UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For quarterly period ended: June 30, 2009 |
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OR |
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-4221
HELMERICH & PAYNE, INC.
(Exact name of registrant as specified in its charter)
Delaware |
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73-0679879 |
(State or other jurisdiction of |
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(I.R.S. Employer I.D. Number) |
incorporation or organization) |
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(Address of principal executive office)(Zip Code)
(918) 742-5531
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of large accelerated filer, accelerated filer and small reporting company in Rule 12b-2 of the Exchange Act.:
Large accelerated filer x |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
CLASS |
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OUTSTANDING AT July 31, 2009 |
Common Stock, $0.10 par value |
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105,454,592 |
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
2
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
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June 30, |
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September 30, |
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2009 |
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2008 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
141,705 |
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$ |
121,513 |
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Short-term investments |
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12,500 |
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Accounts receivable, less reserve of $711 at June 30, 2009 and $1,331 at September 30, 2008 |
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319,827 |
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462,833 |
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Inventories |
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45,685 |
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33,098 |
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Deferred income taxes |
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8,250 |
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21,939 |
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Prepaid expenses and other |
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64,107 |
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51,264 |
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Total current assets |
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592,074 |
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690,647 |
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Investments |
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267,554 |
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199,266 |
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Property, plant and equipment, net |
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3,209,344 |
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2,682,251 |
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Other assets |
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10,882 |
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15,881 |
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Total assets |
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$ |
4,079,854 |
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$ |
3,588,045 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
110,640 |
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$ |
153,851 |
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Accrued liabilities |
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118,152 |
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128,373 |
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Short-term debt |
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105,000 |
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Notes payable |
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1,733 |
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Long-term debt due within one year |
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25,000 |
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25,000 |
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Total current liabilities |
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358,792 |
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308,957 |
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Noncurrent liabilities: |
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Long-term debt |
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430,000 |
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475,000 |
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Deferred income taxes |
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647,975 |
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479,963 |
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Other |
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49,145 |
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58,651 |
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Total noncurrent liabilities |
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1,127,120 |
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1,013,614 |
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Shareholders equity: |
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Common stock, $.10 par value, 160,000,000 shares authorized, 107,057,904 shares issued |
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10,706 |
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10,706 |
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Preferred stock, no par value, 1,000,000 shares authorized, no shares issued |
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Additional paid-in capital |
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174,008 |
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169,497 |
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Retained earnings |
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2,368,737 |
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2,082,518 |
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Accumulated other comprehensive income |
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72,247 |
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38,407 |
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Treasury stock, at cost |
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(31,756 |
) |
(35,654 |
) |
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Total shareholders equity |
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2,593,942 |
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2,265,474 |
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Total liabilities and shareholders equity |
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$ |
4,079,854 |
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$ |
3,588,045 |
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The accompanying notes are an integral part of these statements.
3
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
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Three Months Ended |
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Nine Months Ended |
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June 30, |
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June 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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Operating revenues: |
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Drilling U.S. Land |
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$ |
282,358 |
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$ |
391,755 |
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$ |
1,172,076 |
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$ |
1,104,662 |
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Drilling Offshore |
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55,605 |
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47,298 |
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157,424 |
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104,368 |
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Drilling International Land |
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47,290 |
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80,585 |
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194,297 |
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234,944 |
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Other |
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2,514 |
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2,879 |
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8,024 |
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8,850 |
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387,767 |
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522,517 |
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1,531,821 |
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1,452,824 |
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Operating costs and other: |
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Operating costs, excluding depreciation |
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220,339 |
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274,168 |
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814,561 |
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763,921 |
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Depreciation |
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61,043 |
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51,210 |
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172,928 |
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147,066 |
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General and administrative |
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14,225 |
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14,723 |
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45,807 |
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42,716 |
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Research and development |
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2,777 |
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522 |
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6,630 |
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522 |
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Acquired in-process research and development |
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11,129 |
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11,129 |
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Gain from involuntary conversion of long-lived assets |
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(264 |
) |
(5,426 |
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(541 |
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(10,236 |
) |
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Income from asset sales |
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(1,785 |
) |
(1,616 |
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(4,754 |
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(4,404 |
) |
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296,335 |
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344,710 |
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1,034,631 |
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950,714 |
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Operating income |
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91,432 |
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177,807 |
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497,190 |
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502,110 |
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Other income (expense): |
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Interest and dividend income |
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542 |
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1,034 |
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4,478 |
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3,369 |
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Interest expense |
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(2,793 |
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(4,651 |
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(9,047 |
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(14,255 |
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Gain on sale of investment securities |
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16,388 |
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21,994 |
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Other |
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514 |
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66 |
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614 |
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(370 |
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(1,737 |
) |
12,837 |
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(3,955 |
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10,738 |
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Income before income taxes and equity in income of affiliate |
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89,695 |
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190,644 |
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493,235 |
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512,848 |
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Income tax provision |
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36,651 |
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70,187 |
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201,289 |
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189,117 |
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Equity in income of affiliate net of income taxes |
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4,912 |
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10,111 |
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11,522 |
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NET INCOME |
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$ |
53,044 |
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$ |
125,369 |
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$ |
302,057 |
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$ |
335,253 |
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Earnings per common share: |
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Basic |
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$ |
.50 |
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$ |
1.20 |
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$ |
2.87 |
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$ |
3.22 |
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Diluted |
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$ |
.50 |
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$ |
1.18 |
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$ |
2.84 |
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$ |
3.16 |
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Weighted average shares outstanding: |
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Basic |
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105,425 |
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104,530 |
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105,330 |
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103,973 |
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Diluted |
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106,829 |
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106,689 |
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106,544 |
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106,130 |
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Dividends declared per common share |
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$ |
0.050 |
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$ |
0.050 |
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$ |
0.150 |
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$ |
0.140 |
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The accompanying notes are an integral part of these statements.
4
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
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Nine Months Ended |
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June 30, |
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2009 |
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2008 |
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OPERATING ACTIVITIES: |
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Net income |
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$ |
302,057 |
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$ |
335,253 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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|
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Depreciation |
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172,928 |
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147,066 |
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Provision for bad debt |
|
580 |
|
696 |
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Equity in income of affiliate before income taxes |
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(16,308 |
) |
(18,584 |
) |
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Stock-based compensation |
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6,292 |
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5,610 |
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Gain on sale of investment securities |
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|
|
(21,864 |
) |
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Gain from involuntary conversion of long-lived assets |
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(541 |
) |
(10,236 |
) |
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Income from asset sales |
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(4,754 |
) |
(4,404 |
) |
||
Acquired in-process research and development |
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|
11,129 |
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Other |
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(1 |
) |
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Deferred income tax expense |
|
153,997 |
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66,593 |
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Change in assets and liabilities- |
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|
|
|
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Accounts receivable |
|
142,426 |
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(61,787 |
) |
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Inventories |
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(12,587 |
) |
(2,735 |
) |
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Prepaid expenses and other |
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(7,882 |
) |
(31,594 |
) |
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Accounts payable |
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(15,720 |
) |
(974 |
) |
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Accrued liabilities |
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(9,834 |
) |
13,120 |
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Deferred income taxes |
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6,514 |
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7,774 |
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Other noncurrent liabilities |
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(6,625 |
) |
8,526 |
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Net cash provided by operating activities |
|
710,543 |
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443,588 |
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INVESTING ACTIVITIES: |
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Capital expenditures |
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(738,411 |
) |
(509,018 |
) |
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Acquisition of business, net of cash acquired |
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(16 |
) |
(12,024 |
) |
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Insurance proceeds from involuntary conversion |
|
541 |
|
13,926 |
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Proceeds from sale of investments |
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|
25,507 |
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Proceeds from asset sales |
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6,706 |
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6,077 |
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Purchase of short-term investments |
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(12,500 |
) |
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Net cash used in investing activities |
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(743,680 |
) |
(475,532 |
) |
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FINANCING ACTIVITIES: |
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Increase (decrease) in notes payable |
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(1,733 |
) |
2,259 |
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||
Proceeds from lines of credit |
|
3,185,000 |
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2,630,000 |
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Payments on lines of credit |
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(3,125,000 |
) |
(2,620,000 |
) |
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Increase in bank overdraft |
|
8,992 |
|
4,465 |
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||
Dividends paid |
|
(15,829 |
) |
(14,060 |
) |
||
Proceeds from exercise of stock options |
|
710 |
|
14,267 |
|
||
Excess tax benefit from stock-based compensation |
|
1,189 |
|
24,816 |
|
||
Net cash provided by financing activities |
|
53,329 |
|
41,747 |
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||
|
|
|
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Net increase in cash and cash equivalents |
|
20,192 |
|
9,803 |
|
||
Cash and cash equivalents, beginning of period |
|
121,513 |
|
89,215 |
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Cash and cash equivalents, end of period |
|
$ |
141,705 |
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$ |
99,018 |
|
The accompanying notes are an integral part of these statements.
5
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS EQUITY
NINE MONTHS ENDED JUNE 30, 2009
(Unaudited)
(in thousands, except per share amounts)
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Accumulated |
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Additional |
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Other |
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Total |
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||||||
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Common Stock |
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Paid-In |
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Retained |
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Comprehensive |
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Treasury Stock |
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Shareholders |
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||||||||||
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Shares |
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Amount |
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Capital |
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Earnings |
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Income |
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Shares |
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Amount |
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Equity |
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||||||
Balance, September 30, 2008 |
|
107,058 |
|
$ |
10,706 |
|
$ |
169,497 |
|
$ |
2,082,518 |
|
$ |
38,407 |
|
1,835 |
|
$ |
(35,654 |
) |
$ |
2,265,474 |
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
||||||
Comprehensive Income: |
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|
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|
|
|
|
|
|
|
|
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|
||||||
Net income |
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|
|
|
|
|
|
302,057 |
|
|
|
|
|
|
|
302,057 |
|
||||||
Other comprehensive income, Unrealized gains on available-for-sale securities (net of $20,741 income tax) |
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|
|
|
|
|
|
|
|
33,840 |
|
|
|
|
|
33,840 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
335,897 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital adjustment of equity investee |
|
|
|
|
|
174 |
|
|
|
|
|
|
|
|
|
174 |
|
||||||
Cash dividends ($0.15 per share) |
|
|
|
|
|
|
|
(15,838 |
) |
|
|
|
|
|
|
(15,838 |
) |
||||||
Exercise of stock options |
|
|
|
|
|
(1,913 |
) |
|
|
|
|
(166 |
) |
2,623 |
|
710 |
|
||||||
Tax benefit of stock-based awards, including excess tax benefits of $1,199 |
|
|
|
|
|
1,233 |
|
|
|
|
|
|
|
|
|
1,233 |
|
||||||
Treasury stock issued for vested restricted stock |
|
|
|
|
|
(1,275 |
) |
|
|
|
|
(66 |
) |
1,275 |
|
|
|
||||||
Stock-based compensation |
|
|
|
|
|
6,292 |
|
|
|
|
|
|
|
|
|
6,292 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance, June 30, 2009 |
|
107,058 |
|
$ |
10,706 |
|
$ |
174,008 |
|
$ |
2,368,737 |
|
$ |
72,247 |
|
1,603 |
|
$ |
(31,756 |
) |
$ |
2,593,942 |
|
The accompanying notes are an integral part of these statements.
6
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable rules and regulations of the Securities and Exchange Commission (the Commission) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements and, therefore should be read in conjunction with the consolidated financial statements and notes thereto in the Companys 2008 Annual Report on Form 10-K and other current filings with the Commission. In the opinion of management, all adjustments, consisting of those of a normal recurring nature, necessary to present fairly the results of the periods presented have been included. The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year.
As more fully described in the Companys 2008 Annual Report on Form 10-K, the Companys contract drilling revenues are comprised of daywork drilling contracts for which the related revenues and expenses are recognized as services are performed. For contracts that are terminated by customers prior to the expirations of their fixed term, contractual provisions customarily require early termination amounts to be paid to the Company. Revenues from early terminated contracts are recognized when all contractual requirements have been met.
2. Earnings per Share
Basic earnings per share is based on the weighted-average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of stock options and restricted stock.
A reconciliation of the weighted-average common shares outstanding on a basic and diluted basis is as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||
|
|
June 30, |
|
June 30, |
|
||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares |
|
105,425 |
|
104,530 |
|
105,330 |
|
103,973 |
|
Effect of dilutive shares: |
|
|
|
|
|
|
|
|
|
Stock options and restricted stock |
|
1,404 |
|
2,159 |
|
1,214 |
|
2,157 |
|
Diluted weighted average shares |
|
106,829 |
|
106,689 |
|
106,544 |
|
106,130 |
|
7
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The following shares attributable to outstanding equity awards were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||
|
|
June 30, |
|
June 30, |
|
||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
Shares excluded from calculation of diluted earnings per share |
|
718 |
|
|
|
1,215 |
|
|
|
3. Operations and Risks in Venezuela
Typically, contract drilling revenues are recognized as services are performed. In U.S. generally accepted accounting principles, one of the basic revenue recognition criteria is that collectability of the revenue is reasonably assured. The Companys revenue in Venezuela is from providing drilling services to Petroleos de Venezuela, S.A. (PDVSA), the Venezuelan state-owned petroleum company. The Company determined, as of the beginning of the second quarter of fiscal 2009 and forward, the revenue recognition criteria in Venezuela is no longer met as collectability of revenue is not reasonably assured, primarily due to the uncertainty of the timing of collectability as discussed further below. As a result of this change, $19.7 million and $55.3 million of revenue was not recorded in the International Land segment in the three and nine months ended June 30, 2009 respectively. As of June 30, 2009 the Consolidated Balance Sheet reflected accounts receivable from PDVSA of $76.7 million. During the third quarter of fiscal 2009, approximately $13.0 million (U.S. dollars and U.S. currency equivalent) was collected from PDVSA of which approximately $8.8 million was applicable to the accounts receivable. Additionally, subsequent to the end of the third fiscal quarter, additional payments of approximately $43.0 million (U.S. currency equivalent) were received through July 31, 2009 of which approximately $41.5 million was applicable to the June 30, 2009 accounts receivable balance. The Company does not have enough information to conclude that the remaining receivable balance is not probable of collection. However, there is uncertainty regarding the timing of the collection due to the current political, economic and social instability in Venezuela, the dependence by Venezuela on oil to largely support its economy and the failure of PDVSA to pay many service companies working in Venezuela. The collection of receivables from PDVSA has historically been more difficult and slower than that of other customers in international countries in which the Company has drilling operations due to PDVSA policies and procedures.
The Company is also exposed to risks of currency devaluation in Venezuela primarily as a result of bolivar fuerte (Bsf) receivable and Bsf cash balances.
The Company has made applications with the Venezuelan government requesting the approval to convert bolivar fuerte cash balances to U.S. dollars. Upon approval from the Venezuelan government, the Companys Venezuelan subsidiary may remit approximately $28.4 million as a dividend to its U.S. based parent as cash balances permit. While the Company has been successful in the past in obtaining government approval for conversion of bolivar fuerte to U.S. dollars, there is no guarantee that future conversion to U.S. dollars will be permitted. In the event that conversion to U.S. dollars would be prohibited, then bolivar fuerte cash balances would increase and expose the Company to increased risk of devaluation.
In addition to the accounts receivable discussed above, the Venezuelan subsidiary has received notification from PDVSA that reimbursement of U.S. dollar invoices previously paid in Bsf will be made only when supporting documentation has been approved. The supporting documentation has been delivered to PDVSA and is awaiting approval. The approval and subsequent payment would result in reducing the foreign currency exposure by approximately $38.6 million. The Company is unable to determine when payment will be received.
Past devaluation losses may not be reflective of the potential for future devaluation losses. Venezuela continues to operate under exchange controls and the Venezuelan bolivar fuerte exchange rate has remained fixed at Bsf 2.150 to
8
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
one U.S. dollar since March 2005. The exact amount and timing of any future devaluations of the Venezuelan bolivar fuerte exchange rate is uncertain. At June 30, 2009, the Company had the equivalent of $16.0 million in cash in Bsfs exposed to the risk of currency devaluation.
While the Company is unable to predict the potential magnitude and timing of future devaluation in Venezuela, if current activity levels continue and if a 10 percent to 30 percent devaluation were to occur, the Company could experience potential currency devaluation losses ranging from approximately $4.9 million to $12.2 million.
During the second quarter of fiscal 2009, the Company began discontinuing work for PDVSA as contracts expired. All of the Companys eleven rigs were active in Venezuela during the first quarter of fiscal 2009. At the end of the third quarter of fiscal 2009, only three of the rigs were active. The Company will continue to idle rigs along with other efforts until satisfactory payments for services rendered are received. At July 31, 2009, one additional rig had been idled and if satisfactory payments are not received, it is likely that the remaining two rigs will become idle by the end of September 2009. At June 30, 2009, the net book value of long-lived assets in Venezuela was $74.3 million.
Readers should refer to Note 16 of these Consolidated Condensed Financial Statements for additional information related to risk factors in international operations.
4. Inventories
Inventories consist primarily of replacement parts and supplies held for use in the Companys drilling operations.
5. Financial Instruments
The Company had $175 million of fixed-rate long-term debt outstanding at June 30, 2009, which had an estimated fair value of $201 million. The debt was valued based on the prices of similar securities with similar terms and credit ratings. The Company used the expertise of an outside investment banking firm to assist with the estimate of the fair value of the long-term debt. The Companys line of credit bears interest at market rates and the cost of borrowings, if any, would approximate fair value. The Company has an interest rate swap agreement with a $105 million notional. The fair value of the interest rate swap liability at June 30, 2009 was $0.3 million. The fair value is based on the present value of expected future cash flows, inclusive of the risk of nonperformance, using a discount rate appropriate for the duration. For further information regarding debt and the interest swap, refer to Note 11 of these consolidated condensed financial statements.
Effective April 1, 2009, Atwood Oceanics, Inc. (Atwood) was accounted for as an available-for-sale investment, as the Company determined it no longer exercised significant influence and discontinued accounting for Atwood using the equity method. Mark-to-market gains or losses are now deferred as a component of other comprehensive income.
The estimated fair value of the Companys available-for-sale securities is primarily based on market quotes. The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting, investments in limited partnerships carried at cost and assets held in a Non-qualified Supplemental Savings Plan:
9
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
Gross |
|
Gross |
|
Estimated |
|
||||
|
|
|
|
Unrealized |
|
Unrealized |
|
Fair |
|
||||
|
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
||||
|
|
(in thousands) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||
Equity securities 06/30/09 |
|
$ |
129,183 |
|
$ |
122,448 |
|
$ |
|
|
$ |
251,631 |
|
Equity securities 09/30/08 |
|
$ |
7,685 |
|
$ |
67,867 |
|
$ |
|
|
$ |
75,552 |
|
On an on-going basis, the Company evaluates the marketable equity securities to determine if a decline in fair market is other-than-temporary. If a decline in fair market value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis established. In determining if an unrealized loss is other than temporary, the Company considers how long the market value of the investment has been below cost, how significant the decline in value is as a percentage of the original cost and the market in general and analyst recommendations.
The cost of securities used in determining realized gains and losses is based on the average cost basis of the security sold. During the nine months ended June 30, 2008, marketable equity available-for-sale securities with a fair value at the date of sale of $25.5 million were sold with gross realized gains of $22.0 million. There have been no sales of available-for-sale securities during the nine months ended June 30, 2009.
The investments in the limited partnerships carried at cost were approximately $12.4 million at June 30, 2009 and September 30, 2008. The estimated fair value of the limited partnerships was $17.6 million and $17.3 million at June 30, 2009 and September 30, 2008, respectively. The estimated fair value exceeded the cost of investments at June 30, 2009 and September 30, 2008 and, as such, the investments were not impaired.
The assets held in the Non-qualified Supplemental Savings Plan are carried at fair market value which totaled $3.6 million and $6.4 million at June 30, 2009 and September 30, 2008, respectively.
The majority of cash equivalents are invested in taxable and non-taxable money-market mutual funds. The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments.
At June 30, 2009, the Companys short-term investments consisted of a bank certificate of deposit with an original maturity greater than three months. Interest earned is included in interest and dividend income on the Consolidated Condensed Statement of Income.
The carrying value of other assets, accrued liabilities and other liabilities approximated fair value at June 30, 2009 and September 30, 2008.
10
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
6. Comprehensive Income
Comprehensive income, net of related income taxes, is as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
Net Income |
|
$ |
53,044 |
|
$ |
125,369 |
|
$ |
302,057 |
|
$ |
335,253 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
||||
Unrealized appreciation on securities |
|
90,833 |
|
22,714 |
|
54,581 |
|
602 |
|
||||
Income taxes |
|
(34,516 |
) |
(8,632 |
) |
(20,741 |
) |
(230 |
) |
||||
|
|
56,317 |
|
14,082 |
|
33,840 |
|
372 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of realized gains in net income |
|
|
|
(16,388 |
) |
|
|
(21,994 |
) |
||||
Income taxes |
|
|
|
6,228 |
|
|
|
8,358 |
|
||||
|
|
|
|
(10,160 |
) |
|
|
(13,636 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
Minimum pension liability adjustments |
|
|
|
(4 |
) |
|
|
(10 |
) |
||||
Income taxes |
|
|
|
2 |
|
|
|
4 |
|
||||
|
|
|
|
(2 |
) |
|
|
(6 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
Total comprehensive income |
|
$ |
109,361 |
|
$ |
129,289 |
|
$ |
335,897 |
|
$ |
321,983 |
|
The components of accumulated other comprehensive income, net of related income taxes, are as follows (in thousands):
|
|
June 30, |
|
September 30, |
|
||
|
|
2009 |
|
2008 |
|
||
Unrealized appreciation on securities |
|
$ |
75,918 |
|
$ |
42,078 |
|
Unrecognized actuarial gain (loss) and prior service cost |
|
(3,671 |
) |
(3,671 |
) |
||
Accumulated other comprehensive income |
|
$ |
72,247 |
|
$ |
38,407 |
|
7. Derivative Financial Instruments
In March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS No. 161). SFAS No. 161 provides companies with requirements for enhanced disclosures about derivative instruments and hedging activities to enable investors to better understand their effects on a companys financial position, financial performance and cash flows. In accordance with the effective date of SFAS No. 161, the Company adopted the disclosure provisions of SFAS No. 161 on January 1, 2009.
The Company is exposed to market risk in the normal course of business operations due to ongoing investing and financing activities. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133), requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company has not historically entered into derivative financial instruments for trading purposes or for speculation.
In January 2009, the Company executed an interest rate swap agreement to limit the Companys exposure to changes in interest rates. The interest rate swap qualifies as a derivative and was not designated as a hedging instrument and as such, the Company has not applied hedge accounting. At the end of each period, the interest rate swap is recorded in the Consolidated Condensed Balance Sheet at fair value, either in other current assets or accrued liabilities, and any
11
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
related gains or losses are recognized on the Companys Consolidated Condensed Statement of Income within interest expense. The fair value of the interest rate swap liability at June 30, 2009 was $0.3 million and is included in accrued liabilities in the Consolidated Condensed Balance Sheet. Interest expense of $0.2 million and $0.5 million was recorded for the three and nine months ended June 30, 2009, respectively.
8. Fair Value Measurement
On September 15, 2006, the FASB issued SFAS No. 157 which addresses standardizing the measurement of fair value for companies who are required to use a fair value measure for recognition or disclosure purposes. The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Companys adoption of the required portions of SFAS 157 as of October 1, 2008 did not have a material impact on the Companys financial position, results of operations and cash flows. In February 2008, the FASB issued Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which delayed the required adoption of portions of SFAS 157 related to nonfinancial assets and nonfinancial liabilities, except for items recognized or disclosed at fair value on a recurring basis. Accordingly, the Company will adopt the provisions of SFAS 157 related to nonfinancial assets and nonfinancial liabilities recognized or disclosed at fair value on a nonrecurring basis in fiscal 2010. The Company is currently evaluating the impact, if any, of the adoption of FSP 157-2 on its financial position, results of operations or cash flows.
SFAS 157 establishes a fair value hierarchy to prioritize the inputs used in valuation techniques into three levels as follows:
· Level 1 Observable inputs that reflect quoted prices in active markets for identical assets or liabilities in active markets.
· Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
· Level 3 Valuations based on inputs that are unobservable and not corroborated by market data.
At June 30, 2009, the Companys financial assets utilizing Level 1 inputs include cash equivalents, money market funds the Company has elected to classify as restricted assets and equity securities with active markets. For these items, quoted current market prices are readily available.
During the nine months ended June 30, 2009, the Company entered into an interest rate swap agreement with a $105 million notional to hedge a portion of the risk of changes in the interest rate associated with amounts outstanding under an unsecured line of credit that expires in January 2010. The fair value of the swap agreement was determined using Level 2 inputs. Level 2 inputs also include a bank certificate of deposit classified as a short-term investment and restricted cash included in current assets.
The Company does not currently have any financial instruments utilizing Level 3 inputs.
12
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The following presents information about the Companys fair value hierarchy for financial assets as of June 30, 2009:
|
|
|
|
Quoted Prices |
|
|
|
|
|
||||
|
|
Total |
|
in Active |
|
Significant |
|
|
|
||||
|
|
Measure |
|
Markets for |
|
Other |
|
Significant |
|
||||
|
|
at |
|
Identical |
|
Observable |
|
Unobservable |
|
||||
|
|
Fair |
|
Assets |
|
Inputs |
|
Inputs |
|
||||
|
|
Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
||||
|
|
(in thousands) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
117,159 |
|
$ |
116,136 |
|
$ |
1,023 |
|
$ |
|
|
Equity securities |
|
251,631 |
|
251,631 |
|
|
|
|
|
||||
Certificate of deposit |
|
12,500 |
|
|
|
12,500 |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total assets at fair value |
|
$ |
381,290 |
|
$ |
367,767 |
|
$ |
13,523 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
||||
Interest rate swap |
|
$ |
(273 |
) |
$ |
|
|
$ |
(273 |
) |
$ |
|
|
The following table summarizes the Companys assets and liabilities measured at fair value on a recurring basis presented in the Companys Consolidated Condensed Balance Sheet as of June 30, 2009:
|
|
|
|
Quoted Prices |
|
|
|
|
|
||||
|
|
Total |
|
in Active |
|
Significant |
|
|
|
||||
|
|
Measure |
|
Markets for |
|
Other |
|
Significant |
|
||||
|
|
at |
|
Identical |
|
Observable |
|
Unobservable |
|
||||
|
|
Fair |
|
Assets |
|
Inputs |
|
Inputs |
|
||||
|
|
Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
||||
|
|
(in thousands) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
$ |
103,188 |
|
$ |
103,188 |
|
$ |
|
|
$ |
|
|
Short-term investments |
|
12,500 |
|
|
|
12,500 |
|
|
|
||||
Investments |
|
251,631 |
|
251,631 |
|
|
|
|
|
||||
Other current assets |
|
11,971 |
|
10,948 |
|
1,023 |
|
|
|
||||
Other assets |
|
2,000 |
|
2,000 |
|
|
|
|
|
||||
Total assets measured at fair value |
|
$ |
381,290 |
|
$ |
367,767 |
|
$ |
13,523 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
||||
Other current liabilities |
|
$ |
(273 |
) |
$ |
|
|
$ |
(273 |
) |
$ |
|
|
Total liabilities measured at fair value |
|
$ |
(273 |
) |
$ |
|
|
$ |
(273 |
) |
$ |
|
|
The following information presents the supplemental fair value information about long-term fixed-rate debt at June 30, 2009 and September 30, 2008.
|
|
June 30, |
|
September 30, |
|
||
|
|
2009 |
|
2008 |
|
||
|
|
(in thousands) |
|
||||
Carrying value of long-term fixed-rate debt |
|
$ |
175.0 |
|
$ |
175.0 |
|
Fair value of long-term fixed-rate debt |
|
$ |
201.3 |
|
$ |
198.0 |
|
13
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
In February 2007, the FASB issued SFAS No. 159 which permits companies to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected would be reported in earnings at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. The Company did not elect the fair value option for any of its existing financial instruments other than those already measured at fair value. Therefore, the Companys adoption of SFAS No. 159 as of October 1, 2008 did not have an impact on the Companys financial position, results of operations or cash flows.
9. Cash Dividends
The $0.05 cash dividend declared March 4, 2009, was paid June 1, 2009. On June 3, 2009, a cash dividend of $0.05 per share was declared for shareholders of record on August 14, 2009, payable September 1, 2009.
10. Stock-Based Compensation
The Company has one plan providing for common-stock based awards to employees and to non-employee Directors. The plan permits the granting of various types of awards including stock options and restricted stock awards. Restricted stock may be granted for no consideration other than prior and future services. The purchase price per share for stock options may not be less than market price of the underlying stock on the date of grant. Stock options expire ten years after the grant date. Vesting requirements are determined by the Human Resources Committee of the Companys Board of Directors. Readers should refer to Note 5 of the consolidated financial statements in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2008 for additional information related to stock-based compensation.
The Company uses the Black-Scholes formula to estimate the value of stock options granted. The fair value of the options is amortized to compensation expense on a straight-line basis over the requisite service periods of the stock awards, which are generally the vesting periods. The Company has the right to satisfy option exercises from treasury shares and from authorized but unissued shares.
A summary of compensation cost for stock-based payment arrangements recognized in general and administrative expense is as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
Compensation expense |
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
$ |
1,691 |
|
$ |
1,533 |
|
$ |
5,205 |
|
$ |
4,698 |
|
Restricted stock |
|
363 |
|
365 |
|
1,087 |
|
912 |
|
||||
|
|
$ |
2,054 |
|
$ |
1,898 |
|
$ |
6,292 |
|
$ |
5,610 |
|
STOCK OPTIONS
The following summarizes the weighted-average assumptions utilized in determining the fair value of options granted during the nine months ended June 30, 2009 and 2008:
|
|
2009 |
|
2008 |
|
|
|
|
|
|
|
Risk-free interest rate |
|
1.7 |
% |
3.3 |
% |
Expected stock volatility |
|
43.4 |
% |
31.1 |
% |
Dividend yield |
|
.9 |
% |
.5 |
% |
Expected term (in years) |
|
5.8 |
|
4.8 |
|
14
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Risk-Free Interest Rate. The risk-free interest rate is based on U.S. Treasury securities for the expected term of the option.
Expected Volatility Rate. Expected volatility is based on the daily closing price of the Companys stock based upon historical experience over a period which approximates the expected term of the option.
Dividend Yield. The expected dividend yield is based on the Companys current dividend yield.
Expected Term. The expected term of the options granted represents the period of time that they are expected to be outstanding. The Company estimates the expected term of options granted based on historical experience with grants and exercises.
A summary of stock option activity under the Plan for the three and nine months ended June 30, 2009 is presented in the following tables:
|
|
Three Months Ended June 30, 2009 |
|
||||||||
|
|
|
|
|
|
Weighted- |
|
|
|
||
|
|
|
|
Weighted- |
|
Average |
|
Aggregate |
|
||
|
|
|
|
Average |
|
Remaining |
|
Intrinsic |
|
||
|
|
Shares |
|
Exercise |
|
Contractual |
|
Value |
|
||
Options |
|
(in thousands) |
|
Price |
|
Term |
|
(in thousands) |
|
||
|
|
|
|
|
|
|
|
|
|
||
Outstanding at April 1, 2009 |
|
5,648 |
|
$ |
20.21 |
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
||
Exercised |
|
(204 |
) |
11.07 |
|
|
|
|
|
||
Forfeited/Expired |
|
(1 |
) |
30.24 |
|
|
|
|
|
||
Outstanding at June 30, 2009 |
|
5,443 |
|
$ |
20.55 |
|
5.8 |
|
$ |
59,236 |
|
Vested and expected to vest at June 30, 2009 |
|
5,383 |
|
$ |
20.50 |
|
5.8 |
|
$ |
58,805 |
|
|
|
|
|
|
|
|
|
|
|
||
Exercisable at June 30, 2009 |
|
3,631 |
|
$ |
17.42 |
|
4.5 |
|
$ |
49,670 |
|
|
|
Nine Months Ended |
|
|||
|
|
June 30, 2009 |
|
|||
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average |
|
|
|
|
Shares |
|
Exercise |
|
|
Options |
|
(in thousands) |
|
Price |
|
|
|
|
|
|
|
|
|
Outstanding at October 1, 2008 |
|
4,819 |
|
$ |
20.02 |
|
Granted |
|
865 |
|
21.07 |
|
|
Exercised |
|
(235 |
) |
11.43 |
|
|
Forfeited/Expired |
|
(6 |
) |
29.33 |
|
|
Outstanding at June 30, 2009 |
|
5,443 |
|
$ |
20.55 |
|
The weighted-average fair value of options granted in the first quarter of fiscal 2009 was $8.16. No options were granted in the second or third quarters of fiscal 2009.
The total intrinsic value of options exercised during the three and nine months ended June 30, 2009 was $4.0 million and $4.3 million, respectively.
15
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
As of June 30, 2009, the unrecognized compensation cost related to the stock options was $13.2 million. That cost is expected to be recognized over a weighted-average period of 2.6 years.
RESTRICTED STOCK
Restricted stock awards consist of the Companys common stock and are time vested over 3-5 years. The Company recognizes compensation expense on a straight-line basis over the vesting period. The fair value of restricted stock awards is determined based on the closing trading price of the Companys shares on the grant date.
A summary of the status of the Companys restricted stock awards as of June 30, 2009 and changes during the nine months then ended is presented below:
|
|
Nine Months Ended |
|
|||
|
|
June 30, 2009 |
|
|||
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average |
|
|
|
|
Shares |
|
Grant-Date |
|
|
Restricted Stock Awards |
|
(in thousands) |
|
Fair Value |
|
|
|
|
|
|
|
|
|
Unvested at October 1, |
|
243 |
|
$ |
29.27 |
|
Granted |
|
|
|
|
|
|
Vested |
|
(66 |
) |
29.52 |
|
|
Forfeited |
|
|
|
|
|
|
Unvested at June 30, |
|
177 |
|
$ |
30.06 |
|
As of June 30, 2009, there was $2.5 million of total unrecognized compensation cost related to restricted stock options granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.7 years.
11. Debt
At June 30, 2009, the Company had the following unsecured long-term debt outstanding (in thousands):
Maturity Date |
|
Interest Rate |
|
|
|
|
Fixed rate debt: |
|
|
|
|
|
|
August 15, 2009 |
|
5.91% |
|
$ |
25,000 |
|
August 15, 2012 |
|
6.46% |
|
75,000 |
|
|
August 15, 2014 |
|
6.56% |
|
75,000 |
|
|
Senior credit facility: |
|
|
|
|
|
|
December 18, 2011 |
|
.67%-.68% |
|
280,000 |
|
|
|
|
|
|
455,000 |
|
|
Less long-term debt due within one year |
|
|
|
25,000 |
|
|
Long-term debt |
|
|
|
$ |
430,000 |
|
The terms of the fixed rate debt obligations require the Company to maintain a minimum ratio of debt to total capitalization.
16
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The Company has an agreement with a multi-bank syndicate for a $400 million senior unsecured credit facility which matures December 2011. While the Company has the option to borrow at the prime rate for maturities of less than 30 days, the Company anticipates that the majority of all of the borrowings over the life of the facility will accrue interest at a spread over the London Interbank Bank Offered Rate (LIBOR). The Company pays a commitment fee based on the unused balance of the facility. The spread over LIBOR as well as the commitment fee is determined according to a scale based on a ratio of the Companys total debt to total capitalization. The spread ranges from .30 percent to .45 percent over LIBOR depending on the ratios. At June 30, 2009, the spread on borrowings was .35 percent over LIBOR and the commitment fee was ..075 percent per annum. At June 30, 2009, the Company had two letters of credit totaling $20.9 million under the facility and had $280 million borrowed against the facility with $99.1 million available to borrow. The advances bear interest ranging from 0.67 percent to 0.68 percent. Subsequent to June 30, 2009, the debt was reduced by $115 million with proceeds from a new facility discussed below.
Short-term debt consists of a $105 million unsecured line of credit that will mature January 2010. The Company closed on the agreement with a five-bank syndicate January 21, 2009. The Company anticipates that this loan will remain funded for the entire term and that all borrowings will accrue interest at a spread over 30 day LIBOR. The spread over LIBOR is determined according to the same scale of debt to total capitalization used in the Companys $400 million facility which is described in the preceding paragraph. The spread over LIBOR for the new facility has increased to a range of 2 percent to 2.75 percent. At June 30, 2009, the spread on the borrowing was 2.25 percent over LIBOR. Simultaneous with the closing of this facility, the Company entered into an interest-rate swap with the same maturity and a notional amount of $105 million. The Company believes that the swap will act to fix the annualized interest rate of the facility at approximately 3.17 percent assuming the spread remains at 2.25 percent over LIBOR. For further information regarding the interest rate swap, refer to Note 7 of these consolidated condensed financial statements.
Financial covenants in both facilities require the Company to maintain a funded leverage ratio (as defined) of less than 50 percent and an interest coverage ratio (as defined) of not less than 3.00 to 1.00. Both facilities contain additional terms, conditions, and restrictions that the Company believes are usual and customary in unsecured debt arrangements for companies that are similar in size and credit quality. At June 30, 2009, the Company was in compliance with all debt covenants.
Additionally, as of June 30, 2009, the Company had unsecured letters of credit totaling $3.3 million which were used to obtain surety bonds for the international operations.
On July 21, 2009, the Company closed on a private placement and received proceeds of $200 million from senior unsecured fixed-rate notes that will mature July 2016. Interest on the notes will be paid semi-annually based on an annual rate of 6.10 percent. The Company will make five equal annual principal repayments of $40 million starting on the third anniversary of the closing date. Financial covenants require the Company to maintain a funded leverage ratio of less than 55 percent and an interest coverage ratio (as defined) of not less than 2.50 to 1.00. The note purchase agreement also contains additional terms, conditions, and restrictions that the Company believes are usual and customary in unsecured debt arrangements for companies that are similar in size and credit quality. The $200 million proceeds from this facility will be used to fund capital expenditures, repay indebtedness and for other general corporate purposes.
17
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
12. Income Taxes
The Companys effective tax rate for the first nine months of fiscal 2009 and 2008 was 40.8 percent and 36.9 percent, respectively. The Companys effective tax rate for the three months ended June 30, 2009 and 2008 was 40.9 percent and 36.8 percent, respectively. The effective rate differs from the U.S. federal statutory rate of 35.0 percent primarily due to state and foreign taxes.
It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will increase or decrease during the next 12 months; however, the Company does not expect the change to have a material effect on results of operations or financial position.
13. Contingent Liabilities and Commitments
In conjunction with the Companys current drilling rig construction program, purchase commitments for equipment, parts and supplies of approximately $160.5 million are outstanding at June 30, 2009.
Various legal actions, the majority of which arise in the ordinary course of business, are pending. The Company maintains insurance against certain business risks subject to certain deductibles. None of these legal actions are expected to have a material adverse effect on the Companys financial condition, cash flows or results of operations.
The Company is contingently liable to sureties in respect of bonds issued by the sureties in connection with certain commitments entered into by the Company in the normal course of business. The Company has agreed to indemnify the sureties for any payments made by them in respect of such bonds.
14. Segment Information
The Company operates principally in the contract drilling industry. The Companys contract drilling business includes the following reportable operating segments: U.S. Land, Offshore, and International Land. The contract drilling operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies. The Companys primary international areas of operation include Venezuela, Colombia, Ecuador, Argentina and other South American countries. The International Land operations have similar services, have similar types of customers, operate in a consistent manner and have similar economic and regulatory characteristics. Therefore, the Company has aggregated its International Land operations into one reportable segment. Each reportable segment is a strategic business unit which is managed separately. Other includes non-reportable operating segments.
The Company evaluates segment performance based on income or loss from 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 the Company believes to be a reasonable reflection of the utilization of services provided.
18
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Segment operating income is a non-GAAP financial measure of the Companys performance, as it excludes general and administrative expenses, corporate depreciation, income from asset sales and other corporate income and expense.
The Company considers segment operating income to be an important supplemental measure of operating performance by presenting trends in the Companys core businesses. This measure is used by the Company to facilitate period-to-period comparisons in operating performance of the Companys reportable segments in the aggregate. The Company believes that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments and the Company on an ongoing basis using criteria that are used by our internal decision makers. Additionally, it highlights operating trends and aids analytical comparisons. However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain costs that may affect the Companys operating performance in future periods.
Summarized financial information of the Companys reportable segments for the nine months ended June 30, 2009, and 2008, is shown in the following tables:
|
|
|
|
|
|
|
|
Segment |
|
||||
|
|
External |
|
Inter- |
|
Total |
|
Operating |
|
||||
(in thousands) |
|
Sales |
|
Segment |
|
Sales |
|
Income (Loss) |
|
||||
June 30, 2009 |
|
|
|
|
|
|
|
|
|
||||
Contract Drilling: |
|
|
|
|
|
|
|
|
|
||||
U.S. Land |
|
$ |
1,172,076 |
|
$ |
|
|
$ |
1,172,076 |
|
$ |
483,571 |
|
Offshore |
|
157,424 |
|
|
|
157,424 |
|
43,270 |
|
||||
International Land |
|
194,297 |
|
|
|
194,297 |
|
(975 |
) |
||||
|
|
1,523,797 |
|
|
|
1,523,797 |
|
525,866 |
|
||||
Other |
|
8,024 |
|
630 |
|
8,654 |
|
(4,656 |
) |
||||
|
|
1,531,821 |
|
630 |
|
1,532,451 |
|
521,210 |
|
||||
Eliminations |
|
|
|
(630 |
) |
(630 |
) |
|
|
||||
Total |
|
$ |
1,531,821 |
|
$ |
|
|
$ |
1,531,821 |
|
$ |
521,210 |
|
|
|
|
|
|
|
|
|
Segment |
|
||||
|
|
External |
|
Inter- |
|
Total |
|
Operating |
|
||||
(in thousands) |
|
Sales |
|
Segment |
|
Sales |
|
Income (Loss) |
|
||||
June 30, 2008 |
|
|
|
|
|
|
|
|
|
||||
Contract Drilling: |
|
|
|
|
|
|
|
|
|
||||
U.S. Land |
|
$ |
1,104,662 |
|
$ |
|
|
$ |
1,104,662 |
|
$ |
446,994 |
|
Offshore |
|
104,368 |
|
|
|
104,368 |
|
19,730 |
|
||||
International Land |
|
234,944 |
|
|
|
234,944 |
|
51,400 |
|
||||
|
|
1,443,974 |
|
|
|
1,443,974 |
|
518,124 |
|
||||
Other |
|
8,850 |
|
657 |
|
9,507 |
|
(7,596 |
) |
||||
|
|
1,452,824 |
|
657 |
|
1,453,481 |
|
510,528 |
|
||||
Eliminations |
|
|
|
(657 |
) |
(657) |
|
|
|
||||
Total |
|
$ |
1,452,824 |
|
$ |
|
|
$ |
1,452,824 |
|
$ |
510,528 |
|
19
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Summarized financial information of the Companys reportable segments for the three months ended June 30, 2009, and 2008, is shown in the following tables:
|
|
|
|
|
|
|
|
Segment |
|
||||
|
|
External |
|
Inter- |
|
Total |
|
Operating |
|
||||
(in thousands) |
|
Sales |
|
Segment |
|
Sales |
|
Income (Loss) |
|
||||
June 30, 2009 |
|
|
|
|
|
|
|
|
|
||||
Contract Drilling: |
|
|
|
|
|
|
|
|
|
||||
U.S. Land |
|
$ |
282,358 |
|
$ |
|
|
$ |
282,358 |
|
$ |
96,593 |
|
Offshore |
|
55,605 |
|
|
|
55,605 |
|
12,723 |
|
||||
International Land |
|
47,290 |
|
|
|
47,290 |
|
(8,321 |
) |
||||
|
|
385,253 |
|
|
|
385,253 |
|
100,995 |
|
||||
Other |
|
2,514 |
|
189 |
|
2,703 |
|
(2,304 |
) |
||||
|
|
387,767 |
|
189 |
|
387,956 |
|
98,691 |
|
||||
Eliminations |
|
|
|
(189 |
) |
(189 |
) |
|
|
||||
Total |
|
$ |
387,767 |
|
$ |
|
|
$ |
387,767 |
|
$ |
98,691 |
|
|
|
|
|
|
|
|
|
Segment |
|
||||
|
|
External |
|
Inter- |
|
Total |
|
Operating |
|
||||
(in thousands) |
|
Sales |
|
Segment |
|
Sales |
|
Income (Loss) |
|
||||
June 30, 2008 |
|
|
|
|
|
|
|
|
|
||||
Contract Drilling: |
|
|
|
|
|
|
|
|
|
||||
U.S. Land |
|
$ |
391,755 |
|
$ |
|
|
$ |
391,755 |
|
$ |
159,413 |
|
Offshore |
|
47,298 |
|
|
|
47,298 |
|
12,013 |
|
||||
International Land |
|
80,585 |
|
|
|
80,585 |
|
17,492 |
|
||||
|
|
519,638 |
|
|
|
519,638 |
|
188,918 |
|
||||
Other |
|
2,879 |
|
220 |
|
3,099 |
|
(10,421 |
) |
||||
|
|
522,517 |
|
220 |
|
522,737 |
|
178,497 |
|
||||
Eliminations |
|
|
|
(220 |
) |
(220 |
) |
|
|
||||
Total |
|
$ |
522,517 |
|
$ |
|
|
$ |
522,517 |
|
$ |
178,497 |
|
20
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The following table reconciles segment operating income per the table above to income before income taxes and equity in income of affiliate as reported on the Consolidated Condensed Statements of Income.
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
|
(in thousands) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||
Segment operating income |
|
$ |
98,691 |
|
$ |
178,497 |
|
$ |
521,210 |
|
$ |
510,528 |
|
Gain from involuntary conversion of long-lived assets |
|
264 |
|
5,426 |
|
541 |
|
10,236 |
|
||||
Income from asset sales |
|
1,785 |
|
1,616 |
|
4,754 |
|
4,404 |
|
||||
Corporate general and administrative costs and corporate depreciation |
|
(9,308 |
) |
(7,732 |
) |
(29,315 |
) |
(23,058 |
) |
||||
Operating income |
|
91,432 |
|
177,807 |
|
497,190 |
|
502,110 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
||||
Interest and dividend income |
|
542 |
|
1,034 |
|
4,478 |
|
3,369 |
|
||||
Interest expense |
|
(2,793 |
) |
(4,651 |
) |
(9,047 |
) |
(14,255 |
) |
||||
Gain on sale of investment securities |
|
|
|
16,388 |
|
|
|
21,994 |
|
||||
Other |
|
514 |
|
66 |
|
614 |
|
(370 |
) |
||||
Total other income (expense) |
|
(1,737 |
) |
12,837 |
|
(3,955 |
) |
10,738 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes and equity in income of affiliate |
|
$ |
89,695 |
|
$ |
190,644 |
|
$ |
493,235 |
|
$ |
512,848 |
|
|
|
June 30, |
|
September 30, |
|
||
|
|
2009 |
|
2008 |
|
||
|
|
(in thousands) |
|
||||
Total Assets |
|
|
|
|
|
||
U.S. Land |
|
$ |
2,964,271 |
|
$ |
2,660,232 |
|
Offshore |
|
161,106 |
|
152,497 |
|
||
International Land |
|
457,062 |
|
368,659 |
|
||
Other |
|
32,006 |
|
35,285 |
|
||
|
|
3,614,445 |
|
3,216,673 |
|
||
Investments and Corporate Operations |
|
465,409 |
|
371,372 |
|
||
Total |
|
$ |
4,079,854 |
|
$ |
3,588,045 |
|
The following table presents revenues from external customers by country based on the location of service provided.
|
|
Three Months Ended |
|