e11vk
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For the fiscal year ended December 31, 2008
OR
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TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-5491
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Full title of the plan and the address of the plan, if different from that of the issuer
named below: |
ROWAN COMPANIES, INC. RETIREMENT SAVINGS PLAN
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Name of issuer of the securities held pursuant to the plan and the address of its principal
executive office: |
Rowan Companies, Inc.
2800 Post Oak Boulevard, Suite 5450
Houston, Texas 77056-6189
REQUIRED INFORMATION
The Rowan Companies, Inc. Retirement Savings Plan (the “Plan”) is subject to the Employee
Retirement Income Security Act of 1974 (“ERISA”). Therefore, in lieu of the requirements of Items
1-3 of Form 11-K, the financial statements of the Plan for and as of the fiscal year and fiscal
year-ends reflected therein, which have been prepared in accordance with the financial reporting
requirements of ERISA, are attached hereto as Appendix 1 and incorporated herein by this reference.
SIGNATURES
The Plan, Pursuant to the requirements of the Securities and Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
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ROWAN COMPANIES, INC. RETIREMENT SAVINGS PLAN |
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By: |
Rowan Companies, Inc. Savings
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And Investment Plan |
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Administrative Committee: |
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/s/ GARY L. MARSH June 29, 2009
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Gary L. Marsh |
ROWAN COMPANIES, INC. RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
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FINANCIAL STATEMENTS |
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EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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Note: Schedules required by 29 CFR 2520.103-10 of the Department of Labor’s Rules and Regulations
for reporting and disclosure under ERISA have been omitted because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Rowan Companies, Inc. Retirement Savings Plan:
We have audited the accompanying statement of net assets available for benefits of the Rowan
Companies, Inc. Retirement Savings Plan (the “Plan”) as of December 31, 2008, and the related
statement of changes in net assets available for benefits for the year then ended. These financial
statements are the responsibility of the Plan’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the net assets
available for benefits of the Plan as of December 31, 2008 and the changes in net assets available
for benefits for the year then ended in conformity with accounting principles generally accepted in
the United States of America.
/s/
MCCONNELL & JONES LLP
McConnell & Jones LLP
Houston, Texas
June 29, 2009
Rowan Companies, Inc. Retirement Savings Plan
Statement of Net Assets Available for Benefits
December 31, 2008
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2008 |
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Assets |
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Investment, at fair value: |
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Plan interest in Master Trust 1 |
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328,205 |
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Receivables |
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Employer contributions |
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56,212 |
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Participant contributions |
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59,202 |
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115,414 |
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Net Assets Available for Benefits at Fair Value |
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443,619 |
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Adjustment from fair value to contract value
for fully benefit-responsive investment contracts |
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569 |
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Net Assets Available for Benefits |
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$ |
444,188 |
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Represents 5% or more of net assets available for benefits. |
The accompanying notes are an integral part of these financial statements.
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Rowan Companies, Inc. Retirement Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2008
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2008 |
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Investment Loss |
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Plan interest in net loss of Master Trust |
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(61,414 |
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Contributions |
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Employer |
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230,522 |
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Participant |
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240,178 |
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Rollovers |
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47,666 |
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Total contributions |
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518,366 |
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Deductions |
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Benefits paid directly to participants |
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11,591 |
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Administrative expenses |
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1,173 |
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Total deductions |
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12,764 |
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Net Increase |
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444,188 |
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Net Assets Available for Benefits, Beginning of Year |
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— |
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Net Assets Available for Benefits, End of Year |
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444,188 |
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The accompanying notes are an integral part of these financial statements.
3
Rowan Companies, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2008
1. PLAN DESCRIPTION
The following brief description of the Rowan Companies, Inc. Retirement Savings Plan (the
“Plan”) is provided for general informational purposes only. Participants should refer to the
Plan agreement for more complete information.
General – The Plan is a defined contribution, individual account 401(k) plan covering certain
drilling division employees of Rowan Companies, Inc. and its subsidiaries (“Rowan”). The Plan
document was adopted on January 1, 2008.
Participation – Employees hired on or after January 1, 2008 are eligible to enter the Plan on
the first day of each month upon completion of two months of service. Employees hired before
January 1, 2008 are not eligible to enter the Plan, but are eligible to enter a separate
defined contribution, individual account 401(k) plan administered by Rowan.
Funding – Plan participants may make contributions to the Plan of up to 100% of their regular
compensation on a before-tax basis subject to certain limitations. Eligible employees are
subject to automatic enrollment. Rowan will automatically deduct 3% from their pay on a pre-tax
basis following a 30 day notice period. The deferral rate is increased by 1% each year until it
reaches a maximum of 6% of compensation. Employees can elect to stop or change this automatic
contribution. Rowan makes a Qualified Automatic Safe Harbor Matching Contribution to all
participants in an amount equal to 100% of the first 6% of the participant’s contribution.
Participants who attain the age of 50 before the end of the Plan year may make additional
before-tax contributions to the Plan ($5,000 for 2008).
Investment Options – The assets of the Plan are held in the Master Trust for Rowan Companies
and Affiliates Defined Contribution Plans (the “Master Trust”) and managed by Fidelity
Management Trust Company, the Trustee of the Plan (the “Trustee”). Plan participants direct
the investment of their accounts among the Plan’s investment options and may, at their sole
discretion, transfer amounts between such options, including the Rowan Companies Unitized Stock
Fund (the “Fund”), at any time.
Expenses – Participants’ accounts are charged with investment advisory and other fees by the
Trustee through charges by the underlying funds. Other expenses of administering the Plan and
Master Trust are borne by the Plan or by Rowan, at its discretion.
Vesting Provisions – Participants are 100% vested at all times in their own contributions, plus
any earnings accrued thereon. Qualified Automatic Safe Harbor Matching Contributions and
earnings thereon are fully vested after two years of service.
Distributions – Participants can obtain lump-sum or installment distributions of vested
balances upon termination of employment, retirement, disability or death. Participants may be
permitted to withdraw their before-tax account upon attainment of age 59 1/2 or hardship in
accordance with the terms of the Plan.
Forfeitures – Upon termination of employment, participants’ nonvested balances are forfeited.
Such forfeitures can be applied to reduce employer contributions. At December 31, 2008, Plan
assets included approximately $3,500, of nonvested forfeited accounts.
4
Rowan Companies, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2008
Plan Merger – Pursuant to an amendment dated June 10, 2009, the Plan was merged into another
defined contribution, individual account 401(k) plan administered by Rowan effective July 1,
2009.
Party-in-Interest Transactions – The investment by the Trustee of Plan contributions into
mutual funds managed by an affiliate of the Trustee are party-in-interest transactions, and the
related management fees are deducted from investment earnings. Rowan is also a
party-in-interest.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting – The financial statements are prepared on the accrual basis of accounting
in accordance with accounting principles generally accepted in the United States of America.
Investment Valuation and Income Recognition – Purchases and sales of securities are recorded on
a trade-date-basis. The investments held in the Master Trust are stated at fair value based on
the latest quoted market values of the underlying securities. Securities for which no quoted
market value is available are evaluated and valued by Plan management with reference to the
underlying investments, assumptions and methodologies used in arriving at fair value in
accordance with Financial Accounting Standards Board Statement No. 157, Fair Value Measurements
(FASB Statement No. 157) (See Note 6).
The FASB issued FSP AAG INV-1 and SOP 94-4-1 Reporting of Fully Benefit-Responsive Investment
Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide
and Defined-Contribution Health and Welfare and Pension Plans (the FSP) which requires
benefit-responsive investment contracts held by a defined-contribution plan to be reported at
fair value. However, contract value is the relevant measurement attribute for that portion of
the net assets available for benefits of a defined-contribution plan attributable to fully
benefit-responsive investment contracts because contract value is the amount participants would
receive if they were to initiate permitted transactions under the terms of the plan. The FSP
requires the Statement of Net Assets Available for Benefits to present the fair value of the
investment contracts as well as the adjustment of the fully benefit-responsive investment
contracts from fair value to contract value, if material (See Note 5). The Statement of Changes
in Net Assets Available for Benefits is prepared on a contract value basis.
Net depreciation of investments is comprised of realized and unrealized gains and losses.
Realized gains or losses represent the difference between proceeds received upon sale and the
average cost of the investment. Unrealized gain or loss is the difference between market value
and cost of investments retained in the Plan (at financial statement date). For the purpose of
allocation to participants, the Rowan Companies Unitized Stock Fund is valued by the Plan at
its unit price (comprised of market price plus uninvested cash position) on the date of
allocation and current unit price is used at the time of distribution to participants resulting
in a realized gain or loss reflected in the income from the Plan’s investment in the Master
Trust.
Investment income from the Plan’s investment in the Master Trust consists of the Plan’s
proportionate share of the Master Trust’s interest and dividend income and investment income
from net appreciation (depreciation) in fair value of investments. The Trustee records dividend
income as of the ex-dividend date and accrues interest income as earned. Realized gains and
losses on security sales are computed on an average cost basis.
Payment of Benefits – Benefits are recorded when paid.
5
Rowan Companies, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2008
Use of Estimates – The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
changes therein, and disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
3. RISKS AND UNCERTAINTIES
Investment securities are exposed to various risks, such as interest rate, market, and credit.
Due to the level of risk associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities, it is at least reasonably
possible that changes in risks in the near term could materially affect the amounts reported in
the Statement of Net Assets Available for Benefits.
4. INVESTMENT IN MASTER TRUST
The Master Trust for Rowan Companies and Affiliates Defined Contribution Plans commingles, for
investment and administrative purposes, Plan assets with those of another plan sponsored by a
Rowan subsidiary. The Trustee maintains supporting records for the purpose of allocating
investment gains or losses to the participating plans. Plan interest in the net assets of the
Master Trust is based on the assets held by each plan in the Master Trust on an actual basis.
Net investment gains or losses for each day are allocated by the Trustee to each participating
plan based on the plans’ relative interest in the investment units of the Master Trust. At
December 31, 2008, the Master Trust held the following investments:
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2008 |
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Amount |
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Investments — at fair value: |
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Interest bearing cash |
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$ |
18,591,044 |
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18 |
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Stable value fund |
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11,315,316 |
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11 |
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Employer securities |
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14,827,768 |
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14 |
% |
Registered investment companies |
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57,633,523 |
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56 |
% |
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Total investments at fair value |
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$ |
102,367,651 |
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100 |
% |
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6
Rowan Companies, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2008
Investment income for the Master Trust for the years ended December 31, 2008 was as follows:
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2008 |
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Investment loss: |
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$ |
(44,572,656 |
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Interest and dividends |
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731,243 |
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Net investment loss |
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(43,841,413 |
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Expenses |
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(92,521 |
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Net loss |
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$ |
(43,933,934 |
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The Plan’s interest in the Master Trust’s total investment units was approximately 0.03% at
December 31, 2008, with the balance attributed to the other Rowan-sponsored plans.
The Master Trust invests a significant portion of its assets in employer securities which
approximates 14% of the Master Trust’s net assets available for benefits as of December 31,
2008. As a result of this concentration, any significant fluctuation in the market value of
this stock could affect individual participant accounts and the net assets of the Plan.
5. FULLY BENEFIT- RESPONSIVE INVESTMENT CONTRACTS
The Plan has an interest in a Stable Value Fund that has investments in fixed income securities
and bond funds and may include derivative instruments, such as futures contracts and swap
agreements. The stable value fund also enters into a “wrapper” contract issued by a
third-party.
As described in Note 2, because these contracts are fully benefit-responsive, contract value is
the relevant measurement attribute for that portion of the net assets available for benefits
attributable to these contracts. Contract value represents contributions made under the
contract, plus earnings, less participant withdrawals and administrative expenses. Participants
may ordinarily direct the withdrawal or transfer of all or a portion of their investment at
contract value.
The average yield earned by the contract for the year ended December 31, 2008 was 3.57% and
the average yield earned to reflect the actual interest rate credited to participants for the
year ended December 31, 2008 was 3.04%.
There are no reserves against contract value for credit risk of the contract issuer or
otherwise. The crediting interest rate is based on a formula agreed upon with the issuer, but
it may not be less than zero percent. Such interest rates are reviewed on a quarterly basis for
resetting.
7
Rowan Companies, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2008
6. FAIR VALUE MEASUREMENTS
FASB Statement No. 157 establishes a framework for measuring fair value. That framework
provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (level 1 measurements) and the lowest
priority to unobservable inputs (level 3 measurements). The three levels of the fair value
hierarchy under FASB Statement No. 157 are described below:
Level 1 — Inputs to the valuation methodology are unadjusted quoted prices for identical assets
or liabilities in active markets that the Plan has the ability to access.
Level 2 — Inputs to the valuation methodology include:
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Quoted prices for similar assets or liabilities in active markets; |
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Quoted prices for identical or similar assets or liabilities in inactive markets; |
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Inputs other than quoted prices that are observable for the asset or liability; |
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Inputs that are derived principally from or corroborated by observable market data by
correlation or other means. |
If the asset or liability has a specified (contractual) term, the level 2 input must be
observable for substantially the full term of the asset or liability.
Level 3 — Inputs to the valuation methodology are unobservable and significant to the
fair value measurement.
The asset or liability’s fair value measurement level within the fair value hierarchy is based
on the lowest level of any input that is significant to the fair value measurement. Valuation
techniques used need to maximize the use of observable inputs and minimize the use of
unobservable inputs.
The following is a description of the valuation methodologies used for assets measured at fair
value.
Common stocks: Valued at the closing price reported on the active market on which the
individual securities are traded.
Mutual funds: Valued at the net asset value (‘NAV”) of shares held by the plan at year end.
Stable value fund: Valued at fair value by discounting the related cash flows based on current
yields of similar instruments with comparable durations considering the credit-worthiness of
the issuer (See Note 5).
The methods described above may produce a fair value calculation that may not be indicative of
net realizable value or reflective of future fair values. Furthermore, while the Plan believes
its valuation methods are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the reporting date.
8
Rowan Companies, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2008
The following table sets forth by level, within the fair value hierarchy, the Master Trust’s
assets at fair value as of December 31, 2008:
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Assets at Fair Value as of December 31, 2008 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Interest
bearing cash |
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$ |
18,591,044 |
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$ |
— |
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$ |
— |
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$ |
18,591,044 |
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Employer securities |
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14,827,768 |
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— |
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— |
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14,827,768 |
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Stable value fund |
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— |
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11,315,316 |
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— |
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11,351,316 |
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Registered investment companies |
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57,633,523 |
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— |
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— |
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57,633,523 |
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$ |
91,052,335 |
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$ |
11,351,316 |
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$ |
— |
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$ |
102,367,651 |
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7. TAX STATUS OF THE PLAN
The Plan’s trustee received a favorable opinion letter dated October 9, 2003, from the
Internal Revenue
Service informing the trustee that their prototype non-standardized profit sharing plan is
qualified under provisions of Section 401(a) of the Internal Revenue Code. The plan
administrator believes that the Plan is currently designed and being operated in compliance
with the applicable requirements of the Internal Revenue Code. Therefore, no provision for
income taxes has been included in the Plan’s financial statements.
8. TRANSACTIONS WITH PARTIES-IN-INTEREST
Certain Plan investments are funds managed by the Plan’s trustee and therefore qualify as
party-in-interest transactions. Other party-in-interest investments held by the Plan include
Rowan common stock, which totaled $18,558 at December 31, 2008.
Fees paid during the year for legal, accounting, and other professional services rendered by
parties-in-interest were based on customary and reasonable rates for such services.
9
Rowan Companies, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2008
9. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the financial
statements to Form 5500:
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December 31, |
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2008 |
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Net Assets Available for Benefits per the
financial statements |
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$ |
444,188 |
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Adjustment from contract value to fair value for
fully benefit-responsive contracts |
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569 |
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Net Assets Available for Benefits per Form 5500 |
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$ |
443,619 |
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The following is a reconciliation of the changes in net assets available for benefits per the
financial statements to Form 5500 for the year ended December 31, 2008:
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Increase in Net Assets Available for Benefits per the
financial statements |
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$ |
444,188 |
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Adjustment from contract value to fair value for
fully benefit-responsive contracts |
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(569 |
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Increase in Net Assets Available for Benefits per
Form 5500 |
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$ |
443,619 |
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10