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Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good day, Ladies and Gentlemen, we would like to welcome you to this Rowan Companies Incorporated first quarter 2007 earnings results conference. As a reminder today' call is being recorded.
And now for opening remarks and introductions I would like to turn the conference over to Mr. Bill Provine. Mr. Provine, please go ahead.
BILL PROVINE, VP IR, ROWAN COMPANIES, INC.: Thank you, Dalia. And good morning, everyone. Thanks for tuning into Rowan Companies first quarter 2007 earnings conference call. Please note that we have posted slide on our Website at Rowan companies.com where you may listen to the call and see the acCompanying slides. With me this morning is Danny McNease, our Chairman and CEO; and Bill Wells, our Chief Financial Officer. The duration of this call will be 60 minutes. And I'd like to remind you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Including without limitations statements as to the expectation, beliefs and future financial performance of the Company that are based on current expectations and are subject to certain risks, trends and uncertainties that may cause actual results to differ materially from those projected by the Company. Now, it's my pleasure to turn the call over to Danny McNease for his introductory statements.
DANNY MCNEASE, CEO, ROWAN COMPANIES, INC.: Thanks, Bill. Good morning, everyone and welcome, as Bill said, to our first quarter 2007 conference call. Let me start by saying how pleased I am with the earnings results. We've had another record breaking quarter here at Rowan and we have a lot to be excited about. In accordance with our strategic plan, we have currently 15 of our 21 rigs under long term contract. 12 of those rigs are contracted for international markets. Our redeployment of assets has, for the time being, been concluded and by this time next week, all of our offshore rigs should again be generating revenue.
Demands for jack-ups in the Middle East and many other foreign markets remain strong. And we are continuing to aggressively pursue long term opportunities abroad. While we remain confident in long term visibility -- viability of the Gulf of Mexico jack-up market, we believe the migration of high specification rigs to other areas will continue. We expect to have fewer of our own jack-ups located in the Gulf a year from now than we do today.
We're now operating 27 land rigs and will have two additional new built land rigs delivered in the third quarter of 2007. I'll go into more detail about the drilling division later in this call. Bill Wells will now present an overview of the financials for the quarter and then I will provide the operational overview and our current view of the markets. Following our comments, we will open the call for your questions. Bill?
BILL WELLS, CFO, ROWAN COMPANIES, INC.: Thanks, Danny and good morning, everyone. In the first quarter 2007, our net income was $86.4 million or $0.77 per share, a sequential increase of 38%, compared to $62.4 million or $0.56 per share in the fourth quarter of 2006 and a year-over-year increase of 46%, compared to $59.1 million or $0.53 per share in the first quarter of 2006. Our first quarter consolidated revenues were a record $462.3 million, a sequential increase of $51.3 million or 12%, and a year-over-year increase of $162.5 million or 54%. The current period results included $11.3 million or $0.07 per share of incremental loss recorded on our external rig construction project, bringing the total expected loss on the project to approximately $13.4 million.
This additional loss reflects an increase in the expected cost of the project, most of which is due to the project requiring many more labor hours than we originally anticipated. The efforts by our manufacturing division to deliver the Hank Boswell three months ahead of schedule, rebuild the Rowan Louisiana and assist with modifications to our Middle East rigs have had the affect of delaying our progress on this project. The rig is being built to specification and will be delivered on schedule in June.
Our first quarter 2000 results also included $24.1 million or $0.14 per share of gains on asset sales, compared with $2.5 million or $0.01 per share in the prior year period. There were no significant asset sales in the fourth quarter of 2006, so that period included $12.8 million or $0.10 per share of charges related to environmental matters. The current period gains reflect the following payments received in connection with our 2005 installment sale of the Rowan Midland.
Turning now to each of our divisions. Our first quarter 2007 manufacturing revenues were a record $174 million, a sequential increase of $43.7 million or 34% and a year-over-year increase of $91.3 million or 110%. This growth in revenues was primarily attributable to our drilling products and systems segment, which includes our offshore products, drilling systems and power systems groups. Our first quarter offshore products revenues were $67.1 million, a sequential increase of $22.1 million or 49%, and a year-over-year increase of $48 million or 251%.
Current period revenues included $25.9 million recognized on our external rig construction project and another $13.4 million related to three of our seven rig kit projects in process. Another $19.8 million was earned from custom fabrication work and $6.9 million from part sales. Our first quarter drilling systems revenues were $35.6 million, a sequential increase of $13.3 million or 60% and a year-over-year increase of $19.7 million or 124%. Current period revenues included shipments of 18 month pumps and one draw works and another $16.5 million of land rig package sold through the SourceOne Marketing Alliance.
Our first quarter power systems revenues were $17.4 million, a sequential increase of $3.8 million or 28% and a year-over-year increase of $13.8 million or 383%. Current period revenues included shipments of 106 motors and another $9.9 million of primarily AC drive and control systems work. Our first quarter mining products revenues were $40.4 million, a sequential increase of $1.2 million or 3% and a year-over-year increase of $3.8 million or 10%.
Current period revenues included shipments of seven front end loaders featuring four of the larger L-1850 model. Mining part sales totaled $12.4 million during the first quarter, up by 9% sequentially and by 4% year-over-year. Excluding the impact of the external rig construction project, our first quarter 2007 average margin on direct manufacturing costs was 25% of remaining revenues, or slightly ahead of our 24% normalized margin during the fourth quarter of 2006.
With less than one half of the revenue base, the prior year period, that is the first quarter of 2006, had a higher concentration of aftermarket part sales and thus a higher overall margin on direct costs. Our first quarter 2007 drilling revenues were $288.3 million, an increase of $7.7 million or 3% compared to fourth quarter of 2006 at an increase of $71.2 million or 33% compared to the year ago quarter. The sequential increase reflects the start up of our two 116-C jack-ups offshore Qatar in late January. And a full quarter of activity by the Rowan Louisiana, which more than offset the deferral of revenues associated with our …