SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] 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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(1) Amount Previously Paid:
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ROWAN COMPANIES, INC.
2800 POST OAK BOULEVARD, SUITE 5450
HOUSTON, TEXAS 77056-6127
C. R. PALMER
CHAIRMAN OF THE BOARD
March 19, 2003
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 25, 2003 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 three Class III
Directors. YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
THREE NOMINEES FOR CLASS III 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 and
Chief Executive Officer
Rowan Companies, Inc. 2003 Proxy Statement
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NOTICE OF ANNUAL MEETING OF ROWAN STOCKHOLDERS
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DATE: Friday, April 25, 2003
TIME: 9:00 a.m., Central Time
PLACE: Williams Tower, Level 2 Auditorium
2800 Post Oak Boulevard
Houston, Texas
PURPOSE: - To elect three Class III Directors for three-year terms
- To conduct other business if properly raised
Only stockholders of record on February 28, 2003 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 19, 2003
Rowan Companies, Inc. 2003 Proxy Statement
TABLE OF CONTENTS PAGE
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General Information............................................................1
Election of Directors..........................................................2
Director Compensation..........................................................4
Board Committees...............................................................4
Director and Officer Stock Ownership...........................................6
Compensation Committee Report on Executive Compensation........................7
Audit Committee Report.........................................................9
Executive Compensation Tables.................................................11
Stock Performance Graphs......................................................14
Security Ownership of Certain Beneficial Owners...............................16
Additional Information........................................................17
Audit Committee Charter...............................................Appendix A
Rowan Companies, Inc. 2003 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
February 28, 2003, may vote 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.
HOW PROXIES WORK
Rowan's Board of Directors is asking for your proxy. Giving us your proxy means
you authorize us to vote your shares at the meeting in the manner 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 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 19,
2003. In addition to this mailing, Rowan employees may solicit proxies
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.
VOTING SECURITIES OUTSTANDING
On February 28, 2003, there were 93,617,175 shares of Rowan's common stock
outstanding. Each share is entitled to one vote on the matters to be presented
at the meeting.
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 III Director will be approved if the
votes cast for such nominee exceed the votes cast against him. Unless another
vote is specifically required by law or by Rowan's Bylaws, any other matter
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 count. Abstentions and
broker non-votes count 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.
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Rowan Companies, Inc. 2003 Proxy Statement
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ELECTION OF DIRECTORS
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The Rowan Board of Directors consists of three classes:
- Class I has three directors
- Class II has three directors
- 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:
- Class I 2004
- Class II 2005
- Class III 2003
Three Class III Directors are to be elected at this meeting. Each current member
of the Class, Henry O. Boswell, Frederick R. Lausen and C. R. Palmer, has been
selected by the Nominating and Corporate Governance Committee to be a Class III
nominee, a decision with which the Board concurred.
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 III (TERM TO EXPIRE IN 2006)
Henry O. Boswell Retired in 1987; formerly President (1983-1987) of Amoco 73 1988
Production Company (oil and gas production)
Frederick R. Lausen Retired May 31, 2002; formerly Vice President (1986 to May 65 2000
2002) of Davis Petroleum, Inc. (oil and gas production)
C. R. Palmer Chairman of the Board and Chief Executive Officer of the 68 1969
Company since August 1, 2002; Chairman of the Board,
President and Chief Executive Officer of the Company from
January 1972 to August 2002(2)
(Table continued on following page)
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Rowan Companies, Inc. 2003 Proxy Statement
CONTINUING DIRECTORS
DIRECTOR
NAME PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS(1) AGE SINCE
---- ------------------------------------------------------------ --- --------
CLASS I (TERM EXPIRES IN 2004)
Hans M. Brinkhorst Retired in 1986; formerly Managing Director of the Royal 73 1998
Dutch/Shell Group of Companies' oil and gas exploration,
production and transportation operations in Oman and
Malaysia
William T. Fox III Managing Director responsible for the global energy and 57 2001
mining business of Citibank, N.A. (corporate banking) since
1994
H. E. Lentz Consultant to Lehman Brothers Inc. (investment bankers) 58 1990
since January 2003; Managing Director of Lehman Brothers
Inc. (1993 to January 2003)
CLASS II (TERM EXPIRES IN 2005)
R. G. Croyle Vice Chairman of the Board and Chief Administrative Officer 60 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; Executive 51 1998
Vice President of the Company and President of its Drilling
Subsidiaries from April 1999 to August 2002; Senior Vice
President of the Company from October 1993 to April 1999(2)
Lord Moynihan Executive Chairman of London-based Consort Resources Ltd. 47 1996
(energy investments) since 1999 and Senior Partner of
London-based Colin Moynihan Associates (CMA) (energy
advisors) since 1993; Member of the British House of Lords
(May 1997 to present)
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(1) Directorships other than those listed in the table are as follows: Mr.
Boswell is a director of Cabot Oil & Gas Corporation and Mr. Lentz is a
director of P&L Coal Holdings, Inc.
(2) Information regarding the compensation of Messrs. Croyle, McNease and Palmer
is disclosed in the Summary Compensation Table under "Executive Compensation
Tables" on page 11.
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Rowan Companies, Inc. 2003 Proxy Statement
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DIRECTOR COMPENSATION
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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. The Board of Directors held five
meetings in 2002. Each director attended at least 75% of the meetings of the
Board and Committees on which he served.
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 years. No options were granted under the
plan in 2002.
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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 9 and 10 and in the Audit
Committee's Charter attached as Appendix A.
Committee members: Messrs. Boswell (Chairman), Fox and Lausen
2002 meetings: three
THE NOMINATING COMMITTEE generally designates, on behalf of the Board of
Directors, candidates for the directors of the class to be elected at the next
meeting of stockholders. The Committee will consider for election to the Board
qualified nominees recommended by stockholders. To make such a recommendation,
stockholders should submit to the Company's Secretary at the address listed
under "Questions?" on page 18 a biographical sketch of the prospective
candidate, which should include age, principal occupation, business experience
and other directorships, including positions previously held or now held. 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. Brinkhorst, Fox, Lentz and Moynihan
2002 meetings: four
On January 23, 2003, the Nominating Committee was reconstituted as the
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE, which identifies qualified board
candidates and develops and recommends to the Board of Directors the corporate
governance principles applicable to the Company. The Committee's members include
Messrs. Lentz (Chairman), Boswell, Brinkhorst, Fox, Lausen and Moynihan.
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Rowan Companies, Inc. 2003 Proxy Statement
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 plans and
employee stock option plan, 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 7 and 8.
Committee members: Messrs. Boswell (Chairman), Brinkhorst and Lentz
2002 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, Brinkhorst and Lausen
2002 meetings: none
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. Palmer (Chairman), Boswell, Croyle, McNease and
Moynihan
2002 meetings: four
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Rowan Companies, Inc. 2003 Proxy Statement
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DIRECTOR AND OFFICER STOCK OWNERSHIP
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As of February 28, 2003, Rowan's directors and officers collectively owned
4,092,279 shares or 4.4% of the Company's outstanding common stock, including
shares acquirable through April 29, 2003 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 2.2% 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 ACQUIRABLE WITHIN 60 DAYS(2)
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DEBENTURES (SERIES AND CONVERSION PRICE)
SHARES -----------------------------------------------------------------
BENEFICIALLY 401(K) SERIES III SERIES A SERIES B SERIES C SERIES D SERIES E
NAME OWNED PLAN(1) OPTIONS $6.75 $29.75 $14.06 $28.25 $32.00 $13.12
--------------------- ------------ ------- --------- ---------- -------- -------- -------- -------- --------
Directors:
Henry O. Boswell 73,600(3) 17,000
Hans M. Brinkhorst 1,000 17,000
R. G. Croyle 21,000 71,693 16,807 35,556 26,229
William T. Fox III 8,000
Frederick R. Lausen 17,000(4) 11,000
H. E. Lentz 33,200(5) 14,000
D. F. McNease 1,005 7,549 79,193 81,483 16,807 35,556 26,229
Lord Moynihan 1,000 17,000
C. R. Palmer 579,021(6) 9,438 184,636 711,111 84,034 177,777 134,973 150,000 22,713
Other Executive Officers:
E. E. Thiele 42,000 7,610 68,494 162,963 16,807 35,556 26,229
P. L. Kelly 10,000 35,147 10,084 11,377 14,973
All Directors and
Executive Officers
as a group (21 in
number) 958,209 38,257 1,094,033 1,081,483 161,345 331,377 254,862 150,000 22,713
TOTAL
BENEFICIAL
NAME OWNERSHIP
--------------------- ----------
Directors:
Henry O. Boswell 90,600
Hans M. Brinkhorst 18,000
R. G. Croyle 171,285
William T. Fox III 8,000
Frederick R. Lausen 28,000
H. E. Lentz 47,200
D. F. McNease 247,822
Lord Moynihan 18,000
C. R. Palmer 2,053,703
Other Executive Offic
E. E. Thiele 359,659
P. L. Kelly 81,581
All Directors and
Executive Officers
as a group (21 in
number) 4,092,279
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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
29, 2003 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.
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Rowan Companies, Inc. 2003 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 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.
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 extent
subjective, and Rowan does not make compensation awards based on the degree to
which an individual achieves predetermined objective criteria.
The Compensation Committee met three times during 2002. At its January 2002
meeting, the Committee deliberated over the status of the Company's long-term
incentive plans, in particular the Nonqualified Stock Option Plan and
Convertible Debenture Incentive Plan. The Committee believes that Debenture
offers and stock option grants are an effective way to incentivize management
and determined that each plan should be amended to afford continuing
opportunities to award such offers and grants in the future. The amendments
proposed by the Committee were later ratified by the Company's Board of
Directors and approved by vote of the Company's stockholders at the April 26,
2002 Annual Meeting. The Committee is considering whether the Debenture Plan
should be amended as a result of the enactment of the Sarbanes-Oxley Act.
At its April 2002 meeting, the Committee determined, based upon the continuing
weakness in industry conditions then prevailing and their generally negative
effects on the Company's operations, that none of the Named Executive Officers,
nor any other Rowan officer, would receive a salary increase at that time. The
Committee determined, however, that in recognition of the Company's financial
performance in 2001 in achieving record revenues and a level of net income
exceeding that of 2000, each of the Named Executive Officers, including Mr.
Palmer (see "Chief Executive Officer Compensation" below), would
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Rowan Companies, Inc. 2003 Proxy Statement
receive a cash bonus in April 2002 at least equal to the one he received in
April 2001. In addition, all other Rowan officers, and certain key operations
personnel, received bonuses ranging from $20,000 to $125,000.
At its July 2002 meeting, the Committee considered the proposed change in the
Company's executive management, in particular the promotions, to be effective
August 1, 2002, of Mr. McNease to President of the Company and of Mr. Croyle to
Vice Chairman of the Board. The Committee determined to grant to Messrs. McNease
and Croyle, each a Named Executive Officer, nonqualified stock options for
50,000 shares each, which are exercisable at $18.45 per share, the average of
the high and low sales prices on the grant date, through July 2012. The primary
basis for these stock option grants was to incentivize Messrs. McNease and
Croyle to continue positioning the Company, in extremely competitive conditions,
to be able to withstand a prolonged downturn and, ultimately, to respond to
improving market conditions. Amounts and exercise prices of previous option
grants to and held by Messrs. McNease and Croyle were taken into account when
determining the amount of new option awards.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee's determination for establishing Mr. Palmer's compensation for
2002 was made in April 2002 based on several factors, including the Committee's
review of Rowan's competitive position, ability to respond to market conditions
and ability to complete the change in management.
No specific quantitative measure of Rowan's performance was used for this
purpose. Emphasis was also placed on evaluating Rowan'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 favorable
resolution of the Gorilla V contract dispute, which the Committee believes have
been in large part attributable to Mr. Palmer's abilities and contributions.
In April 2002, the Committee's deliberations with respect to Mr. Palmer's
compensation centered on Rowan's favorable resolution of the Gorilla V contract
dispute and his management of Rowan resources and personnel. 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. The Committee also took into consideration the fact that
limitations on the Company's long-term incentive plans at September 20, 2001,
the date of the most recent awards under such plans, had limited amounts awarded
to Mr. Palmer at that date to a level that the Committee felt was significantly
below what was appropriate. Accordingly, the Committee granted to Mr. Palmer
nonqualified stock options for 138,544 shares, which are exercisable at $13.12
per share, through April 2012. The exercise price per share was equal to the
average of the high and low sales prices of the Company's stock on September 20,
2001 because of the unavailability discussed above. The Committee made no change
to Mr. Palmer's annual salary and awarded him a $2,000,000 bonus, $700,000 more
than he received in the prior year.
OTHER MATTERS
The Committee has also continued to discuss and consider a provision of the tax
code that will 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 19, 2003
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. 2003 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: Henry O. Boswell (Chairman), William T. Fox III 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 also
recommends to the Board of Directors the appointment of the Company's
independent auditors. 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. The Audit
Committee relies, without independent investigation, on the information provided
to it and on the representations made by management and the independent auditors
in fulfilling its oversight and all other responsibilities.
In this context, the Audit Committee held three meetings during fiscal year
2002. 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, 2002
The Audit Committee has reviewed and discussed the audited financial statements
of the Company for the year ended December 31, 2002 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 financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2002 for filing with the Securities and
Exchange Commission.
In addition, the Audit Committee recommended to the Board of Directors the
appointment of Deloitte & Touche LLP to conduct the audit of the Company's
financial statements for fiscal year 2003.
Submitted by:
Henry O. Boswell, Chairman
William T. Fox III
Frederick R. Lausen
Date: March 19, 2003
9
Rowan Companies, Inc. 2003 Proxy Statement
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.
In evaluating the independence of Deloitte & Touche, the Audit Committee
considered whether the provision of services to the Company beyond those
rendered in connection with the audit and review of the Company's consolidated
financial statements was compatible with maintaining its independence. The Audit
Committee also reviewed the amount of fees paid to Deloitte & Touche for audit
and non-audit services, which were as follows:
AUDIT FEES: The aggregate fees for the professional services rendered by
Deloitte & Touche in connection with their audit of our annual consolidated
financial statements and reviews of the interim consolidated financial
statements included in our quarterly reports on Form 10-Q during the year
ended December 31, 2002 were approximately $555,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: There were
no professional services rendered by Deloitte & Touche in the 2002 fiscal
year relating to financial information systems design and implementation.
ALL OTHER FEES: The aggregate fees for all other services rendered by
Deloitte & Touche during the year ended December 31, 2002 were
approximately $159,000, including $63,000 for tax services, $55,000 for
pension and 401(k) plan audits and $41,000 for actuarial services.
The Audit Committee concluded that the non-audit services provided to the
Company and fees paid therefore did not adversely impact the independence of
Deloitte & Touche.
10
Rowan Companies, Inc. 2003 Proxy Statement
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION TABLES
--------------------------------------------------------------------------------
The following table sets forth the compensation of the 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
--------------------------------------------------------------------------------
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS(2)
NAME AND ------------------------ --------------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS(3) DEBENTURES(4) COMPENSATION(5)
------------------ ---- ---------- ---------- ---------- ------------- ---------------
C. R. Palmer 2002 $1,100,000 $2,000,000 138,544 -- $5,500
Chairman of the Board 2001 1,100,000 1,300,000 -- 391,006 5,100
and CEO 2000 1,050,000 1,000,000 -- 180,000 5,100
R. G. Croyle 2002 335,000 200,000 50,000 -- 5,500
Vice Chairman 2001 335,000 200,000 106,772 -- 5,100
and CAO 2000 320,000 140,000 -- 35,009 4,542
D. F. McNease 2002 335,000 200,000 50,000 -- 5,500
President 2001 335,000 200,000 106,772 -- 5,100
and COO 2000 320,000 140,000 -- 35,009 5,100
E. E. Thiele 2002 275,000 150,000 -- -- 5,500
Senior Vice President -- 2001 275,000 100,000 88,977 -- 5,078
Finance, Administration 2000 262,500 70,000 -- 35,009 4,614
and Treasurer
P. L. Kelly 2002 225,000 50,000 -- -- 5,500
Senior Vice President -- 2001 225,000 50,000 35,591 -- 4,969
Special Projects 2000 215,000 57,000 -- 20,000 5,100
--------------------------------------------------------------------------------
(1) Represents calendar year salary compensation based upon annual rates
approved by the Board of Directors effective May 1 of each year. No increase
in annual rate was awarded to any Named Executive Officer in 2002.
(2) None of Named Executive Officers received any restricted stock awards during
the last three years.
(3) Represents shares of Rowan stock that may be acquired through the exercise
of nonqualified stock options issued to the Named Executive Officer on
either April 26, 2002 or July 25, 2002, as set forth below under "Option
Grants in Last Fiscal Year".
(4) Represents shares of Rowan stock that may be acquired through the conversion
of Floating Rate Subordinated Convertible Debentures as follows:
2001 -- Series D offered and issued on April 26th of that year and Series E
offered and issued on September 20th of that year; 2000 -- Series C offered
and issued on April 27th of that year. No debentures were offered or issued
in 2002. See "Certain Transactions" on page 17 for further information.
Shares acquirable by each Named Executive Officer upon conversion of Series
C, Series D and Series E debentures are as follows:
SERIES D SHARES ACQUIRABLE ON APRIL 26,
-------- ---------------------------------
EXECUTIVE OFFICER 2002 2003 2004 2005 TOTAL
----------------- ------ ------ ------ ------ -------
C. R. Palmer 75,000 75,000 75,000 75,000 300,000
SHARES ACQUIRABLE ON
SERIES E SEPTEMBER 20,
-------- ---------------------------------
EXECUTIVE OFFICER 2002 2003 2004 2005 TOTAL
----------------- ------ ------ ------ ------ ------
C. R. Palmer 22,713 22,713 22,790 22,790 91,006
SERIES C SHARES ACQUIRABLE ON APRIL 27,
-------- ---------------------------------
EXECUTIVE OFFICER 2001 2002 2003 2004 TOTAL
----------------- ------ ------ ------ ------ -------
C. R. Palmer 44,991 44,991 44,991 45,027 180,000
R. G. Croyle 8,743 8,743 8,743 8,780 35,009
D. F. McNease 8,743 8,743 8,743 8,780 35,009
E. E. Thiele 8,743 8,743 8,743 8,780 35,009
P. L. Kelly 4,991 4,991 4,991 5,027 20,000
(5) Represents the amount of Rowan's matching contribution on behalf of the
Named Executive Officer to the Rowan Companies, Inc. Savings and Investment
Plan.
11
Rowan Companies, Inc. 2003 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 26, 2002 and July 25,
2002 grants to the Named Executive Officers.
Options become exercisable or vest in 25% increments over a four-year period
with the options being 100% exercisable four years after the date of grant.
Vesting may accelerate under certain circumstances. All such options were
outstanding at February 28, 2003.
--------------------------------------------------------------------------------
PERCENTAGE POTENTIAL REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
OF SHARES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED IN EXERCISE FOR OPTION TERM
OPTIONS FISCAL PRICE EXPIRATION --------------------------------
NAME GRANTED 2002 PER SHARE DATE 5% 10%
---- ----------- ---------- --------- ---------- -------------- --------------
C. R. Palmer 138,544 54.4% $13.12 4-26-2012 $ 1,143,140 $ 2,896,941
All stockholders 93,916,190(1) 25.21(1) 1,488,987,993 3,773,387,918
R. G. Croyle 50,000 19.6% 18.45 7-25-2012 $ 580,155 $ 1,470,227
D. F. McNease 50,000 19.6% 18.45 7-25-2012 580,155 1,470,227
All stockholders 93,765,090(2) 18.45(2) 1,087,966,266 2,757,120,126
--------------------------------------------------------------------------------
(1) Represents the number of outstanding shares of Rowan common stock and the
average per-share market price on April 26, 2002, the date of grant.
(2) Represents the number of outstanding shares of Rowan common stock and the
average per-share market price on July 25, 2002, 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 2002 and
the value of outstanding options at year-end 2002 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, 2002 DECEMBER 31, 2002(2)
ACQUIRED ON EXERCISE VALUE ---------------------------- ----------------------------
NAME EXERCISE DATE(1) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ---------- ----------- ------------- ----------- -------------
C. R. Palmer -- $ -- $ -- 150,000 138,544 $789,375 $1,327,252
R. G. Croyle -- -- -- 56,693 130,079 269,894 548,557
D. F. McNease 10,000 25.38 243,800 64,193 130,079 468,269 548,557
E. E. Thiele 6,250 21.80 130,000 55,994 66,733 368,223 280,052
P. L. Kelly 3,125 26.45 35,000 30,147 26,694 130,021 112,029
--------------------------------------------------------------------------------
(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, 2002
($22.70) and the per-share exercise prices for in-the-money options ($1.00,
$13.12, $15.25, $18.45 and $19.63) times the number of underlying shares.
12
Rowan Companies, Inc. 2003 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, 2003, Rowan had
approximately 3,900 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, 2002, the Named Executive Officers were credited with
years of service under Rowan's pension and pension restoration plans as
follows:
C. R. Palmer 43
R. G. Croyle 29
D. F. McNease 28
E. E. Thiele 33
P. L. Kelly 20
13
Rowan Companies, Inc. 2003 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, 2002.
--------------------------------------------------------------------------------
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, 1997)
(PERFORMANCE GRAPH)
1997 1998 1999 2000 2001 2002
Rowan $100 $ 32 $ 71 $ 89 $ 64 $ 75
S&P 500 100 129 156 141 125 97
DJ OIE 100 48 74 109 75 69
Fiscal Year Ended December 31
* Total return assumes reinvestment of dividends.
--------------------------------------------------------------------------------
14
Rowan Companies, Inc. 2003 Proxy Statement
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-year period,
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
especially meaningful, 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
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Rowan $100 $137 $157 $109 $167 $393 $530 $172 $377 $470 $337 $399
DJ OIE 100 98 108 98 143 215 321 156 237 352 242 223
Fiscal Year Ended December 31
* Total return assumes reinvestment of dividends.
--------------------------------------------------------------------------------
15
Rowan Companies, Inc. 2003 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 February 28, 2003, 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) 2,059,288 -- 13,943,851 -- 13,943,851 14.906%
82 Devonshire Street
Boston, Massachusetts 02109
J.P. Morgan Chase & Co.(2) 4,087,961 5,380 5,271,518 197,618 5,469,236 5.8%
270 Park Avenue
New York, New York 10017
--------------------------------------------------------------------------------
(1) From the Schedule 13G filed by FMR Corp. (FMR) with the Securities and
Exchange Commission on February 14, 2003. 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 11,754,763
shares; Fidelity Management Trust Company, a bank, beneficially owned
597,343 shares; Strategic Advisors, Inc., an investment advisor to
individuals, beneficially owned 1,000 shares; Geode Capital Management LLC,
an investment advisor managed by certain shareholders and employees of FMR,
beneficially owned 345 shares and Fidelity International Limited, an
investment advisor to certain non-U.S. investment companies and
institutional investors, beneficially owned 1,590,400 shares.
(2) From the Schedule 13G filed by J.P. Morgan Chase & Co. (J.P. Morgan) with
the Securities and Exchange Commission on February 10, 2003. Such Schedule
13G indicates that beneficial ownership by J. P. Morgan arises in its
capacity as a parent holding company and that such shares are held for its
subsidiaries, specifically JPMorgan Chase Bank, J.P. Morgan Fleming Asset
Management (USA) Inc., J.P. Morgan Investment Management Inc. and J.P.
Morgan Trust Company, N.A.
16
Rowan Companies, Inc. 2003 Proxy Statement
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
In previous years, Mr. Palmer and certain other 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. The largest amounts of such
promissory notes outstanding during 2002 were as follows:
C. R. Palmer $25,679,000(a)
E. E. Thiele 3,089,000(a)
D. F. McNease 2,689,001(a)
R. G. Croyle 1,989,000(a)
C. W. Johnson 1,674,000(a)
P. L. Kelly 1,165,000(b)
D. C. Eckermann 1,165,000(b)
(a) Issued in connection with both 1986 Plan and 1998 Plan debentures
(b) Issued in connection with 1998 Plan debentures
No such promissory notes were issued in favor of the Company after enactment of
the Sarbanes-Oxley Act.
During 2002, Rowan paid Citibank, N. A., its primary lender, approximately
$697,000 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, is a Managing Director of Citibank, N. A.
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, 2002.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the 2004
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 21, 2003.
Other stockholder proposals submitted for consideration at Rowan's 2004 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, 2004.
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
proxy committee may exercise discretionary voting authority over proxies with
respect to such proposal if presented at the 2004 Annual Meeting.
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, it is
intended that the enclosed proxy will be voted in accordance with the discretion
of the persons voting the proxy unless you indicate otherwise on your proxy.
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, 2003. A representative of Deloitte
& Touche is expected to be present at the Annual Meeting of Stockholders on
April 25, 2003 and will be offered the opportunity to make a
17
Rowan Companies, Inc. 2003 Proxy Statement
statement if he desires to do so. He will also be available to respond to
appropriate questions.
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, 2002, 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, Secretary
Rowan Companies, Inc.
2800 Post Oak Boulevard
Suite 5450
Houston, Texas 77056-6127
18
Rowan Companies, Inc. 2003 Proxy Statement
APPENDIX A
--------------------------------------------------------------------------------
AUDIT COMMITTEE CHARTER
--------------------------------------------------------------------------------
I. ORGANIZATION
The audit committee shall be comprised of three or more directors as determined
by the Board of Directors, each of whom shall be non-employee directors, and
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, financial literacy and experience requirements of
the New York Stock Exchange.
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 audit 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 POLICY
The audit committee shall provide assistance to the Board in fulfilling its
oversight responsibilities to the shareholders in overviewing (i) the Company's
accounting and reporting practices, and the quality and integrity of the
financial reports of the Company, (ii) the compliance by the Company with legal
and regulatory requirements and (iii) the independence and performance of the
Company's independent auditor. The Audit Committee shall have the authority to
retain special legal, accounting or other consultants to advise the Committee,
subject to prior approval of the Board of Directors. 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.
III. RESPONSIBILITIES AND PROCEDURES
In fulfilling its responsibilities to the Company's Board of Directors and
shareholders, the audit committee will carry out certain procedures, as
enumerated below. The timing and extent of specific steps to be taken within
each such procedure is fully within the discretion of the Committee. The
specific procedures employed by the Audit Committee will remain flexible, in
order to best enable the Committee to react to changing conditions. Other
responsibilities and procedures of the Audit Committee may be required from time
to time by law, the Company's by-laws or the Board of Directors.
In fulfilling its responsibilities, the audit committee will:
- Recommend to the Board the independent auditor to be selected to audit the
financial statements of the Company, which firm is ultimately accountable to
the Audit Committee and the Board. Review and approve the fees and other
compensation to be paid to the independent auditor. Review and discuss 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.
- Review with the independent auditor and financial managers of the Company the
scope of the proposed audit for the current year.
- Review the audited financial statements to be included or incorporated by
reference in the Company's annual report on Form 10-K with management and the
independent auditor, with a focus on 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, or any changes therein.
- Following completion of the annual audit, review with management and the
independent auditor any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or access to
required
A-1
Rowan Companies, Inc. 2003 Proxy Statement
information. Review any significant disagreements identified by management and
the independent auditor in connection with the preparation of the financial
statements.
- Review with the independent auditor, 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. Obtain from the independent auditor
assurance that no matters are reportable pursuant to Section 10A of the
Securities Exchange Act of 1934. Discuss with the independent auditor other
matters required to be discussed by Statement on Auditing Standards No. 61
relating to the conduct of an audit, such as proposed audit adjustments.
- Meet 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, recommend that the Board replace the independent auditor.
- 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 results of the annual survey of employees in key positions.
- 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 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 for approval.
- Report through the Chairman to the Board following any meeting of the audit
committee.
- Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
While 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 conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and 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 to it herein.
A-2
ROWAN COMPANIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
The Board of Directors unanimously recommends
a vote FOR: FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. Electing these nominees for Class III Directors: [ ] [ ] [ ]
0-1 - Henry O. Boswell, 02 - Frederick R. Lausen
and 03 - C. R. Palmer, (except nominee(s) written
below from whom vote is withheld)
-------------------------------------------------
2. Authorizing the proxies, in their discretion, to
vote on any other matter properly coming before
the meeting.
----------------------------------
Signature
----------------------------------
Signature if held joint
Dated 2003
---------------------
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.
-- FOLD AND DETACH HERE --
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
PROXY
ROWAN COMPANIES, INC.
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 powers which the undersigned would possess
if present at the Annual Meeting of Stockholders of the Company to be held April
25, 2003 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 dated and signed, on the reverse side)