EQUITY METHOD INVESTMENTS AND VARIABLE INTEREST ENTITIES (Tables)

12 Months Ended

Dec. 31, 2018

EQUITY METHOD INVESTMENTS AND VARIABLE INTEREST ENTITIES [Abstract]

Summarized financial information for ARO, as derived from ARO's financial statements, is as follows (in millions):



	Year ended			October 17, 2017 to
	December 31, 2018			December 31, 2017
Revenue	$	348.8		$	48.6
Direct operating costs (excluding items below)	194.0			22.2
Depreciation and amortization	67.4			12.9
Selling, general and administrative	27.0			6.1
(Gain) loss on disposals of property and equipment	1.4			(0.1		)
Income from Operations	59.0			7.5
Interest expense	(26.2		)	(4.2		)
Provision for income taxes	12.3			1.6
Net Income	$	20.5		$	1.7

Rowan's equity in earnings from ARO	$	10.3		$	0.9



	December 31, 2018		December 31, 2017
Current assets	$	348.9	$	108.6
Non-current assets	727.0		459.7
Total assets	$	1,075.9	$	568.3

Current liabilities	$	112.2	$	29.2
Non-current liabilities	949.1		545.1
Total liabilities	$	1,061.3	$	574.3

The following summarizes the total assets and liabilities as reflected in the Company's consolidated balance sheets as well as the Company's maximum exposure to loss related to ARO (in millions). Generally, the Company's maximum exposure to loss is limited to its 1) equity investment in the joint venture, 2) outstanding note receivable and 3) any receivable to the Company for services it provides to the joint venture, reduced by payables for services which the Company owes to ARO.



	December 31, 2018		December 31, 2017
Total assets	$	566.0	$	319.5
Total liabilities	6.1		10.8
Maximum exposure to loss	$	559.9	$	308.7

Schedule of Related Party Transactions

In October 2017 and October 2018, the Company contributed cash to ARO in exchange for a 10-year shareholder note receivable from ARO, at a stated interest rate of LIBOR plus two percent (See Note 1). Interest is being recognized as a part of Interest income in the Company's Consolidated Statements of Operations and totaled approximately $12.9 million for the year ended December 31, 2018, and $2.1 million for the period from October 17, 2017 to December 31, 2017. Interest was received in kind and accreted to the note in 2018.

Activity related to the shareholder note receivable (in millions):



Long-term note receivable from unconsolidated subsidiary	2018			2017
Beginning Balance January 1,	$	270.2		$	—
Origination	271.3			357.7			See Note 1
Repayments ⁽²⁾	(98.5		)	(87.5		)	See Note 1
Interest in kind	12.0			—
Other	1.0			1.1
Total	456.0			271.3
Less: Current Portion ⁽¹⁾	—			1.1
Ending Balance December 31,	$	456.0		$	270.2

⁽¹⁾ Included in Receivables - trade and other on the Company's Consolidated Balance Sheet.
⁽²⁾ Includes excess cash distributed back to Rowan in October of 2018 and October 2017 (See Note 1).

In conjunction with the establishment of ARO, the Company entered into a series of agreements with ARO including: a Transition Services Agreement, Secondment Agreement and Lease Agreements. There is also an agreement between the Company and ARO, pursuant to which ARO will reimburse the Company for certain Capital Expenditures related to four rigs leased to ARO (See Note 3). Pursuant to these agreements the Company, or its seconded employees, will provide various services to ARO, and in return, the Company is to be provided remuneration for those services. From time to time Rowan may sell equipment or supplies to ARO. Revenue and other amounts recognized by Rowan related to these agreements and transactions is as follows (in millions):



	Year ended		October 17, 2017 to
	December 31, 2018		December 31, 2017
Secondment Revenue - Jack-ups	$	55.9	$	9.2
Lease and related Revenue - Jack-ups	24.4		—
Transition Services Revenue - Unallocated	33.8		7.4
Sales of supplies - Jack-ups	5.0		0.5
Total Revenue received from ARO	$	119.1	$	17.1

Reimbursement of preparation costs^(a)	$	—	$	1.6
Proceeds from equipment sales to ARO ^(b)	10.8		1.0

^(a) For the year ended December 31, 2017, the reimbursement resulted in a reduction in expense of $1.3 million and a $0.3 million decrease to Prepaid expenses and other current assets. The entire $1.6 million was included in Receivables - trade and other at December 31, 2017 for the amount to be reimbursed.
^(b) A gain of $1.2 million for the year ended December 31, 2018 was recognized in Loss on disposals of property and equipment on the Consolidated Statements of Operations. There was no gain or loss recognized for the year ended December 31, 2017. $3.5 million and $1.0 million is included in Receivables - trade and other as of December 31, 2018 and 2017, respectively, for the $10.8 million and $1.0 million purchase price, respectively.