<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM_____TO_____
ROWAN COMPANIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-5491 75-0759420
------------------------------- --------------- ------------------
(State or other jurisdiction of Commission File (I.R.S. Employer
incorporation or organization) Number Identification No.)
2800 Post Oak Boulevard, Suite 5450, Houston, Texas 77056-6127
---------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
(713) 621-7800
--------------------------------------------------
Registrant's telephone number, including area code
Inapplicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of common stock, $.125 par value, outstanding at
October 31, 2000 was 94,368,554.
<PAGE> 2
ROWAN COMPANIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheet --
September 30, 2000 and December 31, 1999....................2
Consolidated Statement of Operations --
Three and Nine Months Ended September 30,
2000 and 1999...............................................4
Consolidated Statement of Cash Flows --
Nine Months Ended September 30, 2000
and 1999....................................................5
Notes to Consolidated Financial Statements..................6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations...............................................8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk..........................................12
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K...........................13
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- --------------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 169,601 $ 87,055
Receivables - trade and other.................................................. 142,786 93,083
Inventories - at cost:
Raw materials and supplies.............................................. 82,689 87,568
Work-in-progress........................................................ 21,237 30,748
Finished goods.......................................................... 5,337 2,140
Prepaid expenses............................................................... 5,889 5,877
Deferred tax assets - net...................................................... 9,899 18,604
--------------- --------------
Total current assets.............................................. 437,438 325,075
--------------- --------------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Drilling equipment............................................................. 1,544,776 1,268,704
Aircraft and related equipment................................................. 234,248 221,776
Manufacturing plant and equipment.............................................. 92,927 83,835
Construction in progress....................................................... 140,752 248,567
Other property and equipment................................................... 119,747 113,008
--------------- --------------
Total............................................................. 2,132,450 1,935,890
Less accumulated depreciation and amortization 966,101 910,151
--------------- --------------
Property, plant and equipment - net............................. 1,166,349 1,025,739
--------------- --------------
OTHER ASSETS AND DEFERRED CHARGES...................................................... 12,744 5,253
--------------- --------------
TOTAL............................................................. $ 1,616,531 $ 1,356,067
=============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
-2-
<PAGE> 4
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 6).................................. $ 28,007 $ 129,123
Accounts payable - trade....................................................... 27,041 22,742
Other current liabilities...................................................... 39,103 50,418
-------------- -------------
Total current liabilities...................................... 94,151 202,283
-------------- -------------
LONG-TERM DEBT - less current maturities............................................... 351,095 296,677
-------------- -------------
OTHER LIABILITIES...................................................................... 56,139 55,270
-------------- -------------
DEFERRED INCOME TAXES - net............................................................ 88,436 78,113
-------------- -------------
STOCKHOLDERS' EQUITY (Note 6):
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series III Preferred Stock, authorized 10,300 shares, none outstanding
Series A Preferred Stock, authorized 4,800 shares, none outstanding
Series B Preferred Stock, authorized 4,800 shares, none outstanding
Series C Preferred Stock, authorized 9,606 shares, none outstanding
Series A Junior Preferred Stock, authorized 1,500,000 shares,
none issued
Common stock, $.125 par value:
Authorized 150,000,000 shares; issued 94,348,304 shares at
September 30, 2000 and 89,061,665 shares at December 31, 1999.............. 11,794 11,133
Additional paid-in capital............................................................. 624,612 426,380
Retained earnings...................................................................... 390,304 347,545
Less cost of 5,759,319 treasury shares at December 31, 1999............................ 61,334
-------------- -------------
Total stockholders' equity..................................... 1,026,710 723,724
-------------- -------------
TOTAL.......................................................... $ 1,616,531 $ 1,356,067
============== =============
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE> 5
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
---------------------- ---------------------
2000 1999 2000 1999
---------- ---------- ---------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Drilling services...................................... $ 117,434 $ 60,883 $ 291,311 $ 189,670
Manufacturing sales and services....................... 28,223 22,007 72,770 69,653
Aviation services...................................... 45,192 37,033 97,659 79,822
--------- --------- --------- ---------
Total..................................... 190,849 119,923 461,740 339,145
--------- --------- --------- ---------
COSTS AND EXPENSES:
Drilling services...................................... 71,694 50,534 188,474 160,207
Manufacturing sales and services....................... 25,413 21,346 64,310 66,382
Aviation services...................................... 30,040 26,928 81,095 71,002
Depreciation and amortization.......................... 15,608 13,964 43,051 40,856
General and administrative............................. 6,690 4,572 17,479 14,061
----------- --------- --------- ---------
Total.................................... 149,445 117,344 394,409 352,508
----------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS................................. 41,404 2,579 67,331 (13,363)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense...................................... (6,283) (5,773) (18,715) (16,057)
Less interest capitalized............................. 2,038 3,020 10,940 7,554
Interest income....................................... 2,938 866 7,827 3,565
Other - net........................................... 136 199 389 476
------------ --------- --------- ---------
Other income (expense) - net............. (1,171) (1,688) 441 (4,462)
------------ --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES............................. 40,233 891 67,772 (17,825)
Provision (credit) for income taxes................... 14,674 290 25,013 (5,802)
------------ --------- --------- ---------
NET INCOME (LOSS)............................................. $ 25,559 $ 601 $ 42,759 $ (12,023)
============ ========= ========= =========
EARNINGS (LOSS) PER SHARE
OF COMMON STOCK (Note 5):
Basic................................................. $ .27 $ .01 $ .46 $ (.14)
============ ========= ========= =========
Diluted............................................... $ .27 $ .01 $ .45 $ (.14)
============ ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE> 6
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For The Nine Months
Ended September 30,
--------------------------
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
CASH PROVIDED BY (USED IN):
Operations:
Net income (loss)....................................................................... $ 42,759 $ (12,023)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization..................................................... 43,051 40,856
Gain on disposals of property, plant and equipment................................ (2,314) (1,024)
Compensation expense.............................................................. 4,956 4,018
Change in sale/leaseback payable.................................................. (4,151) (7,597)
Amortization of sale/leaseback gain............................................... (2,344) (2,338)
Provision for pension and postretirement benefits................................. 3,054 4,887
Deferred income taxes............................................................. 18,613 (6,093)
Other - net....................................................................... 120 108
Changes in current assets and liabilities:
Receivables- trade and other...................................................... (48,910) (10,045)
Inventories....................................................................... 13,068 1,452
Other current assets.............................................................. 132 729
Current liabilities............................................................... (1,130) (1,168)
Net changes in other noncurrent assets and liabilities.................................. 299 687
--------- ---------
Net cash provided by operations................................................................ 67,203 12,449
--------- ---------
Investing activities:
Property, plant and equipment additions................................................. (183,637) (166,266)
Purchase of pump companies, net of cash acquired........................................ (7,245)
Proceeds from disposals of property, plant and equipment................................ 3,214 2,592
--------- ---------
Net cash used in investing activities.......................................................... (187,668) (163,674)
--------- ---------
Financing activities:
Proceeds from borrowings............................................................... 80,184 76,337
Repayments of borrowings................................................................ (129,882) (12,756)
Proceeds from common stock offering, net of issue costs................................. 246,683
Proceeds from stock option and convertible debenture plans.............................. 6,026 1,115
Payments to acquire treasury stock...................................................... (2,258)
--------- ---------
Net cash provided by financing activities...................................................... 203,011 62,438
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................................... 82,546 (88,787)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......................................................... 87,055 148,834
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................................................... $ 169,601 $ 60,047
========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE> 7
ROWAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements of Rowan included in this Form 10-Q
have been prepared without audit in accordance with accounting principles
generally accepted in the United States of America and the rules and
regulations of the Securities and Exchange Commission. Certain information
and notes have been condensed or omitted as permitted by those rules and
regulations. We believe that the disclosures included herein are adequate,
but suggest that you read these consolidated financial statements in
conjunction with the financial statements and related notes included in our
1999 Annual Report to Stockholders, which are incorporated by reference in
our Form 10-K for the year ended December 31,1999.
2. We believe the accompanying unaudited consolidated financial statements
contain all adjustments and reclassifications, which are of a normal
recurring nature, necessary to present fairly Rowan's financial position as
of September 30, 2000 and December 31, 1999, and the results of its
operations for the three and nine month periods ended September 30, 2000
and 1999 and its cash flows for the nine months ended September 30, 2000
and 1999.
3. Rowan's results of operations for the three and nine month periods ended
September 30, 2000 are not necessarily indicative of results to be expected
for the full year.
4. Rowan has three principal operating segments: contract drilling of oil and
gas wells, both onshore and offshore ("Drilling"), helicopter and
fixed-wing aircraft services ("Aviation") and the manufacture and sale of
heavy equipment for the mining, timber and transportation industries, alloy
steel and steel plate and marine drilling equipment ("Manufacturing"). The
following table presents certain financial information of Rowan as of
September 30, 2000 and 1999 and for the nine month periods then ended by
operating segment (in thousands).
<TABLE>
<CAPTION>
2000 Drilling Manufacturing Aviation Consolidated
-------------------- ------------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Total Assets $ 1,277,864 $ 184,327 $ 154,340 $ 1,616,531
Revenues 291,311 72,770 97,659 461,740
Operating Profit (1) 75,165 2,969 6,676 84,810
</TABLE>
<TABLE>
<CAPTION>
1999 Drilling Manufacturing Aviation Consolidated
-------------------- ------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Total Assets $ 980,266 $ 176,815 $ 141,578 $ 1,298,659
Revenues 189,670 69,653 79,822 339,145
Operating Profit (Loss)(1) 3,375 (1,472) (1,205) 698
</TABLE>
(1) Income (loss) from operations before deducting general and administrative
expenses.
Excluded from the preceding table are the effects of transactions between
segments. During the nine months ended September 30, 2000 and 1999, Rowan's
manufacturing division provided approximately $83 million and $100 million
respectively, of products and services to its drilling division and Rowan's
aviation division provided approximately $1,015,000 and $797,000, respectively,
of flight services to its drilling division.
-6-
<PAGE> 8
5. Computation of basic and diluted earnings (loss) per share is as
follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
------------------------ -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <S> <C>
Weighted average shares of common
stock outstanding ....................................... 94,312 83,227 91,972 83,141
Stock options and related (treasury stock method)........... 932 717 1,043
Shares issuable from assumed conversion of
floating rate subordinated debentures.................... 1,086 889 1,088
-------- ------- ------ --------
Weighted average shares for diluted earnings
(loss) per share calculation ............................ 96,330 84,833 94,103 83,141
======== ======= ======= ========
Net income (loss) for basic and
diluted calculations..................................... $ 25,559 $ 601 $42,759 $(12,023)
======== ======= ======== ========
Earnings (loss) per share:
Basic.................................................... $ .27 $ .01 $ .46 $ (.14)
======== ======= ======== ========
Diluted.................................................. $ .27 $ .01 $ .45 $ (.14)
======== ======= ======== ========
</TABLE>
6. During the first quarter of 2000, Rowan completed the sale of 10.3 million
shares of its common stock, consisting of 5.8 million shares of treasury
stock and 4.5 million newly issued shares. The net proceeds of
approximately $247 million were first applied to repayment of the $110
million outstanding under our $155 million bank revolving credit facility
maturing in October 2000, which was subsequently cancelled. Remaining
offering proceeds were retained for working capital and general corporate
purposes.
7. In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, which establishes accounting and
reporting standards for derivative instruments and hedging activities.
Statement No. 133, as amended, is effective for fiscal years beginning
after June 15, 2000. Rowan held no derivatives in 2000 and 1999 and we
believe that Statement No. 133, as amended, when adopted effective
January 1, 2001, will not materially impact our financial position or
results of operations.
8. Certain reclassifications have been made to the prior year amounts to
conform with the current year presentations.
-7-
<PAGE> 9
ROWAN COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2000 Compared to
Nine Months Ended September 30, 1999
Rowan achieved net income of $42.8 million in the first nine months of 2000
compared to a net loss of $12.0 million in the same period of 1999. The improved
results were attained largely through a substantial increase in offshore
drilling activity between periods, primarily in the Gulf of Mexico, and
increased contributions from our manufacturing and aviation divisions. Improving
supply and demand fundamentals for oil and natural gas have yielded an
increasingly favorable commodity price environment for most of the past twelve
months, driving an increase in demand for drilling services.
A comparison of the revenues and operating profit (loss) from drilling,
manufacturing, aviation and consolidated operations for the first nine months of
2000 and 1999, respectively, is reflected below (dollars in thousands):
<TABLE>
<CAPTION>
Drilling Manufacturing Aviation Consolidated
---------------------------- ------------------------- ------------------------ ---------------------
2000 1999 2000 1999 2000 1999 2000 1999
------------- ------------ ----------- ----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $291,311 $189,670 $72,770 $69,653 $97,659 $79,822 $461,740 $339,145
Percent of Consolidated
Revenues 63% 56% 16% 21% 21% 23% 100% 100%
Operating Profit (Loss)(1) $ 75,165 $ 3,375 $ 2,969 $(1,472) $ 6,676 $(1,205) $ 84,810 $ 698
</TABLE>
---------------------------
(1) Income (loss) from operations before deducting general and administrative
expenses.
As shown above, Rowan's consolidated operating results increased by $84.1
million when comparing the first nine months of 2000 and 1999. Drilling revenues
increased by $101.6 million or 54% as our offshore fleet was 91% utilized during
the first nine months of 2000, compared to 63% in the prior-year period. Related
expenses increased by $28.3 million, or 18%, between periods, primarily due to
the commencement of our AHTS (anchor-handling, towing and supply) vessel
operations and increased land rig activity, the costs of which were
substantially offset by outside revenues, and the addition to the fleet, in late
June, of Rowan Gorilla VI.
The $4.4 million increase shown above in Rowan's manufacturing results between
periods reflects increased contributions from each of the equipment, steel and
marine groups, as well as the initial eight months of operations of the pump
group, LeTourneau Ellis Williams Company, which we acquired during the first
quarter of 2000. The division's external backlog was $18.2 million at September
30, 2000, almost twice the year-ago level. Manufacturing operations exclude
approximately $83 million of products and services provided to our drilling
division during the first nine months of 2000, most of which was attributable to
the completed construction of Rowan Gorilla VI and progress on Rowan Gorilla
VII, compared to $100 million in the same period of 1999.
Rowan's aviation operating results during the first nine months of 2000 were
significantly improved over the prior-year period due primarily to a 47%
increase in energy-related flying in the Gulf of Mexico and on the Alaskan North
Slope and a 30% increase in fire response work between periods.
-8-
<PAGE> 10
Three Months Ended September 30, 2000 Compared to
Three Months Ended September 30, 1999
Rowan achieved net income of $25.6 million in the third quarter of 2000 compared
to $.6 million in the same period of 1999. The improved results were attained
largely through a substantial increase in offshore drilling activity between
periods, primarily in the Gulf of Mexico, and increased contributions from our
manufacturing and aviation divisions. Improving supply and demand fundamentals
for oil and natural gas have yielded an increasingly favorable commodity price
environment for most of the past twelve months, driving an increase in demand
for drilling services.
A comparison of the revenues and operating profit (loss) from drilling,
manufacturing, aviation and consolidated operations for the third quarters of
2000 and 1999, respectively, is reflected below (dollars in thousands):
<TABLE>
<CAPTION>
Drilling Manufacturing Aviation Consolidated
----------------------- ------------------------- --------------------- --------------------------
2000 1999 2000 1999 2000 1999 2000 1999
----------- ---------- ----------- ----------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $117,434 $60,883 $28,223 $22,007 $45,192 $37,033 $190,849 $119,923
Percent of Consolidated
Revenues 62% 51% 15% 18% 23% 31% 100% 100%
Operating Profit (Loss) $ 35,267 $ 1,396 $ 928 $ (958) $11,899 $ 6,713 $ 48,094 $ 7,151
</TABLE>
As shown above, Rowan's consolidated operating results increased by $40.9
million when comparing the third quarters of 2000 and 1999. Drilling revenues
increased by $56.6 million or 93% as our offshore fleet was 92% utilized during
the third quarter of 2000, compared to 71% in the third quarter of 1999, and
achieved a 36% increase in average day rates between periods. Related expenses
increased by $21.2 million, or 42%, between periods, primarily due to the
commencement of our AHTS (anchor-handling, towing and supply) vessel operations
and increased land rig activity, the costs of which were substantially offset by
outside revenues, and the addition to the fleet, in late June, of Rowan Gorilla
VI.
The $1.9 million increase shown above in Rowan's manufacturing results between
periods reflects increased contributions from each of the equipment, steel and
marine groups, as well as incremental operations of the pump group, LeTourneau
Ellis Williams Company, which we acquired during the first quarter of 2000. The
division's external backlog was $18.2 million at September 30, 2000.
Manufacturing operations exclude approximately $24 million of products and
services provided to our drilling division during the third quarter of 2000,
most of which was attributable to construction progress on Rowan Gorilla VII,
compared to $28 million in the same period of 1999.
Rowan's aviation operating results in the third quarter of 2000 were
significantly improved over the prior-year period due primarily to a 53%
increase in energy-related flying in the Gulf of Mexico and on the Alaskan North
Slope and a 26% increase in fire response work between periods.
-9-
<PAGE> 11
Perceptible trends in the offshore drilling markets in which we are currently
operating and the number of Rowan-operated rigs in each of those markets are as
follows:
<TABLE>
<CAPTION>
AREA RIGS PERCEPTIBLE INDUSTRY TRENDS
---------------------------- ------------- ------------------------------------------------------------
<S> <C> <C>
Gulf of Mexico 21 Moderately improving exploration and development activity
Eastern Canada 2 Generally stable demand
</TABLE>
Rowan believes a significant increase in North Sea jack-up drilling activity
will not occur until the middle of 2001, at the earliest, and has effectively
withdrawn from that market at this time. However, we remain confident in the
long-term viability of the North Sea jack-up market.
Perceptible trends in the aviation markets in which we are currently operating
and the number of Rowan-operated aircraft based in each of those markets are as
follows:
<TABLE>
<CAPTION>
AREA AIRCRAFT PERCEPTIBLE INDUSTRY TRENDS
------------------------ ------------------- ----------------------------------------------------------
<S> <C> <C>
Alaska 69 Normal seasonal decline
Gulf of Mexico 45 Moderately improving levels of flight support activity
</TABLE>
The drilling and aviation markets in which Rowan 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 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. Rowan'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 by weather each winter. The volatile nature of such factors prevents us
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, we can relocate our drilling rigs and
aircraft from one geographic area to another, but only when we believe such
moves are economically justified.
Though considerably less volatile than its drilling and aviation operations,
Rowan's manufacturing operations have been adversely impacted by a prolonged
period of unfavorable world commodity prices; in particular, prices for copper,
iron ore, coal, gold and diamonds. Prices for some commodities have stabilized
somewhat in recent months and prospects for additional mining equipment sales
have improved. However, we cannot accurately predict whether or not our
manufacturing operations will be profitable throughout the remainder of 2000.
-10-
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
A comparison of key balance sheet amounts and ratios as of September 30, 2000
and December 31, 1999 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Cash and cash equivalents $169,601 $87,055
Current assets $437,438 $325,075
Current liabilities $94,151 $202,283
Current ratio 4.65 1.61
Long-term debt $351,095 $296,677
Stockholders' equity $1,026,710 $723,724
Long-term debt/total capitalization .25 .29
</TABLE>
Reflected in the comparison above are the effects in the first nine months of
2000 of net cash provided by operations of $67.2 million, proceeds from
borrowings of $80.2 million, net proceeds from the issuance of common stock of
$246.7 million, capital expenditures of $190.9 million and debt payments of
$129.9 million, including the $110 million outstanding under Rowan's $155
million revolving credit facility which was scheduled to mature in October 2000.
Capital expenditures during the first nine months of 2000 were primarily related
to construction of Rowan Gorilla VI and Rowan Gorilla VII, each being an
enhanced version of Rowan's Gorilla Class jack-ups, like Rowan Gorilla V,
featuring a combination drilling and production capability. In addition, we
acquired the two companies that manufacture Ellis Williams (EWCO) mud pumps,
which currently range in size from 350 to 3000 horsepower and have wide
acceptance in both oilfield and non-oilfield applications.
Construction of Rowan Gorilla VI was completed on schedule during June and the
rig immediately commenced operations in the Gulf of Mexico. Rowan financed $171
million of the cost of Gorilla VI through 12-year bank loans guaranteed by the
U. S. Department of Transportation's Maritime Administration ("MARAD") under its
Title XI Program. The notes require semiannual payments in each March and
September and currently bear floating interest rates averaging approximately
7.1%.
The construction of Rowan Gorilla VII continues on schedule at Rowan's
Vicksburg, Mississippi shipyard and should be completed by year-end 2001. We are
financing up to $185 million of the cost of Gorilla VII under the Title XI
Program on terms and conditions similar to Gorilla VI. At September 30, 2000, we
had drawn down about $85 million under this facility with outstanding advances
bearing interest at floating rates averaging approximately 7.0%.
We have begun ordering long lead-time components for Rowan Gorilla VIII, an
enhanced version of our Super Gorilla Class jack-up designated as Super Gorilla
XL. Gorilla VIII will be outfitted with 708 feet of leg, 134 feet more than
Gorillas V, VI or VII, and have 30% larger spud cans enabling operation in the
Gulf of Mexico in water depths up to 550 feet. Gorilla VIII will also be able to
operate in water depths up to 400 feet in the hostile environments offshore
eastern Canada and in the North Sea. Gorilla VIII will be constructed at
Vicksburg, Mississippi with delivery expected during the third quarter of 2003.
We have filed an application with MARAD for long-term construction financing for
Gorilla VIII under terms and conditions similar to those obtained for Gorillas
V, VI and VII.
-11-
<PAGE> 13
Rowan estimates remaining 2000 capital expenditures will be between $40 million
and $45 million, including approximately $30-35 million for Gorillas VII and
VIII. We may also spend amounts to acquire additional aircraft as market
conditions justify and to upgrade existing offshore rigs and manufacturing
facilities.
During the first quarter of 2000, Rowan completed the sale of 10.3 million
shares of its common stock, consisting of 5.8 million shares of treasury stock
and 4.5 million newly issued shares. The net proceeds of approximately $247
million were first applied to repayment of the $110 million outstanding under
our $155 million bank revolving credit facility, which was subsequently
cancelled. Remaining offering proceeds were retained for working capital and
general corporate purposes. We currently have no other available credit
facilities, but believe financing could be arranged if deemed necessary.
On January 31, 2000, in connection with the Ellis Williams acquisition, Rowan
issued $3 million in 7.5% promissory notes that are repayable in equal annual
installments through January 31, 2003.
Based upon current operating levels and the previously discussed market trends,
we believe that 2000 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 2000.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, which establishes accounting and
reporting standards for derivative instruments and for hedging activities.
Statement No. 133, as amended, is effective for fiscal years beginning after
June 15, 2000. Rowan held no derivatives in 2000 or 1999 and we believe that
Statement No. 133, as amended, when adopted effective January 1, 2001, will not
materially impact our financial position or results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Rowan believes that its exposure to risk of earnings loss due to changes in
interest rates is not significant.
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:
oil, natural gas and other commodity prices; the level of offshore expenditures
by energy companies; the general economy, including inflation; weather
conditions in the Company's principal operating areas; and 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.
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<PAGE> 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 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 2000.
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, 2000 /s/ E. E. THIELE
----------------------------------
E. E. Thiele
Senior Vice President- Finance,
Administration and Treasurer
(Chief Financial Officer)
Date: November 14, 2000 /s/ W. H. WELLS
----------------------------------
W. H. Wells
Controller
(Chief Accounting Officer)
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<PAGE> 15
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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27 Financial Data Schedule
