Segment Information

6 Months Ended

Mar. 31, 2013

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 six months ended March 31, 2013, and 2012, is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2013
Contract Drilling:
U.S. Land	$	1,381,740	$	—		$	1,381,740		$	460,386
Offshore	113,323		—			113,323			28,656
International Land	181,359		—			181,359			22,280
	1,676,422		—			1,676,422			511,322
Other	6,459		429			6,888			(4,174		)
	1,682,881		429			1,683,310			507,148
Eliminations	—		(429		)	(429		)	—
Total	$	1,682,881	$	—		$	1,682,881		$	507,148

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2012
Contract Drilling:
U.S. Land	$	1,276,583	$	—		$	1,276,583		$	434,665
Offshore	94,213		—			94,213			22,022
International Land	124,823		—			124,823			6,965
	1,495,619		—			1,495,619			463,652
Other	6,951		420			7,371			(3,621		)
	1,502,570		420			1,502,990			460,031
Eliminations	—		(420		)	(420		)	—
Total	$	1,502,570	$	—		$	1,502,570		$	460,031

Summarized financial information of our reportable segments for the three months ended March 31, 2013, and 2012, is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2013
Contract Drilling:
U.S. Land	$	685,710	$	—		$	685,710		$	225,998
Offshore	55,605		—			55,605			13,650
International Land	94,092		—			94,092			13,169
	835,407		—			835,407			252,817
Other	2,902		214			3,116			(2,539		)
	838,309		214			838,523			250,278
Eliminations	—		(214		)	(214		)	—
Total	$	838,309	$	—		$	838,309		$	250,278

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2012
Contract Drilling:
U.S. Land	$	658,804	$	—		$	658,804		$	209,959
Offshore	43,421		—			43,421			9,818
International Land	64,088		—			64,088			(974		)
	766,313		—			766,313			218,803
Other	3,669		210			3,879			(1,833		)
	769,982		210			770,192			216,970
Eliminations	—		(210		)	(210		)	—
Total	$	769,982	$	—		$	769,982		$	216,970

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,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
Segment operating income	$	250,278		$	216,970		$	507,148		$	460,031
Income from asset sales	5,313			7,820			10,532			12,503
Corporate general and administrative costs and corporate depreciation	(22,671		)	(17,765		)	(44,213		)	(34,970		)
Operating income	232,920			207,025			473,467			437,564
Other income (expense):
Interest and dividend income	315			356			741			692
Interest expense	(1,186		)	(2,421		)	(2,494		)	(4,882		)
Gain on sale of investment securities	—			—			8,752			—
Other	103			(42		)	(1,981		)	(21		)
Total other income (expense)	(768		)	(2,107		)	5,018			(4,211		)
Income from continuing operations before income taxes	$	232,152		$	204,918		$	478,485		$	433,353

The following table presents total assets by reportable segment.

	March 31,		September 30,
	2013		2012
	(in thousands)
Total assets
U.S. Land	$	4,627,120	$	4,422,297
Offshore	146,570		160,135
International Land	470,054		467,538
Other	32,244		33,539
	5,275,988		5,083,509
Investments and corporate operations	732,391		629,957
Total assets from continued operations	6,008,379		5,713,466
Discontinued operations	4,073		7,619
	$	6,012,452	$	5,721,085

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,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Operating revenues
United States	$	742,635	$	699,741	$	1,499,120	$	1,362,092
Colombia	24,069		19,660		51,474		39,325
Ecuador	15,611		13,939		32,241		26,575
Argentina	17,572		11,701		31,168		24,108
Other foreign	38,422		24,941		68,878		50,470
Total	$	838,309	$	769,982	$	1,682,881	$	1,502,570