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ROWAN COS : Rowan Reports Third Quarter 2009 Operating Results

11/03/2009 | 08:05am US/Eastern
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HOUSTON, Nov. 3 /PRNewswire-FirstCall/ -- For the three months ended September 30, 2009, Rowan Companies, Inc. ("Rowan" or the "Company") (NYSE: RDC) generated net income of $78.4 million or $0.69 per share, compared to $114.1 million or $1.00 per share in the third quarter of 2008 and $96.6 million or $0.85 per share in the second quarter of 2009. Excluding the tax benefit described in the following paragraph, earnings in the third quarter of 2009 were $61.4 million or $0.54 per share. Revenues were $393.4 million in the third quarter of 2009, compared to $527.1 million in the third quarter of 2008 and $482.2 million in the second quarter of 2009.

(Logo: http://www.newscom.com/cgi-bin/prnh/20081031/DA43093LOGO)

Results for the third quarter of 2009 included a $17.0 million or $0.15 per share net tax benefit related to a recent third-party tax court ruling, which provided that certain foreign-source income is not taxable in the United States. This is in addition to the $8.0 million or $0.07 per share tax benefit recorded during the second quarter related to the same issue. Results for the third quarter of 2008 included gains on asset disposals of $21.4 million or $0.12 per share. There were no significant asset disposals in the second or third quarters of 2009.

Rowan's drilling operations generated revenues of $258.4 million in the third quarter of 2009, down by 28% from the prior-year quarter and by 19% from the second quarter of 2009 due primarily to lower rig utilization. The Company's gross drilling margin was 53% of revenues in the third quarter of 2009, down from 54% in the prior-year quarter and 57% in the second quarter of 2009. Income from drilling operations was $81.1 million in the third quarter of 2009, down by 51% from the prior-year quarter and by 37% from the second quarter of 2009.

Rowan's manufacturing operations generated external revenues of $135.0 million in the third quarter of 2009, down by 21% from the prior-year quarter and by 16% from the second quarter of 2009. The Company's gross manufacturing margin was 13% of revenues in the third quarter of 2009, up from 12% in the prior-year quarter and 9% in the second quarter of 2009. Income from manufacturing operations was $6.0 million in the third quarter of 2009, up by 13% from the prior-year quarter and by 122% from the second quarter of 2009.

Matt Ralls, President and Chief Executive Officer, commented, "Our third quarter results, both in drilling and manufacturing, benefitted from our contract backlog and great execution by our employees. While excess rig supply has, and will likely continue to, put pressure on day rates, we believe global demand for jack-ups and land rigs bottomed during the third quarter. Many drilling tenders remain highly competitive, but we are seeing a notable increase in demanding drilling projects for which our higher specification equipment and capable workforce provide a competitive advantage. We are encouraged by the increased contracting activity in the North America land and jack-up drilling markets, and optimistic regarding the multiple inquiries for our Super Gorilla Class rigs, especially in the North Sea. In our manufacturing operations, a recent improvement in demand for our innovative mining equipment has been a positive development on top of our success in adding three new rig kit packages earlier this year."

Rowan will conduct its earnings conference call on Tuesday, November 3, 2009, at 10:00 a.m. Central Standard Time. Interested parties are invited to listen to the call by telephone or over the Internet. Individuals who wish to participate on the conference call by telephone can dial (877) 869-3847, or internationally (201) 689-8261. Alternatively, to access the online simulcast and rebroadcast of the conference call, please visit Rowan's website at www.rowancompanies.com. You should connect to our website at least 15 minutes prior to the conference call to register, download and install any necessary software.

Rowan Companies, Inc. is a worldwide provider of contract drilling services utilizing a fleet of 22 high-spec offshore jack-up rigs and 32 deep-well land drilling rigs. The Company also owns and operates a manufacturing division that produces equipment for the drilling, mining and timber industries. For more information on Rowan, please visit www.rowancompanies.com.

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 include oil and natural gas prices, the level of offshore expenditures by energy companies, energy demand, 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.


                                   ROWAN COMPANIES, INC.
                          CONDENSED CONSOLIDATED BALANCE SHEETS
                                Unaudited (In Millions)

                                              SEPTEMBER 30,  DECEMBER 31,
                                                   2009          2008
                                                   ----          ----
                  ASSETS

    Cash and cash equivalents                     $681.1        $222.4
    Accounts receivable                            361.2         485.0
    Inventories                                    480.8         551.4
    Other current assets                           127.8         110.4
                                                   -----         -----
      Total current assets                       1,650.9       1,369.2
    Property, plant and equipment - net          3,440.0       3,147.5
    Other assets                                    91.7          32.2
                                                    ----          ----
      TOTAL                                     $5,182.6      $4,548.9
                                                ========      ========

     LIABILITIES AND STOCKHOLDERS' EQUITY

    Current maturities of long-term debt           $64.9         $64.9
    Accounts payable                               118.3         235.0
    Other current liabilities                      308.9         444.7
      Total current liabilities                    492.1         744.6
    Long-term debt                                 801.2         355.6
    Other liabilities                              917.2         788.9
    Stockholders' equity                         2,972.1       2,659.8
                                                 -------       -------
      TOTAL                                     $5,182.6      $4,548.9
                                                ========      ========


                                ROWAN COMPANIES, INC.
                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    Unaudited (In Millions Except Per Share Amounts)

                                        THREE MONTHS          NINE MONTHS
                                     ENDED SEPTEMBER 30    ENDED SEPTEMBER 30
                                      2009       2008       2009       2008
                                      ----       ----       ----       ----

    REVENUES                         $393.4     $527.1    $1,370.4   $1,599.7
                                     ------     ------    --------   --------

    COSTS AND EXPENSES:
      Operations (excluding items
       shown below)                   238.2      312.5       758.6      937.9
      Depreciation and amortization    43.7       36.2       126.8      102.8
      Selling, general and
       administrative                  24.1       27.6        73.4       85.7
      Loss (gain) on sale of
       property and equipment           0.3      (21.4)       (4.3)     (28.3)
                                        ---      -----        ----      -----
        Total                         306.3      354.9       954.5    1,098.1
                                      -----      -----       -----    -------
    INCOME FROM OPERATIONS             87.1      172.2       415.9      501.6
    Net interest and other income
     (expense)                         (0.7)      (0.9)        3.1        4.0
                                       ----       ----         ---        ---
    INCOME BEFORE INCOME TAXES         86.4      171.3       419.0      505.6
    Provision for income taxes          8.0       57.2       112.3      172.3
                                        ---       ----       -----      -----
    NET INCOME                        $78.4     $114.1      $306.7     $333.3
                                      =====     ======      ======     ======

    NET INCOME PER DILUTED SHARE      $0.69      $1.00       $2.70      $2.94
                                      =====      =====       =====      =====

    AVERAGE DILUTED SHARES            113.9      113.8       113.6      113.5
                                      =====      =====       =====      =====


    NOTE: See pages 6 and 7 for supplemental operating information.


                                 ROWAN COMPANIES, INC.
                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                Unaudited (In Millions)

                                                             NINE MONTHS
                                                         ENDED SEPTEMBER 30
                                                        2009            2008
                                                        ----            ----
    CASH PROVIDED BY (USED IN):
      Operations:
        Net income                                     $306.7          $333.3
        Adjustments to reconcile net income to net
         cash provided by operations:
          Depreciation and amortization                 126.8           102.8
          Deferred income taxes                          70.6            38.0
          Gain on disposals of assets                    (4.3)          (28.3)
          Other - net                                     4.5             9.0
         Net changes in current assets and liabilities  (62.1)          (17.7)
         Net changes in other noncurrent assets and
          liabilities                                   (33.2)           (3.5)
                                                        -----            ----
    Net cash provided by operations                     409.0           433.6
                                                        -----           -----
    Investing activities:
      Property, plant and equipment additions          (393.2)         (618.5)
      Proceeds from disposals of property, plant
       and equipment                                      5.7            53.4
      Decrease in restricted cash balance                   -            50.0
                                                          ---            ----
    Net cash used in investing activities              (387.5)         (515.1)
                                                       ------          ------
    Financing activities:
      Proceeds from borrowings                          491.7            80.0
      Repayments of borrowings                          (51.2)         (131.2)
      Payment of cash dividends                             -           (33.7)
      Proceeds from equity compensation plans
       and other                                         (3.3)           34.6
                                                         ----            ----
    Net cash provided by (used in) financing
     activities                                         437.2           (50.3)
                                                        -----           -----

    INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS    458.7          (131.8)
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD      222.4           284.5
                                                        -----           -----
    CASH AND CASH EQUIVALENTS, END OF PERIOD           $681.1          $152.7
                                                       ======          ======



                                  ROWAN COMPANIES, INC.
                            SUPPLEMENTAL DRILLING INFORMATION
            Unaudited (dollars in millions, except where otherwise indicated)

                                               THREE MONTHS ENDED
                                               ------------------
                                               September 30, 2009
                                               ------------------
                                       $(a)     Elims.     $(b)     % Revs.
                                        ---     ------      ---     -------

    DRILLING OPERATIONS:
      Revenues                        $258.4              $258.4      100
      Operating costs (excluding
       items shown below)             (122.2)    $0.9     (121.3)     (47)
      Depreciation and amortization
       expense                         (39.8)              (39.8)     (15)
      Selling, general and
       administrative expenses (c)     (16.3)              (16.3)      (6)
      Gain on sale of property and
       equipment                         0.1                 0.1        0
                                         ---                 ---
        Income from operations         $80.2     $0.9      $81.1       31
                                       =====     ====      =====       ==
        EBITDA (d)                    $119.9     $0.9     $120.8       47
                                      ======     ====     ======       ==

    OFFSHORE RIG DAYS:
      Operating                                            1,197
      Available                                            2,024
                                                           -----
        Utilization                                           59%
                                                              ==

    LAND RIG DAYS:
      Operating                                            1,652
      Available                                            2,944
                                                           -----
        Utilization                                           56%
                                                              ==

    AVERAGE DAY RATES (in thousands):
      Gulf of Mexico rigs                                 $137.9
      Middle East rigs                                     161.4
      North Sea rigs                                       209.2
      All offshore rigs                                    182.5
      Land rigs                                             22.5


                                               THREE MONTHS ENDED
                                               ------------------
                                                  June 30, 2009
                                                  -------------
                                       $(a)     Elims.     $(b)     % Revs.
                                        ---     ------      ---     -------

    DRILLING OPERATIONS:
      Revenues                        $320.8              $320.8      100
      Operating costs (excluding
       items shown below)             (137.1)    $0.3     (136.8)     (43)
      Depreciation and amortization
       expense                         (38.7)              (38.7)     (12)
      Selling, general and
       administrative expenses (c)     (17.4)              (17.4)      (5)
      Gain on sale of property and
       equipment                           -                   -        -
                                         ---                 ---
        Income from operations        $127.6     $0.3     $127.9       40
                                      ======     ====     ======       ==
        EBITDA (d)                    $166.3     $0.3     $166.6       52
                                      ======     ====     ======       ==

    OFFSHORE RIG DAYS:
      Operating                                            1,561
      Available                                            2,002
                                                           -----
        Utilization                                           78%
                                                              ==

    LAND RIG DAYS:
      Operating                                            1,721
      Available                                            2,849
                                                           -----
        Utilization                                           60%
                                                              ==

    AVERAGE DAY RATES (in thousands):
      Gulf of Mexico rigs                                 $150.4
      Middle East rigs                                     144.7
      North Sea rigs                                       285.4
      All offshore rigs                                    177.2
      Land rigs                                             22.4

                                               THREE MONTHS ENDED
                                               ------------------
                                               September 30, 2008
                                               ------------------
                                                $(b)       % Revs.
                                                 ---       -------
    DRILLING OPERATIONS:
      Revenues                                 $357.1        100
      Operating costs (excluding items
       shown below)                            (163.3)       (46)
      Depreciation and amortization expense     (32.2)        (9)
      Selling, general and administrative
       expenses (c)                             (16.2)        (5)
      Gain on sale of property and equipment     21.5          6
                                                 ----        ---
        Income from operations                 $166.9         47
                                               ======         ==
        EBITDA (d)                             $177.6         50
                                               ======         ==

    OFFSHORE RIG DAYS:
      Operating                                 1,817
      Available                                 1,915
                                                -----
        Utilization                                95%
                                                   ==

    LAND RIG DAYS:
      Operating                                 2,620
      Available                                 2,710
                                                -----
        Utilization                                97%
                                                   ==

    AVERAGE DAY RATES (in thousands):
      Gulf of Mexico rigs                      $131.4
      Middle East rigs                          159.2
      North Sea rigs                            238.3
      All offshore rigs                         161.1
      Land rigs                                  20.9


    (a)  Amounts include intercompany transactions between drilling and
         manufacturing operations.
    (b)  Amounts exclude intercompany transactions.
    (c)  Amounts include corporate SG&A costs that are allocated between
         operating segments.
    (d)  EBITDA (earnings before interest, taxes, depreciation and
         amortization) is a non-GAAP financial measure that we believe is
         relevant to our stockholders.  We measure EBITDA as operating income
         plus depreciation and any loss on sale of property and equipment,
         less any gain on sale.


                                  ROWAN COMPANIES, INC.
                        SUPPLEMENTAL MANUFACTURING INFORMATION
                            Unaudited (dollars in millions)

                                               THREE MONTHS ENDED
                                               ------------------
                                               September 30, 2009
                                               ------------------
                                 $(a)    % Revs.    Elims.    $(b)    % Revs.
                                  ---    -------    ------     ---    -------

    MANUFACTURING OPERATIONS:
      Revenues                  $219.1      100     $(84.1)   $135.0    100
      Operating costs
       (excluding items shown
       below)                   (172.6)     (79)      55.7    (116.9)   (87)
      Depreciation and
       amortization expense       (3.9)      (2)                (3.9)    (3)
      Selling, general and
       administrative
       expenses (c)               (7.8)      (4)                (7.8)    (6)
      Gain (loss) on sale of
       property and equipment     (0.4)      (0)                (0.4)    (0)
                                  ----                 ---      ----
        Income from operations   $34.4       16     $(28.4)     $6.0      4
                                 =====       ==     =======     ====     ==
        EBITDA (d)               $38.7       18     $(28.4)    $10.3      8
                                 =====       ==    =======     =====     ==

    REVENUES:
      Drilling Products and
       Systems                  $177.5       81     $(84.1)    $93.4     69
      Mining, Forestry and
       Steel Products             41.6       19          -      41.6     31
                                  ----                 ---      ----
         Total                  $219.1      100     $(84.1)   $135.0    100
                                ======      ===     =======   ======    ===

    MANUFACTURING  BACKLOG:
      Drilling Products and
       Systems                  $745.4             $(340.9)   $404.5
      Mining, Forestry and
       Steel Products             35.3                   -      35.3
                                  ----                 ---      ----
        Total                   $780.7             $(340.9)   $439.8
                                ======             =======    ======



                                           THREE MONTHS ENDED
                                           ------------------
                                              June 30, 2009
                                              -------------
                                 $(a)    % Revs.    Elims.    $(b)    % Revs.
                                  ---    -------    ------     ---    -------

    MANUFACTURING OPERATIONS:
      Revenues                  $196.5      100     $(35.1)   $161.4    100
      Operating costs
       (excluding items shown
       below)                   (172.6)     (88)      25.2    (147.4)   (91)
      Depreciation and
       amortization expense       (3.9)      (2)                (3.9)    (2)
      Selling, general and
       administrative
       expenses (c)               (7.3)      (4)                (7.3)    (5)
      Gain (loss) on sale of
       property and equipment     (0.1)      (0)                (0.1)    (0)
                                  ----                 ---      ----
        Income from operations   $12.6        6      $(9.9)     $2.7      2
                                 =====       ==      =====      ====     ==
        EBITDA (d)               $16.6        8      $(9.9)     $6.7      4
                                 =====       ==      =====      ====     ==

    REVENUES:
      Drilling Products and
       Systems                  $141.9       72     $(35.1)   $106.8     66
      Mining, Forestry and
       Steel Products             54.6       28          -      54.6     34
                                  ----                 ---      ----
         Total                  $196.5      100     $(35.1)   $161.4    100
                                ======      ===     ======    ======    ===

    MANUFACTURING BACKLOG:
      Drilling Products and
       Systems                  $914.0             $(424.4)   $489.6
      Mining, Forestry and
       Steel Products             28.2                   -      28.2
                                  ----                 ---      ----
        Total                   $942.2             $(424.4)   $517.8
                                ======             =======    ======


                                                THREE MONTHS ENDED
                                                ------------------
                                                September 30, 2008
                                                ------------------
                                                 $(b)     % Revs.
                                                  ---     -------

    MANUFACTURING  OPERATIONS:
      Revenues                                  $170.0      100
      Operating costs (excluding items
       shown below)                             (149.2)     (88)
      Depreciation and amortization expense       (4.0)      (2)
      Selling, general and administrative
       expenses (c)                              (11.4)      (7)
      Gain (loss) on sale of property
       and equipment                              (0.1)      (0)
                                                  ----
        Income from operations                    $5.3        3
                                                  ====       ==
        EBITDA (d)                                $9.4        6
                                                  ====       ==

    REVENUES:
      Drilling Products and Systems             $110.9       65
      Mining, Forestry and Steel Products         59.1       35
                                                  ----
        Total                                   $170.0      100
                                                ======      ===

    MANUFACTURING  BACKLOG:
      Drilling Products and Systems             $562.5
      Mining, Forestry and Steel Products        131.5
                                                 -----
        Total                                   $694.0
                                                ======


    (a)  Amounts include intercompany transactions between manufacturing
         and drilling operations.
    (b)  Amounts exclude intercompany transactions.
    (c)  Amounts include corporate SG&A costs that are allocated between
         operating segments.
    (d)  EBITDA (earnings before interest, taxes, depreciation and
         amortization) is a non-GAAP financial measure that we believe is
         relevant to our stockholders.  We measure EBITDA as operating income
         plus depreciation and any loss on sale of property and equipment,
         less any gain on sale.

SOURCE Rowan Companies, Inc.

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