Bell 212 helicopters (14
passenger), 16 twin-engine turbine IFR rated Bell 412 helicopters (14
passenger), 29 twin-engine turbine MBB BO-105CBS helicopters (five passenger),
two Aerospatiale 332L Super Puma helicopters (19 passenger) and 25 various
single-engine turbine helicopters (four to six passenger). The U.S.-based
fixed-wing fleet of Company-owned aircraft consisted of four Convair 580s (50
passenger), nine DeHavilland Twin Otters (9-19 passenger), two DeHavilland Dash
8s (37 passenger), two Douglas DC-3s (28 passenger), one Lear Jet 35A (six
passenger) and one Beechcraft King Air 200C (six passenger).
Helicopters owned by KLM ERA on March 29, 1996 consisted of five
twin-engine turbine IFR rated Sikorsky S-61N helicopters (26 passenger) and
eight twin-engine turbine IFR rated Sikorsky S-76B helicopters (13 passenger).
The Company's principal aircraft bases in Alaska, all located on
leased property, are a fixed-wing air service center (57,000 square feet of
hangar, repair and office facilities) at Anchorage International Airport, with
two adjacent hangars housing the Company's helicopter and fixed-wing operations
totaling aproximately 45,000 square feet, and hangar, office and repair
facilities at Fairbanks International Airport (13,000 square feet). The
Company also maintains similar, smaller helicopter facilities in Alaska at
Deadhorse, Juneau, Valdez and Yakutat.
The Company's principal facilities to accommodate its Gulf of Mexico
operations are located on leased property at Lake Charles Regional Airport.
The facilities, comprising 53,000 square feet, include helicopter hangars, a
repair facility and an operations and administrative building. The Company
also operates a helicopter facility (20,700 square feet of hangar, repair and
office facilities) located on leased property at the Terrebonne Airport in
Houma, Louisiana and a helicopter facility (5,700 square feet of hangar, repair
and office facilities) located on leased property in New Iberia, Louisiana.
KLM ERA's principal facility to accommodate its operations in the
Dutch sector of the North Sea is a base located in Den Helder. The facility,
comprising 35,000 square feet, includes a helicopter hangar, a repair facility
and an operations and administrative building. A facility located in Amsterdam
was closed and consolidated with the Den Helder operations in March 1995. To
accommodate its operations in the British Sector of the North Sea, KLM ERA also
has a helicopter hangar (13,000 square feet) and office facility (2,800 square
feet) located at Norwich Airport.
-17-
<PAGE> 20
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising out of
the conduct of the Company's operations and other matters, not all the
potential liabilities with respect to which are covered by the terms of the
Company's insurance policies. While the Company is unable to predict the
ultimate liabilities which may result from such litigation, the Company
believes that no such litigation in which the Company was involved as of March
29, 1996 will have a material adverse effect on the financial position or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's common
stockholders during the fourth quarter of the fiscal year ended December 31,
1995.
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions, years of credited service and ages of the officers
of the Company and certain officers of the Company's wholly-owned
subsidiaries, Era Aviation, Inc. and LeTourneau Inc., as of March 29, 1996 are
listed below. Officers of all three entities are normally appointed annually
by each entity's Board of Directors at the bylaws-prescribed meetings held in
the spring and serve at the discretion of the Board of Directors. There are no
family relationships among these officers, nor any arrangements or
understandings between any officer and any other person pursuant to which the
officer was selected.
<TABLE>
<CAPTION>
Years of
Credited
Name Position Service Age
-------------------- -------------------------------- ---------- -----
<S> <C> <C>
Executive Officers of the Registrant:
C. R. Palmer Chairman of the Board, President 35 61
and Chief Executive Officer
R. G. Croyle Executive Vice President 22 53
D. F. McNease Senior Vice President, Drilling 22 44
E. E. Thiele Senior Vice President, Finance, 26 56
Administration and Treasurer
J. Earl Beckman(1) Vice President, Manufacturing 2 58
John L. Buvens Vice President, Legal 15 40
C. W. Johnson(2) Vice President, Aviation 18 52
Mark A. Keller Vice President, Marketing - 4 43
North American Drilling
Paul L. Kelly Vice President, Special Projects 13 56
Bill S. Person Vice President, Industrial Relations 28 47
William C. Provine Vice President, Investor Relations 9 49
Other Officers of the Registrant:
William H. Wells Controller 2 33
Mark H. Hay Secretary and Assistant Treasurer 17 51
P. G. Wheeler Assistant Treasurer 21 48
Lynda A. Aycock Assistant Treasurer and 24 49
Assistant Secretary
Certain Officer of Era Aviation, Inc.:
James Vande Voorde Vice President 22 56
</TABLE>
(1) Also serves as President and Chief Executive Officer of LeTourneau, Inc.
(2) Also serves as President and Chief Operating Officer of Era Aviation, Inc.
Each of the executive officers and other officers of the Company as well
as the officers of Era Aviation, Inc. and LeTourneau, Inc. listed above
continuously served in
-18-
<PAGE> 21
the position shown above for more than the past five years except as noted in
the following paragraphs.
Since October 1993, Mr. Croyle's principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Croyle
served as Vice President, Legal of the Company.
Since October 1993, Mr. McNease's principal occupation has been in the
position set forth. From April 1991 to October 1993, Mr. McNease served as
Vice President, Drilling of the Company. For more than five years prior to
that time, he served as Vice President of Rowandrill, Inc., a subsidiary of the
Company.
Since April 1994, Mr. Thiele's principal occupation has been in the
position set forth. From January 1994 to April 1994, Mr. Thiele served in the
position of Vice President, Finance, Administration and Treasurer. From
February 1989 to January 1994, he served as Vice President, Finance and
Administration.
Since April 1994, Mr. Beckman's principal occupation has been in the
position set forth. From February 1994 to present, Mr. Beckman has also served
in the position of President and Chief Executive Officer of LeTourneau, Inc, a
subsidiary of the Company. For more than five years prior to that time, he
served as President of Marathon LeTourneau Company, a company whose net assets
were purchased by LeTourneau, Inc. in February 1994. Marathon LeTourneau was
not, and is not now, a parent, subsidiary or affiliate of the Company.
Since October 1993, Mr. Buvens' principal occupation has been in the
position set forth. From April 1988 to present and April 1994 to present, Mr.
Buvens has also served in the positions of Vice President of Rowandrill, Inc.
and Rowan International, Inc., respectively, both subsidiaries of the Company.
Since April 1994, Mr. Johnson's principal occupation has been in the
position set forth. From December 1993 to present, Mr. Johnson has also served
in the position of President and Chief Operating Officer of Era Aviation, Inc.,
a subsidiary of the Company. For more that five years prior to that time, he
served as Executive Vice President of Era.
Since April 1994, Mr. Keller's principal occupation has been in the
position set forth.From July 1992 to present and April 1993 to present, Mr.
Keller has also served in the positions of Vice President of Terminator, Inc.
and Rowandrill, Inc., respectively, both subsidiaries of the Company. From
April 1992 to July 1992, Mr. Keller served as Marketing Coordinator for
Terminator, Inc. For more than five years prior to April 1992, he served as
Senior Vice President of Chiles Offshore Corp. Chiles is not a parent,
subsidiary or affiliate of the Company.
Since October 1993, Mr. Person's principal occupation has been in the
position set forth. From April 1990 to October 1993, Mr. Person served as
Director of British American Offshore Limited, a subsidiary of the Company.
For more than five years prior to that time, he served as Manager of Industrial
Relations of the Company.
Since October 1993, Mr. Provine's principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Provine
served as Vice President of Rowandrill, Inc., a subsidiary of the Company.
Since joining the Company in March 1994, Mr. Wells' occupation has
been in the position set forth. For more than five years prior to that time,
Mr. Wells served in various positions with the independent accounting firm of
Deloitte & Touche LLP, including Audit Manager and, most recently, Senior Audit
Manager. Deloitte & Touche is not a parent, subsidiary or affiliate of the
Company but does serve as the Company's independent auditors.
Since April 1994, Ms. Aycock's principal occupation has been in the
position set forth. From October 1993 to April 1994, Ms. Aycock served in the
position of Assistant Treasurer. For more than five years prior to that time,
Ms. Aycock served as an Accountant for the Company.
In addition to serving in the position shown above, Mr. Wheeler has
also served as Corporate Tax Director of the Company for more than five years.
-19-
<PAGE> 22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required hereunder regarding the Common Stock price range
and cash dividend information for 1995 and 1994 and the number of holders of
Common Stock is set forth on page 27 of the Company's Annual Report under the
title "Common Stock Price Range, Cash Dividends and Stock Splits", and is
incorporated herein by reference, except for the final two paragraphs under such
title. Also incorporated herein by reference to the Annual Report is the
twelfth paragraph appearing on page 14 within "Management's Discussion and
Analysis of Financial Condition and Results of Operations", which paragraph
provides information pertinent to the Company's ability to pay cash dividends
subject to certain restrictions. The Company's Common Stock is listed on the
New York Stock Exchange and the Pacific Stock Exchange.
ITEM 6. SELECTED FINANCIAL DATA
The information required hereunder is set forth on pages 10 and 11 of the
Company's Annual Report under the title "Financial Review" and is incorporated
herein by reference, except for the information for the years 1990, 1989, 1988,
1987 and 1986.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required hereunder is set forth on pages 12, 13 and 14
under the title "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report and is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K on page 21 of this Form 10-K for a listing of financial statements of
the registrant and its subsidiaries, all of which financial statements are
incorporated by reference under this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information provided under the columns entitled Name, Principal
Occupation for the Past Five Years, Age and Year First Became Director in the
table on pages 5 and 6, in footnotes (1) and (3) on page 6 and in the paragraph
following footnote (3) on page 3 of the Proxy Statement for the Company's 1996
Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein
by reference. There are no family relationships among the directors or
nominees for directors and the executive officers of the Company, nor any
arrangements or understandings between any director or nominee for director and
any other person pursuant to which such director or nominee for director was
selected. Except as otherwise indicated, each director or nominee for director
of the Company has been employed or engaged for the past five years in the
principal occupation set forth opposite his name in the information
incorporated by reference. See ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE
REGISTRANT on pages 18-19 of this Form 10-K for information relating to
executive officers.
ITEM 11. EXECUTIVE COMPENSATION
The standard arrangement for compensating directors described under the
title, "Director Compensation" at the bottom of page 11 of the Proxy Statement
and the information appearing under the titles "Summary Compensation Table",
"Option Grants in Last Fiscal Year", "Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values", "Option Plans", "Convertible
Debenture Incentive Plan" and "Pension Plan" on pages 7 through 11 of the Proxy
Statement are incorporated herein by reference. In accordance with the
instructions to Item 402 of Regulation S-K, the information contained in the
Proxy Statement under the titles "Board Compensation Committee Report on
Executive
-20-
<PAGE> 23
Compensation" and "Stockholder Return Performance Presentation" shall not be
deemed to be filed as part of this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding security ownership of certain beneficial owners
and management of the Company set forth under the headings "Voting Securities
Outstanding" appearing on page 1 and "Security Ownership of Management and
Principal Stockholders" appearing on pages 2 and 3 of the Proxy Statement is
incorporated herein by reference.
The business address of all directors is the principal executive offices
of the Company as set forth on the facing page of this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain business relationships and transactions
between the Company and certain of the directors of the Company under the
heading "Compensation Committee Interlocks and Insider Participation; Certain
Transactions" appearing on page 19 of the Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following financial statements and independent auditors'
report, included in the Annual Report, are incorporated herein by
reference:
<TABLE>
<CAPTION>
Page of 1995
Annual Report
-------------
<S> <C>
Independent Auditors' Report............................. 15
Consolidated Balance Sheet
December 31, 1995 and 1994.............................. 16
Consolidated Statement of Operations for the
Years Ended December 31, 1995, 1994 and 1993 ........... 17
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1995, 1994 and
1993.................................................... 18
Consolidated Statement of Cash Flows for
the Years Ended December 31, 1995, 1994 and 1993........ 19
Notes to Consolidated Financial Statements............... 20
Selected Quarterly Financial Data (Unaudited) for
the Quarters Ended March 31, June 30, September 30
and December 31, 1995 and 1994.......................... 27
</TABLE>
2. Financial Statement Schedules
Financial Statement Schedules I, II, III, IV, and V are not included
in this Form 10-K because such schedules are not required, not significant or
because the required information is shown in Notes to the Consolidated
Financial Statements of the Company's Annual Report.
3. Exhibits:
Unless otherwise indicated below as being incorporated by reference to
another filing of the Company with the Securities and Exchange
Commission, each of the following exhibits is filed herewith:
<TABLE>
<S> <C>
3a Restated Certificate of Incorporation of the Company, dated February 17, 1984, incorporated by reference to:
Exhibit 3a to the Company's Form 10-K for the fiscal year ended December 31, 1983 (File No. 1-5491); Exhibit 4.2 to
the Company's Registration Statement on Form S-3 (Registration No. 33-13544); and Exhibits 4a, 4b, 4c, 4d and 4e
below.
</TABLE>
-21-
<PAGE> 24
<TABLE>
<S> <C>
3b Bylaws of the Company amended as of April 23, 1993, incorporated by reference to Exhibit 3 to the Company's Form
10-Q for the quarter ended March 31, 1993 (File No. 1-5491).
4a Certificate of Designation of the Company's $2.125 Convertible Exchangeable Preferred Stock incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-6476).
4b Certificate of Designation of the Company's Series I Preferred Stock incorporated by reference to Exhibit 4b to the
Company's Form 10-K for the fiscal year ended December 31, 1986 (File No.1-5491).
4c Certificate of Designation of the Company's Series II Preferred Stock incorporated by reference to Exhibit 4c to the
Company's Form 10-K for the fiscal year ended December 31, 1987 (File No.1-5491).
4d Certificate of Designation of the Company's Series III Preferred Stock incorporated by reference to Exhibit 4d to
the Company's Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-5491).
4e Certificate of Designation of the Company's Series A Junior Preferred Stock dated March 2, 1992 incorporated by
reference to Exhibit 4d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
4f Rights Agreement as amended dated as of February 25, 1992 between the Company and Citibank, N.A. as Rights Agent
incorporated by reference to Exhibit 4g to the Company's Form 10-K for the fiscal year ended December 31, 1994
(File No. 1-5491).
4g Indenture dated December 1, 1991 between the Company and Bankers Trust Company, as Trustee, relating to the Company's
11-7/8% Senior Notes due 2001 incorporated by reference to Exhibit 28.1 to the Company's Current Report on Form 8-K
dated December 12, 1991 (File No. 1-5491).
4h Specimen Common Stock certificate, incorporated by reference to Exhibit 4g to the Company's Form 10-K for the fiscal
year ended December 31, 1992 (File No. 1-5491).
4i Form of Promissory Note dated November 30, 1994 between the purchasers of Series III Floating Rate Subordinated
Convertible Debentures due 2004 and the Company incorporated by reference to Exhibit 4j to the Company's Form 10-K
for the fiscal year ended December 31, 1994 (File No. 1-5491).
10a 1980 Nonqualified Stock Option Plan of the Company together with form of Stock Option Agreement related thereto
incorporated by reference to Exhibit 5.10 to the Company's Registration Statement on Form S-7 (Registration
No. 2-68622).
10b 1988 Nonqualified Stock Option Plan of the Company as amended together with form of Stock Option Agreement related
thereto incorporated by reference to Exhibit 10b of the Company's Form 10-K for the fiscal year ended December 31,
1992 (File No. 1-5491).
10c Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1980
Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10c to the Company's Form 10-K
for the fiscal year ended December 31, 1990 (File No. 1-5491).
10d Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1980 Nonqualified
Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal
year ended December 31, 1991 (File No. 1-5491).
10e Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1988
Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K
for the fiscal year ended December 31, 1990 (File No. 1-5491).
10f Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1988 Nonqualified
Stock Option Plan of the Company
</TABLE>
-22-
<PAGE> 25
<TABLE>
<S> <C>
incorporated by reference to Exhibit 10f to the Company's Form 10-K for the fiscal
year ended December 31, 1991 (File No. 1-5491).
10g 1986 Convertible Debenture Incentive Plan of the Company as amended incorporated by reference to Exhibit 10h to the
Company's Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-5491).
10h Pension Restoration Plan of the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1992 (File No. 1-5491).
10i Pension Restoration Plan of LeTourneau, Inc. incorporated by reference to Exhibit 10j to the Company's Form 10-K for
the fiscal year ended December 31, 1994 (File No. 1-5491).
10j Credit Agreement dated September 22, 1986 (including amendatory letter dated March 25, 1987) and First Preferred Ship
Mortgage dated November 7, 1986 between the Company and Marathon LeTourneau Company incorporated by reference to
Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1986 and amendatory letter dated
February 21, 1992 incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
10k Participation Agreement dated December 1, 1984 between the Company and Textron Financial Corporation et al. and
Bareboat Charter dated December 1, 1984 between the Company and Textron Financial Corporation et al. incorporated by
reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No. 1-5491).
10l Participation Agreement dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. and
Bareboat Charter dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. incorporated by
reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No.1-5491).
10m Corporate Continuing Guaranty dated December 31, 1986 between Shearson Lehman Brothers Holdings Inc. and the Company
incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File
No.1-5491).
10n Corporate Continuing Guaranty dated September 10, 1987 between Shearson Lehman Brothers Holdings Inc. and the Company
incorporated by reference to Exhibit 10i to the Company's Form 10-K for the fiscal year ended December 31, 1987 (File
No.1-5491).
10o Cross-Border Corporate Continuing Guaranty dated May 29, 1991 between Citicorp and the Company's wholly-owned
subsidiary, Rowan International, Inc. incorporated by reference to Exhibit 10o to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-5491).
10p Amendment No. 2 dated April 1, 1995 to the Consulting Agreement dated March 1, 1991 between the Company and C. W.
Yeargain.
10q Consulting Agreement as amended dated March 1, 1991 between the Company and C. W. Yeargain.
10r Acquisition Agreement dated as of November 7, 1991, among KLM Royal Dutch Airlines, Blue Yonder I B.V., KLM
Helikopters B.V. and Rowan Aviation (Netherlands) B.V. incorporated by reference to Exhibit 28.1 to the Company's
Current Report on Form 8-K dated November 7, 1991 (File No. 1-5491).
10s Business Loan Agreement dated January 27, 1993 between Key Bank of Alaska and the Company's wholly-owned subsidiary,
Era Aviation, Inc. incorporated by reference to Exhibit 10s to the Company's Form 10-K for the fiscal year ended
December 31, 1992 (File No. 1-5491).
10t Asset Purchase Agreement dated as of November 12, 1993, among Rowan Companies, Inc., Rowan Equipment, Inc., General
Cable Corporation, Marathon LeTourneau Company, Marathon LeTourneau Sales & Service Company and Marathon LeTourneau
</TABLE>
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<PAGE> 26
<TABLE>
<S> <C>
Australia Pty. Ltd. incorporated by reference to the Company's Current Report on Form 8-K dated February 11, 1994
(File No. 1-5491).
10u Asset Purchase and Sale Agreement dated December 5, 1995 between Era Aviation, Inc. and Columbia Helicopters, Inc.,
Alaska Helicopters, Inc. and BIJOS Enterprises.
11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share for the years ended December 31, 1995, 1994 and
1993 appearing on page 27 in this Form 10-K.
*13 Annual Report to Stockholders for fiscal year ended December 31, 1995.
21 Subsidiaries of the Registrant as of March 29, 1996.
23 Independent Auditors' Consent.
24 Powers of Attorney pursuant to which names were affixed to this Form 10-K for the fiscal year ended December 31, 1995.
27 Financial Data Schedule for the year ended December 31, 1995.
</TABLE>
The Company agrees to furnish to the Commission upon request a copy of
all instruments defining the rights of holders of long-term debt of the Company
and its subsidiaries.
________________________________
* Only portions specifically incorporated herein are deemed to
be filed.
EXECUTIVE COMPENSATION PLANS
AND ARRANGEMENTS
Compensatory plans in which directors and executive officers of the
Company participate are listed as follows:
o 1980 Nonqualified Stock Option Plan of the Company together with form
of Stock Option Agreement related thereto incorporated by reference to
Exhibit 5.10 to the Company's Registration Statement on Form S-7
(Registration No. 2-68622); Amendment No. 1 dated October 25, 1990, to
all then outstanding Stock Option Agreements related to such Plan
incorporated by reference to Exhibit 10c to the Company's Form
10-K for the fiscal year ended December 31, 1990 (File No. 1-5491); and
Amendment No. 2 dated May 23, 1991, to all then outstanding Stock
Option Agreements related to such Plan incorporated by reference to
Exhibit 10d to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
o 1988 Nonqualified Stock Option Plan of the Company as amended
together with form of Stock Option Agreement related thereto
incorporated by reference to Exhibit 10b to the Company's Form 10-K for
the fiscal year ended December 31, 1992 (File No. 1-5491; Amendment
No. 1 dated October 25, 1990, to all then outstanding Stock Option
Agreements related to such Plan incorporated by reference to Exhibit
10d to the Company's Form 10-K for the fiscal year ended December 31,
1990 (File No. 1-5491); and Amendment No. 2 dated May 23, 1991, to all
then outstanding Stock Option Agreements related to such Plan
incorporated by reference to Exhibit 10f to the Company's Form 10-K for
the fiscal year ended December 31, 1991 (File No. 1-5491).
o 1986 Convertible Debenture Incentive Plan of the Company as amended
included as Exhibit 10h to the Company's Form 10-K for the fiscal
year ended December 31, 1994 (File No. 1-5491).
o Pension Restoration Plan of the Company incorporated by reference to
Exhibit 10h to the Company's Form 10-K for the fiscal year ended
December 31, 1992 (File 1-5491).
o Pension Restoration Plan of LeTourneau, Inc. incorporated by reference
to Exhibit 10j to the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
-24-
<PAGE> 27
(b) Reports on Form 8-K:
o No reports on Form 8-K were filed by the Registrant during the fourth
quarter of fiscal year 1995.
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933,
the undersigned registrant hereby undertakes as follows, which undertaking
shall be incorporated by reference into registrant Registration Statements on
Form S-8 Nos. 2-67866 (filed May 22, 1980), 2-58700, as amended by
Post-Effective Amendment No. 4 (filed June 11, 1980), 33-33755, as amended by
Amendment No. 1 (filed March 29, 1990),33-61444 (filed April 23, 1993),
33-51103 (filed November 18, 1993) 33- 51105 (filed November 18, 1993) and
33-51109 (filed November 18, 1993):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the act and will be governed by the final
adjudication of such issue.
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<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ROWAN COMPANIES, INC.
By: C. R. PALMER
(C. R. Palmer, Chairman of
the Board, President and
Chief Executive Officer)
Date: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
C. R. PALMER Chairman of the Board, President March 29, 1996
(C. R. Palmer) and Chief Executive Officer
E. E. THIELE Principal Financial Officer March 29, 1996
(E. E. Thiele)
WILLIAM H. WELLS Principal Accounting Officer March 29, 1996
(William H. Wells)
*RALPH E. BAILEY Director March 29, 1996
(Ralph E. Bailey)
*HENRY O. BOSWELL Director March 29, 1996
(Henry O. Boswell)
*H. E. LENTZ Director March 29, 1996
(H. E. Lentz)
*WILFRED P. SCHMOE Director March 29, 1996
(Wilfred P. Schmoe)
*CHARLES P. SIESS, JR. Director March 29, 1996
(Charles P. Siess, Jr.)
*PETER SIMONIS Director March 29, 1996
(Peter Simonis)
*C. W. YEARGAIN Director March 29, 1996
(C. W. Yeargain)
* BY C. R. PALMER
(C. R. Palmer, Attorney-in-fact)
</TABLE>
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<PAGE> 29
EXHIBIT 11
ROWAN COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY
DILUTED EARNINGS (LOSS) PER SHARE
(in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Weighted average shares of common stock outstanding 84,589 84,092 78,924
Stock options (treasury stock method) 1,593 (A) 1,436 (A) 1,377 (A)
----------------------------------------------
Weighted average shares for primary earnings (loss) per share
calculation 86,182 85,528 80,301
Stock options (treasury stock method) 78 (A)
Shares issuable from assumed conversion of floating rate
subordinated convertible debentures 2,003 (A) 612 (A) 516 (A)
----------------------------------------------
Weighted average shares for fully diluted earnings
(loss) per share calculation 88,263 86,140 80,817
===============================================
Net income (loss) for primary calculation $(18,436) $(22,989) $(13,259)
Subordinated debenture interest 374 301 282
-----------------------------------------------
Net income (loss) for fully diluted
calculation $(18,062) $(22,688) $(12,977)
================================================
Primary earnings (loss) per share $ (0.21) (B) $ (0.27) $ (0.17)
================================================
Fully diluted earnings (loss) per share $ (0.20) (B) $ (0.26) (B) $ (0.16)( B)
=================================================
</TABLE>
Note: Reference is made to Note 1 to Consolidated Financial Statements
regarding computation of per share amounts.
(A) Included in accordance with Regulation S-K Item 601(b)(11) although not
required to be provided for by Accounting Principles Board Opinion No. 15
because the effect is insignificant.
(B) This calculation is submitted in accordance with regulation S-K Item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an antidilutive result.
27
<PAGE> 30
EXHIBIT INDEX
Page 1 of 4
<TABLE>
<CAPTION>
FOOTNOTE EXHIBIT
REFERENCE NUMBER EXHIBIT DESCRIPTION
- ---------- --------- -----------------------------------------------------
<S> <C> <C>
(1) 3a Restated Certificate of Incorporation of the
Company, dated February 17, 1984, incorporated by
reference to: Exhibit 3a to the Company's Form 10-K
for the fiscal year ended December 31, 1983 (File
No. 1-5491); Exhibit 4.2 to the Company's
Registration Statement on Form S-3 (Registration No.
33-13544); and Exhibits 4a, 4b, 4c, 4d and 4e below.
(1) 3b Bylaws of the Company amended as of April 23, 1993,
incorporated by reference to Exhibit 3 to the
Company's Form 10-Q for the quarter ended March 31,
1993 (File No. 1-5491).
(1) 4a Certificate of Designation of the Company's $2.125
Convertible Exchangeable Preferred Stock
incorporated by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-3
(Registration No. 33-6476).
(1) 4b Certificate of Designation of the Company's Series I
Preferred Stock incorporated by reference to Exhibit
4b to the Company's Form 10-K for the fiscal year
ended December 31, 1986 (File No.1-5491).
(1) 4c Certificate of Designation of the Company's Series
II Preferred Stock incorporated by reference to
Exhibit 4c to the Company's Form 10-K for the fiscal
year ended December 31, 1987 (File No.1-5491).
(1) 4d Certificate of Designation of the Companies Series
III Preferred Stock incorporated by reference to
Exhibit 4d to the Company's Form 10-K for the fiscal
year ended December 31, 1994 (File No. 1-5491).
(1) 4e Certificate of Designation of the Company's Series A
Junior Preferred Stock dated March 2, 1992
incorporated by reference to Exhibit 4d to the
Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(1) 4f Rights Agreement as amended dated as of February 25,
1992 between the Company and Citibank, N.A. as
Rights Agent incorporated by reference to Exhibit 4g
to the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
(1) 4g Indenture dated December 1, 1991 between the Company
and Bankers Trust Company, as Trustee, relating to
the Company's 11-7/8% Senior Notes due 2001
incorporated by reference to Exhibit 28.1 to the
Company's Current Report on Form 8-K dated December
12, 1991 (File No. 1-5491).
(1) 4h Specimen Common Stock certificate, incorporated by
reference to Exhibit 4g to the Company's Form 10-K
for the fiscal year ended December 31, 1992 (File
No. 1-5491).
</TABLE>
<PAGE> 31
EXHIBIT INDEX
Page 2 of 4
<TABLE>
<CAPTION>
FOOTNOTE EXHIBIT
REFERENCE NUMBER EXHIBIT DESCRIPTION
- ---------- ------- ------------------------------------------------------
<S> <C> <C>
(1) 4i Form of Promissory Note dated November 30, 1994
between the purchasers of Series III Floating Rate
Subordinated Convertible Debentures due 2004 and the
Company incorporated by reference to Exhibit 4j to
the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
(1) 10a 1980 Nonqualified Stock Option Plan of the Company
together with form of Stock Option Agreement related
thereto incorporated by reference to Exhibit 5.10 to
the Company's Registration Statement on Form S-7
(Registration No. 2-68622).
(1) 10b 1988 Nonqualified Stock Option Plan of the Company
as amended together with form of Stock Option
Agreement related thereto incorporated by reference
to Exhibit 10b of the Company's Form 10-K for the
fiscal year ended December 31, 1992 (File No. 1-
5491).
(1) 10c Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the
1980 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10c to the
Company's Form 10-K for the fiscal year ended
December 31, 1990 (File No. 1-5491).
(1) 10d Amendment No. 2 dated May 23, 1991, to all then
outstanding Stock Option Agreements related to the
1980 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10d to the
Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(1) 10e Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the
1988 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10d to the
Company's Form 10-K for the fiscal year ended
December 31, 1990 (File No. 1-5491).
(1) 10f Amendment No. 2 dated May 23, 1991, to all then
outstanding Stock Option Agreements related to the
1988 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10f to the
Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(1) 10g 1986 Convertible Debenture Incentive Plan of the
Company as amended incorporated by reference to
Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1994 (File No. 1-
5491).
(1) 10h Pension Restoration Plan of the Company incorporated
by reference to Exhibit 10h to the Company's Form
10-K for the fiscal year ended December 31, 1992
(File No. 1-5491).
(1) 10i Pension Restoration Plan of LeTourneau, Inc
incorporated by reference to Exhibit 10j to the
Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
</TABLE>
<PAGE> 32
EXHIBIT INDEX
Page 3 of 4
<TABLE>
<CAPTION>
FOOTNOTE EXHIBIT
REFERENCE NUMBER EXHIBIT DESCRIPTION
- ----------- ------- -----------------------------------------------------
<S> <C> <C>
(1) 10j Credit Agreement dated September 22, 1986 (including
amendatory letter dated March 25, 1987) and First
Preferred Ship Mortgage dated November 7, 1986
between the Company and Marathon LeTourneau Company
incorporated by reference to Exhibit 10c to the
Company's Form 10-K for the fiscal year ended
December 31, 1986 and amendatory letter dated
February 21, 1992 incorporated by reference to
Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No.
1-5491).
(1) 10k Participation Agreement dated December 1, 1984
between the Company and Textron Financial
Corporation et al. and Bareboat Charter dated
December 1, 1984 between the Company and Textron
Financial Corporation et al. incorporated by
reference to Exhibit 10c to the Company's Form 10-K
for the fiscal year ended December 31, 1985 (File
No. 1-5491).
(1) 10l Participation Agreement dated December 1, 1985
between the Company and Eaton Leasing Corporation
et. al. and Bareboat Charter dated December 1, 1985
between the Company and Eaton Leasing Corporation
et. al. incorporated by reference to Exhibit 10d to
the Company's Form 10-K for the fiscal year ended
December 31, 1985 (File No.1-5491).
(1) 10m Corporate Continuing Guaranty dated December 31,
1986 between Shearson Lehman Brothers Holdings Inc.
and the Company incorporated by reference to Exhibit
10h to the Company's Form 10-K for the fiscal year
ended December 31, 1986 (File No.1-5491).
(1) 10n Corporate Continuing Guaranty dated September 10,
1987 between Shearson Lehman Brothers Holdings Inc.
and the Company incorporated by reference to Exhibit
10i to the Company's Form 10-K for the fiscal year
ended December 31, 1987 (File No.1-5491).
(1) 10o Cross-Border Corporate Continuing Guaranty dated May
29, 1991 between Citicorp and the Company's
wholly-owned subsidiary, Rowan International, Inc.
incorporated by reference to Exhibit 10o to the
Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
(2) 10p Amendment No. 2 dated April 1, 1995 to the
Consulting Agreement dated March 1, 1991 between the
Company and C. W. Yeargain.
(2) 10q Consulting Agreement as amended dated March 1, 1991
between the Company and C. W. Yeargain.
(1) 10r Acquisition Agreement dated as of November 7, 1991,
among KLM Royal Dutch Airlines, Blue Yonder I B.V.,
KLM Helikopters B.V. and Rowan Aviation
(Netherlands) B.V. incorporated by reference to
Exhibit 28.1 to the Company's Current Report on Form
8-K dated November 7, 1991 (File No. 1-5491).
</TABLE>
<PAGE> 33
EXHIBIT INDEX
Page 4 of 4
<TABLE>
<CAPTION>
FOOTNOTE EXHIBIT
REFERENCE NUMBER EXHIBIT DESCRIPTION
- ------------ -------- -----------------------------------------------------
<S> <C> <C>
(1) 10s Business Loan Agreement dated January 27, 1993
between Key Bank of Alaska and the Company's
wholly-owned subsidiary, Era Aviation, Inc.
incorporated by reference to Exhibit 10s to the
Company's Form 10-K for the fiscal year ended
December 31, 1992 (File No. 1-5491).
(1) 10t Asset Purchase Agreement dated as of November 12,
1993, among Rowan Companies, Inc., Rowan Equipment,
Inc., General Cable Corporation, Marathon LeTourneau
Company, Marathon LeTourneau Sales & Service Company
and Marathon LeTourneau Australia Pty. Ltd.
incorporated by reference to the Company's Current
Report on Form 8-K dated February 11, 1994 (File No.
1-5491).
(2) 10u Asset Purchase and Sale Agreement dated December 5,
1995 between Era Aviation, Inc. and Columbia
Helicopters, Inc., Alaska Helicopters, Inc. and
BIJOS Enterprises.
(3) 11 Computation of Primary and Fully Diluted Earnings
(Loss) Per Share for the years ended December 31,
1995, 1994 and 1993 appearing on page 26 in this
Form 10-K.
(4) 13 Annual Report to Stockholders for fiscal year ended
December 31, 1995.
(2) 21 Subsidiaries of the Registrant as of March 29,
1995
(2) 23 Independent Auditors' Consent.
(2) 24 Powers of Attorney pursuant to which names were
affixed to this Form 10-K for the fiscal year ended
December 31, 1995.
(2) 27 Financial Data Schedule for the year ended December
31, 1995.
</TABLE>
__________________________________________
(1) Incorporated herein by reference to another filing of the Company with
the Securities and Exchange Commission as indicated.
(2) Included herein.
(3) Included in Form 10-K on page 27.
(4) Included herein. See ITEM 1, ITEMS 5-8 and Subpart (a)1. of ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on pages
20 through 23 on Form 10-K for specific portions incorporated herein by
reference.
<PAGE> 1
EXHIBIT 10p
ROWAN COMPANIES, INC.
Amendment No. 2 to the Consultancy
Agreement Dated March 1, 1991
Between Rowan Companies, Inc.
and C. W. Yeargain
Effective April 1, 1995:
Section 2 of the Agreement, Duties of the Consultant, is amended by
adding an additional paragraph as follows:
(B) The Consultant also shall serve as a Director of LeTourneau, Inc.
and as Chairman of the Board of Directors of LeTourneau, Inc. and
shall provide such services as may be required, from time to time, in
connection with serving in such capacities.
(C) The Consultant shall provide advice as may be required for the
design and construction of the enhanced Gorilla design jack-up rig,
designated GORILLA V.
Section 4 of the Agreement, Consideration and Expenses, is hereby
deleted and the following is substituted therefor:
(A) The Company shall pay $100,000 annually (payable quarterly) plus
the per diem rate of US $500.00 for services rendered. Further, the
Company shall reimburse to the consultant all proper and reasonable
out-of- pocket expenses (including, but not limited to, all travel and
accommodation expenses).
<PAGE> 1
EXHIBIT 10q
DATED MARCH 1, 1991
ROWAN COMPANIES, INC. (1)
-AND-
C. W. YEARGAIN (2)
AGREEMENT
FOR THE PROVISION OF CONSULTANCY SERVICES,
AS AMENDED
<PAGE> 2
Page 1
THIS AGREEMENT is dated March 1, 1991 and is entered into BY and BETWEEN:
(1) ROWAN COMPANIES, INC. OF 5450 Transco Tower Building, Houston, Texas
77056-6196 ("the Company"); and
(2) C. W. YEARGAIN ("the Consultant") of #8 Tokeneke Trail, Houston, Texas
77024
NOW IT IS HEREBY AGREED as follows:
1. Appointment
(A) The Company hereby engages the Consultant and the Consultant hereby
agrees to act as consultant to the Company including any of its incorporated
affiliates (hereafter referred to as "the Group") pursuant to the terms of this
Agreement.
(B) The said engagement, which shall be deemed to have commenced on
March 1, 1991, shall continue hereafter unless and until terminated (i) by
either party by not less than three (3) months' prior notice in writing given
to the other party or (ii) pursuant to the provisions of clause 6.
2. Duties of the Consultant
(A) The Consultant shall advise the Group on a when-requested basis in
connection with matters pertaining to the Group's existing and prospective
worldwide business operations.
(B) The Consultant also shall serve as a Director of LeTourneau, Inc.
and as Chairman of the Board of Directors of LeTourneau, Inc. and shall provide
such services as may be required, from time to time, in connection with serving
in such capacities.
(C) The Consultant shall provide advice as may be required for the
design and construction of the enhanced Gorilla design jack-up rig, designated
GORILLA V.
3. Conflict of Interest
(A) The Consultant hereby undertakes at all times to perform his
obligations hereunder with the utmost good faith and shall not deliberately do
or omit to do anything whereby a conflict is likely to arise between the
interests of the Group and the Consultant's own interests or the interests of
any other person or organization on whose behalf the Consultant is so employed.
(B) The Consultant shall not at any time knowingly make or cause or
permit to be made any untrue or misleading statement in relation to the Group
nor in particular after the termination of this Agreement represent or cause or
permit any representation to be made that he is connected with the Group.
<PAGE> 3
Page 2
4. Consideration and Expenses
(A) The Company shall pay $100,000 annually (payable quarterly) plus
the per diem rate of US $500.00 for services rendered. Further, the Company
shall reimburse to the Consultant all proper and reasonable out-of-pocket
expenses (including, but not limited to, all travel and accommodation
expenses).
(B) All payments to be made pursuant to this agreement shall be made by
the Company upon receipt of an invoice from the Consultant specifying the
amount payable.
5. Confidentiality
(A) The Consultant undertakes that he shall not, either during or after
the termination of this Agreement without limit in point of time:
(i) divulge or communicate or cause or permit to be divulged or
communicated whether directly or indirectly to any other
person or persons (except to those of the officials of the
Group whose province it is to know the same); or
(ii) use for his own purposes or for any purpose other than those
of the Group
any secret, confidential or other information:
(a) relating to the private affairs of the Group;
or
(b) which the Group has obtained from any third party on
terms restricting its disclosure or use
but these restrictions shall cease to apply to any information or knowledge
which may come into the public domain (otherwise than through the default of
the Consultant).
(B) All notes, memoranda, records and other documents made or created
in relation to the performance by the Consultant of his duties hereunder shall
be and remain the property of the Company and shall be handed over by the
Consultant to the Company from time to time on demand and in any event on the
termination of this Agreement.
6. Events of Termination
The Company only on the occurrence of the events specified in (B) below and
either party on the occurrence of the events specified in (A) below shall have
the right at any time by giving notice in writing to the other party to
terminate this Agreement forthwith:
(A) if the other party commits a material breach of any of the terms of
this Agreement and fails to remedy the same within 30 days of being required in
writing to do so by the party not in breach (if such breach shall be capable of
remedy);
<PAGE> 4
Page 3
(B) upon the demise or incapacity of the Consultant;
(C) upon the termination of the engagement by not less than the period
of notice provided for in clause 1 or upon the proper termination as provided
in this clause 6, the Consultant shall not have any claims for damages or
compensation of any nature whatsoever other than to any outstanding fees and
properly documented expenses due pursuant to clause 4 hereof.
7. Status of Agreement
Nothing herein contained shall be deemed to constitute a partnership between
the parties hereto and the Consultant shall have no power to bind the Group or
pledge its credit. Consultant agrees that he is an independent contractor and
is solely responsible for the performance of any duties required under this
Agreement. The Consultant agrees that he shall solely be responsible for any
income tax liability asserted by any taxing jurisdiction upon payments of
consideration received under this Agreement.
8. Assignment
Neither party shall be entitled to assign its rights hereunder without the
prior written consent of the other.
9. Notice
All notices to be given under this Agreement shall be in writing and shall
either be delivered personally or sent by first class registered post to the
address of the party to be served given at the head of this Agreement or such
other address as shall from time to time be notified to the other party and
shall be deemed duly served (i) in the case of a notice delivered personally,
at the time of delivery, and (ii) in the case of a notice sent by post, five
clear business days after the date of dispatch.
10. Entire Agreement
This Agreement constitutes the entire Agreement between the parties hereto with
respect to its subject matter and shall have effect to the exclusion of any
other memorandum, agreement or understanding of any kind between the parties
hereto preceding the date of this Agreement and touching and concerning its
subject matter.
11. Amendments in Writing
This Agreement may be amended, superseded, cancelled or any of its terms and
conditions waived only by written instrument signed by or on behalf of the
Company and Consultant or, in the case of waiver, by the party which is waiving
compliance.
<PAGE> 5
Page 4
12. Governing Law
This Agreement shall be governed by and construed in accordance with the Laws
of the State of Texas and each of the parties hereto hereby agrees to submit to
the non-exclusive jurisdiction of the courts of Texas in connection with any
matter arising out of this Agreement.
IN WITNESS whereof this Agreement has been entered into the day and year first
above written.
)
SIGNED BY ) /s/ C. R. Palmer
-----------------------------------------
duly authorized signatory ) C. R. Palmer
for and on behalf of
ROWAN COMPANIES, INC.
in the presence of: President
----------------------------------------
/s/ Kitty Lindley
- --------------------------
SIGNED BY )
C. W. Yeargain ) /s/ C. W. Yeargain
-----------------------------------------
) C. W. Yeargain
In the presence of:
/s/ Mary H. Cocca
- --------------------------
<PAGE> 1
EXHIBIT 10U
ASSET PURCHASE
AND SALE AGREEMENT
DATED DECEMBER 5, 1995
BETWEEN
ERA AVIATION, INC.
AND
COLUMBIA HELICOPTERS, INC.
<PAGE> 2
Assigned
12/5/95
ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (this "Agreement") is entered
into and effective as of December 5, 1995, by and among Columbia Helicopters,
Inc., an Oregon corporation ("Guarantor"), Alaska Helicopters, Inc., an Alaska
corporation, which is a wholly owned subsidiary of Guarantor ("AHI"), and BIJOS
Enterprises a/k/a BIJO Enterprises, an Alaska general partnership ("BIJO"), on
the one hand (AHI and BIJO are collectively referred to as "Sellers"), and Era
Aviation, Inc., a Washington corporation ("Era", "Buyer"), on the other hand.
RECITALS
A. The Sellers desire to sell and Buyer desires to purchase
certain specified Assets described below for the purchase price and on the
terms and conditions set forth herein.
B. AHI desires to sell the AHI Assets described below; and
BIJO desires to sell the BIJO Assets described below. BIJO desires to assume
no obligations with respect to the AHI Assets or any contractual undertakings
taken herein by AHI or Guarantor.
C. In consideration for Guarantor receiving a portion of
the net proceeds of the sale pursuant to an agreement with AHI and BIJO,
Guarantor has agreed to guarantee the performance and payment by AHI of its
obligations under the Agreement.
THEREFORE, in consideration of the mutual benefits and reciprocal
promises, the representations, warranties and conditions set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree:
1. PURCHASE. Sellers will sell and Buyer will purchase the
Assets on and subject to the terms and conditions of this Agreement. AHI will
sell the AHI Assets, and BIJO will sell the BIJO Assets. BIJO assumes no
obligations with respect to the AHI Assets or any contractual undertakings
taken herein by AHI or Guarantor. The closing of this Agreement shall be in
accordance with Section 13 hereof ("Closing").
2. ASSETS. The "Assets" consist of the "AHI Assets" and
the "BIJO Assets", as described in subsections 2(a) through 2(g) below:
a. BIJO Assets include: All estates, rights, titles and
interests in and to real property, leaseholds, rights of way,
rights of ingress and egress, privileges thereto,
improvements, fixtures, furnishings, equipment and other
assets constituting or located on or associated with Lots Five
"B" (5- B) ("Lot 5-B") and Six "B" (6-B) ("Lot 6-B"), Block
Eighteen (18) at the Anchorage International
Asset Purchase and Sale Agreement page 1 of 57
<PAGE> 3
Airport according to the unrecorded plat on file with the
State of Alaska, Department of Transportation and Public
Facilities, Division of Airport Leasing, located within the
Anchorage Recording District, Third Judicial District, State
of Alaska (the "Real Property") and further described in
Attachment A hereto.
b. AHI Assets include: The Helicopters and Airplane
("Aircraft") further described in Attachment B hereto.
c. AHI Assets also include: The aircraft parts ("Parts")
described in Attachment C hereto.
d. AHI Assets also include: The vehicles ("Vehicles")
described in Attachment D hereto.
e. AHI Assets also include: The fixtures, furnishings,
equipment and miscellaneous items ("Equipment") described in
Attachment E hereto.
f. AHI Assets also include: The permits, licenses, leases
and contracts ("Permits") described in Attachment F hereto.
g. AHI Assets also include: All other or additional
privileges, rights, interests, properties and assets owned by
AHI on August 18, 1995, and after, and as defined and
described in Attachment G hereto ("Other Assets"), except and
excluding goodwill and the assets listed on Attachment H
hereto ("Excluded Assets"). The Other Assets also include,
without limitation, all manufacturers' and other warranties,
technical records, maintenance records, and Flight Manuals,
brought up to date as of the date of Closing, relating to the
AHI Assets, and all rights, titles and interests of AHI and
Guarantor in and to the BIJO Assets.
3. PURCHASE PRICE. The Purchase Price for the Assets is
$9,971,575. The Purchase Price may be adjusted in accordance with the
"Adjustments" described in Attachment I hereto
4. PAYMENT OF PURCHASE PRICE.
a. The Purchase Price will be payable to Sellers in the
following manner:
1. Cash at Closing: $3,000,000
2. The balance to be payable
as provided in subsection 4(b)
below: $6,971,575
TOTAL PURCHASE PRICE: $9,971,575
----------
Guarantor, AHI and BIJO will among themselves divide the
proceeds at Closing; and Era shall have no responsibility with
respect to any division of the Purchase Price among Guarantor
or the Sellers at any time.
Asset Purchase and Sale Agreement page 2 of 57
<PAGE> 4
b. The balance of the purchase price as provided in
subsection 4(a)(2) above will be evidenced by a Promissory
Note from Era to AHI in the amount of $6,971,575 (the "Note")
in the form of Attachment J hereto, and secured by the
Aircraft under a Security Agreement in the form of Attachment
K hereto (the "Security Agreement") until such time as each
Aircraft is sold or selected in accordance with this
subsection 4(b). The Note shall bear no interest and shall be
payable on or before the first anniversary of the date of
Closing. The parties anticipate that Era will sell all or
some of the Aircraft to third parties or select all or some of
the Aircraft for Era's own use.
1. Upon sale of each Aircraft to a third party, Era
shall pay AHI the Formula Value listed on Attachment B
for that Aircraft, and each such payment shall be
applied as a credit to the balance owing under the Note.
2. Upon selection by Era of any of the Aircraft for its
own use, Era shall pay AHI the Formula Value listed on
Attachment B for that Aircraft, and each such payment
shall be applied as a credit to the balance owing under
the Note. Era shall make every effort to make any such
selections within 60 days of Closing; however, should
Era's business circumstances change, Era shall not be
precluded from selecting any of the Aircraft for its own
use at a later date.
3. Any remaining balance of the Note not sooner paid
shall be due and paid in full on or before the first
anniversary of the date of Closing.
Upon payment for any Aircraft as provided in this subsection
4(b), AHI shall immediately release any security interest of
AHI in such Aircraft. Upon final payment of the balance of
the Note, AHI shall immediately release any remaining security
interests.
5. STATUS OF TITLE.
a. BIJO ASSETS AND REAL PROPERTY LEASEHOLDS. At Closing,
BIJO will execute and deliver to Buyer an Assignment of Lease
Agreement for all of BIJO's leasehold interests in Lot 5-B and
Lot 6-B, in form acceptable to Buyer and the State of Alaska.
Forms of such Assignments are attached as Attachment A-1.
True and correct copies of the Lease Agreements to be assigned
are attached hereto as Attachment A-2. The Assignment of
Lease Agreement for Lot 5-B shall warrant the term of the
leasehold is until August 15, 2011, subject to the terms of
the applicable lease, and the Assignment of Lease Agreement
for Lot 6-B shall warrant the term of the leasehold is until
August 15, 2011, subject to the terms of the applicable lease,
and the Assignments shall convey all of BIJO's right, title
and interest in the leaseholds and warrant the leaseholds free
and clear of all liens and encumbrances, except reservations,
exceptions, restrictions and easements of record, the
Asset Purchase and Sale Agreement page 3 of 57
<PAGE> 5
Aviall sublease, and such month to month tiedowns and other
exceptions as may be acceptable to Buyer.
BIJO Assets are sold as is, where is.
BIJO will furnish Buyer with a standard form policy of
title insurance issued by Stewart Title Company of Alaska,
Inc., or some other title insurance company duly qualified to
do business in the State of Alaska acceptable to Buyer. Such
policy shall be issued as of the date of Closing and shall be
in the amount of $2,200,000. Title objections which can be
cured to the satisfaction of Buyer by the mere payment of
money shall be satisfied by BIJO out of BIJO's proceeds of
sale. In the event there are title objections which cannot be
remedied by the mere payment of money, then Buyer shall have
the option to unconditionally revoke this Agreement and
receive full reimbursement by Sellers of all of Buyer's out of
pocket expenses advanced pursuant to the terms of this
Agreement.
b. AIRCRAFT AND PARTS. At Closing AHI will execute and
deliver to Buyer one or more Bills of Sale in form acceptable
to Buyer for the Aircraft and Parts and Certificates of Title
for the Aircraft. The Bills of Sale shall convey marketable
title and all of Sellers' right, title and interest in the
Aircraft and Parts and warrant title to the Aircraft and Parts
free and clear of all liens and encumbrances, except those
evidenced by the Security Agreement. Some of the Helicopters
are currently under contract to third party customers. Such
contracts are described in Attachment F. To the extent
assignable, AHI shall use its best efforts to effect valid
assignments of such contracts to Buyer at Closing.
c. VEHICLES. At Closing AHI will execute and deliver to
Buyer one or more Bills of Sale in form acceptable to Buyer
and Certificates of Title for the Vehicles. The Bills of Sale
shall convey marketable title and all of AHI's right, title
and interest in the Vehicles and warrant title to the Vehicles
free and clear of all liens and encumbrances.
d. BIJO LEASEHOLD IMPROVEMENTS, FIXTURES, FURNISHINGS,
EQUIPMENT AND OTHER ASSETS. At Closing BIJO will execute and
deliver to Buyer one or more Bills of Sale and assignments in
form acceptable to Buyer for the leasehold improvements,
fixtures, furnishings, equipment and other assets described in
Attachment A. The Bills of Sale and assignments shall convey
marketable title and all of BIJO's right, title and interest
in such leasehold improvements, fixtures, furnishings,
equipment and other assets, including without limitation any
manufacturers' warranties related to the BIJO Assets, and
warrant title to such leasehold improvements, fixtures,
furnishings, equipment and other assets free and clear of all
liens and encumbrances. At Closing BIJO shall also execute
and deliver such other transfer documents as are reasonably
necessary or appropriate to accomplish transfer of all the
BIJO Assets that are the subject of this Agreement so as to
vest in Buyer
Asset Purchase and Sale Agreement page 4 of 57
<PAGE> 6
good and marketable title free and clear of all liens and
encumbrances. Otherwise, such assets are sold "as is where
is."
e. AHI FIXTURES, FURNISHINGS AND EQUIPMENT. At Closing AHI
will execute and deliver to Buyer one or more Bills of Sale in
form acceptable to Buyer for the fixtures, furnishings and
equipment described in Attachment E. The Bills of Sale shall
convey marketable title and all of AHI's right, title and
interest in such fixtures, furnishings and equipment and
warrant title to such fixtures, furnishings and equipment free
and clear of all liens and encumbrances.
f. PERMITS AND OTHER ASSETS. At Closing AHI will execute
and deliver to Buyer one or more assignments in form
acceptable to Buyer for the Permits and Other Assets,
including without limitation any manufacturers' warranties
related to the AHI Assets, along with such other transfer
documents as are reasonably necessary or appropriate to
accomplish transfer of all the AHI Assets that are the subject
of this Agreement so as to vest in Buyer good and marketable
title free and clear of all liens and encumbrances and AHI
shall so warrant title to such permits and other assets.
6. DELIVERY AND POSSESSION. At Closing Sellers shall
deliver all Assets to Era. Sellers shall vacate the Real Property. AHI shall
deliver all Aircraft to either Anchorage International Airport or at Merrill
Field in Anchorage, at Era's election, except as otherwise expressly provided
in this Agreement. Buyer shall be entitled to possession of all Assets upon
Closing. Buyer will permit AHI reasonable use of 2 offices for up to 30 days
following Closing at no charge.
7. CONDITIONS TO CLOSING. Consummation of the transactions
contemplated by this Agreement is conditioned upon and subject to the
satisfaction of the following conditions, each of which may be waived in
writing by Buyer: (a) State of Alaska unconditional consent and approval of
the Assignments of Lease Agreement between BIJO and Buyer with respect to the
Real Property, in accordance with the current terms and conditions of the
leases; (b) Sellers providing all reasonable assistance and cooperation so that
Buyer may make thorough inspections of all the Assets requested or required by
Buyer; (c) Buyer's satisfaction with results of its inspections of the Assets;
(d) Sellers have delivered to Buyer respective corporate and partnership (i)
resolutions authorizing this Agreement and its obligations, and (ii)
appropriate certificates of incumbency, all satisfactory to Buyer; and (e)
removal of all aircraft including the C-123 from Lot 6-B.
8. INSURANCE AND RISK OF LOSS. Risk of loss or other
damage to the Assets by accident, theft, disappearance, fire, storm, vandalism
or other event between August 18, 1995, and Closing shall be and is assumed by
Sellers, according to their respective interests. In the case of the Real
Property, BIJO shall maintain Commercial Property Insurance to cover all risks
of physical loss or damage on the buildings in a total amount of $2,500,000.00
until Closing. If any such loss or damage occurs prior to Closing Sellers
shall have the option to replace or repair the destroyed or damaged property to
the satisfaction of Buyer prior to Closing. In the absence of such
satisfactory replacement or repair, Buyer shall have the option to (i) accept
Adjustments as set forth in
Asset Purchase and Sale Agreement page 5 of 57
<PAGE> 7
Attachment I or (ii) unconditionally revoke this Agreement with no further
obligation to Sellers. In the case of the Real Property, BIJO shall not be
required to replace or repair the property; and, in lieu of Adjustments, Buyer
shall have the option to accept BIJO's assignment of the proceeds of BIJO's
insurance, or unconditionally revoke this Agreement as provided in phrase (ii)
immediately above.
Subject always to the provisions of Sections 12 and 14
below, upon Closing all risk of loss of or damage to the Assets shall be
assumed by Buyer. Buyer shall insure the individual Aircraft for hull loss in
the amounts of the respective Insured Values set forth in Attachment B and for
aircraft liability when operated by Era in the amount of $50 million, until the
Formula Value for each Aircraft is paid as provided in subsection 4(b) above.
AHI shall be named as an additional insured as respects the liability policy
and as an additional insured and loss payee as respects the hull policy to the
extent of the Formula Values as its interests may appear. Both policies shall
waive subrogation to the extent of liabilities assumed by Buyer under this
Agreement, as respects AHI, and shall not be materially altered or amended nor
canceled without 30 days prior written notice to AHI.
9. NONCOMPETITION. At Closing Sellers and Guarantor shall
execute and deliver a Covenant Not to Compete in the form of Attachment L.
10. UPDATED INVENTORY. AHI shall provide Buyer an updated
inventory of Parts and Equipment as of November 30, 1995, and a final inventory
as of Closing delivered no later than December 22, 1995, or seven days
following Closing, whichever occurs later. Such inventories shall be certified
as complete and accurate as of their effective dates and times.
11. TERMINATION. Buyer shall have the unconditional right
to revoke this Agreement: (a) If Closing has not occurred for any reason by
December 31, 1995; (b) If any breach by AHI or BIJO of this Agreement has not
been cured by Sellers or expressly waived by Buyer prior to Closing; (c) If
the results of Buyer's inspections of the Assets are not satisfactory to Buyer;
or (d) For the reasons set forth in Section 8 above. In the event this
Agreement is revoked as provided in this Section 11, the parties shall bear
their own respective costs and expenses incurred and shall have no further
liability under this Agreement.
12. INDEMNITY BY SELLERS.
a. The only liabilities assumed by Buyer under this
Agreement are the obligations of the respective Sellers to
perform under the leases, helicopter service contracts,
maintenance agreements and other Permits listed in Attachments
A and F. Except for liabilities and obligations which result
from the condition of the Real Property which exists at the
time of Closing, Buyer does not agree to pay, perform, or
discharge, and shall not be responsible for, and expressly
disclaims any liability for, any other liabilities or
obligations of AHI or BIJO, whether accrued, absolute,
contingent or otherwise, whether known or not known by the
respective Sellers on the date of Closing, which:
Asset Purchase and Sale Agreement page 6 of 57
<PAGE> 8
1. result from any event or condition occurring or
existing prior to the date of Closing, or
2. result from liability for defective performance of
any contract or Permit by AHI or BIJO or either's
default under any contract or Permit occurring prior to
Closing, or
3. result from any actual or threatened litigation or
other claims of third parties, including without
limitation governmental entities, whether arising in
contract or tort or claims of violations of law or
permits, relating to the Assets, for occurrences prior
to or existing at the time of Closing, or
4. result from any taxes, similar obligations or
assessments attributable to the Assets or the employees
of AHI or BIJO, or
5. result from either of AHI's or BIJO's directors,
officers, employees, consultants, contractors or
shareholders, or any claims by any of them relating to
or arising out of (i) their employment (including any
modification or termination thereof) by either Seller,
(ii) any employment contract, (iii) any pension or other
benefit or welfare liabilities of either Seller, or (iv)
any severance, transaction bonus, supplemental contracts
or other bonus or incentive compensation plans of either
Seller.
b. Except as expressly otherwise provided for in the first
sentence of subsection 12(a) above, AHI shall defend and
indemnify Buyer and hold Buyer harmless from and against any
and all obligations, claims, demands, damages, deaths,
injuries to person, property or natural resources, losses,
liens, liabilities, penalties, fines, lawsuits, other judicial
or administrative proceedings of any kind, deficiencies, costs
and expenses of any kind and nature (including reasonable
attorneys' fees, consultants' fees, experts' fees and
disbursements) ("Liabilities") which result from conditions
that exist or events that occur, or were associated with AHI's
business operations or the AHI Assets, at or prior to the
Closing, or result from any breach of any of the
representations, warranties, covenants, terms, conditions,
commitments or agreements of AHI contained in this Agreement.
c. At or before Closing, AHI shall cause Buyer to be named
as an additional insured on its aircraft public liability,
hangar keeper's, premises, products and completed operations
insurance covering conditions that exist or events that occur
before Closing and for events or occurrences otherwise related
to AHI's obligations to Buyer under this Agreement, and such
insurance shall be primary to Buyer's insurance, shall waive
subrogation in favor of Buyer, shall be endorsed to provide
contractual liability coverage, and shall warrant Buyer has no
operational interest. As respects those operations which
occurred prior to Closing, AHI shall keep its products and
completed operations policies in force for a period of three
years from the date of final payment on the Note; and except
as set forth in this sentence, AHI shall have no obligation to
maintain any insurance policies beyond the date of Closing.
This
Asset Purchase and Sale Agreement page 7 of 57
<PAGE> 9
subsection 12(c) shall in no way limit the obligations of AHI
to defend and indemnify Buyer pursuant to this Section 12.
d. AHI shall defend and indemnify Buyer and hold Buyer
harmless from and against any and all obligations, claims,
demands, damages, deaths, injuries to person, property or
natural resources, losses, liens, liabilities, penalties,
fines, lawsuits, other judicial or administrative proceedings
of any kind, deficiencies, costs and expenses of any kind and
nature (including reasonable attorneys' fees, consultants'
fees, experts' fees and disbursements) ("Environmental
Liabilities") which result from any and all use, storage,
disposal, generation, transportation, release, suspected
release, presence or suspected presence of toxic or hazardous
substances or any Material of Environmental Concern (as such
terms are defined by any applicable federal, state or local
governmental law, rule, ordinance or regulation pertaining to
conservation or protection of the environment, environmental
regulation, contamination or cleanup ("Environmental Laws"))
on Lot 5-B of the Real Property on or before the date of
Closing, including without limitation costs associated with
(i) investigation, removal, disposal and remediation of
contamination, and (ii) removal of fuel and lubricant oil
tanks, contaminants and hazardous substances. AHI shall pay
all costs and penalties arising out of or relating to any
remediation or cleanup required as the result of activities or
conditions occurring or existing on or before the date of
Closing. Buyer shall pay all costs and penalties arising out
of or relating to any remediation or cleanup required as the
result of activities occurring after the date of Closing.
Guarantor, Sellers and Buyer shall to the extent reasonably
requested by the other cooperate in any required remediation,
make employees available to meet the environmental regulatory
officials if, when and as requested, and provide reasonable
access to or copies of such documents, records and other data
as any party may reasonably request in connection with any
required remediation or cleanup. Guarantor's and AHI's
obligations under this subsection 12(d) shall be limited to
any required remediation or cleanup commenced within three
years after Closing and in maximum amount to $300,000.
e. Except as expressly otherwise provided for in the first
sentence of subsection 12(a) above, BIJO shall indemnify Buyer
against all Liabilities which result from any material breach
of any of the representations, warranties, covenants, or
commitments of BIJO contained in this Agreement, excluding
however, any claims, demands, and Liabilities, for personal
injury, death and/or property damage which accrue after
Closing and which are attributable to any defects or condition
of any building or asset located upon or erected upon the BIJO
leased premises; and Buyer shall give BIJO reasonable notice
of any such claims for indemnity and an opportunity to
participate in the defense.
f. The only obligation of Sellers to defend and indemnify
the Buyer from environmental liabilities is found in
subsection 12(d) above. Buyer is expressly taking the risk
that the costs of any
Asset Purchase and Sale Agreement page 8 of 57
<PAGE> 10
potential environmental liability may exceed the limitations
stated in subsection 12(d).
13. CLOSING, COSTS AND APPORTIONMENTS.
a. LEGAL FEES. Guarantor, Sellers and Buyer shall each
bear their own legal fees.
b. CLOSING. Closing of the purchase and sale shall occur
at a mutually convenient time on or about December 15, 1995,
in Anchorage, Alaska. Buyer may extend the date of Closing
for such period of time as may be required, if State of Alaska
consent and approval of the Assignments of Lease Agreement
have not been obtained as provided herein, however Guarantor
and/or AHI have the unconditional right to terminate this
Agreement if Closing has not occurred by 5pm, December 31,
1995. If this termination is exercised, all parties shall be
responsible for their own legal fees and other expenses with
no further recourse against another party.
c. TITLE INSURANCE POLICY. The premium costs for the
owner's title insurance policy for Buyer's benefit will be
borne by BIJO.
d. TITLE COMPANY CLOSING FEES, RECORDING AND OTHER CLOSING
COSTS. Title company closing fees, registration, recording,
filing and other closing costs will be borne equally between
Buyer and Sellers. Taxes for 1995, current annual Real
Property lease payments to the State of Alaska and sublease
payments from Aviall, and similar other sublease and assigned
agreement payments, will be prorated as of the date of
Closing. There will be no brokerage commissions or finders
fees arising out of this transaction and each party hereto
shall indemnify the other party or parties to the extent any
such commissions or fees are attributable to the indemnifying
party.
14. GUARANTOR AND SELLERS REPRESENTATIONS AND WARRANTIES.
Guarantor and Sellers, as their interests appear, represent and warrant to
Buyer that the following are true and correct on and as of the date of this
Agreement and will be true and correct through the date of Closing as if made
on and as of that date. For purposes of this Section 14, whenever a statement
regarding the existence or absence of facts in this Agreement is qualified by a
phrase such as "to the best of Seller's knowledge" it is intended by the
parties that the only information to be attributed to such person or entity is
information actually known to (a) a partner in the case of BIJO, or (b) in the
case of a corporation an officer or senior management official to include the
Director of Operations and Director of Maintenance, as a result of his
employment, but no such officer or senior management official shall be required
to make inquiries of any other person unless such additional inquiries would be
deemed to be necessary by a reasonable person in the ordinary course of
business:
a. Guarantor and AHI, each, is a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and is qualified
to do business and is in good standing in the State of Alaska;
BIJO is an Alaska general
Asset Purchase and Sale Agreement page 9 of 57
<PAGE> 11
partnership duly organized and validly existing, and is
qualified to do business and in good standing in Alaska. Each
of the Sellers has the power and authority to own, lease and
operate the assets now owned, leased and operated by it. BIJO
has delivered to Buyer complete and correct copies of its
partnership agreement, as amended and in effect on the date of
this Agreement and the date of Closing.
b. Guarantor and each Seller may execute, deliver and
perform this Agreement without the necessity of obtaining any
consent, approval, authorization or waiver or giving any
notice or otherwise, except for the consent and approval of
the State of Alaska to the Assignments of Lease Agreement
expressly described in this Agreement, and except as otherwise
expressly provided herein.
c. Guarantor and each Seller has the power to enter into
this Agreement and carry out its respective obligations
hereunder. This Agreement has been duly authorized, executed
and delivered by Guarantor and each Seller, as its interests
appear, and constitutes the legal, valid and binding
obligations of, and is enforceable against, Guarantor and each
Seller.
d. The execution, delivery and performance of this
Agreement does not and will not constitute a violation of
Guarantor's or either Seller's articles of incorporation, as
amended, or its bylaws, as amended, or its partnership
agreement, as amended, or result in any lien against the
Assets, except as otherwise expressly provided herein;
constitute a violation of any applicable statute, judgment,
order, decree or regulation or rule relating to Guarantor or
either Seller or its respective Assets; or conflict with,
constitute a breach or default under, or give rise to any
right of termination, cancellation or acceleration under, any
term or provision of any material contract, agreement, lease,
mortgage, deed of trust, commitment, license, franchise,
permit, authorization or any other instrument or obligation to
which Guarantor or either Seller is a party or by which its
respective assets are bound; or constitute any event which
with notice, lapse of time, or both, would result in any such
conflict, breach, default or right.
e. Without limiting the foregoing provisions of this
Section 14, the execution, delivery and performance of this
Agreement and consummation of the transactions contemplated
herein, have been duly authorized and approved by the
respective boards of directors and partners.
f. All Assets that are real or tangible personal property
held by each Seller under leases are held under lease
agreements that are valid and binding and in full force and
effect. For each Seller which has a current lease, such
leases are not in default, and no notice of alleged default
has been received by such Seller, and no party thereto is in
default or alleged to be in default thereunder. For each
Seller which has such a lease, none of the rights under any
such lease will be impaired by the consummation of the
transactions contemplated by this Agreement, assuming that the
consent and
Asset Purchase and Sale Agreement page 10 of 57
<PAGE> 12
approval of the State of Alaska to the Assignments of Lease
Agreement related to the Real Property is obtained.
g. To the best of the respective Seller's knowledge, there
are no claims, actions, suits or proceedings, or governmental
or administrative investigations pending or threatened against
the respective Seller or any of its Assets.
h. The Permits and Other Assets listed on Attachment F and
Attachment G, constituting a part of the Assets, are valid and
binding and in full force and effect, have not been amended or
supplemented in any manner or respect and upon consummation of
the transactions contemplated by this Agreement will continue
to be valid, in full force and effect and enforceable by Buyer
in accordance with their respective terms. There are no
defaults by AHI thereunder and AHI knows of no defaults
thereunder by any other party thereto, and no event has
occurred that with the lapse of time or action or inaction by
any party thereto would result in a violation thereof or a
default thereunder. None of the rights to the AHI Assets or
under the Permits or Other Assets will be impaired by the
consummation of the transactions contemplated by this
Agreement, and all such rights will inure to and be
enforceable according to their respective terms by Buyer after
the date of Closing without the authorization, consent,
approval, permit or license of, or filing with, any other
person. None of the rights to the AHI Assets or under the
Permits or Other Assets referenced in this subsection 14(h)
have been or are threatened to be revoked, canceled, suspended
or modified.
i. The respective Sellers, to the best of their knowledge,
have delivered to Buyer complete copies of all Permits,
As-Built Drawings and plans and specifications of the
improvements to the Real Property, and other documents and
records related to the Assets.
j. To the best of Guarantor's, BIJO's and AHI's knowledge:
no BIJO Asset is or has been in violation of, or is subject to
a remedial or reporting obligation under, any Environmental
Laws; there are no underground storage tanks, pits, sumps or
impoundments, as defined under any applicable Environmental
Laws, on any of the Real Property, except a 300 gallon
underground storage tank on Lot 5-B; Sellers have received no
notice of any violation or non-compliance with, or remedial
obligation under Environmental Laws (except the removal of a
gasoline storage tank on Lot 5-B, which was done in the summer
of 1992); and there are no outstanding injunctions, decrees,
orders, judgments, lawsuits, claims, proceedings or
investigations pending or threatened under Environmental Laws
relating to the Real Property. However this section as it
relates to BIJO does not put any affirmative duty on BIJO to
perform any environmental audit, inspection or make any
inquiry other than what is presently known by the partners of
BIJO. BIJO has furnished to Buyer copies of documents it has
relating to the environmental conditions on the property, but
BIJO disclaims any expertise in such matters, and does not
warrant that the
Asset Purchase and Sale Agreement page 11 of 57
<PAGE> 13
information contained in such copies of documents is true or
accurate.
k. Guarantor and each Seller is not insolvent, nor will
such party be rendered insolvent by the transactions
contemplated by this Agreement.
l. All taxes on the Assets owned by each Seller which have
come due have been paid.
m. The tangible AHI Assets are in good operating condition,
order and repair, subject to ordinary wear and tear, and have
been maintained in accordance with standard industry practice,
and conform in all material respects with all applicable legal
requirements. The Aircraft and Parts are airworthy, except
for such Parts as are indicated otherwise by appropriate
maintenance or other inventory or work in progress records.
The aircraft maintenance records shall be accurate as of
closing.
n. To the best of BIJO's knowledge, improvements to the
Real Property and fixtures did not violate applicable
building, fire or other applicable codes at the time
constructed, modified, installed, repaired or reconstructed.
However this statement as it relates to BIJO does not put any
affirmative duty on BIJO to perform any inspection or make any
inquiry other than what is presently and actually known by the
partners of BIJO. BIJO has furnished to Buyer copies of
documents it has relating to the construction of the building,
but BIJO disclaims any expertise in such matters, and does not
warrant that the information contained in such copies of
documents is true or accurate.
o. There are no assets of the kinds contemplated to be sold
under this Agreement that have not been fully disclosed to
Buyer and that are not in fact being sold under this
Agreement.
p. BIJO has no employees and no employee pension plans; AHI
does not participate in any Multi- employer Pension Plan and
is subject to no employee collective bargaining agreement.
15. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer
represents and warrants to Sellers that the following are true and correct on
and as of the date of this Agreement and will be true and correct through the
date of Closing as if made on and as of that date:
a. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Washington
and is qualified to transact business and is in good standing
in the State of Alaska. Buyer has the corporate power and
authority to own, lease or operate all properties and assets
now owned, leased or operated by it and to carry on its
business as now conducted.
b. Buyer may execute, deliver and perform this Agreement
without the necessity of obtaining any consent, approval,
authorization or waiver or giving any notice or otherwise,
except for
Asset Purchase and Sale Agreement page 12 of 57
<PAGE> 14
the consent and approval of the State of Alaska to the
Assignments of Lease Agreement related to the Real Property
expressly contemplated by this Agreement.
c. The execution, delivery and performance of this
Agreement do not and will not constitute a violation of the
articles of incorporation, as amended, or the bylaws, as
amended, of Buyer, or constitute a violation or default under
any contract to which Buyer is a party.
d. The execution, delivery and performance of this
Agreement have been duly authorized by Buyer, and this
Agreement constitutes the legal, valid and binding obligation
of Buyer.
e. Buyer is not, nor will the execution of this Agreement
cause Buyer to become, insolvent.
16. GUARANTOR GUARANTY. Guarantor unconditionally
guarantees each and every obligation of AHI under this Agreement as set forth
in Attachment M.
17. LAWS OF ALASKA, AMBIGUITIES, GOOD FAITH PERFORMANCE.
Every provision of this Agreement shall be construed and enforced in accordance
with the laws of the State of Alaska. The canon of contract interpretation
that ambiguities, if any, in a writing be construed against the drafter shall
not apply to this Agreement. The parties agree to do such things and execute
such further documents and assurances, including without limitation title or
escrow closing instructions, as may be necessary or advisable in order to carry
out the terms and conditions of this Agreement. Whenever the context so
requires, the singular of Sellers includes the plural and the plural of Sellers
includes the singular.
18. ACTIONS, JURISDICTION AND VENUE. If any of Guarantor,
AHI, BIJO or Buyer fails or refuses to comply with the conditions agreed to by
it or to perform any of its respective obligations hereunder, any legal action
or other proceeding for the enforcement of this Agreement or because of an
alleged dispute, breach, default or misrepresentation in connection with this
Agreement or the transactions contemplated hereby, shall be maintained in the
appropriate court located in Anchorage, Alaska. The prevailing party in any
such action or proceeding shall be entitled to recover full reasonable
attorneys fees and costs in addition to any other relief to which it may be
entitled.
19. ASSIGNMENT, MODIFICATION, ENTIRE UNDERSTANDING OF
PARTIES. The rights or obligations of Guarantor or either Seller hereunder
shall not be assigned without the prior written consent of Buyer. Any
purported assignment without such prior written consent shall be void.
This Agreement may be modified with the mutual consent
of all the parties; provided, however, that no such modification shall be valid
or binding unless such modification is in writing, duly dated and signed by
Guarantor, Sellers and Buyer. This Agreement, with its Attachments, which are
incorporated by reference as though set forth in full herein, constitutes the
entire agreement between the parties. No party shall be bound by any other
terms, conditions, statements or representations, oral or written, not herein
contained.
Asset Purchase and Sale Agreement page 13 of 57
<PAGE> 15
Each party hereby acknowledges that in executing this Agreement, it has not
been induced, persuaded or motivated by any promise or representation made by
any other party unless expressly set forth herein. All previous negotiations,
statements, and prior offers by the parties or their representatives, including
the document signed the 18th day of August 1995 by Era, AHI and BIJO, are
superseded by and merged into this Agreement.
20. WAIVER. Any waiver of any term or condition of this
Agreement, or any amendment of this Agreement, shall be effective only if in
writing and signed by the waiving party. A waiver of breach or failure to
enforce any of the terms or conditions of this Agreement shall not in any way
affect, limit or waive a party's rights at any other time to enforce strict
compliance thereafter with every term or condition of this Agreement.
21. SURVIVAL. All warranties, covenants, representations
and obligations contained in this Agreement or in any certificate, assignment,
document or other instrument delivered in connection herewith shall survive the
Closing and will not be affected by any investigation, verification, or
approval by any party or anyone on behalf of any party.
22. ACCESS TO RECORDS AND OPERATIONS. Between the date of
this Agreement and Closing: (a) Each Seller shall give Buyer, its agents and
representatives, access to its respective Assets and related records and
furnish such information with respect to Sellers and the Assets as Buyer shall
from time to time reasonably request; (b) AHI and BIJO shall operate only in
the ordinary course of their respective businesses and in compliance with all
applicable laws and regulations; (c) Sellers shall not enter into any
transaction or contract, or amend or terminate any transaction or contract,
substantially affecting the value of any Asset, normal wear and tear excepted;
(d) Each Seller shall cause the tangible Assets owned by it to be maintained
and repaired in accordance with past practices of Sellers, except that Sellers
shall not contract with any third party or parties for repair or service of any
Assets without Buyer's written consent, which consent shall not be unreasonably
withheld; (e) Each Seller shall cause its respective Assets to be operated and
maintained so that the representations and warranties of such Seller contained
herein shall continue to be true and correct on and as of the date of Closing;
(f) Each Seller and Buyer shall advise the others promptly in writing of any
condition or circumstance, known to it, occurring from the date of this
Agreement to and including the date of Closing that would cause the respective
representations and warranties of the respective Seller or Buyer contained
herein or contemplated by this Agreement to become untrue in any material
respect.
23. CONSENTS. Sellers and Buyer shall use their respective
best efforts to obtain the consent and approval of the State of Alaska to the
Assignments of Lease Agreement and any other required consents relating to the
transactions contemplated by this Agreement.
24. SURRENDER. Within 30 days after Closing, AHI shall
surrender its Air Carrier Operating Certificate to the Federal Aviation
Administration.
25. NOTICE. Any notice required or contemplated under this
Agreement shall be in writing and shall be delivered personally or by telex,
facsimile, United States mail (postage prepaid), or express courier or delivery
service, as follows:
Asset Purchase and Sale Agreement page 14 of 57
<PAGE> 16
If to BIJO:
P.O. Box 220554
Anchorage, Alaska 99522
Attention: Rex Bishopp
Phone: (907) 243-1097
If to AHI:
Alaska Helicopters, Inc.
P.O. Box 3500
Portland, Oregon 97208
Attention: President
Phone: (503) 678-1222
Facsimile: (503) 678-5841
or physical address:
Aurora State Airport
Aurora, Oregon 97002
If to Guarantor:
Columbia Helicopters, Inc.
P.O. Box 3500
Portland, Oregon 97208
Attention: President
Phone: (503) 678-1222
Facsimile: (503) 678-5841
or physical address:
Aurora State Airport
Aurora, Oregon 97002
If to Buyer:
Era Aviation, Inc.
6160 South Airpark Drive
Anchorage, Alaska 99502
Telephone: (907) 248-4422
Facsimile: (907) 266-8350
Attention: President
or at such other address as the respective party shall have designated by
written notice, as provided in this Section 25, to the other parties. Notices
shall be deemed given when received or upon the date of attempted delivery
where delivery is refused.
26. SIGNATURES. The signatures of Guarantor, AHI, BIJO and
Buyer in the spaces hereinafter provided shall indicate their respective
concurrence and agreement with the terms and conditions set forth in this
Agreement consistent with their respective obligations. By execution of this
Agreement, each of the parties hereto further represents and warrants that all
respective corporate or partnership actions necessary for execution of this
Agreement have been duly and properly taken.
Asset Purchase and Sale Agreement page 15 of 57
<PAGE> 17
IN WITNESS WHEREOF, Guarantor, Sellers and Buyer have executed this
Agreement as of the date first set forth above.
GUARANTOR: BUYER:
Columbia Helicopters, Inc., Era Aviation, Inc.,
an Oregon corporation a Washington corporation
By: /s/ MICHAEL A. FAHEY By: /s/ JACK BIRMINGHAM
---------------------------------- -----------------------------
Title: V.P. Finance Jack Birmingham,
--------------------------------- Vice President
Oregon Drivers License #1047337 5/17/97 Airline Employee I.D. Code #01940
By: /s/ RICHARD H. HUMPHREYS
-----------------------------------
Title: Secretary
-------------------------------
Oregon Drivers License #2023573 7/20/98
SELLERS:
Alaska Helicopters, Inc.,
an Alaska corporation
By: /s/ MICHAEL A. FAHEY
-------------------------------------
Title: Treasurer
-------------------------------
Oregon Drivers License #1047337 5/17/97
By: /s/ RICHARD H. HUMPHREYS
-----------------------------------
Title: Secretary
-------------------------------
Oregon Drivers License #2023573 7/20/98
BIJOS Enterprises,
a/k/a BIJO Enterprises,
an Alaska general partnership
By: /s/ REX I. BISHOPP By: /s/ ELLA BLADE BY REX I. BISHOPP
---------------------------------- ---------------------------------
Title: PARTNER Title: Attorney in Fact
------------------------------ ------------------------------
ADL 0260010 6/6/99
By: /s/ RUTH M. BISHOPP By: /s/ CLINTON O. JOHNSON
---------------------------------- ---------------------------------
Title: PARTNER Title: PARTNER
------------------------------ ------------------------------
ADL 0420112 6/9/99 ADL 0662978 4/16/99
By: /s/ LYNN C. JOHNSON By: /s/ THOMAS CRAIG
---------------------------------- ---------------------------------
Title: PARTNER Title: PARTNER
------------------------------ ------------------------------
ADL 0381865 9/37/00 ADL 0305957 5/25/96
By: /s/ GARY BLADE BY REX.I. BISHOPP By: /s/ EILEEN M. CRAIG
--------------------------------- ---------------------------------
Title: Attorney in Fact Title: PARTNER
------------------------------- ------------------------------
ADL 0253620 3/29/99
Asset Purchase and Sale Agreement page 16 of 57
<PAGE> 18
BIJOS Enterprises,
a/k/a BIJO Enterprises,
an Alaska general partnership
(Continued)
By: /s/ STEVEN R. SMITH
----------------------------
Title: PARTNER
-------------------------
ADL 0381072 5/22/00
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
The foregoing instrument was acknowledged before me this 5th day of
December, 1995, by Michael A. Fahey, and Richard H. Humphreys, Jr. who are the
Vice President Finance and Secretary, respectively, of Columbia Helicopters,
Inc., an Oregon corporation, on behalf of the corporation.
/s/ SUSAN M. RUNYON
---------------------------
NOTARY PUBLIC FOR ALASKA
My commission expires: November 21, 1997
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
The foregoing instrument was acknowledged before me this 5th day of
December, 1995, by Michael A. Fahey, and Richard H. Humphreys, Jr., who are
the Treasurer and Secretary, respectively, of Alaska Helicopters, Inc., an
Alaska corporation, on behalf of the corporation.
/s/ SUSAN M. RUNYON
----------------------------
NOTARY PUBLIC FOR ALASKA
My commission expires: November 21, 1997
Asset Purchase and Sale Agreement page 17 of 57
<PAGE> 19
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
The foregoing instrument was acknowledged before me this 5th day of
December, 1995, by Rex. I. Bishopp, Ruth M. Bishopp, Lyan C. Johnson, Gary
Blade, Ella Blade, Clinton O. Johnson, Thomas Craig, Eileen M. Craig, Steven R.
Smith, partners (or agents) on behalf of BIJOS Enterprises, a/k/a BIJO
Enterprises, an Alaska general partnership.
/s/ SUSAN M. RUNYON
---------------------------
NOTARY PUBLIC FOR ALASKA
My commission expires: November 21, 1997
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
The foregoing instrument was acknowledged before me this 5th day of
December, 1995, by Jack Birmingham, who is Vice President of Era Aviation,
Inc., a Washington corporation, on behalf of the corporation.
/s/ SUSAN M. RUNYON
---------------------------
NOTARY PUBLIC FOR ALASKA
My commission expires: November 21, 1997
Asset Purchase and Sale Agreement page 18 of 57
<PAGE> 20
INDEX OF ATTACHMENTS
A BIJO Assets, Real Property and Other Assets
A-1 Forms of Assignments of Lease Agreements
A-2 Copies of the Airport Lease Agreements
B Aircraft
C Parts
D Vehicles
E Equipment
F Permits
G Other Assets
H Excluded Assets
I Adjustments to Purchase Price
J Note
K Security Agreement
L Covenant Not to Compete
M Guaranty Agreement
Asset Purchase and Sale Agreement page 19 of 57
<PAGE> 21
ATTACHMENT A
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(A)
BIJO ASSETS, REAL PROPERTY AND OTHER ASSETS
The following constitute BIJO Assets under Section 2 of the Asset Purchase
and Sale Agreement, to which this document is attached: All Real Property,
including appurtenances, as owned or possessed by BIJO on August 18, 1995,
excepting only those items listed on Attachment H, and in the same condition as
on August 18, 1995, normal wear and tear excepted (premature failure or damage
do not constitute normal wear and tear), including without limitation the
following (all dimensions are approximate):
1. Leasehold for Lot 5-B, Lease No. ADA-02970, including 121,589
square feet.
2. Leasehold for Lot 6-B, Lease No. ADA-03722, including 151,441
square feet.
3. Hangar, 100' X 120', built 1980, 12,000 square feet.
4. Office, 24' X 120', two story, built 1980, 4,800 square feet.
5. Office addition, 25' X 80', built 1989, 2,000 square feet.
6. Warehouse addition, 20' X 111', built 1989, 2,200 square feet.
7. Shed, 336 square feet.
8. Generator building, 160 square feet.
9. Five stall garage, 2,400 square feet.
10. Affixed equipment, such as overhead cranes, pumps, and
generator.
11. Overhead fire extinguishing systems and equipment.
12. The Aviall Sublease dated February 15, 1987, as amended by
extensions dated May 10, 1990, January 18, 1995 and May 30, 1995 (currently
expected to terminate December 31, 1995).
13. All maps, as-builts, plans, specifications, blueprints, designs,
and maintenance and service records and manuals relating to the Real Property.
14. All manufacturers' warranties related to BIJO Assets.
Asset and Sale Agreement page 20 of 57
Attachment A
<PAGE> 22
BILL OF SALE
BIJO ASSETS, REAL PROPERTY AND OTHER ASSETS
For and in consideration of $10 and Other Valuable Consideration, receipt
and sufficiency of which are hereby acknowledged, the undersigned, BIJOS
Enterprises a/k/a BIJO Enterprises, an Alaska general partnership, owner of
full legal and beneficial title of the Items described as follows:
All BIJO Assets listed in paragraphs 3 through 14, Attachment A,
BIJO Assets, Real Property and Other Assets, to that certain Asset
Purchase and Sale Agreement, made and entered by and among BIJOS
Enterprises and Era Aviation, Inc. and others as of December 5,
1995, a true and correct copy of which Attachment A, BIJO Assets,
Real Property and Other Assets, is attached hereto as Exhibit A
and incorporated by this reference as though set forth in full in
this paragraph;
does sell such Assets as is where is and does this __ day of December, 1995,
hereby sell, grant, transfer and deliver all rights, titles and interests in
and to such Items unto:
Era Aviation, Inc.
6160 South Airpark Drive
Anchorage, Alaska 99502
and to its successors and assigns, to have and to hold singularly the said
Items forever, and warrants the good and marketable titles thereof, free and
clear of all liens and encumbrances, and that it has full right and power to
sell the same and will defend the same against any claims and demands of other
persons.
IN TESTIMONY WHEREOF I have set my hand and seal this __ day of December,
1995.
Seller:
BIJOS Enterprises,
a/k/a BIJO Enterprises,
an Alaska general partnership
By: _____________________________
Rex I. Bishopp,
Managing General Partner
Asset Purchase and Sale Agreement page 21 of 57
Attachment A
<PAGE> 23
ATTACHMENT A-1
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 5(A)
ASSIGNMENTS OF AIRPORT LEASE AGREEMENTS
ASSIGNMENT OF LEASE AGREEMENT
ADA-02970
Know all men by these presents that BIJOS Enterprises, a/k/a
BIJO Enterprises, an Alaska general partnership, whose address is P.O. Box
220554, Anchorage, Alaska 99522, hereinafter called the Assignor, in
consideration of One Dollar ($1) and other good and valuable consideration paid
by Era Aviation, Inc., a Washington corporation, hereinafter called the
Assignee, whose address is 6160 South Airpark Drive, Anchorage, Alaska 99502,
does hereby assign, transfer and set over to the Assignee all of the Assignor's
right, title, and interest in and to that certain Lease Agreement dated August
13, 1976, known as Lease Agreement ADA-02970 as amended by Supplement Nos. 1-7,
and the leasehold interests therein described, which covers the following
described real property situated in the Anchorage Recording District, Third
Judicial District, State of Alaska:
Lot Five "B" (5B), Block Eighteen (18), on the Anchorage
International Airport, as shown on the unrecorded plat on file
with the State of Alaska, Department of Transportation and Public
Facilities, Anchorage International Airport, Division of Airport
Leasing;
and, warrants the term of the leasehold is until August 15, 2011, and further
warrants the same free and clear of all liens and encumbrances, except
reservations, exceptions, restrictions and easements of record, and subject to
that certain sublease between Aviall and Assignor.
The effective date of this assignment is December __, 1995.
ASSIGNOR:
BIJOS Enterprises,
a/k/a BIJO Enterprises,
an Alaska general partnership
By: ___________________________________________
Name: _____________________________________
Title: ____________________________________
Asset Purchase and Sale Agreement page 22 of 57
Attachment A-1
<PAGE> 24
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on this __ day of December, 1995,
before me personally appeared ____________, known to me and known to be the
_______________ of BIJOS Enterprises, a/k/a BIJO Enterprises, an Alaska general
partnership, which executed the foregoing instrument, and he acknowledged to me
that he signed the same for and on behalf of this partnership and that he is
fully authorized to do so.
IN WITNESS WHEREOF, I have set my hand and affixed my official
seal the day and year written above.
__________________________________
NOTARY PUBLIC IN AND FOR ALASKA
My Commission Expires: __________
ACCEPTANCE OF ASSIGNMENT
Era Aviation, Inc., as Assignee, accepts the foregoing
Assignment of Lease Agreement ADA-02970, as amended by Supplement Nos. 1-7, and
the leasehold interests therein described, and agrees to keep and perform all
terms, conditions, covenants and provisions of such Lease Agreement. The
effective date of this acceptance is December __, 1995.
ASSIGNEE:
Era Aviation, Inc.,
a Washington corporation
By: __________________________________________
Charles W. Johnson
President
Asset Purchase and Sale Agreement page 23 of 57
Attachment A-1
<PAGE> 25
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
On this __ day of December, 1995, before me personally
appeared Charles W. Johnson, known to me to be the President of Era Aviation,
Inc., a Washington corporation, which executed the foregoing instrument, and he
acknowledged to me that he executed the same for and on behalf of this
corporation, and that he is fully authorized to do so.
IN WITNESS WHEREOF, I have set my hand and affixed my official
seal the day and year written above.
_________________________________
NOTARY PUBLIC IN AND FOR ALASKA
My Commission Expires: _________
CONSENT TO ASSIGNMENT
The State of Alaska, Department of Transportation and Public
Facilities, Anchorage International Airport, Lessor in Lease Agreement
ADA-02970, dated August 13, 1976, as amended by Supplement Nos. 1-7, by and
through its Chief of Leasing, consents to the foregoing Assignment of Lease
Agreement, ADA-02970, effective December __, 1995, assigning all right, title
and interest of the Assignor, Lessee BIJOS Enterprises, a/k/a BIJO Enterprises,
in such Lease Agreement to Assignee, Era Aviation, Inc., whose address is 6160
South Airpark Drive, Anchorage, Alaska 99502, and verifies that the subject
Lease Agreement is in full force and effect and valid and that to the State's
knowledge is not currently in default.
This consent is given subject to and providing that if there
is a conflict between Lease Agreement ADA- 02970, as amended by Supplement Nos.
1-7, and the Assignment or its underlying documents, Lease Agreement ADA-02970,
as amended by Supplement Nos. 1-7, governs, and unless specifically provided
otherwise in this consent, nothing in the Assignment or its
Asset Purchase and Sale Agreement page 24 of 57
Attachment A-1
<PAGE> 26
underlying documents will operate to grant the Assignee greater rights or
obligate the Lessor to greater obligations, than the respective rights and
obligations set out in Lease Agreement ADA-02970, as amended by Supplement Nos.
1-7.
The effective date of this consent is December __, 1995.
STATE OF ALASKA,
Department of Transportation and
Public Facilities
By: ___________________________________________
Diane E. Barth, Chief of Leasing,
Anchorage International Airport
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on this __ day of December, 1995,
before me, the undersigned, a Notary Public, in and for the State of Alaska,
duly commissioned and sworn, personally appeared Diane E. Barth, Chief of
Leasing, Anchorage International Airport, Department of Transportation and
Public Facilities, and she acknowledged to me that she executed the foregoing
instrument freely and voluntarily on behalf of the State of Alaska, Department
of Transportation and Public Facilities, for the uses and purposes therein set
forth and that she is authorized by said State of Alaska so to do.
IN WITNESS WHEREOF, I have set my hand and affixed my official
seal, the day and year first written above.
____________________________________
NOTARY PUBLIC IN AND FOR ALASKA
My Commission Expires: ____________
Asset Purchase and Sale Agreement page 25 of 57
Attachment A-1
<PAGE> 27
ASSIGNMENT OF LEASE AGREEMENT
ADA-03722
Know all men by these presents that BIJOS Enterprises, a/k/a
BIJO Enterprises, an Alaska general partnership, whose address is P.O. Box
220554, Anchorage, Alaska 99522, hereinafter called the Assignor, in
consideration of One Dollar ($1) and other good and valuable consideration paid
by Era Aviation, Inc., a Washington corporation, hereinafter called the
Assignee, whose address is 6160 South Airpark Drive, Anchorage, Alaska 99502,
does hereby assign, transfer and set over to the Assignee all of the Assignor's
right, title, and interest in and to that certain Lease Agreement dated March
19, 1979, known as Lease Agreement ADA-03722 as amended by Supplement Nos. 1-5,
and the leasehold interests therein described, which covers the following
described real property situated in the Anchorage Recording District, Third
Judicial District, State of Alaska:
Lot Six "B" (6B), Block Eighteen (18), on the Anchorage
International Airport, as shown on the unrecorded plat on file
with the State of Alaska, Department of Transportation and Public
Facilities, Anchorage International Airport, Division of Airport
Leasing;
and, warrants the term of the leasehold is until August 15, 2011, and further
warrants the same free and clear of all liens and encumbrances, except
reservations, exceptions, restrictions and easements of record, and subject to
that certain sublease between Aviall and Assignor.
The effective date of this assignment is December __, 1995.
ASSIGNOR:
BIJOS Enterprises,
a/k/a BIJO Enterprises,
an Alaska general partnership
By: ________________________________________
Name: _________________________________
Title: _________________________________
Asset Purchase and Sale Agreement page 26 of 57
Attachment A-1
<PAGE> 28
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on this __ day of December, 1995,
before me personally appeared ____________, known to me and known to be the
_______________ of BIJOS Enterprises, a/k/a BIJO Enterprises, an Alaska general
partnership, which executed the foregoing instrument, and he acknowledged to me
that he signed the same for and on behalf of this partnership and that he is
fully authorized to do so.
IN WITNESS WHEREOF, I have set my hand and affixed my official
seal the day and year written above.
__________________________________________
NOTARY PUBLIC IN AND FOR ALASKA
My Commission Expires: ____________
ACCEPTANCE OF ASSIGNMENT
Era Aviation, Inc., as Assignee, accepts the foregoing
Assignment of Lease Agreement ADA-03722, as amended by Supplement Nos. 1-5, and
the leasehold interests therein described, and agrees to keep and perform all
terms, conditions, covenants and provisions of such Lease Agreement. The
effective date of this acceptance is December __, 1995.
ASSIGNEE:
Era Aviation, Inc.,
a Washington corporation
By: _____________________________________
Charles W. Johnson
President
Asset Purchase and Sale Agreement page 27 of 57
Attachment A-1
<PAGE> 29
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
On this __ day of December, 1995, before me personally
appeared Charles W. Johnson, known to me to be the President of Era Aviation,
Inc., a Washington corporation, which executed the foregoing instrument, and he
acknowledged to me that he executed the same for and on behalf of this
corporation, and that he is fully authorized to do so.
IN WITNESS WHEREOF, I have set my hand and affixed my official
seal the day and year written above.
____________________________________
NOTARY PUBLIC IN AND FOR ALASKA
My Commission Expires: ____________
CONSENT TO ASSIGNMENT
The State of Alaska, Department of Transportation and Public
Facilities, Anchorage International Airport, Lessor in Lease Agreement
ADA-03722, dated March 19, 1979, as amended by Supplement Nos. 1-5, by and
through its Chief of Leasing, consents to the foregoing Assignment of Lease
Agreement, ADA-03722, effective December __, 1995, assigning all right, title
and interest of the Assignor, Lessee BIJOS Enterprises, a/k/a BIJO Enterprises,
in such Lease Agreement to Assignee, Era Aviation, Inc., whose address is 6160
South Airpark Drive, Anchorage, Alaska 99502, and verifies that the subject
Lease Agreement is in full force and effect and valid and that to the State's
knowledge is not currently in default.
This consent is given subject to and providing that if there
is a conflict between Lease Agreement ADA- 03722, as amended by Supplement Nos.
1-5, and the Assignment or its underlying documents, Lease Agreement ADA-03722,
as amended by Supplement Nos. 1-5, governs, and unless specifically provided
otherwise in this consent, nothing in the Assignment or its
Asset Purchase and Sale Agreement page 28 of 57
Attachment A-1
<PAGE> 30
underlying documents will operate to grant the Assignee greater rights or
obligate the Lessor to greater obligations, than the respective rights and
obligations set out in Lease Agreement ADA-03722, as amended by Supplement Nos.
1-5.
The effective date of this consent is December __, 1995.
STATE OF ALASKA,
Department of Transportation and
Public Facilities
By: _____________________________________
Diane E. Barth, Chief of Leasing,
Anchorage International Airport
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on this __ day of December, 1995,
before me, the undersigned, a Notary Public, in and for the State of Alaska,
duly commissioned and sworn, personally appeared Diane E. Barth, Chief of
Leasing, Anchorage International Airport, Department of Transportation and
Public Facilities, and she acknowledged to me that she executed the foregoing
instrument freely and voluntarily on behalf of the State of Alaska, Department
of Transportation and Public Facilities, for the uses and purposes therein set
forth and that she is authorized by said State of Alaska so to do.
IN WITNESS WHEREOF, I have set my hand and affixed my official
seal, the day and year first written above.
____________________________________
NOTARY PUBLIC IN AND FOR ALASKA
My Commission Expires: ____________
Asset Purchase and Sale Agreement page 29 of 57
Attachment A-1
<PAGE> 31
ATTACHMENT A-2
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 5(a)
COPIES OF AIRPORT LEASE AGREEMENTS
THE ATTACHED PAGES 30A THROUGH 30BO ARE PRESENTED BY BIJO AS TRUE AND
CORRECT COPIES OF THE AIRPORT LEASE AGREEMENTS COVERING LOT 5-B AND LOT 6-B.
Asset Purchase and Sale Agreement page 30 of 57
Attachment A-2
<PAGE> 32
ATTACHMENT B
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(b)
AIRCRAFT
The following constitute AHI Assets under Section 2 of the Asset Purchase
and Sale Agreement, to which this document is attached: The Aircraft listed
below, as owned or possessed by AHI on August 18, 1995, and equipped and
configured and in the same condition as on August 18, 1995, normal wear and
tear excepted (premature failure or damage do not constitute normal wear and
tear):
<TABLE>
<CAPTION>
INSURED FORMULA
MAKE MODEL "N" NO. MFG SN YEAR VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
1 Bell 212 N213AH 30554 1973 $ 1,200,000.00 $ 935,258.80
2 Bell 212 N212AH 30853 1977 1,200,000.00 935,258.80
3 Bell 205A1 N58116 30133 1973 965,000.00 752,103.96
4 Bell 205A1 N183AH 30217 1976 1,055,000.00 822,248.37
5 Bell 206BII N265AH 369 1969 225,000.00 175,361.03
6 Bell 206BII N7982J 738 1971 225,000.00 175,361.03
7 Bell 206BIII N371AH 1660 1975 295,000.00 229,917.79
8 Bell 206BIII N577AH 2989 1980 375,000.00 292,268.38
9 Bell 206BIII N401AH 3314 1981 310,000.00 241,608.52
10 Bell 206BIII N2300Y 3576 1982 310,000.00 241,608.52
11 Bell 206BIII N2300Z 3583 1982 310,000.00 241,608.52
12 Bell 206L1 N3928B 45214 1978 595,000.00 463,732.49
13 Bell 206L1 N5013G 45254 1979 595,000.00 463,732.49
14 Bell 206L1 N210AH 45314 1979 595,000.00 463,732.49
15 Bell 206L1 N222AC 45354 1979 595,000.00 463,732.49
SUBTOTAL $ 8,850,000.00 $ 6,897,533.68
16 Cessna 185F N118AH 18503865 1979 $ 95,000.00 $ 74,041.32
-------------- --------------
TOTAL $ 8,945,000.00 $ 6,971,575.00
============== ==============
Factor: 0.779382337
</TABLE>
Asset Purchase and Sale Agreement page 31 of 57
Attachment B
<PAGE> 33
ATTACHMENT C
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(c)
PARTS
The following constitute AHI Assets under Section 2 of the Asset Purchase
and Sale Agreement, to which this document is attached: All engines, parts,
components, accessories, instruments, avionics, airframe components, hardware
and related items, as owned or possessed by AHI on August 18, 1995, and in the
same condition as on August 18, 1995, normal wear and tear excepted (premature
failure or damage do not constitute normal wear and tear), including those
items listed or described in the Inventory List, signed by AHI and Buyer, and
on file at Era Aviation, Inc., 6160 South Airpark Drive, Anchorage, Alaska
99502.
The Inventory List is defined as including the Control Stock Inventory,
computer generated by CHI and dated as of November 30, 1995, and the Era
Inventory, generated by Era personnel and dated as of October 31, 1995,
excluding those parts designated in CHI fax no. 52298 to Era Aviation, Inc.,
dated November 8, 1995. These two documents list Parts, Equipment and
miscellaneous items of varying descriptions. The parties understand and
contemplate that items may move from one list to another from time to time, or
from a list to an Aircraft, to work in process, to stores, and the like; but
that all items should remain in the AHI system and remain accounted for.
Asset Purchase and Sale Agreement page 32 of 57
Attachment C
<PAGE> 34
BILL OF SALE
PARTS
For and in consideration of $10 and Other Valuable Consideration,
receipt and sufficiency of which are hereby acknowledged, the undersigned,
Alaska Helicopters, Inc., owner of full legal and beneficial title of the Items
described as follows:
All AHI Assets listed in Attachment C, Parts, to that certain Asset
Purchase and Sale Agreement, made and entered by and among Alaska
Helicopters, Inc. and Era Aviation, Inc. and others as of December
5, 1995, a true and correct copy of which Attachment C, Parts, is
attached hereto as Exhibit A and incorporated by this reference as
though set forth in full in this paragraph;
does this __ day of December, 1995, hereby sell, grant, transfer and deliver
all rights, titles and interests in and to such Items unto:
Era Aviation, Inc.
6160 South Airpark Drive
Anchorage, Alaska 99502
and to its successors and assigns, to have and to hold singularly the said
Items forever, and warrants the good and marketable titles thereof, free and
clear of all liens and encumbrances, and that it has full right and power to
sell the same and will defend the same against any claims and demands of other
persons.
IN TESTIMONY WHEREOF I have set my hand and seal this __ day of
December, 1995.
Seller:
Alaska Helicopters, Inc.,
an Alaska corporation
By:
---------------------------
Roy M. Simmons,
Vice President
Asset Purchase and Sale Agreement page 33 of 57
Attachment C
<PAGE> 35
ATTACHMENT D
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(d)
VEHICLES
The following constitute AHI Assets under Section 2 of the Asset
Purchase and Sale Agreement, to which this document is attached: The Vehicles
listed below, as owned or possessed by AHI on August 18, 1995, and in the same
condition as on August 18, 1995, normal wear and tear excepted (premature
failure or damage do not constitute normal wear and tear):
<TABLE>
<CAPTION>
ESTIMATED
YEAR MAKE/TYPE VIN OR SERIAL NO. VALUE
<S> <C> <C> <C>
1984 Ford Escort 1FABP0941EW116845 $ 500
1983 Chrysler LeBaron 1C3BT46G4DC113096 500
1990 Chevrolet 3/4 T 4WD P/U 1GCFK24HXLE123604 10,000
1989 Ford F250 Snowplow Trk 1FTHF26H5KCA10173 8,500
1988 Ford F250 P/U 1FTHF25H7JPA51113 7,000
1984 Chevrolet Van 2G8EG25D8E4134249 4,000
1978 Ford 3/4T F250 F25HNCE0433 4,000
1993 Ford Aerostar Van 1FMDA41X1PZA28165 10,000
1993 Ford 4X4 Pickup 1FTHX26H1PKB96312 14,000
1993 Ford Van 1FMEE11N3PHC03480 14,000
1958 Int'l 2050-gal Tank Trk 17481 2,500
1955 Ford Fuel Trk (1000-gal) F60Z5R21534 1,000
1981 GMC 2500-g Fuel Truck 1GDT7D4Y0BV590377 7,500
1968 Fruehauf 26' Van Trailer AVJ-771434 500
1979 HM Helicopter Trailer AK16263 500
Clark Electric Forklift EC20C-SG-65806 1,500
Clark Gas Forklift P140642 4,500
Helicopter Dolly NSN 3,500
Terrex Loader Model 72-40 17 UPM 42081 12,500
1964 United Tractor Tug 6964 2,500
--------
TOTAL $109,000
</TABLE>
Asset Purchase and Sale Agreement page 34 of 57
Attachment D
<PAGE> 36
BILL OF SALE
VEHICLES
For and in consideration of $10 and Other Valuable Consideration,
receipt and sufficiency of which are hereby acknowledged, the undersigned,
Alaska Helicopters, Inc., owner of full legal and beneficial title of the Items
described as follows:
All AHI Assets listed in Attachment D, Vehicles, to that certain
Asset Purchase and Sale Agreement, made and entered by and among
Alaska Helicopters, Inc. and Era Aviation, Inc. and others as of
December 5, 1995, a true and correct copy of which Attachment D,
Vehicles, is attached hereto as Exhibit A and incorporated by
this reference as though set forth in full in this paragraph;
does this __ day of December, 1995, hereby sell, grant, transfer and deliver
all rights, titles and interests in and to such Items unto:
Era Aviation, Inc.
6160 South Airpark Drive
Anchorage, Alaska 99502
and to its successors and assigns, to have and to hold singularly the said
Items forever, and warrants the good and marketable titles thereof, free and
clear of all liens and encumbrances, and that it has full right and power to
sell the same and will defend the same against any claims and demands of other
persons.
IN TESTIMONY WHEREOF I have set my hand and seal this __ day of
December, 1995.
Seller:
Alaska Helicopters, Inc.,
an Alaska corporation
By:
------------------------
Roy M. Simmons,
Vice President
Asset Purchase and Sale Agreement page 35 of 57
Attachment D
<PAGE> 37
ATTACHMENT E
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(e)
EQUIPMENT
The following constitute AHI Assets under Section 2 of the Asset
Purchase and Sale Agreement, to which this document is attached: All fixtures,
furnishings and equipment, as owned or possessed by AHI on August 18, 1995,
excepting only those items listed on Attachment H, and in the same condition as
on August 18, 1995, normal wear and tear excepted (premature failure or damage
do not constitute normal wear and tear), including those items listed or
described in the Inventory List, signed by AHI and Buyer, and on file at Era
Aviation, Inc., 6160 South Airpark Drive, Anchorage, Alaska 99502.
The Inventory List is defined as including the Control Stock Inventory,
computer generated by CHI and dated as of November 30, 1995, and the Era
Inventory, generated by Era personnel and dated as of October 31, 1995,
excluding those parts designated in CHI fax no. 52298 to Era Aviation, Inc.,
dated November 8, 1995. These two documents list Parts, Equipment and
miscellaneous items of varying descriptions. The parties understand and
contemplate that items may move from one list to another from time to time, or
from a list to an Aircraft, to work in process, to stores, and the like; but
that all items should remain in the AHI system and remain accounted for.
Asset Purchase and Sale Agreement page 36 of 57
Attachment E
<PAGE> 38
BILL OF SALE
EQUIPMENT
For and in consideration of $10 and Other Valuable Consideration,
receipt and sufficiency of which are hereby acknowledged, the undersigned,
Alaska Helicopters, Inc., owner of full legal and beneficial title of the Items
described as follows:
All AHI Assets listed in Attachment E, Equipment, to that
certain Asset Purchase and Sale Agreement, made and entered by
and among Alaska Helicopters, Inc. and Era Aviation, Inc. and
others as of December 5, 1995, a true and correct copy of which
Attachment E, Equipment, is attached hereto as Exhibit A and
incorporated by this reference as though set forth in full in
this paragraph;
does this __ day of December, 1995, hereby sell, grant, transfer and deliver
all rights, titles and interests in and to such Items unto:
Era Aviation, Inc.
6160 South Airpark Drive
Anchorage, Alaska 99502
and to its successors and assigns, to have and to hold singularly the said
Items forever, and warrants the good and marketable titles thereof, free and
clear of all liens and encumbrances, and that it has full right and power to
sell the same and will defend the same against any claims and demands of other
persons.
IN TESTIMONY WHEREOF I have set my hand and seal this __ day of
December, 1995.
Seller:
Alaska Helicopters, Inc.,
an Alaska corporation
By:
---------------------------
Roy M. Simmons,
Vice President
Asset Purchase and Sale Agreement page 37 of 57
Attachment E
<PAGE> 39
ATTACHMENT F
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(f)
PERMITS
The items, contracts, and agreements listed below, as owned or
possessed by AHI on August 18, 1995, and in the same condition as on August 18,
1995, constitute Assets under Section 2 of the Asset Purchase and Sale
Agreement, to which this document is attached. The contracts and agreements to
the extent transferable shall be assigned to Buyer:
1. The continuing OAS helicopter service contracts:
(a) OAS Contract No. 1406-93-81-0679, Items 1, 2, and 3.
(b) OAS Contract No. 1406-95-81-0681, Items 1 and 2.
2. Lynden agreement (month to month, verbal).
3. State of Alaska, Department of Public Safety contract number
CA26947, Aircraft Electrical and Avionics Maintenance.
4. Any Forest Service or other federal or state owned land, landing
permits.
5 EPA Acknowledgment of Notification of Hazardous Waste Activity EPA
ID No. AKR000000034 and State of Alaska, Department of Environmental
Conservation, Underground Petroleum Storage Tank Registration for 1996,
Facility #0-001345.
6. Office machine leases and maintenance agreements:
(a) Alaska Office Systems facsimile maintenance agreement,
RFX-FAX60, SN R8071003439, expires 9/26/96.
(b) Paymaster National Exchange, checkwrite 2 year warranty,
Paymaster System No. 4311A9, 10/10/95 to 10/10/97.
(c) Pitney Bowes postage meter rental agreement, account number
0167-5805-20-2, model 6501, SN 0006807372.
(d) Pitney Bowes scale EMS-5, maintenance agreement, account
number 0167-5805-20-2, 3/1/95 to 2/29/96.
(e) Xerox Corporation maintenance contracts, two MW610
Memorywriters, SN C80-036728 and C80- 036794, 10/1/95 to 9/30/96.
(f) Xerox Corporation maintenance contract, one MW6010
Memorywriter, SN 01C176570, 9/1/95 to 8/30/96.
(g) Xerox Corporation maintenance contract, one MW6010
Memorywriter, SN 01C197610, 6/1/95 to 5/30/96.
(h) Benson Business Systems, Inc. maintenance agreement for 14
pieces of IBM equipment per BBS, Inc. Invoice No. 0030395-IN, 8/15/95 to
8/14/96.
7 All rights to use, and corporate name registrations for the use of,
the names, "Alaska Helicopters", "Alaska Helicopters, Inc.", "Alaska Copters"
and "Helitours Alaska". This action shall be coordinated by Buyer with
Guarantor and
Asset Purchase and Sale Agreement page 38 of 57
Attachment F
<PAGE> 40
AHI at a future date not later than 18 months from Closing. Guarantor and AHI
agree that they will not conduct helicopter flight operations during this
period under any of the stated names following Closing.
8. FCC station licenses.
9. The following Supplemental Type Certificates:
(a) SH-5695SW - C30, Engine Installation, purchased from Petroleum
Helicopters for Bell 206L1's.
(b) SH-5132NM, Installation of 212 Main Rotor Head and 212 Blades
on N183AH and N58116, Bell 205's, purchased from Helijet.
(c) SH-1004NE, Installation of dual battery kit on BH205 N58116,
purchased from Dart Aero Accessories.
(d) Any other STC owned by AHI but not documented herein.
10. Any other EPA and OSHA permits and variances.
11. Equipment Lease Agreement bet.een AHI and Tyler Camera Systems
dated October 1, 1991
Asset Purchase and Sale Agreement page 39 of 57
Attachment F
<PAGE> 41
ATTACHMENT G
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(g)
OTHER ASSETS
The items listed below, as owned or possessed by AHI on August 18,
1995, and in the same condition as on August 18, 1995, updated as contemplated
by the Asset Purchase and Sale Agreement, to which this document is attached,
constitute, without limitation, AHI Assets under Section 2 of the Agreement:
1. All operating and maintenance logs for Aircraft, Parts, Vehicles
and Equipment.
2. All manufacturers' warranties for Aircraft, Parts, Vehicles and
Equipment.
3. All maintenance and service records and manuals for Aircraft,
Parts, Vehicles and Equipment.
4. All patents, copyrights, STC's, trademarks and tradenames used in
the business of AHI or in the occupation or use of the Real Property.
5. All rights, titles and interests of AHI and Guarantor in and to the
BIJO Assets.
6. All phone numbers presently used by AHI in the conduct of their day
to day charter, contract and flightseeing business to be transferred to Buyer
no later than December 31, 1995 (to the extent transferable).
Asset Purchase and Sale Agreement page 40 of 57
Attachment G
<PAGE> 42
BILL OF SALE
OTHER ASSETS
For and in consideration of $10 and Other Valuable Consideration,
receipt and sufficiency of which are hereby acknowledged, the undersigned,
Alaska Helicopters, Inc., owner of full legal and beneficial title of the Items
described as follows:
All AHI Assets listed in Attachment G, Other Assets, to that
certain Asset Purchase and Sale Agreement, made and entered by
and among Alaska Helicopters, Inc. and Era Aviation, Inc. and
others as of December 5, 1995, a true and correct copy of which
Attachment G, Other Assets, is attached hereto as Exhibit A and
incorporated by this reference as though set forth in full in
this paragraph;
does this __ day of December, 1995, hereby sell, grant, transfer and deliver
all rights, titles and interests in and to such Items unto:
Era Aviation, Inc.
6160 South Airpark Drive
Anchorage, Alaska 99502
and to its successors and assigns, to have and to hold singularly the said
Items forever, and warrants the good and marketable titles thereof, free and
clear of all liens and encumbrances, and that it has full right and power to
sell the same and will defend the same against any claims and demands of other
persons.
IN TESTIMONY WHEREOF I have set my hand and seal this __ day of
December, 1995.
Seller:
Alaska Helicopters, Inc.
an Alaska corporation
By:
--------------------
Roy M. Simmons,
Vice President
Asset Purchase and Sale Agreement page 41 of 57
Attachment G
<PAGE> 43
ATTACHMENT H
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(g)
EXCLUDED ASSETS
The following are specifically excluded from the definition of Assets
under Section 2 of the Asset Purchase and Sale Agreement, to which this
document is attached:
1. Mr. Craig's moose.
2. Mr. Bishopp's pictures.
3. One MAI Basic Four Model 2000 computer with seven terminals and two
Printronix printers Model MVP and related peripherals, manuals and accessories.
4. One IBM 486-66 computer with terminal and Laser Jet II printer.
5. Cash and all receivables due AHI through Closing and all prepaid
expenses and deposits, except those which apply to a specific Asset being
transferred.
6. Goodwill.
Asset Purchase and Sale Agreement page 42 of 57
Attachment H
<PAGE> 44
ATTACHMENT I
ASSET PURCHASE AND SALE AGREEMENT
SECTIONS 3 AND 8
ADJUSTMENTS TO PURCHASE PRICE
The Parties have agreed that the Purchase Price was established based upon the
actual inventory of Assets as of August 18, 1995. In the event of loss or
damage to the Assets between August 18, 1995, and the date of closing the
Purchase Price shall be adjusted as follows:
AIRCRAFT: In the event of a total loss of an Aircraft, the Purchase Price
shall be reduced by the Insured Value listed on Attachment "B" less 10%. For
repairable damage to an aircraft the Seller shall repair the aircraft to like
condition on August 18, 1995, within 60 days of closing or, in the event of
major damage (estimated repair costs to exceed one half of the insured Value)
at the Buyers option, Seller shall retain ownership of the aircraft and reduce
the Purchase Price by the Insured Value less 10%.
SPARE PARTS AND COMPONENTS: In the event of economically repairable damage to
a Part with a new list price exceeding $1,000.00, the Purchase Price shall be
reduced by the average of the Average Overhaul Cost as estimated in the current
Helicopter Equipment Lists and Prices section of The Official Helicopter Blue
Book. If the part or component is not listed in the Blue Book, the Purchase
Price shall be reduced by an amount equal to 50% of the manufacturer's new list
price for that component.
In the event of total destruction or loss of a Part the Purchase Price shall be
reduced by 65% of the New Price listed in the current Helicopter Equipment Lists
and Prices section of The Official Helicopter Blue Book. If the part or
component is not listed in the Blue Book, the Purchase Price shall be reduced by
amount equal to 65% of the manufacturer's new list price for that component.
VEHICLES AND ROLLING EQUIPMENT: In the event of economically repairable damage
to a Vehicle, the Purchase Price shall be reduced by the repair cost to a like
condition on August 18, 1995, as estimated by a neutral party acceptable to
both Seller and Buyer.
In the event of destruction or loss of a Vehicle the Purchase Price shall be
reduced by the amount shown under Estimated Value on Attachment D. If the
vehicle is not listed therein, the Purchase Price shall be reduced by the
estimated fair market value of that item, assuming serviceable condition, as
determined by a neutral party acceptable to both Seller and Buyer.
FURNITURE, OFFICE MACHINES AND SHOP EQUIPMENT: In the event of loss or damage
to the office furniture and machines, shop equipment, avionics test equipment
and miscellaneous items and the like, the Purchase Price shall be reduced by an
amount equal to replacement of the lost or damaged item by a comparable piece
of used equipment. This value shall be determined by mutual agreement between
the Parties. If an agreement is not reached then the Parties shall select a
neutral third party experienced in such matters who is acceptable to both
Parties to estimate that value.
ALL OTHER ITEMS: For loss of or damage to any other item not described in this
Attachment I, the Purchase Price shall be reduced by an amount equal to the
fair
Asset Purchase and Sale Agreement page 43 of 57
Attachment I
<PAGE> 45
market value of a like item in like condition before the loss or damage as
determined by a neutral party, if necessary.
Asset Purchase and Sale Agreement page 44 of 57
Attachment I
<PAGE> 46
ATTACHMENT J
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 2(b)
NON-INTEREST BEARING PROMISSORY NOTE
December , 1995 $6,971,575.00
Anchorage, Alaska
FOR VALUE RECEIVED, Era Aviation, Inc. promises to pay to Alaska
Helicopters, Inc., an Alaska corporation with principal offices at Anchorage,
Alaska, the sum of Six Million Nine Hundred Seventy-One Thousand Five Hundred
Seventy-Five and No/100 Dollars ($6,971,575.00), with no interest in any event,
which sum shall be paid in lawful money of the United States of America as
follows: Upon the sale of any Aircraft listed on Attachment B of the Asset
Purchase and Sale Agreement made by and among Era Aviation, Inc., as Buyer, and
Alaska Helicopters, Inc. and BIJO Enterprises, as Sellers, and Columbia
Helicopters, Inc., as Guarantor, dated as of December 5, 1995, (Agreement), to
a third party or selection of any such Aircraft by Era Aviation, Inc. for its
own use, Era Aviation, Inc. shall pay to holder hereof the Formula Value listed
on said Attachment B for that respective Aircraft. Any remaining balance, if
not sooner paid, shall be due and payable in full on or before one year from
the date of this note. All payments shall be paid at P.O. Box 3500, Portland,
Oregon 97208, unless otherwise designated in writing by the holder of this
note.
This note is secured by collateral for the due payment of this note in
accordance with the terms of the security agreement made a part of the
Agreement. Upon the occurrence of an Event of Default (as defined in the
security agreement), the principal sum then remaining unpaid shall forthwith
become due and payable at the election of the holder of this note. Failure to
exercise such election shall not waive the right to exercise it upon any
continuing or subsequent default. If suit is instituted upon this note, the
prevailing party shall be entitled to recover all costs and expenses incurred,
including attorney's fees.
The undersigned hereby waives presentment, dishonor, demand, protest
and notice of demand, protest and nonpayment and expressly agrees that this
note or any payment hereunder may be extended from time to time as mutually
agreed by Era Aviation, Inc. and Alaska Helicopters, Inc. without in any way
affecting the liability of the undersigned.
This Promissory Note is non-assignable and non-transferable except to
Columbia Helicopters, Inc. or a wholly owned subsidiary thereof.
Era Aviation, Inc.,
a Washington corporation
By: ____________________________
Title: _________________________
Asset Purchase and Sale Agreement page 45 of 57
Attachment J
<PAGE> 47
GUARANTY
In consideration of the execution of the Agreement by Alaska
Helicopters, Inc. and in consideration of the execution of a Noncompetition
Agreement by Columbia Helicopters, Inc. as a part of the Agreement, Rowan
Companies, Inc., a Delaware corporation, does hereby covenant and agree with
Alaska Helicopters, Inc., its permitted successors and assigns, to guaranty the
full and prompt payment of the note evidencing the indebtedness of Era
Aviation, Inc. to Alaska Helicopters, Inc., in the principal sum of Six Million
Nine Hundred Seventy-One Thousand Five Hundred Seventy-Five and No/100 Dollars
($6,971,575.00), and of any and all renewals thereof, when the same shall
become due and payable, until all of the note, and any and all renewals, are
fully paid and discharged.
This guaranty is an absolute, irrevocable and continuing guaranty of
payment and is not a guaranty of collection and shall not be diminished or
otherwise affected by reason of any failure or delay in enforcing the rights of
Alaska Helicopters, Inc. Rowan Companies, Inc. waives any right to require
Alaska Helicopters, Inc. to (a) proceed against Era Aviation, Inc. or any other
person liable for the note, (b) proceed or enforce its rights against or
exhaust any security given to secure any portion of the Note, (c) have Era
Aviation, Inc. joined with Rowan Companies, Inc. in any suit arising out of
this guaranty, or (d) pursue any other remedy in Alaska Helicopters, Inc.'s
power whatsoever. Alaska Helicopters, Inc. shall not be required to mitigate
damages or take any action to reduce, collect or enforce the note. Rowan
Companies, Inc. waives any defense arising by reason of any disability, lack of
corporate authority or power, or similar defense (excepting any defenses
provided for in the Agreement) of Era Aviation, Inc. or any other guarantor of
any portion of the note, and shall remain liable hereon regardless of whether
Era Aviation, Inc. or any other guarantor be found not liable thereon for any
such reason. Until the note is paid in full, Rowan Companies, Inc. waives any
right to enforce any remedy which Alaska Helicopters, Inc. now has or may
hereafter have against Era Aviation, Inc., and waives any benefit of any right
to participate in any security now or hereafter held by Alaska Helicopters,
Inc.
Rowan Companies, Inc. shall not raise, and hereby specifically waives,
any defense in any action or proceeding by Alaska Helicopters, Inc. seeking
performance of the note, or damages for its non-performance, excepting those
defenses which Era Aviation, Inc. would be able to raise were such action or
proceeding instituted against Era Aviation, Inc. based on the Agreement and its
performance or non-performance of the obligations contained therein.
This Guaranty is non-assignable and non-transferable except to Columbia
Helicopters, Inc., or a wholly owned subsidiary thereof.
Rowan Companies, Inc.,
a Delaware corporation
By: __________________________
Title: _______________________
Asset Purchase and Sale Agreement page 46 of 57
Attachment J
<PAGE> 48
ATTACHMENT K
ASSET PURCHASE AND SALE AGREEMENT
SUBSECTION 4(b)
AIRCRAFT SECURITY AGREEMENT
NAME & ADDRESS OF DEBTOR:
Era Aviation, Inc.
6160 South Airpark Drive
Anchorage, Alaska 99502
NAME & ADDRESS OF SECURED PARTY:
Alaska Helicopters, Inc.
P.O. Box 3500
Portland, Oregon 97208
ABOVE SPACE
FOR FAA USE ONLY
Date: December __, 1995
Complete description of collateral being mortgaged:
AIRCRAFT (FAA registration, model, and serial number):
See Attachment A
together with all equipment and accessories attached thereto or used in
connection therewith, including engines of 750 or more horsepower, or the
equivalent, and propellers capable of absorbing 750 or more rated takeoff shaft
horsepower, described above, all of which are included in the term aircraft as
used herein.
The above described aircraft is hereby mortgaged to the secured party for the
purpose of securing in the order named:
FIRST: The payment of all indebtedness evidenced by and according to
the terms of that certain promissory note hereinbelow described, and all
renewals and extensions thereof.
Note bearing date of December __, 1995, executed by the debtor and
payable to Alaska Helicopters, Inc. in the aggregate sum of $6,971,575 with no
interest in any event thereon, payable in accordance with the provisions of
that certain Asset Purchase and Sale Agreement, entered as of December 5, 1995,
by and among debtor and secured party and others, and any remaining balance, if
not sooner paid, payable in full within one year from the date of the note.
SECOND: The prompt and faithful discharge and performance of each
agreement of the debtor herein contained made with or for the benefit of the
secured party in connection with the indebtedness to secure which this
instrument is executed, and the repayment of any sums expended or advanced by
the secured party for the maintenance or preservation of the property mortgaged
hereby or in enforcing his rights hereunder.
Asset Purchase and Sale Agreement page 47 of 57
Attachment K
<PAGE> 49
Said debtor hereby declares and hereby warrants to the said secured party, that
he is the absolute owner of the legal and beneficial title to the said aircraft
and in possession thereof, and that the same is free and clear of all liens,
encmbrances, and adverse claims whatsoever except as follows: (If no liens
other than this mortgage indicate "none").
None.
It is the intention of the parties to deliver this instrument in the state of
Alaska.
Provided, however, that if the debtor, its heirs, administrators, successors,
or assigns shall pay said note in accordance with the terms thereof and shall
keep and perform all and singular the terms covenants, and agreements in this
security agreement, then this security agreement shall be null and void, and
the same shall apply with respect to each individual aircraft to be released
from this security agreement in accordance with the applicable provisions of
the said Asset Purchase and Sale Agreement.
Time is of the essence of this security agreement. It is hereby agreed that if
default is made in the payment of any part of the principal of the promissory
note secured hereby at the time and in the manner therein specified, or if any
breach be made of any obligation or promise of the debtor herein contained or
secured hereby, and ten days having elapsed after written notice from secured
party without cure, then the whole principal sum unpaid upon said promissory
note shall immediately become due and payable at the option of the secured
party.
Upon such default and acceleration, secured party may at once proceed to
foreclose this mortgage in any manner provided by law, or he may at his option,
and he is hereby empowered so to do, with or without foreclosure action, enter
upon the premises where the said aircraft may be and take possession thereof;
and remove and sell and dispose of the same at public or private sale and from
the proceeds of such sale retain all costs and charges incurred by it in the
taking or advanced under the terms of this security agreement and interest
thereon, or due or owing to the said secured party, under any provisions of
this security agreement, or secured hereby, with the interest thereon, and any
surplus of such proceeds remaining shall be paid to the debtor, or whoever may
be lawfully entitled to receive the same. If a deficiency occurs, the debtor
agrees to pay such deficiency forthwith.
Asset Purchase and Sale Agreement page 48 of 57
Attachment K
<PAGE> 50
Said secured party or its agent may bid and purchase at any sale made under
this mortgage or herein authorized, or at any sale made upon foreclosure of
this mortgage.
In witness whereof, the debtor has hereunto set its hand on the day and year
first above written.
NAME OF DEBTOR: Era Aviation, Inc.
By: _________________
Charles W. Johnson
President
ACCEPTED AND AGREED:
SECURED PARTY: Alaska Helicopters, Inc.
By: _________________
Roy M. Simmons
Vice President
Asset Purchase and Sale Agreement page 49 of 57
Attachment K
<PAGE> 51
ATTACHMENT A
TO
AIRCRAFT SECURITY AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FAA AIRCRAFT AIRCRAFT
REGISTRATION SERIAL MANUFACTURER &
NUMBER NUMBER MODEL YEAR
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 N213AH 30554 Bell 212 1973
- --------------------------------------------------------------------------------
2 N212AH 30853 Bell 212 1977
- --------------------------------------------------------------------------------
3 N58116 30133 Bell 205A1 1973
- --------------------------------------------------------------------------------
4 N183AH 30217 Bell 205A1 1976
- --------------------------------------------------------------------------------
5 N265AH 369 Bell 206BII 1969
- --------------------------------------------------------------------------------
6 N7982J 738 Bell 206BII 1971
- --------------------------------------------------------------------------------
7 N371AH 1660 Bell 206BIII 1975
- --------------------------------------------------------------------------------
8 N577AH 2989 Bell 206BIII 1980
- --------------------------------------------------------------------------------
9 N401AH 3314 Bell 206BIII 1981
- --------------------------------------------------------------------------------
10 N2300Y 3576 Bell 206BIII 1982
- --------------------------------------------------------------------------------
11 N2300Z 3583 Bell 206BIII 1982
- --------------------------------------------------------------------------------
12 N3928B 45214 Bell 206L1 1978
- --------------------------------------------------------------------------------
13 N5013G 45254 Bell 206L1 1979
- --------------------------------------------------------------------------------
14 N210AH 45314 Bell 206L1 1979
- --------------------------------------------------------------------------------
15 N222AC 45354 Bell 206L1 1979
- --------------------------------------------------------------------------------
16 N118AH 18503865 Cessna 185F 1979
- --------------------------------------------------------------------------------
</TABLE>
Asset Purchase and Sale Agreement page 50 of 57
Attachment K
<PAGE> 52
RELEASE OF SECURITY AGREEMENT
(PARTIAL)
NAME (LAST NAME FIRST) OF DEBTOR:
NAME and ADDRESS OF SECURED PARTY:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FAA REGISTRATION AIRCRAFT AIRCRAFT
NUMBER SERIAL NUMBER MANUFACTURER & MODEL
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The aircraft Security Agreement dated ________, covering the collateral
described above, was recorded by the FAA Aircraft Registry on __________, as
Conveyance No. ______.
THE UNDERSIGNED HEREBY CERTIFIES AND ACKNOWLEDGES THAT HE IS THE TRUE
AND LAWFUL HOLDER OF THE NOTE OR OTHER EVIDENCE OF INDEBTEDNESS SECURED BY THE
SECURITY AGREEMENT REFERRED TO ABOVE ON THE COLLATERAL DESCRIBED ABOVE AND THAT
THE SAME COLLATERAL IS HEREBY RELEASED FROM THE TERMS OF THE AGREEMENT. ANY
TITLE RETAINED IN THE COLLATERAL BY THE AGREEMENT IS HEREBY SOLD, GRANTED,
TRANSFERRED, AND ASSIGNED TO THE PARTY WHO EXECUTED THE SECURITY AGREEMENT, OR
TO THE ASSIGNEE OF SAID PARTY IF THE SECURITY AGREEMENT SHALL HAVE BEEN
ASSIGNED; PROVIDED THAT NO EXPRESS WARRANTY IS GIVEN NOR IMPLIED BY REASON OF
EXECUTION OR DELIVERY OF THIS RELEASE.
Date of this Release: _________________
Name of Security Holder: _________________
Signature: _________________
Title: _________________
Asset Purchase and Sale Agreement page 51 of 57
Attachment K
<PAGE> 53
ATTACHMENT L
ASSET PURCHASE AND SALE AGREEMENT
SECTION 9
COVENANT NOT TO COMPETE
THIS NONCOMPETITION AGREEMENT is entered into effective ___________,
1995, by and among Columbia Helicopters, Inc., an Oregon corporation (CHI),
Alaska Helicopters, Inc., an Alaska corporation and a wholly owned subsidiary
of CHI (AHI) and BIJOS Enterprises a/k/a/ BIJO Enterprises, an Alaska general
partnership (BIJO) on the one hand (Restricted Parties), and Era Aviation,
Inc., a Washington corporation (Era), on the other hand.
Whereas AHI and BIJO are Sellers of certain specified Assets to Era and
CHI is the guarantor of AHI's obligations pursuant to the terms and conditions
of that certain Asset Purchase and Sale Agreement dated _____________, 1995
(Sale Agreement) and this Noncompetition Agreement is contemplated by Section 9
of said Sale Agreement.
In consideration of the mutual benefits, reciprocal promises, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
For a period of three years from the date of this Noncompetition
Agreement, except as specifically provided herein, CHI and AHI shall not
compete in any manner with Era within the boundaries of the State of Alaska.
CHI is permitted to conduct the following operations within the State of
Alaska: 1) helicopter logging; 2) any other operation using helicopters with a
maximum certified take-off weight of more than 12,500 pounds; 3) the use of
helicopters with a maximum certified take-off weight of 12,500 pounds or less
in support of the operations permitted in 1) and 2).
For a period of three years from the date of this Noncompetition
Agreement, neither BIJO, nor any of its partners, shall operate, maintain,
service, sell or own helicopters of any size, directly or indirectly, through
ownership, management or investment, passive or active, within the State of
Alaska under the name of Alaska Helicopters, Inc., Alaska Helicopters, Alaska
Copters, Helitours Alaska or any name of similar import which contains the
words "Alaska" or "Alaskan."
AHI, CHI and BIJO agree that this Noncompetition Agreement is intended
to protect and preserve legitimate business interests, including, the
proprietary interest of Era as Buyer under the Asset Purchase and Sale
Agreement. It is further agreed that any breach of this Agreement may render
irreparable harm, directly or indirectly, to Era. In the event of a breach by
AHI, CHI and/or BIJO, Era shall have available to it all remedies provided by
law or
Asset Purchase and Sale Agreement page 52 of 57
Attachment L
<PAGE> 54
equity, including, but not limited to, injunctive relief to restrain the
breaching party or parties from violating this Noncompetition Agreement.
Any waiver or amendment of this Agreement shall be effective only if in
writing and signed by the waiving party. A waiver of breach or failure to
enforce any of the terms or conditions of this Agreement shall not in any way
affect, limit or waive a party's rights at any other time to enforce strict
compliance thereafter with every term or condition of this Agreement. The
canon of contact interpretation that ambiguities, if any, in a writing be
construed against the drafter shall not apply to this Agreement.
It is the desire, intent and agreement of the parties hereto that the
restrictions placed upon the Restricted Parties by this Noncompetition
Agreement be enforced to the fullest extent permissible under the law and
public policy applied by the courts in the State of Alaska. Accordingly, if,
and to the extent that, any portion of this Noncompetition Agreement shall be
adjudicated by a court of competent jurisdiction to exceed the permissible
scope, such provisions shall be deemed amended to the extent necessary so as to
be enforceable to the maximum permissible scope in light of such determination.
This Noncompetition Agreement shall be subject to and governed by the laws of
the State of Alaska.
Date:________, 1995.
Columbia Helicopters, Inc., Era Aviation, Inc.,
an Oregon corporation a Washington corporation
By: By:
---------------------------------- ------------------------
Title: Title:
------------------------------- ---------------------
Alaska Helicopters, Inc.,
an Alaskan corporation
By:
----------------------------------
Title:
-------------------------------
BIJOS Enterprises,
a/k/a BIJO Enterprises,
an Alaska general partnership
By:
----------------------------------
Title:
------------------------------
Asset Purchase and Sale Agreement page 53 of 57
Attachment L
<PAGE> 55
ATTACHMENT M
ASSET PURCHASE AND SALE AGREEMENT
GUARANTY AGREEMENT
This Guaranty Agreement is made by COLUMBIA HELICOPTERS, INC., an
Oregon corporation (hereinafter called the "Guarantor"), in favor of ERA
AVIATION, INC., a Washington corporation (hereinafter called "Buyer").
WHEREAS, on even date herewith, ALASKA HELICOPTERS, INC., an Alaska
corporation and a wholly-owned subsidiary of Guarantor (hereinafter called
"AHI"), BIJO Enterprises, an Alaska general partnership ("BIJO"), and Buyer
entered into that certain Asset Purchase and Sale Agreement (the "Agreement")
pursuant to which Buyer agreed to purchase certain of AHI's and BIJO's assets
on the terms and conditions set forth in the Agreement;
WHEREAS, in consideration for Guarantor receiving a portion of the net
proceeds of the sale pursuant to the Agreement from AHI, Guarantor has agreed
to guarantee the performance and payment by AHI of all of its obligations under
the Agreement; and
WHEREAS, one of the terms and conditions stated in the Agreement for
the consummation of the transactions described therein is the execution and
delivery to Buyer of the Guaranty Agreement;
NOW, THEREFORE, (i) in order to comply with the terms and conditions of
the Agreement, (ii) to induce Buyer to purchase certain of AHI's assets in
accordance with the terms of the Agreement, (iii) at the special insistence and
request of Buyer and (iv) for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby
agrees as follows:
ARTICLE 1
GENERAL TERMS
Section 1.1 TERMS DEFINED ABOVE. As used in this Guaranty
Agreement, the terms "Agreement", "AHI", "Buyer" and "Guarantor" shall have the
meanings indicated above.
Section 1.2 OTHER DEFINITIONS. As used in this Guaranty
Agreement, all other capitalized terms that are not defined herein shall have
the meanings set forth in the Agreement.
ARTICLE 2
THE GUARANTY
Section 2.1 OBLIGATIONS GUARANTEED. In consideration of the
execution of the Agreement by Buyer, Guarantor does hereby fully and
unconditionally guarantee, promise and agree to and with Buyer, its successors
and assigns,
Asset Purchase and Sale Agreement page 54 of 57
Attachment M
<PAGE> 56
that AHI, as one of the Sellers named in the Agreement, will faithfully perform
and fulfill every obligation arising out of or pursuant to the Agreement on
AHI's part to be performed or fulfilled, absolute or contingent, secured or
unsecured, direct or indirect, including without limitation all payment
obligations (individually and collectively, the "Obligations"). If AHI fails
to perform the Obligations, then Guarantor shall perform or cause to be
performed all of the Obligations as if they were Guarantor's own obligation by
performing such Obligations directly or by investing with AHI the necessary
resources to fulfill such Obligations or to have AHI make such other
arrangements as may be necessary for fulfillment by others (which may include
Guarantor), or all of the foregoing, subject to Buyer's consent, which consent
shall not be unreasonably withheld.
Section 2.2 NATURE OF GUARANTY. This Guaranty Agreement is an
absolute, irrevocable and continuing guarantee of performance and payment, is
not a guarantee of collection and shall not be diminished or otherwise affected
by reason of any failure or delay in enforcing the rights of Buyer. Any
amendments or extensions made or granted by mutual consent of the parties to
the Agreement shall be conclusively deemed to be consented to by Guarantor.
Guarantor specifically consents to the jurisdiction of the courts and the law
specified in the Agreement.
Section 2.3 GUARANTOR'S WAIVERS. Guarantor hereby expressly
waives presentment for payment, protest, notice of protest, notice of dishonor,
any demand by Buyer and any notice of nonperformance or nonpayment by AHI of
any Obligations. Guarantor waives any right to require Buyer to (a) proceed
against AHI or any other person liable for the Obligations, (b) enforce its
rights against any other guarantor, (c) proceed or enforce its rights against
or exhaust any security given to secure any portion of the Obligations, (d)
have AHI joined with Guarantor in any suit arising out of this Guaranty
Agreement and/or the Obligations, or (e) pursue any other remedy in Buyer's
power whatsoever. Buyer shall not be required to mitigate damages or take any
action to reduce, collect or enforce the Obligations. Guarantor waives any
defense arising by reason of any disability, lack of corporate authority or
power, or similar defense (excepting any defenses provided for in the
Agreement) of AHI or any other guarantor of any portion of the Obligations, and
shall remain liable hereon regardless of whether AHI or any other guarantor be
found not liable thereon for any such reason. Until the Obligations shall have
been performed or paid in full, Guarantor shall have no right of subrogation.
Until the Obligations have been performed or paid in full, Guarantor waives any
right to enforce any remedy which Buyer now has or may hereafter have against
AHI, and waives any benefit of any right to participate in any security now or
hereafter held by Buyer. Guarantor shall not raise, and hereby specifically
waives, any defense in any action or proceeding by Buyer seeking performance of
this Guaranty Agreement, or damages for its nonperformance, excepting those
defenses which AHI would be able to raise were such action or proceeding
instituted against AHI based on the Agreement and its performance or
nonperformance of the Obligations.
Section 2.4 LIABILITY. It is expressly agreed that the
liability of Guarantor for the payment and performance of the Obligations shall
be as if primary and not secondary.
Asset Purchase and Sale Agreement page 55 of 57
Attachment M
<PAGE> 57
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 BY GUARANTOR. In order to induce Buyer to accept
this Guaranty Agreement, the Guarantor represents and warrants to Buyer (which
representations and warranties will survive the completion of the Obligations)
that:
(a) BENEFIT TO GUARANTOR. The Guarantor's guarantee pursuant
to this Guaranty Agreement reasonably may be expected to benefit, directly or
indirectly, the Guarantor.
(b) BINDING OBLIGATIONS. ThisGuaranty Agreement constitutes
the valid and binding obligation of the Guarantor, enforceable in accordance
with its terms (except that enforcement with respect to Guarantor may be
subject to any applicable bankruptcy, insolvency or similar laws generally
affecting the enforcement of creditor's rights).
(c) NO LEGAL BAR OR RESULTANT LIEN. This Guaranty Agreement
will not violate any provisions of any contract, agreement, law, regulation,
order, injunction, judgment, decree or writ to which the Guarantor is subject,
or result in the creation or imposition of any lien upon any property of the
Guarantor.
(d) NO CONTEST. The Guarantor's execution, delivery and
performance of this Guaranty Agreement does not require the consent or approval
of any other person or entity, including without limitation any regulatory
authority or governmental body of the United States or any state thereof or any
political subdivision of the United States or any state thereof.
Section 3.2 NO REPRESENTATIONS BY BUYER. Neither Buyer nor
any other person or entity have made any representation, warranty or statement
to the Guarantor in order to induce the Guarantor to execute this Guaranty
Agreement.
Section 3.3 GUARANTOR'S FINANCIAL CONDITION. As of this date
hereof, and after giving effect to this Guaranty Agreement and the contingent
obligations evidenced hereby, the Guarantor is and will be solvent.
Asset Purchase and Sale Agreement page 56 of 57
Attachment M
<PAGE> 58
ARTICLE 4
MISCELLANEOUS
Section 4.1 SUCCESSORS AND ASSIGNS. This Guaranty Agreement is and
shall be in every particular available to the successors and assigns of Buyer
and is and shall always be fully binding upon the successors and assigns of the
Guarantor.
Section 4.2 NOTICES. Any notice or demand to the Guarantor under
or in connection with this Guaranty Agreement may be given and shall
conclusively be deemed and considered to have been given and received upon the
deposit thereof, in writing, duly stamped and addressed to the Guarantor at the
address of Guarantor appearing on the last page of this Guaranty Agreement or
at such other address of which the Guarantor shall have notified Buyer in
writing, in the U.S. mail, but actual notice, however given or received, shall
always be effective.
Section 4.3 CONSTRUCTION. THIS GUARANTY AGREEMENT IS A CONTRACT
MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF ALASKA.
WITNESS THE EXECUTION HEREOF, as of this the ______ day of December,
1995.
COLUMBIA HELICOPTERS, INC.
Address:
P.O. Box 3500 By:
Portland, Oregon 97208
Name:
-------------------
Title:
------------------
By:
Name:
-------------------
Title:
------------------
Asset Purchase and Sale Agreement page 57 of 57
Attachment M
<PAGE> 1
Rowan Companies, Inc. and Subsidiaries
FINANCIAL REVIEW
<TABLE>
<CAPTION>
(In thousands except per share amounts and ratios)
1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Revenues:
Drilling services $ 250,080 $ 245,917 $ 271,022 $ 162,121
Manufacturing sales and services 133,755 96,664
Aircraft services 87,462 95,578 82,174 87,877
- ------------------------------------------------------------------------------------------------------------
Total 471,297 438,159 353,196 249,998
- ------------------------------------------------------------------------------------------------------------
Costs and expenses:
Drilling services 207,934 207,577 211,095 162,816
Manufacturing sales and services 120,378 87,382
Aircraft services 79,993 79,955 68,882 74,347
Depreciation and amortization 50,555 50,790 51,918 51,367
General and administrative 14,692 13,862 13,940 12,092
- ------------------------------------------------------------------------------------------------------------
Total 473,552 439,566 345,835 300,622
- ------------------------------------------------------------------------------------------------------------
Income (loss) from operations (2,255) (1,407) 7,361 (50,624)
- ------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (27,702) (27,530) (25,361) (26,254)
Less interest capitalized
Gain on disposals of property, plant
and equipment 6,598 1,344 1,955 731
Interest income 5,209 4,813 2,348 2,658
Other - net 468 260 150 165
- ------------------------------------------------------------------------------------------------------------
Other income (expense) - net (15,427) (21,113) (20,908) (22,700)
- ------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (17,682) (22,520) (13,547) (73,324)
Provision (credit) for income taxes 754 469 (288) 429
- ------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary charge (18,436) (22,989) (13,259) (73,753)
Extraordinary charge from redemption of debt
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ (18,436) $ (22,989) $ (13,259) $ (73,753)
- ------------------------------------------------------------------------------------------------------------
Per share of common stock:
Net income (loss):
Primary $ (.22) $ (.27) $ (.17) $ (1.01)
- ------------------------------------------------------------------------------------------------------------
Fully diluted $ (.22) $ (.27) $ (.17) $ (1.01)
- ------------------------------------------------------------------------------------------------------------
Cash dividends $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 200,588 $ 195,945 $ 172,117 $ 61,397
- ------------------------------------------------------------------------------------------------------------
Property, plant and equipment - at cost:
Drilling equipment 944,021 961,391 950,538 939,793
Aircraft and related equipment 189,954 176,874 166,791 162,001
Manufacturing plant and equipment 25,037 18,955
Other property and equipment 91,089 86,883 81,636 79,801
- ------------------------------------------------------------------------------------------------------------
Total 1,250,101 1,244,103 1,198,965 1,181,595
- ------------------------------------------------------------------------------------------------------------
Property, plant and equipment - net 487,039 506,121 507,193 537,819
Total assets 802,488 805,179 765,263 684,301
Capital expenditures 33,881 43,377 21,989 39,528
Long-term debt 247,744 248,504 207,137 212,907
Common stockholders' equity 429,155 442,347 460,300 375,754
- ------------------------------------------------------------------------------------------------------------
STATISTICAL INFORMATION
Current ratio 3.75 4.39 4.90 2.47
Long-term debt/total capitalization .37 .36 .31 .36
Book value per share of common stock $ 5.06 $ 5.25 $ 5.49 $ 5.13
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes $.08 per share effect of extraordinary charge.
** At December 31, 1991, the $125,000,000 principal amount of the Company's
13 3/4% Senior Notes had been called for redemption and appeared as a
current liability. If redemption had occurred prior to year-end, the
current ratio would have been 3.61.
10
<PAGE> 2
Rowan Companies, Inc. and Subsidiaries
FINANCIAL REVIEW
<TABLE>
<CAPTION>
(In thousands except per share amounts and ratios)
1991 1990 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Revenues:
Drilling services $ 170,739 $ 180,118 $ 128,818 $ 144,018 $ 90,145 $ 113,651
Manufacturing sales and services
Aircraft services 101,433 111,992 97,446 72,667 52,984 53,512
- --------------------------------------------------------------------------------------------------------------------------
Total 272,172 292,110 226,264 216,685 143,129 167,163
- --------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Drilling services 147,853 130,845 119,182 126,288 113,348 139,177
Manufacturing sales and services
Aircraft services 82,364 88,182 75,943 62,571 48,996 52,846
Depreciation and amortization 52,954 50,702 52,062 60,324 61,312 62,525
General and administrative 11,739 9,549 7,690 7,313 6,766 7,100
- --------------------------------------------------------------------------------------------------------------------------
Total 294,910 279,278 254,877 256,496 230,422 261,648
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (22,738) 12,832 (28,613) (39,811) (87,293) (94,485)
- --------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (21,379) (21,601) (23,682) (23,920) (23,463) (17,208)
Less interest capitalized 237 319 2,013
Gain on disposals of property, plant
and equipment 1,660 3,996 2,320 27,578 1,814 962
Interest income 4,763 8,635 12,709 4,002 4,917 6,786
Other - net 127 178 161 345 407 399
- --------------------------------------------------------------------------------------------------------------------------
Other income (expense) - net (14,829) (8,792) (8,492) 8,242 (16,006) (7,048)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (37,567) 4,040 (37,105) (31,569) (103,299) (101,533)
Provision (credit) for income taxes 1,174 2,081 672 32 (34,009) (53,002)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary charge (38,741) 1,959 (37,777) (31,601) (69,290) (48,531)
Extraordinary charge from redemption of debt (5,627)
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (44,368) $ 1,959 $ (37,777) $ (31,601) $ (69,290) $ (48,531)
- --------------------------------------------------------------------------------------------------------------------------
Per share of common stock:
Net income (loss):
Primary $ (.61)* $ .03 $ (.52) $ (.44) $ (1.12) $ (.93)
- --------------------------------------------------------------------------------------------------------------------------
Fully diluted $ (.61)* $ .03 $ (.52) $ (.44) $ (1.12) $ (.93)
- --------------------------------------------------------------------------------------------------------------------------
Cash dividends $ -- $ -- $ -- $ -- $ -- $ .06
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 125,996 $ 134,393 $ 143,963 $ 152,335 $ 76,779 $ 77,265
- --------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment - at cost:
Drilling equipment 913,379 885,264 867,540 863,450 946,127 941,726
Aircraft and related equipment 158,361 138,327 107,985 97,500 98,860 100,339
Manufacturing plant and equipment
Other property and equipment 76,251 73,504 70,598 88,039 88,113 90,795
- --------------------------------------------------------------------------------------------------------------------------
Total 1,147,991 1,097,095 1,046,123 1,048,989 1,133,100 1,132,860
- --------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment - net 552,481 549,608 542,995 585,365 697,144 751,225
Total assets 895,889 739,133 737,826 800,684 827,785 875,004
Capital expenditures 85,618 59,905 22,945 18,318 14,123 102,094
Long-term debt 220,764 153,621 163,473 181,330 184,187 200,125
Common stockholders' equity 445,368 485,748 479,287 515,491 546,078 505,115
- --------------------------------------------------------------------------------------------------------------------------
STATISTICAL INFORMATION
Current ratio 1.71** 4.00 4.55 4.07 2.88 3.46
Long-term debt/total capitalization .33 .24 .25 .26 .25 .27
Book value per share of common stock $ 6.11 $ 6.69 $ 6.64 $ 7.16 $ 7.59 $ 9.28
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 3
Rowan Companies, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following analysis highlights the Company's operating results for the years
indicated (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling $ 250.1 $ 245.9 $ 271.0
Manufacturing 133.7 96.7
Aviation 87.5 95.6 82.2
- -----------------------------------------------------------------------------------------------
Total $ 471.3 $ 438.2 $ 353.2
===============================================================================================
Operating Profit (Loss)*:
Drilling $ 5.0 $ 0.2 $ 19.1
Manufacturing 11.7 7.7
Aviation (4.3) 4.6 2.2
- -----------------------------------------------------------------------------------------------
Total $ 12.4 $ 12.5 $ 21.3
===============================================================================================
Net Income (Loss) $ (18.4) $ (23.0) $ (13.3)
===============================================================================================
</TABLE>
* Income (loss) from operations before deducting general and administrative
expenses.
Continued volatility in energy prices and in the resulting demand for
drilling and aviation services, has pervaded the principal markets in which the
Company has operated during the past several years. As shown above, the
Company's results have been directly impacted. The Company's manufacturing
operations, which have consistently yielded positive results since being
acquired in early- 1994, have effectively complemented the Company's marine
drilling business while also offering diversification beyond energy.
The Company's results in 1995 were improved over 1994 primarily due to
higher rig utilization and, beginning in the second quarter, increasing
drilling day rates which, coupled with gains realized from sales of drilling
and aviation equipment and the continued growth of the Company's manufacturing
operations, more than offset unfavorable results of aviation operations and
reduced turnkey drilling. The Company's 1994 results declined in comparison to
1993 primarily due to a decrease in turnkey drilling revenues and a softening
of drilling day rates, which more than offset the improved results of aviation
operations and the addition of profitable manufacturing operations.
DRILLING OPERATIONS. The Company's drilling operating results are generally a
function of rig rates and activity achieved in its offshore drilling business
conducted primarily in the Gulf of Mexico and the North Sea. In turn, the rates
obtained for and the utilization of the Company's offshore fleet are primarily
influenced by the level of offshore expenditures by energy companies.
The offshore drilling industry has fluctuated throughout the 1993 - 1995
period, but overall, has generally experienced weak market conditions since the
early 1980's, as characterized by short-term, marginal rate contracts. An
improvement in natural gas prices strengthened utilization and day rates in the
Gulf of Mexico throughout 1993 and much of 1994, while North Sea drilling
activity and rates weakened due to energy companies downsizing their drilling
programs in the face of impending changes in United Kingdom energy policies. In
late 1994, Gulf of Mexico utilization and day rates were impaired by the
downward trend of natural gas prices while the North Sea market began to
stabilize as changes in U.K. policies were deferred. Beginning in the second
quarter of 1995, both markets began to offer improving returns, but for
different reasons. Activity and day rates in the Gulf of Mexico were positively
influenced by strengthening gas prices, while North Sea utilization approached
100% due to the relatively scarce supply of harsh environment drilling
equipment. As a result, the Company's North Sea fleet achieved an 11% average
increase in day rates in 1995 compared to 1994 while the Company's Gulf of
Mexico fleet, reflecting the depth of the late-1994 decline, averaged a 9% drop
between years.
The number of marine rigs operated by the Company at the end of each year
in the 1993 - 1995 period and the rig utilization percentages (number of days
producing revenue as a percent of days the rig was available for service) for
each of those years are reflected in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jack-ups:
Number 20 20 20
Utilization 90% 86% 85%
Semi-submersible:
Number 1 1 1
Utilization 85% 73% 94%
Submersible barges:
Number - * 3 3
Utilization 87% 52% 30%
- -----------------------------------------------------------------------------------------
</TABLE>
* The Company sold its three submersible barge rigs during the fourth quarter
of 1995.
The effects of fluctuations in activity and day rates are shown in the
following analysis of changes in the Company's contract drilling revenues (in
millions):
<TABLE>
<CAPTION>
1994 1993
to 1995 to 1994
- -----------------------------------------------------------------
<S> <C> <C>
Utilization $ 33.9 $ 22.1
Drilling Rates (13.3) (20.7)
- -----------------------------------------------------------------
</TABLE>
These fluctuations, combined with the impact of Total Project Management,
yielded a $4.2 million or 2% increase in 1995 drilling revenues compared to
1994, which was 9% under 1993. Drilling operations expenses were unchanged in
1995 compared to 1994, which was 2% lower than 1993. The expense variations do
not correlate with the revenue fluctuations primarily due to the effects of
turnkey drilling operations.
12
<PAGE> 4
Perceptible trends existing in the offshore drilling markets in which the
Company operates are shown below:
- ------------------------------------------------------------------------------
GULF OF MEXICO - Continuing high levels of exploration & development activity
NORTH SEA - Continuing high levels of drilling activity for jack-up rigs
EASTERN CANADA - Improving demand
TRINIDAD - Uncertain demand
- ------------------------------------------------------------------------------
The drilling markets in which the Company competes frequently experience
significant fluctuations in 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 volatile nature of such factors prevents the
Company from being able to accurately predict whether existing market
conditions or the perceptible market trends reflected in the preceding table
will continue. Assuming such conditions and trends prevail, however, the
Company should be profitable in 1996.
In response to fluctuating market conditions, the Company can, as it has
done in the past, relocate its drilling rigs from one geographic area to
another, but only when such moves are economically justified.
Three of the Company's deep-well land rigs were under contract in Texas and
Louisiana at year end and two others worked most of the third and fourth
quarters in Argentina. The Company's three trailer-mounted rigs commenced
operations in April under a two-year assignment in Argentina. The Company's
five arctic land rigs and remaining four rigs in western Texas and Oklahoma
were idle in 1995. The cost of maintaining the idle rigs is modest and the
remaining investment in such rigs is not significant.
AVIATION OPERATIONS. Although the aviation division's operating results are
still heavily influenced by oil and natural gas exploration and production,
principally in the Gulf of Mexico, and seasonal weather conditions, primarily
in Alaska, the division has continued to diversify its flight services. The
Company offers, among other services, forest fire control, commuter airline
services, flightseeing and medivac services, and, in recent years, has
developed and sold auxiliary fuel tanks for helicopters. The Company further
broadened its aviation operations in 1994 to include China, where two twin
engine helicopters are currently under contract.
Aviation revenues fell by 8% in 1995 compared to 1994, which was 16% higher
than 1993. Aviation division expenses in 1995 were unchanged from 1994, which
was 16% above 1993. The decrease in 1995 revenues was primarily due to a
drop-off in forest fire control services traditionally provided during the
third quarter throughout the western United States and a decrease in United
Nations-related flying.
The number of aircraft operated by the Company at the end of each year in
the 1993 - 1995 period and the revenue hours for each of those years are
reflected in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Twin Engine Helicopters:
Number 62 63 63
Revenue Hours 29,129 33,330 29,715
Single Engine Helicopters:
Number 25 27 31
Revenue Hours 9,563 11,574 10,150
Fixed-Wing Aircraft:
Number 19 17 15
Revenue Hours 20,430 23,136 22,728
- --------------------------------------------------------------------------------
</TABLE>
Excluded from the preceding table are 13 twin engine helicopters owned by
the Company's Dutch affiliate which recorded revenue hours of 8,907, 8,134 and
8,420 in 1995, 1994 and 1993, respectively. Also excluded are 14 helicopters
and one fixed-wing aircraft acquired in December 1995.
Perceptible trends existing in the aviation markets in which the Company
operates are shown below:
- --------------------------------------------------------------------------------
ALASKA - Moderately improving market conditions
GULF OF MEXICO - Moderately improving market conditions
NORTH SEA - Moderately improving flight support activity
CHINA - Generally stable demand
- --------------------------------------------------------------------------------
Assuming the foregoing trends continue, the aviation division should
contribute positive operating results in 1996. The Company, however, cannot
predict whether these market trends will continue. Changes in energy company
exploration and production activities, seasonal weather patterns and other
factors can affect the demand for flight services in the aviation markets in
which the Company competes. The Company can, as it has done in the past, move
aircraft from one market to another, but only when the likelihood of higher
returns makes such action economical.
MANUFACTURING OPERATIONS. The Company's manufacturing operations generated
revenues of $133.7 million in 1995, a 38% increase over 1994, while operating
profit improved to 9% of revenues. The heavy equipment division shipped 47
mining, timber and transportation loaders, stackers and cranes during 1995, or
34% more than in 1994, while the marine division's revenues more than doubled
to about $25 million. The Company's mini-steel mill, which produces steel for
the other two divisions as well as for outside sale, achieved a 17% increase in
revenues between years.
The Company's manufacturing operations are considerably less volatile than
its drilling and aviation operations. Given a year-end order backlog of $42
million and barring unforeseen circumstances, the Company's manufacturing
operations should continue to contribute positive operating results during
1996.
13
<PAGE> 5
LIQUIDITY AND CAPITAL RESOURCES
Key balance sheet amounts and ratios for 1995 and 1994 were as follows (dollars
in millions):
<TABLE>
<CAPTION>
December 31, 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 90.3 $ 111.1
Current assets $ 273.5 $ 253.7
Current liabilities $ 72.9 $ 57.8
Current ratio 3.75 4.39
Note payable and current maturities
of long-term debt $ 7.0 $ 0.3
Long-term debt $ 247.7 $ 248.5
Stockholders' equity $ 429.2 $ 442.3
Long-term debt/total capitalization .37 .36
- ------------------------------------------------------------------------
</TABLE>
Reflected in the comparisons above are the effects of net cash used in
operations of $6.8 million, capital expenditures of $33.9 million, and proceeds
from equipment disposals and repayments from affiliates totaling $19.7 million.
The operating cash deficit resulted primarily from an increase in inventories
consistent with growing manufacturing operations, start-up costs associated
with Argentina land rig operations and deferred turnkey drilling costs on
projects in progress.
Capital expenditures encompass new assets or enhancements to existing
assets as expenditures for routine maintenance and major repairs are charged to
operations as incurred. Property, plant and equipment additions in 1995
included major rig enhancements, purchases of five aircraft and the December
acquisition of 15 helicopters, one fixed-wing aircraft and a hangar and office
facility in Alaska.
On April 28, 1995, the Company announced plans for the design and
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 is expected to be completed by mid-1998 at
an estimated cost of $170 million. The Company intends to finance a significant
portion of the construction cost and is currently evaluating credit
alternatives. While completion of the project could be contingent upon the
Company obtaining outside financing, the Company believes that, based upon the
relatively long duration of the project and the expected timing of
disbursements, such financing will not be necessary prior to early 1997. In the
interim, the Company expects capital expenditures related to the construction
of Rowan Gorilla V to be about $40 million, which will be financed through
existing working capital and anticipated cash flow from operations. While the
Company believes it will be able to obtain outside financing for the project,
and at a reasonable cost, there can be no assurance that such financing will be
obtained. The Company currently has no unused lines of credit.
The reactivation of the Company's marine construction capability,
principally through improvements to the Vicksburg shipyard, is expected to cost
approximately $20 million, most of which will be incurred over the first half
of 1996, and be financed through existing working capital.
The Company estimates all other 1996 capital expenditures to be between $20
and $25 million. The Company may also spend amounts to acquire additional
aircraft as market conditions justify and to upgrade existing offshore rigs.
Based on current operating levels and the previously discussed market
trends, management believes that 1996 operations, together with existing
working capital, will generate sufficient cash flow to sustain planned capital
expenditures and debt service requirements at least through the remainder of
1996.
At December 31, 1995, the provisions of the Company's existing indebtedness
would allow the Company to enter into sale/leaseback transactions with a
maximum value of approximately $73 million.
In December 1995, in connection with the purchase of 16 aircraft and a
hangar and office facility in Alaska, the Company issued a $7 million
promissory note payable at the end of one year. The note bears no interest, is
secured by the aircraft and can be repaid through the application of proceeds
from the Company's sale of any of the aircraft.
In February 1994, the Company completed the acquisition of the net assets
of Marathon LeTourneau Company for $52.1 million, with $10.4 million cash paid
at the time of closing and the balance financed by nonrecourse promissory notes
bearing interest at 7% and payable at the end of five years.
In 1993, the Company sold 10 million shares of common stock using the $92
million net proceeds to expand the Company's turnkey drilling operations and
increase working capital. During 1993, the Company repaid $10 million
outstanding under its $35 million unsecured revolving line of credit and
canceled the line. Also in 1993, the Company entered into a $3.6 million
nonrecourse bank loan agreement to finance the purchase of two fixed-wing
aircraft in conjunction with a five-year medivac service contract.
The Company did not pay any dividends on its common stock during the 1993 -
1995 period and is currently prohibited from doing so under the terms of its
11 7/8% Senior Notes. See Note 5 of the Notes to Consolidated Financial
Statements.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, which governs accounting for the impairment of
long-lived assets. The effect of adopting the statement on the Company's
financial position or results of operations was not material.
The Company does not intend to adopt the accounting provisions of Statement
of Financial Accounting Standards No. 123 in 1996, but rather has elected to
continue to apply Accounting Principles Board Opinion No. 25 for measurement
and recognition of employee stock-based compensation.
14
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
Rowan Companies, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Rowan
Companies, Inc. and Subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Houston, Texas
March 1, 1996
15
<PAGE> 7
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
--------------------------------------
(In thousands except share amounts) 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 90,338 $ 111,070
Receivables - trade and other 87,811 78,317
Inventories:
Raw materials and supplies 51,898 42,364
Work-in-progress 23,015 14,238
Finished goods 708 2,784
Prepaid expenses 11,430 3,290
Cost of turnkey drilling contracts in progress 8,259 1,642
-----------------------------------------------------------------------------------------------------------------
Total current assets 273,459 253,705
-----------------------------------------------------------------------------------------------------------------
Investment In and Advances To 49% Owned Companies 29,770 34,476
-----------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment - at cost:
Drilling equipment 944,021 961,391
Aircraft and related equipment 189,954 176,874
Manufacturing plant and equipment 25,037 18,955
Other property and equipment 91,089 86,883
-----------------------------------------------------------------------------------------------------------------
Total 1,250,101 1,244,103
Less accumulated depreciation and amortization 763,062 737,982
-----------------------------------------------------------------------------------------------------------------
Property, plant and equipment - net 487,039 506,121
-----------------------------------------------------------------------------------------------------------------
Other Assets and Deferred Charges 12,220 10,877
-----------------------------------------------------------------------------------------------------------------
Total $ 802,488 $ 805,179
=================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable and current maturities of long-term debt (Note 2) $ 7,039 $ 289
Accounts payable - trade 21,774 20,513
Other current liabilities (Note 4) 44,058 36,958
-----------------------------------------------------------------------------------------------------------------
Total current liabilities 72,871 57,760
-----------------------------------------------------------------------------------------------------------------
Long-Term Debt - less current maturities (Note 2) 247,744 248,504
-----------------------------------------------------------------------------------------------------------------
Other Liabilities (Notes 6 and 9) 36,227 36,557
-----------------------------------------------------------------------------------------------------------------
Deferred Credits:
Income taxes (Note 7) 4,146 4,468
Gain on sale/leaseback transactions (Note 9) 12,345 15,543
-----------------------------------------------------------------------------------------------------------------
Total deferred credits 16,491 20,011
-----------------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities (Note 9)
-----------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series I Preferred Stock, authorized 6,500 shares, none issued
Series II Preferred Stock, authorized 6,000 shares, none issued
Series 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 86,353,792 shares at December 31, 1995 and 85,737,581 shares at
December 31, 1994 (Note 3) 10,794 10,717
Additional paid-in capital 396,092 390,925
Retained earnings (Note 5) 24,754 43,190
Less cost of treasury stock - 1,457,919 shares 2,485 2,485
-----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 429,155 442,347
-----------------------------------------------------------------------------------------------------------------
Total $ 802,488 $ 805,179
=================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
16
<PAGE> 8
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------
(In thousands except per share amounts) 1995 1994 1993
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling services $ 250,080 $ 245,917 $ 271,022
Manufacturing sales and services 133,755 96,664
Aircraft services 87,462 95,578 82,174
-----------------------------------------------------------------------------------------------------------------
Total 471,297 438,159 353,196
-----------------------------------------------------------------------------------------------------------------
Costs and Expenses:
Drilling services 207,934 207,577 211,095
Manufacturing sales and services 120,378 87,382
Aircraft services 79,993 79,955 68,882
Depreciation and amortization 50,555 50,790 51,918
General and administrative 14,692 13,862 13,940
-----------------------------------------------------------------------------------------------------------------
Total 473,552 439,566 345,835
-----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations (2,255) (1,407) 7,361
-----------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest expense (27,702) (27,530) (25,361)
Gain on disposals of property, plant and equipment 6,598 1,344 1,955
Interest income 5,209 4,813 2,348
Other - net 468 260 150
-----------------------------------------------------------------------------------------------------------------
Other income (expense) - net (15,427) (21,113) (20,908)
-----------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes (17,682) (22,520) (13,547)
Provision (credit) for income taxes (Note 7) 754 469 (288)
-----------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (18,436) $ (22,989) $ (13,259)
=================================================================================================================
Earnings (Loss) Per Share of Common Stock (Note 1) $ (.22) $ (.27) $ (.17)
=================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
17
<PAGE> 9
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995, 1994 and 1993
------------------------------------------------------------------
Common Stock
---------------------------------------
Issued In Treasury Additional
----------------- ---------------- Paid-in Retained
(In thousands) Shares Amount Shares Amount Capital Earnings
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 74,645 $ 9,331 1,458 $ 2,485 $ 289,470 $ 79,438
Exercise of stock options 531 66 464
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 4,282
Conversion of subordinated debentures 174 22 978
Sale of common stock (Note 3) 10,000 1,250 90,743
Net loss (13,259)
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 85,350 10,669 1,458 2,485 385,937 66,179
Exercise of stock options 388 48 340
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 4,648
Net loss (22,989)
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 85,738 10,717 1,458 2,485 390,925 43,190
Exercise of stock options 538 67 472
Value of services rendered by
participants in the Nonqualified
Stock Option Plans (Note 3) 4,255
Conversion of subordinated debentures 78 10 440
Net loss (18,436)
---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 86,354 $10,794 1,458 $ 2,485 $ 396,092 $ 24,754
=====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE> 10
Rowan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Provided By (Used In):
Operations:
Net income (loss) $ (18,436) $ (22,989) $ (13,259)
Noncash charges (credits) to net income (loss):
Depreciation and amortization 50,555 50,790 51,918
Gain on disposals of property, plant and equipment (6,598) (1,344) (1,955)
Compensation expense 4,255 4,648 4,282
Change in sale/leaseback payable (1,460) (1,405) (273)
Amortization of sale/leaseback gain (3,198) (3,198) (3,198)
Provision for pension and postretirement benefits 7,402 6,922 5,623
Other - net 1,161 (503) (1,271)
Changes in current assets and liabilities:
Receivables - trade and other (9,494) 18,080 (28,867)
Inventories (16,235) (9,205) 670
Other current assets (17,718) (2,464) 2,257
Current liabilities 3,148 6,064 774
Net changes in other noncurrent assets and liabilities (171) (2,591) 1,665
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations (6,789) 42,805 18,366
- ------------------------------------------------------------------------------------------------------------------------
Investing activities:
Capital expenditures:
Property, plant and equipment additions (33,881) (32,963) (21,989)
Acquisition of net manufacturing assets (10,414)
Repayments from (advances to) affiliates 3,676 (100)
Proceeds from disposals of property, plant and equipment 16,013 2,604 2,929
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (14,192) (40,773) (19,160)
- ------------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from common stock offering, net of issue costs 91,993
Proceeds from revolving credit arrangements 10,000
Payments on revolving credit arrangements (10,000)
Proceeds from other borrowings 3,560
Repayments of other borrowings (290) (8,127) (8,061)
Other - net 539 387 530
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 249 (7,740) 88,022
- ------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (20,732) (5,708) 87,228
Cash and Cash Equivalents, Beginning of Year 111,070 116,778 29,550
- ------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 90,338 $ 111,070 $ 116,778
========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE> 11
Rowan Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Rowan Companies, Inc. and all of its wholly and majority owned
subsidiaries (the "Company").
On February 11, 1994, the Company completed the acquisition of
substantially all of the assets, and assumed certain related liabilities, of
Marathon LeTourneau Company for $52,070,000 pursuant to an agreement with
General Cable Corporation dated November 12, 1993. The acquisition was financed
with $10,414,000 in cash and $41,656,000 in 7% promissory notes due in 1999 and
has been recorded using the purchase method of accounting. The accompanying
consolidated financial statements give effect to the acquisition as of January
1, 1994 and include the financial position, results of operations and cash
flows associated with the acquired net assets from that date. Had the
acquisition been completed effective January 1, 1993, the Company's unaudited
pro forma operating results for 1993 would have been as follows: revenues -
$449,400,000, net loss - $10,300,000 and net loss per share of common stock -
$.13.
The Company accounts for its investment in 49% owned companies using
the equity method.
The excess of cost over the net assets of subsidiaries at dates of
acquisitions ($8,452,000) is being amortized over a thirty-year period. At
December 31, 1995, the unamortized excess cost was $2,967,000.
Intercompany transactions are eliminated in consolidation.
REVENUE RECOGNITION. Most drilling contracts provide for payment on a day rate
basis, and revenues and expenses are recognized as the work progresses. The
Company also utilizes turnkey contracts for certain of its drilling operations.
Under these short-term, fixed price arrangements, revenues and expenses are
recognized on a completed contract basis.
The Company's aviation services generally are provided under master
service agreements (which provide for incremental payments based on usage),
term contracts, or day-to-day charter arrangements. Aviation revenues and
expenses are recognized as services are rendered.
Manufacturing sales and related costs are generally recognized as
products are shipped. Revenues and costs and expenses included sales and costs
of sales of $119,640,000 and $97,324,000, respectively, in 1995 and $90,460,000
and $72,717,000, respectively, in 1994.
INVENTORIES. Manufacturing inventories are stated principally at lower of
first-in, first-out cost or market. Drilling and aviation materials and
supplies are carried at average cost.
STATEMENT OF CASH FLOWS. The Company generally considers all highly liquid
instruments with a maturity of three months or less when purchased to be cash
equivalents.
Noncash financing activities consisted of the issuance of a
$6,972,000 non-interest bearing promissory note in connection with the purchase
of certain aviation assets in 1995, the issuance of $41,656,000 in 7%
promissory notes in connection with the acquisition of the net assets of
Marathon LeTourneau Company in 1994, the issuance of $10,300,000 Series III
Floating Rate Convertible Subordinated Debentures in 1994 and the conversion of
$450,000 and $1,000,000 of Series I Floating Rate Convertible Subordinated
Debentures into 78,261 and 173,913 shares of common stock in 1995 and 1993,
respectively. See Notes 2 and 3.
PROPERTY AND DEPRECIATION. For financial reporting purposes, the Company
computes depreciation using the straight-line method over the estimated lives
of the related assets as follows:
<TABLE>
<CAPTION>
Salvage
Years Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Marine drilling equipment:
Semi-submersible 15 20%
Cantilever jack-ups 15 20%
Conventional jack-ups 12 20%
Barges 12 20%
Land Drilling equipment 8 to 12 20%
Drill pipe and tubular equipment 4 10%
Aviation equipment:
Aircraft 7 to 10 15% to 25%
Other 2 to 10 various
Manufacturing plant and equipment:
Buildings and improvements 10 to 25 10% to 20%
Other 2 to 12 various
Other property and equipment 3 to 40 various
- ---------------------------------------------------------------------------------------
</TABLE>
The Company depreciates its equipment from the date placed in service
until the equipment is sold or becomes fully depreciated.
The Company capitalizes, during the construction period, an allocation
of the interest cost incurred during the period required to complete the asset.
Engineering salaries and other expenses related to the construction of drilling
equipment are also capitalized.
Expenditures for new property or enhancements to existing property are
capitalized. Expenditures for routine maintenance and major repairs are charged
to operations as incurred. See Note 10.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." This statement generally
requires a periodic review of long-lived assets for indications that their
carrying amount may not be recoverable and governs the measurement and
disclosure of any resulting impairment loss. Its application did not have a
material impact on the Company's financial position or results of operations.
INCOME TAXES. The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 under which deferred income tax assets
and liabilities reflect
20
<PAGE> 12
the future tax consequences of differences between the financial statement and
tax bases of assets and liabilities. See Note 7.
EARNINGS (LOSS) PER COMMON SHARE. Earnings (loss) per share amounts are
computed by dividing net income (loss) by the weighted average number of common
shares outstanding during the year. Shares issuable upon conversion of the
Series I, Series II and Series III Floating Rate Convertible Subordinated
Debentures and the exercise of stock options are excluded from the computation
because their effect is antidilutive.
MANAGEMENT ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS. Certain reclassifications have been made in the 1994 and
1993 amounts to conform with the 1995 presentations.
2. LONG-TERM DEBT
Long-term debt consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
11 7/8% Senior Notes due 2001 $ 200,000 $ 200,000
Nonrecourse notes payable in quarterly
installments through 1998 with a
final balloon payment due at
maturity; bearing interest at 7% and
collateralized by two aircraft costing
approximately $3.6 million 2,797 3,087
Nonrecourse notes payable due 1999
bearing interest at 7% 41,656 41,656
Promissory note payable in 1996; non-
interest bearing and secured by 15
aircraft costing approximately
$6.7 million 6,730
Series I subordinated convertible
debentures due 1996 bearing interest
at 1/2% above prime rate 450
Series II subordinated convertible
debenture due 1997 bearing interest
at 1/2% above prime rate 3,600 3,600
- -----------------------------------------------------------------------------------
Total 254,783 248,793
Less current maturities 7,039 289
- -----------------------------------------------------------------------------------
Remainder $ 247,744 $ 248,504
===================================================================================
</TABLE>
Maturities of long-term debt for the five years ending December 31,
2000 are as follows: 1996 - $7,039,000, 1997 - $3,932,000, 1998 - $2,156,000,
1999 - $41,656,000 and 2000 - $0.
The 11 7/8% Senior Notes due 2001 may be redeemed early, in whole or
in part from time to time at the Company's option, beginning December 1, 1996,
upon payment of a premium of 6% and descending 2% annually from that date to
December 1, 1999, when the Company may redeem them at the principal amount.
In January 1993, the Company entered into a five-year nonrecourse loan
agreement with a bank to finance the purchase of two fixed-wing aircraft for
$3,560,000. The resulting notes payable are collateralized by the aircraft and
bear a fixed interest rate of 7%. The notes will be repaid in quarterly
installments through 1998, with a final balloon payment due at maturity.
In February 1994, in connection with the acquisition of certain net
manufacturing assets, the Company issued $41,656,000 in 7% promissory notes due
in 1999. See Note 1 for further information.
In December 1995, in connection with the purchase of 15 helicopters,
one fixed-wing aircraft and a hangar and office facility, the Company issued a
$6,972,000 promissory note due in one year. The note bears no interest and is
secured by the aircraft.
The $3,600,000 principal amount of the Series II Floating Rate
Convertible Subordinated Debenture is convertible into $3,600,000 Series II
Preferred Stock, which may be converted into an aggregate of 400,000 shares of
the Company's common stock. At December 31, 1995 the interest rate was 9.25%.
See Note 3 for further information.
In November 1994, the Company issued $10,300,000 principal amount of
Series III Floating Rate Convertible Subordinated Debentures. The debentures
are convertible into $10,300,000 Series III Preferred Stock, which may be
converted into an aggregate of 1,525,926 shares of the Company's common stock.
The debentures were issued in exchange for promissory notes containing
provisions for setoff. Accordingly, the debentures and notes, and the related
interest amounts, have been offset in the consolidated financial statements
pursuant to Financial Accounting Standards Board Interpretation No. 39. See
Note 3 for further information.
Interest payments for 1995, 1994 and 1993 were $27,433,000,
$26,900,000 and $24,867,000, respectively.
Certain debt agreements of the Company contain provisions that require
an excess of current assets over current liabilities and an excess of
stockholders' equity over consolidated funded indebtedness, and restrict
investments, sale/leaseback transactions, mergers, consolidations, sales of
assets, borrowings, creation of liens, purchases of the Company's capital
stock, and present and future common stock dividend payments. See Note 5 for
further information.
3. STOCKHOLDERS' EQUITY
The Company has two nonqualified stock option plans through which options have
been granted to certain key employees.
The Company's 1980 Nonqualified Stock Option Plan authorized the Board
of Directors to grant, through January 25, 1990, options to purchase a total of
1,000,000 shares of the Company's common stock.
Under the terms of the 1988 Nonqualified Stock Option Plan, as amended
(the "1988 Plan"), the Board of Directors can grant, before January 21, 2003,
options to purchase a total of 7,000,000 shares of the Company's common stock.
At December 31, 1995, options for 5,726,504 shares had been granted at
an exercise price of $1.00 per share and 317 active, key employees had been
granted options.
21
<PAGE> 13
Options are exercisable to the extent of 25% after one year from date of grant,
50% after two years, 75% after three years and 100% after four years. All
options not exercised expire ten years after the date of grant.
For financial accounting purposes, the Company recognizes compensation
expense with respect to any nonqualified option in an amount equal to the
difference between the market price per share and the option price per share on
the date of grant. The compensation is recorded as expense over the period in
which the employee performs services to earn the right to exercise the option
and an equal amount is credited to additional paid-in capital.
Stock option activity was as follows:
<TABLE>
<CAPTION>
Number of Shares
--------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stock options outstanding,
January 1 2,182,650 1,616,325 1,490,475
Changes during the year:
Granted, at $1.00
per share 928,000 982,000 707,250
Exercised (537,950) (387,675) (530,650)
Forfeited (73,000) (28,000) (50,750)
- ----------------------------------------------------------------------------------------------
Stock options outstanding,
December 31 2,499,700 2,182,650 1,616,325
==============================================================================================
Stock options exercisable,
December 31 494,513 440,338 317,137
==============================================================================================
Stock options available for
grant, December 31:
1988 Plan 2,608,821 3,463,821 4,417,821
==============================================================================================
</TABLE>
The Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan
(the "Plan") provides for the issuance to key employees of up to $20,000,000 in
aggregate principal amount of the Company's floating rate convertible
subordinated debentures. The debentures are initially convertible into
preferred stock which has no voting rights (except as required by law or the
Company's charter), no dividend and a nominal liquidation preference. The
preferred stock is immediately convertible into common stock.
Since the inception of the plan, debentures in the aggregate principal
amount of $19,925,000 have been issued by the Company. At December 31, 1995,
all $5,125,000 principal amount of debentures issued in 1986 had been converted
into common stock at $5.75 per share. In 1987, the Company issued a debenture
in the principal amount of $4,500,000, of which $3,600,000 was outstanding at
December 31, 1995. This residual amount is ultimately convertible into common
stock at $9.00 per share for each $1,000 principal amount of debenture at any
time through September 10, 1997, unless earlier redeemed or the conversion
privilege is terminated. In November 1994, the Company issued debentures in the
principal amount of $10,300,000 which are ultimately convertible into common
stock at $6.75 per share for each $1,000 principal amount of debenture through
November 30, 2004, as follows, unless earlier redeemed or the conversion
privilege is terminated: $2,350,000 through November 29, 1996; $4,800,000 on or
after November 30, 1996; $7,500,000 on or after November 30, 1997 and
$10,300,000 on or after November 30, 1998.
On February 25, 1992, the Company adopted a Stockholder Rights
Agreement to protect against coercive takeover tactics. The agreement provides
for the distribution to the Company's stockholders of one Right for each
outstanding share of common stock. Each Right entitles the holder to purchase
from the Company one one-hundredth of a share of Series A Junior Preferred
Stock of the Company at an exercise price of $30. In addition, under certain
circumstances, each Right will entitle the holder to purchase securities of the
Company or an acquiring entity at 1/2 market value. The Rights are exercisable
only if a person or group acquires 15% or more of the Company's outstanding
common stock or makes a tender offer for 30% or more of the Company's
outstanding common stock. The Rights will expire on February 25, 2002. The
Company may generally redeem the Rights at a price of $.01 per Right at any
time until the 10th day following public announcement that a 15% position has
been acquired.
In June 1993, the Company sold 10,000,000 shares of its common stock
in a public offering. Net proceeds of the sale were $91,993,000 after deducting
underwriting commissions and direct offering costs totaling $4,257,000.
4. OTHER CURRENT LIABILITIES
Other current liabilities consisted of (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Gain on sale/leaseback transactions $ 3,198 $ 3,198
Accrued liabilities:
Income taxes 1,321 577
Compensation and related
employee costs 24,578 17,837
Interest 2,012 2,195
Taxes and other 12,949 13,151
- -------------------------------------------------------------------
Total $ 44,058 $ 36,958
===================================================================
</TABLE>
5. RESTRICTIONS ON RETAINED EARNINGS
Under the terms of certain debt agreements, the Company has agreed not to
declare dividends or make any distribution on its common stock unless the total
dividends or distributions subsequent to December 31, 1991 are less than the
sum of a) $20,000,000, plus b) 50% of cumulative consolidated net income, if
positive, subsequent to December 31, 1991, plus c) the net proceeds from the
sale of any class of capital stock after December 31, 1991, less d) 100% of
cumulative consolidated net income, if negative, subsequent to December 31,
1991. Under this dividend restriction, the Company had a computed negative
balance of $16,444,000 at December 31, 1995. Subject to these restrictions, the
Board of Directors will determine payment, if any, of future dividends or
distributions in light of conditions then existing, including the Company's
earnings, financial condition and requirements, opportunities for reinvesting
earnings, business conditions and other factors.
22
<PAGE> 14
6. BENEFIT PLANS
Since 1952, the Company has sponsored defined benefit pension plans covering
substantially all of its employees. In 1994, in connection with the acquisition
of net manufacturing assets, the Company assumed the assets and obligations of
a separate plan covering manufacturing employees.
Pension benefits are based on an employee's years of service and
average earnings for the five highest consecutive calendar years of
compensation during the ten years immediately preceding retirement. The
Company's policy is to fund the minimum amount required by the Internal Revenue
Code.
The following table sets forth the plans' funded status and the
amounts recognized in the Company's consolidated balance sheet (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994
- --------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
Vested benefits $107,803 $80,539
====================================================================
Total benefits $115,533 $87,380
====================================================================
Plan assets at fair value $108,056 $88,650
Projected benefit obligation
for service rendered to date 130,722 99,275
- --------------------------------------------------------------------
Plan assets less than projected
benefit obligation 22,666 10,625
Unrecognized net loss (9,857) (2,941)
Unrecognized net benefits being
recognized over 15 years 4,845 6,057
Unrecognized prior service cost (555) (671)
- --------------------------------------------------------------------
Accrued pension cost included in
Current and Other Liabilities $ 17,099 $13,070
====================================================================
</TABLE>
The plans' assets consist primarily of equity securities and
U.S. Treasury bonds and notes and, at December 31, 1995, included 1,500,000
shares of the Company's common stock at an average cost of $4.81 per share.
At December 31, 1995, $13,200,000 of the plans' assets were invested
in a dedicated bond fund. The plans had a basis in these assets of $9,900,000
yielding approximately 5.4% to maturity.
Net pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 4,335 $ 4,784 $ 3,982
Interest cost on projected
benefit obligation 8,580 7,879 6,796
Actual return on plan
assets - (gain) loss (24,166) 7,264 (8,580)
Net amortization
and deferral 15,280 (17,105) (5)
- ---------------------------------------------------------------------
Net periodic pension cost $ 4,029 $ 2,822 $ 2,193
=====================================================================
</TABLE>
Assumptions used in actuarial calculations were:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.25% 8.75% 7.5%
Rate of compensation
increase 4.0% 4.0% 4.5%
Expected rate of return
on plan assets 9.0% 9.0% 9.0%
- --------------------------------------------------------------------
</TABLE>
The Company also sponsors pension restoration plans to supplement the
benefits for certain key executives that would otherwise be limited by Section
415 of the Internal Revenue Code. The plans are unfunded and had projected
benefit obligations at December 31, 1995 and 1994 of $3,021,000 and $2,404,000,
respectively. The net pension liabilities included in the Company's
consolidated balance sheet were $2,230,000 and $1,497,000 at December 31, 1995
and 1994, respectively. Net pension cost was $473,000 in 1995, $437,000 in 1994
and $408,000 in 1993.
In addition to pension benefits, the Company provides certain health
care and life insurance benefits for retired employees. Substantially all of
the Company's drilling and aviation employees may become eligible for those
benefits if they reach normal retirement age while working for the Company.
The following table sets forth the plan's status and the amounts
recognized in the Company's consolidated balance sheet (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994
- --------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligations:
Retirees $12,006 $8,081
Fully eligible active plan
participants 7,751 5,388
Other active plan participants 11,570 9,057
- --------------------------------------------------------------------
Total benefits 31,327 22,526
Unrecognized transition obligation
being recognized over 20 years (12,859) (17,022)
Unrecognized net gain (loss) (8,870) 1,195
- --------------------------------------------------------------------
Accrued postretirement benefit cost
included in Other Liabilities $9,598 $6,699
====================================================================
</TABLE>
The actuarially determined accumulated postretirement benefit
obligation reflects health care cost trend rates of 12% for 1995 and decreasing
by 1% annually through 2001 and a discount rate of 7.25%. A one percentage
point increase in the assumed health care cost trend rate would increase net
periodic postretirement benefit cost by approximately $353,000 and increase the
accumulated postretirement benefit obligation by approximately $2,986,000.
23
<PAGE> 15
Net postretirement benefit cost included the following components
(in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,157 $ 1,475 $ 1,039
Interest cost 1,998 1,799 1,537
Net amortization and
deferral 797 1,003 946
- ------------------------------------------------------------------------
Net periodic postretirement
benefit cost $ 3,952 $ 4,277 $ 3,522
========================================================================
</TABLE>
Cash payments for postretirement benefits in 1995, 1994 and 1993 were
approximately $1,052,000, $614,000 and $500,000, respectively.
Effective April 1, 1995, the Company commenced the Rowan Companies,
Inc. Savings and Investment Plan in conformity with Section 401(k) of the
Internal Revenue Code. The plan, to which the Company contributed about
$988,000 in 1995, covers all drilling and aviation employees. Manufacturing
employees are covered by a separate plan to which the Company contributed
approximately $620,000 and $433,000 in 1995 and 1994, respectively.
7. INCOME TAXES
The detail of income tax provisions (credits) is presented below (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 87 $ (98) $ 123
Foreign 787 145 501
State 202 268
- -------------------------------------------------------------------------
Total current provision 1,076 315 624
Deferred - foreign and other (322) 154 (912)
- -------------------------------------------------------------------------
Total income tax
provision (credit) $ 754 $ 469 $ (288)
=========================================================================
</TABLE>
Total income tax expense (credit) shown in the consolidated statement
of operations is reconciled to the amount that would be computed if the income
(loss) before income taxes was multiplied by the federal income tax rate
(statutory rate) as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35% 35% 35%
Tax at statutory rate $(6,189) $(7,883) $(4,742)
Increase (decrease)
in taxes resulting from:
Limitation on utilization
of tax benefits 6,224 7,663 3,679
Additional taxes on
foreign source income 465 753 551
Alternative minimum tax 87 (98) 123
Other - net 167 34 101
- -------------------------------------------------------------------------
Total income tax
provision (credit) $754 $469 $(288)
=========================================================================
</TABLE>
Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities at December 31, 1995 and 1994 were as follows (in
thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax asset:
Deferred sale/leaseback gain $ 5,443 $ 6,563
Accrued pension and
postretirement benefit costs 10,190 7,454
ESOP/PAYSOP contributions 1,428 1,753
Net operating loss carryforward 97,608 95,352
Investment tax credit carryforward 49,495 56,450
Other 3,546 3,256
- ---------------------------------------------------------------------
167,710 170,828
Valuation allowance (69,278) (69,031)
- ---------------------------------------------------------------------
98,432 101,797
- ---------------------------------------------------------------------
Deferred tax liability:
Property, plant and equipment 99,162 102,113
Foreign income taxes 2,632 3,030
Other 784 1,122
- ---------------------------------------------------------------------
102,578 106,265
- ---------------------------------------------------------------------
Deferred tax liability - net $4,146 $4,468
=====================================================================
</TABLE>
The valuation allowance at December 31, 1995 primarily consisted of
investment tax credit carryforwards ($49.5 million) and a portion of the net
operating loss carryforward ($18.8 million) which are forecast as not being
utilized prior to their statutory expiration dates. The valuation allowance
increased by $247,000 in 1995 primarily as a result of the Company's loss in
the current year which was offset by expiring tax credits.
At December 31, 1995, the Company had $45,414,000 of regular
investment tax credits and $4,081,000 of ESOP (Employee Stock Ownership Plan)
tax credits available for application against future federal taxes payable.
Total credits, if not utilized, will expire as follows: 1996 - $12,772,000,
1997 - $11,069,000, 1998 - $8,026,000, 1999 - $10,110,000, 2000 - $2,017,000
and 2001 - $5,501,000.
At December 31, 1995, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $278,880,000 which will
expire, if not utilized, as follows: 2001 - $89,438,000, 2002 - $129,124,000,
2006 - $1,860,000, 2007 - $50,260,000, 2008 - $3,002,000, 2009 - $1,465,000 and
2010 - $3,731,000.
Deferred income taxes not provided for undistributed earnings of
foreign subsidiaries, because such earnings are considered permanently invested
abroad, amounted to approximately $3,900,000 at December 31, 1995.
Loss before income taxes consisted of $(17,292,000), $(21,640,000) and
$(10,346,000) of domestic losses, and $(390,000), $(880,000) and $(3,201,000)
of foreign losses for 1995, 1994 and 1993, respectively.
Income tax payments exceeded refunds by $388,000 in 1995, $393,000 in
1994 and $248,000 in 1993.
24
<PAGE> 16
8. FAIR VALUES OF FINANCIAL INSTRUMENTS
At December 31, 1995, the carrying amount of the Company's cash and cash
equivalents approximated fair value due to the short maturity of the
instruments. Except for the 11 7/8% Senior Notes discussed below, the carrying
amount of the Company's long-term debt was estimated to approximate its fair
value at December 31, 1995 based upon quoted market prices for similar issues.
The 11 7/8% Senior Notes had a fair value of $216,000,000 at December
31, 1995, or a $16,000,000 premium to carrying value, based upon the closing
price quoted on the New York Stock Exchange.
9. COMMITMENTS AND CONTINGENT LIABILITIES
During 1984 and 1985, the Company sold two cantilever jack-ups, Rowan-Halifax
and Cecil Provine, for a total of $126,500,000 in cash and leased each rig back
under 15-year operating leases at effective interest rates of 9.3% and 8.0%,
respectively. In each of 1999 and 2000, the Company will have an option to
purchase the respective rig at the then fair market value, terminate the lease,
or renew the lease at the lesser of a) a fixed rental renewal of 50% of the
weighted average amount of the semi-annual installments during the basic term,
or b) a fair market rental renewal. Each transaction resulted in a gain which
is being recognized over the respective lease term.
Total payments to be made under the sale/leaseback agreements are
being expensed on a straight-line basis though the payments are variable. Other
liabilities at December 31, 1995 and 1994 included the excess of inception-to-
date sale/leaseback expenses over related payments of $12,857,000 and
$14,089,000, respectively.
The Company has operating leases covering aircraft hangars, offices
and computer equipment and the sale/leaseback rigs. Net rental expense under
all operating leases was $20,113,000 in 1995, $20,756,000 in 1994 and
$17,633,000 in 1993.
As of December 31, 1995, the future minimum payments to be made under
noncancelable operating leases were (in thousands):
<TABLE>
<S> <C>
1996 $ 21,538
1997 23,592
1998 19,161
1999 21,232
2000 17,646
Later years 1,717
- -----------------------------------------------
Total $ 104,886
===============================================
</TABLE>
Capital expenditures for 1996 are estimated as follows: reactivation
of the Company's Vicksburg shipyard ($20 million), progress toward construction
of Rowan Gorilla V ($40 million) and other asset purchases or enhancements ($20
to $25 million).
In the Company's opinion, at December 31, 1995, there were no
contingencies, claims or lawsuits against the Company which could have a
material adverse effect on its financial position or results of operations.
10. SEGMENTS OF BUSINESS
The Company has three principal segments of business: contract and turnkey
drilling of oil and gas wells, both onshore and offshore ("Drilling"), charter
helicopter and fixed-wing aircraft services ("Aviation") and, beginning in
1994, manufacture of heavy equipment for the mining, timber and transportation
industries, alloy steel and steel plate and marine drilling equipment
("Manufacturing").
Drilling services are provided in both domestic and foreign areas.
Aviation services primarily include charter airline, flightseeing and forest
fire control services in Alaska as well as oil and gas related services in the
Gulf of Mexico. Manufacturing operations are primarily conducted in Longview,
Texas, but sales and services are carried out throughout the United States and
in many foreign locations.
Total revenues reported by industry segments consist principally of
revenues from unaffiliated customers. The Company had revenues, primarily from
drilling operations, in excess of 10% of consolidated revenues from one
customer in each of 1995 (11%), 1994 (10%) and 1993 (17%).
The Company believes that it has no significant concentrations of
credit risk. The Company has never experienced any significant credit losses
and its drilling and aviation services customers have heretofore primarily been
large energy companies and government bodies. The addition of manufacturing
operations in 1994 has diversified the Company's operations and attendant
credit risk. Further, the Company retains the ability to relocate its major
drilling and aviation assets over significant distances on a timely basis in
response to changing market conditions.
Assets are identified to a segment by their direct use. The Company
classifies its drilling rigs for segment purposes as domestic or foreign based
upon the drilling rig's country of registry. Accordingly, drilling rigs
registered in the United States are classified with domestic operations and
revenues generated from foreign operations of these rigs are considered export
revenues. Revenues generated by foreign-registered drilling rigs from
operations offshore the United States are classified as foreign revenues.
Assuming revenues derived from all drilling operations within the United
States, both onshore and offshore, were treated as domestic revenues and export
revenues were treated as foreign revenues, revenues from foreign drilling
operations would have been $82,453,000 in 1995.
Domestic drilling operations included export revenues of $82,177,000
in 1995, $84,025,000 in 1994 and $79,697,000 in 1993. Except for $39,826,000 in
1995, $34,533,000 in 1994 and $38,005,000 in 1993, from other foreign areas,
such export revenues were generated from North Sea operations. Manufacturing
operations included export sales of $48,222,000 in 1995 and $34,543,000 in
1994.
At December 31, 1995, 27 drilling rigs, including 15 offshore rigs,
with a carrying value of $217,755,000 were located in the United States and 11
drilling rigs, including 6 offshore rigs, with a carrying value of $129,599,000
were located in foreign jurisdictions.
25
<PAGE> 17
Information concerning the Company's operations is summarized by
segment as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Drilling services:
Domestic $ 224,563 $ 217,395 $ 243,993
Foreign 25,517 28,522 27,029
Manufacturing sales and services 133,755 96,664
Aviation services 87,462 95,578 82,174
- ----------------------------------------------------------------------------
Consolidated $ 471,297 $ 438,159 $ 353,196
============================================================================
Operating profit (loss):
Drilling services:
Domestic $ 5,902 $ 4,771 $ 22,856
Foreign (883) (4,597) (3,803)
Manufacturing sales and services 11,737 7,667
Aviation services (4,319) 4,614 2,248
- ----------------------------------------------------------------------------
Consolidated 12,437 12,455 21,301
Gain on disposals of property, plant
and equipment 6,598 1,344 1,955
Interest and other income 5,677 5,073 2,498
General and administrative (14,692) (13,862) (13,940)
Interest expense (27,702) (27,530) (25,361)
- ----------------------------------------------------------------------------
Income (loss) before income taxes $ (17,682) $ (22,520) $ (13,547)
============================================================================
Identifiable assets at
December 31:
Drilling services:
Domestic $ 483,354 $ 531,990 $ 584,583
Foreign 56,077 40,863 41,687
Manufacturing sales and services 108,798 83,616
Aviation services 154,259 148,710 138,993
- ----------------------------------------------------------------------------
Total assets $ 802,488 $ 805,179 $ 765,263
============================================================================
</TABLE>
Certain other financial information for each of the Company's
principal business segments is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization:
Drilling $ 37,127 $ 38,166 $ 40,874
Aviation 11,788 11,009 11,044
Manufacturing 1,640 1,615
Capital expenditures:
Drilling 14,846 17,033 12,741
Aviation 12,897 14,657 9,248
Manufacturing 6,138 11,687
Maintenance and repairs:
Drilling 25,870 27,237 22,129
Aviation 13,911 16,138 10,197
Manufacturing 9,071 7,836
- ----------------------------------------------------------------------------
</TABLE>
11. RELATED PARTY TRANSACTIONS
A member of the Company's Board of Directors also serves as a director of one
of the Company's 1995 drilling customers. The transaction with this customer
involved a day rate and operating costs which were comparable to those
experienced by the Company in connection with third party contracts for similar
rigs. Because of the aforementioned relationship, the contract between the
Company and the customer was reviewed and ratified by the Board of Directors of
the Company. Related 1995 revenues were $2,755,000.
The chairman of the board of one of the Company's drilling customers
served as a director of the Company until April 1993. Transactions with this
customer involved day rates and operating costs which were comparable to those
experienced by the Company in connection with third party contracts for similar
rigs. Because of the aforementioned relationship, each drilling contract
between the Company and the customer was reviewed and ratified by the Board of
Directors of the Company during his tenure as a board member. Related 1993
revenues were $3,469,000.
In 1993, a director of the Company was an investment banker with one
of the underwriters of the Company's 10,000,000 share common stock offering.
That underwriter received $2,876,000 in commissions from the offering.
26
<PAGE> 18
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following unaudited information for the quarters ended March 31, June 30,
September 30 and December 31, 1994 and 1995 includes, in the Company's opinion,
all adjustments (which comprise only normal recurring accruals) necessary for a
fair presentation of such amounts (in thousands except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994:
Revenues $100,704 $105,380 $129,219 $102,856
Operating
profit (loss) 3,432 3,596 13,859 (8,432)
Net income (loss) (5,958) (5,862) 5,646 (16,815)
Earnings (loss) per
common share (.07) (.07) .07 (.20)
- -------------------------------------------------------------------------------------------
1995:
Revenues $92,797 $117,382 $134,343 $126,775
Operating
profit (loss) (13,637) 5,261 10,184 10,629
Net income (loss) (21,735) (3,706) 663 6,342
Earnings (loss) per
common share (.26) (.04) .01 .07
- -------------------------------------------------------------------------------------------
</TABLE>
COMMON STOCK PRICE RANGE,
CASH DIVIDENDS AND STOCK SPLITS (UNAUDITED)
The price range below is as reported by the New York Stock Exchange on the
Composite Tape. On February 28, 1996 there were approximately 3,400 holders of
record.
<TABLE>
<CAPTION>
Quarter 1995 1994
- -------------------------------------------------------------------------------------------
High Low High Low
---------------------------------------------------------------
<S> <C> <C> <C> <C>
First $6.75 $5.38 $9.13 $6.88
Second 8.38 6.38 8.75 6.63
Third 8.63 6.75 9.25 7.00
Fourth 10.00 6.00 7.88 5.75
- -------------------------------------------------------------------------------------------
</TABLE>
The Company did not pay any dividends on its common stock during 1995
and 1994. See Note 5 of the Notes to the Consolidated Financial Statements for
restrictions on dividends.
Stock splits and stock dividends since the Company became publicly
owned in 1967 have been as follows: 2 for 1 stock splits on January 25, 1973,
December 16, 1976 and May 13, 1980; 2 for 1 stock splits effected in the form
of a stock dividend on February 6, 1978 and January 20, 1981; and a 5% stock
dividend on May 21, 1975.
On the basis of these splits and dividends, each share acquired prior
to January 25, 1973 would be represented by 33.6 shares if still owned at
present.
27
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following is a list of subsidiaries of the Registrant:
Registrant and Parent:
Rowan Companies, Inc.
Wholly-Owned Subsidiaries of Registrant:
Era Aviation, Inc., a Washington corporation
Rowan International, Inc., a Panamanian corporation
Rowandrill, Inc., a Texas corporation
Rowan Drilling Company, Inc., a Texas corporation
Atlantic Maritime Services, Inc., a Texas corporation
Rowan Petroleum, Inc., a Texas corporation
LeTourneau, Inc., a Texas corporation
Note: Certain subsidiaries have been omitted from this listing because
such subsidiaries, when considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
Rowan Companies, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 4
to Registration Statement No. 2-58700, Amendment No. 1 to Registration
Statement No. 33-33755, Registration Statement No. 33-61444, Registration
Statement No. 33-51103, Registration Statement No. 33-51105 and Registration
Statement No. 33-51109, each on Form S-8, and to the incorporation by reference
in Amendment No. 1 to Registration Statement No. 33-15721, Amendment No. 2 to
Registration Statement No. 33-30057, Amendment No. 2 to Registration Statement
No. 33-61696, and Amendment No. 1 to Registration Statement No. 33-62885, each
on Form S-3, of our report dated March 1, 1996 incorporated by reference in
this Annual Report on Form 10-K of Rowan Companies, Inc., for the year ended
December 31, 1995. We also consent to the reference to us under the heading
"Experts" in Amendment No. 1 to Registration Statement No. 33-62885.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Houston, Texas
March 29, 1996
<PAGE> 1
EXHIBIT 24
Form 10-K for the Year Ended December 31,
1995 The Exchange Act of 1934
____________________
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints C. R. Palmer or E. E. Thiele, or either
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign to the Company's Form 10-K for the year ended
December 31, 1995 and any or all amendments, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
____________________
Pursuant to the requirement of the Exchange Act of 1934, the Company's
Form 10-K for the year ended December 31, 1995 or amendment has been signed
below by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
----------------------- President, Chairman of the
(C. R. Palmer) Board and Chief Executive Officer
RALPH E. BAILEY Director
(Ralph E. Bailey)
HENRY O. BOSWELL Director
(Henry O. Boswell)
H. E. LENTZ Director
(H. E. Lentz)
WILFRED P. SCHMOE Director March 29, 1996
(Wilfred P. Schmoe)
CHARLES P. SIESS, JR. Director
(Charles P. Siess, Jr.)
PETER SIMONIS Director
(Peter Simonis)
C. W. YEARGAIN Director
(C. W. Yeargain)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ROWAN COMPANIES, INC. FOR THE YEAR ENDED
DECEMBER 31, 1995 INCLUDED IN ITS 1995 ANNUAL REPORT TO STOCKHOLDERS AND
INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 90,338
<SECURITIES> 0
<RECEIVABLES> 87,811
<ALLOWANCES> 0
<INVENTORY> 75,621
<CURRENT-ASSETS> 273,459
<PP&E> 1,250,101
<DEPRECIATION> 763,062
<TOTAL-ASSETS> 802,488
<CURRENT-LIABILITIES> 72,871
<BONDS> 247,744
<COMMON> 0
0
10,794
<OTHER-SE> 418,361
<TOTAL-LIABILITY-AND-EQUITY> 802,488
<SALES> 119,640
<TOTAL-REVENUES> 471,297
<CGS> 97,324
<TOTAL-COSTS> 473,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,702
<INCOME-PRETAX> (17,682)
<INCOME-TAX> 754
<INCOME-CONTINUING> (18,436)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,436)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
