Rowan Reports 'Solid' 4Q Results
For the three months ended December 31, 2010, Rowan generated net income of $57.3 million or $0.45 per share, compared to $60.8 million or $0.53 per share in the fourth quarter of 2009. Revenues were $458.8 million in the fourth quarter of 2010, compared to $399.8 million in the fourth quarter of 2009.
Results for the fourth quarter of 2010 included $5.7 million or $0.03 per share of net gains on debt redemptions and asset disposals, compared to $1.4 million or $0.01 per share of asset disposal gains in the fourth quarter of 2009.
For the year ended December 31, 2010, the Company generated net income of $280.0 million or $2.36 per share on revenues of $1.82 billion, compared to net income of $367.5 million or $3.24 per share on revenues of $1.77 billion in 2009. The 2010 results included $4.5 million or $0.03 per share of net gains on debt redemptions and asset disposals, compared to $5.7 million or $0.03 per share of asset disposal gains in 2009. The 2010 results also included a $42.0 million pre-tax charge in the first quarter, or $0.26 per share after tax, for estimated losses associated with non-conforming and slow-moving inventory items in the Company's Drilling Products and Systems manufacturing segment. The 2009 results included no such charges but included $25.4 million or $0.22 per share of tax benefits related to a third-party tax court ruling, which provided that certain foreign-source income is not taxable in the United States. Excluding these charges and tax benefits and the gains described above, earnings were $307.8 million or $2.59 per share in 2010 and $338.3 million or $2.98 per share in 2009.
Rowan's drilling operations generated revenues of $259.6 million in the fourth quarter of 2010, up by 2% over the prior-year quarter as the impact of offshore fleet additions and higher land rig utilization more than offset lower average day rates. The Company's gross drilling margin was 47% of revenues in the fourth quarter of 2010, down from 52% in the prior-year quarter. Income from drilling operations was $55.3 million in the fourth quarter of 2010, down by 27% from the prior-year quarter.
Rowan's manufacturing operations generated external revenues of $199.2 million in the fourth quarter of 2010, up by 38% over the prior-year quarter. The Company's gross manufacturing margin was 17% of revenues in the fourth quarter of 2010, unchanged from the prior-year quarter. Income from manufacturing operations was $18.9 million in the fourth quarter of 2010, up by 108% from the prior-year quarter.
Matt Ralls, President and Chief Executive Officer, commented, "Our contract drilling operations provided solid results in the fourth quarter, exceeding consensus expectations primarily due to continued success in managing our costs. Similarly, our manufacturing results were above expectations, with the out-performance again led by the mining products group. We expect demand for our mining products to continue to strengthen in 2011.
"The current jack-up newbuilding cycle appears to be gaining momentum, with several contractors ordering new higher specification jack-ups in response to increasingly demanding drilling requirements. Rowan's strategy has been to stay at the front of this trend, with six high-spec jack-ups delivered over the past year, three more scheduled for delivery in 2011 and an industry-leading share of the high-spec jack-up market going forward. We expect LeTourneau's drilling products segment, which has been experiencing an increase in jack-up inquiries and quotation activity, to benefit from this trend through new kit and equipment package orders.
"We have repeatedly stated that our strategy is to separate LeTourneau from Rowan when suitable market conditions exist. We believe favorable conditions now exist and expect to begin a process soon to either spin off or sell our manufacturing operations. Likewise, the land rig market in the US has been strengthening, particularly for more capable land rigs like those that characterize the Rowan fleet, and we expect to begin a process to monetize this business in the near future as well. As always, we will look at all alternatives for both businesses with the objective of maximizing shareholder value."