INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2011

Significant components of income taxes attributable to continuing operations

The significant components of income taxes attributable to continuing operations consisted of (in thousands):

	2011			2010			2009

Current:
Federal	$	(39,708	)	$	16,959		$	86,235
Foreign		15,368			32,402			22,607
State		566			(908	)		779
Total current provision (benefit)		(23,774	)		48,453			109,621
Deferred		18,115			43,481			9,565
Total provision (benefit)	$	(5,659	)	$	91,934		$	119,186

Income tax expense (benefit), income tax reconciliation

Rowan's provision for income taxes differs from that determined by applying the federal income tax rate (statutory rate) to income before income taxes, as follows (dollars in thousands):

	2011			2010			2009

Statutory rate		35	%		35	%		35	%
Tax at statutory rate	$	45,528		$	125,837		$	156,631
Increase (decrease) due to:
Foreign companies' operations		(59,349	)		(25,711	)		(7,335	)
Extraterritorial income exclusion		(522	)		-			(25,391	)
State tax expense		81			(590	)		512
Domestic production activities		-			(6,372	)		(2,790	)
Other, net		8,603			(1,230	)		(2,441	)
Total provision	$	(5,659	)	$	91,934		$	119,186

Deferred tax assets and liabilities

Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities at December 31 were as follows (in thousands):

	2011					2010
	Current		Noncurrent			Current		Noncurrent

Deferred tax assets:
Accrued employee benefit plan costs	$	26,519	$	72,467		$	16,788	$	54,821
U.S. net operating loss		-		64,495			-		109,654
U.K. net operating loss		-		14,722			-		17,778
Other		4,874		10,861			3,473		12,403
Total deferred tax assets		31,393		162,545			20,261		194,656
Less: valuation allowance		-		(14,722	)		-		(17,778	)
Deferred tax assets, net of valuation allowance		31,393		147,823			20,261		176,878

Deferred tax liabilities:
Property, plant and equipment		-		615,319			-		609,321
Other		4,370		8,947			7,218		2,849
Total deferred tax liabilities		4,370		624,266			7,218		612,170
Net deferred tax asset (liability)	$	27,023	$	(476,443	)	$	13,043	$	(435,292	)

Changes in gross unrecognized tax benefits

The following table highlights the changes in the Company's gross unrecognized tax benefits during the years ended December 31 (in thousands):

	2011		2010			2009

Gross unrecognized tax benefits - beginning of year	$	51,000	$	54,200		$	6,500
Gross increases - tax positions in prior period		4,300		-			37,600
Gross decreases - tax positions in prior period		-		(1,300	)		-
Gross increases - current period tax positions		-		-			11,900
Settlements		-		-			-
Lapse of statute of limitations		-		(1,900	)		(1,800	)
Gross unrecognized tax benefit - end of year	$	55,300	$	51,000		$	54,200

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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