Segment Information

3 Months Ended

Dec. 31, 2011

Segment Information

Segment Information

12. 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.

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 three months ended December 31, 2011, and 2010, is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
December 31, 2011
Contract Drilling:
U.S. Land	$	617,779	$	—		$	617,779		$	224,706
Offshore	50,792		—			50,792			12,204
International Land	60,735		—			60,735			7,939
	729,306		—			729,306			244,849
Other	3,282		210			3,492			(1,788		)
	732,588		210			732,798			243,061
Eliminations	—		(210		)	(210		)	—
Total	$	732,588	$	—		$	732,588		$	243,061

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
December 31, 2010
Contract Drilling:
U.S. Land	$	476,818	$	—		$	476,818		$	158,361
Offshore	44,867		—			44,867			9,000
International Land	68,954		—			68,954			14,367
	590,639		—			590,639			181,728
Other	4,003		210			4,213			(1,151		)
	594,642		210			594,852			180,577
Eliminations	—		(210		)	(210		)	—
Total	$	594,642	$	—		$	594,642		$	180,577

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
	December 31,
	2011			2010
	(in thousands)
Segment operating income	$	243,061		$	180,577
Income from asset sales	4,683			2,669
Corporate general and administrative costs and corporate depreciation	(17,205		)	(12,520		)
Operating income	230,539			170,726
Other income (expense):
Interest and dividend income	336			314
Interest expense	(2,461		)	(4,451		)
Other	21			166
Total other income (expense)	(2,104		)	(3,971		)
Income from continuing operations before income taxes	$	228,435		$	166,755

The following table presents total assets by reportable segment.

	December 31,		September 30,
	2011		2011
	(in thousands)
Total assets
U.S. Land	$	3,869,204	$	3,719,387
Offshore	146,244		151,656
International Land	362,775		333,142
Other	34,952		35,076
	4,413,175		4,239,261
Investments and corporate operations	836,935		757,101
Total assets from continued operations	5,250,110		4,996,362
Discontinued operations	7,777		7,529
	$	5,257,887	$	5,003,891

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

	Three Months Ended
	December 31,
	2011		2010
	(in thousands)
Operating revenues
United States	$	662,351	$	519,040
Colombia	19,665		18,817
Ecuador	12,636		12,025
Argentina	12,407		13,009
Other foreign	25,529		31,751
Total	$	732,588	$	594,642