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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to Section 240.14a-12
Rowan Companies, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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SEC 1913 (02-02)
ROWAN COMPANIES, INC.
2800 POST OAK BOULEVARD, SUITE 5450
HOUSTON, TEXAS 77056-6127
C. R. PALMER
CHAIRMAN OF THE BOARD
March 12, 2004
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders of Rowan
Companies, Inc., which will be held in the Williams Auditorium located on Level
2 of the Williams Tower, 2800 Post Oak Boulevard, Houston, Texas, on Friday,
April 23, 2004 at 9:00 a.m., Central Time. Your Board of Directors and
management look forward to greeting personally those stockholders able to
attend.
At the meeting, stockholders will be asked to elect four Class I
Directors. YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
FOUR NOMINEES FOR CLASS I DIRECTOR.
Regardless of the number of shares you own or whether you plan to
attend, it is important that your shares be represented and voted at the
meeting. You are requested to sign, date and mail the enclosed proxy promptly.
Both your interest and participation in the affairs of the Company are
appreciated.
Sincerely,
/s/ C.R. Palmer
C. R. Palmer
Chairman
Rowan Companies, Inc. 2004 Proxy Statement
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NOTICE OF ANNUAL MEETING OF ROWAN STOCKHOLDERS
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DATE: Friday, April 23, 2004
TIME: 9:00 a.m., Central Time
PLACE: Williams Tower, Level 2 Auditorium
2800 Post Oak Boulevard
Houston, Texas
PURPOSE: - To elect four Class I Directors for three-year terms
- To conduct other business if properly raised
Only stockholders of record on March 1, 2004 may vote at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED RETURN ENVELOPE AT YOUR EARLIEST
CONVENIENCE.
/S/ MARK H. HAY
Mark H. Hay
Secretary
March 12, 2004
Rowan Companies, Inc. 2004 Proxy Statement
TABLE OF CONTENTS PAGE
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General Information......................................... 1
Election of Directors....................................... 2
Director Compensation and Attendance........................ 3
Board Committees............................................ 4
Director and Officer Stock Ownership........................ 5
Compensation Committee Report on Executive Compensation..... 6
Audit Committee Report...................................... 8
Executive Compensation Tables............................... 10
Stock Performance Graphs.................................... 13
Security Ownership of Certain Beneficial Owners............. 14
Additional Information...................................... 15
Audit Committee Charter..................................... Appendix A
Rowan Companies, Inc. 2004 Proxy Statement
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GENERAL INFORMATION
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WHO MAY VOTE
Stockholders of Rowan Companies, Inc., as recorded in our stock register on
March 1, 2004, may vote at the meeting. On that date, there were 105,724,036
shares of Rowan's common stock outstanding. Each share is entitled to one vote
on the matters to be presented at the meeting.
HOW TO VOTE
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting. If you are unable to attend the meeting, you must complete and
return the enclosed proxy card to ensure that your shares are voted at the
meeting.
HOW A PROXY WORKS
Rowan's Board of Directors is asking for your proxy. Giving us your proxy means
you authorize the persons appointed as proxies to vote your shares at the
meeting in the manner that you have indicated on the proxy card. You may vote
for all, some or none of our director nominees. You may also abstain from
voting.
If you sign and return the enclosed proxy card but do not indicate your vote,
the appointed proxies will vote your shares in favor of our director nominees.
You may receive more than one proxy card depending on how you hold your shares.
Shares registered in your name are covered by one card and any shares held by
someone else, such as a stockbroker, may be covered by a separate card. Rowan
employees receive a separate card for any shares they hold in Rowan's 401(k)
plans.
HOW WE SOLICIT PROXIES
We are mailing this proxy statement and the proxy card on or about March 12,
2004. In addition to this mailing, Rowan employees may solicit your proxy
personally, electronically or by telephone. Rowan will pay all costs of
solicitation and has retained D. F. King & Co., Inc. to assist with the
solicitation at an estimated cost of $8,000, plus reasonable expenses. We also
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their expenses in sending these materials to you.
REVOKING A PROXY
You may revoke your proxy before it is voted by submitting a new proxy card with
a later date, by voting in person at the meeting or by notifying Rowan's
Corporate Secretary in writing before 5:00 P.M., Central Time, on the day before
the meeting at the address listed under "Questions?" on page 18.
QUORUM
In order to carry on the business of the meeting, we must have a quorum. This
means that at least a majority of the outstanding shares must be represented at
the meeting, either by proxy or in person. You are considered present at the
meeting if you attend or are represented by a valid proxy, regardless of whether
your proxy card is marked as casting a vote or as abstaining or is left blank.
Any shares owned by Rowan and held in treasury are not voted and do not count
for this purpose.
VOTES NEEDED
The election of each nominee for Class I Director will be decided by a plurality
of the votes cast.
Unless another vote is specifically required by law or by Rowan's Bylaws, any
other matter to properly come before the meeting shall be approved if the votes
cast in favor of the matter exceed the votes cast opposing the matter.
Only votes cast for or against are counted in determining the voting outcome.
Abstentions and broker non-votes are counted for quorum purposes, but not for
voting purposes. Broker non-votes occur when a broker returns a proxy, but does
not have the authority to vote on a particular matter.
OTHER BUSINESS
We are not aware of any other matters that are to be presented for action at the
meeting. However, if any other matters properly come before the meeting, your
shares will be voted in accordance with the discretion of the appointed proxies
unless you indicate otherwise on your proxy card.
-1-
Rowan Companies, Inc. 2004 Proxy Statement
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ELECTION OF DIRECTORS
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The Rowan Board of Directors consists of three classes:
o Class I currently has three directors
o Class II has three directors
o Class III has three directors
Each class of directors is elected for a three-year term, and the current terms
will expire on the date of Rowan's annual meeting, in the year indicated:
o Class I 2004
o Class II 2005
o Class III 2006
Four Class I Directors are to be elected at this meeting. One of the current
members of this Class, Hans M. Brinkhorst, who served as a Director of the
Company for six years, will not stand for reelection. The Board expresses its
gratitude to Mr. Brinkhorst for his many years of valuable and devoted service
to the Company.
P. Dexter Peacock and Sir Graham Hearne, who have not previously served on the
Board, were recommended to the Nominating and Corporate Governance Committee by
the full Board of Directors. The Committee then nominated Messrs. Peacock and
Hearne, along with the two remaining members of the Class, William T. Fox III
and H. E. Lentz, to be the nominees for Class I director, a decision with which
the full Board concurred.
Because the effect of these actions is to increase the size of Class I and the
Board by one, a Board-approved amendment to the Bylaws to accomplish that
purpose will become effective April 23, 2004, the date of the 2004 Annual
Meeting of Stockholders.
If a director nominee becomes unavailable to serve prior to the election, your
proxy card authorizes us to vote for a replacement nominee if the Board names
one.
THE BOARD RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES LISTED BELOW.
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DIRECTOR NOMINEES
DIRECTOR
NAME PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS(1) AGE SINCE
------------------- ------------------------------------------------------------ --- --------
CLASS I (TERM TO EXPIRE IN 2007)
William T. Fox III Retired in 2003; formerly Managing Director (1994-2003) 58 2001
responsible for the global energy and mining businesses of
Citigroup (corporate banking)
Sir Graham Hearne Retired in 2002; formerly Chairman (1991-2002) and Chief 66 -
Executive Officer (1984-1991) of Enterprise Oil plc (oil and
gas production)
H. E. Lentz Advisory Director of Lehman Brothers Inc. (investment 59 1990
bankers) since January 2004; Consultant to Lehman Brothers
Inc. (January 2003 to December 2003); Managing Director of
Lehman Brothers Inc. (1993 to January 2003)
P. Dexter Peacock Of Counsel to Andrews Kurth LLP (law firm) since 1997; 62 -
formerly Managing Partner of Andrews Kurth
(Table continued on following page)
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Rowan Companies, Inc. 2004 Proxy Statement
CONTINUING DIRECTORS
DIRECTOR
NAME PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS(1) AGE SINCE
------------------- ------------------------------------------------------------ --- --------
CLASS II (TERM EXPIRES IN 2005)
R. G. Croyle Vice Chairman of the Board and Chief Administrative Officer 61 1998
of the Company since August 1, 2002; Executive Vice
President of the Company from October 1993 to August 2002
(2)
D. F. McNease President of the Company since August 1, 2002 and Chief 52 1998
Executive Officer since May 1, 2003; Executive Vice
President of the Company and President of its Drilling
Subsidiaries from April 1999 to August 2002 (2)
Lord Moynihan Senior Partner of London-based Colin Moynihan Associates 48 1996
(energy advisors) since 1993; Executive Chairman (1999-2003)
of London-based Consort Resources Ltd. (upstream UK natural
gas company); Member of the British House of Lords (May 1997
to present)
CLASS III (TERM EXPIRES IN 2006)
Henry O. Boswell Retired in 1987; formerly President (1983-1987) of Amoco 74 1988
Production Company (oil and gas production)
Frederick R. Lausen Retired in 2002; formerly Vice President (1986 to May 2002) 66 2000
of Davis Petroleum, Inc. (oil and gas production)
C. R. Palmer Chairman of the Board of the Company since January 1972; 69 1969
President of the Company from January 1972 until August
2002; Chief Executive Officer of the Company from January
1972 to May 1, 2003 (2)
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(1) Directorships other than those listed in the table are as follows: Mr.
Peacock is a director of Cabot Oil & Gas Corporation, Mr. Lentz is a
director of P&L Coal Holdings, Inc. and CARBO Ceramics Inc., and Mr. Hearne
is a director of Novar plc, Braemer Seascope Group plc, Catlin Group
Limited, Gallaher Group plc, N.M. Rothschild & Sons Limited and Wellstream
International Limited.
(2) Information regarding the compensation of Messrs. Croyle, McNease and Palmer
is disclosed in the Summary Compensation Table under "Executive Compensation
Tables" on page 10.
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DIRECTOR COMPENSATION AND ATTENDANCE
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Rowan employees receive no additional compensation for serving as directors.
Nonemployee directors receive a base fee of $30,000 annually, $750 per regular
or special Board meeting attended, $500 per committee meeting attended and
reimbursement for reasonable travel expenses. Directors are expected to meet
their responsibilities by attending at least 75% of scheduled meetings of the
Board and the committees on which they serve. The Board of Directors held six
meetings in 2003 and each director attended all of such meetings. Directors are
strongly encouraged to attend annual meetings of Company shareholders and each
of our directors attended the last annual meeting.
Each nonemployee director may also be selected to receive a nonqualified stock
option grant under the 1998 Rowan Companies, Inc. Nonemployee Directors Stock
Option Plan. Eligibility and the terms and conditions of each grant are
determined by the Board of Directors, with the Board generally setting the
amounts granted at the median of the range in comparison to peer group
companies. Options granted under the plan become 100% exercisable one year after
the date of grant and expire after five or ten years. Each nonemployee director
received a grant of options for 6,000 shares in 2003 at an option exercise price
of $21.19 per share.
-3-
Rowan Companies, Inc. 2004 Proxy Statement
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BOARD COMMITTEES
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The functions performed by the committees of the Board of Directors are as
follows:
THE AUDIT COMMITTEE has as its principal functions those responsibilities
described in the Audit Committee Report on pages 8 and 9 and in the Audit
Committee's Charter attached as Appendix A.
Committee members: Messrs. Fox (Chairman), Boswell and Lausen
2003 meetings: four
THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE generally identifies qualified
board candidates and develops and recommends to the Board of Directors the
corporate governance principles applicable to the Company.
As described under "Director Nominations" on page 16, the Committee will
consider for election to the Board qualified nominees recommended by
stockholders. Any such stockholder recommendations must be submitted not less
than 60 days prior to the anniversary date of the previous annual meeting and,
in the case of a special meeting, not more than ten days following the earlier
of the date of the meeting notice or the public announcement notice.
Committee members: Messrs. Lentz (Chairman), Boswell, Brinkhorst, Fox, Lausen
and Moynihan
2003 meetings: six
THE COMPENSATION COMMITTEE recommends to the Board of Directors the compensation
to be paid to the executive and other officers of the Company and its
subsidiaries and any plan for additional compensation that it deems appropriate.
In addition, the Committee administers the Company's debenture and stock option
plans, having broad authority to interpret the plans and to make all
determinations necessary or advisable for the administration of the plans. See
the Committee's report on pages 6 and 7.
Committee members: Messrs. Boswell (Chairman), Brinkhorst and Lentz
2003 meetings: three
THE EXECUTIVE COMMITTEE has the authority to exercise all of the powers of the
Board in the management of the business and affairs of the Company, except for
certain qualifications noted in the Company's Bylaws.
Committee members: Messrs. Palmer (Chairman), Boswell, Fox, Lentz and McNease
2003 meetings: two
THE HEALTH, SAFETY AND ENVIRONMENT COMMITTEE reviews the Company's performance
and policies with respect to health, safety and environmental matters and, when
appropriate, makes recommendations to the full Board regarding such matters.
Committee members: Messrs. McNease (Chairman), Boswell, Croyle, Moynihan and
Palmer
2003 meetings: four
-4-
Rowan Companies, Inc. 2004 Proxy Statement
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DIRECTOR AND OFFICER STOCK OWNERSHIP
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As of March 1, 2004, Rowan's directors and officers collectively owned 4,759,466
shares or 4.5% of the Company's outstanding common stock, including shares
acquirable through April 30, 2004 by the exercise of stock options or the
conversion of subordinated debentures. No continuing director, nominee or
executive officer owned more than 1% of Rowan's outstanding shares, except Mr.
Palmer who owned 2.3% of the common stock.
The following table sets forth the number of shares of Rowan stock owned by each
director, the five most highly compensated executive officers of the Company and
all directors and executive officers as a group. Unless otherwise indicated,
each individual has sole voting and dispositive power with respect to the shares
shown below.
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SHARES AQUIRABLE WITHIN 60 DAYS(2)
---------------------------------
DEBENTURES (SERIES AND CONVERSION PRICE)
SHARES ---------------------
BENEFICIALLY 401(K) SERIES III SERIES A
NAME OWNED PLAN (1) OPTIONS $6.75 $29.75
------------------------------- ------------ -------- --------- ---------- --------
Directors:
Henry O. Boswell 73,600(3) 18,000
Hans M. Brinkhorst 9,000 15,000
R. G. Croyle 20,000 129,636 16,807
William T. Fox III 1,000 14,000
Frederick R. Lausen 17,000(4) 17,000
H. E. Lentz 33,200(5) 15,000
D. F. McNease 1,005 7,481 183,386 81,483 16,807
Lord Moynihan 1,000 18,000
C. R. Palmer 579,021(6) 10,359 338,944 711,111 84,034
Nominees for Director:
Sir Graham Hearne
P. Dexter Peacock 3,500
Other Executive Officers:
E. E. Thiele 48,250 7,541 99,488 162,963 16,807
P. L. Kelly 2,000 46,545 10,084
J. L. Buvens 7,500 66,586
All Directors and Executive
Officers as a group (21 in
number) 1,015,494 44,897 1,405,206 1,081,483 161,345
SHARES AQUIRABLE WITHIN 60 DAYS(2)
-----------------------------------------
DEBENTURES (SERIES AND CONVERSION PRICE)
----------------------------------------- TOTAL
SERIES B SERIES C SERIES D SERIES E BENEFICIAL
NAME $14.06 $28.25 $32.00 $13.12 OWNERSHIP
------------------------------- -------- -------- -------- -------- ----------
Directors:
Henry O. Boswell 91,600
Hans M. Brinkhorst 24,000
R. G. Croyle 35,556 35,009 237,008
William T. Fox III 15,000
Frederick R. Lausen 34,000
H. E. Lentz 48,200
D. F. McNease 35,556 35,009 360,727
Lord Moynihan 19,000
C. R. Palmer 177,777 180,000 300,000 91,006 2,472,252
Nominees for Director:
Sir Graham Hearne
P. Dexter Peacock 3,500
Other Executive Officers:
E. E. Thiele 35,556 35,009 405,614
P. L. Kelly 20,000 78,629
J. L. Buvens 74,086
All Directors and Executive
Officers as a group (21 in
number) 320,000 340,035 300,000 91,006 4,759,466
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(1) Reflects shares of Rowan stock allocated to participants in the Rowan
Companies, Inc. Savings and Investment Plan. The Plan participants have sole
voting power and limited dispositive power over such shares.
(2) Included herein are shares of Rowan stock that may be acquired through April
30, 2004 through the exercise of Nonqualified Stock Options and the
conversion of Series III, Series A, Series B, Series C, Series D and Series
E Floating Rate Subordinated Convertible Debentures.
(3) Includes 23,000 shares held by Dome Lake Investments, Ltd., in which Mr.
Boswell and his wife hold a 59% interest in the general partner's 99%
interest and a 60% interest in the limited partner's 1% interest. Mr.
Boswell disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest. Also included are 23,000 shares owned by Mr.
Boswell's wife. Mr. Boswell disclaims beneficial ownership of such shares.
(4) Mr. Lausen's shares are owned jointly with his wife.
(5) Mr. Lentz's shares are owned jointly with his wife. The total includes 200
shares held in the names of Mr. Lentz's two minor children with respect to
which Mr. Lentz's wife serves as custodian. Mr. Lentz disclaims beneficial
ownership of such shares.
(6) Includes 33,132 shares held in a charitable foundation for which Mr. Palmer
is one of three trustees. Mr. Palmer has no pecuniary interest in the shares
held in such charitable foundation and disclaims beneficial ownership of
such shares. Also included are 1,680 shares owned by Mr. Palmer's wife. Mr.
Palmer disclaims beneficial ownership of such shares.
-5-
Rowan Companies, Inc. 2004 Proxy Statement
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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COMPENSATION POLICY FOR EXECUTIVE OFFICERS
Under the supervision of the Compensation Committee (the "Committee") of the
Board of Directors, Rowan has developed and implemented compensation policies
and programs that seek to retain and motivate employees whose performance
contributes to our goal of maximizing stockholder value in a volatile industry.
In addition, these compensation policies attempt to align the executive
officers' interests with those of the stockholders by providing incentive
compensation related to the value of Rowan's common stock. The Committee makes
compensation decisions after reviewing recommendations prepared by Rowan's Chief
Executive Officer, with the assistance of other Company personnel. Rowan
historically has combined salaries with stock option grants, convertible
debenture offerings and selected cash bonuses to provide a compensation balance.
The balance established by the Committee is designed to recognize past
performance, retain key employees and encourage future performance.
In approving and establishing compensation for an executive officer, several
factors are considered by the Committee. Performance criteria include individual
contribution and performance, overall Rowan performance versus that of its
competitors and performance of Rowan's common stock in comparison to prior
levels and to the relative stock prices of its competitors. When evaluating
individual performance, particular emphasis has been placed on the executive
officer's ability to develop innovative ways to obtain better returns on Rowan's
assets and to respond to prevailing conditions in the drilling, aviation and
manufacturing industries. Emphasis is also placed upon an individual's
integrity, loyalty and competence in his areas of responsibility. When
evaluating the foregoing performance criteria in setting executive compensation,
the Committee gives greatest weight to those factors it believes have or will
contribute the most towards maximizing stockholder value and increasing Rowan's
financial viability. The factors that contribute the most towards these goals
vary depending on the state of the industries in which Rowan operates.
The Committee met three times during 2003. At its January 2003 meeting, the
Committee deliberated over the Company's compensation policies for independent
members of the Board of Directors in light of the additional efforts being
required of such members to comply with the new corporate governance rules,
which followed the Sarbanes-Oxley Act of 2002. The Committee took no action on
this matter, except to provide that any future option grants under the
Nonemployee Directors Stock Option Plan would have a ten-year life consistent
with the Company's 1988 Restated Nonqualified Stock Option Plan.
At its April 2003 meeting, the Committee determined, based upon expected
improvements in industry conditions and their generally positive effects on the
Company's operations, and to ensure that the Company's compensation levels
remained competitive relative to its peers, that each of the Named Executive
Officers, except for Messrs. Palmer, McNease and Buvens, would receive a salary
increase ranging from 4-11% effective May 1, 2003 and a cash bonus at least
equal to the one he received in April 2002. Mr. Buvens' 2002 bonus had been
increased due to his efforts in settling the Gorilla V contract dispute earlier
that year. See "Chief Executive Officer Compensation" below for further
discussion of Messrs. Palmer and McNease. In addition, all other Rowan officers
received a salary increase ranging from 5-11% and bonuses ranging from $16,000
to $75,000.
The Committee further determined in April 2003 to grant nonqualified stock
options to each of the Named Executive Officers. On April 25, 2003, nonqualified
stock options were granted in varying amounts to each of the Named Executive
Officers, except for Mr. Buvens, at an exercise price of $21.19 per share, the
average of the high and low sales prices on that date, through April 2013. Other
officers of the Company, including Mr. Buvens, received a grant of stock options
with a discounted exercise price.
The primary basis for these stock option grants was to incentivize the Named
Executive Officers to continue positioning the Company, in extremely competitive
conditions, to be able to respond to improving market conditions. Amounts and
exercise prices of previous option grants to and held by each of the Named
Executive Officers were taken into account when determining the amount of new
option awards.
In addition to the factors discussed above, the Committee considered Rowan's
operating results and profitability, management of its assets and debts and
increasing market share. Additionally, the Committee's objectives included
setting salaries which are both externally competitive relative to the industry
and internally equitable when considering performance and responsibility levels.
Competitor comparisons for purposes of determining executive officer
compensation consisted of a comparison to Rowan's principal competitors and
certain additional public companies in the energy service industry. Although no
specific target has been established, the Committee generally seeks to set
salaries at the median to high end of the range in comparison to peer group
companies. Measurement of each individual's performance is to some
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Rowan Companies, Inc. 2004 Proxy Statement
extent subjective, and Rowan does not make compensation awards based on the
degree to which an individual achieves predetermined objective criteria.
At its July 2003 meeting, the Committee determined to continue deferring any
further changes in the Company's compensation policies for independent board
members.
CHIEF EXECUTIVE OFFICER COMPENSATION
Effective May 1, 2003, Mr. Palmer retired after more than 31 years as the
Company's Chief Executive Officer. During this period, Rowan's share price
increased at an average compounded annual rate of 11% and its market
capitalization grew from under $36 million to about $2 billion. Accordingly, the
Committee determined to award Mr. Palmer cash bonuses totaling $1,375,000. To
enlist his ongoing efforts as non-executive Chairman of the Board to ensure a
smooth transition in Chief Executive Officer responsibilities to Mr. McNease,
the Committee determined to retain Mr. Palmer in a consulting capacity for an
annual retainer of $250,000 effective May 1, 2003 and to grant him a
nonqualified stock option for 150,000 shares of the Company's common stock at an
exercise price of $21.19 per share, the average of the high and low sales prices
on the date of grant, through April 2013. The Committee also determined to
accelerate the vesting schedule so that all prior nonqualified stock option
grants and convertible debenture awards made to Mr. Palmer that were then
outstanding became fully vested.
The Committee's determination for establishing Mr. McNease's compensation for
2003 was made at its April 2003 meeting based on several factors, including the
Committee's review and assessment of Rowan's competitive position, the Company's
response to market conditions and its progress to-date on the transition in
management.
No specific quantitative measure of Rowan's performance was used for this
purpose. Emphasis was also placed on evaluating the Company's performance versus
the performance of its principal competitors as well as certain additional
public companies in the energy service industry. The Committee considered
Rowan's relatively strong position in the contract drilling industry, the
successful design and implementation of its rig fleet expansion program and the
Company's early success in the emerging "deep shelf" drilling market in the Gulf
of Mexico, all of which the Committee believes have been in large part
attributable to Mr. McNease's abilities and contributions.
In April 2003, the Committee's deliberations with respect to Mr. McNease's
compensation focused on the aforementioned factors as well as his additional
responsibilities as the Company's Chief Executive Officer. The Committee
continues to believe that tying a significant portion of the chief executive
officer's compensation to the interests of the stockholders is a prudent
remuneration policy. Accordingly, the Committee granted to Mr. McNease on April
25, 2003, a nonqualified stock option for 300,000 shares of the Company's common
stock, which is exercisable at $21.19 per share, the average of the high and low
sales prices on that date, through April 2013. In addition, the Committee
increased Mr. McNease's annual salary to $450,000 and awarded him a $250,000
bonus, $50,000 more than he received in the prior year.
OTHER MATTERS
At its April 2003 meeting, the Committee determined to grant to all nonemployee
members of the Board of Directors, including Mr. Palmer, options for 6,000
shares of the Company's common stock at an exercise price of $21.19 per share,
the average of the high and low sales prices on the date of grant, through April
2013.
The Committee has continued to discuss and consider a provision of the tax code
that would generally limit Rowan's ability to deduct compensation in excess of
$1 million to a particular executive. The Committee will continue to consider
the deductibility of the compensation paid to its executive officers in the
future.
This report has been provided by the following members of the Committee:
Henry O. Boswell, Chairman
Hans M. Brinkhorst
H. E. Lentz
Date: March 12, 2004
The foregoing report of the Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
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Rowan Companies, Inc. 2004 Proxy Statement
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AUDIT COMMITTEE REPORT
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MEMBERSHIP AND ROLE OF THE AUDIT COMMITTEE
The Audit Committee presently consists of three nonemployee members of the Board
of Directors: William T. Fox III (Chairman), Henry O. Boswell and Frederick R.
Lausen. The Audit Committee operates under a written charter adopted by the
Board of Directors, which is included in this proxy statement as Appendix A.
Each of the members of the Audit Committee meets the independence requirements
of the New York Stock Exchange currently in effect and is financially literate
as such qualifications are interpreted by the Board of Directors in its business
judgment.
The Audit Committee is responsible for monitoring the integrity of the Company's
consolidated financial statements, the annual audit and the independence and
performance of the Company's independent auditors. The Audit Committee is
directly responsible for the appointment, compensation and oversight of the
public accounting firm engaged to issue an audit report on the financial
statement of the Company or to perform other audit, review or attest services
for the Company. Management is responsible for the Company's financial reporting
process, including internal controls, and for the preparation of consolidated
financial statements in accordance with generally accepted accounting
principles. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and for issuing a report
thereon. The Audit Committee's responsibility is to monitor and oversee the
audit. However, the Audit Committee is not professionally engaged in the
practice of accounting, auditing and evaluating auditor independence.
In this context, the Audit Committee held four meetings during fiscal year 2003.
The meetings were designed, among other things, to facilitate and encourage
communication among the Audit Committee, management, the internal accounting
personnel and the Company's independent auditors and to perform the
responsibilities required by the rules and regulations of the Securities and
Exchange Commission and the New York Stock Exchange.
REVIEW OF THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER
31, 2003
The Audit Committee has reviewed and discussed the audited consolidated
financial statements of the Company for the year ended December 31, 2003 with
the Company's management. The Audit Committee has also discussed with Deloitte &
Touche LLP, the Company's independent auditors, the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended, regarding
communication with audit committees.
The Audit Committee has also received the written disclosures and the letter
from Deloitte & Touche required by Independence Standards Board No. 1 regarding
independence discussions with audit committees, and the Audit Committee has
discussed with Deloitte & Touche its independence.
Based on the Audit Committee's review and discussions with management and the
independent auditors, and subject to the limitations of the Audit Committee's
role and responsibilities referred to above and in the Audit Committee Charter,
the Audit Committee recommended to the Board of Directors that the Company's
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003 for filing with the
Securities and Exchange Commission.
In addition, the Audit Committee approved the appointment of Deloitte & Touche
LLP to conduct the audit of the Company's financial statements for fiscal year
2004.
Submitted by:
William T. Fox III, Chairman
Henry O. Boswell
Frederick R. Lausen
Date: March 12, 2004
The foregoing report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
-8-
Rowan Companies, Inc. 2004 Proxy Statement
The following table sets forth the fees paid to Deloitte & Touche LLP over the
past two years. All such audit, audit-related and tax services were pre-approved
by the Audit Committee, which concluded that the provision of such services by
Deloitte & Touche LLP was compatible with the maintenance of that firm's
independence in the conduct of its auditing functions. The Audit Committee has
delegated to its Chairman the authority to pre-approve audit-related and
non-audit services not prohibited by law to be performed by the Company's
independent auditors and associated fees, provided that the Chairman shall
report any decisions to pre-approve such audit-related and non-audit services
and fees to the full Audit Committee at its next regular meeting.
Fees paid to Deloitte & Touche LLP in 2003 and 2002 were as follows:
2003 2002
--------------------------------------------------------
Audit fees $ 630,000 $610,000
Audit-related fees 27,945 40,370
Tax fees 558,013 63,307
All other fees - -
--------------------------------------------------------
Total $1,215,958 $713,677
--------------------------------------------------------
-9-
Rowan Companies, Inc. 2004 Proxy Statement
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION TABLES
--------------------------------------------------------------------------------
The following table sets forth the compensation of the current Chief Executive
Officer, the former Chief Executive Officer and the other four most highly paid
executive officers of the Company (the "Named Executive Officers") for each of
the last three years.
During such period, no Named Executive Officer received any perquisites or other
personal benefits having an aggregate incremental cost to Rowan in excess of the
lesser of $50,000 or 10% of his total annual salary and bonus as reported in
this table.
SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS (6)
NAME AND --------------------------- ----------------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY (1) BONUSES OPTIONS (3) DEBENTURES (4) COMPENSATION (5)
------------------------------- ---- ---------- ---------- ----------- -------------- ----------------
C. R. Palmer 2003 $ 451,282(2) $1,375,000 156,000 - $519,378(2)
Chairman of the Board 2002 1,100,000 2,000,000 138,544 - 5,500
2001 1,100,000 1,300,000 - 391,006 5,100
---------------------------------------------------------------------------------------------------------------------------
D. F. McNease 2003 450,000 250,000 300,000 - 6,000
President and Chief 2002 335,000 200,000 50,000 - 5,500
Executive Officer 2001 335,000 200,000 106,772 - 5,100
---------------------------------------------------------------------------------------------------------------------------
R. G. Croyle 2003 370,000 200,000 75,000 - 6,000
Vice Chairman and Chief 2002 335,000 200,000 50,000 - 5,500
Administrative Officer 2001 335,000 200,000 106,772 - 5,100
---------------------------------------------------------------------------------------------------------------------------
E. E. Thiele 2003 290,000 150,000 60,000 - 6,000
Senior Vice President - Finance, 2002 275,000 150,000 - - 5,500
Administration and Treasurer 2001 275,000 100,000 88,977 - 5,078
---------------------------------------------------------------------------------------------------------------------------
P. L. Kelly 2003 240,000 50,000 35,000 - 6,000
Senior Vice President - 2002 225,000 50,000 - - 5,500
Special Projects 2001 225,000 50,000 35,591 - 4,969
---------------------------------------------------------------------------------------------------------------------------
J. L. Buvens 2003 215,000 75,000 13,400 - 6,000
Senior Vice President - 2002 200,000 125,000 - - 5,500
Legal 2001 195,000 75,000 28,473 - 5,100
---------------------------------------------------------------------------------------------------------------------------
(1) Unless otherwise indicated, the amount shown represents salary compensation
based upon annual rates approved by the Board of Directors effective May 1
of each year.
(2) Mr. Palmer retired after more than 31 years as Chief Executive Officer of
the Company effective May 1, 2003, and was succeeded by Mr. McNease. The
amount shown in the Table under "Salary" represents the portion of his
annual salary paid in 2003, through his retirement date. At that time, the
Board of Directors approved the retention of Mr. Palmer's services in a
consulting capacity for an annual retainer of $250,000, for which he
received $166,667 in 2003. Upon his retirement, Mr. Palmer became eligible
for benefits under Rowan's pension restoration plan, for which he received
$346,711 in 2003. These amounts are shown in the Table, along with the
$6,000 matching 401(k) contribution referred to in (5) below, under "All
Other Compensation". The Company's pension restoration plans are discussed
more fully under "Pension Plans" on page 12. See the "Compensation Committee
Report on Executive Compensation" on pages 6 and 7 for more information
regarding Mr. Palmer's 2003 compensation.
(3) Represents shares of Rowan common stock that may be acquired through the
exercise of nonqualified stock options issued to the Named Executive Officer
on April 25, 2003, as set forth under "Option Grants in Last Fiscal Year" on
page 11.
(4) Represents shares of Rowan common stock that may be acquired through the
conversion of Floating Rate Subordinated Convertible Debentures as follows:
Series D offered and issued on April 26, 2001 are ultimately convertible
into 300,000 shares of Rowan common stock at a conversion price of $32.00
per share and Series E offered and issued on September 20, 2001 are
ultimately convertible into 91,006 shares of common stock at a conversion
price of $13.12 per share. No debentures were offered or issued in 2002 or
2003. During 2003, in connection with Mr. Palmer's retirement, the Board of
Directors accelerated the vesting schedule for the Series D and Series E
debentures and they became fully convertible into the indicated number of
shares. See "Certain Transactions" on page 15 for further information
regarding Rowan's Floating Rate Subordinated Convertible Debentures.
(5) Unless otherwise indicated, the amount shown represents Rowan's matching
contribution on behalf of the Named Executive Officer to the Rowan
Companies, Inc. Savings and Investment Plan.
(6) None of Named Executive Officers received any restricted stock awards during
the last three years.
-10-
Rowan Companies, Inc. 2004 Proxy Statement
OPTION GRANTS IN LAST FISCAL YEAR
The Rowan Companies, Inc. Restated 1988 Nonqualified Stock Option Plan, as
amended, was approved at the Company's 1998 Annual Meeting of Stockholders. The
table below sets forth information pertinent to the April 25, 2003 grant to the
Named Executive Officers.
Except as otherwise indicated, options become exercisable or vest in 25%
increments over a four-year period with the options being 100% exercisable on
the fourth anniversary of the date of grant. Vesting may accelerate under
certain circumstances. All such options were outstanding at March 1, 2004.
-----------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER PERCENTAGE AT ASSUMED ANNUAL RATES
OF SHARES OF TOTAL OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS EXERCISE FOR OPTION TERM
OPTIONS GRANTED IN PRICE PER EXPIRATION --------------------------------
NAME GRANTED FISCAL 2003 SHARE DATE 5% 10%
--------------------- ---------- ----------- --------- ---------- -------------- --------------
C. R. Palmer 156,000 (1) 10.6% $21.19 4-25-2013 $ 2,078,899 $ 5,268,339
D. F. McNease 300,000 20.4% 21.19 4-25-2013 3,997,883 10,131,421
R. G. Croyle 75,000 5.1% 21.19 4-25-2013 999,471 2,532,855
E. E. Thiele 60,000 4.1% 21.19 4-25-2013 799,577 2,026,284
P.L. Kelly 35,000 2.4% 21.19 4-25-2013 466,420 1,181,999
J. L. Buvens 13,400 0.9% 6.19 4-25-2013 379,572 653,537
All stockholders 93,639,143 (2) 21.19 (2) 1,247,861,171 3,162,325,210
-------------------------------------------------------------------------------------------------------------------
(1) Includes an option for 150,000 shares granted to Mr. Palmer under the
Restated 1988 Plan and an option for 6,000 shares granted him under the
Nonemployee Directors Stock Option Plan. The former vests in one-third
increments each year and is fully exercisable on April 25, 2006. The latter
becomes fully exercisable on April 25, 2004.
(2) Represents the number of outstanding shares of Rowan common stock and the
average per-share market price on April 25, 2003, the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table below reflects the value of stock options exercised during 2003 and
the value of outstanding options at year-end 2003 for each of the Named
Executive Officers.
----------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
CLOSING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES PRICE ON DECEMBER 31, 2003 DECEMBER 31, 2003 (2)
ACQUIRED ON EXERCISE VALUE ---------------------------- ----------------------------
NAME EXERCISE DATE (1) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- ----------- -------- -------- ----------- ------------- ----------- -------------
C. R. Palmer 5,600 $23.53 $ 58,296 282,944 156,000 $2,195,962 $ 308,880
D. F. McNease 10,000 22.65 216,500 93,386 390,886 446,204 1,006,029
R. G. Croyle - - - 95,886 165,886 466,004 560,529
E. E. Thiele 6,250 20.70 123,125 71,988 104,489 348,029 314,664
P. L. Kelly 6,250 24.91 60,375 32,794 52,797 131,505 147,660
J. L. Buvens - - - 54,236 32,637 408,285 324,174
----------------------------------------------------------------------------------------------------------------------------
(1) Based upon the last reported per-share sales price of Rowan's common stock
on the New York Stock Exchange on the date of exercise.
(2) Represents the difference between the last reported per-share sales price of
Rowan's common stock on the New York Stock Exchange on December 31, 2003
($23.17) and the per-share exercise prices for in-the-money options ($4.06,
$6.19, $13.12, $15.25, $18.25, $18.45, $19.63, $19.75, $21.19 and $22.00)
times the number of underlying shares.
-11-
Rowan Companies, Inc. 2004 Proxy Statement
PENSION PLANS
All Rowan employees (including executive officers but excluding non-U.S.
citizens) who have completed the requisite service are eligible to participate
in one of two non-contributory, defined benefit pension plans. Benefits under
the drilling and aviation employees plan generally begin at age 60 and are based
upon the employee's number of years of credited service and his average annual
compensation during the highest five consecutive years of his final ten years of
service. Compensation includes salary but excludes discretionary bonuses. The
manufacturing employees plan is substantially similar to the drilling and
aviation employees plan except that benefits begin at age 65 and are subject to
reduction for Social Security benefits. As of January 1, 2004, Rowan had
approximately 4,200 employees eligible to participate in its pension plans.
Rowan also sponsors pension restoration plans, which essentially replace any
retirement income that is lost because of Internal Revenue Code limitations on
benefits payable or the compensation level on which they are based. Both pension
restoration plans are unfunded and benefits thereunder are paid directly by
Rowan. Currently, the plans have eight participants, including each of the Named
Executive Officers.
The following table illustrates, for representative average earnings and years
of credited service levels, the annual retirement benefits payable to eligible
drilling and aviation employees.
PENSION PLAN TABLE (1)
------------------------------------------------------------------------------------------
YEARS OF SERVICE (2)
----------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40 45
------------ -------- -------- -------- -------- -------- -------- ----------
$ 150,000 $ 39,375 $ 52,500 $ 65,625 $ 78,750 $ 91,875 $105,000 $ 118,125
200,000 52,500 70,000 87,500 105,000 122,500 140,000 157,500
250,000 65,625 87,500 109,375 131,250 153,125 175,000 196,875
300,000 78,750 105,000 131,250 157,500 183,750 210,000 236,250
400,000 105,000 140,000 175,000 210,000 245,000 280,000 315,000
500,000 131,250 175,000 218,750 262,500 306,250 350,000 393,750
600,000 157,500 210,000 262,500 315,000 367,500 420,000 472,500
700,000 183,750 245,000 306,250 367,500 428,750 490,000 551,250
800,000 210,000 280,000 350,000 420,000 490,000 560,000 630,000
900,000 236,250 315,000 393,750 472,500 551,250 630,000 708,750
1,000,000 262,500 350,000 437,500 525,000 612,500 700,000 787,500
1,100,000 288,750 385,000 481,250 577,500 673,750 770,000 866,250
1,200,000 315,000 420,000 525,000 630,000 735,000 840,000 945,000
1,300,000 341,250 455,000 568,750 682,500 796,250 910,000 1,023,750
1,400,000 367,500 490,000 612,500 735,000 857,500 980,000 1,102,500
------------------------------------------------------------------------------------------
(1) The benefits payable under the drilling and aviation employees' pension plan
as reflected in the table are not subject to reduction for Social Security
benefits or other offset amounts.
(2) As of December 31, 2003, the Named Executive Officers were credited with
years of service under Rowan's pension and pension restoration plans as
follows:
C. R. Palmer 43
D. F. McNease 29
R. G. Croyle 30
E. E. Thiele 34
P. L. Kelly 21
J. L. Buvens 23
-12-
Rowan Companies, Inc. 2004 Proxy Statement
--------------------------------------------------------------------------------
STOCK PERFORMANCE GRAPHS
--------------------------------------------------------------------------------
The line graph below compares the yearly and cumulative percentage changes in
each of the Company's Common Stock, the Standard & Poor's Composite 500 Stock
Index, and the Dow Jones Oil Drilling, Equipment and Services Index, for the
five-year period ended December 31, 2003.
--------------------------------------------------------------------------------
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK, S&P 500 INDEX & DOW JONES OIL DRILLING, EQUIPMENT
AND SERVICES INDEX (DJ OIE)
(Assumes $100 Invested on December 31, 1998)
(PERFORMANCE GRAPH)
Fiscal Year Ended December 31
*Total return assumes reinvestment of dividends
--------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
--------------------------------------------------------------------------------------
Rowan 100 220 273 196 232 237
S&P 500 100 121 110 97 75 97
DJ OIE 100 152 226 156 143 164
--------------------------------------------------------------------------------
The previous line graph is presented pursuant to and in accordance with specific
SEC rules which prescribe a five-year measurement period. Such rules also
require the inclusion of a graph line reflecting a broad stock market benchmark,
as reflected in the Standard & Poor's Composite 500 Index. We believe the
contract drilling industry moves in very long cycles, significantly greater than
five years, and that such cycles encompass extended periods of growth as well as
extended periods of contraction. During much of the past eleven years, Rowan,
and the industry as a whole, have generally experienced conditions more closely
associated with the latter; though we anticipate industry growth in the years
ahead.
Accordingly, we do not believe a five-year presentation of stockholder return is
particularly relevant, but rather believe a comparison covering a longer period
of time is more informative. Furthermore, we believe the breadth of the S&P 500
Index yields an unsuitable barometer for measuring stockholder return in an
industry as volatile as that in which Rowan operates. The line graph comparison
set forth below reflects the yearly percentage change in and cumulative total
stockholder return for each of Rowan and the same Dow Jones Oil Drilling,
Equipment and Services Index since the inception of the index, which commenced
January 1, 1992.
--------------------------------------------------------------------------------
COMPARISON OF CUMULATIVE TOTAL RETURN*
ROWAN COMMON STOCK & DOW JONES OIL DRILLING, EQUIPMENT AND SERVICES
INDEX (DJ OIE)
(Assumes $100 Invested on December 31, 1991)
(PERFORMANCE GRAPH)
----------------------------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
----------------------------------------------------------------------------------------------------------------------------------
Rowan 100 137 157 109 167 393 530 172 377 470 337 399 407
DJ OIE 100 98 108 98 143 215 321 156 237 352 242 223 256
Fiscal Year Ended December 31
*Total return assumes reinvestment of dividends
-13-
Rowan Companies, Inc. 2004 Proxy Statement
--------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
--------------------------------------------------------------------------------
To the knowledge of the Company, no person owned more than 5% of its outstanding
shares of common stock at March 1, 2004, except as set forth in the following
table.
-------------------------------------------------------------------------------------------------------------
VOTING POWER INVESTMENT POWER
--------------------- ---------------------- PERCENT OF
NAME AND ADDRESS SOLE SHARED SOLE SHARED TOTAL CLASS
---------------------------------- --------- --------- ---------- --------- ---------- ----------
FMR Corp.(1) 2,352,353 - 14,100,331 - 14,100,331 14.99%
82 Devonshire Street
Boston, Massachusetts 02109
Citigroup(2) - 5,620,655 - 5,620,655 5,620,655 6.0%
399 Park Avenue
New York, New York 10043
-------------------------------------------------------------------------------------------------------------
(1) From the Schedule 13G filed by FMR Corp. (FMR) with the Securities and
Exchange Commission on February 17, 2004. Such Schedule 13G indicates that
beneficial ownership by FMR arises in its capacity as a parent holding
company and that its wholly owned subsidiaries or affiliates had beneficial
holdings as follows: Fidelity Management & Research Company, an investment
advisor to various investment companies, beneficially owned 11,626,678
shares; Fidelity Management Trust Company, a bank, beneficially owned
1,568,995 shares; Strategic Advisors, Inc., an investment advisor to
individuals, beneficially owned 1,000 shares; and Fidelity International
Limited, an investment advisor to certain non-U.S. investment companies and
institutional investors, beneficially owned 903,658 shares.
(2) From the joint Schedule 13G filed by Citigroup Inc. (Citigroup) and
Citigroup Global Markets Holdings Inc. (CGM) with the Securities and
Exchange Commission on February 17, 2004. Such Schedule 13G indicates that
beneficial ownership by Citigroup and CGM arises in their capacity as a
parent holding companies and that such shares are held by subsidiaries,
specifically Salomon Brothers Asset Management and Smith Barney Fund
Management LLC, each of whom are investment advisors.
-14-
Rowan Companies, Inc. 2004 Proxy Statement
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
In previous years, certain officers of the Company issued promissory notes in
favor of Rowan in connection with their purchases from Rowan of one or more
series of Floating Rate Subordinated Convertible Debentures. The promissory
notes bear interest at the same rate as the debentures, prime + .5%, and mature
at various dates from 2004-2011. The promissory notes are secured by a pledge of
the debentures purchased and contain provisions for set-off, effectively
protecting the Company from any credit risk since the face amount of the
debentures are equal to the amount of the notes. All such promissory notes
pre-dated enactment of the Sarbanes-Oxley Act of 2002. The largest amounts of
such promissory notes outstanding during 2003 were as follows:
C. R. Palmer $25,679,000(a)
E. E. Thiele 3,089,000(a)
D. F. McNease 2,539,001(a)
R. G. Croyle 1,989,000(a)
C. W. Johnson 1,674,000(a)
D. C. Eckermann 1,165,000(b)
P. L. Kelly 1,025,000(b)
(a) Issued in connection with both 1986 Plan and 1998 Plan debentures
(b) Issued in connection with 1998 Plan debentures
Effective May 1, 2003, Mr. Palmer retired after more than 31 years as the
Company's Chief Executive Officer. To enlist his ongoing efforts as
non-executive Chairman of the Board to ensure a smooth transition in
responsibilities to Mr. McNease, the Compensation Committee determined at that
time to retain Mr. Palmer in a consulting capacity. Mr. Palmer's consulting
agreement provides for an annual retainer of $250,000, for which he received
$166,667 in 2003, and personal use of or access to Rowan's facilities, equipment
and staff at his expense.
During 2003, Rowan paid Citibank, N. A., its primary lender, approximately
$970,000 in interest and fees. The financial terms of such borrowings reflected
market conditions prevailing at the time of their origination and were reviewed
and approved by the Company's Board of Directors. Mr. William T. Fox III, a
Class I Director, was a Managing Director of the parent company of Citibank
until his retirement in August 2003.
During 2003, Rowan paid Andrews Kurth LLP, its general counsel, approximately
$170,000 in legal fees, which the Company believes reflected market rates for
services rendered. Such fees were approved by the Board of Directors. Mr. P.
Dexter Peacock, a nominee for Class I Director, is Of Counsel to Andrews Kurth.
The Company's sale, in early 2004, of 11.5 million shares of common stock for
$23.05 per share was solely underwritten by Lehman Brothers Inc. The
underwriting agreement provided that Lehman's commission depended upon the
proceeds it received upon its sale of Rowan's common stock, and such proceeds
and, therefore, such commission are not known by the Company. These transactions
were negotiated by the Company and approved by the Board of Directors. Mr. H. E.
Lentz, a Class I Director, is currently an Advisory Director of Lehman, and
served as a Consultant to Lehman from January to December 2003 and as a Managing
Director of Lehman from 1993 to January 2003.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the 2005
Annual Meeting of Stockholders and for inclusion in the proxy statement and
proxy card must forward such proposal to the Secretary of the Company, at the
address indicated on page 18, so that the Secretary receives it no later than
November 12, 2004.
Other stockholder proposals submitted for consideration at Rowan's 2005 Annual
Meeting (but not for inclusion in the proxy statement or proxy card) must be
received by the Secretary of the Company at the address indicated on page 18 no
later than February 5, 2005.
If such timely notice of a stockholder proposal is given but is not accompanied
by a written statement in compliance with applicable securities laws, Rowan's
appointed proxies are authorized to exercise discretionary voting authority with
respect to such proposal, as described under "Other Business" on page 1 of this
proxy statement, if it is presented at the 2005 Annual Meeting.
-15-
Rowan Companies, Inc. 2004 Proxy Statement
DIRECTOR NOMINATIONS
The Nominating and Corporate Governance Committee of the Board of Directors is
responsible for, among other things, the selection and recommendation to the
Board of Directors of nominees for election as directors.
Shareholders may nominate candidates for election as directors if they follow
the procedures and comply with the deadlines specified in our Bylaws.
Shareholders may submit in writing recommendations for consideration by the
Committee to Rowan's Corporate Secretary at the address listed under
"Questions?" on page 18.
Recommendations should contain a detailed discussion of the qualifications of
each recommended candidate and any other material information the shareholder
wants the Committee to consider. The complete description of the requirements
for shareholder nomination of director candidates is contained in the Bylaws.
Director nominees should have the highest professional and personal integrity,
values and ethics, and must be committed to representing the interests of all
shareholders of the Company. They must also have substantial experience at the
policy-making level in business, government, technology, engineering, energy,
finance, law or in other areas that are relevant to our business and operations.
Director nominees must have sufficient time to carry out their duties
effectively. They must have mature judgment developed through business
experience and/or educational background and must meet criteria of independence
and expertise that satisfy applicable New York Stock Exchange (NYSE) and legal
regulations. Each individual nominee must have the potential to contribute to
the effective functioning of the Board as a whole.
Evaluation of any shareholder recommendation is the responsibility of the
Nominating and Corporate Governance Committee under its charter, which is posted
on the Company's website. The Committee will evaluate a person recommended by a
shareholder in the same manner as any other persons it considers, and reserves
the right to request additional background and supporting information to
evaluate each candidate nominated by a shareholder.
After reviewing the materials submitted by a shareholder, if the Committee
believes that the person merits additional consideration, the Committee (or
individual members) would interview the potential nominee and conduct
appropriate reference checks. The Committee would then determine whether to
recommend to the Board of Directors that the Board nominate and recommend
election of that person at the next annual meeting.
The number of other public company boards on which a director may serve shall be
subject to a case-by-case review by the Committee, in order to ensure that each
director is able to devote sufficient time to perform his or her duties as a
director.
We have not required the services of third parties to identify potential
nominees, although we reserve the right to retain a search firm in the future,
if necessary.
As of February 25, 2004, we had not received any recommendations from
shareholders for potential director candidates.
DIRECTOR INDEPENDENCE
At least a majority of the directors of the Company must be independent
directors, in accordance with the definition of "independence" under NYSE rules,
and free from any relationship that in the opinion of the Board would interfere
with the exercise of independent judgment as a director of the Company. All
members of the Compensation Committee, the Nominating and Corporate Governance
Committee and the Audit Committee must be independent directors.
The directors that the Board has determined to be independent include: Henry O.
Boswell, Hans M. Brinkhorst, William T. Fox III, Frederick R. Lausen, H. E.
Lentz and Lord Moynihan. The Board has determined that these directors meet the
NYSE standards for independence and are free from any material relationships
that in the opinion of the Board would interfere with their exercise of
independent judgment.
-16-
Rowan Companies, Inc. 2004 Proxy Statement
Under the rules of the NYSE, the Board has adopted categorical standards to
assist in making determinations of the independence of directors and nominees
for director. The Board, however, considers all material relationships with each
director and all facts and circumstances it deems relevant in making its
independence determinations. Under these standards adopted for 2004, the Board
has determined that any of the following business relationships would not on its
own prevent a director from being considered by the Board to be an independent
director: if the director is a consultant or advisor to, or is employed by,
affiliated or associated with, a law firm, investment bank, or lender to which
the Company has made payments (other than any reimbursement or repayment of
principal) during any of the preceding three fiscal years that do not exceed 2%
of the annual gross revenues of the other entity.
COMMUNICATIONS WITH DIRECTORS
Interested parties and shareholders may communicate with the Chairs of our
Nominating and Corporate Governance, Audit, and Compensation committees or with
our independent directors as a group by mail through Rowan's Corporate Secretary
at the address listed under "Questions?" on page 18.
Communications to one or more directors will be collected and organized by our
Corporate Secretary under procedures approved by our independent directors. The
Corporate Secretary will forward all communications to the appropriate committee
Chairman or to the identified director as soon as practicable.
DISCLOSURE OF CORPORATE GOVERNANCE GUIDELINES, CHARTERS AND ETHICS CODES
The Corporate Governance Guidelines and the charters of the Nominating and
Corporate Governance, Audit and Compensation committees are available to be
viewed on the Company's website, at www.rowancompanies.com. The Code of Business
Conduct and Ethics and the Code of Ethics for Senior Financial Officers of the
Company can also be found on the Company's website. Any waivers under these
codes will be posted on the Company's website.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors has determined that William T. Fox III, a Class I
director and the current Audit Committee Chair, is an "audit committee financial
expert", as such term is defined in Item 401(h) of Regulation S-K promulgated by
the SEC.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP has been selected as principal auditors for
the Company for the year ending December 31, 2004. A representative of Deloitte
& Touche is expected to be present at the Annual Meeting of Stockholders on
April 23, 2004 and will be offered the opportunity to make a statement if he
desires to do so. He will also be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All of Rowan's directors, executive officers and any greater than ten percent
stockholders are required by Section 16(a) of the Securities Exchange Act of
1934 to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Rowan common stock and to
furnish the Company with copies of such reports. Based on a review of those
reports and written representations that no other reports were required, we
believe that all applicable Section 16(a) filing requirements were complied with
during the year ended December 31, 2003.
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Rowan Companies, Inc. 2004 Proxy Statement
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO ANY PERSON WHOSE PROXY IS BEING
SOLICITED, UPON WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND
ANY FINANCIAL STATEMENT SCHEDULES THERETO. THE COMPANY WILL FURNISH TO ANY SUCH
PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING THE FORM 10-K, UPON THE
PAYMENT, IN ADVANCE, OF REASONABLE FEES RELATED TO THE COMPANY'S FURNISHING SUCH
EXHIBIT(S). ALL REQUESTS FOR COPIES OF SUCH REPORT AND/OR EXHIBIT(S) SHOULD BE
DIRECTED TO MR. MARK H. HAY, SECRETARY OF THE COMPANY, AT THE COMPANY'S
PRINCIPAL ADDRESS AS SHOWN BELOW.
QUESTIONS?
If you have any questions or need more information about the annual meeting,
write to us at our principal executive offices:
Mark H. Hay, Corporate Secretary
Rowan Companies, Inc.
2800 Post Oak Boulevard
Suite 5450
Houston, Texas 77056-6127
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Rowan Companies, Inc. 2004 Proxy Statement Appendix A
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AUDIT COMMITTEE CHARTER
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I. ORGANIZATION
The Audit Committee shall consist of three or more directors as determined by
the Board of Directors, each of whom shall be free from any relationship that in
the opinion of the Board would interfere with the exercise of independent
judgement as a member of the Committee. Each member shall meet the independence
and financial literacy requirements of the New York Stock Exchange (NYSE). One
member must have accounting or related financial management expertise, as
interpreted by the Board. One or more members may be designated as an Audit
Committee financial expert by the Board.
If an Audit Committee member simultaneously serves on the audit committees of
more than three public companies, then in each case the Board must determine
that simultaneous service on such other audit committees would not impair the
effectiveness of the service of that director on the Company's Audit Committee.
The Board shall disclose any such determination in the Company's annual proxy
statement.
The members of the Committee shall be elected by the Board for a one-year term
and may be re-elected for successive terms. One member of the Committee will be
elected by the Board as Chairman and will be responsible for the scheduling of
regular and special meetings and the functioning of the Committee.
II. STATEMENT OF PURPOSE AND AUTHORITY
The Audit Committee shall assist the Board in fulfilling its oversight
responsibilities to the shareholders to overview (i) the integrity of the
financial statements of the Company, (ii) the compliance by the Company with
legal and regulatory requirements, (iii) the independence, qualifications and
performance of the Company's independent auditor, and (iv) the performance of
the Company's internal audit function. The Committee shall prepare an Audit
Committee report as required to be included in the Company's annual proxy
statement under the rules of the Securities and Exchange Commission.
The Audit Committee is directly responsible for the appointment, compensation
and oversight of the public accounting firm engaged to issue an audit report on
the financial statements of the Company or to perform other audit, review or
attest services for the Company, and such public accounting firm shall report
directly to the Audit Committee. The Audit Committee shall have the sole
authority to retain special legal, accounting or other consultants to advise the
Committee and to approve the fees and other retention terms of these
consultants.
The Audit Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditor to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention, with full power to retain outside counsel or
other experts for this purpose or to otherwise carry out its duties.
III. RESPONSIBILITIES AND PROCEDURES
In fulfilling its responsibilities to the Company's Board of Directors and
shareholders, the Audit Committee will have certain responsibilities and follow
certain procedures, as described below. The timing and extent of specific steps
to be taken within each such procedure is fully within the discretion of the
Committee. Other responsibilities and procedures of the Committee may be
required from time to time by law, rules of the NYSE, the Company's bylaws or
the Board of Directors.
In fulfilling its responsibilities, the Committee will:
-- Engage the independent auditor to audit the financial statements of the
Company, which firm is ultimately accountable to the Committee.
-- Review and approve the fees and other compensation to be paid to the
independent auditor.
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Rowan Companies, Inc. 2004 Proxy Statement Appendix A
-- Review and discuss at least annually a written statement from the
independent auditor detailing any and all relationships between the
auditor and the Company that bear on the independence of the auditor, as
well as the internal quality control procedures of the auditor, any
material issues raised by the most recent internal quality control review,
or peer review, of the firm, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the firm, and any
steps taken to deal with any such issues.
-- Review with the independent auditor and financial managers of the Company
the scope of the proposed audit for the current year.
-- Review with management and the independent auditor the audited financial
statements and quarterly financial statements and the discussions under
"Management's Discussion and Analysis" to be included or incorporated by
reference in the Company's annual and quarterly reports.
-- Review significant financial reporting issues and judgements highlighted
by management and the independent auditor. Inquire whether the independent
auditor is satisfied with the disclosure and content of the financial
statements to be presented to the shareholders. Review any major issues
identified by the independent auditor regarding accounting and auditing
principles and estimates, or any changes therein.
-- Review the effects of regulatory and accounting changes, as well as off
balance sheet structures, on the financial statements of the Company.
-- Discuss the Company's earnings press releases, as well as any financial
information provided to analysts and rating agencies. The Committee may
address this information generally and is not required to address it in
advance of each such earnings release or instance when information is to
be provided.
-- Following completion of the annual audit, review with management and the
independent auditor any significant problems or difficulties encountered
during the course of the audit, including any restrictions on the scope of
work or access to required information, and management's response. This
review should include the responsibilities, budget and staffing of the
internal audit function.
-- Review any significant disagreements identified by management and the
independent auditor in connection with the preparation of the financial
statements. Review any special steps adopted in light of any material
control deficiencies.
-- Review with the independent auditor and with financial and accounting
personnel, the adequacy and effectiveness of the accounting and financial
controls of the Company, and elicit any recommendations for the
improvement of internal controls. Particular emphasis should be given to
the adequacy of the internal controls to expose any payments,
transactions, or procedures that might be deemed illegal or otherwise
improper.
-- Meet separately, periodically, with the internal auditors and with the
independent auditor without members of management present. Among the items
to be discussed in this meeting are the independent auditors' evaluation
of the competency of the Company's financial and accounting personnel, and
the level of cooperation that the independent auditor received during the
course of the audit.
-- Evaluate the performance of the independent auditor and, if so determined
by the Audit Committee, terminate the engagement of the independent
auditor. This evaluation should include the review and evaluation of the
lead partner of the independent auditor.
-- Determine that rotation requirements for partners of the independent
auditor have been satisfied. Consider whether there should be rotation of
the audit firm itself in order to assure continuing auditor independence.
-- Set clear hiring policies for employees or former employees of the
independent auditor.
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Rowan Companies, Inc. 2004 Proxy Statement Appendix A
-- Review a summary of the programs and policies of the Company designed to
monitor compliance with applicable laws and regulations.
-- Periodically review the Company's Policy Statement and Conflict of
Interest Guide. Review the exceptions and disclosed matters in the annual
survey of employees in key positions.
-- Establish procedures for (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and (ii) the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
-- Establish procedures for reporting violations of the Company's Code of
Business Conduct and Ethics and Code of Ethics for Senior Financial
Officers and monitoring accountability for such Codes.
-- Review a summary of the procedures established by the Company that monitor
the compliance by the Company with its loan and indenture covenants and
restrictions.
-- Discuss guidelines and policies with respect to risk assessment and risk
management. Inquire of the chief financial officer, the internal auditor
and the independent auditor about significant risks or exposures and
assess the steps management has taken to minimize such risk to the
Company.
-- Oversee and review the Company's internal audit function.
-- Discuss any exceptions identified by the independent auditor resulting
from their review of the Company's quarterly reports on Form 10-Q.
-- Review and reassess the adequacy of this charter annually and recommend
any proposed changes to the Board of Directors for approval.
-- Conduct an annual self-evaluation of the performance of the Committee.
-- Report periodically to the full Board and review with the Board any issues
regarding the quality or integrity of the Company's financial statements,
the performance and independence of the independent auditors or the
performance of the internal audit function.
-- Prepare the report required to be included in the Company's annual proxy
statement by the rules of the Securities and Exchange Commission.
Although the Audit Committee has certain responsibilities and powers, as set
forth in this charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to assure compliance with
laws and regulations or the Company's Policy Statement and Conflict of Interest
Guide. The Audit Committee shall be entitled to rely on management and the
independent auditor in fulfilling its oversight and all other responsibilities
under this charter.
A-3
ROWAN COMPANIES, INC.
[ ] Mark this box with an X if you have made
changes to your name or address details above.
ANNUAL MEETING PROXY CARD
ELECTION OF DIRECTORS
1. The Board of Directors unanimously recommends a vote FOR the listed nominees
for Class I Director.
FOR WITHHOLD
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01 - William T. Fox III [ ] [ ]
02 - Sir Graham Hearne [ ] [ ]
03 - H.E. Lentz [ ] [ ]
04 - P. Dexter Peacock [ ] [ ]
AUTHORIZATION OF DISCRETION BY PROXIES
2. Authorizing the proxies, in their discretion, to vote on any other matter
properly coming before the meeting or any adjournment thereof.
AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Please complete, sign and return this proxy promptly in the enclosed envelope.
Sign exactly as the name appears hereon. Executors, administrators, trustees,
etc. should so indicate when signing. When shares are held by joint tenants,
both should sign. If the signature is for a corporation, please sign the full
corporate name by an authorized officer. If the signature is for a partnership,
please sign the full partnership name by an authorized person. If shares are
registered in more than one name, all holders must sign.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
-------------------------------------------------- -------------------------------------------------- -----------------
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1 U P X
PROXY - ROWAN COMPANIES, INC.
MEETING DETAILS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. R. Palmer and Mark H. Hay proxies, each with
power to act without the other and with full power of substitution, and hereby
authorizes each of them to represent and vote, as designated on the reverse
side hereof, all the shares of stock of Rowan Companies, Inc. ("Company")
standing in the name of the undersigned with all power which the undersigned
would possess if present at the Annual Meeting of Stockholders of the Company
to be held April 23, 2004 or any adjournment thereof.
IF CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED AS INDICATED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 IN ACCORDANCE WITH
THE DISCRETION OF THE PERSONS VOTING THE PROXY WITH RESPECT TO ANY OTHER MATTER
WHICH MAY PROPERLY COME BEFORE THE MEETING. ALL PRIOR PROXIES ARE HEREBY
REVOKED.
(Continued and to be voted, signed and dated on reverse side.)