NOTE 15 BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

Description of the Business

We are a global contract drilling company based in Tulsa, Oklahoma with operations in all major U.S. onshore basins as well as South America and the Middle East. Our contract drilling operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies. We believe we are the recognized industry leader in drilling as well as technological innovation.

Effective October 1, 2018, we implemented organizational changes, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. Certain operations previously reported in “other” within our segment disclosures are now managed and presented within the new H&P Technologies reportable segment. As a result, beginning with the reporting of first quarter 2019, our operations are organized into the following reportable business segments: U.S. Land, Offshore, International Land and H&P Technologies. Certain other corporate activities and our real estate operations are included in Other. All segment disclosures have been recast for these segment changes. Consolidated revenues and expenses reflect the elimination of intercompany transactions.

Segment Performance

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.

Summarized financial information of our reportable segments for the three months ended March 31, 2019 and 2018 is shown in the following tables:


	March 31, 2019
					International		H&P
(in thousands)	U.S. Land (1)		Offshore		Land		Technologies		Other		Eliminations		Total
External Sales	$	623,935	$	34,583	$	50,808	$	8,327	$	3,215	$	—	$	720,868
Intersegment		—		—		—		1,814		232	$	(2,046)		—
Total Sales		623,935		34,583		50,808		10,141		3,447		(2,046)		720,868

Segment Operating Income (Loss)		106,139		4,531		7,968		(7,933)		1,165		—		111,870

	March 31, 2018
					International		H&P
(in thousands)	U.S. Land		Offshore		Land		Technologies (2)		Other (2)		Eliminations		Total
External Sales	$	482,729	$	32,983	$	52,459	$	6,300	$	3,013	$	—	$	577,484
Intersegment		35		—		—		—		252		(287)		—
Total Sales		482,764		32,983		52,459		6,300		3,265		(287)		577,484

Segment Operating Income (Loss)		27,075		5,449		(695)		(8,533)		1,518		—		24,814

(1)

Includes $1,731 thousand of technology related sales.

(2)

Prior period information has been recast to reflect the change in operating segments.

Summarized financial information of our reportable segments for the six months ended March 31, 2019 and 2018 is shown in the following tables:


	March 31, 2019
					International		H&P
(in thousands)	U.S. Land (1)		Offshore		Land		Technologies		Other		Eliminations		Total
External Sales	$	1,248,758	$	71,493	$	117,095	$	17,665	$	6,455	$	—	$	1,461,466
Intersegment		—		—		—		2,396		466		(2,862)		—
Total Sales		1,248,758		71,493		117,095		20,061		6,921		(2,862)		1,461,466

Segment Operating Income (Loss)		185,807		11,699		14,597		(18,277)		2,719		—		196,545

	March 31, 2018
					International		H&P
(in thousands)	U.S. Land		Offshore		Land		Technologies (2)		Other (2)		Eliminations		Total
External Sales	$	944,369	$	66,349	$	115,673	$	9,149	$	6,031	$	—	$	1,141,571
Intersegment		35		—		—		33		439		(507)		—
Total Sales		944,404		66,349		115,673		9,182		6,470		(507)		1,141,571

Segment Operating Income (Loss)		51,820		14,174		2,839		(17,348)		3,016		—		54,501

(1)

Includes $2,313 thousand of technology related sales.

(2)

Prior period information has been recast to reflect the change in operating segments.

The following table reconciles segment operating income (loss) per the tables above to income from continuing operations before income taxes as reported on the Unaudited Condensed Consolidated Statements of Operations:


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
(in thousands)			As adjusted				As adjusted
Segment operating income	$	111,870	$	24,814	$	196,545	$	54,501
Gain on sale of assets		11,546		5,255		17,090		10,820
Corporate selling, general and administrative costs and corporate depreciation		(28,270)		(31,233)		(64,200)		(62,876)
Operating income (loss) from continuing operations		95,146		(1,164)		149,435		2,445
Other income (expense)
Interest and dividend income		2,061		1,847		4,512		3,571
Interest expense		(6,167)		(6,028)		(10,888)		(11,801)
Loss on investment securities		5,878		—		(36,957)		—
Other		17		(210)		548		231
Total unallocated amounts		1,789		(4,391)		(42,785)		(7,999)
Income (loss) from continuing operations before income taxes	$	96,935	$	(5,555)	$	106,650	$	(5,554)

The following table presents total assets by reportable segment:


	March 31,		September 30,
(in thousands)	2019		2018
Total assets
U.S. Land	$	5,090,206	$	5,012,378
Offshore		94,627		105,439
International Land		318,600		362,033
H&P Technologies		153,216		146,957
Other		30,343		29,525
		5,686,992		5,656,332
Investments and corporate operations		457,570		558,535
Total assets from continuing operations		6,144,562		6,214,867
Discontinued operations		—		—
	$	6,144,562	$	6,214,867

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


	Three Months Ended				Six Months Ended
	March 31,				March 31,
(in thousands)	2019		2018		2019		2018
Operating revenues
United States	$	669,424	$	524,435	$	1,343,425	$	1,025,193
Argentina		41,084		49,800		82,689		98,629
Colombia		7,198		237		24,624		12,233
Other Foreign		3,162		3,012		10,728		5,516
Total	$	720,868	$	577,484	$	1,461,466	$	1,141,571

Refer to Note 9—Revenue from Contracts with Customers for additional information regarding the recognition of revenue upon adoption of ASC 606.