Rowan Reports Third Quarter 2017 Results

ROWAN COMPANIES PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

Three months ended September 30,

Nine months ended September 30,

2017

2016

2017

2016

REVENUES

$

291.6

$

379.4

$

986.1

$

1,491.4

COSTS AND EXPENSES:

Direct operating costs (excluding items below)

167.4

186.0

504.9

598.3

Depreciation and amortization

103.4

102.2

304.0

301.2

Selling, general and administrative

25.0

23.5

71.0

76.5

Loss on disposals of property and equipment

2.8

1.2

9.3

5.3

Material charges and other operating items

—

32.9

—

32.9

Total costs and expenses

298.6

345.8

889.2

1,014.2

INCOME (LOSS) FROM OPERATIONS

(7.0)

33.6

96.9

477.2

OTHER INCOME (EXPENSE):

Interest expense

(38.5)

(39.4)

(117.0)

(116.6)

Interest income

3.7

1.2

8.9

2.1

Gain (loss) on extinguishment of debt

(0.5)

—

1.7

2.4

Other - net

(0.4)

(2.1)

(0.5)

(5.4)

Total other (expense), net

(35.7)

(40.3)

(106.9)

(117.5)

INCOME (LOSS) BEFORE INCOME TAXES

(42.7)

(6.7)

(10.0)

359.7

Provision (benefit) for income taxes

(21.8)

(12.2)

29.3

14.7

NET INCOME (LOSS)

$

(20.9)

$

5.5

$

(39.3)

$

345.0

NET INCOME (LOSS) PER SHARE - DILUTED

$

(0.17)

$

0.04

$

(0.31)

$

2.73

WEIGHTED AVERAGE SHARES - BASIC

$

126.2

$

125.4

$

126.1

$

125.3

WEIGHTED AVERAGE SHARES - DILUTED

126.2

126.7

126.1

126.4

ROWAN COMPANIES PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

September 30,
2017

December 31,
2016

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

1,220.0

$

1,255.5

Receivables - trade and other

244.1

301.3

Prepaid expenses and other current assets

24.5

23.5

Total current assets

1,488.6

1,580.3

Property and equipment - net

6,815.9

7,060.0

Investment in unconsolidated subsidiary

25.0

—

Other assets

43.7

35.3

$

8,373.2

$

8,675.6

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt

$

—

$

126.8

Accounts payable - trade

71.4

94.3

Deferred revenues

43.8

103.9

Accrued liabilities

141.4

158.8

Total current liabilities

256.6

483.8

Long-term debt, less current portion

2,510.2

2,553.4

Other liabilities

292.5

338.8

Deferred income taxes - net

19.2

185.7

Shareholders' equity

5,294.7

5,113.9

$

8,373.2

$

8,675.6

ROWAN COMPANIES PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Nine months ended September 30,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

(39.3)

$

345.0

Adjustments to reconcile net income (loss) to net cash provided by operations:

Depreciation and amortization

304.0

301.2

Deferred income taxes

32.8

(21.9)

Provision for pension and other postretirement benefits

5.1

13.0

Share-based compensation expense

19.5

25.9

Loss on disposals of property and equipment

9.3

5.3

Contingent payment derivative

0.1

(4.2)

Asset impairment charges

—

34.3

Other

1.7

0.3

Net changes in current assets and liabilities

46.7

(56.3)

Other postretirement benefit claims paid

(2.0)

(6.6)

Contributions to pension plans

(23.9)

(16.1)

Deferred revenues

(70.0)

45.3

Net changes in other noncurrent assets and liabilities

(43.0)

28.3

Net cash provided by operating activities

241.0

693.5

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(78.6)

(88.5)

Investment in unconsolidated subsidiary

(25.0)

—

Proceeds from disposals of property and equipment

1.5

1.1

Net cash used in investing activities

(102.1)

(87.4)

CASH FLOWS FROM FINANCING ACTIVITIES:

Reductions of long-term debt

(170.0)

(47.9)

Shares repurchased for tax withholdings on vesting of restricted share units

(4.4)

(4.9)

Net cash used in financing activities

(174.4)

(52.8)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(35.5)

553.3

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

1,255.5

484.2

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

1,220.0

$

1,037.5

ROWAN COMPANIES PLC

SUPPLEMENTAL OPERATING SEGMENT INFORMATION

(In millions)

(Unaudited)

Three months ended September 30,

Nine months ended September 30,

2017

2016

2017

2016

Deepwater:

Revenues

$

88.4

$

135.1

$

371.8

$

699.0

Operating expenses:

Direct operating costs (excluding items below)

32.9

52.4

116.2

175.4

Depreciation and amortization

27.4

28.8

84.1

86.0

Other operating items

—

0.1

—

0.4

Income from Operations

$

28.1

$

53.8

$

171.5

$

437.2

Jack-ups:

Revenues

$

203.2

$

244.3

$

614.3

$

792.4

Operating expenses:

Direct operating costs (excluding items below)

134.5

133.6

388.7

422.9

Depreciation and amortization

75.3

71.5

217.8

211.0

Other operating items

2.7

33.6

9.3

37.3

Income (loss) from Operations

$

(9.3)

$

5.6

$

(1.5)

$

121.2

Unallocated costs and other:

Operating expenses:

Depreciation and amortization

0.7

1.9

2.1

4.2

Selling, general and administrative

25.0

23.5

71.0

76.5

Other operating items

0.1

0.4

—

0.5

Loss from Operations

$

(25.8)

$

(25.8)

$

(73.1)

$

(81.2)

Consolidated:

Revenues

$

291.6

$

379.4

$

986.1

$

1,491.4

Operating expenses:

Direct operating costs (excluding items below)

167.4

186.0

504.9

598.3

Depreciation and amortization

103.4

102.2

304.0

301.2

Selling, general and administrative

25.0

23.5

71.0

76.5

Other operating items

2.8

34.1

9.3

38.2

Income (loss) from Operations

$

(7.0)

$

33.6

$

96.9

$

477.2

ROWAN COMPANIES PLC

SUPPLEMENTAL OPERATING INFORMATION

(Unaudited)

Three months ended

Nine months ended

September 30,

June 30,

September 30,

September 30,

2017

2017

2016

2017

2016

RIG DAYS ⁽¹⁾

Deepwater:

Revenue-producing ⁽²⁾

184

204

276

658

962

Available

368

364

368

1,092

1,096

Jack-up:

Revenue-producing

1,646

1,503

1,509

4,696

4,610

Available

2,115

2,093

2,208

6,279

6,576

Total:

Revenue-producing ⁽²⁾

1,830

1,707

1,785

5,354

5,572

Available

2,483

2,457

2,576

7,371

7,672

UTILIZATION ⁽¹⁾

Deepwater ⁽²⁾

50

%

56

%

75

%

60

%

88

%

Jack-up

78

%

72

%

68

%

75

%

70

%

Total ⁽²⁾

74

%

69

%

69

%

73

%

73

%

AVERAGE DAY RATES ⁽³⁾ (in thousands)

Deepwater ^{(2) (4)}

$

476.6

$

599.6

$

490.0

$

562.1

$

575.5

Jack-up

$

122.1

$

129.9

$

158.8

$

129.1

$

168.6

Total ^{(2) (4)}

$

157.7

$

186.0

$

210.1

$

182.3

$

238.9

REBILLABLES ⁽⁵⁾ (in millions)

Deepwater

$

0.8

$

0.4

$

(0.2)

$

2.0

$

2.5

Jack-up

1.9

2.1

4.5

7.4

12.9

Total

$

2.7

$

2.5

$

4.3

$

9.4

$

15.4

_______________________

(1) Available rig days and utilization exclude cold-stacked days.

(2) Revenue-producing days for the three and nine months ended September 30, 2017 includes 92 days for the drillship Rowan Reliance. The drillship did not operate in the third quarter, but was available for Cobalt per the 2016 contract amendment. Revenue of $29 million ($315 thousand per day), previously deferred in 2016, was recognized during the three and nine months ended September 30, 2017 related to these 92 days for which the rig was available to Cobalt but not operating.

(3) Average day rates exclude other revenue, which is primarily revenue received for contract reimbursable costs.

(4) Average day rate for the nine months ended September 30, 2016 includes operating days for the drillship Rowan Relentless up to the contract termination which was 143 days for the nine months ended September 30, 2016.

(5) Rebillable operating costs equally offset with rebillable revenue.

ROWAN COMPANIES PLC

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In millions, except per share amounts)

(Unaudited)

Three months ended September 30, 2017

Three months ended September 30, 2016

Pretax

Tax

Net

Diluted
EPS*

Pretax

Tax

Net

Diluted
EPS*

GAAP NET INCOME (LOSS)

$

(42.7)

$

21.8

$

(20.9)

$

(0.17)

$

(6.7)

$

12.2

$

5.5

$

0.04

Loss on extinguishment of debt

0.5

—

0.5

—

—

—

—

—

Non-cash asset impairment charges

—

—

—

—

34.3

—

34.3

0.27

Litigation-related credit

—

—

—

—

(1.4)

(1.4)

(0.01)

NON-GAAP NET INCOME (LOSS)

$

(42.2)

$

21.8

$

(20.4)

$

(0.16)

$

26.2

$

12.2

$

38.4

$

0.30

Nine months ended September 30, 2017

Nine months ended September 30, 2016

Pretax

Tax

Net

Diluted
EPS*

Pretax

Tax

Net

Diluted
EPS*

GAAP NET INCOME (LOSS)

$

(10.0)

$

(29.3)

$

(39.3)

$

(0.31)

$

359.7

$

(14.7)

$

345.0

$

2.73

Gain on extinguishment of debt

(1.7)

—

(1.7)

(0.01)

(2.4)

—

(2.4)

(0.02)

Non-cash asset impairment charges

—

—

—

—

34.3

—

34.3

0.27

Litigation-related credit

—

—

—

—

(1.4)

—

(1.4)

(0.01)

Customer contract termination settlement

—

—

—

—

(120.0)

—

(120.0)

(0.95)

NON-GAAP NET INCOME (LOSS)

$

(11.7)

$

(29.3)

$

(41.0)

$

(0.32)

$

270.2

$

(14.7)

$

255.5

$

2.02

* Per share amounts may not sum due to rounding.

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

ADJUSTED EARNINGS BEFORE INTEREST, TAXES AND DEPRECIATION (EBITDA):

GAAP NET INCOME (LOSS)

$

(20.9)

$

5.5

$

(39.3)

$

345.0

Depreciation and amortization

103.4

102.2

304.0

301.2

Interest (income) expense and other, net

35.2

40.3

108.6

119.9

Income tax expense (benefit)

(21.8)

(12.2)

29.3

14.7

(Gain) loss on extinguishment of debt

0.5

—

(1.7)

(2.4)

Non-cash asset impairment charges

—

34.3

—

34.3

Litigation-related credit

—

(1.4)

—

(1.4)

Loss on disposals of property and equipment

2.8

1.2

9.3

5.3

Customer contract termination settlement

—

—

—

(120.0)

NON-GAAP ADJUSTED EBITDA

$

99.2

$

169.9

$

410.2

$

696.6