Segment Information

3 Months Ended

Dec. 31, 2015

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, Bahrain, and the U.A.E.  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 three months ended December 31, 2015 and 2014 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
December 31, 2015
Contract Drilling:
U.S. Land	$	369,805	$	—		$	369,805		$	55,532
Offshore	41,880		—			41,880			7,722
International Land	72,194		—			72,194			(6,665		)
	483,879		—			483,879			56,589
Other	3,968		219			4,187			(1,304		)
	487,847		219			488,066			55,285
Eliminations	—		(219		)	(219		)	—
Total	$	487,847	$	—		$	487,847		$	55,285

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
December 31, 2014, as adjusted
Contract Drilling:
U.S. Land	$	890,047	$	—		$	890,047		$	318,129
Offshore	69,887		—			69,887			21,662
International Land	96,673		—			96,673			10,561
	1,056,607		—			1,056,607			350,352
Other	4,180		222			4,402			(1,899		)
	1,060,787		222			1,061,009			348,453
Eliminations	—		(222		)	(222		)	—
Total	$	1,060,787	$	—		$	1,060,787		$	348,453

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,
	2015			2014 (as adjusted)
	(in thousands)
Segment operating income	$	55,285		$	348,453
Income from asset sales	4,589			4,173
Corporate general and administrative costs and corporate depreciation	(21,204		)	(22,255		)
Operating income	38,670			330,371
Other income (expense):
Interest and dividend income	733			295
Interest expense	(4,524		)	(590		)
Other	(261		)	314
Total other income (expense)	(4,052		)	19
Income from continuing operations before income taxes	$	34,618		$	330,390

The following table presents total assets by reportable segment:

			September 30,
	December 31, 2015		2015 (as adjusted)
	(in thousands)
Total assets
U.S. Land	$	5,321,369	$	5,429,179
Offshore	116,563		118,852
International Land	544,257		565,712
Other	37,498		38,397
	6,019,687		6,152,140
Investments and corporate operations	1,102,138		987,005
Total assets from continued operations	7,121,825		7,139,145
Discontinued operations	8,449		8,097
	$	7,130,274	$	7,147,242

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

	Three Months Ended
	December 31,
	2015		2014 (as adjusted)
	(in thousands)
Operating revenues
United States	$	409,506	$	956,281
Argentina	49,786		28,476
Colombia	6,743		23,937
Ecuador	3,940		13,890
Other foreign	17,872		38,203
Total	$	487,847	$	1,060,787