Guarantor and Non-Guarantor Financial Information

6 Months Ended

Mar. 31, 2016

Guarantor and Non-Guarantor Financial Information

Guarantor and Non-Guarantor Financial Information

16.Guarantor and Non-Guarantor Financial Information

In March 2015, Helmerich & Payne International Drilling Co. (“the issuer”), a wholly-owned subsidiary of Helmerich & Payne, Inc. (“parent”, “the guarantor”), issued senior unsecured notes with an aggregate principal amount of $500.0 million.  The notes are fully and unconditionally guaranteed by the parent. No subsidiaries of parent currently guarantee the notes, subject to certain provisions that if any subsidiary guarantees certain other debt of the issuer or parent, then such subsidiary will provide a guarantee of the obligations under the notes.

In connection with the notes, we are providing the following condensed consolidating financial information for the issuer, Helmerich & Payne International Drilling Co. and parent/guarantor, Helmerich & Payne, Inc., in accordance with the Commission disclosure requirements.  Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands)

	Three Months Ended March 31, 2016
	Guarantor/			Issuer			Non-Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Operating revenue	$	—		$	382,747		$	55,460		$	(16	)	$	438,191
Operating costs and other	3,156			331,998			61,818			(402		)	396,570
Operating income (loss) from continuing operations	(3,156		)	50,749			(6,358		)	386			41,621
Other income (loss), net	(271		)	734			1,375			(386		)	1,452
Interest expense	(62		)	(5,272		)	(387		)	—			(5,721		)
Equity in net income (loss) of subsidiaries	23,065			(7,818		)	—			(15,247		)	—
Income (loss) from continuing operations before income taxes	19,576			38,393			(5,370		)	(15,247		)	37,352
Income tax provision	(1,629		)	15,657			(1,850		)	—			12,178
Income (loss) from continuing operations	21,205			22,736			(3,520		)	(15,247		)	25,174
Loss from discontinued operations before income taxes	—			—			(56		)	—			(56		)
Income tax provision	—			—			3,913			—			3,913
Loss from discontinued operations	—			—			(3,969		)	—			(3,969		)
Net income (loss)	$	21,205		$	22,736		$	(7,489	)	$	(15,247	)	$	21,205

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended March 31, 2016
	Guarantor/		Issuer			Non-Guarantor						Total
	Parent		Subsidiary			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	21,205	$	22,736		$	(7,489	)	$	(15,247	)	$	21,205
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net	—		(1,453		)	—			—			(1,453		)
Minimum pension liability adjustments, net	106		207			—			—			313
Other comprehensive income (loss)	106		(1,246		)	—			—			(1,140		)
Comprehensive income	$	21,311	$	21,490		$	(7,489	)	$	(15,247	)	$	20,065

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands)

	Three Months Ended March 31, 2015, as adjusted
	Guarantor/			Issuer			Non-Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Operating revenue	$	—		$	774,896		$	110,798		$	(24	)	$	885,670
Operating costs and other	3,059			548,083			104,236			(1,034		)	654,344
Operating income (loss) from continuing operations	(3,059		)	226,813			6,562			1,010			231,326
Other income	2			3,738			(111		)	(1,010		)	2,619
Interest expense	(12		)	(121		)	(2,467		)	—			(2,600		)
Equity in net income of subsidiaries	155,706			3,373			—			(159,079		)	—
Income from continuing operations before income taxes	152,637			233,803			3,984			(159,079		)	231,345
Income tax provision	(906		)	78,923			(214		)	—			77,803
Income from continuing operations	153,543			154,880			4,198			(159,079		)	153,542
Loss from discontinued operations before income taxes	—			—			(76		)	—			(76		)
Income tax provision	—			—			(77		)	—			(77		)
Loss from discontinued operations	—			—			1			—			1
Net income	$	153,543		$	154,880		$	4,199		$	(159,079	)	$	153,543

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended March 31, 2015, as adjusted
	Guarantor/		Issuer			Non-Guarantor					Total
	Parent		Subsidiary			Subsidiaries		Eliminations			Consolidated
Net income	$	153,543	$	154,880		$	4,199	$	(159,079	)	$	153,543
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net	—		(1,203		)	—		—			(1,203		)
Minimum pension liability adjustments, net	82		115			—		—			197
Other comprehensive income (loss)	82		(1,088		)	—		—			(1,006		)
Comprehensive income	$	153,625	$	153,792		$	4,199	$	(159,079	)	$	152,537

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands)

	Six Months Ended March 31, 2016
	Guarantor/			Issuer			Non-Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Operating revenue	$	—		$	788,284		$	137,787		$	(33	)	$	926,038
Operating costs and other	5,861			688,749			151,940			(803		)	845,747
Operating income (loss) from continuing operations	(5,861		)	99,535			(14,153		)	770			80,291
Other income	(251		)	1,390			1,555			(770		)	1,924
Interest expense	(124		)	(9,990		)	(131		)	—			(10,245		)
Equity in net income (loss) of subsidiaries	40,614			(16,015		)	—			(24,599		)	—
Income from continuing operations before income taxes	34,378			74,920			(12,729		)	(24,599		)	71,970
Income tax provision	(2,829		)	34,884			(1,157		)	—			30,898
Income (loss) from continuing operations	37,207			40,036			(11,572		)	(24,599		)	41,072
Income from discontinued operations before income taxes	—			—			48			—			48
Income tax provision	—			—			3,913			—			3,913
Loss from discontinued operations	—			—			(3,865		)	—			(3,865		)
Net income (loss)	$	37,207		$	40,036		$	(15,437	)	$	(24,599	)	$	37,207

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Six Months Ended March 31, 2016
	Guarantor/		Issuer			Non-Guarantor						Total
	Parent		Subsidiary			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	37,207	$	40,036		$	(15,437	)	$	(24,599	)	$	37,207
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net	—		(12,463		)	—			—			(12,463		)
Minimum pension liability adjustments, net	213		413			—			—			626
Other comprehensive income (loss)	213		(12,050		)	—			—			(11,837		)
Comprehensive income (loss)	$	37,420	$	27,986		$	(15,437	)	$	(24,599	)	$	25,370

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands)

	Six Months Ended March 31, 2015, as adjusted
	Guarantor/			Issuer			Non-Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated
Operating revenue	$	—		$	1,727,005		$	219,492		$	(40	)	$	1,946,457
Operating costs and other	6,080			1,177,121			203,625			(2,066		)	1,384,760
Operating income (loss) from continuing operations	(6,080		)	549,884			15,867			2,026			561,697
Other income	3			4,659			592			(2,026		)	3,228
Interest expense	(19		)	(103		)	(3,068		)	—			(3,190		)
Equity in net income of subsidiaries	361,065			10,091			—			(371,156		)	—
Income from continuing operations before income taxes	354,969			564,531			13,391			(371,156		)	561,735
Income tax provision	(2,182		)	205,045			1,707			—			204,570
Income from continuing operations	357,151			359,486			11,684			(371,156		)	357,165
Loss from discontinued operations before income taxes	—			—			(91		)	—			(91		)
Income tax provision	—			—			(77		)	—			(77		)
Loss from discontinued operations	—			—			(14		)	—			(14		)
Net income	$	357,151		$	359,486		$	11,670		$	(371,156	)	$	357,151

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Six Months Ended March 31, 2015, as adjusted
	Guarantor/		Issuer			Non-Guarantor					Total
	Parent		Subsidiary			Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	357,151	$	359,486		$	11,670	$	(371,156	)	$	357,151
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net	—		(43,447		)	—		—			(43,447		)
Minimum pension liability adjustments, net	164		229			—		—			393
Other comprehensive income (loss)	164		(43,218		)	—		—			(43,054		)
Comprehensive income	$	357,315	$	316,268		$	11,670	$	(371,156	)	$	314,097

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

	March 31, 2016
	Guarantor/			Issuer			Non-Guarantor					Total
	Parent			Subsidiary			Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	(1,900	)	$	885,570		$	14,343	$	—		$	898,013
Short-term investments	—			45,526			—		—			45,526
Accounts receivable, net of reserve	(13		)	270,387			60,352		—			330,726
Inventories	—			88,799			40,850		—			129,649
Prepaid expenses and other	25,867			3,142			43,353		(16,129		)	56,233
Current assets of discontinued operations	—			—			230		—			230
Total current assets	23,954			1,293,424			159,128		(16,129		)	1,460,377
Investments	12,205			71,158			—		—			83,363
Property, plant and equipment, net	64,190			4,962,375			419,787		—			5,446,352
Intercompany	15,144			1,310,646			262,269		(1,588,059		)	—
Other assets	10,992			478			34,301		(10,758		)	35,013
Investment in subsidiaries	5,653,326			211,418			—		(5,864,744		)	—
Total assets	$	5,779,811		$	7,849,499		$	875,485	$	(7,479,690	)	$	7,025,105
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt due within one year	$	—		$	39,144		$	—	$	—		$	39,144
Accounts payable	78,165			10,529			2,743		—			91,437
Accrued liabilities	11,388			193,249			52,157		(16,129		)	240,665
Current liabilities of discontinued operations	—			—			82		—			82
Total current liabilities	89,553			242,922			54,982		(16,129		)	371,328
Noncurrent liabilities:
Long-term debt	—			492,919			—		—			492,919
Deferred income taxes	—			1,267,164			22,258		(10,758		)	1,278,664
Intercompany	890,370			183,734			513,855		(1,587,959		)	—
Other	17,788			27,204			50,992		—			95,984
Noncurrent liabilities of discontinued operations	—			—			4,110		—			4,110
Total noncurrent liabilities	908,158			1,971,021			591,215		(1,598,717		)	1,871,677
Shareholders’ equity:
Common stock	11,136			100			—		(100		)	11,136
Additional paid-in capital	436,117			46,832			393		(47,225		)	436,117
Retained earnings	4,536,047			5,596,819			228,895		(5,825,714		)	4,536,047
Accumulated other comprehensive loss	(13,214		)	(8,195		)	—		8,195			(13,214		)
Treasury stock, at cost	(187,986		)	—			—		—			(187,986		)
Total shareholders’ equity	4,782,100			5,635,556			229,288		(5,864,844		)	4,782,100
Total liabilities and shareholders’ equity	$	5,779,811		7,849,499			$	875,485	$	(7,479,690	)	$	7,025,105

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

	September 30, 2015, as adjusted
	Guarantor/			Issuer		Non-Guarantor					Total
	Parent			Subsidiary		Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	(838	)	$	693,273	$	36,949	$	—		$	729,384
Short-term investments	—			45,543		—		—			45,543
Accounts receivable, net of reserve	152			374,383		71,418		(5		)	445,948
Inventories	—			88,010		40,531		—			128,541
Deferred income taxes	2,834			19,277		—		(4,905		)	17,206
Prepaid expenses and other	20,018			6,713		45,647		(7,903		)	64,475
Current assets of discontinued operations	—			—		8,097		—			8,097
Total current assets	22,166			1,227,199		202,642		(12,813		)	1,439,194
Investments	12,871			91,483		—		—			104,354
Property, plant and equipment, net	55,902			5,063,705		443,563		—			5,563,170
Intercompany	15,875			1,192,634		230,652		(1,439,161		)	—
Other assets	8,387			1,389		38,901		(8,153		)	40,524
Investment in subsidiaries	5,623,754			227,587		—		(5,851,341		)	—
Total assets	$	5,738,955		$	7,803,997	$	915,758	$	(7,311,468	)	$	7,147,242
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt due within one year	$	—		$	39,094	$	—	$	—		$	39,094
Accounts payable	80,673			20,404		7,097		(5		)	108,169
Accrued liabilities	10,688			151,721		46,251		(11,103		)	197,557
Current liabilities of discontinued operations	—			—		3,377		—			3,377
Total current liabilities	91,361			211,219		56,725		(11,108		)	348,197
Noncurrent liabilities:
Long-term debt	—			492,443		—		—			492,443
Deferred income taxes	—			1,275,428		33,546		(13,058		)	1,295,916
Intercompany	733,008			186,784		516,169		(1,435,961		)	—
Other	18,740			31,560		59,820		—			110,120
Noncurrent liabilities of discontinued operations	—			—		4,720		—			4,720
Total noncurrent liabilities	751,748			1,986,215		614,255		(1,449,019		)	1,903,199
Shareholders’ equity:
Common stock	11,099			100		—		(100		)	11,099
Additional paid-in capital	420,141			45,824		349		(46,173		)	420,141
Retained earnings	4,648,346			5,556,783		244,429		(5,801,212		)	4,648,346
Accumulated other comprehensive income (loss)	(1,377		)	3,856		—		(3,856		)	(1,377		)
Treasury stock, at cost	(182,363		)	—		—		—			(182,363		)
Total shareholders’ equity	4,895,846			5,606,563		244,778		(5,851,341		)	4,895,846
Total liabilities and shareholders’ equity	$	5,738,955		$	7,803,997	$	915,758	$	(7,311,468	)	$	7,147,242

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended March 31, 2016
	Guarantor/			Issuer			Non-Guarantor					Total
	Parent			Subsidiary			Subsidiaries			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	3,543		$	510,685		$	(21,711	)	$	—	$	492,517
INVESTING ACTIVITIES:
Capital expenditures	(12,667		)	(165,291		)	(2,523		)	—		(180,481		)
Intercompany transfers	12,667			(12,667		)	—			—		—
Purchase of short-term investments	—			(21,869		)	—			—		(21,869		)
Proceeds from sale of short-term investments	—			21,676			—			—		21,676
Proceeds from asset sales	—			8,131			1,584			—		9,715
Net cash used in investing activities	—			(170,020		)	(939		)	—		(170,959		)
FINANCING ACTIVITIES:
Dividends paid	(149,300		)	—			—			—		(149,300		)
Intercompany transfers	149,300			(149,300		)	—			—		—
Debt issuance costs	—			(32		)	—			—		(32		)
Exercise of stock options, net of tax withholding	(199		)	—			—			—		(199		)
Tax withholdings related to net share settlements of restricted stock	(3,617		)	—			—			—		(3,617		)
Excess tax benefit from stock-based compensation	(789		)	964			44			—		219
Net cash provided by (used in) financing activities	(4,605		)	(148,368		)	44			—		(152,929		)
Net increase (decrease) in cash and cash equivalents	(1,062		)	192,297			(22,606		)	—		168,629
Cash and cash equivalents, beginning of period	(838		)	693,273			36,949			—		729,384
Cash and cash equivalents, end of period	$	(1,900	)	$	885,570		$	14,343		$	—	$	898,013

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended March 31, 2015, as adjusted
	Guarantor/			Issuer			Non-Guarantor					Total
	Parent			Subsidiary			Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities	$	64,996		$	730,744		$	20,828		$	—	$	816,568
INVESTING ACTIVITIES:
Capital expenditures	(11,571		)	(713,797		)	(40,661		)	—		(766,029		)
Intercompany transfers	11,571			(11,571		)	—			—		—
Proceeds from asset sales	1			14,215			939			—		15,155
Net cash provided by (used in) investing activities	1			(711,153		)	(39,722		)	—		(750,874		)
FINANCING ACTIVITIES:
Proceeds from senior notes, net of discount	—			497,125			—			—		497,125
Debt issuance costs	—			(4,334		)	—			—		(4,334		)
Net increase in bank overdraft	—			—			12,560			—		12,560
Dividends paid	(149,347		)	—			—			—		(149,347		)
Intercompany transfers	149,347			(149,347		)	—			—		—
Repurchase of common stock	(59,654		)	—			—			—		(59,654		)
Exercise of stock options, net of tax withholding	(1,079		)	—			—			—		(1,079		)
Tax withholdings related to net share settlements of restricted stock	(4,248		)	—			—			—		(4,248		)
Excess tax benefit from stock-based compensation	85			2,653			23			—		2,761
Net cash provided by (used in) financing activities	(64,896		)	346,097			12,583			—		293,784
Net increase (decrease) in cash and cash equivalents	101			365,688			(6,311		)	—		359,478
Cash and cash equivalents, beginning of period	(2,050		)	329,655			32,702			—		360,307
Cash and cash equivalents, end of period	$	(1,949	)	$	695,343		$	26,391		$	—	$	719,785