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 March 31, 2017
	Guarantor/		Issuer		Non-Guarantor				Total
	Parent		Subsidiary		Subsidiaries		Eliminations		Consolidated

Operating revenue	$	—	$	367,202	$	38,097	$	(16)	$	405,283
Operating costs and other		3,300		415,544		52,341		(230)		470,955

Operating loss from continuing operations		(3,300)		(48,342)		(14,244)		214		(65,672)

Other income (expense), net		1		1,814		(89)		(214)		1,512
Interest expense		(87)		(5,148)		(849)		—		(6,084)
Equity in net loss of subsidiaries		(46,677)		(11,118)		—		57,795		—
Loss from continuing operations before income taxes		(50,063)		(62,794)		(15,182)		57,795		(70,244)

Income tax provision		(1,245)		(17,410)		(3,116)		—		(21,771)
Loss from continuing operations		(48,818)		(45,384)		(12,066)		57,795		(48,473)

Loss from discontinued operations before income taxes		—		—		(94)		—		(94)
Income tax provision		—		—		251		—		251
Loss from discontinued operations		—		—		(345)		—		(345)

Net loss	$	(48,818)	$	(45,384)	$	(12,411)	$	57,795	$	(48,818)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)


	Three Months Ended March 31, 2017
	Guarantor/		Issuer		Non-Guarantor				Total
	Parent		Subsidiary		Subsidiaries		Eliminations		Consolidated

Net loss	$	(48,818)	$	(45,384)	$	(12,411)	$	57,795	$	(48,818)
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net		—		(10,507)		—		—		(10,507)
Minimum pension liability adjustments, net		106		260		—		—		366
Other comprehensive income (loss)		106		(10,247)		—		—		(10,141)
Comprehensive loss	$	(48,712)	$	(55,631)	$	(12,411)	$	57,795	$	(58,959)

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 (expense), 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 (loss)	$	21,311	$	21,490	$	(7,489)	$	(15,247)	$	20,065

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands)


	Six Months Ended March 31, 2017
	Guarantor/		Issuer		Guarantor				Total
	Parent		Subsidiary		Subsidiaries		Eliminations		Consolidated

Operating revenue	$	—	$	664,650	$	109,256	$	(33)	$	773,873
Operating costs and other		6,760		755,046		127,364		(461)		888,709

Operating loss from continuing operations		(6,760)		(90,396)		(18,108)		428		(114,836)

Other income, net		1		2,833		483		(428)		2,889
Interest expense		(173)		(9,857)		(1,109)		—		(11,139)
Equity in net loss of subsidiaries		(79,669)		(10,789)		—		90,458		—
Loss from continuing operations before income taxes		(86,601)		(108,209)		(18,734)		90,458		(123,086)

Income tax provision		(2,720)		(29,960)		(7,379)		—		(40,059)
Loss from continuing operations		(83,881)		(78,249)		(11,355)		90,458		(83,027)

Loss from discontinued operations before income taxes		—		—		(518)		—		(518)
Income tax provision		—		—		336		—		336
Loss from discontinued operations		—		—		(854)		—		(854)

Net loss	$	(83,881)	$	(78,249)	$	(12,209)	$	90,458	$	(83,881)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Six Months Ended March 31, 2017
	Guarantor/		Issuer		Non-Guarantor				Total
	Parent		Subsidiary		Subsidiaries		Eliminations		Consolidated

Net loss	$	(83,881)	$	(78,249)	$	(12,209)	$	90,458	$	(83,881)
Other comprehensive income, net of income taxes:
Unrealized appreciation on securities, net		—		1,905		—		—		1,905
Minimum pension liability adjustments, net		212		520		—		—		732
Other comprehensive income		212		2,425		—		—		2,637
Comprehensive loss	$	(83,669)	$	(75,824)	$	(12,209)	$	90,458	$	(81,244)

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands)


	Six Months Ended March 31, 2016
	Guarantor/		Issuer		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 (expense), net		(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 (loss) 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 BALANCE SHEETS

(in thousands)


	March 31, 2017
	Guarantor/		Issuer		Non-Guarantor				Total
	Parent		Subsidiary		Subsidiaries		Eliminations		Consolidated

ASSETS
Current assets:
Cash and cash equivalents	$	(2,681)	$	730,220	$	14,207	$	—	$	741,746
Short-term investments		—		48,012		—		—		48,012
Accounts receivable, net of reserve		2,875		316,580		27,077		(986)		345,546
Inventories		—		96,565		35,114		—		131,679
Prepaid expenses and other		10,274		2,647		60,237		(3,091)		70,067
Assets held for sale		—		—		26,801		—		26,801
Current assets of discontinued operations		—		—		36		—		36
Total current assets		10,468		1,194,024		163,472		(4,077)		1,363,887

Investments		13,668		74,631		—		—		88,299
Property, plant and equipment, net		53,472		4,666,972		340,924		—		5,061,368
Intercompany		16,284		1,577,024		267,754		(1,861,062)		—
Other assets		234		8,101		16,295		—		24,630
Investment in subsidiaries		5,506,749		197,817		—		(5,704,566)		—

Total assets	$	5,600,875	$	7,718,569	$	788,445	$	(7,569,705)	$	6,538,184

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	79,483	$	44,242	$	4,372	$	(981)	$	127,116
Accrued liabilities		13,655		137,964		25,738		(3,096)		174,261
Current liabilities of discontinued operations		—		—		40		—		40
Total current liabilities		93,138		182,206		30,150		(4,077)		301,417

Noncurrent liabilities:
Long-term debt		—		492,373		—		—		492,373
Deferred income taxes		(5,472)		1,284,083		30,183		—		1,308,794
Intercompany		1,145,078		232,586		483,298		(1,860,962)		—
Other		20,737		36,036		26,779		—		83,552
Noncurrent liabilities of discontinued operations		—		—		4,654		—		4,654
Total noncurrent liabilities		1,160,343		2,045,078		544,914		(1,860,962)		1,889,373

Shareholders’ equity:
Common stock		11,188		100		—		(100)		11,188
Additional paid-in capital		470,918		51,811		967		(52,778)		470,918
Retained earnings		4,052,974		5,431,855		212,414		(5,644,269)		4,052,974
Accumulated other comprehensive income		2,433		7,519		—		(7,519)		2,433
Treasury stock, at cost		(190,119)		—		—		—		(190,119)
Total shareholders’ equity		4,347,394		5,491,285		213,381		(5,704,666)		4,347,394

Total liabilities and shareholders’ equity	$	5,600,875	$	7,718,569	$	788,445	$	(7,569,705)	$	6,538,184

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)


	March 31, 2017
	Guarantor/		Issuer		Non-Guarantor				Total
	Parent		Subsidiary		Subsidiaries		Eliminations		Consolidated

Net cash provided by (used in) operating activities	$	(5,634)	$	144,620	$	7,373	$	—	$	146,359

INVESTING ACTIVITIES:
Capital expenditures		(1,343)		(172,338)		(1,622)		—		(175,303)
Purchase of short-term investments		—		(37,899)		—		—		(37,899)
Proceeds from sale of short-term investments		—		34,000		—		—		34,000
Intercompany transfers		1,343		(1,343)		—		—		—
Proceeds from asset sales		—		12,908		551		—		13,459
Net cash provided by (used in) investing activities		—		(164,672)		(1,071)		—		(165,743)

FINANCING ACTIVITIES:
Intercompany transfers		152,617		(152,617)		—		—		—
Dividends paid		(152,617)		—		—		—		(152,617)
Exercise of stock options, net of tax withholding		9,946		—		—		—		9,946
Tax withholdings related to net share settlements of restricted stock		(5,679)		—		—		—		(5,679)
Excess tax benefit from stock-based compensation		(359)		3,861		417		—		3,919
Net cash provided by (used in) financing activities		3,908		(148,756)		417		—		(144,431)

Net increase (decrease) in cash and cash equivalents		(1,726)		(168,808)		6,719		—		(163,815)
Cash and cash equivalents, beginning of period		(955)		899,028		7,488		—		905,561
Cash and cash equivalents, end of period	$	(2,681)	$	730,220	$	14,207	$	—	$	741,746

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)


	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)
Purchase of short-term investments		—		(21,869)		—		—		(21,869)
Proceeds from sale of short-term investments		—		21,676		—		—		21,676
Intercompany transfers		12,667		(12,667)		—		—		—
Proceeds from asset sales		—		8,131		1,584		—		9,715
Net cash used in investing activities		—		(170,020)		(939)		—		(170,959)

FINANCING ACTIVITIES:
Debt issuance costs		—		(32)		—		—		(32)
Intercompany transfers		149,300		(149,300)		—		—		—
Dividends paid		(149,300)		—		—		—		(149,300)
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