Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] 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.
Incorporated in Delaware Commission File I. R. S. Employer
Number 1-5491 Identification:
75-0759420
5450 Transco Tower
2800 Post Oak Boulevard, Houston, Texas 77056-6196
Registrant's telephone number, including area code: (713) 621-7800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------------------- ----------------------
Common Stock, $.125 Par Value New York Stock Exchange
Pacific Stock Exchange
11-7/8% Senior Notes due 2001 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[ ]
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 aggregate market value as of February 27, 1997 of the Common Stock
held by non-affiliates of the registrant was approximately $1,642 million.
The number of shares of Common Stock, $.125 par value, outstanding at
February 27, 1997 was 85,609,984.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
-------- -----------------
Annual Report to Stockholders for
fiscal year ended December 31, 1996 Parts I, II and IV
Proxy Statement for the 1997 Annual
Meeting of Stockholders Part III
2
TABLE OF CONTENTS
PART I Page
Item 1. Business .................................................... 1
Drilling Operations................................................. 1
Offshore Operations ............................................. 2
Onshore Operations .............................................. 3
Contracts ....................................................... 4
Competition ..................................................... 5
Regulations and Hazards ......................................... 6
Manufacturing Operations............................................ 7
Raw Materials.................................................... 8
Competition...................................................... 8
Regulations and Hazards.......................................... 9
Aviation Operations ................................................ 10
Contracts ....................................................... 11
Competition ..................................................... 11
Regulations and Hazards ......................................... 12
Employees .......................................................... 12
Item 2. Properties .................................................. 13
Drilling Rigs ...................................................... 13
Manufacturing Facilities............................................ 18
Aircraft ........................................................... 18
Item 3. Legal Proceedings ........................................... 19
Item 4. Submission of Matters to a Vote of Security Holders ......... 19
Additional Item. Executive Officers of the Registrant ................ 19
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters ....................................... 21
Item 6. Selected Financial Data ..................................... 21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 21
Item 8. Financial Statements and Supplementary Data ................. 21
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ....................... 21
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 22
Item 11. Executive Compensation ...................................... 22
Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................................ 22
Item 13. Certain Relationships and Related Transactions .............. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ...................................... 23
3
PART I
ITEM 1. BUSINESS
Rowan Companies, Inc.(the "Company"), organized in 1947 as a Delaware
corporation and a successor to a contract drilling business conducted since 1923
under the name Rowan Drilling Company, Inc., is engaged principally in the
contract drilling of oil and gas wells in domestic and foreign areas. As noted
below, it also provides aircraft services and operates a mini-steel mill, a
heavy equipment manufacturing plant and a marine rig construction yard.
Offshore operations of the Company consist primarily of contract
drilling services utilizing mobile rigs, principally a fleet of 20
self-elevating drilling platforms ("jack-up rigs"), including three heavy duty
cantilever jack-up rigs ("Gorilla Class rigs"). See "DRILLING OPERATIONS" below
for information with respect to the ongoing construction of one rig and planned
construction of two others, each being an enhanced version of the Company's
Gorilla Class jack-ups. In 1992, the Company began providing offshore platform
installation and removal services as well as Total Project Management, an
approach to drilling operations which emphasizes drilling and completing wells
on a turnkey basis. In light of the increasing demand for the Company's daywork
drilling services, and the relatively unfavorable results of its turnkey
drilling operations during the recent past, the Company has elected to focus on
daywork drilling and project management contracts and not pursue additional
turnkey work at this time.
In February 1994, the Company purchased through its wholly-owned
subsidiary, LeTourneau, Inc., the net assets of Marathon LeTourneau Company.
LeTourneau, Inc. operates a mini-steel mill that recycles scrap and produces
alloy steel and steel plate; a manufacturing facility that produces heavy
equipment for the mining, timber and transportation industries including, among
other things, front-end loaders up to 50 ton capacity and trucks up to 200 ton
capacity; and a marine group that has built over one-third of all mobile
offshore jack-up drilling rigs, including all 20 operated by the Company. As
discussed more fully below in "DRILLING OPERATIONS", the marine group is
currently constructing for the Company at its Vicksburg, Mississippi shipyard
the first of three enhanced Gorilla Class jack-up rigs.
The Company's wholly-owned subsidiary, Era Aviation, Inc., provides
contract and charter helicopter and fixed-wing aircraft services, with its fleet
consisting on March 28, 1997 of 88 helicopters and 21 fixed-wing aircraft. The
Company's aircraft services include flightseeing, medivac services, forest fire
control and support for oil and gas related operations out of its primary bases
in Alaska, Louisiana and Nevada. In addition, the Company provides commuter
airline services in Alaska using its fixed-wing aircraft. The Company also owns
a 49% interest in a Dutch-based joint venture company, KLM ERA Helicopters B.V.
("KLM ERA"), which owns a fleet consisting of 15 helicopters in the Dutch and
British sectors of the North Sea.
Information regarding revenues, operating profit, identifiable assets
and export sales of the Company's industry segments and foreign and domestic
operations for each of the three years in the period ended December 31, 1996 is
incorporated by reference herein and provided in Footnote 10 of the Notes to
Consolidated Financial Statements on pages 25 and 26 of the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1996 ("Annual
Report"), incorporated portions of which are filed as Exhibit 13 hereto.
In 1996, no customer accounted for 10% or more of consolidated
revenues. In 1994 and 1995, the Company had revenues (primarily from drilling
operations) representing 10% or more of consolidated revenues from one customer,
specifically AMOCO Corp., which provided 10% and 11%, respectively.
DRILLING OPERATIONS
In 1996, drilling operations generated an operating profit (income from
operations before deducting general and administrative expenses) of $79,247,000.
-1-
4
Offshore Operations
At December 31, 1996, the Company's drilling fleet consisted of 20
deep-water jack-up rigs (eight conventional and twelve cantilever, including
three Gorilla Class rigs in the latter category) and one semi-submersible rig.
The Company owns all of the rigs comprising its fleet except for two cantilever
jack-up rigs leased under sale/leaseback arrangements expiring in 1999 and 2000.
In 1995, the Company sold its three submersible barge rigs.
In April 1995, the Company announced plans for the design and
construction of Rowan Gorilla V, an enhanced version of the Company's Gorilla
Class jack-ups, which will be the world's largest bottom supported mobile
offshore drilling unit. The rig will be able to operate year-round in 400 feet
of water south of the 61st parallel, within the worst case combination of
100-year storm criteria for waves, wave periods, winds and currents.
Construction of the rig, which began in early 1996, is being carried out at
LeTourneau's Vicksburg, Mississippi shipyard and is expected to be completed
during the third quarter of 1998 at an estimated cost of $175 million. The
Company is financing up to 87.5% of the construction cost through a 12-year bank
loan guaranteed by the Maritime Administration of the U.S. Department of
Transportation under its Title XI Program.
On October 28, 1996, the Company announced plans for the construction
of Rowan Gorilla VI and Rowan Gorilla VII. Each rig will be a combination
drilling and production unit like Gorilla V, capable of operating in hostile
environments like the North Sea in water depths of up to 400 feet. These rigs
will also be constructed at the Company's Vicksburg facility at a combined cost
of approximately $380 million. Delivery is expected during the first quarter of
1999 and the second quarter of 2000.
This major construction project to build three enhanced Gorilla Class
rigs represents the Company's first new construction since a major drilling rig
expansion program was conducted in the early to mid-1980s. In the intervening
years, the Company's capital expenditures have been primarily for improvements
to existing drilling rigs and the purchase of aircraft. Adding to these capital
expenditures were the purchases of the 49% interest in KLM ERA and the net
assets of Marathon LeTourneau in 1991 and 1994, respectively. For a discussion
of the Company's availability of funds in 1997 for future operations and for
estimated capital expenditures, including those related to the reactivation of
the Company's marine construction capability, the construction and associated
financing of Gorilla V, Gorilla VI and Gorilla VII and Company plans with
respect to its $200 million 11-7/8% Senior Notes, see "Liquidity and Capital
Resources" under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 14 and 15 of the Annual Report, which
information is incorporated herein by reference. Also, see ITEM 2. PROPERTIES on
page 13 of this Form 10-K for additional information with respect to the
operating status of the Company's rigs.
The Company's existing Gorilla Class rigs are a heavier class of
jack-up rig, intended to drill up to 30,000 feet in water depths up to 328 feet
in extreme hostile environments (winds up to 100 miles per hour and seas up to
90 feet). Each Gorilla Class rig is equipped with a "top-drive", a drilling
system costing approximately $1.25 million which assists in faster drilling
while reducing the hazard of the drill string sticking, and is particularly
advantageous in the case of horizontal drilling.
Of the Company's other jack-up rigs, six Class 116-C rigs and one Class
116 rig have been modified to provide (but to a lesser extent than Gorilla Class
rigs) the capability of operating in hostile environments. The Company's nine
Class 116-C jack-up rigs, two Class 116 jack-up rigs, two Class 84 jack-up rigs,
one semi-submersible rig and three of its four Class 52 jack-up rigs have been
equipped with top-drive drilling systems.
In 1989, the Company acquired a patent (U. S. Patent No. 4,103,503)
applicable to the transfer of a drilling rig substructure from a jack-up type
drilling unit to a fixed platform. In conjunction with technology contained in
the patent, the Company has developed additional substructure transfer or "skid
base" technology which has allowed the Company's conventional jack-up rigs to
work over wells on a production platform that heretofore required a cantilever
jack-up or platform rig. At March 28,
-2-
5
1997, two Class 116 jack-up rigs, two Class 84 jack-up rigs and one of its Class
52 jack-up rigs have been equipped with skid base units.
The Company's four Class 116-C rigs and one Gorilla Class rig presently
located in the North Sea continue to undergo modifications in order to meet new
offshore safety standards being implemented in the United Kingdom. Some of the
safety standards under government consideration, many of which the Company has
already modified its North Sea rigs to meet, are as follows: a minimum of two
independent sources of sea water for firefighting; a temporary safe refuge for
personnel near the escape capsules which will provide a high degree of
protection from fire, smoke and gas inhalation and will contain additional
safety, communication and survival gear; additional enclosed motorized escape
capsules; and expanded smoke and gas protection in the crew quarters.
Since 1970, the Company has pursued a policy of concentrating on
jack-up rigs. Jack-ups are utilized for both offshore exploratory and
development drilling and, in certain areas, for well workover operations. The
Company operates larger deep-water type jack-up rigs capable of drilling to
depths of 20,000 to 30,000 feet in maximum water depths ranging from 225 to 450
feet, depending on the size of the rig and its location. A jack-up rig consists
of a floating hull with three independent elevating legs. The Company's rigs are
equipped with propulsion thrusters to assist in towing. The entire drilling
unit, consisting of the drilling rig, supplies, crew quarters, loading and
unloading facilities, helicopter landing deck and other related equipment, is
mounted on the hull. At the drilling site, the legs are lowered until they
penetrate the ocean floor, and the platform hull is jacked up on the legs to the
desired elevation above the water. The platform hull then serves as a drilling
platform until the well is completed and the operation is reversed by lowering
the platform hull into the water and towing it to the next drilling site. The
cantilever feature contained on the Company's newer jack-ups provides for the
extension of the portion of the drilling platform containing the drilling rig
over fixed production platforms so that the drilling rig may be utilized to
perform development or workover operations on the platforms with a minimum of
interruption to production.
The Company's semi-submersible rig is utilized principally for offshore
exploratory drilling from a floating position in waters to depths of 1,200 feet.
A semi-submersible drilling rig consists of a drilling platform raised above
multiple hulls by columns. The hulls are flooded so as to be submerged beneath
the surface, in which position the rig is anchored during drilling operations.
The same type of equipment which is contained on a jack-up rig is mounted on the
drilling platform. After completion of the well, the submerged hull is
deballasted to reduce vessel draft and facilitate towing to another drilling
location.
Onshore Operations
The Company has drilling equipment, personnel and camps available on a
contract basis for exploration and development of onshore areas. It currently
owns 14 land rigs located as follows: deep-well rigs - three in Oklahoma, one in
Southeast Texas, three in Louisiana, and two in Argentina, which are scheduled
to be moved to the United States in the second quarter of 1997; and winterized
rigs - five in Alaska. Three trailer-mounted land rigs, along with the Company's
Argentina subsidiary, were sold in late 1996.
Over the 1992-1996 period, the drilling areas providing the greatest
amount of activity for the Company's land rigs have been Venezuela and
Argentina. At the start of that five year period going through mid-1994, five of
the Company's rigs carried out a three-year drilling contract in Venezuela and
were then returned to the United States where three of the five had sporadic
work in the second half of 1994. Three of these rigs were moved to Argentina in
March 1995 to perform a two-year drilling contract. Two deep-well land rigs were
also moved to Argentina in 1995. Except for four deep-well land rigs that have
worked fairly consistently in Texas, Mississippi and Louisiana since mid-1994,
and one winterized land rig in Alaska that worked in the first quarter of 1992,
another that worked in the first quarter of 1993 and another that worked for
most of the first four months of 1994, the deep-well land rigs based in Texas,
Oklahoma, Louisiana and Alaska have been idle since mid-1988 due to inadequate
rates. Accordingly, seven of the Company's land rigs remained "mothballed" at
March 28, 1997.
-3-
6
The cost of maintaining these rigs is modest and the remaining investment in the
rigs is not significant.
The drilling equipment comprising an onshore rig consists basically of
engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid,
drill pipe and drilling bits. The type of rig required by a customer depends
upon the anticipated well depth, terrain and conditions in the drilling area.
Contracts
The Company's policy with regard to day rates and contract durations
depends upon the prevailing strength or weakness of the market. During periods
when the offshore rig markets are weak and declining rates prevail, the Company
generally pursues a policy of entering into lower rate contracts to remain in a
competitive position and to offset the substantial cost of maintaining and
reactivating stacked rigs. During those times when the markets are strong and
increasing rates prevail, the Company's policy is generally one of negotiating
short rather than long-term contracts for its offshore rigs because such policy
allows the Company to maximize its ability to obtain the benefit of rate
increases and to pass through cost increases to customers.
Drilling contracts presently being sought by the Company are those
which provide for drilling compensation on a day rate basis, such contracts
being obtained either through competitive bidding or individual negotiations.
Rates obtained depend upon the type of equipment used, its availability and its
location, as well as the type of operations involved. Both offshore and onshore
contracts for use of the Company's drilling equipment are "well-to-well",
"multiple well" or for a fixed term generally ranging from four to twelve
months. Well-to-well contracts are cancelable at the option of either party upon
completion of drilling at any one site, and fixed-term contracts customarily
provide for termination by either party if drilling operations are suspended for
extended periods by events of force majeure. While most current fixed-term
contracts are for relatively short periods, some fixed-term and well-to-well
contracts continue for a longer period than the original term or for a specific
series of wells. Contracts, particularly those for offshore operations,
generally contain renewal or extension provisions exercisable at the option of
the customer at prices mutually agreeable to the Company and the customer and,
in many cases, provide for additional payments for mobilization and
demobilization. Contracts for work in foreign countries generally provide for
payment in United States dollars except for minimal amounts required to meet
local expenses. Most of the Company's drilling contracts in the North Sea are
well-to-well contracts or short-term contracts of similar duration lasting
60-120 days, while most of the Company's contracts in the Gulf of Mexico are
well-to-well contracts lasting 30-60 days.
Beginning in 1992 and going through late 1996, the Company also sought
drilling contracts for work done on a turnkey basis. In the case of such
contracts, the Company's compensation was contingent on the Company successfully
drilling a well to a specified depth for a fixed price. In the event certain
operational problems would occur causing the Company to not be unable to reach
the specified turnkey depth, the Company was not entitled to any portion of the
turnkey price thereby causing it to absorb substantial out-of-pocket expenses.
For this reason, wells drilled on a turnkey basis generally involved greater
economic risk to the Company than wells drilled on a day rate basis. As
previously noted, the Company is not presently pursuing additional turnkey work
due to the relatively unfavorable results during the recent past.
The Company expects to conclude its current turnkey operations in early 1997.
Contracts for platform installation and removal services typically
contain the same types of provisions and features described herein for drilling
contracts.
The Company believes that the contract status of its onshore and
offshore rigs is more informative than backlog calculations, and that backlog
information is neither calculable nor meaningful given the cancellation options
contained in, and the short duration of, fixed-term contracts and the
indeterminable duration of well-to-well and multiple well contracts. See ITEM 2.
PROPERTIES beginning on page 13 of this Form 10-K for the contract status of
rigs as of March 28, 1997.
-4-
7
Competition
The Company encounters continual competition in securing domestic and
foreign drilling contracts from approximately 34 offshore drilling contractors
operating or having available to operate about 557 mobile rigs, approximately
14 major domestic drilling contractors operating or having available to operate
about 50 land rigs in the deep-well market in the Permian and Anadarko Basins,
and five domestic drilling contractors operating or having available to operate
about 16 winterized land rigs on the Alaskan North Slope. Some of the Company's
competitors with greater financial and other resources may be in a better
position than the Company to make the continuous capital investments required to
make technological improvements to existing equipment or to replace equipment
that becomes obsolete. Furthermore, a few of the Company's competitors have been
substantially relieved of debt burdens by bankruptcy proceedings.
Technological advances in equipment, particularly offshore equipment,
may cause older equipment having lower capital costs to be less suitable for
some proposed drilling operations. As a result, the Company has employed the
following strategy: during the 1980-1986 period - carried out a drilling rig
expansion program, including the development of the heavier jack-up rig class
known as the Gorilla rig; during the period 1987 through the present - engaged
in a drilling rig modification program designed to provide the Company's fleet
with jack-ups reflecting recent technological advancements and which meet known
government-imposed safety and pollution control requirements; and during the
period 1995 to present - began to carry out a drilling rig expansion program
involving the development of an enhanced version of the Gorilla Class rig. The
completion schedule for the three rigs comprising the current expansion program
is as follows: Rowan Gorilla V - third quarter 1998; Rowan Gorilla VI - first
quarter 1999 and Rowan Gorilla VII - second quarter 2000.
The offshore markets in which the Company competes are chosen on the
basis of those which offer the greatest market potential and are generally
located in the more politically stable areas of the world. Relocation of
drilling rigs from one geographic location to another is dependent upon changing
market dynamics with moves occurring only when the likelihood of higher returns
make such action economical. At March 28, 1997, 14 jack-ups were located in the
Gulf of Mexico, five jack-ups were located in the North Sea, one jack-up was
located offshore eastern Canada, and one semi-submersible rig was located in the
Gulf of Mexico.
A number of factors affect a drilling contractor's ability both onshore
and offshore to obtain contracts at a profitable rate within an area. Such
factors include the location and availability of equipment, its suitability for
the project, the comparative cost of the equipment, the competence of personnel
and the reputation of the contractor. The ability to obtain a profitable rate of
return is also dependent upon receiving adequate rates to compensate for the
added cost of moving equipment to drilling locations. See "Contracts" on page 4
of this Form 10-K concerning the pricing policies pursued by the Company under
various market conditions.
The Company markets its drilling services by directly contacting
present and potential customers, including large international energy companies,
many smaller energy companies and foreign government-owned or controlled energy
companies. Beginning in 1992, downsizings by major energy companies, coupled
with the significant reductions of exploration by such companies in offshore
U.S. waters, resulted in the Company adapting its marketing efforts to increase
emphasis on independent operators. Because the exploration activities of the
Company's present and potential customers are impacted by state, federal and
foreign regulations associated with the production and transportation of oil and
gas, the demand for the Company's drilling services is impacted accordingly.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 12 through 15 of the Annual Report, the
information under which caption is incorporated herein by reference, for a
discussion of current industry conditions and their impact on operations.
-5-
8
Regulations and Hazards
The offshore and onshore operations of the Company are subject to many
hazards. In the drilling business, inherent hazards include blowouts and well
fires, which could cause personal injury, suspend drilling operations, seriously
damage or destroy the equipment involved and cause substantial damage to
producing formations and the surrounding areas. Offshore drilling operations and
platform installation and removal operations are also subject to the hazards
incident to marine operations, either on site or while under tow, such as
capsizing, collision or grounding. Raising and lowering the legs of jack-up rigs
into the ocean bottom and ballasting semi-submersible units require skillful
handling to avoid capsizing or other serious damage. Drilling deviated holes
into high pressure formations is a complex process and problems frequently
occur. The process of removing platforms and caissons using underwater
explosives involves substantial risks and requires a significant amount of skill
in order to confine the resulting destruction to the intended areas.
The Company believes that it is adequately insured for physical damage
to its rigs, and for marine liabilities, worker's compensation, Maritime
Employees Liability, automobile liability and for various other types of
exposures customarily encountered in providing the Company's services. Certain
of the Company's liability insurance policies specifically exclude coverage for
fines, penalties and punitive or exemplary damages. Under current conditions,
the Company anticipates that its present insurance coverage will be maintained,
but no assurance can be given that insurance coverage will continue to be
available at rates considered reasonable, that self-insured amounts or
deductibles will not increase or that certain types of coverage will be
available at any cost.
Foreign operations are subject to certain political, economic and other
uncertainties not encountered in domestic operations, including risks of
expropriation of equipment as well as expropriation of a particular energy
company operator's property and drilling rights, taxation policies, customs
restrictions, currency rate fluctuations and the general hazards associated with
foreign sovereignty over certain areas in which operations are conducted. The
Company attempts to minimize the risk of currency rate fluctuations by generally
denominating contract payment terms in United States dollars.
Many aspects of the operations of the Company are subject to government
regulation, including those relating to equipping and operating vessels,
drilling practices and methods and the level of taxation. In addition, various
countries (including the United States) have regulations relating to
environmental protection and pollution control affecting drilling operations.
Recent events have also increased the sensitivity of the oil and gas industry to
environmental matters. The Company may be liable for damages resulting from
pollution of offshore waters and, under United States regulations, must
establish financial responsibility. Generally, the Company is substantially
indemnified under drilling contracts compensated on a day rate basis from
pollution damages, except in certain cases of pollution emanating above the
surface of land or water from spills of pollutants, or in the case of pollutants
emanating from the Company's drilling rigs, but no assurance can be given
regarding the enforceability of such indemnification provisions.
In performing a contract for work done on a turnkey basis, the Company
is normally responsible for certain risks that would customarily be assumed by
the customer under a contract compensated on a day rate basis. These risks
include liability for pollution resulting from a blowout or uncontrolled flow
from the well bore, an underground blowout, the cost of controlling a wild well
and the expense to redrill a well which has blown out. The Company carries
insurance to cover such risks and generally obtains an indemnity from its
customers with respect to liabilities exceeding the amount of insurance carried
by the Company.
The Company believes that it complies with all material legislation and
regulations affecting its operations in the drilling of oil and gas wells, and
in controlling the discharge of wastes. To date the Company has made significant
-6-
9
modifications to its rigs located in the Gulf of Mexico in order to reduce waste
and rain water discharge from such rigs and believes that it could operate those
rigs at "zero discharge" without material additional expenditures. Other than
these expenditures and those relating to the previously discussed United Kingdom
safety standards, compliance has not, to date, materially affected the capital
expenditures, earnings or competitive position of the Company, although these
measures add to the costs of operating drilling equipment in some instances, and
in others they may operate to reduce drilling activity. Further legislation or
regulation may reasonably be anticipated, but the effects thereof on operations
cannot be predicted.
The Company is subject to the requirements of the Federal Occupational
Safety and Health Act ("OSHA") and comparable state statutes. The OSHA hazard
communication standard, the Environmental Protection Agency "community
right-to-know" regulations under Title III of the Federal Superfund Amendment
and Reauthorization Act and comparable state statutes require the Company to
organize and report certain information about the hazardous materials used in
its operations to employees, state and local government authorities and local
citizens.
MANUFACTURING OPERATIONS
In 1994, LeTourneau, Inc. ("LeTourneau"), a wholly-owned subsidiary of
the Company, acquired the net assets of Marathon LeTourneau Company, which is
headquartered in Longview, Texas. As more fully described below, LeTourneau
operates a manufacturing facility that produces heavy equipment, a mini-steel
mill that recycles scrap and produces steel plate and forging ingots and a
marine group that has built over one-third of all mobile offshore jack-up
drilling rigs, including all 20 operated by the Company. The Company holds a
number of patents on its inventions and the "LeTourneau" name is considered to
be significant to its manufacturing operation.
The mining equipment product line of LeTourneau includes loaders and
off-road trucks. The primary production line is front-end loaders with bucket
capacities of 17, 22, 28 and 33 cubic yards. A secondary product line is
off-road trucks with capacities of 190 and 200 tons. LeTourneau's loaders and
trucks are generally used in coal, gold, copper, iron ore and other mines and
utilize the LeTourneau diesel electric-drive systems with solid state controls.
The primary benefit of the diesel electric-drive system is to allow large,
mobile equipment to stop, start and reverse without gear shifting and high
maintenance braking. LeTourneau loaders can load LeTourneau rear-dump trucks and
competitive trucks in the 85 ton to 310 ton size range. LeTourneau's mining
equipment and parts are distributed through a world-wide network of independent
distributors and a Company-owned distribution network serving the western United
States.
The forestry equipment product line includes diesel electric powered
log stackers having either two or four wheel drive configurations with load
capacities ranging from 35 to 65 tons. LeTourneau is the only manufacturer that
sells electrically powered jib cranes with ratings from 25,000 to 52,000 lbs. at
a reach of 100 to 150 feet and having a 360 degree rotation. The forestry
equipment is marketed primarily in North America through independent
distributors and a Company-owned distribution network in the northwestern United
States.
LeTourneau's material handling equipment line includes several
different types of intermodal equipment. These include 50 ton capacity, diesel
electric, gantry cranes and large forklift type vehicles, called side porters,
used for lifting, transporting and stacking large shipping containers and
trailers at ports and rail yards. Gantry cranes equipped with a spreader can
lift containers from the top and also have retractable arms which are used in
loading and unloading piggyback trailers. Gantry cranes can span up to seven
rows plus a truck aisle and stack 9 ft. 6 inch containers up to five high. The
intermodal equipment is marketed primarily in North America through independent
distributors and a Company-owned distribution network in the northwestern United
States.
LeTourneau also sells parts and components to repair and maintain
mining, forestry and intermodal equipment. Equipment parts are marketed through
one dealer and a Company-owned distribution network in the United States with 17
parts stocking branches, one dealer in Canada with over 19 parts stocking
branches, and 31 international dealers with over 50 parts stocking locations.
-7-
10
LeTourneau's mini-steel mill located in Longview, Texas produces
carbon, alloy and specialty steel plate products. LeTourneau concentrates on
"niche" markets that require alloy, specialty steel grades, or "exotic" versions
of carbon steel products including mold steels, tool steels, aircraft quality
steels, 400 series stainless steel and hydrogen induced crack resistant steels.
External steel sales, which are garnered through a direct sales force of
LeTourneau employees, consist primarily of steel plate, but also include forging
ingots and value-added fabrication of steel products. Steel products are
generally sold to steel service centers, fabricators, manufacturers, forge shops
and brokers. The market for carbon steel plate products and fabricated products
is regional and encompasses Texas, Oklahoma, Louisiana, Mississippi and
Arkansas. LeTourneau ships alloy and specialty grades of plate products
nationally and exports quantities to Mexico and Canada. The forging ingot market
is concentrated in the Gulf Coast region of Texas. Carbon and alloy plate
products are also used internally in the production of heavy equipment and
parts.
LeTourneau has a shipyard in Vicksburg, Mississippi for the
construction of mobile self-elevating offshore drilling platforms. LeTourneau
also has the capability of providing engineering support and spare parts to the
drilling industry. With the announcement of the construction of Rowan Gorilla V
in April 1995, the Company began, and has now largely completed, the rebuilding
of this facility. The yard currently employs about 625, most of whom have been
newly hired. Ongoing rig component manufacturing and marine repair service
businesses, as well as a marine design engineering business, have been and
continue to be located at the Company's Longview, Texas facility.
In 1996, manufacturing operations generated an operating profit (income
from operations before deducting general and administrative expenses) of
$9,468,000 and had an external backlog for all of its product lines at March 1,
1997 of approximately $36 million.
LeTourneau engages in a limited amount of research and product
development, primarily to increase the capacity of and provide innovative
improvements to the product lines. The Company evaluates on an ongoing basis the
LeTourneau product and service lines with the intention of making enhancements.
Raw Materials
The principal raw material utilized in LeTourneau's manufacturing
operations is steel plate, most of which is supplied by LeTourneau's mini-steel
mill. Other required materials are generally available in sufficient quantities
through purchases in the open market to meet its manufacturing needs. LeTourneau
does not believe that it is dependent on any single supplier.
Competition
LeTourneau's loaders and large trucks compete worldwide with several
competitors. LeTourneau's loader product line has only two direct competitors;
however, the larger loader models compete with other types of loading equipment,
primarily electric and hydraulic mining shovels. The LeTourneau truck competes
with five truck manufacturers all of whom offer a broader range of truck sizes
than LeTourneau, including trucks in the 240-ton class. Three competitors have
recently introduced models in the 260-ton to 310-ton class.
The market for LeTourneau forestry and intermodal equipment is also
characterized by vigorous competition. Even though LeTourneau's jib crane is
unique, it does encounter competition from other equipment manufacturers that
offer alternate methods for meeting the requirements. The number of major
competitors by type of equipment are as follows: log stackers - four, jib cranes
- - three, side porters - six and gantry cranes - more than ten.
LeTourneau's mini-steel mill encounters competition from a total of
eight major competitors, with the breakdown by product line being as follows:
plate products - four; fabricated products - two and forging ingots - two.
-8-
11
The competition LeTourneau encounters in the parts business is
extremely fragmented with only three other companies being considered to be
competitors. Vendors supplying parts directly to end-users and well-fitters who
obtain parts and copy them to supply less expensive and lower quality
substitutes represent more intense competition than that of direct competitors.
In order to be competitive in the mining and forestry heavy equipment
markets, LeTourneau offers warranties at the time of purchase as well as parts
guarantees. Warranties, which are based upon stipulated periods of ownership or
hours of usage, whichever occurs first, generally cover the drive train and, in
the case of LeTourneau trucks, covers the frame. Parts consumption guaranties
and maintenance and repair contracts are also made on the same basis. LeTourneau
pursues a parts return policy, which provides that returned parts must be in
new, usable condition, be in current production and be readily resalable.
At present, LeTourneau has a limited number of competitors in the
marine rig construction and support industry due to low demand over a prolonged
period. However, as demand for marine rigs increases, new competitors can be
expected to enter the market.
Historically, the make up of LeTourneau's customer base has been such
that none of the product lines have been dependent upon any one customer or
small group of customers.
Regulations and Hazards
LeTourneau's manufacturing operations and facilities are subject to
regulation by a variety of local, state and federal agencies which regulate
safety and the discharge of materials into the environment, including the
Environmental Protection Agency (EPA), the Texas Natural Resources Conservation
Commission (TNRCC) and the Mississippi Department of Environmental Quality.
LeTourneau's manufacturing facilities are also subject to the requirements of
the Occupational Safety Health Act and comparable state statutes.
Hazardous materials are generated at LeTourneau's Longview plant in
association with the steel making process. Industrial waste water generated at
the mini-steel mill facility for cooling operations is recirculated and quality
tests are conducted regularly. The facility has permits for waste water
discharges, solid waste disposal and air emissions. Waste products considered
hazardous by the EPA are disposed of by shipment to an EPA or state permitted
waste disposal facility.
As a part of the acquisition of the net assets of Marathon LeTourneau
Company, the sellers agreed to remediate certain environmental conditions at the
Longview, Texas and Vicksburg, Mississippi sites. In September 1996, the Company
assumed certain environmental liabilities related to these facilities in
exchange for a negotiated amount of cash and a reduction in a promissory note.
The remediation efforts include, among other things, post-closure care for a
landfill at the Longview facility closed by Marathon LeTourneau Company prior to
LeTourneau's acquisition.
LeTourneau jack-up designs are subject to regulatory approvals by
various agencies depending upon the customer's selection of geographic areas
where the rig will qualify for drilling. The rules vary by location and are
subject to frequent change. These rules primarily relate to safety and
environmental issues in addition to those which classify the jack-up as a
vessel.
LeTourneau may be liable for damages resulting from pollution of air,
land and inland waters associated with its manufacturing operations. LeTourneau
believes that compliance with environmental protection laws and regulations will
have no material effect on its capital expenditures, earnings or competitive
position during 1997. Although further legislation or regulation pertaining to
the protection of the environment may reasonably be anticipated, the effects
thereof on LeTourneau's manufacturing operations cannot be accurately predicted.
-9-
12
As a manufacturing company, LeTourneau may be responsible for certain
risks associated with the use of its products. These risks include product
liability claims for personal injury and/or death, property damage, loss of use
of product, business interruption and necessary legal expenses to defend
LeTourneau against such claims. LeTourneau carries insurance which it believes
adequately covers such risks. LeTourneau did not assume certain liabilities of
Marathon LeTourneau Company, such as product liability and tort claims,
associated with all products manufactured, produced, marketed or distributed
prior to the date of the acquisition.
LeTourneau anticipates incurring expenses associated with the warranty
of its products, including those existing at the date of the acquisition. In the
non-marine business segments, dealers of LeTourneau's products perform the
warranty work for the manufacturer, and in the marine segment, LeTourneau
generally performs warranty work directly.
AVIATION OPERATIONS
The Company, through its wholly-owned subsidiary, Era Aviation, Inc.
("Era"), provides charter and contract helicopter and fixed-wing aircraft
services principally in Alaska, the coastal areas of Louisiana and Texas, and
the western United States. In Alaska, a diversified range of services has been
developed to include tourism, commercial fishing support and medical evacuation
as well as support for forest fire control, mining operations and seismic
testing. Additionally, the fixed-wing division of the Company conducts scheduled
airline service between six cities from a hub in Anchorage and to 17 villages
from a hub in Bethel, Alaska. Services provided offshore Louisiana and Texas are
primarily to oil and gas related industries. In the western United States, the
majority of helicopter services are provided to governmental agencies in support
of forest fire control, construction, seismic testing and onshore and offshore
oil field support.
Since 1991, the Company has owned a 49% interest in KLM Helikopters
B.V., a wholly-owned subsidiary of KLM Royal Dutch Airlines, as a means of
gaining access to the North Sea aviation market. The joint venture company, KLM
ERA Helicopters B.V., currently owns 15 helicopters. Operating locations and the
numbers of helicopters deployed at March 28, 1997 were as follows: ten in the
Dutch Sector of the North Sea and five in the British Sector of the North Sea.
KLM ERA serves principally the offshore oil and gas drilling, production and
service companies operating in the Dutch and British Sectors of the North Sea.
Based on the number of helicopters operating, the Company is the
largest helicopter operator in Alaska. It provides charter services from bases
at Anchorage, Deadhorse (on the North Slope), Juneau, Kenai and Valdez. The
Company's charter and contract services are provided throughout Alaska with
particular emphasis in the oil, mining and high density tourist regions within
the state.
Helicopters are usually operated on a seasonal basis in Alaska because
of the prevalent climatic conditions. The peak utilization period in Alaska is
May through September, with the winter months comprising the least active
period. The seasonal nature of the Alaska business has been ameliorated in prior
years by moving helicopters on a limited basis to the Gulf of Mexico area and,
more recently, by moving helicopters to the west and northwest regions of the
United States and various overseas locations, the most recent being the Peoples
Republic of China. From 1992 to 1995, the Company had operations in Croatia and
Macedonia flying for the United Nations.
Since 1983, the Company has operated a scheduled commuter airline
service in Alaska encompassing the transportation of passengers, mail and cargo.
The Company currently serves Valdez, Kenai, Homer, Kodiak, Iliamna and Cordova
from its base hub in Anchorage. In May 1997, scheduled services will begin to
Whitehorse in the Yukon from Anchorage. In addition, it services 17 remote
villages from its hub in Bethel, Alaska. The Company operates under a code
sharing agreement with Alaska Airlines which
-10-
13
is the largest carrier of passengers from the contiguous United States to
Alaska. The Company's commuter airline is the largest airline operation of that
type within the state of Alaska and is the third largest carrier of passengers
into and out of the Anchorage International Airport, including the large jet
carriers.
Since 1979, the Company has been providing charter and contract
helicopter services in the Gulf of Mexico area primarily to the offshore oil and
gas industry. Operations are conducted from the division office in Lake Charles,
Louisiana and from bases in the Louisiana cities of Morgan City, Cameron, New
Iberia, Intracoastal City, Venice, Fourchon, Houma, Schriever and Johnson Bayou
and the Texas cities of Houston, Corpus Christi, Bay City and Sabine Pass. Based
upon the number of helicopters operating, the Company is the third largest
helicopter operator in the Gulf of Mexico.
In 1987, upon receiving FAA certification, the Company began
manufacturing and marketing, from its Gulf Coast Division facility at Lake
Charles, Louisiana, a composite external auxiliary fuel tank for use on Bell
205, 212 and 412 helicopters and the military "Huey" helicopter. The tank system
provides enhanced range with nominal drag while increasing the passenger seats
available. Sales to date have been to both civilian and military customers,
including emergency float systems for US Army UH-1 Helicopters. Other aircraft
accessories are also manufactured at the facility.
In 1996, aviation operations generated an operating profit (profit from
operations before deducting general and administrative expenses) of $6,547,000.
Contracts
The Company's flight services generally are engaged by customers by
entering into master service agreements, term contracts or day-to-day charter
arrangements. Master service agreements provide for incremental payments based
on usage, in some instances with fixed terms ranging from one month to one year,
and are cancelable upon notice by either party in 30 days or less. Some
contracts are not cancelable by either party and generally provide for payments,
depending upon the term, as follows: less than one month - either incremental
payments based on usage or incremental payments based on usage plus a base daily
rental; and one month to one year - incremental payments based on usage plus a
base monthly rental. Under day-to-day charters, the compensation arrangement is
the same as that of term contracts having a term of less than one month.
Payment, duration and cancellation features of the agreements, contracts and
charter arrangements used by KLM ERA are similar in nature and in principle to
those used in the Company's domestic operations. Because master service
agreements and day-to-day charters are the most common types of engagements for
its flight services, the Company believes that the contract status of its
aircraft as discussed in the following paragraph is more informative than
backlog information, which it believes is neither calculable nor meaningful.
Company-owned aircraft available for contract use and day charters on
March 28, 1997 consisted of 88 helicopters (of which 45 were based in Alaska and
43 in the Gulf of Mexico area) and 21 fixed-wing aircraft that were based in
Alaska. The contract status as of March 28, 1997 consisted of: 31 master
helicopter service agreements and 39 term contracts (34 helicopters and five
fixed-wing aircraft). The remaining aircraft were being operated under day
charters or were available for operation under day charter or contract
arrangements.
KLM ERA-owned aircraft available for contract use and day charters on
March 28, 1997 consisted of ten helicopters based in The Netherlands and five in
the United Kingdom. The contract status of such aircraft as of March 28, 1997
consisted of six master service agreements and six term contracts.
Competition
Although the Company maintains the largest helicopter operation in
Alaska in terms of numbers of aircraft and revenues, it encounters intense
competition from several other companies which furnish similar services.
Approximately six other operators compete directly with the Company in Alaska on
a contract or charter basis.
-11-
14
The Company competes over its scheduled airline routes with up to four other
carriers. In the Gulf of Mexico area, the Company competes directly with five
other operators and ranks third in the number of helicopters operating with
approximately 8% of the market. A number of other helicopter operators compete
with the Company in the west and northwest regions of the United States and in
overseas locations.
At present, the number of competitors that KLM ERA has in the areas of
the North Sea in which it operates are as follows: Dutch Sector - one; southern
British Sector - three. KLM ERA's share of the helicopter markets in those two
areas are estimated to be 55% and 30%, respectively.
Regulations and Hazards
The operation of scheduled airline services in the United States
requires a certificate under the Federal Aviation Act of 1958, as presently
administered by the Department of Transportation. The granting of a certificate
is conditioned upon a showing of financial ability and operational expertise. A
similar certificate authorizing the right to operate a charter service is not
required by any jurisdiction in the Company's operating areas.
KLM ERA holds the necessary certificates for operating aircraft in The
Netherlands and, since June 1993, in the U.K sector of the North Sea. Other
operating certificates will be obtained on a case by case basis depending upon
the contracts to be awarded.
Operation of helicopters and fixed-wing aircraft, particularly under
weather conditions prevailing in Alaska, is considered potentially hazardous,
although the Company conducts rigorous safety training programs to minimize
these hazards. The Company believes that it is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment, but carries no insurance against loss of earnings.
The Company believes that KLM ERA is adequately protected by public
liability and property damage insurance, including hull insurance against loss
of equipment.
EMPLOYEES
The total numbers of employees of the Company at March 15, 1997 and at
December 31, 1996, 1995 and 1994 were as follows: 4,624, 4,587, 3,930 and 3,484,
respectively. Some of the employees included in these numbers are not United
States citizens. None of the Company's employees are covered by collective
bargaining agreements with labor unions. The Company considers relations with
its employees to be satisfactory.
-12-
15
ITEM 2. PROPERTIES
The Company leases as its corporate headquarters 59,600 square feet of
space in an office tower located at 2800 Post Oak Boulevard in Houston, Texas.
DRILLING RIGS
The following is a summary of the principal drilling equipment owned or
operated by the Company and in service at March 28, 1997. See "Liquidity and
Capital Resources" as appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 14 and 15 in the Annual
Report, which pages are incorporated herein by reference.
OFFSHORE
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- ------------------------ -------- ------- -------- --------------------------
Cantilever Jack-up Rigs:
Rowan Gorilla II 450'/30,000' 1984 Gulf of Mexico BHP Petroleum (Americas), Inc.
200-C (d) (e) (h) (l) Single Well (m) June 1997
Rowan Gorilla III 328'/30,000' 1984 Eastern Canada PanCanadian Nova Scotia Limited
200-C (d) (e) (l) Term (m) December 1997
Rowan Gorilla IV 328'/30,000' 1986 North Sea Phillips Petroleum U.K. Limited
200-C (d) (e) (l) Multiple Well (m) January 1998
Rowan-California 225'/30,000' 1983 North Sea Wintershall Noordzee B.V.
116-C (c) (e) (l) Multiple Well (m) October 1997
Rowan-Halifax 225'/30,000' 1982 North Sea Mobil North Sea Limited
116-C (c) (e) (i) (l) Term (m) November 1998
Cecil Provine 225'/30,000' 1982 North Sea Wintershall Noordzee B.V.
116-C (c) (e) (j) (l) Multiple Well (m) May 1997;
Talisman
(1) Single Well (m) July 1997
Wintershall Noordzee B.V.
(1) Multiple Well (m) September 1997
Arch Rowan 225'/30,000' 1981 North Sea Amoco Netherlands B.V.
116-C (c) (e) (1) Multiple Well (m) June 1997
Gilbert Rowe 350'/30,000' 1981 Gulf of Mexico Walter Oil & Gas Corporation
116-C (c) (e) (h) (l) Multiple Well (m) June 1997
-13-
16
ITEM 2. PROPERTIES
OFFSHORE (Continued)
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- ------------------------ -------- ------- -------- --------------------------
Cantilever Jack-up Rigs:
Charles Rowan 350'/30,000' 1981 Gulf of Mexico Amoco Production Company
116-C (c) (e) (h) (l) Multiple Well (m) August 1997
Rowan-Paris 350'/30,000' 1980 Gulf of Mexico Union Pacific Resources Company
116-C (e) (h) (l) Multiple Well (m) June 1997
Rowan-Middletown 350'/30,000' 1980 Gulf of Mexico Amoco Production Company
116-C (e) (h) (l) Multiple Well (m) September 1997
Rowan-Fort Worth 350'/30,000' 1978 Gulf of Mexico Mobil Exploration & Production U.S., Inc.
116-C (e) (h) (1) Single Well (m) June 1997
17
ITEM 2. PROPERTIES
OFFSHORE (Continued)
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- ------------------------ -------- ------- -------- --------------------------
Conventional Jack-up Rigs:
Rowan-Juneau 300'/30,000' 1977 Gulf of Mexico Pennzoil Exploration & Production Co.
116 (c) (e) (f) (l) Single Well (Turnkey) (m) April 1997
Mariner Exploration, Inc.
(1) Single Well (m) May 1997
Rowan-Odessa 350'/30,000' 1977 Gulf of Mexico Barrett Resources Corp.
116 (e) (f) (h) (1) Multiple Well (m) May 1997
Rowan-Louisiana 350'/30,000' 1975 Gulf of Mexico Seneca Resources Corp.
84 (e) (f) (h) (1) Single Well (m) April 1997
Rowan-Alaska 350'/30,000' 1975 Gulf of Mexico CXY Energy, Inc.
84 (e) (f) (h) (l) Multiple Well (m) July 1997
Rowan-Texas 250'/20,000' 1973 Gulf of Mexico Forcenergy Gas Exploration, Inc.
52 (e) (1) Multiple Well (m) April 1997;
Zilka Energy Corp.
(1) Term (m) October 1997
Rowan-Anchorage 250'/20,000' 1972 Gulf of Mexico Apache Corporation
52 (e) (l) Term (m) January 1998
Rowan-New Orleans 250'/20,000' 1971 Gulf of Mexico Barrett Resources Corp.
52 (f) (g) (l) Term (m) September 1997
Rowan-Houston 250'/20,000' 1970 Gulf of Mexico Hall-Houston Oil Company
52 (e) (l) Term (m) June 1997
-15-
18
ITEM 2. PROPERTIES
OFFSHORE (Continued)
(b)
Depth: Year Contracting Party/
Water/ in (l) Type of Contract
Name/Class (a) Drilling Service Location (m) Estimated Release Date
- ------------------------ -------- ------- -------- --------------------------
Semi-Submersible Rig:
Rowan-Midland (e) 1,200'/25,000' 1976 Gulf of Mexico Murphy Exploration & Production Co.
(l) Single Well (m) May 1997
ONSHORE (k) Contracting Party/
Maximum (l) Type of Contract
Description Drilling Depth Location (m) Estimated Release Date
- ----------- -------------- --------- ---------------------------
Rig 9 25,000' Louisiana Egan Hub Partners, LP
(l) Single Well (m) May 1997
Rig 26 25,000' Louisiana Chesapeake Operating, Inc.
(1) Term (m) August 1997
Rig 31 30,000' Louisiana Chesapeake Operating, Inc.
(l) Single Well (m) May 1997
Rig 12 20,000' Southeast Texas Reata Oil & Gas
(1) Single Well (m) April 1997
Rig 7 20,000' Argentina/Texas(n) Aegis Energy, Inc.
(1) Single Well (m) June 1997
Rig 30 20,000' Argentina/Texas(n) Not Committed
Three rigs 30,000' Oklahoma Not Committed
Five rigs 18,000'/20,000' Alaska Not Committed
- -----------------------------------------------
(a) Classes 200-C ("Gorilla"), 116-C, 116, 84 and 52 are nomenclature
assigned by LeTourneau, Inc. to jack-ups of its design and construction.
(b) Indicates rated water depth in current location and rated drilling depth,
respectively.
-16-
19
(Footnotes continued)
(c) Unit modified to increase operating capability in hostile environments.
(d) Gorilla Class unit designed for extreme hostile environment capability.
(e) Unit equipped with a "top-drive" drilling system.
(f) Unit equipped with a "skid base" unit.
(g) Unit equipped with drilling/heavy-lift crane option.
(h) Unit equipped with leg extensions.
(i) Rig sold in December 1984 and leased back for 15 years.
(j) Rig sold in December 1985 and leased back for 15 years.
(k) Onshore rigs were constructed at various dates between 1960 and 1982,
utilizing, in some instances, new as well as used equipment. Most of
the older rigs have been substantially rebuilt subsequent to their
respective dates of construction.
(l) Refer to "Contracts" on page 4 of this Form 10-K for definition of types
of contracts.
(m) Indicates estimated completion date of work to be performed.
(n) The rigs will be relocated from Argentina in the second quarter of 1997.
The Company's drilling division leases and, in some cases, owns various
operating and administrative facilities generally consisting of office,
maintenance and storage space in the states of Alaska, Texas and Louisiana and,
on a foreign basis, in the countries of Canada, England, Scotland and The
Netherlands.
-17-
20
MANUFACTURING FACILITIES
LeTourneau's principal manufacturing facility and headquarters are
located in Longview, Texas on approximately 2,400 acres with about 1.2 million
square feet under roof. Included within the facility are: a mini-steel mill
having approximately 330,000 square feet of covered work space and housing two
25-ton electric arc furnaces having an aggregate 120,000 tons per year capacity;
a fabrication shop having approximately 300,000 square feet of covered work
space and housing a 3,000 ton vertical bender for making roll-ups or flattening
materials up to 2 1/2 inches thick by 11 feet wide; a machine shop having
approximately 140,000 square feet of covered work space and housing various
types of machinery; and an assembly shop having approximately 124,000 square
feet and housing various types of machinery.
The marine group's facility located in Vicksburg, Mississippi is
located on 1,850 acres of land and has approximately 560,000 square feet of
covered work space. In conjunction with the announcement of the construction of
Rowan Gorilla V, this facility has now been reopened and has been essentially
rebuilt.
The LeTourneau Portland Division's distributor for forest products in
the northwestern United States is located on a six acre site in Troutdale,
Oregon with approximately 22,000 square feet of building space.
The Western Mining Division of LeTourneau headquartered in Tucson,
Arizona is housed in a 20,000 square foot leased facility. It functions as
the distributor for LeTourneau's mining equipment products in the western
United States.
AIRCRAFT
At March 28, 1997, the U.S.-based Company-owned helicopter fleet
consisted of 16 twin-engine turbine IFR rated Bell 212 helicopters (14
passenger), 16 twin-engine turbine IFR rated Bell 412 helicopters (14
passenger), 28 twin-engine turbine MBB BO-105CBS helicopters (five passenger),
two Aerospatiale 332L Super Puma helicopters (19 passenger) and 26 various
single-engine turbine helicopters (four to six passenger). The U.S.-based
fixed-wing fleet of Company-owned aircraft consisted of five Convair 580s (50
passenger), ten DeHavilland Twin Otters (9-19 passenger), two DeHavilland Dash
8s (37 passenger), two Douglas DC-3s (28 passenger), one Lear Jet 35A (six
passenger) and one Beechcraft King Air 200C (six passenger).
Helicopters owned by KLM ERA on March 28, 1997 consisted of five
twin-engine turbine IFR rated Sikorsky S-61N helicopters (26 passenger), eight
twin-engine turbine IFR rated Sikorsky S-76B helicopters (13 passenger) and two
MBB BO-105CBS helicopters equipped as air ambulances.
The Company's principal aircraft bases in Alaska, all located on leased
property, are a fixed-wing air service center (57,000 square feet of hangar,
repair and office facilities) at Anchorage International Airport, with two
adjacent hangars housing the Company's helicopter and fixed-wing operations
totaling aproximately 45,000 square feet, and hangar, office and repair
facilities at Fairbanks International Airport (13,000 square feet). The Company
also maintains similar, smaller helicopter facilities in Alaska at Deadhorse,
Juneau, Valdez and Yakutat.
The Company's principal facilities to accommodate its Gulf of Mexico
operations are located on leased property at Lake Charles Regional Airport. The
facilities, comprising 63,000 square feet, include helicopter hangars, a repair
facility and an operations and administrative building. The Company also
operates a helicopter facility (20,700 square feet of hangar, repair and office
facilities) located on leased property at the Terrebonne Airport in Houma,
Louisiana and a helicopter facility (5,700 square feet of hangar, repair and
office facilities) located on leased property in New Iberia, Louisiana.
KLM ERA's principal facility to accommodate its operations in the Dutch
sector of the North Sea is a base located in Den Helder. The facility,
comprising 35,000 square feet, includes a helicopter hangar, a repair facility
and an operations and administrative building. To accommodate its operations in
the British Sector of the North Sea, KLM ERA also has a helicopter hangar
(13,000 square feet) and office facility (2,800 square feet) located at Norwich
Airport.
-18-
21
ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising out of
the conduct of the Company's operations and other matters, not all the potential
liabilities with respect to which are covered by the terms of the Company's
insurance policies. While the Company is unable to predict the ultimate
liabilities which may result from such litigation, the Company believes that no
such litigation in which the Company was involved as of March 28, 1997 will have
a material adverse effect on the financial position or results of operations of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's common
stockholders during the fourth quarter of the fiscal year ended December 31,
1996.
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions, years of credited service and ages of the officers
of the Company and certain officers of the Company's wholly-owned subsidiaries,
Era Aviation, Inc. and LeTourneau Inc., as of March 28, 1997 are listed below.
Officers of all three entities are normally appointed annually by each entity's
Board of Directors at the bylaws-prescribed meetings held in the spring and
serve at the discretion of the Board of Directors. There are no family
relationships among these officers, nor any arrangements or understandings
between any officer and any other person pursuant to which the officer was
selected.
Years of
Credited
Name Position Service Age
------------------- ------------------------------------ --------- ---
Executive Officers of the Registrant:
C. R. Palmer Chairman of the Board, President 36 62
and Chief Executive Officer
R. G. Croyle Executive Vice President 23 54
Paul L. Kelly Senior Vice President, Special Projects 14 57
D. F. McNease Senior Vice President, Drilling 23 45
E. E. Thiele Senior Vice President, Finance, 27 57
Administration and Treasurer
John L. Buvens Vice President, Legal 16 41
C. W. Johnson(1) Vice President, Aviation 19 53
Mark A. Keller Vice President, Marketing - 5 44
North American Drilling
Bill S. Person Vice President, Industrial Relations 29 48
William C. Provine Vice President, Investor Relations 10 50
Other Officers of the Registrant:
William H. Wells Controller 3 34
Mark H. Hay Secretary and Assistant Treasurer 18 52
P. G. Wheeler Assistant Treasurer 22 49
Lynda A. Aycock Assistant Treasurer and 25 50
Assistant Secretary
Certain Officer of LeTourneau, Inc.:
Dan C. Eckermann President and Chief 6 49
Executive Officer
Certain Officer of Era Aviation, Inc.:
James Vande Voorde Senior Vice President 23 57
(1) Also serves as President and Chief Operating Officer of Era Aviation, Inc.
-19-
22
Each of the executive officers and other officers of the Company as
well as the officers of Era Aviation, Inc. and LeTourneau, Inc. listed above
continuously served in the position shown above for more than the past five
years except as noted in the following paragraphs.
Since October 1993, Mr. Croyle's principal occupation has been in the
position set forth. For more than five years prior to that time, Mr. Croyle
served as Vice President, Legal of the Company.
Since April 1996, Mr. Kelly's principal occupation has been in the
position set forth. For more than five years prior to that time Mr. Kelly
served as Vice President, Special Projects.
Since October 1993, Mr. McNease's principal occupation has been in the
position set forth. From April 1991 to October 1993, Mr. McNease served as Vice
President, Drilling of the Company. For more than five years prior to that time,
he served as Vice President of Rowandrill, Inc., a subsidiary of the Company.
Since April 1994, Mr. Thiele's principal occupation has been in the
position set forth. From January 1994 to April 1994, Mr. Thiele served in the
position of Vice President, Finance, Administration and Treasurer. From February
1989 to January 1994, he served as Vice President, Finance and Administration.
Since October 1993, Mr. Buvens' principal occupation has been in the
position set forth. From April 1988 to present and April 1994 to present,
Mr. Buvens has also served in the positions of Vice President of Rowandrill,
Inc. and Rowan International, Inc., respectively, both subsidiaries of
the Company.
Since April 1994, Mr. Johnson's principal occupation has been in the
position set forth. From December 1993 to present, Mr. Johnson has also served
in the position of President and Chief Operating Officer of Era Aviation, Inc.,
a subsidiary of the Company. For more that five years prior to that time, he
served as Executive Vice President of Era.
Since April 1994, Mr. Keller's principal occupation has been in the
position set forth. From July 1992 to present and April 1993 to present, Mr.
Keller has also served in the positions of Vice President of Terminator, Inc.
and Rowandrill, Inc., respectively, both subsidiaries of the Company. From April
1992 to July 1992, Mr. Keller served as Marketing Coordinator for Terminator,
Inc. For more than five years prior to April 1992, he served as Senior Vice
President of Chiles Offshore Corp. Chiles is not a parent, subsidiary or
affiliate of the Company.
Since October 1993, Mr. Person's principal occupation has been in the
position set forth. From April 1990 to October 1993, Mr. Person served as
Director of British American Offshore Limited, a subsidiary of the Company. For
more than five years prior to that time, he served as Manager of Industrial
Relations of the Company.
Since October 1993, Mr. Provine's principal occupation has been in
the position set forth. For more than five years prior to that time, Mr.
Provine served as Vice President of Rowandrill, Inc., a subsidiary of the
Company.
Since joining the Company in March 1994, Mr. Wells' occupation has been
in the position set forth. For more than five years prior to that time, Mr.
Wells served in various positions with the independent accounting firm of
Deloitte & Touche LLP, including Audit Manager and, most recently, Senior Audit
Manager. Deloitte & Touche LLP is not a parent, subsidiary or affiliate of the
Company but does serve as the Company's independent auditors.
Since April 1994, Ms. Aycock's principal occupation has been in
the position set forth. From October 1993 to April 1994, Ms. Aycock served in
the position of Assistant Treasurer. For more than five years prior to that
time, Ms. Aycock served as an Accountant for the Company.
-20-
23
Since September 1996, Mr. Eckermann's principal occupation has been in
the position set forth. From February 1994 to September 1996, Mr. Eckermann
served in the position of President of LeTourneau Marine Group and Vice
President, Operations of LeTourneau, Inc, a subsidiary of the Company. From May
1990 to February 1994, he served as President of Marathon LeTourneau Marine
Company, a subsidiary of Marathon LeTourneau Company. Marathon LeTourneau was a
company whose net assets were purchased by LeTourneau, Inc. in February 1994.
Marathon LeTourneau was not, and is not now, a parent, subsidiary or affiliate
of the Company.
Since October 1982, Mr. Vande Voorde's principal occupation has been in
the position set forth. For more than five years prior to that time, Mr. Vande
Voorde served as Vice President of Era Aviation, Inc., a subsidiary of the
Company.
In addition to serving in the position shown above, Mr. Wheeler has
also served as Corporate Tax Director of the Company for more than five years.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required hereunder regarding the Common Stock price range
and cash dividend information for 1996 and 1995 and the number of holders of
Common Stock is set forth on page 27 of the Company's Annual Report under the
title "Common Stock Price Range, Cash Dividends and Stock Splits (Unaudited)",
and is incorporated herein by reference, except for the final two paragraphs
under such title. Also incorporated herein by reference to the Annual Report is
the eighth paragraph appearing on page 15 within "Management's Discussion and
Analysis of Financial Condition and Results of Operations", which provides
information pertinent to the Company's ability to pay cash dividends subject to
certain restrictions. The Company's Common Stock is listed on the New York Stock
Exchange and the Pacific Stock Exchange.
ITEM 6. SELECTED FINANCIAL DATA
The information required hereunder is set forth on pages 10 and 11 of the
Company's Annual Report under the title "Ten-Year Financial Data" and is
incorporated herein by reference except for the information for the years 1991,
1990, 1989, 1988 and 1987.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required hereunder is set forth on pages 12 through 15
under the title "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's Annual Report and is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K on pages 23 through 27 of this Form 10-K for a listing of financial
statements of the registrant and its subsidiaries, all of which financial
statements are incorporated by reference under this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
-21-
24
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information provided under the columns entitled Name, Principal
Occupation for the Past Five Years, Age and Year First Became Director in the
table on page 6, in footnotes (1) and (3) on page 7 and in the paragraph under
the caption, "Section 16(a) Beneficial Ownership Reporting Compliance" on page 4
of the Proxy Statement for the Company's 1997 Annual Meeting of Stockholders
(the "Proxy Statement") is incorporated herein by reference. There are no family
relationships among the directors or nominees for directors and the executive
officers of the Company, nor any arrangements or understandings between any
director or nominee for director and any other person pursuant to which such
director or nominee for director was selected. Except as otherwise indicated,
each director or nominee for director of the Company has been employed or
engaged for the past five years in the principal occupation set forth opposite
his name in the information incorporated by reference. See ADDITIONAL ITEM.
EXECUTIVE OFFICERS OF THE REGISTRANT on pages 19 through 21 of this Form 10-K
for information relating to executive officers.
ITEM 11. EXECUTIVE COMPENSATION
The standard arrangement for compensating directors described under the
title, "Director Compensation" at the bottom of page 12 of the Proxy Statement
and the information appearing under the titles "Summary Compensation Table",
"Option Grants in Last Fiscal Year", "Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values", "Option Plans", "Convertible Debenture
Incentive Plan" and "Pension Plans" on pages 8 through 12 of the Proxy Statement
are incorporated herein by reference. In accordance with the instructions to
Item 402 of Regulation S-K, the information contained in the Proxy Statement
under the titles "Board Compensation Committee Report on Executive Compensation"
and "Stockholder Return Performance Presentation" shall not be deemed to be
filed as part of this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding security ownership of certain beneficial owners
and management of the Company set forth under the headings "Voting Securities
Outstanding" appearing on page 1 and "Security Ownership of Management and
Principal Stockholders" appearing on pages 2 through 4 of the Proxy Statement is
incorporated herein by reference.
The business address of all directors is the principal executive offices of
the Company as set forth on the facing page of this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain business relationships and transactions
between the Company and certain of the directors of the Company under the
heading "Compensation Committee Interlocks and Insider Participation; Certain
Transactions" appearing on page 18 of the Proxy Statement is incorporated herein
by reference.
-22-
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following financial statements and independent auditors'
report, included in the Annual Report, are incorporated herein by
reference:
Page of 1996
Annual Report
-------------
Consolidated Balance Sheet
December 31, 1996 and 1995 ............................. 16
Consolidated Statement of Operations for the
Years Ended December 31, 1996, 1995 and 1994 ........... 17
Consolidated Statement of Changes in Stockholders'
Equity for the Years Ended December 31, 1996, 1995 and
1994 18
Consolidated Statement of Cash Flows for
the Years Ended December 31, 1996, 1995 and 1994........ 19
Notes to Consolidated Financial Statements............... 20
Independent Auditors' Report............................. 27
Selected Quarterly Financial Data (Unaudited) for
the Quarters Ended March 31, June 30, September 30
and December 31, 1996 and 1995.......................... 27
2. Financial Statement Schedules
Financial Statement Schedules I, II, III, IV, and V are not included in
this Form 10-K because such schedules are not required, not significant or
because the required information is shown in Notes to the Consolidated Financial
Statements of the Company's Annual Report.
3. Exhibits:
Unless otherwise indicated below as being incorporated by reference to
another filing of the Company with the Securities and Exchange
Commission, each of the following exhibits is filed herewith:
3a Restated Certificate of Incorporation of the Company, dated
February 17, 1984, incorporated by reference to: Exhibit 3a to
the Company's Form 10-K for the fiscal year ended December 31,
1983 (File No. 1-5491); Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (Registration No. 33-13544); and Exhibits
4a, 4b, 4c, 4d and 4e below.
3b Bylaws of the Company amended as of August 30, 1996,
incorporated by reference to Exhibit 3 to the Company's
Form 10-Q for the quarter ended September 30, 1996
(File No. 1-5491).
4a Certificate of Designation of the Company's $2.125 Convertible
Exchangeable Preferred Stock incorporated by reference to Exhibit
4.2 to the Company's Registration Statement on Form S-3
(Registration No. 33-6476).
4b Certificate of Designation of the Company's Series I Preferred
Stock incorporated by reference to Exhibit 4b to the Company's
Form 10-K for the fiscal year ended December 31, 1986 (File
No.1-5491).
-23-
26
4c Certificate of Designation of the Company's Series II Preferred
Stock incorporated by reference to Exhibit 4c to the Company's
Form 10-K for the fiscal year ended December 31, 1987 (File
No.1-5491).
4d Certificate of Designation of the Company's Series III Preferred
Stock incorporated by reference to Exhibit 4d to the Company's
Form 10-K for the fiscal year ended December 31, 1994
(File No. 1-5491).
4e Certificate of Designation of the Company's Series A Junior
Preferred Stock dated March 2, 1992 incorporated by reference
to Exhibit 4d to the Company's Form 10-K for the fiscal year
ended December 31, 1991 (File No. 1-5491).
4f Rights Agreement as amended dated as of February 25, 1992 between
the Company and Citibank, N.A. as Rights Agent incorporated by
reference to Exhibit 4g to the Company's Form 10-K for the fiscal
year ended December 31, 1994 (File No. 1-5491).
4g Indenture dated December 1, 1991 between the Company and Bankers
Trust Company, as Trustee, relating to the Company's 11-7/8%
Senior Notes due 2001 incorporated by reference to Exhibit 28.1
to the Company's Current Report on Form 8-K dated December 12,
1991 (File No. 1-5491).
4h Specimen Common Stock certificate.
4i Form of Promissory Note dated November 30, 1994 between the
purchasers of Series III Floating Rate Subordinated Convertible
Debentures due 2004 and the Company incorporated by reference to
Exhibit 4j to the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
10a 1980 Nonqualified Stock Option Plan of the Company together with
form of Stock Option Agreement related thereto incorporated by
reference to Exhibit 5.10 to the Company's Registration Statement
on Form S-7 (Registration No. 2-68622).
10b 1988 Nonqualified Stock Option Plan of the Company as amended
together with form of Stock Option Agreement related thereto
incorporated by reference to Exhibit 10b of the Company's Form
10-K for the fiscal year ended December 31, 1992 (File No.
1-5491).
10c Amendment No. 1 dated October 25, 1990, to all then outstanding
Stock Option Agreements related to the 1980 Nonqualified
Stock Option Plan of the Company incorporated by reference
to Exhibit 10c to the Company's Form 10-K for the fiscal year
ended December 31, 1990 (File No. 1-5491).
10d Amendment No. 2 dated May 23, 1991, to all then outstanding
Stock Option Agreements related to the 1980 Nonqualified Stock
Option Plan of the Company incorporated by reference to
Exhibit 10d to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
10e Amendment No. 1 dated October 25, 1990, to all then outstanding
Stock Option Agreements related to the 1988 Nonqualified
Stock Option Plan of the Company incorporated by reference to
Exhibit 10d to the Company's Form 10-K for the fiscal year ended
December 31, 1990 (File No. 1-5491).
10f Amendment No.2 dated May 23, 1991, to all then outstanding Stock
Option Agreements related to the 1988 Nonqualified Stock Option
Plan of the Company incorporated by reference to Exhibit 10f
to the Company's Form 10-K for the fiscal year ended December
31, 1991 (File No. 1-5491).
10g Amendment No. 4 dated July 24, 1996 to the 1996 convertible
Debenture Incentive Plan.
10h 1986 Convertible Debenture Incentive Plan of the Company
amended as of July 24, 1996.
-24-
27
10i Pension Restoration Plan of the Company incorporated by
reference to Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1992 (File No. 1-5491).
10j Pension Restoration Plan of LeTourneau, Inc. incorporated by
reference to Exhibit 10j to the Company's Form 10-K for the
fiscal year ended December 31, 1994 (File No. 1-5491).
10k Credit Agreement dated September 22, 1986 (including amendatory
letter dated March 25, 1987) and First Preferred Ship Mortgage
dated November 7, 1986 between the Company and Marathon
LeTourneau Company incorporated by reference to Exhibit 10c to
the Company's Form 10-K for the fiscal year ended December 31,
1986 and amendatory letter dated February 21, 1992 incorporated
by reference to Exhibit 10h to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-5491).
10l Participation Agreement dated December 1, 1984 between the
Company and Textron Financial Corporation et al. and Bareboat
Charter dated December 1, 1984 between the Company and Textron
Financial Corporation et al. incorporated by reference to
Exhibit 10c to the Company's Form 10-K for the fiscal year ended
December 31, 1985 (File No. 1-5491).
10m Participation Agreement dated December 1, 1985 between the
Company and Eaton Leasing Corporation et. al. and Bareboat
Charter dated December 1, 1985 between the Company and Eaton
Leasing Corporation et. al. incorporated by reference to
Exhibit 10d to the Company's Form 10-K for the fiscal year
ended December 31, 1985 (File No.1-5491).
10n Corporate Continuing Guaranty dated September 10, 1987 between
Shearson Lehman Brothers Holdings Inc. and the Company
incorporated by reference to Exhibit 10i to the Company's Form
10-K for the fiscal year ended December 31, 1987 (File
No.1-5491).
10o Cross-Border Corporate Continuing Guaranty dated May 29,
1991 between Citicorp and the Company's wholly-owned
subsidiary, Rowan International, Inc. incorporated by
reference to Exhibit 10o to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-5491).
10p Consulting Agreement as amended dated April 1, 1995 between
the Company and C. W. Yeargain incorporated by reference to
Exhibit 10q to the Company's Form 10-K for the fiscal year
ended December 31, 1995 (File No. 1-5491)
10q Acquisition Agreement dated as of November 7, 1991, among KLM
Royal Dutch Airlines, Blue Yonder I B.V., KLM Helikopters B.V.
and Rowan Aviation (Netherlands) B.V. incorporated by reference
to Exhibit 28.1 to the Company's Current Report on Form 8-K
dated November 7, 1991 (File No. 1-5491).
10r Asset Purchase Agreement dated as of November 12, 1993, among
Rowan Companies, Inc., Rowan Equipment, Inc., General Cable
Corporation, Marathon LeTourneau Company, Marathon LeTourneau
Sales & Service Company and Marathon LeTourneau Australia Pty.
Ltd. incorporated by reference to the Company's Current Report on
Form 8-K dated February 11, 1994 (File No. 1-5491).
10s Asset Purchase and Sale Agreement dated December 5, 1995
between Era Aviation, Inc. and Columbia Helicopters, Inc.,
Alaska Helicopters, Inc. and BIJOS Enterprises. Incorporated
by reference to Exhibit 10u to the Company's Form 10-K for the
fiscal year ended December 31, 1995 (File No. 1-5491)
10t Commitment to Guarantee Obligations and First Preferred Ship
Mortgage both dated December 17, 1996 between the Company and
the Maritime Administration of the U.S. Department of
Transportation.
10u Credit Agreement and Trust Indenture both dated December 17,
1996 between the Company and Citibank, N.A.
-25-
28
11 Computation of Primary and Fully Diluted Earnings (Loss) Per
Share for the years ended December 31, 1996, 1995 and 1994
appearing on page 29 in this Form 10-K.
*13 Annual Report to Stockholders for fiscal year ended
December 31, 1996.
21 Subsidiaries of the Registrant as of March 28, 1997.
23 Independent Auditors' Consent.
24 Powers of Attorney pursuant to which names were affixed to this
Form 10-K for the fiscal year ended December 31, 1996.
27 Financial Data Schedule for the year ended December 31, 1996.
The Company agrees to furnish to the Commission upon request a copy
of all instruments defining the rights of holders of long-term debt of the
Company and its subsidiaries.
--------------------------
* Only portions specifically incorporated herein are deemed to be filed.
EXECUTIVE COMPENSATION PLANS
AND ARRANGEMENTS
Compensatory plans in which directors and executive officers of the
Company participate are listed as follows:
. 1980 Nonqualified Stock Option Plan of the Company together with form of
Stock Option Agreement related thereto incorporated by reference to Exhibit
5.10 to the Company's Registration Statement on Form S-7 (Registration No.
2-68622); Amendment No. 1 dated October 25, 1990, to all then outstanding
Stock Option Agreements related to such Plan incorporated by reference to
Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31,
1990 (File No. 1-5491); and Amendment No. 2 dated May 23, 1991, to all then
outstanding Stock Option Agreements related to such Plan incorporated by
reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended
December 31, 1991 (File No. 1-5491).
. 1988 Nonqualified Stock Option Plan of the Company as amended together with
form of Stock Option Agreement related thereto incorporated by reference to
Exhibit 10b to the Company's Form 10-K for the fiscal year ended December 31,
1992 (File No. 1-5491; Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to such Plan incorporated by
reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended
December 31, 1990 (File No. 1-5491); and Amendment No. 2 dated May 23, 1991,
to all then outstanding Stock Option Agreements related to such Plan
incorporated by reference to Exhibit 10f to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (File No. 1-5491).
. 1986 Convertible Debenture Incentive Plan of the Company as amended
included as Exhibit 10h of this Form 10-K.
. Pension Restoration Plan of the Company incorporated by reference to
Exhibit 10i to the Company's Form 10-K for the fiscal year ended December
31, 1992 (File 1-5491).
. Pension Restoration Plan of LeTourneau, Inc. incorporated by reference
to Exhibit 10j to the Company's Form 10-K for the fiscal year ended
December 31, 1994 (File No. 1-5491).
-26-
29
(b) Reports on Form 8-K:
. No reports on Form 8-K were filed by the Registrant during the fourth
quarter of fiscal year 1996.
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933,
the undersigned registrant hereby undertakes as follows, which undertaking shall
be incorporated by reference into registrant Registration Statements on Form S-8
Nos. 2-67866 (filed May 22, 1980), 2-58700, as amended by Post-Effective
Amendment No. 4 (filed June 11, 1980), 33-33755, as amended by Amendment No. 1
(filed March 29, 1990),33-61444 (filed April 23, 1993), 33-51103 (filed November
18, 1993) 33-51105 (filed November 18, 1993) and 33-51109 (filed November 18,
1993):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the act and will be
governed by the final adjudication of such issue.
-27-
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: C. R. PALMER
(C. R. Palmer, Chairman of
the Board, President and
Chief Executive Officer)
Date: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
C. R. PALMER Chairman of the Board, President March 28, 1997
(C. R. Palmer) and Chief Executive Officer
E. E. THIELE Principal Financial Officer March 28, 1997
(E. E. Thiele)
WILLIAM H. WELLS Principal Accounting Officer March 28, 1997
(William H. Wells)
*RALPH E. BAILEY Director March 28, 1997
(Ralph E. Bailey)
*HENRY O. BOSWELL Director March 28, 1997
(Henry O. Boswell)
*H. E. LENTZ Director March 28, 1997
(H. E. Lentz)
*HON. COLIN B. MOYNIHAN Director March 28, 1997
(Hon. Colin B. Moynihan)
*WILFRED P. SCHMOE Director March 28, 1997
(Wilfred P. Schmoe)
*CHARLES P. SIESS, JR. Director March 28, 1997
(Charles P. Siess, Jr.)
*PETER SIMONIS Director March 28, 1997
(Peter Simonis)
*C. W. YEARGAIN Director March 28, 1997
(C. W. Yeargain)
* BY C. R. PALMER
(C. R. Palmer, Attorney-in-fact)
-28-
31
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal year ended: Commission file number:
December 31, 1996 1-5491
- -------------------------- -----------------------
ROWAN COMPANIES, INC.
--------------------------------------------------------
(Exact name of Registrant as specified in its charter)
EXHIBITS
32
EXHIBIT INDEX
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ------- --------------------------------------------------------
(1) 3a Restated Certificate of Incorporation of the Company,
dated February 17, 1984, incorporated by reference to:
Exhibit 3a to the Company's Form 10-K for the fiscal
year ended December 31, 1983 (File No. 1-5491);
Exhibit 4.2 to the Company's Registration Statement on
Form S-3 (Registration No. 33-13544); and Exhibits 4a,
4b, 4c, 4d and 4e below.
(1) 3b Bylaws of the Company amended as of August 30, 1996,
incorporated by reference to Exhibit 3 to the
Company's Form 10-Q for the quarter ended September
30, 1996 (File No. 1-5491).
(1) 4a Certificate of Designation of the Company's $2.125
Convertible Exchangeable Preferred Stock incorporated
by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-3 (Registration No.
33-6476).
(1) 4b Certificate of Designation of the Company's Series I
Preferred Stock incorporated by reference to Exhibit
4b to the Company's Form 10-K for the fiscal year
ended December 31, 1986 (File No.1-5491).
(1) 4c Certificate of Designation of the Company's Series II
Preferred Stock incorporated by reference to Exhibit
4c to the Company's Form 10-K for the fiscal year
ended December 31, 1987 (File No.1-5491).
(1) 4d Certificate of Designation of the Companies Series III
Preferred Stock incorporated by reference to Exhibit
4d to the Company's Form 10-K for the fiscal year
ended December 31, 1994 (File No. 1-5491).
(1) 4e Certificate of Designation of the Company's Series A
Junior Preferred Stock dated March 2, 1992
incorporated by reference to Exhibit 4d to the
Company's Form 10-K for the fiscal year ended December
31, 1991 (File No. 1-5491).
(1) 4f Rights Agreement as amended dated as of February 25,
1992 between the Company and Citibank, N.A. as Rights
Agent incorporated by reference to Exhibit 4g to the
Company's Form 10-K for the fiscal year ended December
31, 1994 (File No. 1-5491).
(1) 4g Indenture dated December 1, 1991 between the Company
and Bankers Trust Company, as Trustee, relating to the
Company's 11-7/8% Senior Notes due 2001 incorporated
by reference to Exhibit 28.1 to the Company's Current
Report on Form 8-K dated December 12, 1991 (File No.
1-5491).
(2) 4h Specimen Common Stock certificate.
33
EXHIBIT INDEX
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ------- --------------------------------------------------------
(1) 4i Form of Promissory Note dated November 30, 1994
between the purchasers of Series III Floating Rate
Subordinated Convertible Debentures due 2004 and the
Company incorporated by reference to Exhibit 4j to the
Company's Form 10-K for the fiscal year ended December
31, 1994 (File No. 1-5491).
(1) 10a 1980 Nonqualified Stock Option Plan of the Company
together with form of Stock Option Agreement related
thereto incorporated by reference to Exhibit 5.10 to
the Company's Registration Statement on Form S-7
(Registration No. 2-68622).
(1) 10b 1988 Nonqualified Stock Option Plan of the Company as
amended together with form of Stock Option Agreement
related thereto incorporated by reference to Exhibit
10b of the Company's Form 10-K for the fiscal year
ended December 31, 1992 (File No. 1-5491).
(1) 10c Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the
1980 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10c to the
Company's Form 10-K for the fiscal year ended December
31, 1990 (File No. 1-5491).
(1) 10d Amendment No. 2 dated May 23, 1991, to all then
outstanding Stock Option Agreements related to the
1980 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10d to the
Company's Form 10-K for the fiscal year ended December
31, 1991 (File No. 1-5491).
(1) 10e Amendment No. 1 dated October 25, 1990, to all then
outstanding Stock Option Agreements related to the
1988 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10d to the
Company's Form 10-K for the fiscal year ended December
31, 1990 (File No. 1-5491).
(1) 10f Amendment No. 2 dated May 23, 1991, to all then
outstanding Stock Option Agreements related to the
1988 Nonqualified Stock Option Plan of the Company
incorporated by reference to Exhibit 10f to the
Company's Form 10-K for the fiscal year ended December
31, 1991 (File No. 1-5491).
(2) 10g Amendment No. 4 dated July 24, 1996 to the 1996
Convertible Debenture Incentive Plan.
(2) 10h 1986 Convertible Debenture Incentive Plan of the
Company amended as of July 24, 1996.
(1) 10i Pension Restoration Plan of the Company incorporated
by reference to Exhibit 10h to the Company's Form 10-K
for the fiscal year ended December 31, 1992 (File No.
1-5491).
(1) 10j Pension Restoration Plan of LeTourneau, Inc
incorporated by reference to Exhibit 10j to the
Company's Form 10-K for the fiscal year ended December
31, 1994 (File No. 1-5491).
34
EXHIBIT INDEX
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ------- --------------------------------------------------------
(1) 10k Credit Agreement dated September 22, 1986 (including
amendatory letter dated March 25, 1987) and First
Preferred Ship Mortgage dated November 7, 1986 between
the Company and Marathon LeTourneau Company
incorporated by reference to Exhibit 10c to the
Company's Form 10-K for the fiscal year ended December
31, 1986 and amendatory letter dated February 21, 1992
incorporated by reference to Exhibit 10h to the
Company's Form 10-K for the fiscal year ended December
31, 1991 (File No. 1-5491).
(1) 10L Participation Agreement dated December 1, 1984 between
the Company and Textron Financial Corporation et al.
and Bareboat Charter dated December 1, 1984 between
the Company and Textron Financial Corporation et al.
incorporated by reference to Exhibit 10c to the
Company's Form 10-K for the fiscal year ended December
31, 1985 (File No. 1-5491).
(1) 10m Participation Agreement dated December 1, 1985 between
the Company and Eaton Leasing Corporation et. al. and
Bareboat Charter dated December 1, 1985 between the
Company and Eaton Leasing Corporation et. al.
incorporated by reference to Exhibit 10d to the
Company's Form 10-K for the fiscal year ended December
31, 1985 (File No.1-5491).
(1) 10n Corporate Continuing Guaranty dated September 10, 1987
between Shearson Lehman Brothers Holdings Inc. and the
Company incorporated by reference to Exhibit 10i to
the Company's Form 10-K for the fiscal year ended
December 31, 1987 (File No.1-5491).
(1) 10o Cross-Border Corporate Continuing Guaranty dated May
29, 1991 between Citicorp and the Company's
wholly-owned subsidiary, Rowan International, Inc.
incorporated by reference to Exhibit 10o to the
Company's Form 10-K for the fiscal year ended December
31, 1991 (File No. 1-5491).
(1) 10p Consulting Agreement as amended dated April 1, 1995
between the Company and C. W Yeargain incorporated by
reference to Exhibit 10q to the Company's Form 10-K
for the fiscal year ended December 31, 1996 (File No.
1-5491).
(1) 10q Acquisition Agreement dated as of November 7, 1991,
among KLM Royal Dutch Airlines, Blue Yonder I B.V.,
KLM Helikopters B.V. and Rowan Aviation (Netherlands)
B.V. incorporated by reference to Exhibit 28.1 to the
Company's Current Report on Form 8-K dated November 7,
1991 (File No. 1-5491).
35
EXHIBIT INDEX
Footnote Exhibit
Reference Number Exhibit Description
- ------------- ------- --------------------------------------------------------
(1) 10r Asset Purchase Agreement dated as of November 12,
1993, among Rowan Companies, Inc., Rowan Equipment,
Inc., General Cable Corporation, Marathon LeTourneau
Company, Marathon LeTourneau Sales & Service Company
and Marathon LeTourneau Australia Pty. Ltd.
incorporated by reference to the Company's Current
Report on Form 8-K dated February 11, 1994 (File No.
1-5491).
(1) 10s Asset Purchase and Sale Agreement dated December 5,
1995 between Era Aviation, Inc. and Columbia
Helicopters, Inc., Alaska Helicopters, Inc. and BIJOS
Enterprises.
(2) 10t Commitment to Guarantee Obligations and First
Preferred Ship Mortgage both dated December 17, 1996
between the Company and the Maritime Administration of
the U.S. Department of Transportation.
(2) 10u Credit Agreement and Trust Indenture both dated
December 17, 1996 between the Company and Citibank,
N.A.
(3) 11 Computation of Primary and Fully Diluted Earnings
(Loss) Per Share for the years ended December 31,
1996, 1995 and 1994 appearing on page 29 in this Form
10-K.
(4) 13 Annual Report to Stockholders for fiscal year ended
December 31, 1996.
(2) 21 Subsidiaries of the Registrant as of March 28,
1996
(2) 23 Independent Auditors' Consent.
(2) 24 Powers of Attorney pursuant to which names were
affixed to this Form 10-K for the fiscal year ended
December 31, 1996.
(2) 27 Financial Data Schedule for the year ended December
31, 1996.
__________________________________________
(1) Incorporated herein by reference to another filing of the Company with
the Securities and Exchange Commission as indicated.
(2) Included herein.
(3) Included in Form 10-K on page 29.
(4) Included herein. See ITEM 1, ITEMS 5-8 and Subpart (a)1. of ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on pages
21 through 23 on Form 10-K for specific portions incorporated herein
by reference.