SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM_____TO_____
ROWAN COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-5491 75-0759420
(State or other jurisdiction of Commission File (I.R.S. Employer
incorporation or organization) Number Identification No.)
5450 TRANSCO TOWER, 2800 POST OAK BOULEVARD, HOUSTON, TEXAS 77056-6196
(Address of principal executive offices) (Zip Code)
(713) 621-7800
Registrant's telephone number, including area code
INAPPLICABLE
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of common stock, $.125 par value, outstanding at October
31, 1997 was 86,616,608.
<PAGE>
ROWAN COMPANIES, INC.
INDEX
PAGE NO.
PART I. Financial Information:
Consolidated Balance Sheet -- September 30, 1997 and
December 31, 1996................................................ 2
Consolidated Statement of Operations -- Three and Nine
Months Ended September 30, 1997 and 1996......................... 4
Consolidated Statement of Cash Flows -- Nine Months
Ended September 30, 1997 and 1996................................ 5
Notes to Consolidated Financial Statements....................... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 8
PART II. Other Information:
Exhibits and Reports on Form 8-K.................................12
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
September 30, December 31,
1997 1996
---------- ----------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ........................ $ 117,426 $ 97,225
Receivables - trade and other .................... 134,593 112,836
Inventories - at cost:
Raw materials and supplies ..................... 71,573 65,734
Work-in-progress ............................... 37,133 21,181
Finished goods ................................. 1,551 1,758
Prepaid expenses ................................. 10,829 8,750
Cost of turnkey drilling contracts in progress ... -- 9,835
---------- ----------
Total current assets ..................... 373,105 317,319
---------- ----------
INVESTMENT IN AND ADVANCES TO 49% OWNED COMPANIES .. 26,191 28,049
---------- ----------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Drilling equipment ............................... 966,923 954,249
Aircraft and related equipment ................... 200,201 188,681
Manufacturing plant and equipment ................ 53,056 37,377
Construction in progress ......................... 147,827 77,318
Other property and equipment ..................... 91,816 94,517
---------- ----------
Total .................................... 1,459,823 1,352,142
Less accumulated depreciation and amortization ... 832,987 805,942
---------- ----------
Property, plant and equipment - net .... 626,836 546,200
---------- ----------
OTHER ASSETS AND DEFERRED CHARGES .................. 7,120 7,740
---------- ----------
TOTAL .................................... $1,033,252 $ 899,308
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Notes payable and current maturities of long-term debt ................................ $ 2,241 $ 3,932
Accounts payable - trade .............................................................. 25,534 28,106
Other current liabilities ............................................................. 64,813 53,236
---------- --------
Total current liabilities ...................................................... 92,588 85,274
---------- --------
LONG-TERM DEBT - less current maturities ................................................. 274,374 267,321
---------- --------
OTHER LIABILITIES ........................................................................ 46,098 39,573
---------- --------
DEFERRED CREDITS:
Income taxes .......................................................................... 9,857 1,774
Gain on sale/leaseback transactions ................................................... 6,755 9,147
---------- --------
Total deferred credits ......................................................... 16,612 10,921
---------- --------
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 88,039,566
shares at September 30, 1997 and 87,054,028 shares
at December 31, 1996 .............................................................. 11,005 10,882
Additional paid-in capital ............................................................... 409,948 401,730
Retained earnings ........................................................................ 185,112 86,092
Less cost of 1,457,919 treasury shares ................................................... 2,485 2,485
---------- --------
Total stockholders' equity ..................................................... 603,580 496,219
---------- --------
TOTAL .......................................................................... $1,033,252 $899,308
========== ========
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
--------------------------- --------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Drilling services ........................................... $ 117,114 $ 77,927 $ 309,659 $ 226,000
Manufacturing sales and services ............................ 40,738 36,538 111,976 104,205
Aviation services ........................................... 37,604 40,218 83,371 88,452
--------- --------- --------- ---------
Total ................................................. 195,456 154,683 505,006 418,657
--------- --------- --------- ---------
COSTS AND EXPENSES:
Drilling services ........................................... 51,471 47,674 165,315 150,478
Manufacturing sales and services ............................ 34,964 33,710 97,478 95,232
Aviation services ........................................... 29,438 28,892 73,235 72,370
Depreciation and amortization ............................... 11,808 12,083 34,598 36,113
General and administrative .................................. 4,061 4,046 12,644 11,963
--------- --------- --------- ---------
Total ................................................. 131,742 126,405 383,270 366,156
--------- --------- --------- ---------
INCOME FROM OPERATIONS ......................................... 63,714 28,278 121,736 52,501
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense ............................................ (6,601) (6,903) (20,139) (20,714)
Less: interest capitalized .................................. 2,663 711 6,770 1,270
Gain on disposals of property, plant and equipment .......... 127 165 1,075 2,171
Interest income ............................................. 1,213 875 3,449 3,124
Other - net ................................................. 21 93 168 351
--------- --------- --------- ---------
Other income (expense) - net .......................... (2,577) (5,059) (8,677) (13,798)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ..................................... 61,137 23,219 113,059 38,703
Provision for income taxes .................................. 6,850 509 10,561 971
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY CHARGE ............................. 54,287 22,710 102,498 37,732
Extraordinary charge from early redemption of debt .......... 3,478
--------- --------- --------- ---------
NET INCOME ..................................................... $ 54,287 $ 22,710 $ 99,020 $ 37,732
========= ========= ========= =========
PER SHARE OF COMMON STOCK (Note 6):
Primary:
Income before extraordinary charge ........................ $ .61 $ .26 $ 1.16 $ .43
Extraordinary charge from early redemption of debt ........ -- -- .04 --
--------- --------- --------- ---------
Net income ............................................... $ .61 $ .26 $ 1.12 $ .43
========= ========= ========= =========
Fully diluted:
Income before extraordinary charge ........................ $ .61 $ .26 $ 1.15 $ .43
Extraordinary charge from early redemption of debt ........ -- -- .04 --
--------- --------- --------- ---------
Net income ............................................... $ .61 $ .26 $ 1.11 $ .43
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For The Nine Months
Ended September 30,
---------------------------
1997 1996
--------- --------
(Unaudited)
<S> <C> <C>
CASH PROVIDED BY (USED IN):
Operations:
Net income ............................................................................... $ 99,020 $ 37,732
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization .......................................................... 34,598 36,113
Gain on disposals of property, plant and equipment ..................................... (1,075) (2,171)
Compensation expense ................................................................... 3,496 3,510
Change in sale/leaseback payable ....................................................... (8,019) (4,258)
Amortization of sale/leaseback gain .................................................... (2,392) (2,392)
Provision for pension and postretirement benefits ...................................... 4,698 6,510
Deferred income taxes .................................................................. 8,083 356
Extraordinary charge from early redemption of debt ..................................... 3,478 --
Other - net ............................................................................ 1,893 1,716
Changes in current assets and liabilities:
Receivables- trade and other ........................................................... (21,757) (26,512)
Inventories ............................................................................ (21,584) (14,723)
Other current assets ................................................................... 7,756 (2,019)
Current liabilities .................................................................... 18,861 16,755
Net changes in other noncurrent assets and liabilities ................................... (340) 3,657
--------- --------
Net cash provided by operations ............................................................. 126,716 54,274
--------- --------
Investing activities:
Property, plant and equipment additions .................................................. (116,909) (71,486)
Repayments from affiliates ............................................................... 229 32
Proceeds from disposals of property, plant and equipment ................................ 2,958 3,583
--------- --------
Net cash used in investing activities ....................................................... (113,722) (67,871)
--------- --------
Financing activities:
Proceeds from borrowings ................................................................. 59,209 --
Repayments of borrowings ................................................................. (50,247) (2,096)
Premium on redemption of debt ............................................................ (3,000) --
Other - net .............................................................................. 1,245 588
--------- --------
Net cash provided by (used in) financing activities ......................................... 7,207 (1,508)
--------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............................................. 20,201 (15,105)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................................................ 97,225 90,338
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ...................................................... $ 117,426 $ 75,233
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
ROWAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements of the Company included herein have
been prepared without audit pursuant to generally accepted accounting
principles and the rules and regulations of the Securities and Exchange
Commission. Certain information and notes have been condensed or omitted
pursuant to such rules and regulations and the Company believes that the
disclosures included herein are adequate. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and related notes included in the Company's 1996 Annual Report
to Stockholders incorporated by reference in the Form 10-K for the year
ended December 31, 1996.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments and reclassifications, which
are of a normal recurring nature, necessary to present fairly its
financial position as of September 30, 1997 and December 31, 1996, and the
results of its operations for the three and nine month periods ended
September 30, 1997 and 1996 and its cash flows for the nine months ended
September 30, 1997 and 1996.
3. The results of operations for the three and nine month periods ended
September 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
4. In the opinion of the Company, the accompanying unaudited consolidated
financial statements would not have been materially affected by the
provisions of Statement of Financial Accounting Standards Nos. 128-131,
which are effective for periods beginning or ending after December 15,
1997.
5. On November 3, 1997, the Company called its outstanding $150 million of
11 7/8% Senior Notes for redemption on December 3, 1997. The Company
expects to realize an estimated $6.3 million net extraordinary loss upon
such redemption, consisting primarily of a 4% prepayment penalty.
-6-
<PAGE>
6. Computation of primary and fully diluted earnings per share is as follows
(in thousands except per share amounts):
<TABLE>
<CAPTION>
For The For The
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1997 1996 1997 1996
------- ------- -------- -------
<S> <C> <C> <C> <C>
Weighted average shares of common
stock outstanding .............................................. 86,500 85,495 86,022 85,261
Stock options and related (treasury stock method) ................. 2,842 2,195 2,406 1,828
------- ------- -------- -------
Weighted average shares for primary
earnings per share calculation ................................. 89,342 87,690 88,428 87,089
Stock options and related (treasury stock method) ................. 126 241 347 466
Shares issuable from assumed conversion
of the Series II Convertible Subordinated
Debenture ...................................................... 49 400 276 400
------- ------- -------- -------
Weighted average shares for fully diluted
earnings per share calculation ................................. 89,517 88,331 89,051 87,955
======= ======= ======== =======
Income before extraordinary charge ................................ $54,287 $22,710 $102,498 $37,732
Extraordinary charge .............................................. 3,478
------- ------- -------- -------
Net income for primary calculation ................................ 54,287 22,710 99,020 37,732
Subordinated debenture interest, net of
income tax effect ............................................... 14 80 172 242
------- ------- -------- -------
Net income for fully diluted calculation .......................... $54,301 $22,790 $ 99,192 $37,974
======= ======= ======== =======
Primary earnings per share:
Income before extraordinary charge ............................. $ .61 $ .26 $ 1.16 $ .43
Extraordinary charge ........................................... -- -- .04 --
------- ------- -------- -------
Net income ..................................................... $ .61 $ .26 $ 1.12 $ .43
======= ======= ======== =======
Fully diluted earnings per share:
Income before extraordinary charge ............................. $ .61 $ .26 $ 1.15 $ .43
Extraordinary charge ........................................... -- -- .04 --
------- ------- -------- -------
Net income ..................................................... $ .61 $ .26 $ 1.11 $ .43
======= ======= ======== =======
</TABLE>
-7-
<PAGE>
ROWAN COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1996
The Company achieved net income of $99.0 million in the first nine months
of 1997 compared to $37.7 million in the same period of 1996. The current period
results were after charges of $20 million from concluding the Company's turnkey
business and $3.5 million from partially redeeming 11 7/8% Senior Notes. The
improved performance primarily resulted from the continued strengthening of
offshore drilling day rates, in addition to the enhanced contribution made by
the Company's manufacturing operations.
A comparison of the revenues and operating profit from drilling,
manufacturing, aviation and consolidated operations for the first nine months of
1997 and 1996, respectively, is reflected below (dollars in thousands):
<TABLE>
<CAPTION>
Drilling Manufacturing Aviation Consolidated
-------------------- -------------------- ------------------ --------------------
1997 1996 1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues .............. $309,659 $226,000 $111,976 $104,205 $83,371 $88,452 $505,006 $418,657
Percent of Consolidated
Revenues .............. 61% 54% 22% 25% 17% 21% 100% 100%
Operating Profit (1) .. $121,431 $ 49,637 $ 11,505 $ 7,196 $ 1,444 $ 7,631 $134,380 $ 64,464
</TABLE>
- -------
(1) Income from operations before deducting general and administrative expenses.
As reflected above, the Company's consolidated operating results more than
doubled when comparing the first nine months of 1997 and 1996. Day rate drilling
revenues increased by $94.4 million or 44% between periods as the Company's
offshore fleet achieved 99% utilization during the first nine months of 1997,
compared to 97% in the same period of 1996, and a 43% increase in average day
rates between periods. Related expenses increased by only $6.7 million, or less
than 5%, between periods.
Drilling results for the first nine months of 1997 include an
approximately $20 million loss from the Company's turnkey division, primarily
reflecting the costs incurred on one well where the Company was unable to reach
the contract depth due to a series of misfortunes, including underground
blow-outs, stuck pipe, lost holes and, finally, an unstable, heaving shale
section. In the year-earlier period, the turnkey division generated revenues of
$10.7 million and an incremental operating loss of $1.3 million. The Company
currently has no turnkey wells in progress nor any plans for additional turnkey
work at this time.
The improvements between periods in the Company's manufacturing revenues
and profitability of 7% and 60%, respectively, primarily reflect production
efficiencies attained through economies of scale and growth in the marine
product line. The manufacturing division had an external backlog of $71 million
at September 30, 1997, almost half of which is represented by three marine
construction contracts whereby the
-8-
<PAGE>
Company will provide, by the end of 1998, vessel design and components (a
"LeTourneau kit") for the construction of two new Super 116 Class rigs and
vessel design and components needed to upgrade an existing LeTourneau 116-C kit
to an enhanced 116-C rig. Manufacturing operations during the first nine months
of 1997 exclude approximately $59 million of products and services provided to
the Company's drilling division, as compared to $21 million in the same period
of 1996.
The Company's aviation operations experienced a reduction in revenues and
profitability between periods as the effects of a relatively mild forest fire
season was only partially offset by increased flying for energy companies in the
Gulf of Mexico and in connection with Alaska tourism.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1996
The Company achieved net income of $54.3 million in the third quarter of
1997 compared to $22.7 million in the same period of 1996. The improved
performance primarily resulted from the continued strengthening of offshore
drilling day rates, in addition to the enhanced contribution of the Company's
manufacturing operations.
A comparison of the revenues and operating profit from drilling,
manufacturing, aviation and consolidated operations for the third quarter of
1997 and 1996, respectively, is reflected below (dollars in thousands):
<TABLE>
<CAPTION>
Drilling Manufacturing Aviation Consolidated
--------------------- -------------------- ------------------ --------------------
1997 1996 1997 1996 1997 1996 1997 1996
--------- -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues .............. $ 117,114 $ 77,927 $ 40,738 $ 36,538 $37,604 $ 40,218 $195,456 $154,683
Percent of Consolidated
Revenues .............. 60% 50% 21% 24% 19% 26% 100% 100%
Operating Profit ...... $ 57,917 $ 21,665 $ 4,688 $ 2,130 $ 5,170 $ 8,529 $ 67,775 $ 32,324
</TABLE>
As shown above, the Company's consolidated operating results more than
doubled when comparing the third quarters of 1997 and 1996. Day rate drilling
revenues increased by $41.7 million or 55% as the Company's offshore fleet
achieved 99% utilization during the third quarter of 1997, compared to 98% in
the third quarter of 1996, and a 50% increase in average day rates between
periods. Related expenses increased by only $6.0 million, or about 13%, between
periods.
The improvements between periods in the Company's manufacturing revenues
and profitability of 11% and 120%, respectively, primarily reflect production
efficiencies attained through economies of scale and growth in the marine
product line. During the third quarter, the manufacturing division began
shipping components for the first of two Super 116-C rig kits sold earlier this
year. The division's external backlog grew by $10 million during the quarter to
$71 million at September 30, 1997, a level 71% higher than a year ago.
Manufacturing operations during the third quarter of 1997 exclude approximately
$20 million of products and services provided to the Company's drilling
division, as compared to $10 million in same period of 1996.
The Company's aviation operations experienced the normal seasonal
improvement in flying activity in Alaska during each period, although the 1997
results were hampered by a relatively mild forest fire season.
-9-
<PAGE>
Perceptible trends in the offshore drilling markets in which the Company
is currently operating and the number of Company-operated rigs in each of those
markets are as follows:
<TABLE>
<CAPTION>
AREA RIGS PERCEPTIBLE INDUSTRY TRENDS
- ------------------- ---------- ------------------------------------------
<S> <C> <C>
Gulf of Mexico 15 Continuing high levels of exploration
and development activity
North Sea 5 Continuing high levels of drilling
activity for jack-up rigs
Eastern Canada 1 Stable demand
Perceptible trends in the aviation markets in which the Company is
currently operating and the number of Company-operated aircraft based in each of
those markets are as follows:
</TABLE>
<TABLE>
<CAPTION>
AREA AIRCRAFT (1) PERCEPTIBLE INDUSTRY TRENDS
- ----------------- ------------- ------------------------------------
<S> <C> <C>
Alaska 71 Normal seasonal decline
Gulf of Mexico 44 Moderately improving market
conditions
North Sea (Dutch) 10 Generally stable flight support
activity
North Sea (U. K.) 5 Generally stable flight support
activity
- ----------------------------
(1) Includes 15 units which are 49% owned.
</TABLE>
The preceding table reflects the impending relocation of two aircraft to
the United States following the conclusion of their work in China.
The drilling and aviation markets in which the Company competes frequently
experience significant changes in supply and demand. Offshore drilling
utilization and day rates are primarily a function of the demand for drilling
services, as measured by the level of exploration and development expenditures,
and the supply of capable drilling equipment. These expenditures, in turn, are
affected by many factors such as existing and newly discovered oil and natural
gas reserves, political and regulatory policies, seasonal weather patterns,
contractual requirements under leases or concessions, trends in finding and
extraction costs and, probably most influential, oil and natural gas prices. The
Company's aviation operations are also affected by such factors, as flying in
support of offshore energy operations remains a major source of business and
Alaska operations are hampered each winter. The volatile nature of such factors
prevents the Company from being able to accurately predict whether existing
market conditions or the perceptible market trends reflected in the preceding
tables will continue. In response to fluctuating market conditions, the Company
can, as it has done in the past, relocate its drilling rigs and aircraft from
one geographic area to another, but only when such moves are economically
justified. Assuming such conditions and trends prevail, the Company should
continue to experience profitability over the remainder of 1997.
The Company's manufacturing operations are considerably less volatile than
its drilling and aviation operations and, given the current backlog and barring
unforeseen circumstances, should continue to contribute positive operating
results throughout the remainder of 1997.
-10-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
A comparison of key balance sheet figures and ratios as of September 30,
1997 and December 31, 1996 is as follows (dollars in thousands):
September 30, December 31,
1997 1996
-------- --------
Cash and cash equivalents ................. $117,426 $ 97,225
Current assets ............................ $373,105 $317,319
Current liabilities ....................... $ 92,588 $ 85,274
Current ratio ............................. 4.03 3.72
Notes payable and current maturities of
long-term debt .......................... $ 2,241 $ 3,932
Long-term debt ............................ $274,374 $267,321
Stockholders' equity ...................... $603,580 $496,219
Long-term debt/total capitalization ....... .31 .35
Reflected in the comparison above are the effects in the first nine months
of 1997 of net cash provided by operations of $126.7 million, capital
expenditures of $116.9 million, proceeds from borrowings of $59.2 million and
the redemption of $50 million of 11 7/8% Senior Notes.
Capital expenditures during the first nine months of 1997 were primarily
related to construction of ROWAN GORILLA V, an enhanced version of the Company's
GORILLA CLASS jack-ups featuring a combination drilling and production
capability. The rig is being constructed at the Company's Vicksburg, Mississippi
shipyard and should be completed during the third quarter of 1998. The Company
is financing up to 87.5% of the estimated $175 million cost of GORILLA V through
a 12-year bank loan guaranteed by the Maritime Administration of the U. S.
Department of Transportation under its Title XI Program. Following GORILLA V
will be ROWAN GORILLA VI and ROWAN GORILLA VII in 1999 and 2000, respectively,
at a combined construction cost of approximately $380 million. The Company
intends to pursue outside financing for GORILLA VI and GORILLA VII if necessary,
but believes that internally generated working capital may be sufficient to
finance construction of both rigs if operating conditions continue to improve as
expected.
The Company estimates remaining 1997 capital expenditures will be between
$50 million and $60 million, including approximately $20-25 million for each of
GORILLA V and GORILLA VI. The Company may also spend amounts to acquire
additional aircraft as market conditions justify and to upgrade existing
offshore rigs.
On April 1, 1997, the Company redeemed $50 million of its 11 7/8% Senior
Notes due 2001. The $3.5 million net extraordinary charge incurred on the
transaction consisted primarily of the 6% redemption premium. On November 3,
1997, the Company called the remaining $150 million of outstanding Senior Notes.
On December 3, 1997, the Company will redeem the notes and pay a 4% prepayment
penalty from the proceeds of a $155 million bank revolving credit line. The
Company expects to realize an estimated $6.3 million net extraordinary loss upon
such redemption.
Based upon current operating levels and the previously discussed market
trends, management believes that anticipated 1997 operations, together with
existing working capital and available financial resources, will generate
sufficient cash flow to sustain planned capital expenditures and debt service
requirements at least through the remainder of 1997.
At September 30, 1997, approximately $128 million of the Company's
retained earnings was available for the payment of dividends under the most
restrictive provisions of the Company's debt agreements.
-11-
<PAGE>
THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, INCLUDING, WITHOUT LIMITATION,
STATEMENTS AS TO THE EXPECTATIONS, BELIEFS AND FUTURE EXPECTED FINANCIAL
PERFORMANCE OF THE COMPANY THAT ARE BASED ON CURRENT EXPECTATIONS AND ARE
SUBJECT TO CERTAIN RISKS, TRENDS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED BY THE COMPANY. AMONG THE
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY ARE THE FOLLOWING:
o OIL AND NATURAL GAS PRICES
o THE LEVEL OF OFFSHORE EXPENDITURES BY ENERGY COMPANIES
o THE GENERAL ECONOMY, INCLUDING INFLATION
o WEATHER CONDITIONS IN THE COMPANY'S PRINCIPAL OPERATING AREAS
o ENVIRONMENTAL AND OTHER LAWS AND REGULATIONS
OTHER RELEVANT FACTORS HAVE BEEN DISCLOSED IN THE COMPANY'S FILINGS WITH THE
U. S. SECURITIES AND EXCHANGE COMMISSION.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following is a list of Exhibits filed with this Form 10-Q:
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
third quarter of fiscal year 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROWAN COMPANIES, INC.
(Registrant)
Date: November 14, 1997 /s/ E. E. THIELE
-------------------------------
E. E. Thiele
Senior Vice President- Finance,
Administration and Treasurer
(Chief Financial Officer)
Date: November 14, 1997 /s/ W. H. WELLS
-------------------------------
W. H. Wells
Controller
(Chief Accounting Officer)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ROWAN COMPANIES, INC. FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 INCLUDED IN ITS FORM 10-Q FOR THE QUARTERLY PERIOD THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 117,426
<SECURITIES> 0
<RECEIVABLES> 134,593
<ALLOWANCES> 0
<INVENTORY> 110,257
<CURRENT-ASSETS> 373,105
<PP&E> 1,459,823
<DEPRECIATION> 832,987
<TOTAL-ASSETS> 1,033,252
<CURRENT-LIABILITIES> 92,588
<BONDS> 274,374
0
0
<COMMON> 11,005
<OTHER-SE> 592,575
<TOTAL-LIABILITY-AND-EQUITY> 1,033,252
<SALES> 107,879
<TOTAL-REVENUES> 505,006
<CGS> 80,608
<TOTAL-COSTS> 383,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,369
<INCOME-PRETAX> 113,059
<INCOME-TAX> 10,561
<INCOME-CONTINUING> 102,498
<DISCONTINUED> 0
<EXTRAORDINARY> 3,478
<CHANGES> 0
<NET-INCOME> 99,020
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.11
</TABLE>
