Segment Information

6 Months Ended

Mar. 31, 2016

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 six months ended March 31, 2016 and 2015 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2016
Contract Drilling:
U.S. Land	$	719,088	$	—		$	719,088		$	118,053
Offshore	76,205		—			76,205			11,021
International Land	123,546		—			123,546			(8,933		)
	918,839		—			918,839			120,141
Other	7,199		429			7,628			(2,653		)
	926,038		429			926,467			117,488
Eliminations	—		(429		)	(429		)	—
Total	$	926,038	$	—		$	926,038		$	117,488

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2015, as adjusted
Contract Drilling:
U.S. Land	$	1,608,510	$	—		$	1,608,510		$	542,988
Offshore	132,315		—			132,315			40,702
International Land	197,711		—			197,711			21,140
	1,938,536		—			1,938,536			604,830
Other	7,921		442			8,363			(5,116		)
	1,946,457		442			1,946,899			599,714
Eliminations	—		(442		)	(442		)	—
Total	$	1,946,457	$	—		$	1,946,457		$	599,714

Summarized financial information of our reportable segments for the three months ended March 31, 2016 and 2015 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2016
Contract Drilling:
U.S. Land	$	349,283	$	—		$	349,283		$	62,521
Offshore	34,325		—			34,325			3,299
International Land	51,352		—			51,352			(2,268		)
	434,960		—			434,960			63,552
Other	3,231		210			3,441			(1,349		)
	438,191		210			438,401			62,203
Eliminations	—		(210		)	(210		)	—
Total	$	438,191	$	—		$	438,191		$	62,203

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
March 31, 2015, as adjusted
Contract Drilling:
U.S. Land	$	718,463	$	—		$	718,463		$	224,859
Offshore	62,428		—			62,428			19,040
International Land	101,038		—			101,038			10,579
	881,929		—			881,929			254,478
Other	3,741		220			3,961			(3,217		)
	885,670		220			885,890			251,261
Eliminations	—		(220		)	(220		)	—
Total	$	885,670	$	—		$	885,670		$	251,261

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 March 31,						Six Months Ended March 31,
				2015						2015
	2016			(as adjusted)			2016			(as adjusted)
	(in thousands)						(in thousands)
Segment operating income	$	62,203		$	251,261		$	117,488		$	599,714
Income from asset sales	2,684			2,855			7,273			7,028
Corporate general and administrative costs and corporate depreciation	(23,266		)	(22,790		)	(44,470		)	(45,045		)
Operating income	41,621			231,326			80,291			561,697
Other income (expense):
Interest and dividend income	799			2,564			1,532			2,859
Interest expense	(5,721		)	(2,600		)	(10,245		)	(3,190		)
Other	653			55			392			369
Total other income (expense)	(4,269		)	19			(8,321		)	38
Income from continuing operations before income taxes	$	37,352		$	231,345		$	71,970		$	561,735

The following table presents total assets by reportable segment:

			September 30,
	March 31, 2016		2015 (as adjusted)
	(in thousands)
Total assets
U.S. Land	$	5,210,465	$	5,429,179
Offshore	110,446		118,852
International Land	530,310		565,712
Other	37,117		38,397
	5,888,338		6,152,140
Investments and corporate operations	1,136,537		987,005
Total assets from continued operations	7,024,875		7,139,145
Discontinued operations	230		8,097
	$	7,025,105	$	7,147,242

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

	Three Months Ended March 31,				Six Months Ended March 31,
	2016		2015 (as adjusted)		2016		2015 (as adjusted)
	(in thousands)				(in thousands)
Operating revenues
United States	$	385,977	$	778,637	$	795,483	$	1,734,918
Argentina	35,371		46,273		85,157		74,749
Colombia	4,602		22,691		11,345		46,628
Ecuador	527		5,510		4,467		19,400
Other foreign	11,714		32,559		29,586		70,762
Total	$	438,191	$	885,670	$	926,038	$	1,946,457