Rowan Companies Inc. Reports Operating Results (10-Q)
Rowan Cos Inc has a market cap of $4.28 billion; its shares were traded at around $35.04 with a P/E ratio of 29.1 and P/S ratio of 4.6. Rowan Cos Inc had an annual average earning growth of 18.2% over the past 10 years. GuruFocus rated Rowan Cos Inc the business predictability rank of 3.5-star.
Highlight of Business Operations:Net income from continuing operations rose to $55.5 million in the first quarter of 2012 from $26.8 million in the first quarter of 2011. The effective tax rate was a benefit of less than 1% in the first quarter of 2012, as compared to a provision of 8.8% in the first quarter of 2011, primarily due to the current period amortization of tax benefit related to outbounding certain rigs into our offshore subsidiaries in prior years, the 2011 sales of the Company s manufacturing and land drilling operations, whose earnings were subject to a 35% U.S. statutory rate, and a greater proportion of income projected to be earned in lower-tax foreign jurisdictions in 2012 as compared to 2011.
During the period from January 2011 through the first quarter of 2012, operations commenced for seven newly constructed rigs, including three EXL-class rigs and the Rowan Viking, Rowan Stavanger, and Rowan Norway in 2011, and the Joe Douglas in 2012. These seven rigs contributed 412 incremental revenue-producing days in the first quarter of 2012 (20% of total revenue-producing days) compared to the first quarter of 2011.
Our operating margin (revenues in excess of operating costs, other than depreciation, selling, general and administrative expenses and material charges) was approximately 45% of revenues in 2012 compared to 46% in the first quarter of 2011. Margins for the first quarter of 2012 were negatively impacted as a result of higher rig personnel and maintenance costs as well as increased shorebase costs associated with expanded international operations. Depreciation expense increased by $20.8 million or 55% between these periods due to the rig additions. Selling, general and administrative expenses increased by $2.2 million or 11% between periods due primarily to increases in personnel and related costs.
Cash flows from operations declined to $63 million in the first quarter of 2012 from $114 million in the first quarter of 2011. The decline in cash flows can be attributed in part to the sales of our manufacturing and land drilling businesses in June and September of 2011. As discussed in Note 1 of Notes to Condensed Consolidated Financial Statements, the Company has chosen not to separately disclose cash flows pertaining to discontinued operations in its statement of cash flows, as permitted under GAAP. As a result, the reported amount of cash flows from operating activities in the first quarter of 2011 included cash flows of our former manufacturing and land drilling businesses. The impact of the sales on cash flows from operations was partially offset by higher cash flows attributable to rig additions. We expect the contribution from these newbuild rigs to result in significantly higher operating cash flows in 2012 compared to 2011.
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