BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

3 Months Ended

Dec. 31, 2019

BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

NOTE 17 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.

As of December 31, 2019, our contract drilling services business includes the following reportable operating segments: U.S. Land, Offshore, International Land and H&P Technologies. This is consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. Additionally, during the fourth quarter of fiscal year 2019, we migrated our FlexApp offerings into our H&P Technologies segment. The activity of our FlexApps was previously included in our U.S. Land segment. All segment disclosures have been restated, as practicable, for these segment changes. Our real estate operations, our incubator program for new research and development projects, and our wholly-owned captive insurance company are included in "Other". Consolidated revenues and expenses reflect the elimination of intercompany transactions.

Each reportable operating segment is a strategic business unit that is managed separately, and consolidated revenues and expenses reflect the elimination of all material intercompany transactions. Other includes additional non-reportable operating segments. External revenues included in “Other” primarily consist of rental income.

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 amortization


•	Allocated general and administrative costs


•	Asset impairment charges

but excludes gain on sale of assets and corporate selling, general and administrative costs and corporate depreciation.

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 December 31, 2019 and 2018 is shown in the following tables:



	Three Months Ended December 31, 2019
(in thousands)	U.S. Land		Offshore		International Land		H&P Technologies			Other			Eliminations			Total
External Sales	$	508,828	$	40,255	$	46,462	$	15,853		$	3,259		$	—		$	614,657
Intersegment	—		—		—		2,699			7,740			(10,439		)	—
Total Sales	508,828		40,255		46,462		18,552			10,999			(10,439		)	614,657

Segment Operating Income (Loss)	56,690		6,328		3,115		(4,551		)	(1,237		)				60,345



	Three Months Ended December 31, 2018
(in thousands)	U.S. Land ₍₁₎		Offshore		International Land		H&P Technologies ₍₁₎			Other		Eliminations		Total
External Sales	$	619,425	$	36,910	$	66,287	$	14,736		$	3,240	$	—	$	740,598
Intersegment	—		—		—		—			—		—		—
Total Sales	619,425		36,910		66,287		14,736			3,240		—		740,598

Segment Operating Income (Loss)	75,748		7,168		6,630		(6,381		)	1,554		—		84,719


(1)	Prior period information has been restated to reflect the transfer of FlexApp revenue and the related costs from U.S. Land to H&P Technologies. Certain FlexApp revenue not separately priced in drilling contracts, and recorded in the U.S. Land segment, was impracticable to retrospectively quantify, and as such was not restated.

The following table reconciles segment operating income 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 December 31,
(in thousands)	2019			2018
Segment operating income	$	60,345		$	84,719
Gain on sale of assets	4,279			5,545
Corporate selling, general and administrative costs and corporate depreciation	(33,256		)	(35,975		)
Operating income from continuing operations	31,368			54,289
Other income (expense)
Interest and dividend income	2,214			2,450
Interest expense	(6,100		)	(4,720		)
Gain (loss) on investment securities	2,821			(42,844		)
Gain on sale of subsidiary	14,963			—
Other	(399		)	541
Total unallocated amounts	13,499			(44,573		)
Income from continuing operations before income taxes	$	44,867		$	9,716

The following table presents total assets by reportable segment:



(in thousands)	December 31, 2019		September 30, 2019
Total assets ₍₁₎
U.S. Land	$	4,601,633	$	5,099,583
Offshore	109,564		102,442
International Land	353,681		217,094
H&P Technologies	189,371		184,558
Other	31,723		32,532
	5,285,972		5,636,209
Investments and corporate operations	555,538		203,306
Total assets from continuing operations	5,841,510		5,839,515
Discontinued operations	—		—
	$	5,841,510	$	5,839,515


(1)	Assets by segment exclude investments in subsidiaries and intersegment activity.

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



	Three Months Ended December 31,
(in thousands)	2019		2018
Operating revenues
United States	$	566,815	$	674,001
Argentina	40,609		41,605
Bahrain	4,684		2,528
Colombia	996		17,426
Other Foreign	1,553		5,038
Total	$	614,657	$	740,598

Refer to Note 11—Revenue from Contracts with Customers for additional information regarding the recognition of revenue upon adoption of ASC 606.