Segment Information

6 Months Ended

12 Months Ended

Mar. 31, 2015

Sep. 30, 2014

SEGMENT INFORMATION

Segment Information

11.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.  To provide information about the different types of business activities in which we operate, we have included Offshore and International Land, along with our U.S. Land reportable operating segment, as separate reportable operating segments.  Additionally, each reportable operating segment is a strategic business unit that is managed separately.  Our primary international areas of operation include Colombia, Ecuador, Argentina, Tunisia, Bahrain, U.A.E. and other South American and Middle Eastern countries.  Other includes additional 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 continuing 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 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 six months ended March 31, 2015 and 2014 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2015
Contract Drilling:
U.S. Land	$	1,608,510	$	—		$	1,608,510		$	542,988
Offshore	132,099		—			132,099			40,553
International Land	191,107		—			191,107			18,542
	1,931,716		—			1,931,716			602,083
Other	7,921		442			8,363			(5,116		)
	1,939,637		442			1,940,079			596,967
Eliminations	—		(442		)	(442		)	—
Total	$	1,939,637	$	—		$	1,939,637		$	596,967

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2014
Contract Drilling:
U.S. Land	$	1,473,465	$	—		$	1,473,465		$	496,014
Offshore	122,330		—			122,330			37,841
International Land	180,874		—			180,874			23,919
	1,776,669		—			1,776,669			557,774
Other	5,913		431			6,344			(5,249		)
	1,782,582		431			1,783,013			552,525
Eliminations	—		(431		)	(431		)	—
Total	$	1,782,582	$	—		$	1,782,582		$	552,525

Summarized financial information of our reportable segments for the three months ended March 31, 2015 and 2014 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2015
Contract Drilling:
U.S. Land	$	718,463	$	—		$	718,463		$	224,866
Offshore	62,626		—			62,626			19,069
International Land	98,222		—			98,222			6,328
	879,311		—			879,311			250,263
Other	3,741		220			3,961			(3,217		)
	883,052		220			883,272			247,046
Eliminations	—		(220		)	(220		)	—
Total	$	883,052	$	—		$	883,052		$	247,046

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2014
Contract Drilling:
U.S. Land	$	741,791	$	—		$	741,791		$	245,062
Offshore	63,276		—			63,276			19,343
International Land	85,533		—			85,533			11,168
	890,600		—			890,600			275,573
Other	2,830		211			3,041			(2,244		)
	893,430		211			893,641			273,329
Eliminations	—		(211		)	(211		)	—
Total	$	893,430	$	—		$	893,430		$	273,329

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 Income:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
	(in thousands)						(in thousands)
Segment operating income	$	247,046		$	273,329		$	596,967		$	552,525
Income from asset sales	2,915			4,098			7,070			9,762
Corporate general and administrative costs and corporate depreciation	(22,789		)	(22,085		)	(45,046		)	(42,914		)
Operating income	227,172			255,342			558,991			519,373
Other income (expense):
Interest and dividend income	2,549			490			2,834			943
Interest expense	(2,471		)	(1,725		)	(3,032		)	(2,919		)
Gain on sale of investment securities	—			21,352			—			21,352
Other	55			(32		)	369			(377		)
Total other income (expense)	133			20,085			171			18,999
Income from continuing operations before income taxes	$	227,305		$	275,427		$	559,162		$	538,372

The following table presents total assets by reportable segment:

			September 30,
	March 31,		2014
	2015		(as adjusted)
	(in thousands)
Total assets
U.S. Land	$	5,482,725	$	5,259,947
Offshore	117,813		137,101
International Land	713,138		589,968
Other	40,228		40,080
	6,353,904		6,027,096
Investments and corporate operations	982,760		686,696
Total assets from continued operations	7,336,664		6,713,792
Discontinued operations	7,486		7,206
	$	7,344,150	$	6,720,998

The following table presents revenues from external customers by country based on the location of service provided:

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2015		2014		2015		2014
	(in thousands)				(in thousands)
Operating revenues
United States	$	778,637	$	800,775	$	1,734,918	$	1,589,466
Argentina	39,480		26,695		64,563		53,054
Colombia	22,903		21,064		46,354		47,794
Ecuador	6,420		16,822		21,614		34,622
Other foreign	35,612		28,074		72,188		57,646
Total	$	883,052	$	893,430	$	1,939,637	$	1,782,582

NOTE 14 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. To provide information about the different types of business activities in which we operate, we have included Offshore and International Land, along with our U.S. Land reportable operating segment, as separate reportable operating segments. Additionally, each reportable operating segment is a strategic business unit which is managed separately. Our primary international areas of operation include Colombia, Ecuador, Argentina, Tunisia, Bahrain, U.A.E. and other South American and Middle Eastern countries. Other includes additional 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, 2014, 2013 and 2012 is shown in the following table:

(in thousands)	External Sales		Inter- Segment			Total Sales			Segment Operating Income (Loss)			Depreciation		Total Assets (as adjusted)		Additions to Long-Lived Assets
2014
Contract Drilling
U.S. Land	$	3,099,954	$	—		$	3,099,954		$	1,025,745		$	455,934	$	5,259,947	$	930,263
Offshore		250,811		—			250,811			69,819			12,300		137,101		4,372
International Land		355,532		—			355,532			36,417			39,932		589,968		85,424
		3,706,297		—			3,706,297			1,131,981			508,166		5,987,016		1,020,059
Other		13,410		867			14,277			(9,068	)		15,383		726,776		27,117
		3,719,707		867			3,720,574			1,122,913			523,549		6,713,792		1,047,176
Eliminations		—		(867	)		(867	)		—			—		—		—
Total	$	3,719,707	$	—		$	3,719,707		$	1,122,913		$	523,549	$	6,713,792	$	1,047,176
2013
Contract Drilling
U.S. Land	$	2,785,449	$	—		$	2,785,449		$	932,591		$	391,072	$	4,742,381	$	726,206
Offshore		221,863		—			221,863			53,064			13,766		149,128		4,470
International Land		366,841		—			366,841			44,595			36,000		486,914		51,193
		3,374,153		—			3,374,153			1,030,250			440,838		5,378,423		781,869
Other		13,461		858			14,319			(8,602	)		14,785		881,436		9,872
		3,387,614		858			3,388,472			1,021,648			455,623		6,259,859		791,741
Eliminations		—		(858	)		(858	)		—			—		—		—
Total	$	3,387,614	$	—		$	3,387,614		$	1,021,648		$	455,623	$	6,259,859	$	791,741
2012
Contract Drilling
U.S. Land	$	2,678,475	$	—		$	2,678,475		$	906,968		$	332,723	$	4,420,625	$	991,966
Offshore		189,086		—			189,086			41,775			13,455		160,135		8,547
International Land		270,027		—			270,027			20,366			30,701		467,538		52,864
		3,137,588		—			3,137,588			969,109			376,879		5,048,298		1,053,377
Other		14,214		841			15,055			(8,824	)		10,670		663,496		29,301
		3,151,802		841			3,152,643			960,285			387,549		5,711,794		1,082,678
Eliminations		—		(841	)		(841	)		—			—		—		—
Total	$	3,151,802	$	—		$	3,151,802		$	960,285		$	387,549	$	5,711,794	$	1,082,678

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

	Years Ended September 30,
	2014			2013			2012
	(in thousands)
Segment operating income	$	1,122,913		$	1,021,648		$	960,285
Income from asset sales		19,585			18,923			19,223
Corporate general and administrative costs and corporate depreciation		(87,711	)		(83,910	)		(69,909	)
Operating income		1,054,787			956,661			909,599
Other income (expense)
Interest and dividend income		1,583			1,653			1,380
Interest expense		(4,654	)		(6,129	)		(8,653	)
Gain on sale of investment securities		45,234			162,121			—
Other		(636	)		(9	)		254
Total unallocated amounts		41,527			157,636			(7,019	)
Income from continuing operations before income taxes	$	1,096,314		$	1,114,297		$	902,580

        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,
	2014		2013		2012
	(in thousands)
Revenues
United States	$	3,338,365	$	3,011,760	$	2,864,570
Argentina		107,945		73,208		54,317
Colombia		85,176		100,052		82,247
Ecuador		69,195		67,890		56,448
Other Foreign		119,026		134,704		94,220
Total	$	3,719,707	$	3,387,614	$	3,151,802
Long-Lived Assets
United States	$	4,753,844	$	4,345,950	$	4,039,770
Argentina		144,823		83,149		81,886
Colombia		107,112		81,315		84,389
Ecuador		70,742		63,894		38,265
Other Foreign		112,023		101,795		107,261
Total	$	5,188,544	$	4,676,103	$	4,351,571

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

        Revenues from one customer accounted for approximately 10.7 percent, 9.5 percent and 12.0 percent of total operating revenues during the years ended September 30, 2014, 2013 and 2012, respectively. Revenues from another customer accounted for approximately 8.2 percent, 7.9 percent and 10.2 percent of total operating revenues during the years ended September 30, 2014, 2013 and 2012, respectively. Collectively, the receivables from these customers were approximately $122.5 million and $94.1 million at September 30, 2014 and 2013, respectively.