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 MARCH 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM_____TO_____
ROWAN COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-5491 75-0759420
- ------------------------------- --------------- -------------------
(State or other jurisdiction of Commission File (I.R.S. Employer
incorporation or organization) Number Identification No.)
5450 Transco Tower, 2800 Post Oak Boulevard, Houston, Texas 77056-6196
- ----------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(713) 621-7800
---------------------------------------------------
Registrant's telephone number, including area code
Inapplicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of common stock, $.125 par value, outstanding at April 30,
1995 was 84,410,087.
2
ROWAN COMPANIES, INC.
INDEX
Page No.
--------
PART I. Financial Information:
Consolidated Balance Sheet --
March 31, 1995 and December 31, 1994.................... 2
Consolidated Statement of Operations --
Three Months Ended March 31, 1995
and 1994................................................ 4
Consolidated Statement of Cash Flows --
Three Months Ended March 31, 1995
and 1994................................................ 5
Notes to Consolidated Financial Statements.............. 6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................................... 8
PART II. Other Information:
Exhibits and Reports on Form 8-K........................ 11
3
PART I. FINANCIAL INFORMATION
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
March 31, December 31,
1995 1994
------------ ------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents........................... $ 99,068 $ 111,070
Receivables- trade and other........................ 67,408 78,317
Inventories- at cost:
Raw materials and supplies........................ 44,420 42,364
Work-in-progress.................................. 22,306 14,238
Finished goods.................................... 2,850 2,784
Prepaid expenses.................................... 7,385 3,290
Costs of turnkey drilling contracts in progress..... 3,518 1,642
------------ ----------
Total current assets.................. 246,955 253,705
------------ ----------
INVESTMENT IN AND ADVANCES TO 49% OWNED COMPANIES..... 34,057 34,476
------------ ----------
PROPERTY, PLANT AND EQUIPMENT- at cost:
Drilling equipment.................................. 964,543 961,391
Aircraft and related equipment...................... 177,691 176,874
Manufacturing plant and equipment................... 19,797 18,955
Other property and equipment........................ 87,745 86,883
------------ ----------
Total................................. 1,249,776 1,244,103
Less accumulated depreciation and amortization 749,537 737,982
------------ ----------
Property, plant and equipment- net.. 500,239 506,121
------------ ----------
OTHER ASSETS AND DEFERRED CHARGES..................... 9,608 10,877
------------ ----------
TOTAL................................. $ 790,859 $ 805,179
============ ==========
See Notes to Consolidated Financial Statements.
-2-
4
March 31, December 31,
1995 1994
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Current maturities of long-term debt................................ $ 294 $ 289
Accounts payable- trade............................................. 22,582 20,513
Other current liabilities........................................... 44,012 36,958
------------ ----------
Total current liabilities...................................... 66,888 57,760
------------ ----------
LONG-TERM DEBT- less current maturities.............................. 248,429 248,504
------------ ----------
OTHER LIABILITIES.................................................... 34,544 36,557
------------ ----------
DEFERRED CREDITS:
Income taxes........................................................ 4,556 4,468
Gain on sale/leaseback transactions................................. 14,755 15,543
------------ ----------
Total deferred credits......................................... 19,311 20,011
------------ ----------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series I Preferred Stock, authorized 6,500 shares, none issued
Series II Preferred Stock, authorized 6,000 shares, none issued
Series III Preferred Stock, authorized 10,300 shares, none issued
Series A Junior Preferred Stock, authorized
1,500,000 shares, none issued
Common stock, $.125 par value:
Authorized 150,000,000 shares; issued 85,774,756
shares at March 31, 1995 and 85,737,581 shares
at December 31, 1994............................................. 10,722 10,717
Additional paid-in capital........................................... 391,995 390,925
Retained earnings.................................................... 21,455 43,190
Less cost of 1,457,919 treasury shares............................... 2,485 2,485
------------ ----------
Total stockholders' equity..................................... 421,687 442,347
------------ ----------
TOTAL.......................................................... $ 790,859 $ 805,179
============ ==========
See Notes to Consolidated Financial Statements.
-3-
5
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
For The Three Months
Ended March 31,
------------------------
1995 1994
---------- ---------
(Unaudited)
REVENUES:
Drilling services................. $ 46,870 $ 64,455
Manufacturing sales and services.. 29,975 20,778
Aircraft services................. 15,952 15,471
---------- ---------
Total..................... 92,797 100,704
---------- ---------
COSTS AND EXPENSES:
Drilling services................. 47,758 48,582
Manufacturing sales and services.. 27,801 19,630
Aircraft services................. 18,140 16,566
Depreciation and amortization..... 12,735 12,494
General and administrative........ 3,589 3,707
---------- ---------
Total..................... 110,023 100,979
---------- ---------
INCOME (LOSS) FROM OPERATIONS......... (17,226) (275)
---------- ---------
OTHER INCOME (EXPENSE):
Interest expense.................. (6,912) (6,630)
Gain on disposals of property,
plant and equipment............. 741 182
Interest income................... 1,493 943
Other- net........................ 102 99
---------- ---------
Other income (expense)- net (4,576) (5,406)
---------- ---------
INCOME (LOSS) BEFORE INCOME TAXES..... (21,802) (5,681)
Provision (credit) for income taxes (67) 277
---------- ---------
NET INCOME (LOSS)..................... $ (21,735) $ (5,958)
========== =========
EARNINGS (LOSS) PER COMMON SHARE (Note 4) $ (.26) $ (.07)
========== =========
See Notes to Consolidated Financial Statements.
-4-
6
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
For The Three Months
Ended March 31,
---------------------------
1995 1994
----------- ---------
(Unaudited)
CASH PROVIDED BY (USED IN):
Operations:
Net income (loss)........................................ $ (21,735) $ (5,958)
Noncash charges (credits) to net income (loss):
Depreciation and amortization........................... 12,735 12,494
Gain on disposals of property, plant and equipment...... (741) (182)
Compensation expense.................................... 1,038 1,149
Change in sale/leaseback payable........................ (3,898) (3,639)
Amortization of sale/leaseback gain..................... (789) (789)
Provision for pension and postretirement benefits....... 1,701 1,604
Other- net.............................................. 41 (54)
Changes in current assets and liabilities:
Receivables- trade and other............................ 10,909 22,357
Inventories............................................. (10,190) 122
Other current assets.................................... (5,971) 10
Current liabilities..................................... 9,123 21
Net changes in other noncurrent assets and liabilities... 1,313 (3,459)
----------- ---------
Net cash provided by (used in) operations................. (6,464) 23,676
----------- ---------
Investing activities:
Capital expenditures:
Property, plant and equipment additions................. (7,058) (6,379)
Acquisition of net manufacturing assets................. (10,414)
Repayments from affiliates............................... 535
Proceeds from disposals of property, plant and equipment. 1,015 269
----------- ---------
Net cash used in investing activities..................... (5,508) (16,524)
----------- ---------
Financing activities:
Repayments of borrowings................................. (70) (2,029)
Other- net............................................... 40 16
----------- ---------
Net cash used in financing activities..................... (30) (2,013)
----------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... (12,002) 5,139
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............ 111,070 116,778
----------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................. $ 99,068 $ 121,917
=========== =========
See Notes to Consolidated Financial Statements.
-5-
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 the rules and regulations of the
Securities and Exchange Commission. Certain information and notes normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations; however, the Company believes that the
disclosures included herein are adequate to make the information presented
not misleading. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and related notes
included in the Company's 1994 Annual Report to Stockholders incorporated by
reference in the Form 10-K for the year ended December 31, 1994.
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 March 31, 1995 and December 31, 1994, and the results of its
operations and its cash flows for the three months ended March 31, 1995 and
1994.
3. The results of operations for the three months ended March 31, 1995 are not
necessarily indicative of the results to be expected for the full year.
-6-
8
4. Computation of primary and fully diluted earnings (loss) per share is as
follows (in thousands except per share amounts):
For The
Three Months Ended
March 31,
---------------------------
1995 1994
---------- ---------
Weighted average shares of common
stock outstanding ......................... 84,301 83,899
Stock options (treasury stock method) ....... 1,762 (A) 1,403 (A)
---------- ---------
Weighted average shares for primary
earnings (loss) per share calculation ..... 86,063 85,302
Stock options (treasury stock method) ....... 24 (A)
Shares issuable from assumed conversion
of floating rate convertible subordinated
debentures ................................ 2,004 (A) 478 (A)
---------- ---------
Weighted average shares for fully diluted
earnings (loss) per share calculation ..... 88,091 85,780
========== =========
Net income (loss) for primary calculation ... $ (21,735) $ (5,958)
Subordinated debenture interest, net of
income tax effect ......................... 91 66
---------- ---------
Net income (loss) for fully
diluted calculation ....................... $ (21,644) $ (5,892)
========== =========
Earnings (loss) per share:
Primary ................................... $ (.25) (B) $ (.07)
========== =========
Fully diluted ............................. $ (.25) (B) $ (.07)
========== =========
(A) Included in accordance with Regulation S-K Item 601 (b) (11) although
not required to be provided by Accounting Principles Board Opinion
No. 15 because the effect is insignificant.
(B) This calculation is submitted in accordance with Regulation S-K Item
601 (b) (11) although it is contrary to Accounting Principles Board
Opinion No. 15 because it produces an antidilutive result.
-7-
9
ROWAN COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Three Months Ended March 31, 1995 Compared to
Three Months Ended March 31, 1994
The Company incurred a net loss of $21.7 million in the first quarter
of 1995 compared to a net loss of $6.0 million in the same period of 1994. The
increase in loss was primarily due to reduced drilling activity, especially in
the North Sea, and continued depressed drilling day rates, primarily in the Gulf
of Mexico, which combined with unfavorable aviation operating results to more
than offset improved manufacturing operations.
A comparison of the revenues and operating profit (loss) from drilling,
manufacturing, aviation and consolidated operations for the first quarters of
1995 and 1994, respectively, is reflected below (dollars in thousands):
Drilling Manufacturing Aviation Consolidated
--------------------- -------------------- --------------------- ---------------------
1995 1994 1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- -------- -------- --------
Revenues $ 46,870 $ 64,455 $ 29,975 $ 20,778 $ 15,952 $ 15,471 $ 92,797 $100,704
Percent of Consolidated
Revenues 51% 64% 32% 21% 17% 15% 100% 100%
Operating Profit (Loss) (1) $(10,292) $ 6,474 $ 1,792 $ 761 $ (5,137) $ (3,803) $(13,637) $ 3,432
- -----------------------------------------------------------------------------
(1) Income (loss) from operations before deducting general and administrative
expenses.
As reflected above, the Company's consolidated operating results
declined by $17.1 million when the first quarter of 1995 is compared to the
first quarter of 1994. Day rate drilling revenues decreased by $14.8 million as
the Company's jack-up drilling rigs in the North Sea achieved only 52%
utilization during the first quarter of 1995 compared to 90% utilization in the
area in the first quarter of 1994. Drilling day rates in the Gulf of Mexico
began to soften in the last half of 1994 due to weak natural gas prices and
remained depressed throughout the first quarter of 1995 at more than 18% below
year-ago levels. Turnkey drilling generated first quarter 1995 revenues of $11.0
million and an incremental operating loss of $.7 million, compared to $13.8
million and a $1.5 million profit, respectively, for the first quarter of 1994.
The Company's manufacturing operations have yielded operating profits and
increasing revenues in every quarter since their acquisition in early 1994. The
aviation operating results in both quarters reflect the normal seasonal slowdown
in flying activity in Alaska, with the 1995 results further impaired as a result
of greater than normal aircraft maintenance.
-8-
10
Perceptible trends in the marine drilling markets in which the Company
is currently operating and the number of Company-operated rigs in each of those
markets are as follows:
AREA RIGS PERCEPTIBLE INDUSTRY TRENDS
- ------------------------- -------- ----------------------------------------------------------
Gulf of Mexico 18 Moderately improving levels of exploration and development
activity
North Sea 4 Moderately improving market conditions for jack-up rigs
used in the exploration and development of natural gas
Eastern Canada 1 Generally stable demand
The preceding table reflects the relocation of Rowan Gorilla IV to the
Gulf of Mexico from Trinidad following the completion of its drilling assignment
and the removal from service of the submersible barge rig Rowan-Fairbanks in
April 1995.
Perceptible trends in the aviation markets in which the Company is
currently operating and the number of Company aircraft based in each of those
markets are as follows:
COMPANY-OWNED
AREA AIRCRAFT (1) PERCEPTIBLE INDUSTRY TRENDS
- -------------------- ------------- -----------------------------------------
Alaska 69 Normal seasonal improvement
Gulf of Mexico 36 Moderately improving market conditions
Trinidad 1 Improving flight support activity
China 1 Generally stable flight support activity
Argentina 1 Improving flight support activity
North Sea (Dutch) 10 Generally stable flight support activity
North Sea (U. K.) 2 Improving flight support activity
- ----------------------------
(1) Includes 10 units which are 49% owned.
The drilling and aviation markets in which the Company competes
frequently experience significant changes in supply and demand. Drilling
utilization and day rates achievable in offshore markets are affected by
material changes in overall exploration and development expenditures, as well as
by shifts of such expenditures between markets. These expenditures, in turn, are
driven by major discoveries of oil and natural gas reserves, shifts in the
political climate, regulatory changes, seasonal weather patterns, contractual
requirements under leases or concessions and changes in oil and natural gas
prices, the last being perhaps the most disruptive of all. The markets in which
the Company's aviation division competes are similarly affected by these
factors, since servicing offshore energy operations remains a significant source
of that division's business. The Company can, as it has done in the past,
relocate its drilling rigs and aircraft from one geographic area to another in
response to such changing market dynamics, but only when these moves are
economically justified.
-9-
11
The volatile nature of the various factors affecting the level of
offshore expenditures by energy companies and shifts of such expenditures
between markets prevent the Company from being able to predict whether the
perceptible market trends reflected in the preceding tables will continue, or
their impact on the results of drilling and aviation operations during the
remainder of 1995.
The Company's manufacturing operations are considerably less volatile
than its drilling and aviation operations and, given current backlog levels and
barring unforeseen circumstances, should continue to contribute positive
operating results throughout the remainder of 1995.
LIQUIDITY AND CAPITAL RESOURCES
A comparison of key balance sheet figures and ratios as of March 31,
1995 and December 31, 1994 is as follows (dollars in thousands):
March 31, December 31,
1995 1994
---- ----
Cash and cash equivalents $ 99,068 $111,070
Current assets $246,955 $253,705
Current liabilities $ 66,888 $ 57,760
Current ratio 3.69 4.39
Current maturities of long-term debt $ 294 $ 289
Long-term debt $248,429 $248,504
Stockholders' equity $421,687 $442,347
Long-term debt/total capitalization .37 .36
Reflected in the comparison above are the effects in the first quarter
of 1995 of net cash used in operations of $6.5 million and capital expenditures
of $7.1 million. Capital expenditures consisted primarily of the purchase of
three aircraft and modifications to certain offshore rigs.
On April 28, 1995, the Company announced plans for the design and
construction of Rowan Gorilla V, an enhanced version of the Company's Gorilla
Class jack-up, which will be the world's largest bottom supported mobile
offshore drilling unit. The rig will be constructed at the Company's Vicksburg,
Mississippi shipyard and should be completed during the second quarter of 1998
at an estimated cost of $135 million . The Company expects to finance a
significant portion of the construction cost and is currently evaluating credit
alternatives.
The Company estimates 1995 capital expenditures will be between $40
million and $50 million. The Company may also spend amounts to acquire
additional aircraft as market conditions justify and to upgrade existing
offshore rigs.
In the opinion of management, existing working capital and any cash
provided by operations will be adequate to sustain planned capital expenditures
and debt service requirements for the remainder of 1995 . The Company does not
currently have any unused lines of credit.
Under the terms of its 11 7/8% Senior Notes, the Company is prohibited
from paying a cash dividend on its common stock.
-10-
12
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 first quarter of fiscal year 1995.
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: May 12, 1995 /s/ E. E. THIELE
-------------------------------------
E. E. Thiele
Senior Vice President- Finance,
Administration and Treasurer
(Chief Financial Officer)
Date: May 12, 1995 /s/ W. H. WELLS
-------------------------------------
W. H. Wells
Controller
(Chief Accounting Officer)