ITEM 1. BUSINESS
Rowan Companies, Inc.(the "Company"), organized in 1947 as a Delaware corporation and a successor to a contract drilling business conducted since 1923 under the name Rowan Drilling Company, Inc., is engaged principally in the contract drilling of oil and gas wells in domestic and foreign areas. As noted below, it also provides aircraft services and, since February, 1994, has operated a mini-steel mill, a heavy equipment manufacturing operation and a marine rig construction yard through the purchase of the net assets of Marathon LeTourneau Company.
Offshore operations of the Company consist primarily of contract drilling services utilizing mobile rigs, principally a fleet of 20 self-elevating drilling platforms ("jack-up rigs"), including three heavy duty cantilever jack-up rigs ("Gorilla Class rigs") delivered in the 1984-86 period. Beginning in 1992, the Company has moved towards Total Project Management, an approach to drilling operations which emphasizes drilling and completing wells on a turnkey basis. In that same year it began providing offshore platform installation and removal services.
The Company provides contract and charter helicopter and fixed-wing aircraft services. In Alaska and in the Gulf of Mexico, services provided are primarily to support oil and gas related operations, with the Company's fleet consisting on March 1, 1994 of 94 helicopters and 15 fixed-wing aircraft. Since 1991, the Company has owned a 49% interest in a Dutch-based joint venture company, KLM ERA Helicopters B.V. ("KLM ERA"), which owns a fleet consisting of 10 helicopters in the Dutch and British sectors of the North Sea and one helicopter in Canada.
On February 11, 1994, the Company purchased through its wholly-owned subsidiary, LeTourneau, Inc., the net assets of Marathon LeTourneau Company for $52.1 million with $10.4 million cash paid at the time of the purchase and the balance being seller-financed by promissory notes bearing interest at 7% and payable at the end of five years. LeTourneau, Inc. operates a mini-steel mill that recycles scrap and produces alloy steel and steel plate; a manufacturing facility that produces heavy equipment for the mining, timber and material handling industries including, among other things, front-end loaders up to 50 ton-capacity and trucks under the registered trademark, Titan, up to 240 ton capacity; and a marine division that has built over one-third of all mobile offshore jack-up drilling rigs, including all 20 operated by Rowan.
Information regarding revenues, operating profit, identifiable assets and export sales of the Company's industry segments and foreign and domestic operations for each of the three years in the period ended December 31, 1993, is incorporated by reference herein and provided in Footnote 10 of the Notes to Consolidated Financial Statements on page 25 of the Company's Annual Report to Stockholders for the fiscal year ended December 31, 1993 ("Annual Report"), incorporated portions of which are filed as Exhibit 13 hereto. Information on the Company's manufacturing segment is not provided since the purchase occurred after year-end 1993.
In the years 1991, 1992 and 1993, the Company had revenues from individual customers representing more than 10% of consolidated revenues as follows: Conoco, Inc. - 23% and 11% for 1991 and 1992, respectively; and Shell Oil Company - 12% for 1991 and Phillips Petroleum Company - 17% for 1993. Such revenues were primarily from drilling operations.
For a discussion of the Company's availability of funds for future operations and estimated capital expenditures for 1994 which would be in addition to the $52.1 million purchase of the net assets of Marathon LeTourneau, see "Liquidity and Capital Resources" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 14 of the Annual Report, which information is incorporated herein by reference.
CONTRACT DRILLING
In 1993, drilling operations generated an operating profit (income from operations before deducting general and administrative expenses) of $19.1 million.
Offshore Operations
At December 31, 1993, the Company's drilling fleet consisted of 20 deep-water jack-up rigs (eight conventional and twelve cantilever, including three Gorilla Class rigs in the latter category), one semi-submersible rig and three submersible barge rigs. The Company owns all of the rigs comprising its fleet except for two cantilever jack-up rigs leased under sale/leaseback arrangements expiring in 1999 and 2000.
Since completing a major drilling rig expansion program conducted in the early to mid-1980s, the Company's capital expenditures have been primarily for improvements to existing drilling rigs and the purchase of aircraft. Adding to these capital expenditures was the November 1991 acquisition of the 49% interest in KLM ERA and the February 1994 purchase of the net assets of Marathon LeTourneau. See ITEM 2.

ITEM 2. PROPERTIES
The Company leases as its corporate headquarters 57,800 square feet of space in an office tower located at 2800 Post Oak Boulevard in Houston, Texas.
DRILLING RIGS
The following is a summary of the principal drilling equipment owned or operated by the Company and in service at March 31, 1994. See "Liquidity and Capital Resources" as appearing in "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 14 in the Annual Report which page is incorporated herein by reference.
OFFSHORE
ITEM 2. PROPERTIES
OFFSHORE(Continued)
ITEM 2. PROPERTIES
(Continued)
______________________
(a) Classes 200-C ("Gorilla"), 116-C, 116, 84 and 52 are nomenclature assigned by LeTourneau, Inc. to jack-ups of its design and construction. (b) Indicates rated water depth in current location and rated drilling depth, respectively. (c) Unit modified to increase operating capability in hostile environments. (d) Gorilla Class unit designed for hostile environment capability. (e) Unit equipped with a "top drive" drilling system. (f) Unit equipped with a "skid base" unit. (g) Unit equipped with drilling/heavy-lift crane option. (h) Unit equipped with leg extensions. (i) Rig sold December 1984 and leased back for 15 years. (j) Rig sold December 1985 and leased back for 15 years. (k) Onshore rigs, including the three used rigs purchased in 1991, were constructed at various dates between 1960 and 1982, utilizing, in some instances, new as well as used equipment. Most of the older rigs have been substantially rebuilt subsequent to their respective dates of construction. (l) Refer to "Contracts" on page 4 of this Form 10-K for definition of types of contracts. (m) Indicates estimated completion date of work to be performed. (n) Currently under tow from Alaska. (o) Rigs currently being shipped to the United States.
The Company's Drilling Division leases and, in some cases, owns various operating and administrative facilities generally consisting of office, maintenance and storage space in the states of Alaska, Texas and Louisiana and, on a foreign basis, in the countries of Canada, Venezuela, England, Scotland, The Netherlands, and Trinidad.
AIRCRAFT
At March 1, 1994 the U.S.-based Company-owned helicopter fleet consisted of 14 twin-engine turbine IFR rated Bell 212 helicopters (14 passenger), 16 twin-engine turbine IFR rated Bell 412 helicopters (14 passenger), 31 twin-engine turbine MBB BO-105CBS helicopters (five passenger), two Aerospatiale 332L Super Puma helicopters (19 passenger) and 31 various single-engine turbine helicopters (four to six passenger). The U.S.-based fixed-wing fleet of Company-owned aircraft consisted of four Convair 580s (44 passenger), nine DeHavilland Twin Otters (9-19 passenger), one DeHavilland Dash 8 (37 passenger), one Lear Jet 35A (six passenger) and one Beechcraft King Air 200C (six passenger).
Helicopters owned by KLM ERA on March 1, 1994 consisted of six twin-engine turbine IFR rated Sikorsky S-61N helicopters (26 passenger) and five twin-engine turbine IFR rated Sikorsky S-76B helicopters (13 passenger).
The Company's principal aircraft bases in Alaska, all located on leased property, are a fixed-wing air service center (57,000 square feet of hangar, repair and office facilities) at Anchorage International Airport, with an adjacent helicopter hangar facility (14,800 square feet) and hangar, office and repair facilities at Fairbanks International Airport (13,000 square feet). The Company also maintains similar, smaller helicopter facilities in Alaska at Deadhorse, Juneau, Valdez and Yakutat.
The Company's principal facilities to accommodate its Gulf of Mexico operations are located on leased property at Lake Charles Regional Airport.The facilities, comprising 53,000 square feet, include helicopter hangars, a repair facility and an operations and administrative building. The Company also operates a helicopter facility (20,700 square feet of hangar, repair and office facilities) located on leased property at the Terrebonne Airport in Houma, Louisiana and a helicopter facility (5,700 square feet of hangar, repair and office facilities) located on leased property in New Iberia, Louisiana.
KLM ERA's principal facilities to accommodate its operations in the Dutch sector of the North Sea include bases in Amsterdam and Den Helder. The Amsterdam facility, comprising 149,000 square feet leased and 17,000 square feet subleased, includes helicopter hangars, a repair facility, an operations/administrative building and a passenger waiting area. The Den Helder facility, comprising 35,000 square feet, includes a helicopter hangar, a repair facility and an operations/administrative building. The Amsterdam operations are scheduled for shutdown and consolidation with the Den Helder operations by the fourth quarter of 1994.
Manufacturing Facilities
LeTourneau's principal manufacturing facility and headquarters are located in Longview, Texas on approximately 2,400 acres with approximately 1.2 million square feet under roof. Included within the facility are: A mini-steel mill having approximately 330,000 square feet of covered work space and housing two 25-ton electric arc furnaces having an aggregate 120,000 tons per year capacity; a fabrication shop having approximately 300,000 square feet of covered work space and housing a 3,000 ton vertical bender for making roll-ups or flattening materials up to 2 1/2 inches thick by 11 feet wide; a machine shop having approximately 140,000 square feel of covered work space and housing various types of machinery; and an assembly shop have approximately 124,000 square feel and housing various types of machinery.
The marine division's facility located in Vicksburg, Mississippi is located on 1,850 acres of land and has approximately 476,000 square feet of covered work space. This facility is currently closed and the businesses formerly carried on at this location have been relocated to the Longview, Texas facility.
The LeTourneau Portland Division's distributor for forest products in the Northwestern United States, is located on a six acre site in Troutdale, Oregon
with approximately 22,000 square feet of building space.
The Western Mining Division of LeTourneau located in Tucson, Arizona is housed in a 20,000 square foot leased facility. It functions as the distributor for LeTourneau's mining equipment products in the Western United States.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising out of the conduct of the Company's operations and other matters, not all the potential liabilities with respect to which are covered by the terms of the Company's insurance policies. While the Company is unable to predict the ultimate liabilities which may result from such litigation, the Company believes that no such litigation in which the Company was involved as of March 31, 1994 will have a material adverse effect on the financial position or results of operations of the Company.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's common stockholders during the fourth quarter of the fiscal year ended December 31, 1993.
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The names, positions, years of accredited service and ages of the officers of the Company and certain officers of the Company's wholly-owned subsidiary, Era Aviation, Inc., as of March 24, 1994 are listed below. Officers of both entities are normally appointed annually by the entities' Board of Directors at the bylaws prescribed meetings held in the spring and serve at the discretion of the Board of Directors. There are no family relationships among these officers, nor any arrangements or understandings between any officer and any other person pursuant to which the officer was selected.
Years of Accredited Name Position Service Age - -------------------- -------------------------------- ---------- ----- Executive Officers of the Registrant:
C. R. Palmer Chairman of the Board, President 34 59 and Chief Executive Officer R. G. Croyle Executive Vice President 20 51 D. F. McNease Senior Vice President, Drilling 19 42 John L. Buvens Vice President, Legal 13 38 James B. Davis Vice President, Engineering 20 43 Paul L. Kelly Vice President, Special Projects 11 54 Bill S. Person Vice President, Industrial Relations 26 45 William C. Provine Vice President, Investor Relations 7 47 E. E. Thiele Vice President, Finance, Adminis- 24 54 tration and Treasurer
Other Officers of the Registrant:
Mark H. Hay Secretary and Assistant Treasurer 15 49 P. G. Wheeler Assistant Treasurer 19 46 Lynda A. Aycock Assistant Treasurer 22 47
Certain Officers of Era Aviation, Inc.:
C. W. Johnson President and Chief Operating Officer 16 50 James Vande Voorde Vice President 20 54
Each of the executive officers and other officers of the Company and the two officers of Era Aviation, Inc. listed above continuously served in the position
shown above for more than the past five years except as noted in the following paragraphs.
Since October 1993, Mr. Croyle's principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Croyle served as Vice President, Legal of the Company.
Since October 1993, Mr. McNease's principal occupation has been in the position set forth. From April 1991 to October 1993, Mr. McNease served as Vice President, Drilling of the Company. For more than five years prior to that time, he served as Vice President of Rowandrill, Inc., a subsidiary of the Company.
Since October 1993, Mr. Buvens' principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Buvens served as an Attorney for the Company.
Since October 1993, Mr. Davis' principal occupation has been in the position set forth. From January 1990 to October 1993, Mr. Davis served as Manager of Engineering/Purchasing & Chief Engineer of the Company. From June 1989 to January 1990, he served as, he served as an Engineer for the Company. For more than five years prior to that time, he served as a Tool Pusher for the Company.
Since October 1993, Mr. Person's principal occupation has been in the position set forth. From April 1990 to October 1993, Mr. Person served as Director of British American Offshore Limited, a subsidiary of the Company. For more than five years prior to that time, he served as Manager of Industrial Relations of the Company.
Since October 1993, Mr. Provine's principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Provine served as Vice President of Rowandrill, Inc., a subsidiary of the Company.
Since January 1994, Mr. Thiele's principal occupation has been in the position set forth. From February 1989 to January 1994, Mr. Thiele served as Vice President, Administration and Finance.
Since October 1993, Ms. Aycock's principal position has been in the position set forth. For more than five years prior to that time, Ms. Aycock served as an Accountant for the Company.
Since December 1993, Mr. Johnson's principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Johnson served as Executive Vice President of Era Aviation, Inc., a subsidiary of the Company.
In addition to serving in the position shown above, Mr. Wheeler has also served as Corporate Tax Director of the Company for more than five years.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required hereunder regarding the Common Stock price range and cash dividend information for 1993 and 1992 and the number of holders of Common Stock is set forth on page 26 of the Company's Annual Report under the title "Common Stock Price Range, Cash Dividends and Stock Splits", and is incorporated herein by reference, except for the final two paragraphs under such title. Also incorporated herein by reference to the Annual Report is the first paragraph in the right hand column appearing on page 14 within "Management's Discussion and Analysis of Financial Condition and Results of Operations", such paragraph providing information pertinent to the Company's ability to pay cash dividends subject to certain restrictions. The Company's Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The information required hereunder is set forth on pages 10 and 11 of the Company's Annual Report under the title "Twelve Year Financial Review" and is incorporated herein by reference except for the information for the years 1988, 1987, 1986, 1985, 1984, 1983, and 1982.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required hereunder is set forth on pages 12, 13 and 14 under the title "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report and is incorporated herein by reference.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on page 21 of this Form 10-K for a listing of financial statements of the registrant and its subsidiaries, all of which financial statements are incorporated by reference under this item.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information provided under the columns entitled Name, Principal Occupation for the Past Five Years, Age and Year First Became Director in the table on pages 5 and 6, in footnotes (1) and (3) on page 6 and in the paragraph following footnote (5) on page 4 of the Proxy Statement for the Company's 1994 Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein by reference. There are no family relationships among the directors or nominees for directors and the executive officers of the Company, nor any arrangements or understandings between any director or nominee for director and any other person pursuant to which such director or nominee for director was selected. Except as otherwise indicated, each director or nominee for director of the Company has been employed or engaged for the past five years in the principal occupation set forth opposite his name in the information incorporated by reference. See ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT on pages 18 and 19 of this Form 10-K for information relating to executive officers.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The standard arrangement for compensating directors described in footnote (2)
on page 6 of the Proxy Statement and the information appearing under the titles "Summary Compensation Table", "Option Grants in Last Fiscal Year", Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values", "Option Plans", "Convertible Debenture Incentive Plan" and "Pension Plans" on pages 8 through 11 of the Proxy Statement are incorporated herein by reference. In accordance with the instructions to Item 402 of Regulation S-K, the information contained in the Proxy Statement under the titles "Board Compensation Committee Report on Executive Compensation" and "Stockholder Return Performance Presentation" shall not be deemed to be filed as part of this Form 10-K.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding security ownership of certain beneficial owners and management of the Company set forth under the headings "Voting Securities Outstanding" appearing on page 2 and "Security Ownership of Management and Principal Stockholders" appearing on pages 2 through 4 of the Proxy Statement is incorporated herein by reference.
The business address of all directors is the principal executive offices of the Company as set forth on the facing page of this Form 10-K.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain business relationships and transactions between the Company and certain of the directors of the Company under the heading "Certain Transactions" appearing on page 14 of the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The following financial statements and independent auditors' report, included in the Annual Report, are incorporated herein by reference:
Page of 1993 Annual Report -------------
Independent Auditors' Report............................. 15 Consolidated Balance Sheet, December 31, 1993 and 1992.............................. 16 Consolidated Statement of Operations for the Years Ended December 31, 1993, 1992 and 1991............ 17 Consolidated Statement of Changes in Stockholders' Equity for the Years Ended December 31, 1993, 1992 and 1991................................................ 18 Consolidated Statement of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991........ 19 Notes to Consolidated Financial Statements............... 20 Selected Quarterly Financial Data (Unaudited) for the Quarters Ended March 31, June 30, September 30 and December 31, 1993 and 1992.......................... 26
2. Financial Statement Schedules Page of This Report -----------
Independent Auditors' Report.............................. 27 V - Property and Equipment for the Years Ended December 31, 1993, 1992 and 1991.................... 28 VI - Accumulated Depreciation and Amortization
of Property and Equipment for the Years Ended December 31, 1993, 1992 and 1991.............. 30 IX - Short-Term Borrowings for the Years Ended December 31, 1993, 1992 and 1991.................... 31
Financial Statement Schedules I, II, III, IV, VII, VIII, X, XI, XII, XIII and XIV have been omitted as not required, not significant or because the required information is shown in Notes to the Consolidated Financial Statements of the Company's Annual Report.
3. Exhibits:
Unless otherwise indicated below as being incorporated by reference to another filing of the Company with the Securities and Exchange Commission, each of the following exhibits is filed herewith:
3a Restated Certificate of Incorporation of the Company, dated February 17, 1984, incorporated by reference to: Exhibit 3a to the Company's Form 10-K for the fiscal year ended December 31, 1983 (File No. 1-5491); Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-13544); and Exhibits 4a, 4b, 4c and 4d below.
3b Bylaws of the Company amended as of April 23, 1993, incorporated by reference to Exhibit 3 to the Company's Form 10Q for the quarter ended March 31, 1993 (File No. 1-5491).
4a Certificate of Designation of the Company's $2.125 Convertible Exchangeable Preferred Stock incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 33-6476).
4b Certificate of Designation of the Company's Series I Preferred Stock incorporated by reference to Exhibit 4b to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File No.1-5491).
4c Certificate of Designation of the Company's Series II Preferred Stock incorporated by reference to Exhibit 4c to the Company's Form 10-K for the fiscal year ended December 31, 1987 (File No.1-5491).
4d Certificate of Designation of the Company's Series A Junior Preferred Stock dated March 2, 1992 incorporated by reference to Exhibit 4d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
4e Rights Agreement dated as of February 25, 1992 between the Company and Citibank, N.A. as Rights Agent incorporated by reference to Exhibit 1 to the Company's Current Report on Form 8-K dated March 2, 1992 (File No. 1-5491).
4f Indenture dated December 1, 1991 between the Company and Bankers Trust Company, as Trustee, relating to the Company's 11-7/8% Senior Notes due 2001 incorporated by reference to Exhibit 28.1 to the Company's Current Report on Form 8-K dated December 12, 1991 (File No. 1-5491).
4g Specimen Common Stock certificate, incorporated by reference to Exhibit 4g to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491).
10a 1980 Nonqualified Stock Option Plan of the Company together with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 5.10 to the Company's Registration Statement on Form S-7 (Registration No. 2-68622).
10b 1988 Nonqualified Stock Option Plan of the Company as amended together
with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 10b of the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491).
10c Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1980 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491).
10d Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1980 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
10e Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to the 1988 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491).
10f Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to the 1988 Nonqualified Stock Option Plan of the Company incorporated by reference to Exhibit 10f to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
10g 1986 Convertible Debenture Incentive Plan of the Company incorporated by reference to Exhibit 10b to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File No.1-5491).
10h Pension Restoration Plan of the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491).
10i Credit Agreement dated September 22, 1986 (including amendatory letter dated March 25, 1987) and First Preferred Ship Mortgage dated November 7, 1986 between the Company and Marathon LeTourneau Company incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1986 and amendatory letter dated February 21, 1992 incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
10j Participation Agreement dated December 1, 1984 between the Company and Textron Financial Corporation et al. and Bareboat Charter dated December 1, 1984 between the Company and Textron Financial Corporation et al. incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No. 1-5491).
10k Participation Agreement dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. and Bareboat Charter dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1985 (File No.1-5491).
10l Corporate Continuing Guaranty dated December 31, 1986 between Shearson Lehman Brothers Holdings Inc. and the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File No.1-5491).
10m Corporate Continuing Guaranty dated September 10, 1987 between Shearson Lehman Brothers Holdings Inc. and the Company incorporated by reference to Exhibit 10i to the Company's Form 10-K for the fiscal year ended December 31, 1987 (File No.1-5491).
10n Cross-Border Corporate Continuing Guaranty dated May 29, 1991 between Citicorp and the Company's wholly-owned subsidiary, Rowan International,
Inc. incorporated by reference to Exhibit 10o to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
10o Consulting Agreement dated March 1, 1991 between the Company and C. W. Yeargain incorporated by reference to Exhibit 10K to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491).
10p Acquisition Agreement dated as of November 7, 1991, among KLM Royal Dutch Airlines, Blue Yonder I B.V., KLM Helikopters B.V. and Rowan Aviation (Netherlands) B.V. incorporated by reference to Exhibit 28.1 to the Company's Current Report on Form 8-K dated November 7, 1991 (File No. 1-5491).
10q Business Loan Agreement dated January 27, 1993 between Key Bank of Alaska and the Company's wholly-owned subsidiary, Era Aviation, Inc. incorporated by reference to Exhibit 10s to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491).
10r Asset Purchase Agreement dated as of November 12, 1993, among Rowan Companies, Inc., Rowan Equipment, Inc., General Cable Corporation, Marathon LeTourneau Company, Marathon LeTourneau Sales & Service Company and Marathon LeTourneau Australia Pty. Ltd. incorporated by reference to the Company's Current Report on Form 8-K dated February 11, 1994 (File No. 1-5491).
11 Computation of Primary and Fully Diluted Earnings (Loss) Per Share for the years ended December 31, 1993, 1992 and 1991 appearing on page 32 in this Form 10-K.
*13 Annual Report to Stockholders for fiscal year ended December 31, 1993.
21 Subsidiaries of the Registrant as of March 31, 1994.
23 Independent Auditors' Consent.
24 Powers of Attorney pursuant to which names were affixed to this Form 10-K for the fiscal year ended December 31, 1993.
The Company agrees to furnish to the Commission upon request a copy of all instruments defining the rights of holders of long-term debt of the Company and its subsidiaries. ________________________________
* Only portions specifically incorporated herein are deemed to be filed.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Compensatory plans in which directors and executive officers of the Company participate are listed as follows:
. 1980 Nonqualified Stock Option Plan of the Company together with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 5.10 to the Company's Registration Statement on Form S-7 (Registration No. 2-68622); Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to such Plan incorporated by reference to Exhibit 10c to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491); and Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to such Plan incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
. 1988 Nonqualified Stock Option Plan of the Company as amended together with form of Stock Option Agreement related thereto incorporated by reference to Exhibit 10b to the Company's Form 10-K for the fiscal year ended December 31,
1992 (File No. 1-5491; Amendment No. 1 dated October 25, 1990, to all then outstanding Stock Option Agreements related to such Plan incorporated by reference to Exhibit 10d to the Company's Form 10-K for the fiscal year ended December 31, 1990 (File No. 1-5491); and Amendment No. 2 dated May 23, 1991, to all then outstanding Stock Option Agreements related to such Plan incorporated by reference to Exhibit 10f to the Company's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-5491).
. 1986 Convertible Debenture Incentive Plan of the Company incorporated by reference to Exhibit 10b to the Company's Form 10-K for the fiscal year ended December 31, 1986 (File No. 1-5491).
. Pension Restoration Plan of the Company incorporated by reference to Exhibit 10h to the Company's Form 10-K for the fiscal year ended December 31, 1992 (File 1-5491).
(b) Reports on Form 8-K:
. No reports on Form 8-K were filed by the Registrant during the fourth quarter of fiscal year 1993.
. Subsequent to December 31, 1993, the Company filed a Current Report on Form 8-K as follows:
A report dated February 21, 1994 under ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS in which the Company reported the acquisition of substantially all of the assets, and assumption of certain related liabilities, of Marathon LeTourneau Company and two of its subsidiaries. Marathon LeTourneau is a wholly-owned subsidiary of General Cable Corporation. Filed by amendment on Form 8-K/A dated March 31, 1994 were related financial statements of the Company on a pro forma basis and financial statements of Marathon LeTourneau Company on a historical basis.
For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant Registration Statements on Form S-8 Nos. 2-67866 (filed May 22, 1980), 2-58700, as amended by Post-Effective Amendment No. 4 (June 11, 1980), 33-33755, as amended by Amendment No. 1 (filed March 29, 1990), 33-61444 (filed April 23, 1993), 33-51103 (filed November 18, 1993) 33-51105 (filed November 18, 1993) and 33-51109 (filed November 18, 1993):
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ROWAN COMPANIES, INC.
By: C. R. PALMER (C. R. Palmer, Chairman of the Board, President and Chief Executive Officer)
Date: March 31, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature Title Date
C. R. PALMER Chairman of the Board, President March 31, 1994 (C. R. Palmer) and Chief Executive Officer
E. E. THIELE Principal Financial Officer and March 31, 1994 (E. E. Thiele) Principal Accounting Officer
Director - ------------------------ (Ralph E. Bailey)
* HENRY O. BOSWELL Director March 31, 1994 (Henry O. Boswell)
* H. E. LENTZ Director March 31, 1994 (H. E. Lentz)
* WILFRED P. SCHMOE Director March 31, 1994 (Wilfred P. Schmoe)
* CHARLES P. SIESS, JR. Director March 31, 1994 (Charles P. Siess, Jr.)
* PETER SIMONIS Director March 31, 1994 (Peter Simonis)
* C. W. YEARGAIN Director March 31, 1994 (C. W. Yeargain)
* BY C. R. PALMER March 31, 1994 (C. R. Palmer, Attorney-in-fact)
INDEPENDENT AUDITORS' REPORT
Rowan Companies, Inc. and Subsidiaries:
We have audited the consolidated financial statements of Rowan Companies, Inc. and Subsidiaries as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, and have issued our report thereon dated March 7, 1994; such financial statements and report are included in your 1993 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedules of Rowan Companies, Inc. and Subsidiaries, listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion,such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE DELOITTE & TOUCHE
Houston, Texas March 7, 1994
ROWAN COMPANIES, INC. AND SUBSIDIARIES SCHEDULE V PROPERTY AND EQUIPMENT (In Thousands)
ROWAN COMPANIES, INC. AND SUBSIDIARIES SCHEDULE V PROPERTY AND EQUIPMENT (In Thousands)
SCHEDULE VI ROWAN COMPANIES, INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY AND EQUIPMENT (In Thousands)
SCHEDULE IX
ROWAN COMPANIES, INC. AND SUBSIDIARIES SHORT-TERM BORROWINGS (In thousands)
(A) The only borrowing during the period was for $10,000,000. The proceeds were received on March 31, 1993, and the loan was repaid on June 18, 1993. The borrowing carried a weighted average interest rate of 4.67%.
(B) The only borrowing during the period was for $15,000,000. The proceeds were received on November 27, 1991, and the loan was repaid on December 17, 1991. The borrowing carried a fixed interest rate of 6.31%.
EXHIBIT 11
ROWAN COMPANIES, INC. AND SUBSIDIARIES COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER SHARE (in thousands except per share amounts)
Note: Reference is made to Note 1 to Consolidated Financial Statements regarding computation of per share amounts.
(A) Included in accordance with Regulation S-K Item 601 (b)(11) although not required to be provided for by Accounting Principles Board Opinion No. 15 because the effect is insignificant.
(B) This calculation is submitted in accordance with regulation S-K Item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an antidilutive result.
EXHIBIT INDEX Page 1 of 4
EXHIBIT INDEX Page 2 of 4
EXHIBIT INDEX Page 3 of 4
EXHIBIT INDEX Page 4 of 4
________________________________________________
(1) Incorporated herein by reference to another filing of the Company with the Securities and Exchange Commission as indicated.
(2) Included herein.
(3) Included in Form 10-K on page 32.
(4) Included herein. See Item 1, Items 5-8 and Subpart (a)1. of ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K on page 20 and page 21, respectively, on Form 10-K for specific portions incorporated herein by reference.


ITEM 1. BUSINESS.
General Development of Business
EQK Realty Investors I, a Massachusetts business trust (the 'Company'), was formed pursuant to a Declaration of Trust dated as of October 8, 1984. Equitable Realty Portfolio Management, Inc. ('ERPM,' successor in interest to EQK Partners), acts as the advisor (the 'Advisor') to the Company. ERPM is a wholly owned subsidiary of Equitable Real Estate Investment Management, Inc. ('Equitable Real Estate'), itself an indirect wholly owned subsidiary of The Equitable Life Assurance Society of the United States ('Equitable'). The principal executive offices of the Company and of the Advisor are located at 5775 Peachtree Dunwoody Road, Suite 200D, Atlanta, Georgia, 30342, and their telephone number is (404) 303-6100.
The Company has adopted a fiscal and taxable year ending December 31. The Company has transacted its affairs so as to qualify as, and has elected to be treated as, a real estate investment trust under applicable provisions of the Internal Revenue Code. Under the Internal Revenue Code, a real estate investment trust that meets applicable requirements is not subject to Federal income tax on that portion of its taxable income that is distributed to its shareholders.
The Company consummated the public offering of its Shares of Beneficial Interest (the 'Shares') on March 12, 1985. The net proceeds to the Company from such offering, net of underwriting discount, amounted to $170,856,000 before deducting offering expenses of $1,062,000. Certain of those proceeds aggregating $167,032,000 were expended to acquire the properties (the 'Properties,' described below under 'Narrative Description of Business') on March 13, 1985.
The Company initially intended to hold its real estate investments for a period not to exceed 12 years from the date of acquisition and, after the twelfth year, to dispose of any remaining investments in an orderly fashion within a period of two years in order to achieve a complete liquidation of the Company by March 1999. Actual disposition of the Properties may occur at any time prior to March 1999, depending on prevailing conditions in the relevant real estate markets, and the precise timing of dispositions will be in the discretion of the Trustees.
On December 18, 1985, the Company issued to Salomon Brothers Realty Corp. its seven-year 10.92% Zero Coupon Note (the '1985 Note') in the principal amount of $45,000,000 and the face amount of $94,719,904. The 1985 Note was secured by mortgages on the Properties. The difference between the principal amount of $45,000,000 received for the 1985 Note and the face amount of $94,719,904 that was due at maturity on December 18, 1992 represents interest compounded semi- annually at the rate of 10.92%. The Company utilized the net proceeds from the sale of the 1985 Note ($44,296,000) to repurchase an aggregate of 2,466,211 Shares in the open market
between February 13, 1986 and May 6, 1986. In 1992 the Company utilized proceeds from the sale of real estate at Peachtree-Dunwoody Pavilion to prepay a portion of the Note. Also, in 1992, the Company utilized proceeds from the issuance of previously repurchased Shares to its Advisor to prepay a portion of the Note.
On February 4, 1988, the Company issued to Salomon Brothers Realty Corp. a second Zero Coupon Note (the '1988 Note') in the principal amount of $5,000,000 and the face amount of $7,771,718 payable at its maturity on December 18, 1992. The 1988 Note was also secured by mortgages on the Properties. The difference between the principal amount of $5,000,000 received for the 1988 Note and the face amount of $7,771,718 represents interest compounded semi-annually at the rate of 9.255%. The Company utilized the proceeds from the 1988 Note to repay borrowings under the Company's unsecured revolving credit facility. In 1991 the Company utilized proceeds from the sale of real estate at Castleton Commercial Park ('Castleton') to prepay a portion of the 1988 Note. In 1992 the Company utilized proceeds from the sale of real estate at Peachtree-Dunwoody Pavilion to prepay the remaining portion of the 1988 Note.
The 1985 Note and the 1988 Note, together with the mortgages securing them, were assigned on February 4, 1988 by Salomon Brothers Realty Corp. to The Prudential Insurance Company of America ('Prudential').
In December 1992, the Company completed the refinancing of the 1985 Note, which at that time had a balance of $75,689,000, for a term of three years. The interest rates on the refinanced Note are 9.54% in the first year, 9.79% in the second year, and 10.04% in the third year. The new loan agreement requires monthly payments of interest only at the rate of 8.54% per annum. The additional interest charges will be accrued and added to principal over the term of the loan. The amount of principal due at maturity in December 1995 will be $78,928,000. In addition, the lender received in 1992 and 1993 warrants to purchase 165,086 and 151,556 Company shares, respectively, for $.0001 per share, none of which have yet been exercised. The agreement also stipulates that the lender may purchase up to 50,000 additional Company shares in December 1994, although the actual number of such additional shares at each date will be adjusted proportionately with changes to the mortgage balance. The new financing is collateralized by first mortgage liens on Castleton and Harrisburg East Mall ('Harrisburg') real estate, assignments of leases and rents and certain cash balances.
In December 1992, the Company also completed the restructuring of its bank line of credit into a term loan. The balance of the restructured term loan was $2,859,000 and will also mature in three years. The interest rate on the term loan is 8.33% per annum. Monthly payments are determined based on the same 8.54% pay rate applicable to the primary lender's mortgage. The amount of each monthly payment above the required interest rate is applied to the principal balance of the loan. The amount of principal due at maturity in December 1995 will be $2,839,000. The term loan is secured by subordinate liens on each of the properties and an escrow deposit of $300,000.
In connection with the debt restructuring, the Company issued 1,675,000 previously repurchased Shares of its stock to its Advisor. The Company received proceeds of $6,700,000, or $4.00 per share, for the Shares. The Company may, at its discretion, reissue the remaining 791,211 Shares previously repurchased. Any issuance of Shares in excess of the Shares previously repurchased would require shareholder approval.
Apart from its initial investments in the Properties, and subject to certain restrictions, the Company may make additional real estate investments involving the expansion of existing improvements or the acquisition and development of additional properties that are in the immediate vicinity of the Properties. No additional real estate investments are currently contemplated, other than capital improvements to the existing properties.
The Company may make secured or unsecured borrowings to make distributions to its shareholders, to make permitted additional real estate investments described above and for normal working capital needs, including tenant alterations and/or allowances and the repair and maintenance of properties in which it has invested. The Declaration of Trust prohibits the Company's aggregate borrowings from exceeding 75% of its total asset value, as defined.
The Company will not engage in any business not related to its real estate investments and, in that connection, the Declaration of Trust imposes certain prohibitions and investment restrictions on various investment practices or activities of the Company.
Narrative Description of Business
At December 31, 1993, the Company's portfolio consists of two real estate investments: Castleton Commercial Park ('Castleton' or the 'Park'), an office park located in Indianapolis, Indiana, and Harrisburg East Mall ('Harrisburg' or the 'Mall'), a regional shopping center located in Harrisburg, Pennsylvania. During 1993, the Company sold its two remaining office buildings within its office complex located in Atlanta, Georgia, formerly known as Peachtree-Dunwoody Pavilion or 'Peachtree'.
Castleton Commercial Park
Location and Area Overview. The Park is located in the northeast portion of Marion County, Indiana, approximately 10 miles from downtown Indianapolis, within a triangle formed by Interstate 465 (the major beltway surrounding the Indianapolis metropolitan area), Interstate 69 and East 82nd Street (a major local thoroughfare). The surrounding area is characterized by varied office, retail, residential and light industrial development. The site has convenient access from Interstate 465 via the Allisonville Road interchange and from Interstate 69 via the 82nd Street interchange.
Tenants. At December 31, 1993, there were approximately 200 tenants in the Park occupying approximately 1,034,000 square feet of net rentable area,
representing an occupancy percentage of 89.4%, and approximately 123,000 square feet of space were vacant.
Leases covering 157,000 square feet of space are scheduled to expire during 1994. The Company anticipates leases covering approximately 141,000 square feet will be renewed during 1994.
Competition. The following table provides selected information with respect to Castleton's primary existing competitors. All the competitive properties listed below are comprised of one or more office buildings. Each property is located within 10 miles of the Park.
The Park will continue to be subject to the very competitive market conditions as a result of a high level of existing vacancy. As of December 31, 1993, the office vacancy rate in the Northeast submarket, of which the Park is a part, was 17%, down from 21% in 1992. Space absorption in the suburban market totalled 473,000 square feet in 1993 as compared to 220,000 square feet in 1992. There is virtually no new space expected to come on-line in 1994. The Company believes that, over the long term, Castleton will be able to sustain a relatively high occupancy level due to the quality of the Park, the desirability of its location, and its competitive rent structure, which is somewhat lower than comparable new space.
The president of Castleway Management Corp., the current manager of Castleton, also serves as marketing manager of a similar park, known as the Precedent, located approximately two and one-half miles from the Park and developed by an affiliate of the former owners of the Park. The Company believes that the Precedent will not have a material adverse impact on the Park, based upon the advantage of the Park's more developed location, as well as the Company's assessment of general supply and demand conditions in the relevant market. Moreover, pursuant to the management agreement with the Company, Castleway Management Corp. must disclose to the Company the terms of any offers to any major tenant at the Park (20,000 square feet or more) within 10 days following initial discussions with such tenant and may not conclude an agreement with such tenant for a period of 30 days thereafter.
Harrisburg East Mall
Location and Area Overview. The Mall is located in Dauphin County, Pennsylvania, near the intersection of Paxton Street (U.S. Route 322) and Interstate 83. The Center is adjacent to Pennsylvania Route 441, approximately five miles from the Pennsylvania Turnpike and three miles from the central business district of Harrisburg. Access to the site from Interstate 83, the major north-south traffic corridor serving Harrisburg, is provided by the Paxton Street interchange. Access from the Pennsylvania Turnpike, the major east-west traffic corridor serving Harrisburg, is provided by the Interstate 283 interchange.
Tenants. At December 31, 1993, the Mall had 95 mall and outparcel building tenants (excluding anchor store tenants) occupying approximately 358,000 square feet of gross leasable area, representing an occupancy rate of 93.0%. Other than the anchor store tenants (J.C. Penney, Hess's and John Wanamaker), only Toys R Us, which occupies approximately 51,400 square feet of space, occupies more than five percent of the gross leasable area of the Mall.
Competition. The following table provides selected information with respect to the Mall's primary existing competitors. Each property is located within five miles of the Mall, except for Park City Mall which is 35 miles away. The inclusion of Park City is due to the lack of major retail space along Interstate 283 between Harrisburg and Lancaster, although its degree of competition with the Mall is limited.
ITEM 2.

ITEM 2. PROPERTIES.
Castleton Commercial Park
General. Castleton Commercial Park consists of 44 single-and multi-tenanted office buildings and mixed-use office/warehouse buildings which have a total building area of 1,219,914 square feet and net rentable area of 1,157,000 square feet. It is located immediately northwest of the intersection of Interstate 465 and Interstate 69 in the northeast quadrant of the Indianapolis metropolitan area.
Approximately 66% of the total building area of the Park is designed solely for use as office space and the balance is a combination of both office and warehouse space (including related uses, such as operation of light manufacturing, product assembly, showroom and distribution facilities). On the basis of net rentable area, approximately 85% of the Park comprises office space, with the balance consisting of warehouse space. The Park is located on a site of approximately 18 acres. The site has paved surface parking for approximately 5,580 cars (4.9 spaces per 1,000 net rentable square feet).
Harrisburg East Mall
General. Harrisburg East Mall is a two-level enclosed regional shopping mall located approximately three miles from the central business district of Harrisburg, Pennsylvania, the state capitol. The Mall contains approximately 872,000 gross leasable square feet and is anchored by three major department stores: J.C. Penney, Hess's and John Wanamaker. The Mall is located on a site of approximately 62 acres with paved surface parking for approximately 4,729 automobiles (5.4 spaces per 1,000 gross leasable square feet).
The total building area of the Mall is allocated as shown in the table below.
Physical Improvements. Since acquiring the Mall in 1985, the Company has undertaken several physical improvement programs. In 1987, the Company converted approximately 51,400 square feet of space in the basement of Hess's department store into mall tenant space, currently leased to Toys R Us. During 1988, a new food court with approximately 13,000 square feet of gross leasable area was completed. In 1991, the Company completed the conversion of 47,960 square feet of space previously occupied by J.C. Penney into approximately 31,500 square feet of new leasable area leased at substantially higher rates.
In conjunction with the J.C. Penney conversion, the remaining area of the J.C. Penney store has been remodeled. In addition, the terms of the amended J.C. Penney lease required the Company to renovate the common areas and the exterior facade of the Mall. The renovation was completed in 1993. The project included a complete refurbishment of the property's interior common area, with new floors, finishes, and lighting throughout.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the names and positions of the executive officers of the Company. The term of office of each officer expires at the annual meeting of the Board of Directors or when the respective successor is elected and qualifies.
Phillip E. Stephens, age 46, has been President of Compass Retail, Inc., a subsidiary of Equitable Real Estate, since January of 1992 and was Executive Vice President of the Compass Retail division of Equitable Real Estate from January 1990 to December 1991. He has also served as President of Equitable Realty Portfolio Management, Inc. ('ERPM'), the Company's Advisor and a wholly owned subsidiary of Equitable Real Estate, since December 1989. Prior to that date and since October 1987, he was President of EQK Partners, the predecessor in interest to ERPM. Prior to that date and since its inception in September 1983, he was Senior Vice President of EQK Partners. He is also Senior Vice President and Treasurer and a director of EQK Green Acres Corp., the former managing general partner of EQK Green Acres, L.P. (the 'Partnership'), predecessor to EQK Green Acres Trust (the 'Trust'). On February 28, 1994, the Partnership merged with and into the Trust. Mr. Stephens is a managing trustee of the Trust.
Gregory R. Greenfield, age 37, has been Executive Vice President and Chief Operating Officer of Compass Retail, Inc. since January of 1992 and was Senior Vice President of the Compass Retail division of Equitable Real Estate from January 1990 to December 1991. He has also served as Vice President and Treasurer of ERPM since December 1989. Prior to that date and since November 1988, he was Senior Vice President, General Counsel and Secretary of EQK Partners. Mr. Greenfield joined EQK Partners in June 1984. From 1981 to 1984, he was associated with the law firm of Wolf, Block, Schorr and Solis-Cohen. Mr. Greenfield is also Senior Vice President of EQK Green Acres Corp.
William G. Brown, Jr., age 38, has been Senior Vice President and Chief Financial Officer of Compass Retail, Inc. since January of 1992 and was Vice President of the Compass Retail division of Equitable Real Estate from March 1990 to December 1991. He has also served as a Vice President of ERPM since March 1990. Prior to that date and since November 1988, he was Vice President and Chief Financial Officer of Envirosafe Services, Inc., a hazardous waste management company. Mr. Brown joined Envirosafe in July 1987. From 1981 to 1987, he held financial management positions with IU International Corporation, and from 1978 to 1981, he was associated with the accounting firm of Coopers & Lybrand. Mr. Brown is also Vice President and Controller of EQK Green Acres Corp.
Scott M. Boggio, age 35, has been Vice President of Compass Retail, Inc. since February 1992 and was Director of Construction and Development of the Compass Retail division of Equitable Real Estate from January 1990 to January 1992. He has also served as Assistant Vice President of ERPM since December 1989. Prior to that date and since February 1989, he was Vice President of Construction and Planning of EQK Partners. From 1986 until 1988, he was employed by VMS Realty Management, Inc. as its Northeast Regional Manager. From 1985 to 1986, he was employed by the Linpro Company in acquisitions and site selection. Mr. Boggio is also Vice President of EQK Green Acres Corp.
Gary L. Werkheiser, age 34, has been Vice President of Compass Retail, Inc. since February 1992 and was Director of Asset Management of Equitable Real Estate
from May 1990 to January 1992. Prior to that date and since August of 1986, he was the Real Estate Analyst for EQK Partners. Mr. Werkheiser is also Vice President of EQK Green Acres Corp.
Linda K. Schear, age 41, has been Vice President and General Counsel to Compass Retail, Inc. since February 1992 and was General Counsel to the Compass Retail division of Equitable Real Estate from April 1990 to February 1992. She has also served as Counsel to ERPM and Vice President of Equitable since April 1990. Prior to that date, she was first an associate and then a partner with the Atlanta law firm of Merritt & Tenney, specializing in commercial real estate. Ms. Schear also serves as Secretary of EQK Green Acres Corp.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's shares of beneficial interest are traded on the New York Stock Exchange (symbol EKR). The Company is listed in the stock tables as 'EQK Rt.' As of February 28, 1994 the record number of shareholders of the Company was 413 . Although the Company does not know the exact number of beneficial holders of its shares, it believes the number exceeds 2,100.
The following table presents the high and low prices of the Company's shares based on the New York Stock Exchange daily composite transactions.
There have been no distributions to shareholders during 1992 and 1993. It is the Company's current policy to reinvest all of its cash flow into the properties to fund capital expenditures and leasing costs. The Company does not anticipate a change in this policy.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- ------------------ (a) Calculation is based on 9,264,344 weighted average shares outstanding during 1993, 7,653,415 weighted average shares outstanding during 1992, and 7,589,344 weighted average shares outstanding during all other years.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES ON PAGES 9-18.
FINANCIAL CONDITION
Capital Resources
In December 1993, the Company completed the sale of its two remaining buildings within the Peachtree complex which generated net cash proceeds of $10,552,000 and a gain on sale of real estate of $282,000. The Company's cash management agreement, which was executed in connection with the December 1992 mortgage refinancing, provides for the application of the net proceeds from real estate sales against the balances of the mortgage note and the term loan. The Company negotiated a modification to this provision with its lenders as it related to the December 1993 Peachtree sale, and used net proceeds of $9,626,000 to prepay in full the Harrisburg mortgage notes. This modification allowed the Company to retire debt that was accruing interest for financial reporting purposes at 14% per annum, and to avoid significant prepayment penalties associated with the mortgage note payable.
The Company continues to pursue the orderly liquidation of its real estate portfolio. During this process, the Company will make certain capital expenditures required to enhance or maintain the value of the properties, including tenant allowances associated with leasing activity. For 1994, the Company's capital budget is $2,500,000. One of the conditions of the mortgage restructuring completed in 1992 was the establishment of a capital reserve account, which is maintained by a third-party escrow agent and from which expenditures must be approved by the lender. The balance of this account at December 31, 1993 was approximately $3,400,000.
Liquidity
During 1993, the Company generated cash flow from operating activities of $4,792,000, substantially all of which was transferred to the capital reserve account. Cash flows from operating activities in 1993 were $3,276,000 less than 1992 operating cash flows. This decrease is attributable to the payment of mortgage interest on a current basis in 1993. This decline was partially offset by increased cash flows resulting from improved operating results, net of the effects of results from the buildings at Peachtree which were sold in 1992, and the nonrecurrence of 1992 payments of approximately $1,500,000 for refinancing costs. For 1994, the Company expects to continue to satisfy its liquidity needs solely from operating cash flow. In addition to the capital expenditure requirements described above, liquidity requirements for 1994 will also include principal and interest payments of $6,700,000 pursuant to existing loan agreements.
The Company's cash management agreement stipulates that all rental payments from tenants are to be made directly to a third-party escrow agent who also funds monthly operating expenses in accordance with a budget approved by the lender. The Company believes that its cash flow for 1994 will be sufficient to fund its various operating requirements, although its discretion with respect to cash flow management will be limited by the terms of the cash management agreement.
RESULTS OF OPERATIONS
In 1993, the Company reported a net loss of $3,780,000, or $.41 per share, compared with net losses of $8,850,000 ($1.16 per share) in 1992 and $14,976,000 ($1.97 per share) in 1991. The current year results include an extraordinary charge to earnings of $1,711,000 ($.19 per share) related to the early retirement of debt. The prior year results included a write-down of $4,001,000 ($.52 per share) of the Company's investment in real estate. Similar write-downs of $8,448,000 ($1.11 per share) were recorded in 1991.
Revenues from rental operations decreased in 1993 to $18,458,000 from $20,900,000 in 1992. Revenue decreased at Peachtree in 1993 by approximately $3,400,000 due primarily to the sale of five buildings in the latter part of 1992. At Castleton, a revenue increase of approximately $456,000 was primarily attributable to the collection of a $225,000 lease termination fee received in connection with the loss of a tenant in September 1993. Anticipated rental revenues in 1994 from this tenant had been $176,000. Management believes that this tenant space will be re-leased during 1994. Revenue increased by $500,000 at Harrisburg due to the addition of four large tenants at the end of 1992. In 1992, revenues from rental operations decreased from $21,276,000 in 1991. Revenue declines at Peachtree and Castleton that were attributable to the sale of buildings in the latter part of 1992 and 1991, respectively, were partially offset by revenues generated from increased occupancy levels at the remaining Castleton buildings and at Harrisburg.
Net operating expenses declined in 1993 to $6,384,000 from $9,239,000 in 1992, a decrease of 31%. Expenses decreased at Peachtree by approximately $2,500,000 or 65% due primarily to the sale of five buildings in the latter part of 1992. Expenses increased slightly at Castleton due to higher net common area expenses. Net operating expenses at Harrisburg decreased approximately $478,000 due primarily to decreases in bad debt expense and net common area expenses. Net operating expenses in 1992 decreased from $10,335,000 in 1991. Expenses decreased at Peachtree by approximately 12% due to the sale of buildings and to effective cost containment measures. Expenses decreased at Castleton by approximately 5% due primarily to the effect of a full year of operations without the two buildings sold in the latter part of 1991. Net operating expenses at Harrisburg decreased by approximately $300,000 due primarily to decreased bad debt expense and the absence of certain non-recurring expenditures incurred in 1991.
Interest expense decreased in 1993 due to lower borrowing levels and lower interest costs associated with the refinanced mortgage note. Interest expense will continue to decline in 1994 due to the retirement of Harrisburg mortgage notes payable. Interest expense increased in 1992 due to amortization of the discount on the zero coupon mortgage for the period of time it was outstanding during the year, offset somewhat by lower borrowing levels and lower interest costs on the bank line of credit.
Other expenses consist of portfolio management fees, other costs related to the operation of the Trust, and interest income earned on cash balances. Other expenses decreased approximately $150,000 in 1993 from 1992 due to interest earned on excess cash balances. There were no significant variations in the other expenses between 1992 and 1991.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Registrant's financial statements and supplementary data listed in Item 14(a) appear immediately following the signature pages.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference to the Company's Proxy Statement relating to its 1994 Annual Meeting of Shareholders.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference to the Company's Proxy Statement relating to its 1994 Annual Meeting of Shareholders.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference to the Company's Proxy Statement relating to its 1994 Annual Meeting of Shareholders.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference to the Company's Proxy Statement relating to its 1994 Annual Meeting of Shareholders.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
EQK REALTY INVESTORS I BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
See accompanying Notes to Financial Statements
EQK REALTY INVESTORS I STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
See accompanying Notes to Financial Statements
EQK REALTY INVESTORS I STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT PER SHARE DATA)
See accompanying Notes to Financial Statements
EQK REALTY INVESTORS I STATEMENTS OF CASH FLOWS (IN THOUSANDS)
See accompanying Notes to Financial Statements
EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business:
EQK Realty Investors I (the 'Company'), a Massachusetts business trust, was formed pursuant to a Declaration of Trust dated as of October 8, 1984 to acquire certain income-producing real estate investments. Commencing with the period beginning April 1, 1985, the Company qualified for and elected real estate investment trust status under the provisions of the Internal Revenue Code, and adopted December 31 as its year end, as required for real estate investment trusts.
The Company's portfolio at December 31, 1993 consists of two real estate investments: Castleton Commercial Park ('Castleton'), an office park located in Indianapolis, Indiana, and Harrisburg East Mall ('Harrisburg' or the 'Mall'), a regional shopping center located in Harrisburg, Pennsylvania. During 1993, the Company sold its two remaining office buildings within its office complex in Atlanta, Georgia, formerly known as Peachtree-Dunwoody Pavilion or 'Peachtree' (see Note 4).
Capitalization, Depreciation and Amortization:
Property additions are recorded at cost. Costs directly associated with major renovations and improvements, including interest on funds borrowed to finance construction, are capitalized to the point of substantial completion.
Depreciation of real estate investments is provided on a straight-line basis over the estimated useful lives of the related assets, ranging generally from 5 to 40 years. Intangible assets are amortized on a straight-line basis over their estimated useful lives.
Other Assets
Other assets primarily consist of deferred leasing costs. Costs incurred in connection with the execution of a new lease including leasing commissions, costs associated with the acquisition or buyout of existing leases and legal fees, are deferred and amortized over the term of the new lease. At December 31, 1993 and 1992, deferred leasing costs, net of accumulated amortization, amounted to $4,898,000 and $5,513,000, respectively. Included in deferred leasing costs is a 1990 payment of $5,500,000 made to an anchor tenant at Harrisburg in exchange for which the tenant relinquished space that was subsequently converted into leasable area for mall stores.
Net Loss per Share:
Net loss per share is calculated on the basis of the weighted average number of shares outstanding during each year. For the years ended December 31, 1993, 1992 and 1991, the number of weighted average shares outstanding was 9,264,344, 7,653,415 and 7,589,344, respectively.
EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Share warrants issued in 1993 and 1992 in connection with the Company's debt restructuring (see Note 2) are considered common share equivalents for purposes of the calculation of net loss per share. However, the warrants have not been included in the calculation of net loss per share since the effect on such calculation would be antidilutive.
In December 1992, the Company prepaid $3,000,000 of debt with proceeds from the issuance of the Company's shares to its Advisor (see Notes 2 and 8). Net loss per share for the year ended December 31, 1992 would have been $1.02 had the related shares been included in average shares outstanding from the beginning of the year and had interest expense been lower due to a $3,000,000 reduction of outstanding indebtedness for the entire year.
Income Taxes:
The Company distributes 100% of its real estate investment trust taxable income to its shareholders within certain time limits prescribed by the Internal Revenue Code. Accordingly, no provision has been made for income tax liabilities.
Statements of Cash Flows:
Cash equivalents include short-term investments with an original maturity of three months or less.
Included in the statements of cash flows are cash payments for interest of $7,439,000 (net of amounts capitalized of $115,000), $1,361,000, and $1,670,000 in 1993, 1992 and 1991, respectively.
As a condition of the Company's debt restructuring (see Note 2), the Company issued 151,556 and 165,086 share warrants in 1993 and 1992, respectively, to its primary mortgage lender. Based upon the respective market values of the Company's shares, the value of the warrants at the time of issuance was $397,000 and $392,000, respectively. These amounts were recorded as debt discounts and increases in Shareholders' equity.
Proceeds from the sale of real estate in 1991 exclude a $168,000 note received as partial consideration on the sale of a building at Castleton (see Note 4).
Restricted Cash:
The terms of the Company's restructured mortgage loan required the establishment of a Cash Management Agreement with a third-party escrow agent (see Note 2). The Company's access to cash balances maintained on deposit with the escrow agent are restricted in accordance with the terms of this agreement. In addition, the Company has established a $300,000 escrow account in connection with the restructuring of its bank line of credit.
EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2: MORTGAGE DEBT AND RESTRUCTURING ACTIVITIES
On February 4, 1988, the Company issued a zero coupon mortgage note with an original maturity date of December 18, 1992. The original maturity value of the note was $7,772,500; however, in December 1991 the Company prepaid a portion of the note with proceeds from the sale of buildings at Castleton reducing the maturity value to $4,264,000. In September 1992, the Company prepaid the remainder of the note with proceeds from the sale of a building at Peachtree (see Note 4). At issuance, the Company received $5,000,000 representing an effective interest rate of 9.255% compounded semi-annually.
On December 18, 1985, the Company issued a zero coupon mortgage note with an original face amount of $94,720,000. At issuance, the Company received $45,000,000 representing an effective interest rate of 10.92% compounded semi-annually. As described in Note 4, the Company completed property sales in 1992, and, as described in Note 3, the Company issued additional shares to its Advisor. Proceeds received from these transactions were used to prepay a portion of the mortgage note, reducing the maturity value to $75,689,000.
Upon maturity of this zero coupon mortgage note in December 1992, the Company completed a restructuring of its debt. The new financing, which is collateralized by first mortgage liens on Castleton and Harrisburg, matures in December 1995. Interest will accrue on the mortgage at 9.54%, 9.79% and 10.04% per year in the first, second and third loan years, respectively, although interest is payable at an annual rate of 8.54% for the duration of the loan. The interest differential between the accrual rates and the payment rate will be added to principal over the term of the loan, resulting in a final maturity balance of $78,928,000. The mortgage lender also received in December 1992 and 1993 warrants to purchase 165,086 and 151,556 Company shares, respectively, for $.0001 per share, none of which have yet been exercised. The agreement also stipulates that the mortgage lender may purchase up to 50,000 additional Company shares in December 1994 although the actual number of such additional shares will be adjusted proportionately with changes to the mortgage balance.
As part of the restructuring, the Company also entered into a Cash Management Agreement with the mortgage lender and assigned all lease and rent receipts to the lender as additional collateral. Pursuant to this agreement, a third-party escrow agent has been appointed to receive all rental payments from tenants and to fund monthly operating expenses in accordance with a budget approved by the lender. The agreement also provides for the establishment of a capital reserve account, which is maintained by the escrow agent. Disbursements from this account, which was initially funded with a portion of the proceeds from the sale of shares to the Company's Advisor (see Note 3) and is funded each month with any excess operating cash flow, are limited to capital expenditures approved by the lender.
In December 1992, the Company also completed the restructuring of its bank line of credit into a term loan. The line of credit was an unsecured facility that bore interest at the bank's prime rate through its original maturity date, March 23, 1992, and at the prime
EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
rate plus 1 1/4% until restructured. The balance of the restructured term loan was $2,859,000 and will mature in December 1995. The interest rate on the term loan is 8.33% per annum. Monthly payments are determined based on the same 8.54% pay rate applicable to the primary lender's mortgage. The amount of each monthly payment in excess of the required interest payment is applied to the principal balance of the loan. The amount of principal due at maturity will be $2,839,000. The term loan is secured by subordinate liens on each of the properties and by an escrow deposit of $300,000 (see Note 9).
NOTE 3: ISSUANCE OF SHARES
In connection with its debt restructuring, the Company issued 1,675,000 previously repurchased shares to its Advisor. Upon issuance, the Company received proceeds of $6,700,000, or $4.00 per share. In total, the Advisor owns 1,685,556 shares, or 18.2% of the total shares outstanding.
NOTE 4: VALUATION AND SALES OF REAL ESTATE
The Company is attempting to sell the properties in conjunction with Management's plans for an orderly liquidation of its real estate portfolio. As the likelihood of any specific future property sales cannot be predicted, the Company considers that all of its properties are held for sale. Therefore, to the extent that the net investment in any property exceeds its current market value, an allowance is recorded to adjust such net investment to net realizable value commencing with the date on which the properties were deemed held for sale. For the year ended December 31, 1993, no such write-down was deemed necessary. For the year ended December 31, 1992 the Company recorded write-downs of $4,001,000 to adjust its investment in Castleton to its net realizable value. For the year ended December 31, 1991, the Company recorded write-downs totalling $8,448,000 to adjust its investment in Peachtree and Castleton to their respective net realizable values. Although the determination of net realizable value involves subjective judgment, as market prices of real estate can only be determined by negotiation between a willing buyer and seller, the Company believes that these market values are reasonable approximations of market prices.
In December 1993, the Company completed the sale of its remaining two office buildings at Peachtree. In the aggregate, the Company received cash proceeds of $10,552,000 net of associated costs of $248,000, and recognized a gain on sale of $282,000.
During 1992, the Company completed the sale of five office buildings at Peachtree. In the aggregate, the Company received cash proceeds of $21,748,000, net of associated costs of $888,000, and recognized a gain on sale of $1,143,000.
In December 1991, the Company completed the sales of two buildings at Castleton. In connection with these sales, the Company received cash proceeds of $3,295,000, net of associated costs of $494,000, and a one-year note with a face amount of $168,000 bearing interest at 9.375% per year. These transactions resulted in a gain on sale of $248,000.
EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5: LEASING ARRANGEMENTS
The Company leases office, warehouse and shopping center space, generally under noncancelable operating leases, some of which contain renewal options. The office and warehouse space leases generally provide for either base rentals plus annual increases based on the increase in the Consumer Price Index, or base rentals plus reimbursement to the Company for the increase in certain defined real estate operating expenses.
The shopping center leases generally provide for minimum rentals, plus percentage rentals based upon the retail stores' sales volume. Percentage rentals amounted to $154,000, $268,000 and $453,000 for the years ended December 31, 1993, 1992 and 1991, respectively. In addition, the tenants pay certain utility charges to the Company and, in most leases, reimburse their proportionate share of real estate taxes and common area expenses.
Future minimum rentals under existing leases at December 31, 1993 are as follows:
NOTE 6: INVESTMENT IN REAL ESTATE
The Company's investment in real estate at December 31, 1993 and 1992 consisted of the following:
EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7: EXTRAORDINARY LOSS ON RETIREMENT OF DEBT
The Company used proceeds of $9,626,000 from the 1993 sale of its remaining two buildings at Peachtree (see Note 4) to retire the Harrisburg mortgage notes that had been assumed by the Company in connection with its purchase of the Mall. The Harrisburg mortgage notes, with stated interest rates of 8.8% and 8.562% per annum, had been discounted for financial reporting purposes using a market interest rate of 14%. At retirement, the Harrisburg mortgage notes had a carrying value of $7,975,000, net of a $1,547,000 discount. The Company also paid accommodation fees of $60,000 to the holders of its mortgage note and term loan. In connection with the retirement of the Harrisburg mortgage notes, the Company recognized an extraordinary charge to earnings of $1,711,000.
NOTE 8: ADVISORY AND MANAGEMENT AGREEMENTS
The Company has entered into an agreement with Equitable Realty Portfolio Management, Inc. (successor in interest to EQK Partners), a wholly owned subsidiary of Equitable Real Estate Investment Management, Inc. ('Equitable Real Estate'), to act as its 'Advisor'. The Advisor makes recommendations to the Company concerning investments, administration and day-to-day operations.
Under the terms of the advisory agreement, as amended in December 1989, the Advisor receives a management fee that is based upon the average daily per share price of the Company's shares plus the average daily balance of outstanding mortgage indebtedness, net of the unamortized discount on the zero coupon mortgage note. Such fee is calculated using a factor of 42.5 basis points (0.425%) and is payable monthly without subordination. For the years ended December 31, 1993, 1992 and 1991, portfolio management fees were $484,000, $494,000 and $515,000, respectively.
As of December 31, 1989, portfolio management fees of $5,440,000 payable to the Advisor were deferred in accordance with subordination provisions contained in the original advisory agreement. Pursuant to the amended advisory agreement, the Advisor forgave one-half, or $2,720,000, of the deferred balance. The remaining deferred fees are to be paid upon the disposition of the Company's properties. If the properties are sold before December 1, 1994, the $2,720,000, will be discounted by 13% per year from December 1, 1994 to the date on which the last property is sold. For financial reporting purposes, the deferred balance is being discounted from December 1, 1996. As of December 31, 1993, the discounted liability for deferred management fees was $1,894,000.
EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Upon the sale of all or any portion of any real estate investment of the Company, the Advisor will receive a disposition fee equal to 2% of the gross sales price (including outstanding indebtedness taken subject to or assumed by the buyer and any purchase money indebtedness taken back by the Company). The disposition fee will be reduced by the amount of any brokerage commissions and legal expenses incurred by the Company in connection with such sales. For the years ended December 31, 1993, 1992 and 1991, disposition fees paid to the Advisor amounted to $216,000, $453,000, and $79,000, respectively.
The Company has also entered into agreements for the on-site management of each of its properties. Harrisburg East Mall is managed by an affiliate of Equitable Real Estate, as were the buildings at Peachtree up until the time of their respective sales. Castleton Commercial Park is managed by an unaffiliated third-party management company.
Management fees paid to each of the Equitable Real Estate management affiliates are generally based upon a percentage of rents and certain other charges. For Peachtree, the Company also paid leasing commissions based upon a percentage of total minimum future rents. Such fees and commissions are comparable to those charged by unaffiliated third-party management companies providing comparable services. For the years ended December 31, 1993, 1992 and 1991, management and leasing fees paid to Equitable Real Estate were $204,000, $707,000 and $473,000, respectively.
NOTE 9: RELATED PARTY TRANSACTIONS
In addition to providing management and advisory services to the Company as described in Note 8, Equitable Real Estate and certain of its affiliates, including the Advisor, lease space at Peachtree-Dunwoody Pavilion. As discussed in Note 4, the Company sold its office buildings at Peachtree during 1992 and 1993. The Company received rent payments of approximately $1,167,000, $879,000 and $846,000 for the years ended December 31, 1993, 1992 and 1991, respectively, with respect to such leases.
As a condition of the restructured bank term loan, an escrow deposit of $300,000 was required as additional security for the loan. The Company borrowed this amount from its Advisor, for which it will pay the Advisor interest at a rate of 7.5% per annum. The balance of this loan is repayable at such time as the bank term loan is repaid.
EQK REALTY INVESTORS I NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for the years ended December 31, 1993 and 1992.
The sum of the quarterly per share amounts in 1992 does not equal the corresponding per share amounts on a full year basis due to the effect on average shares outstanding of the additional shares issued in December 1992 (see Note 3). Income (loss) from rental operations includes write-downs of the Company's investment in Castleton of $4,001,000 in the fourth quarter of 1992 (see Note 4).
FINANCIAL STATEMENT SCHEDULES DECEMBER 31, 1993 (IN THOUSANDS)
- -------------------------------------------------------------------------------- SCHEDULE IX -- SHORT-TERM BORROWINGS - --------------------------------------------------------------------------------
(1) Average of month-end balances outstanding during the period. (2) Year-to-date interest expense divided by average of month-end balances outstanding during the period. (3) Revolving credit line was converted to a term loan in 1992. - -------------------------------------------------------------------------------- SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION - --------------------------------------------------------------------------------
(1) Substantially all such costs are recovered from tenants based on the provisions of the tenants' leases. - -------------------------------------------------------------------------------- SCHEDULE XI -- REAL ESTATE AND ACCUMULATED DEPRECIATION - --------------------------------------------------------------------------------
(1) Encumbrance is a mortgage note payable constituting first liens on the Castleton and Harrisburg real estate and a term loan payable to a bank constituting subordinated liens on such properties. (2) Initial cost is net of imputed interest of $5,280 at date of acquisition. (3) The initial cost is net of unrealized loss recognized through 1993 of $19,565. (4) The aggregate tax basis of the Trust's property is $131 million as of December 31, 1993. (5) Renovation of Harrisburg was completed in 1993.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of EQK Realty Investors I:
We have audited the accompanying balance sheets of EQK Realty Investors I (a Massachusetts business trust) as of December 31, 1993 and 1992, and the related statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. These financial statements and financial statement schedules discussed below are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of EQK Realty Investors I as of December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, the financial statement schedules, when consolidated in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Our audits also comprehended the financial statement schedules of EQK Realty Investors I as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements, present fairly in all material respects the information shown therein.
Deloitte & Touche Atlanta, Georgia
March 15, 1994