SEGMENT INFORMATION

12 Months Ended

Sep. 30, 2011

SEGMENT INFORMATION

SEGMENT INFORMATION

NOTE 15 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, Tunisia, Bahrain and other South American countries. 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.

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.

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 for all segments is a non-GAAP financial measure of our performance, as it excludes certain 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 for 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 continuing operations for each of the years ended September 30, 2011, 2010 and 2009 is shown in the following table:

(in thousands)			External Sales		Inter- Segment			Total Sales			Segment Operating Income (Loss)			Depreciation		Total Assets		Additions to Long-Lived Assets
2011
Contract Drilling
	U.S. Land		$	2,100,508	$	—		$	2,100,508		$	691,615		$	264,127	$	3,719,387	$	694,249
	Offshore			201,417		—			201,417			45,291			14,684		151,656		7,092
	International Land			226,849		—			226,849			19,711			28,018		333,142		20,638
				2,528,774		—			2,528,774			756,617			306,829		4,204,185		721,979
Other				15,120		829			15,949			(7,682	)		8,639		792,177		8,368
				2,543,894		829			2,544,723			748,935			315,468		4,996,362		730,347
Eliminations				—		(829	)		(829	)		—			—		—		—
		Total	$	2,543,894	$	—		$	2,543,894		$	748,935		$	315,468	$	4,996,362	$	730,347
2010
Contract Drilling
	U.S. Land		$	1,412,495	$	—		$	1,412,495		$	404,278		$	211,652	$	3,257,382	$	305,206
	Offshore			202,734		—			202,734			53,069			12,519		132,342		9,982
	International Land			247,179		—			247,179			48,271			29,938		411,339		23,865
				1,862,408		—			1,862,408			505,618			254,109		3,801,063		339,053
Other				12,754		814			13,568			(6,765	)		8,549		454,037		6,211
				1,875,162		814			1,875,976			498,853			262,658		4,255,100		345,264
Eliminations				—		(814	)		(814	)		—			—		—		—
		Total	$	1,875,162	$	—		$	1,875,162		$	498,853		$	262,658	$	4,255,100	$	345,264
2009
Contract Drilling
	U.S. Land		$	1,441,164	$	—		$	1,441,164		$	573,708		$	187,259	$	2,955,574	$	703,073
	Offshore			204,702		—			204,702			55,293			11,872		129,465		17,584
	International Land			187,099		—			187,099			18,955			19,278		391,099		94,627
				1,832,965		—			1,832,965			647,956			218,409		3,476,138		815,284
Other				10,775		836			11,611			(7,032	)		9,126		532,346		4,514
				1,843,740		836			1,844,576			640,924			227,535		4,008,484		819,798
Eliminations				—		(836	)		(836	)		—			—		—		—
		Total	$	1,843,740	$	—		$	1,843,740		$	640,924		$	227,535	$	4,008,484	$	819,798

The following table reconciles segment operating income to income from continuing operations before income taxes and equity in income of affiliate as reported on the Consolidated Statements of Income:

Years Ended September 30,			2011			2010			2009
				(in thousands)
Segment operating income			$	748,935		$	498,853		$	640,924
Income from asset sales				13,903			4,992			5,402
Gain from involuntary conversion of long-lived assets				—			—			541
Corporate general and administrative costs and corporate depreciation				(60,327	)		(52,049	)		(37,992	)
	Operating income			702,511			451,796			608,875
Other income (expense)
	Interest and dividend income			1,951			1,811			2,755
	Interest expense			(17,355	)		(17,158	)		(13,590	)
	Gain on sale of investment securities			913			—			—
	Other			(953	)		1,787			245
		Total unallocated amounts		(15,444	)		(13,560	)		(10,590	)
Income from continuing operations before income taxes and equity in income of affiliate			$	687,067		$	438,236		$	598,285

The following table presents revenues from external customers and long-lived assets by country based on the location of service provided:

Years Ended September 30,			2011		2010		2009
				(in thousands)
Revenues
	United States		$	2,276,118	$	1,572,139	$	1,613,940
	Colombia			74,504		57,533		77,322
	Argentina			44,205		55,855		42,087
	Ecuador			42,598		52,115		52,250
	Other Foreign			106,469		137,520		58,141
		Total	$	2,543,894	$	1,875,162	$	1,843,740
Long-Lived Assets
	United States		$	3,423,185	$	2,973,712	$	2,879,222
	Argentina			78,221		91,322		99,896
	Colombia			67,369		59,798		62,942
	Ecuador			28,439		27,772		26,022
	Other Foreign			79,856		122,416		126,191
		Total	$	3,677,070	$	3,275,020	$	3,194,273

Long-lived assets are comprised of property, plant and equipment.

Revenues from one company doing business with the contract drilling business accounted for approximately 12.5 percent of total operating revenues during the years ended September 30, 2011 and 2010 and 10.1 percent of the total operating revenues during the year ended September 30, 2009. Revenues from another company doing business with the contract drilling business accounted for approximately 11.5 percent, 10.6 percent and 12.4 percent of total operating revenues during the years ended September 30, 2011, 2010 and 2009, respectively. Collectively, the receivables from these customers were approximately $95.5 million and $85.1 million at September 30, 2011 and 2010, respectively.