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, 1998
[ ] 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
July 31, 1998 was 85,169,657.
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ROWAN COMPANIES, INC.
INDEX
Page No.
PART I. Financial Information:
Consolidated Balance Sheet --
June 30, 1998 and December 31, 1997..................2
Consolidated Statement of Income --
Three and Six Months Ended June 30, 1998
and 1997.............................................4
Consolidated Statement of Cash Flows --
Six Months Ended June 30, 1998 and 1997..............5
Notes to Consolidated Financial Statements...........6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations........................................8
PART II. Other Information:
Other Information...................................13
Exhibits and Reports on Form 8-K....................13
3
PART I. FINANCIAL INFORMATION
ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
June 30, December 31,
1998 1997
---------- ------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 140,177 $ 108,332
Receivables - trade and other ............................. 138,805 133,627
Inventories - at cost:
Raw materials and supplies .............................. 83,572 69,621
Work-in-progress ........................................ 35,074 25,974
Finished goods .......................................... 763 6,321
Prepaid expenses .......................................... 8,412 7,694
Deferred tax assets ....................................... 25,163 60,809
---------- ----------
Total current assets ......................... 431,966 412,378
---------- ----------
INVESTMENT IN AND ADVANCES TO 49% OWNED COMPANY ............. -- 25,737
---------- ----------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Drilling equipment ........................................ 982,132 965,292
Aircraft and related equipment ............................ 209,669 202,044
Manufacturing plant and equipment ......................... 68,235 60,902
Construction in progress .................................. 270,953 195,996
Other property and equipment .............................. 106,835 94,476
---------- ----------
Total ........................................ 1,637,824 1,518,710
Less accumulated depreciation and amortization ............ 864,706 841,550
---------- ----------
Property, plant and equipment - net......... 773,118 677,160
---------- ----------
OTHER ASSETS AND DEFERRED CHARGES ........................... 6,308 6,860
---------- ----------
TOTAL ........................................ $1,211,392 $1,122,135
========== ==========
See Notes to Consolidated Financial Statements
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June 30, December 31,
1998 1997
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Notes payable and current maturities of long-term debt ............................ $ 6,378
Accounts Payable -- Trade.......................................................... 26,495 $ 22,839
Deferred revenue .................................................................. 11,403 14,927
Other current liabilities ......................................................... 49,656 43,760
---------- ----------
Total current liabilities ................................................ $ 93,932 $ 81,526
---------- ----------
LONG-TERM DEBT - less current maturities .............................................. 254,218 256,150
---------- ----------
OTHER LIABILITIES ..................................................................... 47,647 50,457
---------- ----------
DEFERRED CREDITS:
Income taxes ...................................................................... 74,162 74,956
Gain on sale/leaseback transactions ............................................... 4,362 5,948
---------- ----------
Total deferred credits ................................................... 78,524 80,904
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series A Preferred Stock, authorized 2,300 shares, none outstanding
Series III Preferred Stock, authorized 10,300 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 88,625,726
shares at June 30, 1998 and 88,162,101 shares
at December 31, 1997 ........................................................ 11,078 11,020
Additional paid-in capital ............................................................ 418,371 411,812
Retained earnings ..................................................................... 319,899 232,751
Less cost of 1,957,919 and 1,457,919 treasury shares, respectively .................... 12,277 2,485
---------- ----------
Total stockholders' equity ............................................... 737,071 653,098
---------- ----------
TOTAL .................................................................... $1,211,392 1,122,135
========== ==========
See Notes to Consolidated Financial Statements
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ROWAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
For The Three Months For The Six Months
Ended June 30, Ended June 30,
----------------------- ----------------------
1998 1997 1998 1997
-------- ------- ------- -------
(Unaudited)
REVENUES:
Drilling services ......................................... $ 131,424 $ 102,942 $ 255,649 $ 192,545
Manufacturing sales and services .......................... 45,227 34,594 82,704 71,238
Aviation services ......................................... 27,589 27,249 49,801 45,767
--------- --------- --------- ---------
Total ............................................ 204,240 164,785 388,154 309,550
--------- --------- --------- ---------
COSTS AND EXPENSES:
Drilling services ......................................... 56,907 47,873 105,418 113,844
Manufacturing sales and services .......................... 38,723 30,429 69,647 62,514
Aviation services ......................................... 25,212 23,733 48,792 43,797
Depreciation and amortization ............................. 12,397 11,423 24,276 22,790
General and administrative ................................ 4,766 4,291 9,269 8,583
--------- --------- --------- ---------
Total ............................................ 138,005 117,749 257,402 251,528
--------- --------- --------- ---------
INCOME FROM OPERATIONS ........................................ 66,235 47,036 130,752 58,022
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense .......................................... (4,114) (6,194) (8,391) (13,538)
Less interest capitalized ................................. 3,960 2,166 7,385 4,107
Gain on disposals of property, plant and equipment ........ 195 54 672 948
Interest income ........................................... 1,748 920 3,450 2,236
Other - net ............................................... 75 75 206 147
--------- --------- --------- ---------
Other income (expense) - net ..................... 1,864 (2,979) 3,322 (6,100)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES .................................... 68,099 44,057 134,074 51,922
Provision for income taxes ................................ 23,710 3,477 46,926 3,711
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY CHARGE ............................ 44,389 40,580 87,148 48,211
Extraordinary charge from early redemption of debt ........ 3,478
--------- --------- --------- ---------
NET INCOME (Note 4) ........................................... $ 44,389 $ 40,580 $ 87,148 $ 44,733
========= ========= ========= =========
PER SHARE OF COMMON STOCK (Note 5):
Basic:
Income before extraordinary charge...................... $ .51 $ .47 $ 1.00 $ .56
Extraordinary charge from early redemption of debt ..... .04
--------- --------- --------- ---------
Net income ............................................. $ .51 $ .47 $ 1.00 $ .52
========= ========= ========= =========
Diluted:
Income before extraordinary charge...................... $ .50 $ .46 $ .98 $ .55
Extraordinary charge from early redemption of debt ..... .04
--------- --------- --------- ---------
Net income ............................................. $ .50 $ .46 $ .98 $ .51
========= ========= ========= =========
See Notes to Consolidated Financial Statements.
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ROWAN COMPANIES, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
For The Six Months
Ended June 30,
----------------------------
1998 1997
-------- --------
(Unaudited)
CASH PROVIDED BY (USED IN):
Operations:
Net income ................................................................... $ 87,148 $ 44,733
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization ............................................. 24,276 22,790
Gain on disposals of property, plant and equipment ........................ (672) (948)
Compensation expense ...................................................... 2,509 2,467
Change in sale/leaseback payable .......................................... (6,326) (7,666)
Amortization of sale/leaseback gain ....................................... (1,586) (1,586)
Provision for pension and postretirement benefits ......................... 3,046 3,739
Deferred income taxes ..................................................... 34,852 2,497
Extraordinary charge from early redemption of debt ........................ 3,550
Other - net ............................................................... 71 1,625
Changes in current assets and liabilities:
Receivables- trade and other .............................................. (5,178) (11,534)
Inventories ............................................................... (16,892) (13,954)
Other current assets ...................................................... (718) 5,268
Current liabilities ....................................................... (19) 6,792
Net changes in other noncurrent assets and liabilities ....................... 1,788 17
--------- ---------
Net cash provided by operations .................................................. 122,299 57,790
--------- ---------
Investing activities:
Property, plant and equipment additions ...................................... (114,997) (77,445)
Proceeds from disposals of property, plant and equipment .................... 1,135 2,351
Proceeds from disposition of investment in 49% owned company ................. 19,550
Repayments from affiliates ................................................... 226
--------- ---------
Net cash used in investing activities ............................................ (94,312) (74,868)
--------- ---------
Financing activities:
Proceeds from borrowings .................................................... 40,602 38,569
Repayments of borrowings ..................................................... (36,156) (50,163)
Payments to acquire treasury stock ........................................... (2,080)
Premium on redemption of debt ................................................ (3,000)
Other - net .................................................................. 1,492 957
--------- ---------
Net cash provided by (used in) financing activities .............................. 3,858 (13,637)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .................................... 31,845 (30,715)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...................................... 108,332 97,225
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................................ $ 140,177 $ 66,510
========= =========
See Notes to Consolidated Financial Statements
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ROWAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements of the Company included herein
have been prepared without audit pursuant to generally accepted
accounting principles and the rules and regulations of the Securities
and Exchange Commission. Certain information and notes have been
condensed or omitted pursuant to such rules and regulations and the
Company believes that the disclosures included herein are adequate. It
is suggested that these condensed financial statements be read in
conjunction with the financial statements and related notes included in
the Company's 1997 Annual Report to Stockholders incorporated by
reference in the Form 10-K for the year ended December 31, 1997.
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, 1998 and December 31, 1997, and the
results of its operations for the three and six month periods ended June
30, 1998 and 1997 and its cash flows for the six months ended June 30,
1998 and 1997.
3. The results of operations for the three and six month periods ended June
30, 1998 are not necessarily indicative of the results to be expected
for the full year.
4. The Company's adoption, effective January 1, 1998, of Statements of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", and No. 132, "Employers' Disclosures about Pension and Other
Postretirement Benefits", did not materially affect its financial
statement disclosure. For the periods presented herein, the Company has
no items of "other comprehensive income" as defined in Statement 130.
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5 Computation of basic and diluted earnings per share is as follows (in
thousands except per share amounts):
For The For The
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
------- ------ ------- -------
Weighted average shares of common
stock outstanding .......................................... 87,014 85,932 86,931 85,779
Stock options and related (treasury stock method) ............. 1,270 1,523 1,307 1,564
Shares issuable from assumed conversion
of floating rate subordinated debentures ................... 956 1,328 961 1,351
------- ------- ------- -------
Weighted average shares for diluted
earnings per share calculation ............................. 89,240 88,783 89,199 88,694
======= ======= ======= =======
Income before extraordinary charge ............................ $44,389 $40,580 $87,148 $48,211
Extraordinary charge from early redemption of debt ............ 3,478
------- ------- ------- -------
Net income for basic calculation .............................. 44,389 40,580 87,148 44,733
Subordinated debenture interest, net of
income tax effect .......................................... 80 158
------- ------- ------- -------
Net income for diluted calculation ............................ $44,389 $40,660 $87,148 $44,891
======= ======= ======= =======
Basic earnings per share:
Income before extraordinary charge ......................... $ .51 $ .47 $ 1.00 $ .56
Extraordinary charge ....................................... .04
------- ------- ------- -------
Net income ................................................. $ .51 $ .47 $ 1.00 $ .52
======= ======= ======= =======
Diluted earnings per share:
Income before extraordinary charge ......................... $ .50 $ .46 $ .98 $ .55
Extraordinary charge ....................................... .04
------- ------- ------- -------
Net income ................................................. $ .50 $ .46 $ .98 $ .51
======= ======= ======= =======
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ROWAN COMPANIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 Compared to
Six Months Ended June 30, 1997
The Company achieved net income of $87.1 million in the first half of 1998
compared to $44.7 million in the same period of 1997. This enhanced performance
resulted primarily from increased offshore drilling day rates and improved
manufacturing operations. The prior period results were after charges of $20
million from concluding the Company's turnkey business and $3.5 million from
redeeming early certain 11 7/8% Senior Notes.
A comparison of the revenues and operating profit (loss) from drilling,
manufacturing, aviation and consolidated operations for the first six months of
1998 and 1997, respectively, is reflected below (dollars in thousands):
Drilling Manufacturing Aviation Consolidated
--------------------- ----------------------- ------------------------- -----------------------
1998 1997 1998 1997 1998 1997 1998 1997
------- ------- ------ ------ ------- ------- ------- ------
Revenues $255,649 $192,545 $ 82,704 $ 71,238 $ 49,801 $ 45,767 $388,154 $309,550
Percent of Consolidated
Revenues 66% 62% 21% 23% 13% 15% 100% 100%
Operating Profit (Loss) (1) $134,971 $ 63,514 $ 10,512 $ 6,817 $ (5,462) $ (3,726) $140,021 $ 66,605
- -------------------------------------------------------------
(1) Income (loss) from operations before deducting general and administrative
expenses.
As reflected above, the Company's consolidated operating results more than
doubled to $140 million, or 36% of revenues, when comparing the first halves of
1998 and 1997. Day rate drilling revenues increased by $63.1 million or 33% as
the Company's offshore fleet achieved 97% utilization during the first half of
1998, compared to 99% in the first half of 1997, and a 34% increase in average
day rates between periods. Related expenses increased by $11.8 million or 13%
between periods primarily as a result of higher wages and rig mobilization
costs.
First half 1997 operating results included a loss from concluding the Company's
turnkey drilling operations of approximately $20 million. The Company currently
has no turnkey wells in progress nor any plans for additional turnkey work at
this time.
The 54% improvement shown above in the Company's manufacturing profitability
between periods primarily reflects the increased contribution of the marine
group. During the first half of 1998, the Company provided design and components
("LeTourneau kit") toward the construction of two new Super 116 Class rigs. One
kit was essentially complete at June 30, 1998 and the other should be completed
by year end. The division's external backlog was $47.4 million at June 30, 1998.
Manufacturing operations exclude approximately $51 million of products and
services provided to the Company's drilling division during the
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first half of 1998, most of which was attributable to construction progress on
Rowan Gorillas V and VI, compared to $32 million in the same period of 1997.
The aviation operating results in both periods reflect the normal reduced flying
activity in Alaska throughout much of the first four months of the year,
although the 1998 results were hampered primarily due to higher wages and
aircraft maintenance costs. The Company's disposition in January 1998 of its 49%
interest in the Dutch helicopter joint venture KLM ERA did not have a material
impact on its first half 1998 results of operations.
Three Months Ended June 30, 1998 Compared to
Three Months Ended June 30, 1997
The Company achieved net income of $44.4 million in the second quarter of 1998
compared to $40.6 million in the same period of 1997. This enhanced performance
resulted primarily from increased offshore drilling day rates and improved
manufacturing operations.
A comparison of the revenues and operating profit (loss) from drilling,
manufacturing, aviation and consolidated operations for the second quarters of
1998 and 1997, respectively, is reflected below (dollars in thousands):
Drilling Manufacturing Aviation Consolidated
----------------------------- ------------------------- ------------------------ ----------------------------
1998 1997 1998 1997 1998 1997 1998 1997
-------------- ------------- ----------- ----------- ----------- ----------- ------------- -------------
Revenues $ 131,424 $ 102,942 $ 45,227 $ 34,594 $ 27,589 $ 27,249 $ 204,240 $ 164,785
Percent of
Consolidated
Revenues 64% 62% 22% 21% 14% 17% 100% 100%
Operating Profit
(Loss) $ 66,700 $ 47,497 $ 5,188 $ 3,121 $ (887) $ 709 $ 71,001 $ 51,327
As reflected above, the Company's consolidated operating results improved by
$19.7 million or 38% when comparing the second quarters of 1998 and 1997. Day
rate drilling revenues increased by $28.5 million or 28% as the Company's
offshore fleet achieved 95% utilization during the second quarter of 1998,
compared to 100% in the second quarter of 1997, and a 31% increase in average
day rates between periods. Related expenses increased by $8.7 million or about
18% between periods primarily as a result of higher wages and rig mobilization
costs.
The 66% improvement shown above in the Company's manufacturing profitability
between periods primarily reflects the increased contribution of the marine
group. During the second quarter of 1998, the Company completed one of the two
Super 116 Class rig kits it sold in 1997. The second kit should be completed by
year-end 1998. The division's external backlog was $47.4 million at June 30,
1998. Manufacturing operations exclude approximately $29 million of products and
services provided to the Company's drilling division during the second quarter
of 1998, most of which was attributable to construction progress on Rowan
Gorillas V and VI, compared to $16 million in the same period of 1997.
The Company's aviation operations experienced the normal seasonal improvement in
flying activity in Alaska during both periods, although the 1998 results were
hampered primarily due to higher wages and aircraft maintenance costs.
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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:
AREA RIGS PERCEPTIBLE INDUSTRY TRENDS
- --------------------------- ------------- -----------------------------------------------------
Gulf of Mexico 14 Reduced exploration and development activity in the
near-term
North Sea 5 Generally stable levels of drilling activity for jack-up
rigs
Eastern Canada 2 Improving demand
Perceptible trends in the aviation markets in which the Company is currently
operating and the number of Company-operated aircraft based in each of those
markets are as follows:
AREA AIRCRAFT PERCEPTIBLE INDUSTRY TRENDS
- ------------------------ ------------------- ----------------------------------------------------
Alaska 70 Normal seasonal improvement
Gulf of Mexico 49 Moderately improving market conditions
The drilling and aviation markets in which the Company competes frequently
experience significant changes in supply and demand. Offshore drilling
utilization and day rates are primarily a function of the demand for drilling
services, as measured by the level of exploration and development expenditures,
and the supply of capable drilling equipment. These expenditures, in turn, are
affected by many factors such as existing and newly discovered oil and natural
gas reserves, political and regulatory policies, seasonal weather patterns,
contractual requirements under leases or concessions, trends in finding and
extraction costs and, probably most influential, oil and natural gas prices. The
Company's aviation operations are also affected by such factors, as flying in
support of offshore energy operations remains a major source of business and
Alaska operations are hampered each winter. The volatile nature of such factors
prevents the Company from being able to accurately predict whether existing
market conditions or the perceptible market trends reflected in the preceding
tables will continue. In response to fluctuating market conditions, the Company
can, as it has done in the past, relocate its drilling rigs and aircraft from
one geographic area to another, but only when such moves are economically
justified.
In recent months, the prolonged weakness in oil prices has led to a reduction in
drilling, primarily impacting jack-ups in the Gulf of Mexico. As some energy
companies have suspended portions of their drilling programs and reduced their
1998 drilling budgets, the Company has experienced curtailed drilling
assignments and, in many instances, has had to accept lower day rates in an
effort to maintain utilization of its rig fleet. Many of the Company's Gulf of
Mexico rigs are currently working at day rates well below those obtained during
the just-completed second quarter. At current levels, the Company should
continue to operate profitably. However, there can be no assurance that the
Company's operations will not be more adversely affected should current
conditions persist or that market conditions will not deteriorate further.
The Company's manufacturing operations are considerably less volatile than its
drilling and aviation operations and, given current order backlog and barring
unforeseen circumstances, should continue to contribute positive operating
results throughout the remainder of 1998.
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LIQUIDITY AND CAPITAL RESOURCES
A comparison of key balance sheet figures and ratios as of June 30, 1998 and
December 31, 1997 is as follows (dollars in thousands):
June 30, December 31,
1998 1997
---- ----
Cash and cash equivalents $140,177 $108,332
Current assets $431,966 $412,378
Current liabilities $93,932 $81,526
Current ratio 4.60 5.06
Notes payable and current maturities of long-term debt $6,378 -
Long-term debt $254,218 $256,150
Stockholders' equity $737,071 $653,098
Long-term debt/total capitalization .26 .28
Reflected in the comparison above are the effects in the first half of 1998 of
net cash provided by operations of $122.3 million, capital expenditures of $115
million, proceeds from borrowings of $40.6 million, repayments of borrowings of
$36.2 million and proceeds from the disposition of the Company's 49% interest in
KLM ERA Helicopters of $19.6 million.
Capital expenditures during the first half of 1998 were primarily related to
construction of Rowan Gorilla V and Rowan Gorilla VI, each being an enhanced
version of the Company's Gorilla Class jack-ups featuring a combination drilling
and production capability. Gorilla V recently completed its relocation from the
Company's Vicksburg, Mississippi shipyard to its Sabine Pass, Texas facility for
final outfitting and should be completed and commence operations in the North
Sea during the fourth quarter. The Company has financed $153.1 million of the
cost of Gorilla V through two fixed rate bank notes guaranteed by the Maritime
Administration of the U. S. Department of Transportation under its Title XI
Program. The notes require semiannual repayments beginning in January 1999, with
final payments due in July 2010, and bear interest as follows: $67 million at
6.94% and $86.1 million at 6.15%.
Construction of Gorilla VI should be completed during the second quarter of 2000
and the Company is pursuing outside financing on terms and conditions similar to
those obtained for Gorilla V.
The Company has begun ordering long lead-time items for Rowan Gorilla VII and
expects construction to be completed about one year following delivery of
Gorilla VI. The Company intends to pursue outside financing for Gorilla VII if
necessary, but believes that internally generated working capital may be
sufficient to fund its construction. There can be no assurance that working
capital will be adequate throughout the period required to complete construction
or that outside financing will be available. The Company expects the total
construction cost of Gorillas V, VI and VII will be in the range of $550 to 600
million.
The Company estimates remaining 1998 capital expenditures will be between $90
million and $100 million, including approximately $75-80 million for Gorillas V,
VI and VII. The Company may also spend amounts to acquire additional aircraft as
market conditions justify and to upgrade existing offshore rigs and
manufacturing facilities.
In March 1998, the Company repaid the balance of $36.2 million of promissory
notes originally issued in February 1994 in connection with the acquisition of
its manufacturing operations.
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At June 30, 1998, the Company had available $45 million under a $155 million
bank revolving credit facility maturing in October, 2000. The $110 million
outstanding under the credit line bore interest at 6.06% on June 30, 1998.
Based upon current operating levels and the previously discussed market trends,
management believes that 1998 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 1998.
At June 30, 1998, approximately $137 million of the Company's retained earnings
was available for the payment of dividends under the most restrictive provisions
of the Company's debt agreements.
On June 16, 1998, the Company instituted a program of repurchasing up to five
percent of its outstanding Common Stock. At July 31, 1998, the Company had
repurchased more than two percent of its outstanding shares.
The Company believes that its exposure to potential year 2000 software problems
is limited and the costs associated with readying its information systems will
not materially impact its financial position or results of operations. The
Company expects to substantially complete modifications to its information
systems during 1998 and will expense such costs as they are incurred.
This report contains forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including, without limitation,
statements as to the expectations, beliefs and future expected financial
performance of the Company that are based on current expectations and are
subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from those projected by the Company. Among the
factors that could cause actual results to differ materially are the following:
o oil and natural gas prices
o the level of offshore expenditures by energy companies
o the general economy, including inflation
o weather conditions in the Company's principal operating areas
o environmental and other laws and regulations
Other relevant factors have been disclosed in the Company's filings with the
U.S. Securities and Exchange Commission.
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PART II. OTHER INFORMATION
Item 5. Other Information
To be considered for inclusion in the Company's proxy statement and form
of proxy relating to the 1999 Annual Meeting of Stockholders, proposals of
stockholders submitted for consideration at such annual meeting must be received
by the Corporate Secretary at the Company's principal offices, 5450 Transco
Tower, 2800 Post Oak Boulevard, Houston, Texas 77056-6196 no later than
November 15, 1998.
Other stockholder proposal submitted for consideration at the Company's
1999 Annual Meeting of Stockholders (but not for inclusion in the proxy
statement and form of proxy) must be received by the Corporate Secretary of the
Company at the address indicated above no later than January 27, 1999. If such
timely notice of a stockholder proposal is not given, the proposal may not be
brought before the Annual Meeting. If 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 1999 Annual Meeting of Stockholders.
Stockholder recommendations to the Nominating Committee of the Company's
Board of Directors with respect to nominees for election as directors must be
received by the Corporate Secretary of the Company at the address indicated
above no later than February 22, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 3 - Bylaws of the Company, as amended
(b) Exhibit 27 - Financial Data Schedule
(c) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant
during the second quarter of fiscal year 1998.
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, 1998 /s/ E. E. THIELE
-----------------------------------
E. E. Thiele
Senior Vice President- Finance,
Administration and Treasurer
(Chief Financial Officer)
Date: August 14, 1998 /s/ W. H. WELLS
-----------------------------------
W. H. Wells
Controller
(Chief Accounting Officer)
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INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
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(a) Exhibit 3 - Bylaws of the Company, as amended
(b) Exhibit 27 - Financial Data Schedule