Segment Information

9 Months Ended

Jun. 30, 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 three months ended June 30, 2016 and 2015 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
June 30, 2016
Contract Drilling:
U.S. Land	285,028		$	—		$	285,028		$	25,802
Offshore	30,492		—			30,492			2,084
International Land	47,983		—			47,983			(4,991		)
	363,503		—			363,503			22,895
Other	2,983		206			3,189			(2,186		)
	366,486		206			366,692			20,709
Eliminations	—		(206		)	(206		)	—
Total	$	366,486	$	—		$	366,486		$	20,709

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
June 30, 2015, as adjusted
Contract Drilling:
U.S. Land	$	494,615	$	—		$	494,615		$	121,734
Offshore	57,071		—			57,071			14,684
International Land	106,551		—			106,551			18,999
	658,237		—			658,237			155,417
Other	3,208		204			3,412			(2,324		)
	661,445		204			661,649			153,093
Eliminations	—		(204		)	(204		)	—
Total	$	661,445	$	—		$	661,445		$	153,093

Summarized financial information of our reportable segments for the nine months ended June 30, 2016 and 2015 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
June 30, 2016
Contract Drilling:
U.S. Land	$	1,004,116	$	—		$	1,004,116		$	143,855
Offshore	106,697		—			106,697			13,105
International Land	171,529		—			171,529			(13,924		)
	1,282,342		—			1,282,342			143,036
Other	10,182		635			10,817			(4,839		)
	1,292,524		635			1,293,159			138,197
Eliminations	—		(635		)	(635		)	—
Total	$	1,292,524	$	—		$	1,292,524		$	138,197

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
June 30, 2015, as adjusted
Contract Drilling:
U.S. Land	$	2,103,125	$	—		$	2,103,125		$	664,722
Offshore	189,386		—			189,386			55,386
International Land	304,262		—			304,262			40,139
	2,596,773		—			2,596,773			760,247
Other	11,129		660			11,789			(7,440		)
	2,607,902		660			2,608,562			752,807
Eliminations	—		(660		)	(660		)	—
Total	$	2,607,902	$	—		$	2,607,902		$	752,807

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 Operations:

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2016			2015 (as adjusted)			2016			2015 (as adjusted)
	(in thousands)						(in thousands)
Segment operating income	$	20,709		$	153,093		$	138,197		$	752,807
Income from asset sales	547			1,791			7,820			8,819
Corporate general and administrative costs and corporate depreciation	(34,512		)	(19,835		)	(78,982		)	(64,880		)
Operating income (loss)	(13,256		)	135,049			67,035			696,746
Other income (expense):
Interest and dividend income	778			1,588			2,310			4,447
Interest expense	(6,407		)	(6,136		)	(16,652		)	(9,326		)
Other	534			(281		)	926			88
Total other income (expense)	(5,095		)	(4,829		)	(13,416		)	(4,791		)
Income (loss) from continuing operations before income taxes	$	(18,351	)	$	130,220		$	53,619		$	691,955

The following table presents total assets by reportable segment:

			September 30,
	June 30, 2016		2015 (as adjusted)
	(in thousands)
Total assets
U.S. Land	$	5,113,421	$	5,429,179
Offshore	108,656		118,852
International Land	493,207		565,712
Other	35,750		38,397
	5,751,034		6,152,140
Investments and corporate operations	1,225,405		987,005
Total assets from continued operations	6,976,439		7,139,145
Discontinued operations	80		8,097
	$	6,976,519	$	7,147,242

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,
	2016		2015 (as adjusted)		2016		2015 (as adjusted)
	(in thousands)				(in thousands)
Operating revenues
United States	$	318,059	$	547,043	$	1,113,542	$	2,281,961
Argentina	33,208		53,778		118,365		128,527
Colombia	3,831		13,772		15,176		60,400
Ecuador	481		6,864		4,948		26,264
Other foreign	10,907		39,988		40,493		110,750
Total	$	366,486	$	661,445	$	1,292,524	$	2,607,902