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EX-32.1 - EXHIBIT - ROWAN COMPANIES PLCexhibit-321xq32014.htm
EX-32.2 - EXHIBIT - ROWAN COMPANIES PLCexhibit-322xq32014.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549

FORM 10-Q

þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014

OR

¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM_____TO_____

1-5491
Commission File Number
Rowan Companies plc
(Exact name of registrant as specified in its charter)

England and Wales
98-1023315
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)

2800 Post Oak Boulevard, Suite 5450, Houston, Texas
77056-6189
(Address of principal executive offices)
(Zip Code)
(713) 621-7800
(Registrant's telephone number, including area code)

Inapplicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨   No þ

The number of Class A ordinary shares, $0.125 par value, outstanding at October 31, 2014, was 124,538,858.



ROWAN COMPANIES PLC

TABLE OF CONTENTS

 
 
Page
 
 
 
 

 

 

 

 
 
 



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements


ROWAN COMPANIES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
September 30, 2014
 
December 31, 2013
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
707,729

 
$
1,092,844

Receivables - trade and other
510,194

 
344,546

Prepaid expenses and other current assets
40,873

 
45,538

Deferred tax assets - net
41,899

 
22,137

Assets of discontinued operations

 
23,813

Total current assets
1,300,695

 
1,528,878

 
 
 
 
PROPERTY, PLANT AND EQUIPMENT:
 

 
 

Drilling equipment
8,103,048

 
7,040,451

Construction in progress
1,287,158

 
1,009,380

Other property and equipment
150,385

 
147,884

Property, plant and equipment - gross
9,540,591

 
8,197,715

Less accumulated depreciation and amortization
2,032,020

 
1,811,960

Property, plant and equipment - net
7,508,571

 
6,385,755

 
 
 
 
Other assets
19,514

 
61,128

 
 
 
 
TOTAL ASSETS
$
8,828,780

 
$
7,975,761



See Notes to Unaudited Condensed Consolidated Financial Statements.


1



ROWAN COMPANIES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(In thousands, except shares)
(Unaudited)


 
September 30, 2014
 
December 31, 2013
LIABILITIES AND EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable - trade
$
100,453

 
$
123,976

Deferred revenues
31,803

 
54,515

Accrued pension and other postemployment benefits
5,310

 
49,659

Accrued compensation and related employee costs
74,834

 
59,096

Accrued income taxes
3,973

 
8,374

Accrued interest
35,578

 
27,841

Other current liabilities
10,141

 
11,001

Liabilities of discontinued operations

 
20,122

Total current liabilities
262,092

 
354,584

 
 
 
 
Long-term debt
2,807,540

 
2,008,700

Other liabilities
238,232

 
289,061

Deferred income taxes - net
410,925

 
429,655

Commitments and contingent liabilities (Note 4)

 

 
 
 
 
SHAREHOLDERS' EQUITY:
 

 
 

Class A Ordinary Shares, $0.125 par value, 124,828,807 and 124,778,407 shares issued at September 30, 2014, and December 31, 2013, respectively
15,604

 
15,597

Additional paid-in capital
1,430,612

 
1,407,031

Retained earnings
3,806,453

 
3,619,540

Cost of 300,689 and 542,475 treasury shares at September 30, 2014, and December 31, 2013, respectively
(7,227
)
 
(5,962
)
Accumulated other comprehensive loss
(135,451
)
 
(142,445
)
Total shareholders' equity
5,109,991

 
4,893,761

 
 
 
 
TOTAL LIABILITIES AND EQUITY
$
8,828,780

 
$
7,975,761



See Notes to Unaudited Condensed Consolidated Financial Statements.


2


ROWAN COMPANIES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
REVENUES
$
467,692

 
$
382,808

 
$
1,268,172

 
$
1,185,929

 
 
 
 
 
 
 
 
COSTS AND EXPENSES:
 

 
 

 
 
 
 
Direct operating costs (excluding items below)
246,907

 
211,827

 
711,854

 
637,340

Depreciation and amortization
81,503

 
69,274

 
230,054

 
200,421

Selling, general and administrative
33,040

 
33,263

 
92,057

 
95,957

Loss (gain) on disposals of property and equipment
58

 
(65
)
 
1,720

 
(18,979
)
Litigation settlement

 

 
(20,875
)
 

Material charges and other operating expenses

 

 
8,300

 

Total costs and expenses
361,508

 
314,299

 
1,023,110

 
914,739

 
 
 
 
 
 
 
 
INCOME FROM OPERATIONS
106,184

 
68,509

 
245,062

 
271,190

 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 

 
 

 
 
 
 
Interest expense, net of interest capitalized
(25,656
)
 
(17,111
)
 
(74,308
)
 
(53,377
)
Interest income
372

 
417

 
1,721

 
1,144

Other - net
269

 
(368
)
 
(627
)
 
(1,605
)
Total other income (expense) - net
(25,015
)
 
(17,062
)
 
(73,214
)
 
(53,838
)
 
 
 
 
 
 
 
 
INCOME FROM CONTINUING OPERATIONS
 

 
 

 
 
 
 
BEFORE INCOME TAXES
81,169

 
51,447

 
171,848

 
217,352

(Benefit) provision for income taxes
(38,428
)
 
(453
)
 
(36,165
)
 
14,474

 
 
 
 
 
 
 
 
NET INCOME FROM CONTINUING OPERATIONS
119,597

 
51,900

 
208,013

 
202,878

 
 
 
 
 
 
 
 
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX

 

 
4,023

 

 
 
 
 
 
 
 
 
NET INCOME
$
119,597

 
$
51,900

 
$
212,036

 
$
202,878

 
 
 
 
 
 
 
 
INCOME PER SHARE - BASIC:
 

 
 

 
 
 
 
Income from continuing operations
$
0.96

 
$
0.42

 
$
1.68

 
$
1.64

Discontinued operations
$

 
$

 
$
0.03

 
$

Net income
$
0.96

 
$
0.42

 
$
1.71

 
$
1.64

 
 
 
 
 
 
 
 
INCOME PER SHARE - DILUTED:
 

 
 

 
 
 
 
Income from continuing operations
$
0.96

 
$
0.42

 
$
1.67

 
$
1.63

Discontinued operations
$

 
$

 
$
0.03

 
$

Net income
$
0.96

 
$
0.42

 
$
1.70

 
$
1.63

 
 
 
 
 
 
 
 
CASH DIVIDENDS DECLARED PER SHARE
$
0.10

 
$

 
$
0.20

 
$



See Notes to Unaudited Condensed Consolidated Financial Statements.


3


ROWAN COMPANIES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
NET INCOME
$
119,597

 
$
51,900

 
$
212,036

 
$
202,878

 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME:
 

 
 

 
 
 
 
Pension and other postemployment benefit adjustments, net of income taxes of $1,313 and $1,993 for the three months ended September 30, 2014 and 2013, and $3,899 and $5,915 for the nine months ended September 30, 2014 and 2013, respectively:
 

 
 

 
 
 
 
Amortization of net loss
3,190

 
4,500

 
9,470

 
13,359

Amortization of prior service credit
(737
)
 
(799
)
 
(2,189
)
 
(2,373
)
 
 
 
 
 
 
 
 
Total other comprehensive income
2,453

 
3,701

 
7,281

 
10,986

 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME
$
122,050

 
$
55,601

 
$
219,317

 
$
213,864



See Notes to Unaudited Condensed Consolidated Financial Statements.


4


ROWAN COMPANIES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Nine months ended September 30,
 
2014
 
2013
CASH PROVIDED BY OPERATIONS:
 
 
 
Net income
$
212,036

 
$
202,878

Adjustments to reconcile net income to net cash provided by operations:
 

 
 

Depreciation and amortization
230,054

 
200,421

Deferred income taxes
(42,678
)
 
(9,928
)
Provision for pension and other postemployment benefits
18,715

 
22,810

Share-based compensation expense
23,904

 
27,319

Gain on disposals of property, plant and equipment
(193
)
 
(18,979
)
Other postemployment benefit claims paid
(3,129
)
 
(2,759
)
Contributions to pension plans
(54,251
)
 
(18,609
)
Asset impairment charges
8,300

 

Changes in current assets and liabilities:
 

 
 

Receivables - trade and other
(165,648
)
 
(49,233
)
Prepaid expenses and other current assets
4,708

 
(137
)
Accounts payable
(23,162
)
 
16,032

Accrued income taxes
(4,401
)
 
(18,653
)
Deferred revenues
(22,712
)
 
15,360

Other current liabilities
18,198

 
(24,118
)
Net changes in other noncurrent assets and liabilities
481

 
49,628

Net cash provided by operations
200,222

 
392,032

 
 
 
 
CASH USED IN INVESTING ACTIVITIES:
 

 
 

Capital expenditures
(1,367,414
)
 
(455,164
)
Proceeds from disposals of property, plant and equipment
9,767

 
42,295

Net cash used in investing activities
(1,357,647
)
 
(412,869
)
 
 
 
 
CASH PROVIDED BY FINANCING ACTIVITIES:
 

 
 

Proceeds from borrowings
793,380

 

Dividends paid
(25,123
)
 

Debt issue costs
(687
)
 

Excess tax benefits from share-based compensation
15

 
977

Proceeds from exercise of share options
4,725

 
2,911

Other

 
1,820

Net cash provided by financing activities
772,310

 
5,708

 
 
 
 
DECREASE IN CASH AND CASH EQUIVALENTS
(385,115
)
 
(15,129
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
1,092,844

 
1,024,008

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
707,729

 
$
1,008,879



See Notes to Unaudited Condensed Consolidated Financial Statements.


5


ROWAN COMPANIES PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
 
Shares outstanding
 
Class A ordinary shares/ Common stock
 
Additional paid-in capital
 
Retained earnings
 
Treasury shares
 
Accumulated other comprehensive income (loss)
 
Total shareholders' equity
Balance, January 1, 2013
124,211

 
$
15,593

 
$
1,372,135

 
$
3,366,964

 
$
(1,886
)
 
$
(221,082
)
 
$
4,531,724

Net shares issued (acquired) under share-based compensation plans
26

 
4

 
2,331

 

 
(4,053
)
 

 
(1,718
)
Share-based compensation

 

 
20,918

 

 

 

 
20,918

Excess tax benefit from share-based compensation plans

 

 
977

 

 

 

 
977

Retirement benefit adjustments, net of taxes of $5,915

 

 

 

 

 
10,986

 
10,986

Other

 

 
1,820

 

 

 

 
1,820

Net income

 

 

 
202,878

 

 

 
202,878

Balance, September 30, 2013
124,237

 
$
15,597

 
$
1,398,181

 
$
3,569,842

 
$
(5,939
)
 
$
(210,096
)
 
$
4,767,585

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2014
124,237

 
$
15,597

 
$
1,407,031

 
$
3,619,540

 
$
(5,962
)
 
$
(142,445
)
 
$
4,893,761

Net shares issued (acquired) under share-based compensation plans
291

 
7

 
1,566

 

 
(1,265
)
 

 
308

Share-based compensation

 

 
22,000

 

 

 

 
22,000

Excess tax benefit (shortfall) from share-based compensation plans

 

 
15

 

 

 

 
15

Retirement benefit adjustments, net of taxes of $3,899

 

 

 

 

 
7,281

 
7,281

Dividends

 

 

 
(25,123
)
 

 

 
(25,123
)
Other

 

 

 

 

 
(287
)
 
(287
)
Net income

 

 

 
212,036

 

 

 
212,036

Balance, September 30, 2014
124,528

 
$
15,604

 
$
1,430,612

 
$
3,806,453

 
$
(7,227
)
 
$
(135,451
)
 
$
5,109,991


See Notes to Unaudited Condensed Consolidated Financial Statements.

6

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Note 1 – Basis of Presentation and Nature of Operations

The financial statements included in this Form 10-Q are presented in United States (U.S.) dollars and include the accounts of Rowan Companies plc ("Rowan plc") and its subsidiaries, all of which are wholly owned.  Intercompany balances and transactions are eliminated in consolidation.  Unless the context otherwise requires, the terms “Company,” “we,” “us” and “our” are used to refer to Rowan plc and its consolidated subsidiaries.

The financial statements included in this Form 10-Q have been prepared without audit in accordance with accounting principles generally accepted in the United States of America (US GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission.  Certain information and notes have been condensed or omitted as permitted by those rules and regulations.  Management believes the accompanying financial statements contain all adjustments, which are of a normal recurring nature unless otherwise noted, necessary for a fair statement of the results for the interim periods presented.  The Company’s results of operations and cash flows for the interim periods are not necessarily indicative of results to be expected for the full year.  These financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

We are a global provider of offshore oil and gas contract drilling services utilizing a fleet of 30 self-elevating mobile offshore “jack-up” drilling units and four ultra-deepwater drillships, two of which are currently under construction.  Historically, our primary focus has been on high-specification and premium jack-up rigs, which our customers use for exploratory and development drilling and associated drilling services.  In 2009, we began executing a new strategic plan that included divesting non-core assets and investing in ultra-deepwater assets, with a goal of balancing earnings from jack-ups and deepwater rigs over the long term. In 2011 and 2012, we entered into contracts for the construction of four ultra-deepwater drillships. In January 2014, we took delivery of the first of these drillships, the Rowan Renaissance, which commenced drilling operations under a three-year contract offshore West Africa in April 2014. The Rowan Resolute was delivered in late July 2014 and commenced operations under a three-year contract in the United States Gulf of Mexico (US GOM) on October 16, 2014. The Rowan Reliance is scheduled for delivery in mid November 2014 and expected to commence operations under a three-year contract in the US GOM in late February 2015. The Rowan Relentless is scheduled for delivery in late March 2015 and expected to commence operations under a two-year contract in the US GOM in the third quarter of 2015.

The Company conducts offshore drilling operations in various markets throughout the world including the United Kingdom (U.K.) and Norwegian sectors of the North Sea, the Middle East, the US GOM, Southeast Asia, West and North Africa and Trinidad.

The financial information as of December 31, 2013, presented in this report does not constitute the Company's statutory accounts for that year within the meaning of the U.K. Companies Act 2006 (the "Companies Act").  Statutory accounts as required by the Companies Act for the year ended December 31, 2013, have been delivered to the Registrar of Companies in the U.K. The auditors reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Sections 498(2) or (3) of the Companies Act.

New Accounting Standards In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which sets forth a global standard for revenue recognition and replaces most existing industry-specific guidance. We will be required to adopt the new standard in annual and interim reports for periods beginning January 1, 2017. We are currently evaluating the potential effect of the new guidance.



7

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 2 – Earnings Per Share

A reconciliation of basic and diluted shares follows (in thousands):

 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Average common shares outstanding - basic
124,256

 
123,635

 
124,011

 
123,468

Effect of dilutive securities - share-based compensation
794

 
966

 
835

 
915

Average common shares - diluted
125,050

 
124,601

 
124,846

 
124,383


There were no adjustments to net income required for purposes of computing diluted earnings per share.

Share options and appreciation rights granted under share-based compensation plans are antidilutive and excluded from diluted earnings per share when their exercise or strike price exceeds the average market price during the period.  The following table sets forth antidilutive shares excluded from diluted earnings per share.  Such securities could potentially dilute earnings per share in the future (in thousands):
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Share appreciation rights
1,050

 
978

 
1,050

 
1,012

Employee and director share options
42

 
53

 
42

 
53

Total potentially dilutive shares
1,092

 
1,031

 
1,092

 
1,065



Note 3 – Pension and Other Postemployment Benefits

The Company provides defined-benefit pension, health care and life insurance benefits upon retirement for certain full-time employees.

Recognized net periodic pension cost included the following components (in thousands):

 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Service cost
$
3,701

 
$
3,102

 
$
10,981

 
$
8,833

Interest cost
8,272

 
7,558

 
24,547

 
22,253

Expected return on plan assets
(10,479
)
 
(9,658
)
 
(31,094
)
 
(28,686
)
Amortization of net loss
4,947

 
7,171

 
14,684

 
20,797

Amortization of prior service credit
(1,134
)
 
(1,194
)
 
(3,366
)
 
(3,543
)
Total net pension cost
$
5,307

 
$
6,979

 
$
15,752

 
$
19,654



Recognized other postemployment benefit cost included the following components (in thousands):


8

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Service cost
$
272

 
$
365

 
$
809

 
$
1,072

Interest cost
774

 
757

 
2,297

 
2,194

Amortization of net loss
(40
)
 

 
(119
)
 

Amortization of prior service credit
(8
)
 
(37
)
 
(24
)
 
(110
)
Total other postemployment benefit cost
$
998

 
$
1,085

 
$
2,963

 
$
3,156



During the nine months ended September 30, 2014, the Company contributed $57.4 million to its pension and other postemployment benefit plans and expects to make additional contributions to such plans totaling approximately $1.3 million for the remainder of 2014.

Note 4 – Commitments and Contingent Liabilities

The following table presents the status of the Company’s ultra-deepwater drillship construction program as of September 30, 2014.  Amounts include capitalized interest and an estimate for project contingencies (in millions):

 
Actual/scheduled delivery date
 
Total estimated project costs
 
Total costs incurred through September 30, 2014
 
Projected costs for the remainder of 2014
 
Projected costs in 2015
 
Total future costs
 
 
 
 
 
 
 
 
 
 
 
 
Rowan Resolute
July 2014
 
$
723

 
$
682

 
$
41

 
$

 
$
41

Rowan Reliance
November 2014
 
742

 
277

 
458

 
7

 
465

Rowan Relentless
March 2015
 
755

 
232

 
38

 
485

 
523

 
 
 
$
2,220

 
$
1,191

 
$
537

 
$
492

 
$
1,029


The Company expects to incur an additional approximately $77 million of capital expenditures for the remainder of 2014 for mobilization, commissioning, riser gas-handling equipment, software certifications and drillship fleet spares to support its deepwater operations.

The Company periodically employs letters of credit in the normal course of its business, and had outstanding letters of credit of approximately $25.6 million at September 30, 2014.

Uncertain tax positions – In 2009, the Company recognized certain tax benefits as a result of applying the facts of a third-party tax case to the Company’s situation.  That case provided a more favorable tax treatment for certain foreign contracts entered into in prior years.  Our position was challenged by the U.S. Internal Revenue Service.  We appealed their findings and reached a settlement agreement in the third quarter of 2014 with respect to three of the four years under review. As a result of the agreement, we recognized a current income tax receivable at September 30, 2014, in the amount of $35 million, reduced long-term receivables by approximately $47 million and reduced other long-term liabilities by approximately $58 million, resulting in a net benefit to income taxes of approximately $46 million. We collected the current receivable in the fourth quarter of 2014. A remaining year continues to be under examination. We plan to vigorously defend our position.

We are involved in various other legal proceedings incidental to our business and are vigorously defending our position in all such matters.  Management believes that there are no known contingencies, claims or lawsuits, other than those described above, that could have a material effect on the Company's financial position, results of operations or cash flows.



9

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 5 – Share-Based Compensation

On March 5, 2014, the Company granted restricted share units under its long-term incentive plan with a grant-date fair value aggregating $21.3 million.  The aggregate fair value, net of estimated forfeitures, was $20.2 million, which will be recognized as compensation expense over a weighted-average period of 2.7 years from the grant date.  

Additionally, on March 5, 2014, the Company granted to certain members of management performance units (P-Units) that have a target value of $100 per unit.  The amount ultimately earned with respect to the P-Units will depend on the Company’s total shareholder return (TSR) ranking compared to a group of peer companies over a three-year period ending December 31, 2016, and could range from zero to $200 per unit depending on performance.  Twenty-five percent of the P-Units’ value is determined by the Company’s relative TSR ranking for each one-year period ended December 31, 2014, 2015, and 2016, respectively, and 25% of the P-Units’ value is determined by the relative TSR ranking for the three-year period ending December 31, 2016.  Vesting of awards and any payment with respect to the P-Units would not occur until the third anniversary following the grant date and would be settled in cash.

The grant-date fair value of the P-Units was estimated to be $8.5 million.  Fair value was estimated using a Monte Carlo simulation model, which considers the probabilities of the Company’s TSR ranking at the end of each performance period, and the amount of the payout at each rank to determine the probability-weighted expected payout.  The Company uses liability accounting to account for the P-Units.  Compensation is recognized on a straight-line basis over a maximum period of three years from the grant date and is adjusted for changes in fair value through the vesting date.  In the event there is no payout of the P-Units for any 25% tranche as the result of a failure to meet the performance thresholds, any previously recognized expense relating to that tranche would be reversed at the end of the tranche’s performance period.

At September 30, 2014, the Company had approximately $37.4 million of estimated unrecognized share-based compensation, which is expected to be recognized as compensation expense over a remaining weighted-average period of 1.9 years.

Note 6 – Other Financial Statement Disclosures

Accounts Receivable – The following table sets forth the components of Receivables - trade and other (in thousands):

 
September 30, 2014
 
December 31, 2013
Trade
$
433,997

 
$
323,679

Income tax
62,590

 
6,759

Other
13,607

 
14,108

Total receivables - trade and other
$
510,194

 
$
344,546


During the third quarter of 2014, we reached a settlement agreement with the U.S. Internal Revenue Service in connection with U.S. tax return issues of certain prior year periods. As a result of the agreement, we recognized an income tax receivable at September 30, 2014, in the amount of $35 million, which we collected in the fourth quarter of 2014. The remainder of the increase in tax receivables is primarily attributable to $29 million for overpayment of 2013 U.S. federal income taxes.

Assets of Discontinued Operations – In February 2014, the Company sold a land rig it retained in the 2011 sale of its manufacturing operations. The net carrying value was $4.1 million, consisting of a $24.2 million asset previously classified as assets of discontinued operations, less $20.1 million of deferred revenues previously classified as liabilities of discontinued operations. The Company received $6.0 million in cash resulting in a $4.0 million gain, net of tax effects. The gain is classified as discontinued operations in the condensed consolidated statement of income for the nine months ended September 30, 2014.

Long-term Debt – On January 15, 2014, Rowan plc, as guarantor, and its 100%-owned subsidiary, Rowan Companies, Inc. ("RCI"), as issuer, completed the issuance and sale in a public offering of $400 million aggregate principal amount of 4.75% Senior Notes due 2024 at a price to the public of 99.898% of the principal amount (the "2024 Notes"), and $400 million aggregate principal amount of 5.85% Senior Notes due 2044 at a price to the public of 99.972% of the principal amount (the "2044 Notes," and together, the "notes").  Net proceeds of the offering were approximately $792 million, which the Company intends to use in its rig construction program and for general corporate purposes.


10

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Interest on the notes is payable on January 15 and July 15 of each year, beginning on July 15, 2014. No principal payments are due with respect to the 2024 Notes or the 2044 Notes until their final maturity date of January 15, 2024 and 2044, respectively.

The notes are redeemable in whole or in part at any time at a price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date for redemptions prior to October 15, 2023, with respect to the 2024 Notes, and prior to July 15, 2043, with respect to the 2044 Notes. On or after such dates, the notes may be redeemed at a price of 100% plus accrued and unpaid interest to the redemption date.

The notes are fully and unconditionally guaranteed on a senior and unsecured basis by Rowan plc.

On January 23, 2014, the Company amended and restated its credit agreement to increase the borrowing capacity under the revolving credit facility from $750 million to $1.0 billion, among other things. There were no amounts drawn under the revolving credit facility at September 30, 2014.

Fair Values of Financial Instruments – Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The fair value hierarchy prescribed by US GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The three levels of inputs that may be used to measure fair value are:

Level 1 – Quoted prices for identical instruments in active markets,
Level 2 – Quoted market prices for similar instruments in active markets; quoted prices for identical instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets and
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable, such as those used in pricing models or discounted cash flow methodologies, for example.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Certain of our assets and liabilities are required to be measured at fair value on a recurring basis. Assets and liabilities measured at fair value are summarized below (in thousands):

 
 
 
Estimated fair value measurements
 
Carrying value
 
Quoted prices in active markets (Level 1)
 
Significant other observable inputs (Level 2)
 
Significant other unobservable inputs (Level 3)
September 30, 2014:
 
 
 
 
 
 
 
Assets - cash equivalents
$
663,297

 
$
663,297

 
$

 
$

 
 
 
 
 
 
 
 
December 31, 2013:
 
 
 
 
 
 
 
Assets - cash equivalents
$
1,063,500

 
$
1,063,500

 
$

 
$


Trade receivables and trade payables, which are also required to be measured at fair value, have carrying values that approximate their fair values due to their short maturities.

Those financial instruments not required to be measured at fair value consist of the Company’s publicly traded debt securities.  Fair values of the Company’s debt securities were provided by one to two brokers who make a market in our debt securities and were measured using a market-approach valuation technique.  Fair value was determined by adding a spread based on actual trades for that security (or a trader quote where actual trades were unavailable) to the applicable benchmark Treasury security with a comparable maturity, in order to derive a current yield.  The yield is then used to determine a price given the individual security’s coupon rate and maturity.  Such inputs are considered “significant other observable inputs,” which are categorized as Level 2

11

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

inputs in the fair value hierarchy.  Estimated fair values and related carrying values of our long-term debt securities are shown below (in thousands):

 
September 30, 2014
 
December 31, 2013
 
Fair value
 
Carrying value
 
Fair value
 
Carrying value
 
 
 
 
 
 
 
 
5% Senior Notes, due 2017
$
431,153

 
$
399,173

 
$
433,879

 
$
398,961

7.875% Senior Notes, due 2019
603,258

 
498,418

 
603,177

 
498,171

4.875% Senior Notes, due 2022
731,136

 
712,035

 
711,816

 
713,208

4.75% Senior Notes, due 2024
406,284

 
399,621

 

 

5.4% Senior Notes, due 2042
378,314

 
398,402

 
368,602

 
398,360

5.85% Senior Notes, due 2044
400,405

 
399,891

 

 

 
$
2,950,550

 
$
2,807,540

 
$
2,117,474

 
$
2,008,700


 
Shareholders' Equity – The Company had accumulated other comprehensive losses (AOCL) totaling $135.5 million and $210.1 million at September 30, 2014 and 2013, respectively, which were solely attributable to pension and other postemployment benefits (OPEB).  The following sets forth the significant amounts reclassified out of each component of AOCL. The amounts reclassified are included in the computation of net periodic pension costs. (See Note 3 – Pension and Other Postemployment Benefits.) Amounts in parentheses indicate debits to income (in thousands):

 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Amortization of pension and OPEB items:
 
 
 
 
 
 
 
Actuarial gains (losses)
$
(4,909
)
 
$
(6,924
)
 
$
(14,570
)
 
$
(20,553
)
Prior service costs
1,142

 
1,230

 
3,390

 
3,652

Total before tax
(3,767
)
 
(5,694
)
 
(11,180
)
 
(16,901
)
Tax (expense) benefit
1,314

 
1,993

 
3,899

 
5,915

Total reclassifications for the period, net of tax
$
(2,453
)
 
$
(3,701
)
 
$
(7,281
)
 
$
(10,986
)


On April 25, 2014, the Board of Directors declared a quarterly cash dividend of $0.10 per share, paid on May 20, 2014, to shareholders of record at the close of business on May 5, 2014.

On July 31, 2014, the Board of Directors declared a quarterly cash dividend of $0.10 per share, paid on August 26, 2014, to shareholders of record at the close of business on August 11, 2014.

On October 30, 2014, the Board of Directors declared a quarterly cash dividend of $0.10 per share, payable on November 25, 2014, to shareholders of record at the close of business on November 11, 2014.

During the third quarter of 2014, we completed a capital reduction under U.K. law (the “Capital Reduction”), which increased the Company's distributable reserves and will provide the Company with greater flexibility to increase shareholder return in the form of dividends and share repurchases. The Capital Reduction was authorized by our Board of Directors and approved by our shareholders at a general meeting on August 15, 2014. The Capital Reduction was achieved through the issuance and cancellation of $2.0 billion of newly created Class C shares (the “Capital Reduction Shares”) pursuant to a customary, court approved process in the U.K.


12

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Capital Reduction Shares had no substantive economic rights, provided no voting rights and otherwise provided extremely limited rights (e.g., no right to receive any dividends or other distributions). Once the Capital Reduction Shares were cancelled on September 17, 2014, $2.0 billion of the shareholders’ equity of Rowan Companies plc (the parent company of the Rowan group of companies) that could not be distributed under U.K. law may now be used for dividends, future distributions or share repurchases as determined by our Board of Directors, subject to compliance with applicable rules and limitations under U.K. law.

The Capital Reduction did not involve any distribution or repayment of capital, nor did it have an impact on the underlying net assets of the Company. There was no net impact on our shareholders’ equity for the three-month period ended September 30, 2014 (or any period) as a result of the Capital Reduction.

Supplemental Cash Flow Information – Accrued capital expenditures, which are excluded from capital expenditures in the Condensed Consolidated Statements of Cash Flows until settlement, totaled $48.9 million and $37.2 million at September 30, 2014 and 2013, respectively.  Interest capitalized in connection with rig construction projects totaled $15.5 million and $46.0 million in the three and nine months ended September 30, 2014, as compared to $12.9 million and $35.1 million, respectively, in the comparable period of the prior year.

Income TaxesIn accordance with US GAAP for interim reporting, the Company estimates its full-year effective tax rate and applies this rate to its year-to-date pretax income.  In addition, the Company separately calculates the tax impact of unusual items, if any. We provide for income taxes based upon the tax laws and rates in effect in the countries in which we conduct operations. The amounts of our provisions are impacted by such laws and rates and the availability of deductions, credits and other benefits in each of the various jurisdictions. Our overall effective tax rate may therefore vary considerably from quarter to quarter and from year to year based on the actual or projected location of operations and other factors.

In the three and nine months ended September 30, 2014, our effective tax rates were -47.4% and -21.1%, respectively, compared to -0.9% and 6.7%, respectively, for the comparable periods of 2013. The negative effective rates for 2014 are primarily the result of a settlement agreement reached with the U.S. Internal Revenue Service in the third quarter of 2014 in connection with U.S. tax return issues of certain prior-year periods (see Note 4, "Uncertain tax positions").

The Company has not provided deferred income taxes on undistributed earnings of its non-U.K. subsidiaries, including non-U.S. subsidiaries of RCI.  It is the Company’s policy and intention to permanently reinvest the earnings of non-U.S. subsidiaries of RCI outside the U.S.  Generally, earnings of non-U.K. subsidiaries that are not subsidiaries of RCI can be distributed to the Company without imposition of either U.K. or local country tax.

Litigation Settlement – In the first quarter of 2014, the Company settled its litigation with the owners and operators of a tanker that collided with the EXL I in May 2012 and received $20.9 million in cash as compensation for damages incurred in 2012 for repair costs to and loss of use of the rig. Such amount was recognized as a component of operating income in the nine months ended September 30, 2014.

Material Charges and Other Operating Expenses – Material charges for the first nine months of 2014 included an $8.3 million noncash impairment charge for the carrying value of the Company's sole aircraft, which was used to support operations. The asset had a carrying value of $12.7 million prior to the write-down. The amount of the impairment was based on actual sales prices for similar equipment obtained from a third-party dealer of such equipment. Quoted prices in active markets for similar equipment is considered a Level 2 input in the fair value hierarchy.

Note 7 – Guarantees of Registered Securities

Rowan plc and its 100%-owned subsidiary, RCI, have entered into agreements providing for, among other things, the full, unconditional and irrevocable guarantee by Rowan plc of the prompt payment when due of any amount owed to the holders of RCI's 5% Senior Notes due 2017, 7.875% Senior Notes due 2019, 4.875% Senior Notes due 2022, 4.75% Senior Notes due 2024, 5.4% Senior Notes due 2042, and 5.85% Senior Notes due 2044 (the "Senior Notes").

The condensed consolidating financial information that follows is presented on the equity method of accounting in accordance with Rule 3-10 of Regulation S-X in connection with Rowan plc's guarantee of the Senior Notes and reflects the corporate ownership structure as of September 30, 2014, and customary allocations and intercompany charges. Financial information for the three and nine months ended September 30, 2013, has been recast to reflect changes to the corporate ownership structure that occurred in the first and third quarters of 2014 and is presented as though the structure at September 30, 2014, was in place at January 1, 2013.

13

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the quarter ended March 31, 2014, we identified certain immaterial misclassifications in our guarantor financial information at December 31, 2013, and prior periods primarily relating to the allocation of noncurrent income tax liabilities and deferred tax assets and liabilities between RCI and the non-guarantor subsidiaries. These errors had no impact on our consolidated financial statements. We have revised the consolidating balance sheet at December 31, 2013, and the consolidating income statements for the three and nine months ended September 30, 2013, presented herein, to conform to the current period presentation. A summary of the changes at December 31, 2013, follows (in thousands):
 
 RCI (Issuer)
 
Non-guarantor subsidiaries
 
 
 
 
Condensed Consolidating Balance Sheets
 
 
 
December 31, 2013:
 
 
 
 
 
 
 
Other current assets:
 
 
 
As reported
$
45,031

 
$
22,355

As corrected
43,611

 
23,775

 
 
 
 
Due from affiliates:
 
 
 
As reported
$
1,439,112

 
$
579,501

As corrected
1,436,736

 
542,331

 
 
 
 
Accrued liabilities:
 
 
 
As reported
$
101,478

 
$
54,493

As corrected
99,102

 
56,869

 
 
 
 
Due to affiliates:
 
 
 
As reported
$
575,184

 
$
1,421,553

As corrected
546,690

 
1,410,501

 
 
 
 
Other liabilities (noncurrent):
 
 
 
As reported
$
194,966

 
$
85,960

As corrected
235,779

 
45,147

 
 
 
 
Deferred income taxes (noncurrent liability):
 
 
 
As reported
$
126,681

 
$
302,974

As corrected
115,376

 
314,279

 
 
 
 
Retained earnings:
 
 
 
As reported
$
4,795,441

 
$
5,908,071

As corrected
4,793,007

 
5,910,505


14

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Rowan Companies plc and Subsidiaries
Condensed Consolidating Balance Sheets
September 30, 2014
(in thousands)
(unaudited)
 
Rowan plc (Parent)
 
RCI (Issuer)
 
Non-guarantor subsidiaries
 
Consolidating adjustments
 
Consolidated
CURRENT ASSETS:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
90,014

 
$
62,574

 
$
555,141

 
$

 
$
707,729

Receivables - trade and other
129

 
62,502

 
447,563

 

 
510,194

Other current assets
636

 
70,605

 
11,531

 

 
82,772

Total current assets
90,779

 
195,681

 
1,014,235

 

 
1,300,695

 
 
 
 
 
 
 
 
 
 
Property, plant and equipment - gross

 
674,959

 
8,865,632

 

 
9,540,591

Less accumulated depreciation and amortization

 
305,457

 
1,726,563

 

 
2,032,020

Property, plant  and equipment - net

 
369,502

 
7,139,069

 

 
7,508,571

 
 
 
 
 
 
 
 
 
 
Investments in subsidiaries
5,027,024

 
6,123,393

 

 
(11,150,417
)
 

Due from affiliates
941

 
1,276,950

 
138,071

 
(1,415,962
)
 

Other assets

 
18,877

 
637

 

 
19,514

 
$
5,118,744

 
$
7,984,403

 
$
8,292,012

 
$
(12,566,379
)
 
$
8,828,780

 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES:
 

 
 

 
 

 
 

 
 

Accounts payable - trade
$
409

 
$
9,607

 
$
90,437

 
$

 
$
100,453

Deferred revenues

 

 
31,803

 

 
31,803

Accrued liabilities
283

 
62,448

 
67,105

 

 
129,836

Total current liabilities
692

 
72,055

 
189,345

 

 
262,092

 
 
 
 
 
 
 
 
 
 
Long-term debt

 
2,807,540

 

 

 
2,807,540

Due to affiliates
2,045

 
137,332

 
1,276,585

 
(1,415,962
)
 

Other liabilities
6,016

 
188,855

 
43,361

 

 
238,232

Deferred income taxes - net

 
477,456

 
374,066

 
(440,597
)
 
410,925

Shareholders' equity
5,109,991

 
4,301,165

 
6,408,655

 
(10,709,820
)
 
5,109,991

 
$
5,118,744

 
$
7,984,403

 
$
8,292,012

 
$
(12,566,379
)
 
$
8,828,780


15

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Rowan Companies plc and Subsidiaries
Condensed Consolidating Balance Sheets
December 31, 2013
(in thousands)
 
Rowan plc (Parent)
 
RCI (Issuer)
 
Non-guarantor subsidiaries
 
Consolidating adjustments
 
Consolidated
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
64,292

 
$
92,116

 
$
936,436

 
$

 
$
1,092,844

Receivables - trade and other
58

 
7,877

 
336,611

 

 
344,546

Other current assets
289

 
43,613

 
23,773

 

 
67,675

Assets of discontinued operations

 
23,813

 

 

 
23,813

Total current assets
64,639

 
167,419

 
1,296,820

 

 
1,528,878

 
 
 
 
 
 
 
 
 
 
Property, plant and equipment - gross

 
593,606

 
7,604,109

 

 
8,197,715

Less accumulated depreciation and amortization

 
243,666

 
1,568,294

 

 
1,811,960

Property, plant  and equipment - net

 
349,940

 
6,035,815

 

 
6,385,755

 
 
 
 
 
 
 
 
 
 
Investments in subsidiaries
4,860,492

 
5,657,926

 

 
(10,518,418
)
 

Due from affiliates
136

 
1,384,573

 
506,455

 
(1,891,164
)
 

Other assets

 
60,343

 
785

 

 
61,128

 
$
4,925,267

 
$
7,620,201

 
$
7,839,875

 
$
(12,409,582
)
 
$
7,975,761

 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES:
 

 
 

 
 

 
 

 
 

Accounts payable - trade
$
1,359

 
$
13,409

 
$
109,208

 
$

 
$
123,976

Deferred revenues

 

 
54,515

 

 
54,515

Accrued liabilities

 
105,421

 
50,550

 

 
155,971

Liabilities of discontinued operations

 
20,122

 

 

 
20,122

Total current liabilities
1,359

 
138,952

 
214,273

 

 
354,584

 
 
 
 
 
 
 
 
 
 
Long-term debt

 
2,008,700

 

 

 
2,008,700

Due to affiliates
22,012

 
502,139

 
1,367,013

 
(1,891,164
)
 

Other liabilities
8,135

 
239,287

 
41,639

 

 
289,061

Deferred income taxes - net

 
421,622

 
423,216

 
(415,183
)
 
429,655

Shareholders' equity
4,893,761

 
4,309,501

 
5,793,734

 
(10,103,235
)
 
4,893,761

 
$
4,925,267

 
$
7,620,201

 
$
7,839,875

 
$
(12,409,582
)
 
$
7,975,761



16

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Rowan Companies plc and Subsidiaries
Condensed Consolidating Income Statements
Three months ended September 30, 2014
(in thousands)
(unaudited)
 
Rowan plc (Parent)
 
RCI (Issuer)
 
Non-guarantor subsidiaries
 
Consolidating adjustments
 
Consolidated
 
 
 
 
 
 
 
 
 
 
REVENUES
$

 
$
17,437

 
$
468,013

 
$
(17,758
)
 
$
467,692

 
 
 
 
 
 
 
 
 
 
COSTS AND EXPENSES:
 

 
 

 
 

 
 

 
 

Direct operating costs (excluding items below)

 
(2,247
)
 
266,104

 
(16,950
)
 
246,907

Depreciation and amortization

 
3,439

 
78,213

 
(149
)
 
81,503

Selling, general and administrative
6,020

 
319

 
27,360

 
(659
)
 
33,040

Loss (gain) on disposals of  property and equipment

 
74

 
(16
)
 

 
58

Litigation settlement

 

 

 

 

Material charges and other operating expenses

 

 

 

 

Total costs and expenses
6,020

 
1,585

 
371,661

 
(17,758
)
 
361,508

 
 
 
 
 
 
 
 
 
 
INCOME (LOSS) FROM OPERATIONS
(6,020
)
 
15,852

 
96,352

 

 
106,184

 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 

 
 

 
 

 
 

 
 

Interest expense, net of interest capitalized

 
(25,657
)
 
(713
)
 
714

 
(25,656
)
Interest income
71

 
746

 
269

 
(714
)
 
372

Other - net
9,798

 
(9,793
)
 
264

 

 
269

Total other income (expense) - net
9,869

 
(34,704
)
 
(180
)
 

 
(25,015
)
 
 
 
 
 
 
 
 
 
 
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
3,849

 
(18,852
)
 
96,172

 

 
81,169

(Benefit) provision for income taxes

 
(27,095
)
 
252

 
(11,585
)
 
(38,428
)
 
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
3,849

 
8,243

 
95,920

 
11,585

 
119,597

 
 
 
 
 
 
 
 
 
 
DISCONTINUED OPERATIONS, NET OF TAX

 

 

 

 

 
 
 
 
 
 
 
 
 
 
EQUITY IN EARNINGS OF SUBSIDIARIES, NET OF TAX
115,748

 
34,944

 

 
(150,692
)
 

 
 
 
 
 
 
 
 
 
 
NET INCOME
$
119,597

 
$
43,187

 
$
95,920

 
$
(139,107
)
 
$
119,597







17

ROWAN COMPANIES PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Rowan Companies plc and Subsidiaries
Condensed Consolidating Income Statements
Three months ended September 30, 2013
(in thousands)
(unaudited)
 
Rowan plc (Parent)
 
RCI (Issuer)
 
Non-guarantor subsidiaries
 
Consolidating adjustments
 
Consolidated
 
 
 
 
 
 
 
 
 
 
REVENUES
$

 
$
33,381

 
$
380,307

 
$
(30,880
)
 
$
382,808

 
 
 
 
 
 
 
 
 
 
COSTS AND EXPENSES:
 

 
 

 
 

 
 

 
 

Direct operating costs (excluding items below)

 
8,462

 
234,245

 
(30,880
)
 
211,827

Depreciation and amortization

 
6,868

 
62,406

 

 
69,274

Selling, general and administrative
6,363

 
1,434

 
25,466

 

 
33,263

Loss (gain) on disposals of  property and equipment

 
2

 
(67
)
 

 
(65
)
Total costs and expenses
6,363

 
16,766

 
322,050

 
(30,880
)
 
314,299

 
 
 
 
 
 
 
 
 
 
INCOME (LOSS) FROM OPERATIONS
(6,363
)
 
16,615

 
58,257

 

 
68,509