-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V3kMuexKdJnWCugIP2nhLxRBYrel782ov2eFKYxaaYeO24RSv0q9Eelb7KpZH+d/ emkV9buWdL6YR5nkycScOA== 0000950129-01-001506.txt : 20010320 0000950129-01-001506.hdr.sgml : 20010320 ACCESSION NUMBER: 0000950129-01-001506 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010427 FILED AS OF DATE: 20010319 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROWAN COMPANIES INC CENTRAL INDEX KEY: 0000085408 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 750759420 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-05491 FILM NUMBER: 1571313 BUSINESS ADDRESS: STREET 1: 2800 POST OAK BLVD. STREET 2: SUITE 5450 CITY: HOUSTON STATE: TX ZIP: 77056-6127 BUSINESS PHONE: 7136217800 MAIL ADDRESS: STREET 1: 5450 TRANSCO TOWER STREET 2: 2800 POST OAK BOULEVARD CITY: HOUSTON STATE: TX ZIP: 77056-6196 FORMER COMPANY: FORMER CONFORMED NAME: ROWAN DRILLING CO INC DATE OF NAME CHANGE: 19711110 FORMER COMPANY: FORMER CONFORMED NAME: ROWAN DRILLING CO DATE OF NAME CHANGE: 19671112 DEF 14A 1 h84428def14a.txt ROWAN COMPANIES INC 1 ROWAN COMPANIES, INC. 2800 POST OAK BOULEVARD, SUITE 5450 HOUSTON, TEXAS 77056-6127 C. R. PALMER CHAIRMAN OF THE BOARD March 16, 2001 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 27, 2001 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 I Directors. YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE THREE 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, President and Chief Executive Officer 2 Rowan Companies, Inc. 2001 Proxy Statement - -------------------------------------------------------------------------------- NOTICE OF ANNUAL MEETING OF ROWAN STOCKHOLDERS - -------------------------------------------------------------------------------- DATE: Friday, April 27, 2001 TIME: 9:00 a.m., Central Time PLACE: Williams Tower, Level 2 Auditorium 2800 Post Oak Boulevard Houston, Texas PURPOSE: - To elect three Class I Directors for three-year terms - To conduct other business if properly raised
Only stockholders of record on March 2, 2001 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 16, 2001 3 Rowan Companies, Inc. 2001 Proxy Statement TABLE OF CONTENTS PAGE - -------------------------------------------------------------------------------- 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........................... 15 Additional Information.................................................... 16 Audit Committee Charter........................................... Appendix A 4 Rowan Companies, Inc. 2001 Proxy Statement - -------------------------------------------------------------------------------- GENERAL INFORMATION - -------------------------------------------------------------------------------- WHO MAY VOTE Stockholders of Rowan Companies, Inc., as recorded in our stock register on March 2, 2001, 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 16, 2001. 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 17. VOTING SECURITIES OUTSTANDING On March 2, 2001, there were 94,291,354 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 I 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. 1 5 Rowan Companies, Inc. 2001 Proxy Statement - -------------------------------------------------------------------------------- ELECTION OF DIRECTORS - -------------------------------------------------------------------------------- The Rowan Board of Directors consists of three classes: - - Class I presently has four 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 2001 - - Class II 2002 - - Class III 2003 Three Class I Directors are to be elected at this meeting. Two of the members of this Class, Charles P. Siess, Jr. (age 74), who served as a Director of the Company for ten years, and Wilfred P. Schmoe (age 73), who served as a Director for nine years, will not stand for reelection. The Board expresses its gratitude to Messrs. Siess and Schmoe for their many years of valuable and devoted service to the Company. The two remaining members of the Class, Hans M. Brinkhorst and H. E. Lentz, along with William T. Fox III, who has not previously served on the Board, have been selected by the Nominating Committee to be the Class I nominees, a decision with which the Board concurred. Because the effect of these actions is to reduce 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 27, 2001, the date of the 2001 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. - -------------------------------------------------------------------------------- DIRECTOR NOMINEES
DIRECTOR NAME(1) PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS AGE SINCE - ------- ------------------------------------------------------------ --- -------- CLASS I (TERM TO EXPIRE IN 2004) Hans M. Brinkhorst Retired in 1986; formerly Managing Director of the Royal 71 1998 Dutch/Shell Group of Companies' oil and gas exploration, production and transportation operations in Oman (1980-1986) and Malaysia (1977-1980) William T. Fox III Managing Director responsible for the global energy and 55 -- mining business of Citibank, N.A. (corporate banking) since 1994 H. E. Lentz Managing Director of Lehman Brothers Inc. (investment 56 1990 bankers) since March 1993
(Table continued on following page) 2 6 Rowan Companies, Inc. 2001 Proxy Statement CONTINUING DIRECTORS
DIRECTOR NAME(1) PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS AGE SINCE - ------- ------------------------------------------------------------ --- -------- CLASS II (TERM EXPIRES IN 2002) R. G. Croyle Executive Vice President of the Company since October 58 1998 1993(2) D. F. McNease Executive Vice President of the Company since April 1999; 49 1998 Senior Vice President of the Company from October 1993 to April 1999(2) Lord Moynihan Executive Chairman of London-based Consort Resources Ltd. 45 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) CLASS III (TERM EXPIRES IN 2003) Henry O. Boswell Retired in 1987; formerly President (1983-1987) of Amoco 71 1988 Production Company (oil and gas production) Frederick R. Lausen Vice President (1986-present) of Davis Petroleum, Inc. (oil 63 2000 and gas production) C. R. Palmer Chairman of the Board, President and Chief Executive Officer 66 1969 of the Company(2)
- -------------------------------------------------------------------------------- (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 under "Executive Compensation Tables" beginning on page 11. 3 7 Rowan Companies, Inc. 2001 Proxy Statement - -------------------------------------------------------------------------------- DIRECTOR COMPENSATION - -------------------------------------------------------------------------------- Rowan employees receive no extra 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 2000. 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 to low end 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. On April 27, 2000, each continuing nonemployee director, Messrs. Boswell, Brinkhorst, Lentz, Moynihan, Schmoe and Siess, was granted options for 3,000 shares of Rowan common stock and the Company's newly-elected director, Mr. Lausen, received as his initial grant options for 5,000 shares. The exercise price for the 2000 grants was set at the average of the high and low sales prices on the grant date, or $28.25 per share. - -------------------------------------------------------------------------------- BOARD COMMITTEES - -------------------------------------------------------------------------------- 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), Schmoe and Siess 2000 meetings: one 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 Nominating 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 17 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. Boswell, Lausen, Moynihan and Palmer 2000 meetings: one 4 8 Rowan Companies, Inc. 2001 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 employee stock option plan and debenture plans, having broad authority to interpret, amend, suspend or terminate 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 herein. Committee members: Messrs. Siess (Chairman), Boswell and Schmoe 2000 meetings: one 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 and Siess 2000 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 2000 meetings: five 5 9 Rowan Companies, Inc. 2001 Proxy Statement - -------------------------------------------------------------------------------- DIRECTOR AND OFFICER STOCK OWNERSHIP - -------------------------------------------------------------------------------- As of March 2, 2001, Rowan's directors and officers collectively owned 3,202,275 shares or 3.4% of the Company's outstanding common stock, including shares acquirable through May 1, 2001 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 1.8% 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 ("Named Executive Officers"), 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. - --------------------------------------------------------------------------------
SHARES ACQUIRABLE WITHIN 60 DAYS(2) ----------------------------------------------------- SHARES DEBENTURES TOTAL BENEFICIALLY 401(K) PLAN ------------------------------------------- BENEFICIAL NAME OWNED HOLDINGS(1) OPTIONS SERIES III SERIES A SERIES B SERIES C OWNERSHIP - ------------------------- ------------ ----------- ------- ---------- -------- -------- -------- ---------- Directors: Henry O. Boswell 73,600(3) 11,000 84,600 Hans M. Brinkhorst 1,000 11,000 12,000 R. G. Croyle 5,000(4) 70,000 65,926 12,606 17,778 8,743 180,053 Frederick R. Lausen 12,000(5) 5,000 17,000 H. E. Lentz 30,200(6) 11,000 41,200 D. F. McNease 1,005 3,479 48,500 103,705 12,606 17,778 8,743 195,816 Lord Moynihan 1,000 11,000 12,000 C. R. Palmer 474,997(7) 5,444 272,400 711,111 63,024 88,888 44,991 1,660,855 Wilfred P. Schmoe 9,000 11,000 20,000 Charles P. Siess, Jr. 7,000 11,000 18,000 Nominee for Director: William T. Fox III Other Executive Officers: E. E. Thiele 23,250 52,500 162,963 12,606 17,778 8,743 277,840 D. C. Eckermann 51,000 7,563 10,666 4,991 74,220 All Directors and Executive Officers as a group (22 in number) 860,432 14,432 781,150 1,169,631 121,012 170,664 84,954 3,202,275
- -------------------------------------------------------------------------------- (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 May 1, 2001 through the exercise of Nonqualified Stock Options and the conversion of Series III, Series A, Series B and Series C 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 23,100 shares owned by Mr. Boswell's wife. Mr. Boswell disclaims beneficial ownership of such shares. (4) Includes 2,000 shares owned by Mr. Croyle's son. Mr. Croyle disclaims beneficial ownership of such shares. (5) Mr. Lausen's shares are owned jointly with his wife. (6) 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 (7) Includes 20,752 shares held by the estate of Mr. Palmer's mother over which he has a measure of investment control. Additionally, 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. 6 10 Rowan Companies, Inc. 2001 Proxy Statement - -------------------------------------------------------------------------------- COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION - -------------------------------------------------------------------------------- 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 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 officers' 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. The Compensation Committee met in April 2000. Based upon these existing industry conditions and their positive effects on activity in each of the Company's operating divisions, the Committee determined that each of the Named Executive Officers, including Mr. Palmer (see "Chief Executive Officer Compensation" below), would receive about a 5% salary increase and all but one received a larger bonus in April 2000 than he received in April 1999. All other Rowan officers received salary increases in 2000 ranging from 10-17%, compared to no increases in the prior year. The variations in the percentage increases in the salaries of the Named Executive Officers and the other Rowan officers was a result of the Committee's determination that the Named Executive Officers (and two other Rowan officers) would benefit from participating in the Company's pension restoration plans. Mr. Palmer is already a participant in one of such plans. These plans are designed so that the participants will receive upon retirement the full amount of their calculated pensions, which would otherwise be limited by law. As discussed above, factors considered by the Committee in setting compensation included each individual's past contributions and performance, as well as Rowan's operating results and profitability, management of its assets and debts, increasing market share and the performance of Rowan's common stock in comparison to its competitors. Additionally, setting salaries which are both externally competitive relative to the industry and internally equitable when considering performance and responsibility levels were pursued objectives. 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. 7 11 Rowan Companies, Inc. 2001 Proxy Statement In addition to regular salary payments to executive officers in 2000, the Committee determined to offer Series C Floating Rate Subordinated Convertible Debentures to each of the Named Executive Officers, including Mr. Palmer. The Series C Debentures are ultimately convertible into Rowan common stock at the rate of $28.25 per share, the average of the high and low sales prices on the date of offer, through April 2010. Other officers received a grant of stock options. The primary basis for these Debenture offers and stock option grants was management's performance in positioning the Company to respond to the improving conditions in the industry following an extremely competitive period. The Committee also took into account its evaluation of the individual performance of each officer. The criteria used in evaluating individual performance for purposes of these grants were the same as the criteria discussed above that are considered when setting regular compensation. Previous option grants and debenture offerings to and held by the officers were taken into account when determining the amount of new option and debenture awards. The Committee attempts to avoid treating salaries, bonuses, stock option grants and debenture offerings as entitlements and recommended the 2000 revisions because it believed such changes were warranted. CHIEF EXECUTIVE OFFICER COMPENSATION The Committee's determination for establishing Mr. Palmer's compensation for 2000 was made in April 2000 based on the Committee's belief that Rowan had positioned itself well to benefit from the rebound in the offshore drilling industry. As conditions had begun to soften in the second quarter of 1998, Rowan continued to maintain and improve its assets although energy companies responded to decreased prices by reducing their drilling expenditures, either by allowing contract options to lapse or by canceling or deferring planned drilling projects. Conditions began to improve in mid-1999, and by April 2000, it was evident that Rowan's decision not to alter course was well advised. 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 believed, and believes, that Rowan's relatively strong position in the contract drilling industry and the successful design and implementation of its Super Gorilla Class rig construction program has been in large part attributable to Mr. Palmer's abilities and contributions. In 2000, the Committee's deliberations with respect to Mr. Palmer's compensation centered on Rowan's successful repositioning of its offshore rig fleet to the most promising markets and efficient management of Rowan resources and personnel. Given the Committee's continuing belief that tying a significant portion of the chief executive officer's remuneration to the interests of the stockholders is a prudent remuneration policy, it determined in April 2000 to offer to Mr. Palmer $5,085,000 principal amount of Series C Debentures, convertible into 180,000 shares of common stock at a conversion price equal to the average of the high and low sales prices on the date of offer of $28.25 per share. In addition, in April 2000 the Committee increased Mr. Palmer's annual salary by $50,000 to $1,050,000 and awarded him a $1,000,000 bonus, $365,000 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: Charles P. Siess, Jr., Chairman Henry O. Boswell Wilfred P. Schmoe The foregoing report of the Compensation Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities 8 12 Rowan Companies, Inc. 2001 Proxy Statement 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. - -------------------------------------------------------------------------------- AUDIT COMMITTEE REPORT - -------------------------------------------------------------------------------- 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), Wilfred P. Schmoe and Charles P. Siess, Jr. 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 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, its system of internal controls, the Company's 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 or auditing, including with respect to 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 this context, the Audit Committee held one meeting during fiscal year 2000. The meeting was 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, 2000 The Audit Committee has reviewed and discussed the audited financial statements of the Company for the year ended December 31, 2000 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 Standard No. 1 regarding independence discussions with audit committees, and the Audit Committee has discussed with Deloitte & Touche its independence. 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 consolidated financial statements and reviews of the consolidated financial statements included in our quarterly reports on 9 13 Rowan Companies, Inc. 2001 Proxy Statement Form 10-Q during the year ended December 31, 2000 were approximately $510,000. FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: There were no professional services rendered by Deloitte & Touche in the 2000 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, 2000 were approximately $242,000. The Audit Committee concluded that the non-audit services provided to the Company and fees paid therefor did not adversely impact the independence of Deloitte & Touche. 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, 2000 for filing with the SEC. 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 2001. Submitted by: Henry O. Boswell, Chairman Wilfred P. Schmoe Charles P. Siess, Jr. 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. 10 14 Rowan Companies, Inc. 2001 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 executive officer received any non-cash compensation having an aggregate incremental cost to Rowan in excess of the lesser of $50,000 or 10% of his or her total annual salary and bonus as reported in this table. SUMMARY COMPENSATION TABLE - --------------------------------------------------------------------------------
LONG-TERM ANNUAL COMPENSATION COMPENSATION AWARDS NAME AND -------------------------- ------------- ALL OTHER PRINCIPAL POSITION YEAR SALARY(1) BONUS DEBENTURES(2) COMPENSATION(3) - ------------------ ---- ---------- ---------- ------------- --------------- C. R. Palmer 2000 $1,050,000 $1,000,000 180,000 $5,100 Chairman of the Board, 1999 1,000,000 635,000 177,777 4,800 President and CEO 1998 975,000 635,000 84,034 4,800 R. G. Croyle 2000 320,000 140,000 35,009 4,542 Executive Vice President 1999 305,000 135,000 35,556 4,301 1998 296,667 135,000 16,807 4,800 D. F. McNease 2000 320,000 140,000 35,009 5,100 Executive Vice President 1999 295,000 135,000 35,556 4,800 1998 266,667 110,000 16,807 4,175 E. E. Thiele 2000 262,500 70,000 35,009 4,614 Senior Vice President -- 1999 250,000 65,000 35,556 4,800 Finance, Administration 1998 241,667 65,000 16,807 4,800 and Treasurer D. C. Eckermann 2000 230,000 60,000 20,000 5,100 Vice President -- 1999 220,000 60,000 21,333 5,000 Manufacturing 1998 209,321 45,000 10,084 5,000
- -------------------------------------------------------------------------------- (1) Represents calendar year salary compensation based upon annual rates approved by the Board of Directors effective May 1 of each year. (2) Represents shares of Rowan stock that may be acquired through the conversion of Floating Rate Subordinated Convertible Debentures as follows: 2000 -- Series C offered and issued on April 27th of that year; 1999 -- Series B offered and issued on April 22nd of that year; 1998 -- Series A offered and issued on April 24th of that year. The vesting schedule for the Series C debentures is as set forth below under "Debentures Offered in Last Fiscal Year." Shares acquirable by each Named Executive Officer upon conversion of Series A and Series B debentures are as follows:
SERIES A SHARES ACQUIRABLE ON APRIL 24, -------- --------------------------------- EXECUTIVE OFFICER 1999 2000 2001 2002 TOTAL ----------------- ------ ------ ------ ------ ------ C. R. Palmer 21,008 21,008 21,009 21,009 84,034 R. G. Croyle 4,202 4,202 4,202 4,201 16,807 D. F. McNease 4,202 4,202 4,202 4,201 16,807 E. E. Thiele 4,202 4,202 4,202 4,201 16,807 Dan C. Eckermann 2,521 2,521 2,521 2,521 10,084
SERIES B SHARES ACQUIRABLE ON APRIL 23, -------- --------------------------------- EXECUTIVE OFFICER 2000 2001 2002 2003 TOTAL ----------------- ------ ------ ------ ------ ------- C. R. Palmer 44,444 44,444 44,444 44,445 177,777 R. G. Croyle 8,889 8,889 8,889 8,889 35,556 D. F. McNease 8,889 8,889 8,889 8,889 35,556 E. E. Thiele 8,889 8,889 8,889 8,889 35,556 Dan C. Eckermann 5,333 5,333 5,333 5,334 21,333
(3) Represents the amount of Rowan's matching contribution on behalf of the Named Executive Officer to the Rowan Companies, Inc. Savings and Investment Plan or the LeTourneau, Inc. Savings and Investment Plan (401(k) Plans). 11 15 Rowan Companies, Inc. 2001 Proxy Statement AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The table below reflects the value of stock options exercised during 2000 and the value of outstanding options at year-end 2000 for each of the Named Executive Officers. - --------------------------------------------------------------------------------
NUMBER OF SHARES CLOSING UNDERLYING UNEXERCISED VALUE OF UNEXERCISED PRICE OPTIONS AT IN-THE-MONEY OPTIONS AT SHARES ON DECEMBER 31, 2000 DECEMBER 31, 2000(2) ACQUIRED ON EXERCISE VALUE ---------------------------- ---------------------------- NAME EXERCISE DATE(1) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- ----------- -------- ---------- ----------- ------------- ----------- ------------- C. R. Palmer 6,000 $25.75 $ 148,500 259,250 18,750 $4,624,094 $138,281 R. G. Croyle 49,000 29.88 1,441,500 66,250 3,750 1,299,219 27,656 D. F. McNease -- -- -- 44,750 3,750 775,844 27,656 E. E. Thiele 6,250 24.56 147,266 48,750 3,750 879,844 27,656 D. C. Eckermann -- -- -- 47,250 3,750 880,844 27,656
- -------------------------------------------------------------------------------- (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. A weighted average price has been derived for multiple exercises during the year. (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, 2000 ($27.00) and the per-share exercise prices for in-the-money options ($1.00, $7.625, $8.00, $15.25 and $19.625) times the number of underlying shares. DEBENTURES OFFERED IN LAST FISCAL YEAR The Rowan Companies, Inc. 1998 Convertible Debenture Incentive Plan (the "1998 Debenture Plan") was approved at the Company's 1998 Annual Meeting of Stockholders. The table below sets forth information pertinent to the April 27, 2000 offering to each of the Named Executive Officers. No Series C Debentures are convertible prior to April 27, 2001 and all were outstanding at March 2, 2001. All employees participating in the 2000 Debenture offering have borrowed the Debenture purchase price from Rowan. Promissory notes evidencing the borrowings bear interest at the same rate as the Debentures and are secured by a pledge of the Debentures purchased. - --------------------------------------------------------------------------------
PERCENTAGE POTENTIAL REALIZABLE VALUE OF TOTAL AT ASSUMED ANNUAL RATES NUMBER DEBENTURES OF STOCK PRICE APPRECIATION FACE OF SHARES ISSUED IN CONVERSION FOR DEBENTURE TERM AMOUNT OF UNDERLYING FISCAL PRICE EXPIRATION -------------------------------- NAME DEBENTURE DEBENTURE 2000 PER SHARE DATE 5% 10% - ---- ---------- ---------- ---------- ---------- ---------- -------------- -------------- C. R. Palmer $5,085,000(1) 180,000 52.9% $28.25 4-27-2010 $ 3,197,929 $ 8,104,180 R. G. Croyle 989,000(2) 35,009 10.3% 28.25 4-27-2010 621,979 1,576,218 D. F. McNease 989,000(2) 35,009 10.3% 28.25 4-27-2010 621,979 1,576,218 E. E. Thiele 989,000(2) 35,009 10.3% 28.25 4-27-2010 621,979 1,576,218 D. C. Eckermann 565,000(3) 20,000 5.9% 28.25 4-27-2010 355,325 900,464 All stockholders 93,854,179(4) 28.25(4) 4,318,819,542 6,876,998,328
- -------------------------------------------------------------------------------- (1) Convertible as follows: $1,271,000 into 44,991 shares on or after April 27, 2001; $2,542,000 into 89,982 shares on or after April 27, 2002; $3,813,000 into 134,973 shares on or after April 27, 2003; and $5,085,000 into 180,000 shares on or after April 27, 2004 through April 27, 2010. (2) Convertible as follows: $247,000 into 8,743 shares on or after April 27, 2001; $494,000 into 17,486 shares on or after April 27, 2002; $741,000 into 26,229 shares on or after April 27, 2003; and $989,000 into 35,009 shares on or after April 27, 2004 through April 27, 2010. (3) Convertible as follows: $141,000 into 4,991 shares on or after April 27, 2001; $282,000 into 9,982 shares on or after April 27, 2002; $423,000 into 14,973 shares on or after April 27, 2003; and $565,000 into 20,000 shares on or after April 27, 2004 through April 27, 2010. (4) Represents the number of outstanding shares of Rowan common stock and the average per-share market price on April 27, 2000, the date of issuance of the Series C Debentures. 12 16 Rowan Companies, Inc. 2001 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 31, 2001, Rowan had approximately 3,700 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(3) 15 20 25 30 35 40 - --------------- -------- -------- -------- -------- -------- -------- $ 150,000 $ 39,375 $ 52,500 $ 65,625 $ 78,750 $ 91,875 $105,000 200,000 52,500 70,000 87,500 105,000 122,500 140,000 250,000 65,625 87,500 109,375 131,250 153,125 175,000 300,000 78,750 105,000 131,250 157,500 183,750 210,000 400,000 105,000 140,000 175,000 210,000 245,000 280,000 500,000 131,250 175,000 218,750 262,500 306,250 350,000 600,000 157,500 210,000 262,500 315,000 367,500 420,000 700,000 183,750 245,000 306,250 367,500 428,750 490,000 800,000 210,000 280,000 350,000 420,000 490,000 560,000 900,000 236,250 315,000 393,750 472,500 551,250 630,000 1,000,000 262,500 350,000 437,500 525,000 612,500 700,000 1,100,000 288,750 385,000 481,250 577,500 673,750 770,000 1,200,000 315,000 420,000 525,000 630,000 735,000 840,000
- -------------------------------------------------------------------------------- (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, 2000, the Named Executive Officers (excluding D. C. Eckermann) were credited under the pension and pension restoration plans for the drilling and aviation employees of the Company with years of service as follows: C. R. Palmer 41 R. G. Croyle 27 D. F. McNease 26 E. E. Thiele 31
(3) The estimated annual benefit payable upon retirement to D. C. Eckermann is approximately $61,000, such benefit being based upon his 20 years of projected service at age 65 under the Company's manufacturing employees' pension plan and four years of service under a predecessor plan. 13 17 Rowan Companies, Inc. 2001 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 a peer group index, for the five-year period ending December 31, 2000. - -------------------------------------------------------------------------------- COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN* ROWAN COMMON STOCK, S&P 500 INDEX & COMPANY-SELECTED PEER GROUP** (Assumes $100 Invested on December 31, 1995) [PERFORMANCE GRAPH]
1995 1996 1997 1998 1999 2000 ----- ----- ----- ----- ----- ----- Rowan....................................................... 100 235 317 103 225 281 S&P 500..................................................... 100 123 164 208 248 223 Peer Group.................................................. 100 214 296 91 190 297
Fiscal Year Ended December 31 *Total return assumes reinvestment of dividends. **ENSCO International Incorporated, Global Marine, Inc., Noble Drilling Corporation and R&B Falcon Corporation - -------------------------------------------------------------------------------- The previous line graph is presented pursuant to, and has been prepared in accordance with, specific SEC rules which prescribe, among other characteristics, 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. The Company believes 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 eighteen-year period, the Company, and the industry as a whole, have generally experienced conditions more closely associated with the latter; though the Company anticipates industry growth in the years ahead. For that reason, the Company does not believe a five-year presentation of stockholder return is especially meaningful, but rather believes a comparison covering a period that reflects several cycles is more informative. Furthermore, the Company believes 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 the Company operates. A line graph comparison is set forth on page 15, which reflects the yearly percentage change in, and cumulative total 14 18 Rowan Companies, Inc. 2001 Proxy Statement stockholder return on each of the Company's Common Stock and the same Company-selected peer group for the period of 18 calendar years commencing January 1, 1983 and ending December 31, 2000. - -------------------------------------------------------------------------------- COMPARISON OF EIGHTEEN-YEAR CUMULATIVE TOTAL RETURN* ROWAN COMMON STOCK & COMPANY-SELECTED PEER GROUP** (Assumes $100 Invested on December 31, 1982) [GRAPH COMPARISON OF EIGHTEEN-YEAR TOTAL TURN]
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Rowan................ 100 113 88 78 40 53 58 113 113 58 79 91 63 97 228 Peer Group**......... 100 92 61 32 21 37 25 45 36 20 16 33 28 57 122 1997 1998 1999 2000 ---- ---- ---- ---- Rowan................ 307 100 219 272 Peer Group**......... 168 52 108 169
Fiscal Year Ended December 31 *Total return assumes reinvestment of dividends. **ENSCO International Incorporated, Global Marine, Inc., Noble Drilling Corporation and R&B Falcon Corporation - -------------------------------------------------------------------------------- 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 2, 2001, except as set forth in the following table.
{INVESTMENT {VOTING POWER POWER ---------------- ---------------- PERCENT OF NAME AND ADDRESS SOLE SHARED SOLE SHARED TOTAL CLASS - ---------------- ---- --------- ---- --------- --------- ---------- Wellington Management Company, LLP(1) -- 4,718,840 -- 5,760,440 5,760,440 6.11% 75 State Street Boston, Massachusetts 02109
- -------------------------------------------------------------------------------- (1) Based upon Schedule 13G filed by Wellington Management Company, LLC (WMC) with the Securities and Exchange Commission on February 14, 2001. The Schedule 13G indicates that beneficial ownership by WMC arises in its capacity as investment advisor and that such shares are held of record by clients of WMC. 15 19 Rowan Companies, Inc. 2001 Proxy Statement - -------------------------------------------------------------------------------- ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN TRANSACTIONS During 2000, each of the Named Executive Officers and Messrs. P.L. Kelly and C.W. Johnson issued promissory notes in favor of Rowan in the aggregate amount of $9,606,000 in connection with their purchases from Rowan of Series C Floating Rate Subordinated Convertible Debentures. The debentures are discussed more fully under "Debentures Offered In Last Fiscal Year" on page 12. The promissory notes bear interest at prime + .5%, mature on April 27, 2010 and are secured by a pledge of the debentures purchased. Each of the following promissory notes is still outstanding: C.R. Palmer -- $5,085,000; R.G. Croyle -- $989,000; D.F. McNease -- $989,000; E.E. Thiele -- $989,000; D.C. Eckermann -- $565,000; P.L. Kelly -- $565,000 and C.W. Johnson -- $424,000. During 2000, the Company derived approximately $2,853,000 of drilling revenues from Davis Petroleum, Inc. ("Davis"). Mr. Frederick R. Lausen, a Class III Director of the Company, is a Vice President of Davis. The terms and conditions under which services were provided to Davis were comparable to those experienced by the Company in connection with third parties for similar rigs. The transactions between Rowan and Davis were reviewed and approved by the Company's Board of Directors. During 2000, the Company paid $5,150,000 in underwriting commissions to Lehman Brothers Inc., an investment-banking firm, for managing the Company's 10.3 million share common stock offering concluded in March 2000. Mr. H.E. Lentz, a Class I Director of the Company, is a Managing Director of Lehman Brothers Inc. During 2000, the Company paid Citibank, N. A., its primary lender, approximately $11,459,000 in interest and fees and had borrowings outstanding at December 31, 2000 of $163,881,000. The Company expects this relationship will continue in 2001. Mr. William T. Fox III, a nominee for Class I Director of the Company, is a Managing Director of Citibank, N.A. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE All of the Company'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 the Company's 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, the Company believes that all applicable Section 16(a) filing requirements were complied with during the year ended December 31, 2000. STOCKHOLDER PROPOSALS Any stockholder who wishes to submit a proposal for presentation at the 2002 Annual Meeting of Stockholders must forward such proposal to the Secretary of the Company, at the address below, so that the Secretary receives it no later than November 17, 2001. Other stockholder proposals submitted for consideration at the Company's 2002 Annual Meeting of Stockholders (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 17 no later than January 30, 2002. If such timely notice of a stockholder proposal is given but is not accompanied by a written statement in compliance with applicable securities laws, the Company's proxy committee may exercise discretionary voting authority over proxies with respect to such proposal if presented at the Company's 2002 Annual Meeting of Stockholders. 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. 16 20 Rowan Companies, Inc. 2001 Proxy Statement 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, 2001. A representative of Deloitte & Touche is expected to be present at the Annual Meeting of Stockholders on April 27, 2001 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. 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, 2000, 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). 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: Mark H. Hay, Secretary Rowan Companies, Inc. 2800 Post Oak Boulevard Suite 5450 Houston, Texas 77056-6127 17 21 Rowan Companies, Inc. 2001 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 22 Rowan Companies, Inc. 2001 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. A-2 23 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 27, 2001 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 PROPOSAL 1 AND 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) 24 ROWAN COMPANIES, INC. PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ================================================================================ The Board of Directors unanimously recommends a vote FOR: For Withhold For All (Except nominee(s) All All Except written below from 1. The election of the following nominees for Class I / / / / / / whom vote is withheld) Directors: 01 - Hans M. Brinkhorst, 02 - William T. Fox III and 03 - H.E. Lentz ---------------------- 2. In their discretion, the proxies are authorized ---------------------- to vote on any other matter that may properly come before the meeting. ---------------------- ----------------------------------- Signature ----------------------------------- Signature if held jointly Dated _______________________ , 2001 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. -----END PRIVACY-ENHANCED MESSAGE-----