EX-99 3 release3q06.htm RELEASE Release
 
EXHIBIT 99

News Release
 
Rowan Companies, Inc.
2800 Post Oak Boulevard, Suite 5450
   Houston, Texas 77056 (713) 621-7800

 
FOR IMMEDIATE RELEASE                                                                              October 31, 2006

ROWAN REPORTS THIRD QUARTER OPERATING RESULTS

HOUSTON, TEXAS -- For the three months ended September 30, 2006, Rowan Companies, Inc. (RDC-NYSE) generated net income of $87.0 million, or 78¢ per share, compared to $74.6 million, or 67¢ per share, in the same period of 2005. Revenues were a record $417.1 million in the third quarter of 2006, compared to $284.4 million in the third quarter of 2005.

Current quarter results included $2.3 million, or 2¢ per share, of gains on asset disposals, compared to $31.9 million, or 18¢ per share, in the third quarter of 2005. The current quarter results also included $1.3 million, or 1¢ per share, of after-tax income from discontinued operations related to the 2004 sale of the Company’s aviation operations.

For the nine months ended September 30, 2006, Rowan generated net income of $255.8 million, or $2.29 per share, compared to $160.3 million, or $1.46 per share, in the same period of 2005. Revenues were $1.1 billion during the first nine months of 2006 compared to $751.4 million in the first nine months of 2005. The 2006 results included $1.3 million, or 1¢ per share, of after-tax income from discontinued operations, compared to $12.0 million, or 11¢ per share in 2005.

Rowan’s offshore rig utilization was 91% during the third quarter of 2006, down from 97% in the comparable 2005 period, as two Gulf of Mexico rigs entered the shipyard in August in preparation for two-year assignments in Qatar and another was relocated to Trinidad during the period. The utilization of Rowan’s 10 other available Gulf of Mexico rigs was 95% during the third quarter of 2006. The Company’s average offshore day rate was a record $146,800 during the third quarter of 2006, up by $2,900, or 2%, from the second quarter and by $63,100, or 75%, from the third quarter of 2005.

Rowan’s land rig utilization was 98% during the third quarter of 2006, up from 89% in the comparable 2005 period. The Company’s average land rig day rate was $23,000 during the third quarter of 2006, up by $600, or 3%, from the second quarter and by $4,200, or 22%, from the third quarter of 2005.

The Company’s external manufacturing backlog was a record $578 million at September 30, and included $294 million in the marine group, $193 million in the drilling products group and $52 million in the equipment group.
 
 
Danny McNease, Chairman and Chief Executive Officer, commented, “Rowan’s third quarter operating results were among the best in our history, though they were hampered somewhat by rig downtime. During the period, unscheduled rig downtime resulting primarily from top-drive problems reduced expected revenues by almost $6 million. We also spent time preparing three rigs for long-term assignments overseas, which, at then-existing rates, caused a $13 million shortfall in expected revenues. Lump-sum fees related to these overseas contracts are being deferred until drilling operations commence.

“Our manufacturing division’s three-month acceleration of the Hank Boswell delivery should yield at least $12 million of incremental drilling revenues to the Company in the fourth quarter, though these efforts did increase labor costs related to other marine construction projects. In addition, our third quarter manufacturing results included a charge for environmental remediation at our Longview steel mill. These two items combined to reduce manufacturing margins by approximately $8 million during the third quarter.

“Looking ahead, we expect that our fourth quarter operating results will be very similar to the third quarter. Ongoing preparations for overseas drilling assignments will continue to defer related revenues from the fourth quarter until the start of operations in 2007, and such deferred amounts will be recognized over two- to four-year contract periods. Operating costs have been impacted by higher insurance costs and general inflation in the oilfield, and we do not expect any significant changes in the near term. Our manufacturing results will continue to be heavily influenced by sales mix, though, barring any unforeseen events, our margins should return to the levels we achieved earlier in 2006. All in all, we expect that Rowan’s 2006 net income will exceed $3.00 per share, easily the best in the Company’s 83-year history.

“By the end of March 2007, we should have 12 of our 21 offshore rigs working in international markets, and most under long-term contracts. This is consistent with our stated plan to diversify our drilling operations away from the primarily spot drilling market of the Gulf of Mexico. We will continue to pursue term contracts at attractive rates, and expect that most such opportunities will remain outside the Gulf of Mexico. Our backlog of business continues to grow, giving us revenue and earnings visibility into 2011 and confidence in our prospects for 2007 and beyond.”

Rowan Companies, Inc. is a major provider of international and domestic contract drilling services. The Company also owns and operates a manufacturing division that produces equipment for the drilling, mining and timber industries. The Company’s stock is traded on the New York Stock Exchange and NYSE Arca. Common Stock trading symbol: RDC. Contact: William C. Provine, Vice-President - Investor Relations, 713-960-7575. Website: 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.
 
 
 
-2-
 
 

ROWAN COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (In Thousands)
               
 
    
SEPTEMBER 30 
  
     
2006
 
 
2005
 
ASSETS
              
               
Cash and cash equivalents
  
$
282,874
  
$
516,422
  
Restricted cash
    
156,077
   
-
 
Accounts receivable
    
407,022
   
245,737
 
Inventories
    
282,107
   
192,546
 
Other current assets
    
85,845
   
89,212
 
  Total current assets
    
1,213,925
   
1,043,917
 
Property, plant and equipment - net
    
2,035,528
   
1,674,130
 
Other assets
    
36,313
   
15,525
 
Assets of discontinued operations
    
-
   
458
 
  TOTAL
  
$
3,285,766
  
$
2,734,030
  
               
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
               
Current maturities of long-term debt
  
$
64,922
  
$
64,922
  
Accounts payable
    
110,837
   
47,015
 
Other current liabilities
    
260,333
   
118,839
 
  Total current liabilities
    
436,092
   
230,776
 
Long-term debt
    
499,158
   
563,657
 
Other liabilities
    
508,045
   
391,131
 
Stockholders' equity
    
1,842,471
   
1,548,466
 
  TOTAL
  
$
3,285,766
  
$
2,734,030
  
               
 
 
 
 
 
 
-3-
 
 

ROWAN COMPANIES, INC.         
CONSOLIDATED STATEMENTS OF OPERATIONS         
Unaudited (In Thousands Except Per Share Amounts)             
                           
                           
 
    
THREE MONTHS 
    
NINE MONTHS   
 
 
    
ENDED SEPTEMBER 30,
    
ENDED SEPTEMBER 30,
  
     
2006
 
 
2005
    
2006
    
2005
  
REVENUES:
                          
  Drilling services
  
$
289,577
  
$
217,381
  
$
786,789
  
$
560,297
  
  Manufacturing sales and services
    
127,537
   
67,017
   
312,998
   
191,053
 
    Total
    
417,114
   
284,398
   
1,099,787
   
751,350
 
COSTS AND EXPENSES:
                          
  Drilling services
    
132,986
   
100,204
   
363,170
   
288,811
 
  Manufacturing sales and services
    
114,391
   
57,950
   
260,903
   
166,311
 
  Depreciation and amortization
    
23,310
   
20,261
   
65,372
   
60,221
 
  Selling, general and administrative
    
17,326
   
17,941
   
52,730
   
47,287
 
  Gain on disposals of property and equipment
    
(2,301
)
  
(31,874
)
  
(29,277
)
  
(42,056
)
    Total
    
285,712
   
164,482
   
712,898
   
520,574
 
INCOME FROM OPERATIONS
    
131,402
   
119,916
   
386,889
   
230,776
 
OTHER INCOME (EXPENSE):
                          
  Interest expense
    
(7,198
)
  
(6,694
)
  
(21,323
)
  
(18,868
)
  Less: interest capitalized
    
2,971
   
1,182
   
6,591
   
3,041
 
  Interest income
    
6,490
   
4,349
   
21,767
   
10,460
 
  Gain on sale of investments
    
-
   
-
   
-
   
9,553
 
  Other - net
    
(237
)
  
(41
)
  
(166
)
  
528
 
    OTHER INCOME (EXPENSE) - NET
    
2,026
   
(1,204
)
  
6,869
   
4,714
 
INCOME BEFORE INCOME TAXES
    
133,428
   
118,712
   
393,758
   
235,490
 
Provision for income taxes
    
47,657
   
44,087
   
139,191
   
87,140
 
INCOME FROM CONTINUING OPERATIONS
    
85,771
   
74,625
   
254,567
   
148,350
 
Income from discontinued operations, net of tax
    
1,269
   
-
   
1,269
   
11,963
 
NET INCOME
  
$
87,040
  
$
74,625
  
$
255,836
  
$
160,313
  
                           
PER SHARE AMOUNTS:
                          
  Income from continuing operations
  
$
0.77
  
$
0.67
  
$
2.28
  
$
1.35
  
  Income from discontinued operations, net of tax
  
$
0.01
  
$
-
  
$
0.01
  
$
0.11
  
  Net income
  
$
0.78
  
$
0.67
  
$
2.29
  
$
1.46
  
AVERAGE DILUTED SHARES
    
111,516
   
110,605
   
111,787
   
109,944
 
                           
 
 
 
 
-4-
 
 

ROWAN COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
Unaudited (In Thousands)       
               
 
    
NINE MONTHS
  
 
    
ENDED SEPTEMBER 30 
  
     
2006
   
2005
 
CASH PROVIDED BY (USED IN):
              
  Operations:
              
    Net income
  
$
255,836
  
$
160,313
  
    Adjustments to reconcile net income to net cash provided by operations:
              
      Depreciation and amortization
    
65,372
   
60,308
 
      Deferred income taxes
    
67,987
   
82,882
 
      Contributions to pension plans
    
(6,074
)
  
(89,057
)
      Gain on sale of assets
    
(29,277
)
  
(72,345
)
      Other - net
    
31,196
   
19,434
 
    Net changes in current assets and liabilities
    
(205,585
)
  
(52,759
)
    Net changes in other noncurrent assets and liabilities
    
9,864
   
73
 
  Net cash provided by operations
    
189,319
   
108,849
 
               
  Investing activities:
              
    Property, plant and equipment additions
    
(372,732
)
  
(122,127
)
    Proceeds from disposals of property, plant and equipment
    
36,747
   
72,173
 
    Restricted cash
    
(156,077
)
  
-
 
    Proceeds from disposal of aviation operations
    
1,953
   
-
 
    Proceeds from sale of boat purchase options
    
-
   
20,866
 
    Proceeds from sales of investments
    
-
   
9,553
 
  Net cash used in investing activities
    
(490,109
)
  
(19,535
)
               
  Financing activities:
              
    Proceeds from borrowings
    
-
   
37,486
 
    Repayments of borrowings
    
(51,168
)
  
(48,179
)
    Payment of cash dividends
    
(49,475
)
  
(54,180
)
    Proceeds from option and debenture plans and other
    
8,404
   
26,004
 
  Net cash used in financing activities
    
(92,239
)
  
(38,869
)
               
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
(393,029
)
  
50,445
 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
675,903
   
465,977
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
  
$
282,874
  
$
516,422
  
               
 
 
 
 
-5-