Other Financial Statement Disclosures

Accounts Receivable – The following table sets forth the components of receivables - trade and other (in millions):



	September 30, 2016		December 31, 2015
Trade	$	426.9	$	395.7
Income tax	6.6		4.5
Other	7.0		10.3
Total receivables - trade and other	$	440.5	$	410.5

Accrued Liabilities – The following table sets forth the components of accrued liabilities (in millions):



	September 30, 2016		December 31, 2015
Pension and other postretirement benefits	$	14.0	$	31.4
Compensation and related employee costs	61.1		73.6
Interest	34.2		44.3
Income taxes	37.6		23.9
Other	13.2		12.8
Total accrued liabilities	$	160.1	$	186.0

Long-term Debt – Long-term debt consisted of the following (in millions):



	September 30, 2016		December 31, 2015
5% Senior Notes, due September 2017 ($357.7 million and $366.6 million principal amount, respectively; 5.2% effective rate)	$	357.1	$	365.5
7.875% Senior Notes, due August 2019 ($396.5 million and $435.5 million principal amount, respectively; 8.0% effective rate)	394.7		432.9
4.875% Senior Notes, due June 2022 ($700 million principal amount; 4.7% effective rate)	705.5		706.2
4.75% Senior Notes, due January 2024 ($400 million principal amount; 4.8% effective rate)	397.3		397.1
5.4% Senior Notes, due December 2042 ($400 million principal amount; 5.4% effective rate)	394.9		394.7
5.85% Senior Notes, due January 2044 ($400 million principal amount; 5.9% effective rate)	396.1		396.0
Total carrying value	2,645.6		2,692.4
Current portion	357.1		—
Carrying value, less current portion	$	2,288.5	$	2,692.4

In the first quarter of 2016, we paid $15.9 million in cash to retire $16.5 million aggregate principal amount of the 5% Senior Notes due 2017 and 7.875% Senior Notes due 2019, plus accrued interest, and recognized a $0.6 million gain on early extinguishment of debt.

Also during the first quarter of 2016, we repurchased an additional $21.4 million aggregate principal amount of the 5% and 7.875% Senior Notes, which settled in April 2016 and resulted in a $1.2 million gain on early extinguishment of debt in the second quarter of 2016.

In April 2016, we repurchased $10.0 million aggregate principal amount of the 7.875% Senior Notes which resulted in a $0.6 million gain on early extinguishment of debt in the second quarter of 2016.

Supplemental Cash Flow Information – Accrued capital expenditures, which are excluded from capital expenditures in the Condensed Consolidated Statements of Cash Flows until settlement, totaled $23.2 million and $36.5 million at September 30, 2016 and 2015, respectively. Interest capitalized in connection with rig construction projects totaled $16.2 million in the nine months ended September 30, 2015. We did not capitalize any interest for the three months ended September 30, 2015 and the three and nine months ended September 30, 2016.

Income Taxes – In accordance with US GAAP for interim reporting, the Company estimates its full-year effective tax rate and applies this rate to its year-to-date pretax income. In addition, the Company separately calculates the tax impact of unusual items, if any. We provide for income taxes based upon the tax laws and rates in effect in the countries in which we conduct operations. The amounts of our provisions are impacted by such laws and rates and the availability of deductions, credits and other benefits in each of the various jurisdictions. Our overall effective tax rate may therefore vary considerably from quarter to quarter and from year to year based on the actual or projected location of operations, levels of income, our consolidated effective income tax rate, deferred intercompany gains or losses, and other factors.

We recognized tax benefits of $12.2 million and tax expense of $14.7 million for the three and nine months ended September 30, 2016, respectively, compared to tax expense of $25.9 million and $50.9 million for the comparable periods in 2015.

Our effective tax rate was 181.2% as a result of a tax benefit on a pre-tax loss and 4.1% as a result of tax expense on pre-tax income, respectively, for the three and nine months ended September 30, 2016, compared to (12.2)% as a result of tax expense on a pre-tax loss and 256.2% as a result of tax expense on pre-tax income, respectively, for the comparable prior-year periods ended September 30, 2015.

The decrease in tax expense of $38.1 million resulting in a tax benefit and the decrease in tax expense of $36.2 million for the three and nine month periods compared to the prior-year periods is primarily attributed to:


•	the prior-year period’s discrete tax expense for the establishment of a full valuation allowance on the U.S. deferred tax assets;


•	the current period discrete tax benefit for the decrease in the U.S. valuation allowance due to additional current earnings in other comprehensive income related to the change in our postretirement benefit plan;


•	a change in the geographic mix of earnings including a reduction of income in the high tax jurisdictions; and


•	a partial offset by the prior-year period’s discrete additional tax benefit for the U.S. -impaired assets.

The Company has not provided for deferred income taxes on undistributed earnings of its non-U.K. subsidiaries, including non-U.S. entities under Rowan Companies, Inc. (“RCI”). It is the Company’s policy and intention to permanently reinvest outside the U.S. the earnings of non-U.S. entities directly or indirectly owned by RCI. Generally, earnings of non-U.K. entities in which RCI does not have a direct or indirect ownership interest can be distributed to the Company without imposition of either U.K. or local country tax.

Material Charges and Other Operating Items – Material charges for the three and nine months ended September 30, 2016 include (i) non-cash asset impairment charges totaling $34.3 million on five jack-up drilling units (See Note 7) and (ii) a $1.4 million reversal of an estimated liability for settlement of a withholding tax matter during a tax amnesty period which was related to a legal settlement for a 2014 termination of a contract for refurbishment work on the Rowan Gorilla III, as noted below in the 2015 periods. Payment of such withholding taxes during the tax amnesty period resulted in the waiver of applicable penalties and interest.

Material charges for the three and nine months ended September 30, 2015 includes (i) non-cash asset impairment charges totaling $329.8 million on ten jack-up drilling units (See Note 7) and (ii) adjustments of $2.6 million and $7.6 million, respectively, to an estimated liability for the 2014 contract termination in connection with refurbishment work on the Rowan Gorilla III. A settlement agreement for this matter was signed during the third quarter of 2015.