BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

6 Months Ended

Mar. 31, 2020

BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

NOTE 17 BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

Description of the Business

We are a performance-driven drilling solutions and technologies 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 March 31, 2020, 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 companies 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 March 31, 2020 and 2019 is shown in the following tables:



	Three Months Ended March 31, 2020
(in thousands)	U.S. Land			Offshore			International Land			H&P Technologies			Other		Eliminations			Total
External Sales	$	530,664		$	33,079		$	51,250		$	15,297		$	3,349	$	—		$	633,639
Intersegment	—			—			—			2,412			10,649		(13,061		)	—
Total Sales	530,664			33,079			51,250			17,709			13,998		(13,061		)	633,639

Segment Operating Income (Loss)	(309,093		)	(3,319		)	(152,469		)	(33,574		)	376		—			(498,079		)



	Three Months Ended March 31, 2019
(in thousands)	U.S. Land ₍₁₎		Offshore		International Land		H&P Technologies ₍₁₎			Other		Eliminations		Total
External Sales	$	617,533	$	34,583	$	50,808	$	14,729		$	3,215	$	—	$	720,868
Intersegment	—		—		—		—			—		—		—
Total Sales	617,533		34,583		50,808		14,729			3,215		—		720,868

Segment Operating Income (Loss)	102,015		4,531		7,968		(3,808		)	1,164		—		111,870


(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.

Summarized financial information of our reportable segments for the six months ended March 31, 2020 and 2019 is shown in the following tables:



	Six Months Ended March 31, 2020
(in thousands)	U.S. Land			Offshore		International Land			H&P Technologies			Other			Eliminations			Total
External Sales	$	1,039,492		$	73,334	$	97,712		$	31,150		$	6,608		$	—		$	1,248,296
Intersegment	—			—		—			5,111			18,545			(23,656		)	—
Total Sales	1,039,492			73,334		97,712			36,261			25,153			(23,656		)	1,248,296

Segment Operating Income (Loss)	(252,403		)	3,009		(149,354		)	(38,125		)	(705		)	—			(437,578		)



	Six Months Ended March 31, 2019
(in thousands)	U.S. Land ₍₁₎		Offshore		International Land		H&P Technologies ₍₁₎			Other		Eliminations		Total
External Sales	$	1,236,958	$	71,493	$	117,095	$	29,465		$	6,455	$	—	$	1,461,466
Intersegment	—		—		—		—			—		—		—
Total Sales	1,236,958		71,493		117,095		29,465			6,455		—		1,461,466

Segment Operating Income (Loss)	177,928		11,699		14,597		(10,397		)	2,718		—		196,545


(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 March 31,						Six Months Ended March 31,
(in thousands)	2020			2019			2020			2019
Segment operating income	$	(498,079	)	$	111,870		$	(437,578	)	$	196,545
Gain on sale of assets	10,310			11,546			14,589			17,090
Corporate selling, general and administrative costs and corporate depreciation	(30,772		)	(28,270		)	(64,184		)	(64,200		)
Operating income (loss) from continuing operations	(518,541		)	95,146			(487,173		)	149,435
Other income (expense)
Interest and dividend income	3,566			2,061			5,780			4,512
Interest expense	(6,095		)	(6,167		)	(12,195		)	(10,888		)
Gain (loss) on investment securities	(12,413		)	5,878			(9,592		)	(36,957		)
Gain on sale of subsidiary	—			—			14,963			—
Other	(398		)	17			(797		)	548
Total unallocated amounts	(15,340		)	1,789			(1,841		)	(42,785		)
Income (loss) from continuing operations before income taxes	$	(533,881	)	$	96,935		$	(489,014	)	$	106,650

The following table presents total assets by reportable segment:



(in thousands)	March 31, 2020		September 30, 2019
Total assets ₍₁₎
U.S. Land	$	4,158,450	$	5,099,583
Offshore	111,116		102,442
International Land	179,170		217,094
H&P Technologies	151,577		184,558
Other	42,503		32,532
	4,642,816		5,636,209
Investments and corporate operations	533,938		203,306
Total assets from continuing operations	5,176,754		5,839,515
Discontinued operations	—		—
	$	5,176,754	$	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 March 31,				Six Months Ended March 31,
(in thousands)	2020		2019		2020		2019
Operating revenues
United States	$	581,520	$	669,424	$	1,148,335	$	1,343,425
Argentina	29,682		41,084		70,291		82,689
Bahrain	10,383		2,526		15,067		5,054
United Arab Emirates	6,280		—		6,453		4,728
Colombia	4,905		7,198		5,901		24,624
Other Foreign	869		636		2,249		946
Total	$	633,639	$	720,868	$	1,248,296	$	1,461,466

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