Segment Information

3 Months Ended

Dec. 31, 2012

Segment Information

Segment Information

10. 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 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 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 three months ended December 31, 2012, and 2011, is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
December 31, 2012
Contract Drilling:
U.S. Land	$	696,030	$	—		$	696,030		$	234,388
Offshore	57,718		—			57,718			15,006
International Land	87,267		—			87,267			9,111
	841,015		—			841,015			258,505
Other	3,557		215			3,772			(1,635		)
	844,572		215			844,787			256,870
Eliminations	—		(215		)	(215		)	—
Total	$	844,572	$	—		$	844,572		$	256,870

									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

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
	December 31,
	2012			2011
	(in thousands)
Segment operating income	$	256,870		$	243,061
Income from asset sales	5,219			4,683
Corporate general and administrative costs and corporate depreciation	(21,542		)	(17,205		)
Operating income	240,547			230,539
Other income (expense):
Interest and dividend income	426			336
Interest expense	(1,308		)	(2,461		)
Gain on sale of investment securities	8,752			—
Other	(2,084		)	21
Total other income (expense)	5,786			(2,104		)
Income from continuing operations before income taxes	$	246,333		$	228,435

The following table presents total assets by reportable segment.

	December 31,		September 30,
	2012		2012
	(in thousands)
Total assets
U.S. Land	$	4,529,162	$	4,422,297
Offshore	161,086		160,135
International Land	461,010		467,538
Other	33,153		33,539
	5,184,411		5,083,509
Investments and corporate operations	742,089		629,957
Total assets from continued operations	5,926,500		5,713,466
Discontinued operations	7,788		7,619
	$	5,934,288	$	5,721,085

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

	Three Months Ended
	December 31,
	2012		2011
	(in thousands)
Operating revenues
United States	$	756,485	$	662,351
Colombia	27,405		19,665
Ecuador	16,630		12,636
Argentina	13,596		12,407
Other foreign	30,456		25,529
Total	$	844,572	$	732,588