<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ROWAN COMPANIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ROWAN COMPANIES, INC.
5450 TRANSCO TOWER, 2800 POST OAK BOULEVARD
HOUSTON, TEXAS 77056-6196
C. R. PALMER
CHAIRMAN OF THE BOARD
March 15, 1999
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders of Rowan
Companies, Inc., which will be held in the Transco Auditorium located on Level 2
of the Transco Tower, 2800 Post Oak Boulevard, Houston, Texas, on Friday, April
23, 1999 at 9:00 a.m., Central Time. Your Board of Directors and management look
forward to greeting personally those stockholders able to attend.
At the meeting, stockholders will be asked to elect three Class II
Directors. YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
THREE NOMINEES FOR CLASS II DIRECTOR.
Regardless of the number of shares you own or whether you plan to
attend, it is important that your shares be represented and voted at the
meeting. You are requested to sign, date and mail the enclosed proxy promptly.
Both your interest and participation in the affairs of the Company are
appreciated.
Sincerely,
/s/ C.R PALMER
C. R. Palmer
Chairman, President and
Chief Executive Officer
<PAGE> 3
Rowan Companies, Inc. 1999 Proxy Statement
NOTICE OF ANNUAL MEETING OF ROWAN STOCKHOLDERS
<TABLE>
<S> <C>
DATE: Friday, April 23, 1999
TIME: 9:00 a.m., Central Time
PLACE: Transco Tower, Level 2 Auditorium
2800 Post Oak Boulevard
Houston, Texas
PURPOSE: - To elect three Class II Directors for three-year terms
- To conduct other business if properly raised
</TABLE>
Only stockholders of record on March 1, 1999 may vote at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED RETURN ENVELOPE AT YOUR EARLIEST
CONVENIENCE.
/S/ MARK H. HAY
Mark H. Hay
Secretary
March 15, 1999
<PAGE> 4
Rowan Companies, Inc. 1999 Proxy Statement
TABLE OF CONTENTS PAGE
- --------------------------------------------------------------------------------
General Information....................................................... 1
Election of Directors..................................................... 2
Director Compensation..................................................... 4
Board Committees.......................................................... 4
Director and Officer Stock Ownership...................................... 6
Board Compensation Committee Report
on Executive Compensation........................................... 7
Executive Compensation Tables............................................. 9
Stock Performance Graphs.................................................. 12
Additional Information.................................................... 13
<PAGE> 5
Rowan Companies, Inc. 1999 Proxy Statement
GENERAL INFORMATION
WHO MAY VOTE
Stockholders of Rowan Companies, Inc., as recorded in our stock register on
March 1, 1999, may vote at the meeting.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
HOW PROXIES WORK
Rowan's Board of Directors is asking for your proxy. Giving us your proxy means
you authorize us to vote your shares at the meeting in the manner you have
indicated on the proxy card. You may vote for all, some or none of our director
nominees. You may also abstain from voting.
If you sign and return the enclosed proxy card but do not indicate your vote,
the proxies will vote your shares in favor of our director nominees.
You may receive more than one proxy card depending on how you hold your shares.
Shares registered in your name are covered by one card and any shares held by
someone else, such as a stockbroker, may be covered by a separate card. Rowan
employees receive a separate card for any shares they hold in Rowan's 401(k)
plans.
HOW WE SOLICIT PROXIES
We are mailing this proxy statement and the proxy card on or about March 15,
1999. In addition to this mailing, Rowan employees may solicit proxies
personally, electronically or by telephone. Rowan will pay all costs of
solicitation and has retained D. F. King & Co., Inc. to assist with the
solicitation at an estimated cost of $7,500, plus reasonable expenses. We also
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their expenses in sending these materials to you.
REVOKING A PROXY
You may revoke your proxy before it is voted by submitting a new proxy card with
a later date, by voting in person at the meeting or by notifying Rowan's
Corporate Secretary in writing before 5:00 p.m., Central Time, on the day before
the meeting at the address listed under "Questions?" on page 14.
VOTING SECURITIES OUTSTANDING
On March 1, 1999, there were 83,022,407 shares of Rowan's common stock
outstanding. Each share is entitled to one vote on the matters to be presented
at the meeting.
QUORUM
In order to carry on the business of the meeting, we must have a quorum. This
means that at least a majority of the outstanding shares must be represented at
the meeting, either by proxy or in person. You are considered present at the
meeting if you attend or are represented by a valid proxy, regardless of whether
your proxy card is marked as casting a vote or as abstaining or is left blank.
Shares owned by Rowan and held in treasury are not voted and do not count for
this purpose.
VOTES NEEDED
The election of each nominee for Class II Director will be approved if the votes
cast for such nominee exceed the votes cast against him. Approval of any other
matters requires a majority of the votes cast. Only votes cast for or against
count. Abstentions and broker non-votes count for quorum purposes but not for
voting purposes. Broker non-votes occur when a broker returns a proxy but does
not have the authority to vote on a particular matter. Brokers have the
authority to vote for the election of directors, but they may not for other
matters that may come before the meeting.
1
<PAGE> 6
Rowan Companies, Inc. 1999 Proxy Statement
ELECTION OF DIRECTORS
The Rowan Board of Directors consists of three classes:
- Class I has four directors
- Class II has three directors
- Class III has four directors
Each class of directors is elected for a three-year term, and the current terms
will expire on the date of Rowan's annual meeting, in the year indicated:
- Class I 2001
- Class II 1999
- Class III 2000
Class II Directors are to be elected at this meeting. The nominees selected by
the Board, as well as the continuing directors, are profiled below. Each nominee
currently serves as a Rowan director.
The Board of Directors held five meetings in 1998. Each director attended at
least 75% of the 1998 meetings of the Board and Committees on which he served.
On July 14, 1998, the Nominating Committee recommended and the Board approved
increasing the number of Class I directors from three to four and the size of
the board from ten to eleven. The remaining Class I Directors appointed Hans M.
Brinkhorst to fill the newly created vacancy. On January 21, 1999, Ralph E.
Bailey and C. W. Yeargain resigned as Class II Directors, and R. G. Croyle and
D. F. McNease resigned as Class III Directors. The remaining Class II Director
appointed Messrs. Croyle and McNease to fill the newly created vacancies as
Class II Directors, and the remaining Class III Directors appointed Messrs.
Bailey and Yeargain to fill the newly created vacancies as Class III Directors.
At the same meeting, the Nominating Committee determined, and the full Board
concurred, that it would be in the best interest of Rowan and its stockholders
for the incumbent Class II Directors, Lord Moynihan, and Messrs. Croyle and
McNease, to be selected as Class II Director Nominees.
If a director nominee becomes unavailable to serve prior to the election, your
proxy card authorizes us to vote for a replacement nominee if the Board names
one.
THE BOARD RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES LISTED BELOW.
- --------------------------------------------------------------------------------
DIRECTOR NOMINEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME(1) FOR THE PAST FIVE YEARS AGE SINCE
- ------- ----------------------- --- --------
<S> <C> <C> <C>
CLASS II (TERM TO EXPIRE IN 2002)
R. G. Croyle Executive Vice President of the Company since October 56 1998
1993(3).
D. F. McNease Senior Vice President of the Company since October 1993(3). 47 1998
Lord Moynihan Senior Partner of London-based Colin Moynihan Associates 43 1996
(CMA) (energy advisors) since 1993; Member of Parliament in
the United Kingdom (1983-1992); additionally, Minister for
Energy as Parliamentary Undersecretary of State at the UK
Department of Energy (1990-1992).
</TABLE>
(Table continued on following page)
2
<PAGE> 7
Rowan Companies, Inc. 1999 Proxy Statement
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME(1) FOR THE PAST FIVE YEARS AGE SINCE
- ------- ----------------------- --- --------
<S> <C> <C> <C>
CLASS III (TERM EXPIRES IN 2000)
Ralph E. Bailey Chairman of the Board and, until February 1996, Chairman of 74 1993
the Board and Chief Executive Officer of American Bailey
Corporation (manufacturing and energy investments); Chairman
of the Board of Clean Diesel Technologies, Inc. (diesel fuel
additives) since June 1996; until May 1995, Chairman of the
Board of United Meridian Corporation (oil and gas
exploration and production); and since March 1996, Chairman
of the Board and Chief Executive Officer of XPRONET Inc.
(oil and gas exploration).
Henry O. Boswell Retired; formerly President (1983-1987) of Amoco Production 69 1988
Company (oil and gas production).
C. R. Palmer Chairman of the Board, President and Chief Executive Officer 64 1969
of the Company(3).
C. W. Yeargain Chairman of the Board of LeTourneau, Inc.; Retired; formerly 73 1975
Executive Vice President of the Company (2).
CLASS I (TERM EXPIRES IN 2001)
Hans M. Brinkhorst Retired; formerly Managing Director of the Royal Dutch/Shell 69 1998
Group of Companies' oil and gas exploration, production and
transportation operations in Oman (1980-1986) and Malaysia
(1977-1980).
H. E. Lentz Managing Director of Lehman Brothers Inc. (investment 54 1990
bankers) since March 1993; Investment Banker for Wasserstein
Perella & Co., Inc. (March 1988 through February 1993).
Wilfred P. Schmoe Retired; formerly Executive Vice President, Director and 71 1992
member of the Executive Committee (May 1984 to November
1988) of E.I. DuPont de Nemours & Co. (diversified
chemical/energy conglomerate).
Charles P. Siess, Jr. Chairman of the Board and, until May 1998, Chairman of the 72 1991
Board and Chief Executive Officer of Cabot Oil & Gas
Corporation since May 1995 and from December 1989 to
December 1992 (natural gas exploration and production).
</TABLE>
- --------------------------------------------------------------------------------
(1) Directorships other than those listed in the table are as follows: Mr.
Bailey is a director of Fuel Tech, Inc., Mr. Boswell is a director of
Service Master Company and Cabot Oil & Gas Corporation; Mr. Lentz is a
director of Imperial Sugar Co.; Lord Moynihan is a director of Ranger Oil
Limited and Mr. Siess is a director of Cabot Corporation.
(2) In addition to his Board membership, Mr. Yeargain continues to serve the
Company in a consulting capacity. See "Compensation Committee Interlocks and
Insider Participation; Certain Transactions" on page 13.
(3) Information regarding the compensation of Messrs. Croyle, McNease and Palmer
is disclosed in the Summary Compensation Table under "Executive Compensation
Tables" on page 9.
3
<PAGE> 8
Rowan Companies, Inc. 1999 Proxy Statement
DIRECTOR COMPENSATION
Rowan employees receive no extra compensation for serving as directors.
Nonemployee directors receive a base fee of $30,000 annually, $750 per regular
or special Board meeting attended, $500 per committee meeting attended and
reimbursement for reasonable travel expenses.
Each nonemployee director may also be selected to receive a nonqualified stock
option grant under the 1998 Rowan Companies, Inc. Nonemployee Directors Stock
Option Plan, which was approved at the Company's 1998 Annual Meeting of
Stockholders. Eligibility and the terms and conditions of each grant are
determined by the Board of Directors. Two grants were made in 1998 for an
aggregate of 40,000 shares, with option exercise prices ranging from $17.47-
$29.75 per share. Options granted under the plan become 100% exercisable one
year after the date of grant and expire after five years.
BOARD COMMITTEES
The functions performed by the committees of the Board of Directors are as
follows:
THE AUDIT COMMITTEE has as its principal functions to recommend to the Board of
Directors each year the firm of independent auditors to be selected by the
Company and its subsidiaries, to review the reports to be rendered and the fees
to be charged by the independent auditors and to review with the independent
auditors the principal accounting policies of the Company and its subsidiaries
and other pertinent matters either at the initiative of the Committee or at the
request of the independent auditors.
Committee members: Messrs. Boswell (Chairman), Schmoe and Siess
1998 meetings: one.
THE COMPENSATION COMMITTEE recommends to the Board of Directors the compensation
to be paid to the executive and other officers of the Company and its
subsidiaries and any plan for additional compensation that it deems appropriate.
Committee members: Messrs. Siess (Chairman), Bailey, Boswell and Schmoe
1998 meetings: one
THE EXECUTIVE COMMITTEE has the authority to exercise all of the powers of the
Board in the management of the business and affairs of the Company, except for
certain qualifications noted in the Company's Bylaws.
Committee members: Messrs. Palmer (Chairman), Boswell, Yeargain and Siess
1998 meetings: two
4
<PAGE> 9
Rowan Companies, Inc. 1999 Proxy Statement
THE NOMINATING COMMITTEE generally designates, on behalf of the Board of
Directors, candidates for the directors of the class to be elected at the next
meeting of stockholders. The Nominating Committee will consider for election to
the Board qualified nominees recommended by stockholders. To make such a
recommendation, stockholders should submit to the Company's Secretary at the
address listed under "Questions?" on page 14 a biographical sketch of the
prospective candidate, which should include age, principal occupation and
business experience and other directorships, including positions previously held
or now held. Any such stockholder recommendations must be submitted not less
than 60 days prior to the anniversary date of the previous annual meeting and,
in the case of a special meeting, not more than ten days following the earlier
of the date of the meeting notice or the public announcement notice.
Committee members: Messrs. Palmer, Boswell, Lentz, Schmoe and Siess
1998 meetings: one
THE 1986 DEBENTURE PLAN COMMITTEE and the 1998 DEBENTURE PLAN COMMITTEE
administer the Company's 1986 Convertible Debenture Incentive Plan and its 1998
Convertible Debenture Incentive Plan, respectively. Both Committees have broad
authority to interpret, amend, suspend or terminate the Plans and to make all
determinations necessary or advisable for the administration of the Plans.
Committee members: Messrs. Siess (Chairman), Bailey, Boswell and Schmoe
1998 meetings:
1998 Plan -- one
1986 Plan -- none
THE HEALTH, SAFETY AND ENVIRONMENT COMMITTEE reviews the Company's performance
and policies with respect to health, safety and environmental matters and, when
appropriate, makes recommendations to the full Board regarding such matters.
Committee members: Messrs. Palmer (Chairman), Croyle, McNease, Boswell and Lord
Moynihan
1998 meetings: one
5
<PAGE> 10
Rowan Companies, Inc. 1999 Proxy Statement
DIRECTOR AND OFFICER STOCK OWNERSHIP
As of March 1, 1999, Rowan's directors and officers collectively owned 3,058,387
shares or 3.7% of the Company's outstanding common, including shares acquirable
through April 30, 1999 by the exercise of stock options or the conversion of
subordinated debentures. No continuing director, nominee or executive officer
owned more than 1% of Rowan's outstanding shares, except Mr. Palmer who owned
1.7% of the common stock.
The following table sets forth the number of shares of Rowan stock owned by each
director, the five most highly compensated executive officers of the Company
("Named Executive Officers"), and all directors and executive officers as a
group. Unless otherwise indicated, each individual has sole voting and
dispositive power with respect to the shares shown herein.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES ACQUIRABLE WITHIN 60 DAYS(2)
-------------------------------------
SHARES DEBENTURES TOTAL
BENEFICIALLY 401(K) PLAN ------------------------- BENEFICIAL
NAME OWNED HOLDINGS(1) OPTIONS SERIES III SERIES A OWNERSHIP
- ----------------------------------- ------------ ----------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Directors:
Ralph E. Bailey 30,000 5,000 35,000
Henry O. Boswell 67,600(3) 5,000 72,600
Hans M. Brinkhorst 1,000 1,000
R. G. Croyle 6,000(4) 107,750 125,926 4,202 243,878
H. E. Lentz 30,200(5) 5,000 35,200
D. F. McNease 1,005 3,707 43,875 151,852 4,202 204,641
Lord Moynihan 1,000 5,000 6,000
C. R. Palmer 474,997(6) 5,802 227,750 711,111 21,008 1,440,668
Wilfred P. Schmoe 7,000 5,000 12,000
Charles P. Siess, Jr. 7,000 5,000 12,000
C. W. Yeargain 232,152 5,000 237,152
Other Executive Officers:
E. E. Thiele 10,750 54,375 162,963 4,202 232,290
Paul L. Kelly 25,000 20,000 2,521 47,521
All Directors and Executive
Officers as a group (23 in
number) 1,097,283 13,739 629,250 1,277,778 40,337 3,058,387
</TABLE>
- --------------------------------------------------------------------------------
(1) Reflects shares of Rowan stock allocated to participants in the Rowan
Companies, Inc. Savings and Investment Plan. The Plan participants have sole
voting power and limited dispositive power over such shares.
(2) Included herein are shares of Rowan stock that may be acquired through April
30, 1999 through the exercise of Nonqualified Stock Options, the conversion
of Series III Floating Rate Convertible Subordinated Debentures and the
conversion of Series A Floating Rate Convertible Subordinated Debentures.
(3) Includes 23,000 shares held by Dome Lake Investments, Ltd., in which Mr.
Boswell and his wife hold a 59% interest in the general partner's 99%
interest and a 60% interest in the limited partner's 1% interest. Mr.
Boswell disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest. Also included are 17,100 shares owned by Mr.
Boswell's wife. Mr. Boswell disclaims beneficial ownership of such shares.
(4) Includes 1,000 shares owned by Mr. Croyle's son. Mr. Croyle disclaims
beneficial ownership of such shares.
(5) Mr. Lentz's shares are owned jointly with his wife. The total includes 200
shares held in the names of Mr. Lentz's two minor children with respect to
which Mr. Lentz's wife serves as custodian. Mr. Lentz disclaims beneficial
ownership of such shares.
(6) Includes 20,752 shares owned by Mr. Palmer's mother over which he has a
measure of investment control. Additionally, includes 23,132 shares held in
a charitable foundation for which Mr. Palmer is one of three trustees. Mr.
Palmer has no pecuniary interest in the shares held in such charitable
foundation.
6
<PAGE> 11
Rowan Companies, Inc. 1999 Proxy Statement
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
COMPENSATION POLICY FOR EXECUTIVE OFFICERS
Under the supervision of the Compensation Committee (the "Committee") of the
Board of Directors, the Company has developed and implemented compensation
policies and programs that seek to retain and motivate employees of the Company
and its subsidiaries whose performance contributes to the Company's goal of
maximizing stockholder value in a volatile industry. In addition, these
compensation policies attempt to align the executive officers' interests with
those of the stockholders by providing incentive compensation related to the
value of the Company's Common Stock. Compensation decisions are made by the
Committee after reviewing recommendations prepared by the Company's Chief
Executive Officer, with the assistance of other Company personnel. The Company
historically has combined salaries with stock option grants, convertible
debenture offerings and selected cash bonuses to provide a compensation balance.
The balance established by the Committee is designed to recognize past
performance, retain key employees and encourage future performance.
In approving and establishing compensation for an executive officer, several
factors are considered by the Committee. Performance criteria include individual
performance, overall Company performance versus that of its competitors and
performance of the price of the Company's Common Stock in comparison to prior
levels and to the relative stock prices of its competitors. When evaluating
individual performance, particular emphasis has been placed on the executive
officers' success in enabling the Company to increase its market share, their
ability to develop innovative ways to obtain better returns on the Company's
assets and to respond to prevailing conditions in the drilling, aviation and
manufacturing industries. Emphasis is placed upon an individual's integrity,
loyalty and competence in his areas of responsibility. When evaluating the
foregoing performance criteria in setting executive compensation, the Committee
gives greatest weight to those factors it believes have or will contribute the
most towards maximizing stockholder value and increasing the Company's financial
viability. The factors that contribute the most towards these goals vary
depending on the state of the industry in which the Company operates.
The Compensation Committee met in April 1998. Based upon the Committee's
determination, all of the Named Executive Officers, including Mr. Palmer (see
"Chief Executive Officer Compensation" below), received a salary increase and a
bonus in April 1998 as the Company's operational and financial performance
showed improvement in 1997 over 1996 (reflected in its revenues and earnings
growth during 1997), which had continued through the first quarter of 1998. As
discussed above, factors considered by the Committee in setting compensation
included each individual's past contributions and performance, as well as the
Company's operating results and profitability, management of its assets and
debts, increasing market share and the performance of the Company's stock in
comparison to its competitors. Additionally, setting salaries which are both
externally competitive relative to the industry and internally equitable when
considering performance and responsibility levels were pursued objectives.
Competitor comparisons for purposes of determining executive officer
compensation consisted of a comparison to the competitors in the Company's peer
group under "Stock Performance Graphs" on pages 12 and 13 along with comparison
to certain additional public companies in the energy service industry. Although
no specific target has been established, the Committee generally seeks to set
salaries at the median to high end of the range in comparison to peer group
companies. Measurement of each individual's performance is to some extent
subjective, and the Company does not make compensation awards based on the
degree to which an individual achieves predetermined objective criteria.
In addition to regular salary payments to executive officers in 1998, the
Committee determined to offer Series A Floating Rate Subordinated Convertible
Debentures to each of the Named Executive Officers, including Mr. Palmer. The
Series A Debentures are ultimately convertible into common stock of the Company
at the rate of $29.75 per share, the closing
7
<PAGE> 12
Rowan Companies, Inc. 1999 Proxy Statement
market price for the Company's common stock on the date of offer, through April
2008. Each other executive officer received either a grant of stock options at
an exercise price of $19.75 per share, or an offer of Series A Debentures with a
conversion rate of $29.75 per share. The primary basis for these Debenture
offers and stock option grants was management's performance in increasing market
share and profitability in an increasingly competitive environment. The
Committee also took into account its evaluation of the individual performance of
each officer. The criteria used in evaluating individual performance for
purposes of these grants were the same as the criteria discussed above that are
considered when setting regular compensation. Previous option grants and
debenture offerings to and held by executive officers were taken into account
when determining the amount of new option awards.
Although the Committee chose to revise the compensation of the Named Executive
Officers for the fiscal year just ended, it attempts to avoid treating salaries,
bonuses, stock option grants and debenture offerings as entitlements and
recommends revisions only when it believes such changes are warranted.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee's determination for establishing Mr. Palmer's compensation for
1998 was made in April 1998 based on the fact that during a period of prosperity
in the offshore drilling industry, the Company had increased its market share
and capitalized on the significant increase in offshore drilling activity during
1997 and the first quarter of 1998 to generate record revenues and profits and
achieve significant stock price appreciation. No specific quantitative measure
of the Company's performance was used for this purpose. Emphasis was also placed
on evaluating the Company's performance versus the performance of the
competitors in the Company's peer group described on pages 12 and 13 under
"Stock Performance Graphs", as well as certain additional public companies in
the energy service industry. The Committee believed, and believes, that the
Company's relatively strong position in the contract drilling industry and the
successful design and implementation of the Company's Super Gorilla Class rig
construction program has been in large part attributable to Mr. Palmer's
abilities and contributions.
In 1998, the Committee's deliberations with respect to Mr. Palmer's compensation
centered on the ongoing strong position that the Company maintained in the
contract drilling industry during a period of increased activity and
profitability. During 1997, the Company's operations generated record revenues
and profits and its stock price increased by 35%. The Company's favorable
performance continued through the first quarter of 1998. Given these facts, and
the Committee's continuing belief that tying a significant portion of the chief
executive officer's remuneration to the interests of the Company's stockholders
is a prudent remuneration policy, it determined in April 1998 to offer to Mr.
Palmer $2,500,000 principal amount of Series A Debentures, convertible into
84,034 shares of Common Stock at a conversion price equal to the market value on
the date of offer of $29.75 per share. In addition, in April 1998 the Committee
increased Mr. Palmer's annual salary by $75,000 and awarded a $635,000 bonus.
OTHER MATTERS
The Committee has also continued to discuss and consider a provision of the tax
code that will generally limit the Company's ability to deduct compensation in
excess of $1 million to a particular executive. The Committee will continue to
consider the deductibility of the compensation paid to its executive officers in
the future.
This report has been provided by the following members of the Committee:
Charles P. Siess, Jr. Chairman
Ralph E. Bailey
Henry O. Boswell
Wilfred P. Schmoe
The foregoing report of the Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
8
<PAGE> 13
Rowan Companies, Inc. 1999 Proxy Statement
EXECUTIVE COMPENSATION TABLES
The following table sets forth the compensation of the Chief Executive Officer
and the other four most highly paid executive officers of the Company (the
"Named Executive Officers") for each of the last three years.
During such period, no executive officer received any non-cash compensation
having an aggregate incremental cost to Rowan in excess of the lesser of $50,000
or 10% of his or her total annual salary and bonus as reported in this table.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
NAME AND --------------------- ---------------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1) DEBENTURES(2) COMPENSATION(3)
- ------------------ ---- -------- -------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
C. R. Palmer 1998 $975,000 $635,000 -- 84,034 $4,800
Chairman of the Board, 1997 910,000 450,000 75,000 -- 4,750
President and CEO 1996 853,333 250,000 75,000 -- 4,500
R. G. Croyle 1998 296,667 135,000 -- 16,807 4,800
Executive Vice President 1997 270,000 120,000 15,000 -- 4,750
1996 241,667 50,000 15,000 -- 4,203
D. F. McNease 1998 266,667 110,000 -- 16,807 4,175
Senior Vice President -- 1997 241,667 100,000 15,000 -- 4,750
Drilling 1996 216,667 40,000 12,500 -- 2,937
E. E. Thiele 1998 241,667 65,000 -- 16,807 4,800
Senior Vice President -- 1997 216,667 60,000 15,000 -- 4,750
Finance, Administration 1996 195,000 30,000 12,500 -- 4,182
and Treasurer
Paul L. Kelly 1998 200,000 55,000 -- 10,084 4,800
Senior Vice President -- 1997 186,667 50,000 15,000 -- 4,750
Special Projects 1996 176,667 25,000 12,500 -- 4,175
</TABLE>
- --------------------------------------------------------------------------------
(1) Represents shares of Rowan stock that may be acquired through the exercise
of stock options. No stock options were granted to the Named Executive
Officers during 1998.
(2) Represents shares of Rowan stock that may be acquired through the conversion
of Series A Floating Rate Convertible Subordinated Debentures which were
offered and issued on April 24, 1998.
(3) Represents the amount of Rowan's matching contribution on behalf of the
Named Executive Officer to the Rowan Companies, Inc. Savings and Investment
Plan (401(k) Plan).
9
<PAGE> 14
Rowan Companies, Inc. 1999 Proxy Statement
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table below reflects the value of stock options exercised during 1998 and
the value of outstanding options at year-end 1998 for each of the Named
Executive Officers.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES WEIGHTED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED AVERAGE DECEMBER 31, 1998 DECEMBER 31, 1998(2)
ON PRICE ON VALUE ----------------------------- -----------------------------
NAME EXERCISE EXERCISE(1) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Palmer 230,000 $21.01 $4,587,501 168,750 131,250 $998,438 $332,812
R. G. Croyle -- -- -- 92,750 26,250 723,312 66,563
D. F. McNease 9,000 18.77 160,063 30,750 23,750 184,156 55,469
E. E. Thiele -- -- -- 41,250 23,750 277,344 55,469
Paul L. Kelly 12,500 28.59 347,656 6,875 23,750 -- 55,469
</TABLE>
- --------------------------------------------------------------------------------
(1) Based upon the average of the high and low per share sales price of Rowan's
common stock on the New York Stock Exchange on the date of the exercise.
(2) Represents the difference between the last reported per share sales price of
Rowan's common stock on the New York Stock Exchange on December 31, 1998
($9.875) and the per share exercise price for in-the-money options ($1.00)
times the number of underlying shares.
DEBENTURES OFFERED IN LAST FISCAL YEAR
The Rowan Companies, Inc. 1998 Convertible Debenture Incentive Plan (the "1998
Debenture Plan") was approved at the Company's 1998 Annual Meeting of
Stockholders. The table below sets forth information pertinent to the initial
April 1998 offering to each of the Named Executive Officers. No Debentures are
convertible prior to April 1999 and all were outstanding at March 1, 1999. All
employees participating in the 1998 Debenture offering have borrowed the
Debenture purchase price from Rowan. Promissory notes evidencing the borrowings
bear interest at the same rate as the Debentures and are secured by a pledge of
the Debentures purchased.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
PERCENTAGE AT ASSUMED ANNUAL RATES
OF TOTAL OF STOCK PRICE
NUMBER DEBENTURES APPRECIATION
FACE OF SHARES ISSUED IN CONVERSION FOR DEBENTURE TERM
AMOUNT OF UNDERLYING FISCAL PRICE EXPIRATION -------------------------
NAME DEBENTURE DEBENTURE 1998 PER SHARE DATE 5% 10%
- ---- ------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Palmer $2,500,000(1) 84,034 52.1% $29.75 4-24-2008 $1,572,237 $3,984,356
R. G. Croyle 500,000(2) 16,807 10.4% 29.75 4-24-2008 314,447 796,871
D. F. McNease 500,000(2) 16,807 10.4% 29.75 4-24-2008 314,447 796,871
E. E. Thiele 500,000(2) 16,807 10.4% 29.75 4-24-2008 314,447 796,871
Paul L. Kelly 300,000(3) 10,084 6.3% 29.75 4-24-2008 188,668 478,123
</TABLE>
- --------------------------------------------------------------------------------
(1) After one, two, three and four years from the date of the Debenture (April
24, 1998) until the expiration date, 25% of the Debenture, or $625,000, is
convertible into approximately 21,008 shares of Rowan stock.
(2) After one, two, three and four years from the date of the Debenture (April
24, 1998) until the expiration date, 25% of the Debenture, or $125,000, is
convertible into approximately 4,202 shares of Rowan stock.
(3) After one, two, three and four years from the date of the Debenture (April
24, 1998) until the expiration date, 25% of the Debenture, or $75,000, is
convertible into 2,521 shares of Rowan stock.
10
<PAGE> 15
Rowan Companies, Inc. 1999 Proxy Statement
PENSION PLANS
All Rowan employees (including executive officers but excluding non-U.S.
citizens) who have completed the requisite service are eligible to participate
in one of two non-contributory, defined benefit pension plans. Participants in
the drilling and aviation plan, including each of the Named Executive Officers,
will generally receive a pension at age 60 pursuant to a formula which is based
upon the employee's number of years of credited service and his average annual
compensation during the highest five consecutive years of his final ten years of
service. Compensation for this purpose is based on salary, excluding
discretionary bonuses. As of January 31, 1999, Rowan had approximately 3,500
employees eligible to participate in its pension plans.
Rowan also sponsors pension restoration plans which essentially replace any
retirement income that is lost because of Internal Revenue Code limitations on
benefits payable or the compensation level on which they are based. Both pension
restoration plans are unfunded and benefits thereunder are paid directly by
Rowan. Currently, the plans have two participants, C. R. Palmer and C. W.
Yeargain. Mr. Yeargain retired in March 1991.
The following table illustrates, for representative average earnings and years
of credited service levels, the annual retirement benefits payable to eligible
drilling and aviation employees.
PENSION PLAN TABLE (1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)
---------------------------------------------------------------
COMPENSATION(3) 15 20 25 30 35 40
- --------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 150,000 $ 39,375 $ 52,500 $ 65,625 $ 78,750 $ 91,875 $105,000
200,000 52,500 70,000 87,500 105,000 122,500 140,000
250,000 65,625 87,500 109,375 131,250 153,125 175,000
300,000 78,750 105,000 131,250 157,500 183,750 210,000
400,000 105,000 140,000 175,000 210,000 245,000 280,000
500,000 131,250 175,000 218,750 262,500 306,250 350,000
600,000 157,500 210,000 262,500 315,000 367,500 420,000
700,000 183,750 245,000 306,250 367,500 428,750 490,000
800,000 210,000 280,000 350,000 420,000 490,000 560,000
900,000 236,250 315,000 393,750 472,500 551,250 630,000
1,000,000 262,500 350,000 437,500 525,000 612,500 700,000
1,100,000 288,750 385,000 481,250 577,500 673,750 770,000
1,200,000 315,000 420,000 525,000 630,000 735,000 840,000
</TABLE>
- --------------------------------------------------------------------------------
(1) The benefits payable under the drilling and aviation pension plan as
reflected in the table are not subject to reduction for Social Security
benefits or other offset amounts.
(2) As of December 31, 1998, the Named Executive Officers were credited under
either or both the pension and pension restoration plans for the drilling
and aviation employees of the Company with years of service as follows:
<TABLE>
<S> <C>
C. R. Palmer 38
R. G. Croyle 25
D. F. McNease 25
E. E. Thiele 29
Paul Kelly 16
</TABLE>
(3) Mr. Yeargain's annual benefit amount of $168,127 is based upon his 44 years
of credited service under Rowan's drilling and aviation pension and pension
restoration plans. The estimated annual benefit amount payable upon
retirement to Mr. Palmer is $573,770. The other Named Executive Officers
will essentially receive an annual benefit based upon their 1998 salary
amount as set forth under "Salary" in the table on page 9 and their years of
credited service under the pension plan as shown in Footnote (2).
11
<PAGE> 16
Rowan Companies, Inc. 1999 Proxy Statement
STOCK PERFORMANCE GRAPHS
The line graph below compares the yearly and cumulative percentage changes in
each of the Company's Common Stock, the Standard & Poor's Composite 500 Stock
Index and a company-selected peer group for the five-year period ending
December 31, 1998.
- --------------------------------------------------------------------------------
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK, S&P 500 INDEX &
COMPANY-SELECTED PEER GROUP**
(Assumes $100 Invested on December 31, 1993)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Rowan S&P 500 Peer Group**
<S> <C> <C> <C>
1993 100 100 100
1994 69 101 85
1995 107 139 174
1996 251 171 372
1997 339 228 514
1998 110 289 159
</TABLE>
Fiscal Year Ended December 31
*Total return assumes reinvestment of dividends.
**ENSCO International Incorporated, Global Marine Inc.,
Noble Drilling Corporation and R&B Falcon Corporation
- --------------------------------------------------------------------------------
The previous line graph is presented pursuant to, and has been prepared in
accordance with, specific SEC rules which prescribe, among other
characteristics, a five-year measurement period. Such rules also require the
inclusion of a graph line reflecting a broad stock market benchmark, as
reflected in the Standard & Poor's Composite 500 Index. The Company believes the
contract drilling industry moves in very long cycles, significantly greater than
five years, and that such cycles encompass extended periods of growth as well as
extended periods of contraction. During much of the past sixteen-year period,
the Company, and the industry as a whole, have generally experienced conditions
more closely associated with the latter; though the Company anticipates industry
growth in the years ahead. For that reason, the Company does not believe a
five-year presentation of stockholder return is especially meaningful, but
rather believes a comparison covering the period since the industry last peaked
is more informative. Furthermore, the Company believes the breadth of the S&P
500 Index yields an unsuitable barometer for measuring stockholder return in an
industry as volatile as that in which the Company operates. A line graph
comparison is set forth on page 13 which reflects the yearly percentage change
in and cumulative total stockholder return on each of the Company's Common Stock
and the same Company-selected peer group for the period of sixteen calendar
years commencing January 1, 1983 and ending December 31, 1998.
12
<PAGE> 17
Rowan Companies, Inc. 1999 Proxy Statement
COMPARISON OF SIXTEEN-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK & COMPANY-SELECTED PEER GROUP**
(Assumes $100 Invested on December 31, 1982)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Rowan Peer Group**
<S> <C> <C>
1982 100 100
1983 113 92
1984 88 61
1985 78 32
1986 40 21
1987 53 37
1988 58 25
1989 113 45
1990 113 36
1991 58 20
1992 79 16
1993 91 33
1994 63 28
1995 97 57
1996 228 122
1997 307 168
1998 100 52
</TABLE>
Fiscal Year Ended December 31
* Total return assumes reinvestment of dividends.
**ENSCO International Incorporated, Global Marine Inc.,
Noble Drilling Corporation and R&B Falcon Corporation
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN
TRANSACTIONS
In 1998, the Company recorded approximately $968,000 of revenues attributable to
land drilling services performed for Cabot Oil & Gas Corporation ("Cabot"). Mr.
Charles P. Siess, Jr., a Class I Director of the Company, is Chairman of the
Board of Directors of Cabot and Mr. Henry O. Boswell, a Class III Director of
the Company, is a Director for Cabot. Messrs. Siess and Boswell each served on
the Company's Compensation Committee in 1998, with Mr. Siess serving as
Chairman. The Company believes the terms and conditions under which such
services were provided to Cabot were comparable to that experienced by the
Company in connection with third parties for similar rigs. The transactions
between Rowan and Cabot were reviewed and approved by the Company's full Board
of Directors.
Mr. C. W. Yeargain, a Class III Director and an Executive Vice President of the
Company until his retirement in March 1991, earned and was paid by the Company
$300,000 in consulting fees in 1998.
Mr. Hans M. Brinkhorst, a Class I Director of the Company, is also a director of
N.Z.D. (Noordzee Drill) B.V., a wholly owned subsidiary of the Company, and has
a consultancy agreement with Rowan Energy Investments, Inc., also a wholly owned
subsidiary. In 1998, Mr. Brinkhorst did not receive any director fees or
consulting fees from either entity.
13
<PAGE> 18
Rowan Companies, Inc. 1999 Proxy Statement
PRINCIPAL STOCKHOLDERS
To the knowledge of the Company, no person owned more than 5% of the outstanding
shares of Common Stock at March 1, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All of the Company's directors, executive officers and any greater than ten
percent stockholders are required by Section 16(a) of the Securities Exchange
Act of 1934 to file with the Securities and Exchange Commission and the New York
Stock Exchange initial reports of ownership and reports of changes in ownership
of the Company's Common Stock and to furnish the Company with copies of such
reports. Based on a review of those reports and written representations that no
other reports were required, the Company believes that all applicable Section
16(a) filing requirements were complied with during the year ended December 31,
1998.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the 2000
Annual Meeting of Stockholders must forward such proposal to the Secretary of
the Company, at the address below, so that the Secretary receives it no later
than November 14, 1999.
Other stockholder proposals submitted for consideration at the Company's 2000
Annual Meeting of Stockholders (but not for inclusion in the proxy statement or
proxy card) must be received by the Secretary of the Company at the address
indicated in the adjacent column no later than January 27, 2000. If such timely
notice of a stockholder proposal is given but is not accompanied by a written
statement in compliance with applicable securities laws, the Company's proxy
committee may exercise discretionary voting authority over proxies with respect
to such proposal if presented at the Company's 2000 Annual Meeting of
Stockholders.
OTHER BUSINESS
We are not aware of any other matters which are to be presented for action at
the meeting. However, if any other matters properly come before the meeting, it
is intended that the enclosed proxy will be voted in accordance with the
discretion of the persons voting the proxy unless you indicate otherwise on your
proxy.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has been selected as principal auditors for
the Company for the year ending December 31, 1999. A representative of Deloitte
& Touche is expected to be present at the Annual Meeting of Stockholders on
April 23, 1999 and will be offered the opportunity to make a statement if he
desires to do so. He will also be available to respond to appropriate questions.
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO ANY PERSON WHOSE PROXY IS BEING
SOLICITED, UPON WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND
ANY FINANCIAL STATEMENT SCHEDULES THERETO. THE COMPANY WILL FURNISH TO ANY SUCH
PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE FORM 10-K, UPON THE
PAYMENT, IN ADVANCE, OF REASONABLE FEES RELATED TO THE COMPANY'S FURNISHING SUCH
EXHIBIT(S). REQUESTS FOR COPIES OF SUCH REPORT AND/OR EXHIBIT(S) SHOULD BE
DIRECTED TO MR. MARK H. HAY, SECRETARY OF THE COMPANY, AT THE COMPANY'S
PRINCIPAL ADDRESS AS SHOWN BELOW.
QUESTIONS?
If you have any questions or need more information about the annual meeting,
write to:
Mark H. Hay, Secretary
Rowan Companies, Inc.
2800 Post Oak Boulevard
5450 Transco Tower
Houston, Texas 77056-6196
14
<PAGE> 19
PROXY
ROWAN COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. R. Palmer and Mark H. Hay proxies, each with
power to act without the other and with full power of substitution, and hereby
authorizes each of them to represent and vote, as designated on the reverse side
hereof, all the shares of stock of Rowan Companies, Inc. ("Company") standing in
the name of the undersigned with all powers which the undersigned would possess
if present at the Annual Meeting of Stockholders of the Company to be held April
23, 1999 or any adjournment thereof.
IF CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED AS INDICATED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN ACCORDANCE WITH THE
DISCRETION OF THE PERSONS VOTING THE PROXY WITH RESPECT TO ANY OTHER MATTER
WHICH MAY PROPERLY COME BEFORE THE MEETING. ALL PRIOR PROXIES ARE HEREBY
REVOKED.
(Continued, and to be dated and signed, on the reverse side)
<PAGE> 20
ROWAN COMPANIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<S> <C> <C> <C> <C>
The Board of Directors unanimously recommends a vote
FOR: FOR WITHHOLD FOR ALL (Except nominee(s)
ALL ALL EXCEPT written below)
[ ] [ ] [ ]
1. The election of R. G. Croyle, D. F. McNease and
Lord Moynihan as Class II Directors -------------------
-------------------
2. With discretionary authority on any other matter which
may properly come before the meeting. -------------------
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
Dated ___________________________
,1999 Please complete, sign and
return this proxy promptly in the
enclosed envelope. Sign exactly as
name appears hereon. Executors,
administrators, trustees, etc. should
so indicate when signing. If the
signature is for a corporation,
please sign full corporate name by
authorized officer. If shares are
registered in more than one name, all
holders must sign.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
