16.Guarantor and Non-Guarantor Financial Information

In March 2015, Helmerich & Payne International Drilling Co. (“the issuer”), a 100 percent 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 in accordance with the Securities and Exchange Commission disclosure requirements. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements. Condensed consolidating financial information for the issuer, Helmerich & Payne International Drilling Co., and parent, guarantor, Helmerich & Payne, Inc. is shown in the tables below.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands)

	Three Months Ended December 31, 2016
	Guarantor/			Issuer			Non-Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated

Operating revenue	$	—		$	297,448		$	71,159		$	(17	)	$	368,590
Operating costs and other	3,460			339,502			75,023			(231		)	417,754

Operating income (loss) from continuing operations	(3,460		)	(42,054		)	(3,864		)	214			(49,164		)

Other income, net	—			1,019			572			(214		)	1,377
Interest expense	(86		)	(4,709		)	(260		)	—			(5,055		)
Equity in net income (loss) of subsidiaries	(32,992		)	329			—			32,663			—


Income (loss) from continuing operations before income taxes	(36,538		)	(45,415		)	(3,552		)	32,663			(52,842		)
Income tax provision	(1,475		)	(12,550		)	(4,263		)	—			(18,288		)

Income (loss) from continuing operations	(35,063		)	(32,865		)	711			32,663			(34,554		)

Income (loss) from discontinued operations before income taxes	—			—			(424		)	—			(424		)
Income tax provision	—			—			85			—			85

Loss from discontinued operations	—			—			(509		)	—			(509		)


Net income (loss)	$	(35,063	)	$	(32,865	)	$	202		$	32,663		$	(35,063	)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Three Months Ended December 31, 2016
	Guarantor/			Issuer			Non- Guarantor				Total
	Parent			Subsidiary			Subsidiaries		Eliminations		Consolidated

Net income (loss)	$	(35,063	)	$	(32,865	)	$	202	$	32,663	$	(35,063	)
Other comprehensive income (loss), net of income taxes:
Unrealized (appreciation) depreciation on securities, net	—			12,412			—		—		12,412
Minimum pension liability adjustments, net	106			260			—		—		366

Other comprehensive income (loss)	106			12,672			—		—		12,778

Comprehensive income (loss)	$	(34,957	)	$	(20,193	)	$	202	$	32,663	$	(22,285	)

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands)

	Three Months Ended December 31, 2015
	Guarantor/			Issuer			Non- Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated

Operating revenue	$	—		$	405,537		$	82,327		$	(17	)	$	487,847
Operating costs and other	2,705			356,751			90,122			(401		)	449,177

Operating income (loss) from continuing operations	(2,705		)	48,786			(7,795		)	384			38,670

Other income, net	20			656			180			(384		)	472
Interest expense	(62		)	(4,718		)	256			—			(4,524		)
Equity in net income (loss) of subsidiaries	17,549			(8,197		)	—			(9,352		)	—

Income (loss) from continuing operations before income taxes	14,802			36,527			(7,359		)	(9,352		)	34,618
Income tax provision	(1,200		)	19,227			693			—			18,720

Income (loss) from continuing operations	16,002			17,300			(8,052		)	(9,352		)	15,898

Income from discontinued operations before income taxes	—			—			104			—			104
Income tax provision	—			—			—			—			—

Income from discontinued operations	—			—			104			—			104


Net income (loss)	$	16,002		$	17,300		$	(7,948	)	$	(9,352	)	$	16,002

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended December 31, 2015
	Guarantor/		Issuer			Non-Guarantor						Total
	Parent		Subsidiary			Subsidiaries			Eliminations			Consolidated

Net income (loss)	$	16,002	$	17,300		$	(7,948	)	$	(9,352	)	$	16,002
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net	—		(11,010		)	—			—			(11,010		)
Minimum pension liability adjustments, net	107		206			—			—			313

Other comprehensive income (loss)	107		(10,804		)	—			—			(10,697		)

Comprehensive income (loss)	$	16,109	$	6,496		$	(7,948	)	$	(9,352	)	$	5,305

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

	December 31, 2016
	Guarantor/			Issuer		Non-Guarantor					Total
	Parent			Subsidiary		Subsidiaries		Eliminations			Consolidated

ASSETS
Current assets:
Cash and cash equivalents	$	8,722		$	811,046	$	6,125	$	—		$	825,893
Short-term investments	—			45,263		—		—			45,263
Accounts receivable, net of reserve	3,392			285,285		39,373		(1,279		)	326,771
Inventories	—			90,061		36,021		—			126,082
Prepaid expenses and other	12,019			10,422		53,770		(285		)	75,926
Assets held for sale	—			18,452		26,845		—			45,297
Current assets of discontinued operations	—			—		51		—			51

Total current assets	24,133			1,260,529		162,185		(1,564		)	1,445,283

Investments	13,411			91,766		—		—			105,177
Property, plant and equipment, net	56,028			4,691,273		355,378		—			5,102,679
Intercompany	16,161			1,495,780		260,554		(1,772,495		)	—
Other assets	234			6,814		17,450		—			24,498
Investment in subsidiaries	5,563,500			208,864		—		(5,772,364		)	—


Total assets	$	5,673,467		$	7,755,026	$	795,567	$	(7,546,423	)	$	6,677,637


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	79,896		$	26,861	$	6,155	$	(1,274	)	$	111,638
Accrued liabilities	19,660			126,784		28,767		(291		)	174,920
Current liabilities of discontinued operations	—			—		70		—			70

Total current liabilities	99,556			153,645		34,992		(1,565		)	286,628

Noncurrent liabilities:
Long-term debt	—			492,110		—		—			492,110
Deferred income taxes	(4,081		)	1,308,141		28,209		—			1,332,269
Intercompany	1,081,580			215,050		475,765		(1,772,395		)	—
Other	20,497			39,335		26,527		—			86,359
Noncurrent liabilities of discontinued operations	—			—		4,356		—			4,356

Total noncurrent liabilities	1,097,996			2,054,636		534,857		(1,772,395		)	1,915,094

Shareholders’ equity:
Common stock	11,188			100		—		(100		)	11,188
Additional paid-in capital	463,859			51,638		954		(52,592		)	463,859
Retained earnings	4,178,235			5,477,241		224,764		(5,702,005		)	4,178,235
Accumulated other comprehensive loss	12,574			17,766		—		(17,766		)	12,574
Treasury stock, at cost	(189,941		)	—		—		—			(189,941		)

Total shareholders’ equity	4,475,915			5,546,745		225,718		(5,772,463		)	4,475,915

Total liabilities and shareholders’ equity	$	5,673,467		$	7,755,026	$	795,567	$	(7,546,423	)	$	6,677,637

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

	September 30, 2016
	Guarantor/			Issuer		Non-Guarantor					Total
	Parent			Subsidiary		Subsidiaries		Eliminations			Consolidated

ASSETS
Current assets:
Cash and cash equivalents	$	(955	)	$	899,028	$	7,488	$	—		$	905,561
Short-term investments	—			44,148		—		—			44,148
Accounts receivable, net of reserve	2			325,325		51,121		(1,279		)	375,169
Inventories	—			87,946		36,379		—			124,325
Prepaid expenses and other	6,928			20,625		71,753		(21,239		)	78,067
Assets held for sale	—			18,471		26,881		—			45,352
Current assets of discontinued operations	—			—		64		—			64

Total current assets	5,975			1,395,543		193,686		(22,518		)	1,572,686

Investments	13,431			71,524		—		—			84,955
Property, plant and equipment, net	59,173			4,716,736		368,824		—			5,144,733
Intercompany	16,147			1,399,323		260,939		(1,676,409		)	—
Other assets	233			267		29,145		—			29,645
Investment in subsidiaries	5,579,713			208,118		—		(5,787,831		)	—


Total assets	$	5,674,672		$	7,791,511	$	852,594	$	(7,486,758	)	$	6,832,019


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	80,000		$	10,868	$	5,828	$	(1,274	)	$	95,422
Accrued liabilities	1,822			176,985		35,598		20,234			234,639
Current liabilities of discontinued operations	—			—		59		—			59

Total current liabilities	81,822			187,853		41,485		18,960			330,120

Noncurrent liabilities:
Long-term debt	—			491,847		—		—			491,847
Deferred income taxes	(5,930		)	1,303,324		45,062		—			1,342,456
Intercompany	1,016,673			209,276		491,838		(1,717,787		)	—
Other	21,182			36,379		45,220		—			102,781
Noncurrent liabilities of discontinued operations	—			—		3,890		—			3,890

Total noncurrent liabilities	1,031,925			2,040,826		586,010		(1,717,787		)	1,940,974

Shareholders’ equity:
Common stock	11,140			100		—		(100		)	11,140
Additional paid-in capital	448,452			47,533		549		(48,082		)	448,452
Retained earnings	4,289,807			5,510,105		224,550		(5,734,655		)	4,289,807
Accumulated other comprehensive income (loss)	(204		)	5,094		—		(5,094		)	(204		)
Treasury stock, at cost	(188,270		)	—		—		—			(188,270		)

Total shareholders’ equity	4,560,925			5,562,832		225,099		(5,787,931		)	4,560,925

Total liabilities and shareholders’ equity	$	5,674,672		$	7,791,511	$	852,594	$	(7,486,758	)	$	6,832,019

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended December 31, 2016
	Guarantor/			Issuer			Non-Guarantor					Total
	Parent			Subsidiary			Subsidiaries			Eliminations		Consolidated

Net cash provided by (used in) operating activities	$	5,900		$	65,679		$	(911	)	$	—	$	70,668


INVESTING ACTIVITIES:
Capital expenditures	(607		)	(80,556		)	(964		)	—		(82,127		)
Purchase of short-term investments	—			(15,025		)	—			—		(15,025		)
Proceeds from sales of short-term investments	—			13,900			—			—		13,900
Intercompany transfers	607			(607		)	—			—		—
Proceeds from asset sales	—			1,102			107			—		1,209

Net cash used in investing activities	—			(81,186		)	(857		)	—		(82,043		)


FINANCING ACTIVITIES:
Intercompany transfers	76,176			(76,176		)	—			—		—
Dividends paid	(76,176		)	—			—			—		(76,176		)
Exercise of stock options, net of tax withholding	9,827			—			—			—		9,827
Tax withholdings related to net share settlements of restricted stock	(5,647		)	—			—			—		(5,647		)
Excess tax benefit from stock-based compensation	(403		)	3,701			405			—		3,703

Net cash provided by (used in) financing activities	3,777			(72,475		)	405			—		(68,293		)

Net increase (decrease) in cash and cash equivalents	9,677			(87,982		)	(1,363		)	—		(79,668		)
Cash and cash equivalents, beginning of period	(955		)	899,028			7,488			—		905,561

Cash and cash equivalents, end of period	$	8,722		$	811,046		$	6,125		$	—	$	825,893

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended December 31, 2015
	Guarantor/			Issuer			Non-Guarantor					Total
	Parent			Subsidiary			Subsidiaries			Eliminations		Consolidated

Net cash provided by (used in) operating activities	$	4,381		$	307,138		$	(3,323	)	$	—	$	308,196


INVESTING ACTIVITIES:
Capital expenditures	(9,085		)	(103,510		)	(1,875		)	—		(114,470		)
Intercompany transfers	9,085			(9,085		)	—			—		—
Purchase of short-term investments	—			(6,918		)	—			—		(6,918		)
Proceeds from sales of short-term investments	—			4,600			—			—		4,600
Proceeds from asset sales	—			5,241			817			—		6,058

Net cash used in investing activities	—			(109,672		)	(1,058		)	—		(110,730		)


FINANCING ACTIVITIES:
Dividends paid	(74,560		)	—			—			—		(74,560		)
Intercompany transfers	74,560			(74,560		)	—			—		—
Debt issuance costs	—			(32		)	—			—		(32		)
Exercise of stock options, net of tax withholding	(59		)	—			—			—		(59		)
Tax withholdings related to net share settlements of restricted stock	(3,617		)	—			—			—		(3,617		)
Excess tax benefit from stock-based compensation	(572		)	195			25			—		(352		)

Net cash provided by (used in) financing activities	(4,248		)	(74,397		)	25			—		(78,620		)

Net increase (decrease) in cash and cash equivalents	133			123,069			(4,356		)	—		118,846
Cash and cash equivalents, beginning of period	(838		)	693,273			36,949			—		729,384

Cash and cash equivalents, end of period	$	(705	)	$	816,342		$	32,593		$	—	$	848,230