Segment Information

9 Months Ended

Jun. 30, 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 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 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 nine months ended June 30, 2013 and 2012 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
June 30, 2013
Contract Drilling:
U.S. Land	$	2,077,556	$	—		$	2,077,556		$	696,774
Offshore	167,182		—			167,182			42,778
International Land	268,337		—			268,337			30,738
	2,513,075		—			2,513,075			770,290
Other	10,003		643			10,646			(6,638		)
	2,523,078		643			2,523,721			763,652
Eliminations	—		(643		)	(643		)	—
Total	$	2,523,078	$	—		$	2,523,078		$	763,652

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
June 30, 2012
Contract Drilling:
U.S. Land	$	1,983,369	$	—		$	1,983,369		$	670,349
Offshore	135,830		—			135,830			29,742
International Land	192,305		—			192,305			13,240
	2,311,504		—			2,311,504			713,331
Other	10,851		629			11,480			(5,782		)
	2,322,355		629			2,322,984			707,549
Eliminations	—		(629		)	(629		)	—
Total	$	2,322,355	$	—		$	2,322,355		$	707,549

Summarized financial information of our reportable segments for the three months ended June 30, 2013 and 2012 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
June 30, 2013
Contract Drilling:
U.S. Land	$	695,816	$	—		$	695,816		$	236,388
Offshore	53,859		—			53,859			14,122
International Land	86,978		—			86,978			8,458
	836,653		—			836,653			258,968
Other	3,544		214			3,758			(2,464		)
	840,197		214			840,411			256,504
Eliminations	—		(214		)	(214		)	—
Total	$	840,197	$	—		$	840,197		$	256,504

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
June 30, 2012
Contract Drilling:
U.S. Land	$	706,786	$	—		$	706,786		$	235,684
Offshore	41,617		—			41,617			7,720
International Land	67,482		—			67,482			6,275
	815,885		—			815,885			249,679
Other	3,900		209			4,109			(2,161		)
	819,785		209			819,994			247,518
Eliminations	—		(209		)	(209		)	—
Total	$	819,785	$	—		$	819,785		$	247,518

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						Nine Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
	(in thousands)						(in thousands)
Segment operating income	$	256,504		$	247,518		$	763,652		$	707,549
Income from asset sales	4,006			1,862			14,538			14,365
Corporate general and administrative costs and corporate depreciation	(20,550		)	(16,725		)	(64,763		)	(51,695		)
Operating income	239,960			232,655			713,427			670,219
Other income (expense):
Interest and dividend income	341			329			1,082			1,021
Interest expense	(2,091		)	(2,411		)	(4,585		)	(7,293		)
Gain on sale of investment securities	153,369			—			162,121			—
Other	(1,214		)	309			(3,195		)	288
Total other income (expense)	150,405			(1,773		)	155,423			(5,984		)
Income from continuing operations before income taxes	$	390,365		$	230,882		$	868,850		$	664,235

The following table presents total assets by reportable segment.

	June 30,		September 30,
	2013		2012
	(in thousands)
Total assets
U.S. Land	$	4,705,254	$	4,422,297
Offshore	155,197		160,135
International Land	458,702		467,538
Other	32,047		33,539
	5,351,200		5,083,509
Investments and corporate operations	841,951		629,957
Total assets from continued operations	6,193,151		5,713,466
Discontinued operations	4,460		7,619
	$	6,197,611	$	5,721,085

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

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Operating revenues
United States	$	750,644	$	751,387	$	2,249,764	$	2,113,479
Colombia	22,856		19,046		74,330		58,371
Ecuador	15,993		15,178		48,234		41,753
Argentina	18,943		13,845		50,111		37,953
Other foreign	31,761		20,329		100,639		70,799
Total	$	840,197	$	819,785	$	2,523,078	$	2,322,355