Segment Information

3 Months Ended

Dec. 31, 2016

Segment Information

Segment Information

11.Segment Information

We operate principally in the contract drilling industry. The contract drilling operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies.  Our contract drilling business includes the following reportable operating segments: U.S. Land, Offshore and International Land.  Each reportable operating segment is a strategic business unit that is managed separately.  Our primary international areas of operation include Colombia, Ecuador, Argentina, Bahrain, U.A.E. and other South American and Middle Eastern 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 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, 2016 and 2015 is shown in the following tables:

									Segment
	External		Inter-			Total			Operating
(in thousands)	Sales		Segment			Sales			Income (Loss)
December 31, 2016
Contract Drilling:
U.S. Land	263,636		$	—		$	263,636		$	(30,888	)
Offshore	33,812		—			33,812			6,784
International Land	68,031		—			68,031			825
	365,479		—			365,479			(23,279		)
Other	3,111		208			3,319			(2,049		)
	368,590		208			368,798			(25,328		)
Eliminations	—		(208		)	(208		)	—
Total	$	368,590	$	—		$	368,590		$	(25,328	)

									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

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
	December 31,
	2016			2015
	(in thousands)
Segment operating income (loss)	$	(25,328	)	$	55,285
Income from asset sales	842			4,589
Corporate general and administrative costs and corporate depreciation	(24,678		)	(21,204		)
Operating income (loss)	(49,164		)	38,670
Other income (expense):
Interest and dividend income	990			733
Interest expense	(5,055		)	(4,524		)
Other	387			(261		)
Total other income (expense)	(3,678		)	(4,052		)
Income (loss) from continuing operations before income taxes	$	(52,842	)	$	34,618

The following table presents total assets by reportable segment:

	December 31, 2016		September 30, 2016
	(in thousands)
Total assets
U.S. Land	$	4,933,281	$	5,005,299
Offshore	106,860		105,152
International Land	457,566		487,181
Other	36,408		36,141
	5,534,115		5,633,773
Investments and corporate operations	1,143,471		1,198,182
Total assets from continued operations	6,677,586		6,831,955
Discontinued operations	51		64
	$	6,677,637	$	6,832,019

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

	Three Months Ended
	December 31,
	2016		2015
	(in thousands)
Operating revenues
United States	$	300,559	$	409,506
Argentina	48,082		49,786
Colombia	9,371		6,743
Ecuador	1		3,940
Other foreign	10,577		17,872
Total	$	368,590	$	487,847