Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For quarterly period ended:  June 30, 2011

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                     to                    

 

Commission File Number: 1-4221

 

HELMERICH & PAYNE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

73-0679879

(State or other jurisdiction of

 

(I.R.S. Employer I.D. Number)

incorporation or organization)

 

 

 

1437 South Boulder Avenue, Tulsa, Oklahoma, 74119

(Address of principal executive office)(Zip Code)

 

(918) 742-5531

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year,
if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

 

CLASS

 

OUTSTANDING AT July 31, 2011

Common Stock, $0.10 par value

 

107,085,324

 

 

 



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

 

 

Page No.

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Condensed Balance Sheets as of June 30, 2011 and September 30, 2010

3

 

 

 

 

Consolidated Condensed Statements of Operations for the Three and Nine Months Ended June 30, 2011 and 2010

4

 

 

 

 

Consolidated Condensed Statements of Cash Flows for the Nine Months Ended June 30, 2011 and 2010

5

 

 

 

 

Consolidated Condensed Statement of Shareholders’ Equity for the Nine Months Ended June 30, 2011

6

 

 

 

 

Notes to Consolidated Condensed Financial Statements

7-20

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21-29

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

30

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

30

 

 

 

Item 1A.

Risk Factors

30-31

 

 

 

Item 6.

Exhibits

31

 

 

 

Signatures

32

 

2



Table of Contents

 

PART I. FINANCIAL INFORMATION

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)

 

ITEM 1. FINANCIAL STATEMENTS

 

 

 

June 30,

 

September 30,

 

 

 

2011

 

2010

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

288,065

 

$

63,020

 

Accounts receivable, less reserve of $761 at June 30, 2011 and $830 at September 30, 2010

 

444,214

 

457,659

 

Inventories

 

48,911

 

43,402

 

Deferred income taxes

 

19,535

 

14,282

 

Prepaid expenses and other

 

74,253

 

64,171

 

Current assets of discontinued operations

 

7,631

 

10,270

 

Total current assets

 

882,609

 

652,804

 

 

 

 

 

 

 

Investments

 

453,046

 

320,712

 

Property, plant and equipment, net

 

3,553,743

 

3,275,020

 

Other assets

 

21,638

 

16,834

 

 

 

 

 

 

 

Total assets

 

$

4,911,036

 

$

4,265,370

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

74,312

 

$

80,534

 

Accrued liabilities

 

182,427

 

144,112

 

Current liabilities of discontinued operations

 

5,170

 

7,992

 

Total current liabilities

 

261,909

 

232,638

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

Long-term debt

 

350,000

 

360,000

 

Deferred income taxes

 

984,767

 

771,383

 

Other

 

91,661

 

91,606

 

Noncurrent liabilities of discontinued operations

 

2,461

 

2,278

 

Total noncurrent liabilities

 

1,428,889

 

1,225,267

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock, $.10 par value, 160,000,000 shares authorized, 107,144,058 and 107,057,904 shares issued as of June 30, 2011 and September 30, 2010, respectively and 106,986,909 and 105,819,161 shares outstanding as of June 30, 2011 and September 30, 2010, respectively

 

10,714

 

10,706

 

Preferred stock, no par value, 1,000,000 shares authorized, no shares issued

 

 

 

Additional paid-in capital

 

205,009

 

191,900

 

Retained earnings

 

2,840,315

 

2,547,917

 

Accumulated other comprehensive income

 

168,904

 

84,107

 

Treasury stock, at cost

 

(4,704

)

(27,165

)

Total shareholders’ equity

 

3,220,238

 

2,807,465

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

4,911,036

 

$

4,265,370

 

 

The accompanying notes are an integral part of these statements.

 

3



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Operating revenues:

 

 

 

 

 

 

 

 

 

Drilling — U.S. Land

 

$

539,372

 

$

366,989

 

$

1,511,649

 

$

976,497

 

Drilling — Offshore

 

54,569

 

53,131

 

150,022

 

153,186

 

Drilling — International Land

 

46,051

 

60,045

 

169,689

 

177,377

 

Other

 

4,103

 

3,219

 

11,783

 

9,145

 

 

 

644,095

 

483,384

 

1,843,143

 

1,316,205

 

 

 

 

 

 

 

 

 

 

 

Operating costs and other:

 

 

 

 

 

 

 

 

 

Operating costs, excluding depreciation

 

365,586

 

285,583

 

1,035,671

 

742,761

 

Depreciation

 

79,109

 

65,208

 

228,450

 

189,418

 

General and administrative

 

24,071

 

20,114

 

68,366

 

61,296

 

Research and development

 

4,399

 

3,254

 

11,509

 

8,411

 

Income from asset sales

 

(3,488

)

(2,249

)

(10,262

)

(4,245

)

 

 

469,677

 

371,910

 

1,333,734

 

997,641

 

 

 

 

 

 

 

 

 

 

 

Operating income from continuing operations

 

174,418

 

111,474

 

509,409

 

318,564

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

903

 

940

 

1,573

 

1,536

 

Interest expense

 

(3,221

)

(3,961

)

(13,185

)

(12,693

)

Gain on sale of investment securities

 

913

 

 

913

 

 

Other

 

(190

)

215

 

208

 

253

 

 

 

(1,595

)

(2,806

)

(10,491

)

(10,904

)

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

172,823

 

108,668

 

498,918

 

307,660

 

Income tax provision

 

62,995

 

43,785

 

185,764

 

104,870

 

Income from continuing operations

 

109,828

 

64,883

 

313,154

 

202,790

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations before income taxes

 

(2

)

(101,548

)

(393

)

(127,160

)

Income tax provision

 

 

50

 

(5

)

2,363

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

(2

)

(101,598

)

(388

)

(129,523

)

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

109,826

 

$

(36,715

)

$

312,766

 

$

73,267

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.02

 

$

0.61

 

$

2.93

 

$

1.92

 

Loss from discontinued operations

 

$

 

$

(0.96

)

$

 

$

(1.23

)

Net income (loss)

 

$

1.02

 

$

(0.35

)

$

2.93

 

$

0.69

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.01

 

$

0.61

 

$

2.87

 

$

1.89

 

Loss from discontinued operations

 

$

 

$

(0.95

)

$

 

$

(1.21

)

Net income (loss)

 

$

1.01

 

$

(0.34

)

$

2.87

 

$

0.68

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

106,962

 

105,743

 

106,501

 

105,676

 

Diluted

 

108,784

 

107,444

 

108,550

 

107,400

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.07

 

$

0.06

 

$

0.19

 

$

0.16

 

 

The accompanying notes are an integral part of these statements.

 

4



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

 

Nine Months Ended

 

 

 

June 30,

 

 

 

2011

 

2010

 

OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

312,766

 

$

73,267

 

Adjustment for loss from discontinued operations

 

388

 

129,523

 

Income from continuing operations

 

313,154

 

202,790

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

228,450

 

189,418

 

Provision for bad debt

 

3

 

4

 

Stock-based compensation

 

9,114

 

12,874

 

Other

 

3

 

79

 

Gain on sale of investment securities

 

(913

)

 

Income from asset sales

 

(10,262

)

(4,245

)

Deferred income tax expense

 

155,630

 

36,714

 

Change in assets and liabilities-

 

 

 

 

 

Accounts receivable

 

13,442

 

(101,055

)

Inventories

 

(6,204

)

(3,961

)

Prepaid expenses and other

 

(7,040

)

(11,739

)

Accounts payable

 

(14,379

)

(6,785

)

Accrued liabilities

 

15,247

 

20,025

 

Deferred income taxes

 

209

 

(527

)

Other noncurrent liabilities

 

377

 

952

 

Net cash provided by operating activities from continuing operations

 

696,831

 

334,544

 

Net cash used in operating activities from discontinued operations

 

(388

)

(1,507

)

Net cash provided by operating activities

 

696,443

 

333,037

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(493,776

)

(220,200

)

Proceeds from sale of short-term investments

 

 

12,516

 

Proceeds from sale of investment securities

 

3,932

 

 

Proceeds from asset sales

 

21,738

 

6,297

 

Purchase of short-term investments

 

 

(16

)

Acquisition of TerraVici Drilling Solutions

 

(4,000

)

 

Net cash used in investing activities from continuing operations

 

(472,106

)

(201,403

)

Net cash used in investing activities from discontinued operations

 

 

(55

)

Net cash used in investing activities

 

(472,106

)

(201,458

)

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from line of credit

 

10,000

 

835,000

 

Payments on line of credit

 

(20,000

)

(970,000

)

Increase (decrease) in bank overdraft

 

4,844

 

(2,038

)

Dividends paid

 

(19,222

)

(15,891

)

Exercise of stock options

 

13,734

 

(391

)

Excess tax benefit from stock-based compensation

 

11,352

 

3,316

 

Net cash provided by (used in) financing activities

 

708

 

(150,004

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

225,045

 

(18,425

)

Cash and cash equivalents, beginning of period

 

63,020

 

96,142

 

Cash and cash equivalents, end of period

 

$

288,065

 

$

77,717

 

 

The accompanying notes are an integral part of these statements.

 

5



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY

NINE MONTHS ENDED JUNE 30, 2011

(Unaudited)

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

Paid-In

 

Retained

 

Comprehensive

 

Treasury Stock

 

Shareholders’

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income

 

Shares

 

Amount

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2010

 

107,058

 

$

10,706

 

$

191,900

 

$

2,547,917

 

$

84,107

 

1,239

 

$

(27,165

)

$

2,807,465

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

312,766

 

 

 

 

 

 

 

312,766

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in value on available-for-sale securities

 

 

 

 

 

 

 

 

 

83,391

 

 

 

 

 

83,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net periodic benefit costs-net of actuarial gain

 

 

 

 

 

 

 

 

 

1,406

 

 

 

 

 

1,406

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

397,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends ($.19 per share)

 

 

 

 

 

 

 

(20,368

)

 

 

 

 

 

 

(20,368

)

Exercise of stock options

 

86

 

8

 

(5,639

)

 

 

 

 

(948

)

19,365

 

13,734

 

Tax benefit of stock-based awards, including excess tax benefits of $12.2 million

 

 

 

 

 

12,730

 

 

 

 

 

 

 

 

 

12,730

 

Treasury stock issued for vested restricted stock

 

 

 

 

 

(3,096

)

 

 

 

 

(134

)

3,096

 

 

Stock-based compensation

 

 

 

 

 

9,114

 

 

 

 

 

 

 

 

 

9,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2011

 

107,144

 

$

10,714

 

$

205,009

 

$

2,840,315

 

$

168,904

 

157

 

$

(4,704

)

$

3,220,238

 

 

The accompanying notes are an integral part of these statements.

 

6



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

1.               Basis of Presentation

 

Unless the context otherwise requires, the use of the terms “the Company,” “we,” “us” and “our” in these Notes to Consolidated Condensed Financial Statements refers to Helmerich & Payne, Inc. and its consolidated subsidiaries.

 

The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “Commission”) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the Consolidated Financial Statements and notes thereto in our 2010 Annual Report on Form 10-K and other current filings with the Commission. In the opinion of management, all adjustments, consisting of those of a normal recurring nature, necessary to present fairly the results of the periods presented have been included. The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year.

 

We classified our former Venezuelan operation, an operating segment within the International Land segment, as a discontinued operation in the third quarter of fiscal 2010, as more fully described in Note 2. Unless indicated otherwise, the information in the Notes to the Consolidated Condensed Financial Statements relates only to our continuing operations.

 

Three land rigs in the U.S. Land segment met the held-for-sale classification criteria at June 30, 2011.  The net book value of the rigs are included in prepaid expenses and other in the Consolidated Condensed Balance Sheet as of June 30, 2011.

 

As more fully described in our 2010 Annual Report on Form 10-K, our contract drilling revenues are comprised of daywork drilling contracts for which the related revenues and expenses are recognized as services are performed. For contracts that are terminated by customers prior to the expirations of their fixed term, contractual provisions customarily require early termination amounts to be paid to us. Revenues from early terminated contracts are recognized when all contractual requirements have been met.

 

2.               Discontinued Operations

 

On June 30, 2010, the Official Gazette of Venezuela published the Decree of Venezuelan President Hugo Chavez, which authorized the “forceful acquisition” of eleven rigs owned by our Venezuelan subsidiary. The Decree also authorized the seizure of “all the personal and real property and other improvements” used by our Venezuelan subsidiary in its drilling operations. The seizing of our assets became effective June 30, 2010 and met the criteria established for recognition as discontinued operations under accounting standards for presentation of financial statements. Therefore, operations from the Venezuelan subsidiary, an operating segment within the International Land segment, have been classified as discontinued operations in our Consolidated Condensed Financial Statements.

 

Summarized operating results from discontinued operations are as follows:

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

 

$

6,787

 

$

 

$

13,534

 

Loss before income taxes

 

(2

)

(101,548

)

(393

)

(127,160

)

Income tax provision

 

 

(50

)

5

 

(2,363

)

Loss from discontinued operations

 

$

(2

)

$

(101,598

)

$

(388

)

$

(129,523

)

 

7



Table of Contents

 

Significant categories of assets and liabilities from discontinued operations are as follows:

 

 

 

June 30,

 

September 30,

 

 

 

2011

 

2010

 

Other current assets

 

$

7,631

 

$

10,270

 

Total assets

 

$

7,631

 

$

10,270

 

 

 

 

 

 

 

Current liabilities

 

$

5,170

 

$

7,992

 

Noncurrent liabilities

 

2,461

 

2,278

 

Total liabilities

 

$

7,631

 

$

10,270

 

 

Liabilities consist of municipal and income taxes payable and social obligations due within the country of Venezuela.

 

3.               Earnings per Share

 

Accounting Standards Codification (“ASC”) 260, Earnings per Share, requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividend or dividend equivalents as a separate class of securities in calculating earnings per share. We have granted and expect to continue to grant restricted stock grants to employees that contain non-forfeitable rights to receive dividends. Such grants are considered participating securities under ASC 260. As such, we are required to include these grants in the calculation of our basic earnings per share and calculate basic earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings.

 

Basic net income per share is computed utilizing the two-class method and is calculated based on weighted-average number of common shares outstanding during the periods presented.

 

Diluted net income per share is computed using the weighted-average number of common and common equivalent shares outstanding during the periods utilizing the two-class method for stock options and nonvested restricted stock.

 

8



Table of Contents

 

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Numerator:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

109,828

 

$

64,883

 

$

313,154

 

$

202,790

 

Loss from discontinued operations

 

(2

)

(101,598

)

(388

)

(129,523

)

Net income (loss)

 

109,826

 

(36,715

)

312,766

 

73,267

 

Adjustment for basic earnings per share:

 

 

 

 

 

 

 

 

 

Earnings allocated to unvested shareholders

 

(332

)

99

 

(931

)

(188

)

Numerator for basic earnings per share:

 

 

 

 

 

 

 

 

 

From continuing operations

 

109,496

 

64,982

 

312,223

 

202,602

 

From discontinued operations

 

(2

)

(101,598

)

(388

)

(129,523

)

 

 

109,494

 

(36,616

)

311,835

 

73,079

 

Adjustment for diluted earnings per share:

 

 

 

 

 

 

 

 

 

Effect of reallocating undistributed earnings of unvested shareholders

 

5

 

(2

)

17

 

2

 

Numerator for diluted earnings per share:

 

 

 

 

 

 

 

 

 

From continuing operations

 

109,501

 

64,980

 

312,240

 

202,604

 

From discontinued operations

 

(2

)

(101,598

)

(388

)

(129,523

)

 

 

$

109,499

 

$

(36,618

)

$

311,852

 

$

73,081

 

Denominator:

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per share - weighted-average shares

 

106,962

 

105,743

 

106,501

 

105,676

 

Effect of dilutive shares from stock options and restricted stock

 

1,822

 

1,701

 

2,049

 

1,724

 

Denominator for diluted earnings per share - adjusted weighted-average shares

 

108,784

 

107,444

 

108,550

 

107,400

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.02

 

$

0.61

 

$

2.93

 

$

1.92

 

Loss from discontinued operations

 

 

(0.96

)

 

(1.23

)

Net income (loss)

 

$

1.02

 

$

(0.35

)

$

2.93

 

$

0.69

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.01

 

$

0.61

 

$

2.87

 

$

1.89

 

Loss from discontinued operations

 

 

(0.95

)

 

(1.21

)

Net income (loss)

 

$

1.01

 

$

(0.34

)

$

2.87

 

$

0.68

 

 

The following shares attributable to outstanding equity awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive (in thousands, except per share amounts):

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Shares excluded from calculation of diluted earnings per share

 

 

554

 

323

 

568

 

Weighted-average price per share

 

$

 

$

38.02

 

$

47.94

 

$

38.02

 

 

4.               Inventories

 

Inventories consist primarily of replacement parts and supplies held for use in our drilling operations.

 

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Table of Contents

 

5.               Financial Instruments and Fair Value Measurement

 

The estimated fair value of our available-for-sale securities, reflected on our Consolidated Condensed Balance Sheets as Investments, is primarily based on market quotes. The following is a summary of available-for-sale securities, which excludes investments in limited partnerships carried at cost and assets held in a Nonqualified Supplemental Savings Plan:

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Equity securities June 30, 2011

 

$

129,183

 

$

307,449

 

$

 

$

436,632

 

Equity securities September 30, 2010

 

$

129,183

 

$

174,025

 

$

 

$

303,208

 

 

On an on-going basis, we evaluate the marketable equity securities to determine if any decline in fair value below original cost is other-than-temporary. If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis established. We review several factors to determine whether a decline in fair value is other-than-temporary. These factors include, but are not limited to, (i) the length of time a security is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near term prospects of the issuer and (iv) our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. The cost of securities used in determining realized gains and losses is based on the average cost basis of the security sold. We had no sales of marketable equity available-for-sale securities during the first nine months of fiscal 2011 and 2010.

 

Investments in limited partnerships carried at cost were approximately $9.4 million and $12.4 million at June 30, 2011 and September 30, 2010, respectively. The estimated fair value of the limited partnerships was $18.3 million and $22.5 million at June 30, 2011 and September 30, 2010, respectively.  During the third quarter ending June 30, 2011, we sold our investment in a limited partnership that was carried at a cost of approximately $3.0 million and had a fair value of approximately $3.9 million at the date of the sale.  A gross realized gain of approximately $0.9 million is included in the Consolidated Condensed Statements of Operations.

 

Assets held in the Nonqualified Supplemental Savings Plan are carried at fair market value which totaled $7.1 million at June 30, 2011 and $5.1 million at September 30, 2010.

 

The majority of cash equivalents are invested in taxable and non-taxable money-market mutual funds. The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments.

 

The carrying value of other assets, accrued liabilities and other liabilities approximated fair value at June 30, 2011 and September 30, 2010.

 

ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” We use the fair value hierarchy established in ASC 820-10 to measure fair value to prioritize the inputs:

 

·                  Level 1 — Observable inputs that reflect quoted prices in active markets for identical assets or liabilities in active markets.

 

·                  Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

·                  Level 3 — Valuations based on inputs that are unobservable and not corroborated by market data.

 

At June 30, 2011, our financial instruments utilizing Level 1 inputs include cash equivalents, equity securities with active markets and money market funds we have elected to classify as restricted assets that are included in other current assets and other assets. Also included is cash denominated in a foreign currency we have elected to classify as restricted that is included in current assets of discontinued operations and limited to remaining liabilities of discontinued operations. For these items, quoted current market prices are readily available.

 

At June 30, 2011, financial instruments utilizing Level 2 inputs include a bank certificate of deposit included in other current assets.

 

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Table of Contents

 

Currently, we do not have any financial instruments utilizing Level 3 inputs.

 

The following table summarizes our assets measured at fair value on a recurring basis presented in our Consolidated Condensed Balance Sheet as of June 30, 2011:

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

Total

 

in Active

 

Significant

 

 

 

 

 

Measure

 

Markets for

 

Other

 

Significant

 

 

 

at

 

Identical

 

Observable

 

Unobservable

 

 

 

Fair

 

Assets

 

Inputs

 

Inputs

 

 

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

288,065

 

$

288,065

 

$

 

$

 

Equity securities

 

436,632

 

436,632

 

 

 

Other current assets

 

21,823

 

21,573

 

250

 

 

Other assets

 

2,000

 

2,000

 

 

 

Total assets measured at fair value

 

$

748,520

 

$

748,270

 

$

250

 

$

 

 

The following information presents the supplemental fair value information about long-term fixed-rate debt at June 30, 2011 and September 30, 2010:

 

 

 

June 30,

 

September 30,

 

 

 

2011

 

2010

 

 

 

(in thousands)

 

 

 

 

 

 

 

Carrying value of long-term fixed-rate debt

 

$

350.0

 

$

350.0

 

Fair value of long-term fixed-rate debt

 

$

376.6

 

$

382.9

 

 

The fair value for fixed-rate debt was estimated using cash flows discounted at rates reflecting current interest rates at similar maturities plus a credit spread which was estimated using market information on debt instruments with a similar credit profile to us.  The outstanding line of credit and short-term debt bear interest at market rates and the cost of borrowings, if any, would approximate fair value. The debt was valued using a Level 2 input.

 

6.               Comprehensive Income

 

Comprehensive income (loss), net of related income taxes, is as follows (in thousands):

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

109,826

 

$

(36,715

)

$

312,766

 

$

73,267

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Unrealized appreciation (depreciation) on securities

 

(25,037

)

(80,736

)

133,424

 

(82,121

)

Income taxes

 

9,389

 

30,276

 

(50,033

)

30,795

 

 

 

(15,648

)

(50,460

)

83,391

 

(51,326

)

 

 

 

 

 

 

 

 

 

 

Minimum pension liability adjustments

 

751

 

536

 

2,251

 

1,608

 

Income taxes

 

(282

)

(201

)

(845

)

(603

)

 

 

469

 

335

 

1,406

 

1,005

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

94,647

 

$

(86,840

)

$

397,563

 

$

22,946

 

 

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The components of accumulated other comprehensive income, net of related income taxes, are as follows (in thousands):

 

 

 

June 30,

 

September 30,

 

 

 

2011

 

2010

 

Unrealized appreciation on securities

 

$

191,103

 

$

107,712

 

Unrecognized actuarial loss and prior service cost

 

(22,199

)

(23,605

)

Accumulated other comprehensive income

 

$

168,904

 

$

84,107

 

 

7.               Cash Dividends

 

The $0.06 cash dividend declared March 2, 2011, was paid June 1, 2011.  On June 1, 2011, a cash dividend of $0.07 per share was declared for shareholders of record on August 15, 2011, payable September 1, 2011. The dividend payable is included in accounts payable in the Consolidated Condensed Balance Sheet.

 

8.               Stock-Based Compensation

 

We have one plan providing for common-stock based awards to employees and to non-employee directors.  The plan permits the granting of various types of awards including stock options and restricted stock awards.  Restricted stock may be granted for no consideration other than prior and future services.  The purchase price per share for stock options may not be less than market price of the underlying stock on the date of grant.  Stock options expire ten years after the grant date.  We have the right to satisfy option exercises from treasury shares and from authorized but unissued shares.

 

In March 2006, the Company adopted the 2005 Long-Term Incentive Plan (the “2005 Plan”).  The 2005 Plan, among other things, authorized the Board of Directors to grant nonqualified stock options, restricted stock awards, stock appreciation rights and performance units to selected employees and to non-employee Directors.  There were 324,162 nonqualified stock options and 169,375 shares of restricted stock awards granted in the nine months ended June 30, 2011.  Effective March 2, 2011, no further common-stock based awards will be made under the 2005 Plan.  However, awards outstanding in the 2005 Plan and the Company’s 2000 Stock Incentive Plan remain subject to the terms and conditions of those plans.

 

On March 2, 2011, at the Annual Meeting of Stockholders, the 2010 Long-Term Incentive Plan (the “2010 Plan”) was approved.  The 2010 Plan, among other things, authorizes the Board of Directors to grant nonqualified stock options, restricted stock awards and stock appreciation rights to selected employees and to non-employee Directors.  As of June 30, 2011, no stock awards have been granted from the 2010 Plan.

 

A summary of compensation cost for stock-based payment arrangements recognized in general and administrative expense is as follows (in thousands):

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Compensation expense

 

 

 

 

 

 

 

 

 

Stock options

 

$

1,696

 

$

1,933

 

$

5,509

 

$

9,521

 

Restricted stock

 

1,274

 

1,016

 

3,605

 

3,353

 

 

 

$

2,970

 

$

2,949

 

$

9,114

 

$

12,874

 

 

STOCK OPTIONS

 

The following summarizes the weighted-average assumptions utilized in determining the fair value of options granted during the nine months ended June 30, 2011 and 2010:

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Risk-free interest rate

 

1.9

%

2.3

%

Expected stock volatility

 

51.6

%

49.9

%

Dividend yield

 

.5

%

.5

%

Expected term (in years)

 

5.5

 

5.8

 

 

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Table of Contents

 

Risk-Free Interest Rate.  The risk-free interest rate is based on U.S. Treasury securities for the expected term of the option.

 

Expected Volatility Rate.  Expected volatility is based on the daily closing price of our stock based upon historical experience over a period which approximates the expected term of the option.

 

Dividend Yield.  The expected dividend yield is based on our current dividend yield.

 

Expected Term.  The expected term of the options granted represents the period of time that they are expected to be outstanding.  We estimate the expected term of options granted based on historical experience with grants and exercises.

 

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Table of Contents

 

A summary of stock option activity under the Plan for the three and nine months ended June 30, 2011 is presented in the following table:

 

 

 

Three Months Ended June 30, 2011

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Weighted-

 

Average

 

Aggregate

 

 

 

 

 

Average

 

Remaining

 

Intrinsic

 

 

 

Shares

 

Exercise

 

Contractual Term

 

Value

 

Options

 

(in thousands)

 

Price

 

(in years)

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

Outstanding at April 1, 2011

 

4,829

 

$

25.56

 

 

 

 

 

Granted

 

 

 

 

 

 

 

Exercised

 

(126

)

20.78

 

 

 

 

 

Forfeited/Expired

 

(7

)

32.48

 

 

 

 

 

Outstanding at June 30, 2011

 

4,696

 

$

25.67

 

5.4

 

$

189.9

 

Vested and expected to vest at June 30, 2011

 

4,622

 

$

25.57

 

5.3

 

$

187.4

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2011

 

3,386

 

$

22.20

 

4.3

 

$

148.7

 

 

 

 

Nine Months Ended
June 30, 2011

 

 

 

 

 

Weighted-

 

 

 

 

 

Average

 

 

 

Shares

 

Exercise

 

Options

 

(in thousands)

 

Price

 

 

 

 

 

 

 

Outstanding at October 1, 2010

 

5,572

 

$

22.82

 

Granted

 

324

 

47.94

 

Exercised

 

(1,189

)

18.33

 

Forfeited/Expired

 

(11

)

31.87

 

Outstanding at June 30, 2011

 

4,696

 

$

25.67

 

 

The weighted-average fair value of options granted in the first quarter of fiscal 2011 was $22.20.  No options were granted in the second and third quarters of fiscal 2011.

 

The total intrinsic value of options exercised during the three and nine months ended June 30, 2011 was $6.0 million and $45.3 million, respectively.

 

As of June 30, 2011, the unrecognized compensation cost related to the stock options was $11.4 million.  That cost is expected to be recognized over a weighted-average period of 2.7 years.

 

RESTRICTED STOCK

 

Restricted stock awards consist of our common stock and are time vested over three to six years.  We recognize compensation expense on a straight-line basis over the vesting period.  The fair value of restricted stock awards is determined based on the average of the high and low price of our shares on the grant date.  As of June 30, 2011, there was $9.2 million of total unrecognized compensation cost related to unvested restricted stock awards.  That cost is expected to be recognized over a weighted-average period of 2.5 years.

 

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Table of Contents

 

A summary of the status of our restricted stock awards as of June 30, 2011 and changes in restricted stock outstanding during the nine months then ended is presented below:

 

 

 

Nine Months Ended

 

 

 

June 30, 2011

 

 

 

 

 

Weighted-

 

 

 

 

 

Average

 

 

 

Shares

 

Grant-Date

 

Restricted Stock Awards

 

(in thousands)

 

Fair Value

 

 

 

 

 

 

 

Unvested at October 1, 2010

 

289

 

$

35.23

 

Granted

 

169

 

47.94

 

Vested

 

(134

)

33.92

 

Forfeited

 

 

 

Unvested at June 30, 2011

 

324

 

$

42.41

 

 

9.     Debt

 

At June 30, 2011 and September 30, 2010, we had the following unsecured long-term debt outstanding (in thousands):

 

 

 

June 30,

 

September 30,

 

 

 

2011

 

2010

 

Unsecured intermediate debt issued August 15, 2002:

 

 

 

 

 

Series C, due August 15, 2012, 6.46%

 

$

75,000

 

$

75,000

 

Series D, due August 15, 2014, 6.56%

 

75,000

 

75,000

 

Unsecured senior notes issued July 21, 2009:

 

 

 

 

 

Due July 21, 2012, 6.10%

 

40,000

 

40,000

 

Due July 21, 2013, 6.10%

 

40,000

 

40,000

 

Due July 21, 2014, 6.10%

 

40,000

 

40,000

 

Due July 21, 2015, 6.10%

 

40,000

 

40,000

 

Due July 21, 2016, 6.10%

 

40,000

 

40,000

 

Unsecured senior credit facility due December 18, 2011

 

 

10,000

 

 

 

$

350,000

 

$

360,000

 

Less long-term debt due within one year

 

 

 

Long-term debt

 

$

350,000

 

$

360,000

 

 

The intermediate unsecured debt outstanding at June 30, 2011 matures over a period from August 2012 to August 2014 and carries a weighted-average interest rate of 6.53 percent, which is paid semi-annually.  The terms require that we maintain a ratio of debt to total capitalization of less than 55 percent.  The debt is held by various entities, including $3 million held by a company affiliated with one of our Board members.

 

We have $200 million senior unsecured fixed-rate notes that mature over a period from July 2012 to July 2016.  Interest on the notes will be paid semi-annually based on an annual rate of 6.10 percent.  We will make five equal annual principal repayments of $40 million starting on July 21, 2012.  Financial covenants require us to maintain a funded leverage ratio of less than 55 percent and an interest coverage ratio (as defined) of not less than 2.50 to 1.00.

 

We have an agreement with a multi-bank syndicate for a $400 million senior unsecured credit facility maturing December 2011.  While we have the option to borrow at the prime rate for maturities of less than 30 days, we anticipate that the majority of all of the borrowings over the life of the facility will accrue interest at a spread over the London Interbank Bank Offered Rate (“LIBOR”).  We pay a commitment fee based on the unused balance of the facility.  The spread over LIBOR as well as the commitment fee is determined according to a scale based on a ratio of our total debt to total capitalization.  The LIBOR spread ranges from .30 percent to .45 percent over LIBOR depending on the ratios.  At June 30, 2011, the LIBOR spread on borrowings was .35 percent and the commitment fee was .075 percent per annum.  At June 30, 2011, we had two letters of credit totaling $21.9 million under the facility and no borrowings against the facility leaving $378.1 million available to borrow. Financial covenants in the facility require we maintain a funded leverage ratio (as defined) of less than 50 percent and an interest coverage ratio (as defined) of not less than 3.00 to 1.00.

 

The applicable agreements for all unsecured debt described in this Note 9 contain additional terms, conditions and restrictions that we believe are usual and customary in unsecured debt arrangements for companies that are similar in size and credit quality.  At June 30, 2011 we were in compliance with all debt covenants.

 

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Table of Contents

 

10.   Income Taxes

 

Our effective tax rate for the first nine months of fiscal 2011 and 2010 was 37.2 percent and 34.1 percent, respectively.  Our effective tax rate for the three months ended June 30, 2011 and 2010 was 36.5 percent and 40.3 percent, respectively.  The effective rate differs from the U.S. federal statutory rate of 35.0 percent primarily due to state and foreign taxes.

 

For the next 12 months, we cannot predict with certainty whether we will achieve ultimate resolution of any uncertain tax position associated with our international operations that could result in increases or decreases of our unrecognized tax benefits.  However, we believe it is reasonably possible that the reserve for uncertain tax positions may increase by approximately $3.0 million to $5.0 million during the next 12 months due to an international matter.

 

11.   Acquisition of TerraVici Drilling Solutions

 

Pursuant to the satisfaction of a performance milestone, we paid $4.0 million during the first quarter of fiscal 2011 that was accounted for as goodwill.  The payment is shown as an investing activity in the Consolidated Condensed Statements of Cash Flows.

 

12.   Commitments and Contingencies

 

In conjunction with our current drilling rig construction program, purchase commitments for equipment, parts and supplies of approximately $89.5 million are outstanding at June 30, 2011.

 

A lawsuit had been filed against us and one of our vendors alleging patent infringement as a result of the vendor’s manufacture and sale of its control system to us and our use of that control system on our drilling rigs.  This case has been settled and we expect to pay $7.75 million in the fourth quarter of fiscal 2011 as our share of the total settlement amount.  Pursuant to the terms of the confidential settlement, we have the right, in future drilling operations, to use control systems in the same manner as we have used them in the past.

 

Various other legal actions, the majority of which arise in the ordinary course of business, are pending.  We maintain insurance against certain business risks subject to certain deductibles.  None of these legal actions are currently expected to have a material adverse effect on our financial condition, cash flows or results of operations.

 

We are contingently liable to sureties in respect of bonds issued by the sureties in connection with certain commitments entered into by us in the normal course of business.  We have agreed to indemnify the sureties for any payments made by them in respect of such bonds.

 

During the ordinary course of our business, contingencies arise resulting from an existing condition, situation, or set of circumstances involving an uncertainty as to the realization of a possible gain contingency.  We account for gain contingencies in accordance with the provisions of ASC 450, Contingencies, and, therefore, we do not record gain contingencies and recognize income until realized.  As discussed in Note 2, Discontinued Operations, property and equipment of our Venezuelan subsidiary was seized by the Venezuelan government on June 30, 2010.  We continue to evaluate and pursue various remedies, including any recourse we may have against Petroleos de Venezuela, S.A. (“PDVSA”), the state-owned petroleum company, or related parties, any remuneration or reimbursement that we might collect from PDVSA or related parties, and any other sources of recovery for our losses.  Specifically, we are participating in two arbitrations against third parties not affiliated with PDVSA or the Venezuelan government in an attempt to collect an aggregate $75 million relating to the seizure of our property in Venezuela.  While there exists the possibility of realizing a recovery, we are currently unable to determine the timing or amounts we may receive, if any, or the likelihood of recovery.  No gain contingencies are recognized in our Consolidated Condensed Financial Statements.

 

13.   Segment Information

 

We operate principally in the contract drilling industry. Our contract drilling business includes the following reportable operating segments: U.S. Land, Offshore and International Land.  The contract drilling operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies.  Our primary international areas of operation include Colombia, Ecuador, Argentina, Mexico, Tunisia and Bahrain. The International Land operations have similar services, have similar types of customers, operate in a consistent manner and have similar economic and regulatory characteristics.  Therefore, we have aggregated our international operations into a single reportable segment.  Each reportable segment is a strategic business unit which is managed separately. Other includes non-reportable operating segments.  Revenues included in Other consist primarily of rental income.  Consolidated revenues and expenses reflect the elimination of all material intercompany transactions.

 

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Table of Contents

 

We evaluate segment performance based on income or loss from operations (segment operating income) before income taxes which includes:

 

·      revenues from external and internal customers

·      direct operating costs

·      depreciation and

·      allocated general and administrative costs but excludes corporate costs for other depreciation, income from asset sales and other corporate income and expense.

 

Certain general and administrative costs are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, on other methods which we believe to be a reasonable reflection of the utilization of services provided.

 

Segment operating income is a non-GAAP financial measure of our performance, as it excludes general and administrative expenses, corporate depreciation, income from asset sales and other corporate income and expense.  We consider segment operating income to be an important supplemental measure of operating performance by presenting trends in our core businesses.  We use this measure to facilitate period-to-period comparisons in operating performance of our reportable segments in the aggregate by eliminating items that affect comparability between periods.  We believe that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments on an ongoing basis using criteria that are used by our internal decision makers.  Additionally, it highlights operating trends and aids analytical comparisons.  However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain costs that may affect our operating performance in future periods.

 

Summarized financial information of our reportable segments for the nine months ended June 30, 2011, and 2010, is shown in the following tables:

 

 

 

 

 

 

 

 

 

Segment

 

 

 

External

 

Inter-

 

Total

 

Operating

 

(in thousands)

 

Sales

 

Segment

 

Sales

 

Income (Loss)

 

June 30, 2011

 

 

 

 

 

 

 

 

 

Contract Drilling:

 

 

 

 

 

 

 

 

 

U.S. Land

 

$

1,511,649

 

$

 

$

1,511,649

 

$

499,482

 

Offshore

 

150,022

 

 

150,022

 

33,420

 

International Land

 

169,689

 

 

169,689

 

16,186

 

 

 

1,831,360

 

 

1,831,360

 

549,088

 

Other

 

11,783

 

627

 

12,410

 

(5,044

)

 

 

1,843,143

 

627

 

1,843,770

 

544,044

 

Eliminations

 

 

(627

)

(627

)

 

Total

 

$

1,843,143

 

$

 

$

1,843,143

 

$

544,044

 

 

 

 

 

 

 

 

 

 

Segment

 

 

 

External

 

Inter-

 

Total

 

Operating

 

(in thousands)

 

Sales

 

Segment

 

Sales

 

Income (Loss)

 

June 30, 2010

 

 

 

 

 

 

 

 

 

Contract Drilling:

 

 

 

 

 

 

 

 

 

U.S. Land

 

$

976,497

 

$

 

$

976,497

 

$

285,384

 

Offshore

 

153,186

 

 

153,186

 

39,962

 

International Land

 

177,377

 

 

177,377

 

32,786

 

 

 

1,307,060

 

 

1,307,060

 

358,132

 

Other

 

9,145

 

612

 

9,757

 

(5,020

)

 

 

1,316,205

 

612

 

1,316,817

 

353,112

 

Eliminations

 

 

(612

)

(612

)

 

Total

 

$

1,316,205

 

$

 

$

1,316,205

 

$

353,112

 

 

17



Table of Contents

 

Summarized financial information of our reportable segments for the three months ended June 30, 2011, and 2010, is shown in the following tables:

 

 

 

 

 

 

 

 

 

Segment

 

 

 

External

 

Inter-

 

Total

 

Operating

 

(in thousands)

 

Sales

 

Segment

 

Sales

 

Income (Loss)

 

June 30, 2011

 

 

 

 

 

 

 

 

 

Contract Drilling:

 

 

 

 

 

 

 

 

 

U.S. Land

 

$

539,372

 

$

 

$

539,372

 

$

176,832

 

Offshore

 

54,569

 

 

54,569

 

12,944

 

International Land

 

46,051

 

 

46,051

 

(624

)

 

 

639,992

 

 

639,992

 

189,152

 

Other

 

4,103

 

208

 

4,311

 

(2,078

)

 

 

644,095

 

208

 

644,303

 

187,074

 

Eliminations

 

 

(208

)

(208

)

 

Total

 

$

644,095

 

$

 

$

644,095

 

$

187,074

 

 

 

 

 

 

 

 

 

 

Segment

 

 

 

External

 

Inter-

 

Total

 

Operating

 

(in thousands)

 

Sales

 

Segment

 

Sales

 

Income (Loss)

 

June 30, 2010

 

 

 

 

 

 

 

 

 

Contract Drilling:

 

 

 

 

 

 

 

 

 

U.S. Land

 

$

366,989

 

$

 

$

366,989

 

$

103,138

 

Offshore

 

53,131

 

 

53,131

 

11,231

 

International Land

 

60,045

 

 

60,045

 

9,893

 

 

 

480,165

 

 

480,165

 

124,262

 

Other

 

3,219

 

202

 

3,421

 

(1,803

)

 

 

483,384

 

202

 

483,586

 

122,459

 

Eliminations

 

 

(202

)

(202

)

 

Total

 

$

483,384

 

$

 

$

483,384

 

$

122,459

 

 

The following table reconciles segment operating income per the table above to income from continuing operations before income taxes as reported on the Consolidated Condensed Statements of Operations.

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

(in thousands)

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Segment operating income

 

$

187,074

 

$

122,459

 

$

544,044

 

$

353,112

 

Income from asset sales

 

3,488

 

2,249

 

10,262

 

4,245

 

Corporate general and administrative costs and corporate depreciation

 

(16,144

)

(13,234

)

(44,897

)

(38,793

)

Operating income

 

174,418

 

111,474

 

509,409

 

318,564

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

903

 

940

 

1,573

 

1,536

 

Interest expense

 

(3,221

)

(3,961

)

(13,185

)