<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 JUNE 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)
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 77056-6196
--------------------------------------------------- ----------
(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 July 31,
2000 was 94,294,529.
<PAGE> 2
ROWAN COMPANIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
-------
<S> <C>
PART I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheet --
June 30, 2000 and December 31, 1999......................2
Consolidated Statement of Operations --
Three and Six Months Ended June 30, 2000
and 1999.................................................4
Consolidated Statement of Cash Flows --
Six Months Ended June 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>
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................... $ 176,902 $ 87,055
Receivables - trade and other................... 110,359 93,083
Inventories - at cost:
Raw materials and supplies.................... 86,136 87,568
Work-in-progress.............................. 23,314 30,748
Finished goods................................ 3,801 2,140
Prepaid expenses................................ 8,352 5,877
Deferred tax assets - net....................... 17,005 18,604
---------- ----------
Total current assets......................... 425,869 325,075
---------- ----------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Drilling equipment.............................. 1,531,168 1,268,704
Aircraft and related equipment.................. 229,998 221,776
Manufacturing plant and equipment............... 91,171 83,835
Construction in progress........................ 113,824 248,567
Other property and equipment.................... 118,028 113,008
---------- ----------
Total........................................ 2,084,189 1,935,890
Less accumulated depreciation and amortization.. 952,637 910,151
---------- ----------
Property, plant and equipment - net.......... 1,131,552 1,025,739
---------- ----------
OTHER ASSETS AND DEFERRED CHARGES................... 13,353 5,253
---------- ----------
TOTAL....................................... $1,570,774 $1,356,067
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
-2-
<PAGE> 4
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 6)... $ 28,007 $ 129,123
Accounts payable - trade........................ 23,375 22,742
Other current liabilities....................... 43,695 50,418
---------- ----------
Total current liabilities.................... 95,077 202,283
---------- ----------
LONG-TERM DEBT - less current maturities............ 337,826 296,677
---------- ----------
OTHER LIABILITIES................................... 53,998 55,270
---------- ----------
DEFERRED INCOME TAXES - net......................... 85,041 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
94,267,679 shares at June 30, 2000 and
89,061,665 shares at December 31, 1999........ 11,783 11,133
Additional paid-in capital.......................... 622,304 426,380
Retained earnings................................... 364,745 347,545
Less cost of 5,759,319 treasury shares at
December 31, 1999................................. 61,334
---------- ----------
Total stockholders' equity................... 998,832 723,724
---------- ----------
TOTAL....................................... $1,570,774 $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 Six Months
Ended June 30, Ended June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Drilling services................................ $ 91,953 $ 67,834 $ 173,877 $ 128,787
Manufacturing sales and services 20,618 27,626 44,547 47,646
Aviation services 30,590 23,709 52,467 42,789
------------ ------------ ------------ ------------
Total......................................... 143,161 119,169 270,891 219,222
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Drilling services................................ 61,015 55,862 116,780 109,673
Manufacturing sales and services................. 18,327 24,866 38,897 45,036
Aviation services................................ 27,479 22,455 51,055 44,074
Depreciation and amortization.................... 14,677 13,777 27,443 26,892
General and administrative....................... 5,941 4,645 10,789 9,489
------------ ------------ ------------ ------------
Total......................................... 127,439 121,605 244,964 235,164
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS........................ 15,722 (2,436) 25,927 (15,942)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense................................. (5,912) (5,292) (12,432) (10,284)
Less interest capitalized........................ 4,724 2,461 8,902 4,534
Interest income.................................. 3,078 1,149 4,889 2,699
Other - net...................................... 187 103 253 277
------------ ------------ ------------ ------------
Other income (expense) - net.................. 2,077 (1,579) 1,612 (2,774)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES.................... 17,799 (4,015) 27,539 (18,716)
Provision (credit) for income taxes.............. 6,703 (1,393) 10,339 (6,092)
------------ ------------ ------------ ------------
NET INCOME (LOSS).................................... $ 11,096 $ (2,622) $ 17,200 $ (12,624)
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE
OF COMMON STOCK (Note 5):
Basic............................................ $ .12 $ (.03) $ .19 $ (.15)
============ ============ ============ ============
Diluted.......................................... $ .12 $ (.03) $ .19 $ (.15)
============ ============ ============ ============
</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 Six Months
Ended June 30,
----------------------------
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
CASH PROVIDED BY (USED IN):
Operations:
Net income (loss)........................... $ 17,200 $ (12,624)
Adjustments to reconcile net income
(loss) to net cash provided by
operations:
Depreciation and amortization............. 27,443 26,892
Gain on disposals of property,
plant and equipment..................... (823) (778)
Compensation expense...................... 3,254 2,563
Change in sale/leaseback payable.......... (3,207) (5,693)
Amortization of sale/leaseback gain....... (1,595) (1,586)
Provision for pension and
postretirement benefits................. 4,179 4,826
Deferred income taxes..................... 8,112 (6,188)
Other - net............................... 120 72
Changes in current assets and liabilities:
Receivables- trade and other.............. (16,483) (4,249)
Inventories............................... 9,080 9,908
Other current assets...................... (2,331) 2,201
Current liabilities....................... (5,028) 587
Net changes in other noncurrent assets
and liabilities........................... (140) 721
--------- ----------
Net cash provided by operations................ 39,781 16,652
--------- ----------
Investing activities:
Property, plant and equipment additions..... (132,770) (123,738)
Purchase of pump companies, net of
cash acquired............................. (7,245)
Proceeds from disposals of property,
plant and equipment....................... 1,093 2,282
--------- ----------
Net cash used in investing activities.......... (138,922) (121,456)
--------- ----------
Financing activities:
Proceeds from borrowings.................... 53,411 45,171
Repayments of borrowings.................... (116,378) (6,378)
Proceeds from common stock offering,
net of issue costs........................ 246,685
Proceeds from stock option and convertible
debenture plans........................... 5,270 598
Payments to acquire treasury stock.......... (2,258)
--------- ----------
Net cash provided by financing activities...... 188,988 37,133
--------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... 89,847 (67,671)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD.......................................... 87,055 148,834
--------- ----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD.......................................... $ 176,902 $ 81,163
========= ==========
</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 the Company included herein
have been prepared without audit pursuant to 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 pursuant to such rules and
regulations and the Company believes that the disclosures included herein
are adequate. It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and related notes
included in the Company's 1999 Annual Report to Stockholders (the "Annual
Report") incorporated by reference in the Form 10-K for the year ended
December 31, 1999.
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 June 30, 2000 and December 31, 1999, and the
results of its operations for the three and six month periods ended June
30, 2000 and 1999 and its cash flows for the six months ended June 30,
2000 and 1999.
3. The results of operations for the three and six month periods ended
June 30, 2000 are not necessarily indicative of the results to be expected
for the full year.
4. The Company 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 the Company as of June 30, 2000 and 1999 and for the six
month periods then ended by operating segment (in thousands).
<TABLE>
<CAPTION>
2000 Drilling Manufacturing Aviation Consolidated
-------------- -------- ------------- -------- ------------
<S> <C> <C> <C> <C>
Total Assets $ 1,242,071 $ 185,790 $ 142,913 $ 1,570,774
Revenues 173,877 44,547 52,467 270,891
Operating Profit (Loss)(1) 39,898 2,041 (5,223) 36,716
</TABLE>
<TABLE>
<CAPTION>
1999 Drilling Manufacturing Aviation Consolidated
-------------- -------- ------------- -------- ------------
<S> <C> <C> <C> <C>
Total Assets $ 966,142 $ 170,744 $ 138,602 $ 1,275,488
Revenues 128,787 47,646 42,789 219,222
Operating Profit (Loss)(1) 1,979 (514) (7,918) (6,453)
</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 six months ended June 30, 2000 and 1999, the
Company's manufacturing division provided approximately $59 million and
$72 million respectively, of products and services to the drilling
division and the Company's aviation division provided approximately
$716,000 and $307,000, respectively, of flight services to the 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 For The Six
Months Ended June 30, Months Ended June 30,
----------------------- ------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average shares of common
stock outstanding................................. 93,988 83,106 90,789 83,097
Stock options and related (treasury stock method)... 1,041 512(A) 1,060 490(A)
Shares issuable from assumed conversion of
floating rate subordinated debentures......... 1,132 765(A) 1,093 617(A)
---------- ---------- ----------- ----------
Weighted average shares for diluted
earnings (loss) per share calculation............. 96,161 84,383 92,942 84,204
========== ========== =========== ==========
Net income (loss) for basic and diluted
calculations...................................... $ 11,096 $ (2,622) $ 17,200 $ (12,624)
========== ========== =========== ==========
Earnings (loss) per share:
Basic............................................. $ .12 $ (.03) $ .19 $ (.15)
========== ========== =========== ==========
Diluted........................................... $ .12 $ (.03) $ .19 $ (.15)
========== ========== =========== ==========
</TABLE>
(A) Shares issuable upon exercise of stock options and conversion of
debentures are included in this computation of diluted earnings
(loss) per share in accordance with Regulation S-K Item 601(b)(11).
Such items would be excluded in this instance under the provisions
of Statement of Financial Accounting Standards No. 128 because they
have an antidilutive effect.
6. During the first quarter of 2000, the Company 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 the Company's $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. The Company held no derivatives in 2000 and 1999 and
believes Statement No. 133, as amended, when adopted effective January 1,
2001, will not materially impact its financial position or results of
operations.
-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
Six Months Ended June 30, 2000 Compared to
Six Months Ended June 30, 1999
The Company achieved net income of $17.2 million in the first half of 2000
compared to a net loss of $12.6 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,
though the Company's manufacturing and aviation divisions performed better as
well. 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 six 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>
Revenues $ 173,877 $ 128,787 $ 44,547 $ 47,646 $ 52,467 $ 42,789 $ 270,891 $ 219,222
Percent of Consolidated
Revenues 64% 59% 17% 22% 19% 19% 100% 100%
Operating Profit (Loss)(1) $ 39,898 $ 1,979 $ 2,041 $ (514) $ (5,223) $ (7,918) $ 36,716 $ (6,453)
</TABLE>
------------------
(1) Income (loss) from operations before deducting general and administrative
expenses.
As shown above, the Company's consolidated operating results increased by $43.2
million when comparing the first halves of 2000 and 1999. Drilling revenues
increased by $45.1 million or 35% as the Company's offshore fleet was 91%
utilized during the first half of 2000, compared to 59% in the first half of
1999. Related expenses increased by $7.1 million, or 6%, between periods,
primarily due to wage increases and the commencement of the Company's AHTS
(anchor-handling, towing and supply) vessel operation, the costs of which were
substantially offset by outside revenues.
The $2.6 million increase shown above in the Company's manufacturing results
between periods reflects increased contributions from each of the groups, as
well as the initial five months of operations of the pump group, LeTourneau
Ellis Williams Company, which the Company acquired during the first quarter of
2000. The division's external backlog was at $23.7 million at June 30, 2000,
more than twice the year-ago level. Manufacturing operations exclude
approximately $59 million of products and services provided to the Company's
drilling division during the first half of 2000, most of which was attributable
to the completed construction of Rowan Gorilla VI and progress on Rowan Gorilla
VII, compared to $72 million in the same period of 1999.
The Company's aviation operating results in the first half of 2000 were
improved over the prior-year period, due primarily to the increase in
energy-related flying in the Gulf of Mexico and on the Alaskan North Slope and
increased fire response work, although both periods reflect the normal seasonal
slowdown in helicopter flying activity in Alaska during the first four months
of the year.
-8-
<PAGE> 10
Three Months Ended June 30, 2000 Compared to
Three Months Ended June 30, 1999
The Company achieved net income of $11.1 million in the second quarter of 2000
compared to a net loss of $2.6 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, though the
Company's aviation division performed better as well. 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 second 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 $ 91,953 $ 67,834 $ 20,618 $ 27,626 $ 30,590 $ 23,709 $ 143,161 $ 119,169
Percent of Consolidated
Revenues 64% 57% 15% 23% 21% 20% 100% 100%
Operating Profit (Loss) $ 21,439 $ 3,190 $ 380 $ 1,191 $ (156) $ (2,172) $ 21,663 $ 2,209
</TABLE>
As shown above, the Company's consolidated operating results increased by $19.5
million when comparing the second quarters of 2000 and 1999. Drilling revenues
increased by $24.1 million or 36% as the Company's offshore fleet was 95%
utilized during the second quarter of 2000, compared to 68% in the second
quarter of 1999. Related expenses increased by $5.2 million, or 9%, between
periods, primarily due to wage increases and the commencement of the Company's
AHTS (anchor-handling, towing and supply) vessel operation, the costs of which
were substantially offset by outside revenues.
The $0.8 million decline shown above in the Company's manufacturing results
between periods primarily reflects the decreased contribution from the
equipment group. The division's external backlog increased by more than 50%
during the quarter to $23.7 million at June 30, 2000. Manufacturing operations
exclude approximately $25 million of products and services provided to the
Company's drilling division during the second quarter of 2000, most of which
was attributable to the completed construction of Rowan Gorilla VI and progress
on Rowan Gorilla VII, compared to $35 million in the same period of 1999.
The Company's aviation operating results in the second quarter of 2000 were
improved over the prior-year period, due primarily to the increase in
energy-related flying in the Gulf of Mexico and on the Alaskan North Slope and
increased fire response work.
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 21 Moderately improving exploration and development activity
Eastern Canada 2 Generally stable demand for harsh environment equipment
</TABLE>
-9-
<PAGE> 11
The Company believes a significant increase in North Sea jack-up drilling
activity will not occur until the spring of 2001, at the earliest, and has
effectively withdrawn from that market at this time. However, the Company
remains confident in the long-term viability of the North Sea jack-up market.
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>
<CAPTION>
AREA RIGS PERCEPTIBLE INDUSTRY TRENDS
------------------- ------------- ------------------------------------------------------
<S> <C> <C>
Alaska 68 Normal seasonal improvement
Gulf of Mexico 46 Moderately improving levels of flight support activity
</TABLE>
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 oil and natural gas reserves, political and
regulatory policies, seasonal weather patterns, contractual requirements under
leases or concessions, and, probably most influential, oil and natural gas
prices. The Company's aviation operations are also affected by such factors, as
flying in support of offshore energy operations remains a major source of
business and Alaska operations are hampered by weather 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 relocate its drilling rigs and
aircraft from one geographic area to another, but only when it believes such
moves are economically justified.
Though considerably less volatile than its drilling and aviation operations,
the Company'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, the Company cannot accurately predict
whether or not its 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 June 30, 2000 and
December 31, 1999 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Cash and cash equivalents $176,902 $ 87,055
Current assets $425,869 $325,075
Current liabilities $ 95,077 $202,283
Current ratio 4.48 1.61
Long-term debt $337,826 $296,677
Stockholders' equity $998,832 $723,724
Long-term debt/total capitalization .25 .29
</TABLE>
Reflected in the comparison above are the effects in the first half of 2000 of
net cash provided by operations of $39.8 million, proceeds from borrowings of
$53.4 million, net proceeds from the issuance of common stock of $246.7
million, capital expenditures of $140.0 million and debt payments of $116.4
million, including the $110 million outstanding under the Company's $155
million revolving credit facility which was scheduled to mature in October
2000.
Capital expenditures during the first half of 2000 were primarily related to
construction of Rowan Gorilla VI and Rowan Gorilla VII, each being an enhanced
version of the Company's Gorilla Class jack-ups, like Rowan Gorilla V,
featuring a combination drilling and production capability. In addition, the
Company acquired the two companies that manufacture Ellis Williams (EWCO) mud
pumps, which currently range in size from 350 to 2,200 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. The Company
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
under its Title XI Program. The notes require semiannual payments beginning in
September 2000 and bear floating interest rates averaging approximately 6.7%.
The construction of Rowan Gorilla VII continues on schedule at the Company's
Vicksburg, Mississippi shipyard and should be completed by year-end 2001. The
Company is 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 June 30,
2000, the Company had drawn down about $58 million under this facility with
outstanding advances bearing interest at floating rates averaging approximately
6.8%.
On April 28, 2000, the Company announced plans for the design and construction
of an enhanced version of its Super Gorilla design, the Super Gorilla XL Class
jack-up. The new rig, to be named Rowan 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 of eastern Canada and the North Sea. Gorilla VIII
is estimated to cost $190 million and will be constructed at Vicksburg,
Mississippi. Delivery is expected during the third quarter of 2003.
The Company estimates remaining 2000 capital expenditures will be between $75
million and $90 million, including approximately $50-65 million for Gorillas
VII and VIII. The Company may also spend amounts to acquire additional aircraft
as market conditions justify and to upgrade existing offshore rigs and
manufacturing facilities.
-11-
<PAGE> 13
During the first quarter of 2000, the Company 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 the Company's $155 million bank revolving credit facility,
which was subsequently cancelled. Remaining offering proceeds were retained for
working capital and general corporate purposes. The Company currently has no
other available credit facilities, but believes financing could be arranged if
deemed necessary.
On January 31, 2000, in connection with the Ellis Williams acquisition, the
Company 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,
management believes 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 ("FASB") 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. The Company held no derivatives in 2000 or 1999
and believes that Statement No. 133, as amended, when adopted effective January
1, 2001, will not materially impact its financial position or results of
operations.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's believes that its exposure to risk of earnings loss due to
changes in interest rates is not significant.
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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 second 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: August 14, 2000 /s/ E. E. THIELE
----------------------------------
E. E. Thiele
Senior Vice President- Finance,
Administration and Treasurer
(Chief Financial Officer)
Date: August 14, 2000 /s/ W. H. WELLS
----------------------------------
W. H. Wells
Controller
(Chief Accounting Officer)
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<PAGE> 15
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27 Financial Data Schedule
