SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(MARK ONE) | ||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For quarterly period ended: December 31, 2003
OR
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.
Delaware | 73-0679879 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. Number) |
1437 South Boulder Ave., Tulsa, Oklahoma | 74119 | |
(Address of principal executive office) | (Zip Code) |
(918) 742-5531
Utica at Twenty-First Street, Tulsa, Oklahoma 74114 | ||
(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 is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes
x
No
o
Total Number of Pages 17
CLASS
OUTSTANDING AT JANUARY 31, 2004
Common Stock, $0.10 par value
50,204,751
HELMERICH & PAYNE, INC.
INDEX
Page No. | ||||||||
|
||||||||
PART I
|
|
FINANCIAL INFORMATION
|
||||||
|
Item 1
|
Financial Statements
|
||||||
|
|
Consolidated Condensed Balance Sheets as of December 31, 2003 and September 30, 2003
|
3 | |||||
|
|
Consolidated Condensed Statements of Income for the Three Months Ended December 31, 2003 and 2002
|
4 | |||||
|
|
Consolidated Condensed Statements of Cash Flows for the Three Months Ended December 31, 2003 and 2002
|
5 | |||||
|
|
Consolidated Condensed Statement of Shareholders' Equity for the Three Months Ended December 31, 2003
|
6 | |||||
|
|
Notes to Consolidated Condensed Financial Statements
|
7-11 | |||||
|
Item 2
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
12-15 | |||||
|
Item 3
|
Quantitative and Qualitative Disclosures about Market Risk
|
15 | |||||
|
Item 4
|
Controls and Procedures
|
16 | |||||
PART II
|
OTHER INFORMATION
|
16 | ||||||
|
Item 6
|
Exhibits and Reports on Form 8-K
|
16 | |||||
|
Signatures
|
|
17 |
-2-
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
Item 1. FINANCIAL STATEMENTS
(in thousands)
Unaudited | ||||||||||
December 31, | September 30, | |||||||||
2003 | 2003 | |||||||||
|
|
|||||||||
ASSETS
|
||||||||||
Current assets:
|
||||||||||
Cash and cash equivalents
|
$ | 35,497 | $ | 38,189 | ||||||
Accounts receivable, net
|
89,598 | 91,088 | ||||||||
Inventories
|
22,070 | 22,533 | ||||||||
Prepaid expenses and other
|
58,170 | 45,721 | ||||||||
|
|
|
||||||||
Total current assets
|
205,335 | 197,531 | ||||||||
|
|
|
||||||||
Investments
|
168,157 | 158,770 | ||||||||
Property, plant and equipment, net
|
1,065,268 | 1,058,205 | ||||||||
Other assets
|
1,315 | 1,329 | ||||||||
|
|
|
||||||||
Total assets
|
$ | 1,440,075 | $ | 1,415,835 | ||||||
|
|
|
||||||||
LIABILITIES AND SHAREHOLDERS EQUITY
|
||||||||||
Current liabilities:
|
||||||||||
Notes payable
|
$ | 30,000 | $ | 30,000 | ||||||
Accounts payable
|
30,361 | 29,630 | ||||||||
Accrued liabilities
|
28,110 | 28,988 | ||||||||
|
|
|
||||||||
Total current liabilities
|
88,471 | 88,618 | ||||||||
|
|
|
||||||||
Noncurrent liabilities:
|
||||||||||
Long-term notes payable
|
200,000 | 200,000 | ||||||||
Deferred income taxes
|
195,451 | 181,737 | ||||||||
Other
|
30,106 | 28,229 | ||||||||
|
|
|
||||||||
Total noncurrent liabilities
|
425,557 | 409,966 | ||||||||
|
|
|
||||||||
SHAREHOLDERS EQUITY
|
||||||||||
Common stock, par value $.10 per share
|
5,353 | 5,353 | ||||||||
Preferred stock, no shares issued
|
| | ||||||||
Additional paid-in capital
|
83,609 | 83,302 | ||||||||
Retained earnings
|
842,390 | 840,776 | ||||||||
Unearned compensation
|
| (10 | ) | |||||||
Accumulated other comprehensive income
|
40,022 | 33,668 | ||||||||
|
|
|
||||||||
|
971,374 | 963,089 | ||||||||
Less treasury stock, at cost
|
45,327 | 45,838 | ||||||||
|
|
|
||||||||
Total shareholders equity
|
926,047 | 917,251 | ||||||||
|
|
|
||||||||
Total liabilities and shareholders equity
|
$ | 1,440,075 | $ | 1,415,835 | ||||||
|
|
|
The accompanying notes are an integral part of these statements.
-3-
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
Three Months Ended | |||||||||
December 31, | |||||||||
2003 | 2002 | ||||||||
|
|
||||||||
REVENUES
|
|||||||||
Operating revenues
|
$ | 134,870 | $ | 112,504 | |||||
Income from investments
|
4,024 | 809 | |||||||
|
|
|
|||||||
|
138,894 | 113,313 | |||||||
|
|
|
|||||||
COST AND EXPENSES
|
|||||||||
Direct operating costs
|
93,527 | 81,056 | |||||||
Depreciation
|
22,268 | 18,236 | |||||||
General and administrative
|
9,102 | 10,980 | |||||||
Interest
|
3,222 | 2,770 | |||||||
|
|
|
|||||||
|
128,119 | 113,042 | |||||||
|
|
|
|||||||
Income before income taxes and equity
in income (loss) of affiliates
|
10,775 | 271 | |||||||
Provision for income taxes
|
4,526 | 117 | |||||||
Equity in income (loss) of affiliates
net of income taxes
|
(620 | ) | 453 | ||||||
|
|
|
|||||||
NET INCOME
|
$ | 5,629 | $ | 607 | |||||
|
|
|
|||||||
Earnings per common share:
|
|||||||||
Basic
|
$ | 0.11 | $ | 0.01 | |||||
Diluted
|
$ | 0.11 | $ | 0.01 | |||||
Cash Dividends (Note 3)
|
$ | 0.08 | $ | 0.08 | |||||
AVERAGE COMMON SHARES OUTSTANDING:
|
|||||||||
Basic
|
50,154 | 49,979 | |||||||
Diluted
|
50,667 | 50,467 |
The accompanying notes are an integral part of these statements.
-4-
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended | ||||||||||||
December 31, | ||||||||||||
2003 | 2002 | |||||||||||
|
|
|||||||||||
OPERATING ACTIVITIES:
|
||||||||||||
Net income
|
$ | 5,629 | $ | 607 | ||||||||
Adjustments to reconcile net income to net cash
provided by operating activities:
|
||||||||||||
Depreciation
|
22,268 | 18,236 | ||||||||||
Equity in (income) loss of affiliates before
income taxes
|
1,000 | (731 | ) | |||||||||
Amortization of deferred compensation
|
10 | 137 | ||||||||||
Gain on sale of securities
|
(3,209 | ) | | |||||||||
Gain on sale of property, plant & equipment
|
(881 | ) | (20 | ) | ||||||||
Other, net
|
244 | | ||||||||||
Change in assets and liabilities-
|
||||||||||||
Accounts receivables
|
1,490 | 8,760 | ||||||||||
Inventories
|
463 | 497 | ||||||||||
Prepaid expenses and other
|
(12,435 | ) | (14,177 | ) | ||||||||
Accounts payable
|
731 | 3,049 | ||||||||||
Accrued liabilities
|
(761 | ) | 877 | |||||||||
Deferred income taxes
|
9,819 | 8,471 | ||||||||||
Other noncurrent liabilities
|
1,368 | 1,325 | ||||||||||
|
|
|
||||||||||
Net cash provided by operating activities
|
25,736 | 27,031 | ||||||||||
|
|
|
||||||||||
INVESTING ACTIVITIES:
|
||||||||||||
Capital expenditures
|
(29,746 | ) | (69,255 | ) | ||||||||
Proceeds from sale of investments
|
3,462 | | ||||||||||
Proceeds from sales of property, plant and equipment
|
1,295 | 351 | ||||||||||
|
|
|
||||||||||
Net cash used in investing activities
|
(24,989 | ) | (68,904 | ) | ||||||||
|
|
|
||||||||||
FINANCING ACTIVITIES:
|
||||||||||||
Proceeds from notes payable
|
| 100,000 | ||||||||||
Dividends paid
|
(4,015 | ) | (4,002 | ) | ||||||||
Proceeds from exercise of stock options
|
576 | 223 | ||||||||||
|
|
|
||||||||||
Net cash provided by (used in) financing activities
|
(3,439 | ) | 96,221 | |||||||||
|
|
|
||||||||||
Net increase (decrease) in cash and cash equivalents
|
(2,692 | ) | 54,348 | |||||||||
Cash and cash equivalents, beginning of period
|
38,189 | 46,883 | ||||||||||
|
|
|
||||||||||
Cash and cash equivalents, end of period
|
$ | 35,497 | $ | 101,231 | ||||||||
|
|
|
The accompanying notes are an integral part of these statements.
-5-
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS EQUITY
(in thousands except per share data)
Accumulated | ||||||||||||||||||||||||||||||||||||||
Common Stock | Additional | Treasury Stock | Other | Total | ||||||||||||||||||||||||||||||||||
|
Paid-In | Unearned | Retained |
|
Comprehensive | Shareholders' | ||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Compensation | Earnings | Shares | Amount | Income | Equity | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Balance, September 30, 2003
|
53,529 | $ | 5,353 | $ | 83,302 | $ | (10 | ) | $ | 840,776 | 3,389 | $ | (45,838 | ) | $ | 33,668 | $ | 917,251 | ||||||||||||||||||||
Comprehensive Income:
|
||||||||||||||||||||||||||||||||||||||
Net Income
|
5,629 | 5,629 | ||||||||||||||||||||||||||||||||||||
Other comprehensive income,
Unrealized gains on available-
for-sale securities, net
|
6,282 | 6,282 | ||||||||||||||||||||||||||||||||||||
Amortization of unrealized loss
on derivative instruments, net
|
72 | 72 | ||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||
Total other comprehensive income
|
6,354 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||
Comprehensive income
|
11,983 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||
Cash dividends ($0.08 per share)
|
(4,015 | ) | (4,015 | ) | ||||||||||||||||||||||||||||||||||
Exercise of Stock Options
|
65 | (39 | ) | 511 | 576 | |||||||||||||||||||||||||||||||||
Tax benefit of stock-based awards
|
242 | 242 | ||||||||||||||||||||||||||||||||||||
Amortization of deferred
compensation
|
10 | 10 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Balance, December 31, 2003
|
53,529 | $ | 5,353 | $ | 83,609 | $ | | $ | 842,390 | 3,350 | $ | (45,327 | ) | $ | 40,022 | $ | 926,047 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
-6-
HELMERICH & PAYNE, INC.
(Unaudited)
1. | Basis of Presentation - |
In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly the results of the periods presented. The results of operations for the three months ended December 31, 2003, and December 31, 2002, are not necessarily indicative of the results to be expected for the full year. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Companys 2003 Annual Report on Form 10K. |
2. | Employee Stock-Based Awards |
Employee stock-based awards are accounted for under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. Fixed plan common stock options generally do not result in compensation expense, because the exercise price of the options issued by the Company equals the market price of the underlying stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation. |
Three Months Ended | |||||||||
December 31, | |||||||||
2003 | 2002 | ||||||||
|
|
||||||||
(in thousands except per share amounts) | |||||||||
Net income, as reported
|
$ | 5,629 | $ | 607 | |||||
Add: Stock-based employee compensation expense
included in the Consolidated Statements
of Income, net of related tax effects
|
6 | 85 | |||||||
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects
|
(1,109 | ) | (1,115 | ) | |||||
|
|
|
|||||||
Pro forma net income (loss)
|
$ | 4,526 | $ | ( 423 | ) | ||||
|
|
|
|||||||
Earnings (loss) per share:
|
|||||||||
Basic-as reported
|
$ | 0.11 | $ | 0.01 | |||||
|
|
|
|||||||
Basic-pro forma
|
$ | 0.09 | $ | (0.01 | ) | ||||
|
|
|
|||||||
Diluted-as reported
|
$ | 0.11 | $ | 0.01 | |||||
|
|
|
|||||||
Diluted-pro forma
|
$ | 0.09 | $ | (0.01 | ) | ||||
|
|
|
3. | The $.08 cash dividend declared in September, 2003, was paid December 1, 2003. On December 3, 2003, a cash dividend of $.08 per share was declared for shareholders of record on February 13, 2004, payable March 1, 2004. |
4. | Inventories consist primarily of replacement parts and supplies held for use in the Companys drilling operations. |
5. | Net income for the three months ended December 31, 2003 includes gains from the sale of available-for-sale securities of $2,098,000 ($0.04 per diluted share). Cash realized from the sale was $3,462,000. There were no security sales in the first quarter of fiscal 2003. |
6. | The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting. The recorded amounts for investments accounted for under the equity method are $55.7 million and $56.7 million at December 31, 2003 and September 30, 2003, respectively. |
-7-
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Continued
(Unaudited)
Gross
Gross
Est.
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(in thousands)
$
33,047
$
74,408
$
$
107,455
$
33,300
$
64,276
$
$
97,576
7.
Comprehensive Income -
Comprehensive income, net of related tax, is as follows (in thousands): |
Three Months Ended | |||||||||
December 31, | |||||||||
2003 | 2002 | ||||||||
|
|
||||||||
Net Income
|
$ | 5,629 | $ | 607 | |||||
Other comprehensive income:
|
|||||||||
Net unrealized gain on securities
|
6,282 | 5,857 | |||||||
Amortization of unrealized loss on derivative
instruments
|
72 | 247 | |||||||
|
|
|
|||||||
Other comprehensive income
|
6,354 | 6,104 | |||||||
|
|
|
|||||||
Comprehensive income
|
$ | 11,983 | $ | 6,711 | |||||
|
|
|
The components of accumulated other comprehensive income, net of related taxes, are as follows (in thousands): |
December 31, | September 30, | |||||||
2003 | 2003 | |||||||
|
|
|||||||
Unrealized gain on securities, net
|
$ | 46,133 | $ | 39,851 | ||||
Unrealized loss on derivative instruments
|
| (72 | ) | |||||
Minimum pension liability
|
(6,111 | ) | (6,111 | ) | ||||
|
|
|
||||||
Accumulated other comprehensive income
|
$ | 40,022 | $ | 33,668 | ||||
|
|
|
8. | Notes payable and long-term debt |
At December 31, 2003, the Company had $200 million in long-term debt outstanding at fixed rates and maturities as summarized in the following table. |
Issue Amount | Maturity Date | Interest Rate | ||||||
|
|
|
||||||
$25,000,000 | August 15, 2007 | 5.51 | % | |||||
$25,000,000 | August 15, 2009 | 5.91 | % | |||||
$75,000,000 | August 15, 2012 | 6.46 | % | |||||
$75,000,000 | August 15, 2014 | 6.56 | % |
The terms of the debt obligations require the Company to maintain a minimum ratio of debt to total capitalization. The proceeds of the debt issuances were used to repay $50 million of outstanding debt, fund the Companys rig construction program and for other general corporate purposes. |
At December 31, 2003, the Company had a committed unsecured line of credit totaling $125 million. Short-term loans totaling $30 million and letters of credit totaling $13.7 million were outstanding against the line, leaving $81.3 million available to borrow. The weighted average interest rate on short-term loans at December 31, 2003 was 2.0 percent. Under terms of the line of credit, the Company must maintain certain financial ratios including debt to total capitalization and debt to earnings before interest, taxes, depreciation, and |
-8-
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Continued
(Unaudited)
amortization, and maintain certain levels of liquidity and tangible net worth. A non-use fee of 0.15 percent per annum is calculated on the average daily unused amount, payable quarterly. The interest rate varies based on LIBOR plus .875 to 1.125 percent depending on ratios described above. The line of credit matures in July, 2004. |
On October 27, 2003, the Companys interest rate swap matured. The remaining amortization of $117,065 was included in interest expense. |
9. | 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 include 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: |
Three Months Ended | |||||||||
December 31, | |||||||||
2003 | 2002 | ||||||||
|
|
||||||||
(in thousands) | |||||||||
Basic weighted-average shares
|
50,154 | 49,979 | |||||||
Effect of dilutive shares:
|
|||||||||
Stock options
|
513 | 486 | |||||||
Restricted stock
|
| 2 | |||||||
|
|
|
|||||||
|
513 | 488 | |||||||
|
|
|
|||||||
Diluted weighted-average shares
|
50,667 | 50,467 | |||||||
|
|
|
Options to purchase 1,049,186 and 1,036,762 shares of common stock at a weighted average price of $27.84 and $27.86 were outstanding at December 31, 2003 and 2002, respectively, but were not included in the computation of diluted earnings per common share. Inclusion of these shares would be antidilutive. |
10. | Income Taxes |
The Companys effective tax rate was 42.0% in the first quarter of fiscal 2004, compared to 43.0% in the first quarter of fiscal 2003. |
11. | Commitments - |
The Company, on a regular basis, makes commitments for the purchase of contract drilling equipment. At December 31, 2003, the Company had commitments outstanding of approximately $30 million for the purchase of drilling equipment. |
12. | Segment information |
The Company operates principally in the contract drilling industry. The Companys contract drilling business includes the following operating segments: U.S. Land, U.S. Offshore Platform, and International. The contract drilling operations consist primarily of contracting Company-owned drilling equipment primarily to major oil and gas exploration companies. The Companys primary international areas of operation include Venezuela, Colombia, Ecuador, Argentina and Bolivia. The Company also has a Real Estate Segment whose operations are conducted exclusively in the metropolitan area of Tulsa, Oklahoma. The primary |
-9-
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Continued
(Unaudited)
areas of operations include a major shopping center and several multi-tenant warehouses. Each reportable segment is a strategic business unit which is managed separately. Other includes investments and corporate operations. |
The Company evaluates performance of its segments based upon operating profit or loss from operations 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 and other income and expense. General and administrative costs are allocated to the segments based primarily on specific identification, and to the extent that such identification was not practical, on other methods which the Company believes to be a reasonable reflection of the utilization of services provided. |
Summarized financial information of the Companys reportable segments for
the quarters ended December 31, 2003, and 2002, is shown in the following
tables:
External
Inter-
Total
Operating
(in thousands)
Sales
Segment
Sales
Profit
$
75,468
$
$
75,468
$
6,990
20,865
20,865
4,375
36,144
36,144
3,823
132,477
132,477
15,188
2,393
320
2,713
1,256
4,024
4,024
(320
)
(320
)
$
138,894
$
$
138,894
$
16,444
External
Inter-
Total
Operating
(in thousands)
Sales
Segment
Sales
Profit
$
59,038
$
$
59,038
$
895
27,711
27,711
7,731
23,524
23,524
(592
)
110,273
110,273
8,034
2,231
355
2,586
1,166
809
809
(355
)
(355
)
$
113,313
$
$
113,313
$
9,200
-10-
HELMERICH & PAYNE, INC.
The following table reconciles segment operating profit per the table
above to income before income taxes and equity in income (loss) of
affiliates as reported on the Consolidated Condensed Statements of
Income.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Continued
(Unaudited)
Three Months Ended
December 31,
2003
2002
(in thousands)
$
16,444
$
9,200
4,024
809
(5,820
)
(6,186
)
(3,222
)
(2,770
)
(621
)
(606
)
(30
)
(176
)
(5,669
)
(8,929
)
$
10,775
$
271
The following table presents revenues from external customers by country based
on the location of service provided.
Three Months Ended
December 31,
2003
2002
(in thousands)
$
102,750
$
89,789
13,786
3,682
12,559
13,790
9,799
6,052
$
138,894
$
113,313
-11-
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2003
Risk Factors and Forward-Looking Statements
The following discussion should be read in conjunction with the consolidated condensed financial statements and related notes included elsewhere herein and the consolidated financial statements and notes thereto included in the Companys 2003 Annual Report on Form 10-K. The Companys future operating results may be affected by various trends and factors, which are beyond the Companys control. These include, among other factors, fluctuations in natural gas and crude oil prices, expiration or termination of drilling contracts, currency exchange losses, changes in general economic and political conditions, rapid or unexpected changes in technologies and uncertain business conditions that affect the Companys businesses. Accordingly, past results and trends should not be used by investors to anticipate future results or trends.
With the exception of historical information, the matters discussed in Managements Discussion & Analysis of Financial Condition and Results of Operations includes forward-looking statements. These forward-looking statements are based on various assumptions. The Company cautions that, while it believes such assumptions to be reasonable and makes them in good faith, assumed facts almost always vary from actual results. The differences between assumed facts and actual results can be material. The Company is including this cautionary statement to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company. The factors identified in this cautionary statement are important factors (but not necessarily all important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company.
RESULTS OF OPERATIONS
The Company reported net income of $5,629,000 ($0.11 per diluted share) from revenues of $138,894,000 for the first quarter ended December 31, 2003, compared with net income of $607,000 ($0.01 per diluted share) from revenues of $113,313,000 for the first quarter of fiscal year 2003. Net income for this years first quarter includes $2,098,000 ($0.04 per diluted share) of gains from the sale of available-for-sale securities. There were no security sales in last years first quarter.
The following tables summarize operations by business segment for the three months ended December 31, 2003 and 2002. Operating statistics in the tables exclude the effects of offshore platform management contracts, and do not include reimbursements of out-of-pocket expenses in revenue, expense and margin per day calculations. Per day calculations for international operations also exclude gains and losses from translation of foreign currency transactions.
U.S. LAND operating results in the first quarter of fiscal 2004 increased significantly from the same period in fiscal 2003. Operating profit was $7.0 million and $0.9 million in the first quarter of fiscal 2004 and 2003, respectively. Revenues
-12-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2003
(continued)
were $75.5 million in the first quarter of fiscal 2004, compared with $59.0 million in last years first quarter. Included in land revenues for the three months ended December 31, 2003, and December 31, 2002 are reimbursements for out-of-pocket expenses of $4.3 million and $2.3 million, respectively. The $6.1 million increase in operating profit was primarily the result of higher land rig margins and increased rig days, partially offset by increased depreciation.
Average land rig margin per day was $3,499 and $2,629 for the first quarter of fiscal 2004 and 2003, respectively. The 33% increase in margins was due to reduced rig expense per day in fiscal 2004, as the result of lower workers compensation and advalorem tax accruals and a reduction in labor and other costs associated with efficiencies gained in our FlexRig3 program during calendar 2003. Land rig utilization was 81% and 79% for the first quarter of fiscal 2004 and 2003, respectively. Land rig revenue days for the first quarter of 2004 were 6,280 compared with 5,015 for the same period of 2003, with an average of 68.3 and 54.5 rigs working during the first quarter of fiscal 2004 and 2003, respectively. The increase in rig days and average rigs working is attributable to 16 additional FlexRig3s being added to the Companys land fleet in calendar 2003. Land depreciation expense increased to $13.1 million in the first quarter of fiscal 2004, compared to $9.0 million in the same period of fiscal 2003. The sharp increase is the result of additional rigs added during fiscal 2003 and three new rigs in 2004.
During the quarter, the Company placed three additional FlexRig3s into service. The final two rigs in our FlexRig3 project should be completed by March 2004. The Company will then suspend construction activities and review future possibilities and plans for the FlexRig project. In late December 2003 and into January 2004, there have been some positive signs regarding increased rig activity and increasing dayrates. The extent and timing of these increases is very difficult to project.
U.S. OFFSHORE operating revenues and profit declined, primarily as the result of one rig being stacked and two rigs going from full dayrate to standby status. Operating profit decreased to $4.4 million in the first quarter of fiscal 2004 from $7.7 million in the first quarter of 2003. Rig days were 460 and 572 for the first quarter of fiscal 2004 and 2003, respectively. Rig utilization for the same periods was 42% and 52%, respectively. Revenues were $20.9 million in the first quarter of fiscal 2004, compared with $27.7 million in last years first quarter. Included in offshore revenues for the three months ended December 31, 2003 and December 31, 2002 are reimbursements for out-of-pocket expenses of $1.6 million and $2.0 million, respectively.
-13-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2003
(continued)
Five of the Companys 12 platform rigs are contracted and no significant change in offshore platform results is anticipated for the second quarter of fiscal 2004. The Company has reached an agreement with a large independent for Rig 100 to return to work in the Gulf of Mexico in late March 2004. The Company continues to forecast a slow recovery in our platform rig activity, but is encouraged by inquiries for future possibilities.
INTERNATIONAL DRILLINGS operating profit for the first quarter of fiscal 2004 was $3.8 million, compared to a loss of $0.6 million in the same period of 2003. Rig utilization for international operations averaged 53% for this years first quarter, compared with 33% for the first quarter of fiscal 2003. An average of 16.9 rigs worked during the current quarter, compared to 10.9 rigs in the first quarter of fiscal 2003. International revenues were $36.1 million and $23.5 million for the first quarter of fiscal 2004 and 2003, respectively. The overall increase in margin per day was primarily the result of the increase in revenue days in Venezuela at attractive margins.
Revenues in Venezuela increased $10.1 million in the first quarter of fiscal 2004 to $13.8 million, as the Company averaged 6.4 rigs in 2004, compared with 2.1 rigs in the first quarter of fiscal 2003. Operating days in Venezuela in the first quarter of 2004 and 2003 were 584 and 187, respectively. Operating profit was $2.0 million in the first quarter of fiscal 2004 compared with a loss of $0.9 million in fiscal 2003. Currently, there are seven deep rigs working in Venezuela with an eighth deep rig to begin work in mid-January. The Company is also bidding on other contracts that offer possibilities for idle rigs in Colombia, Bolivia and Argentina. In January 2004 the Venezuelan government approved conversion of bolivar cash balances to U.S. dollars and remittance of those U.S. dollars as dividends by the Companys Venezuelan subsidiary to the U.S. based parent. The Company was able to remit $8.8 million of such dividends to the U.S. based parent in January 2004, which also reduced the Companys exposure to currency devaluation in Venezuela. Effective February 5, 2004, the Central Bank of Venezuela authorized the devaluation of the bolivar from 1600 to 1920. The Company will record an exchange loss of approximately $1.4 million in the second quarter of fiscal 2004 as a result of the currency devaluation.
Operating profit in Ecuador decreased $.2 million in the first quarter of fiscal 2004 to $2.3 million with seven rigs contracted at 85% utilization for the quarter, compared to 98% utilization in the first quarter of fiscal 2003. The Company expects continued high utilization in Ecuador at attractive rates and margins.
Colombia, Argentina, Bolivia and Hungary had one rig working during the quarter. The rig in Chad is expected to begin operations early in the second quarter. The Hungary rig is drilling its fifth well and is expected to work through the fiscal year.
-14-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2003
(continued)
OTHER
Income from investments increased to $4.0 million in the first quarter of 2004, compared to $0.8 million in the first quarter of 2003. The increase is related to gains from the sale of available-for-sale securities of $3.3 million, $2.1 million after-tax ($0.04 per diluted share) in first quarter of 2004.
General and administrative expenses decreased from $11.0 million in the first quarter of fiscal 2003 to $9.1 million in the first quarter of fiscal 2003. The $1.9 decrease is primarily related to a decrease in training costs associated with the FlexRig3 construction project of $1.4 million. Pension expense also decreased from last years first quarter by $0.8 million and was partially offset by a $0.4 million increase in corporate insurance premiums.
Interest expense was $3.2 million in the first quarter of fiscal 2004, compared to $2.8 million in the same period of fiscal 2003. Capitalized interest was $0.2 million and $0.7 million for the same periods, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $25,736,000 for the first quarter of fiscal 2004, compared with $27,031,000 for the same period in 2003. Capital expenditures were $29,746,000 and $69,255,000 for the first quarter of fiscal 2004 and 2003, respectively. The significant decrease in capital expenditures from 2003 is the result of the Companys FlexRig3 construction project winding down in fiscal 2004.
The Company anticipates capital expenditures to be approximately $100 million for fiscal 2004. Included in the $100 million is approximately $25 million to complete the FlexRig3 program. Capital expenditures will be financed primarily by internally generated cash flows. A total of 5 new rigs will be completed by March 2004. In the first quarter of fiscal 2004, three rigs were put into service. Internally generated cash flows are projected to be approximately $110 million for fiscal 2004 and cash balances were $35 million at December 31, 2003. The Companys indebtedness totaled $230 million at December 31, 2003, as described in note 8 to the Consolidated Condensed Financial Statements.
In January 2004, the Venezuelan government approved the conversion of bolivar cash balances to U.S. dollars and the remittance of those U.S. dollars as dividends by the Companys Venezuelan subsidiary to the U.S. based parent. The Company was able to remit $8.8 million of such dividends in January 2004. This also reduced the Companys exposure to currency devaluation on this amount in Venezuela. Effective February 5, 2004, the Central Bank of Venezuela authorized the devaluation of the bolivar from 1600 to 1920. The Company will record an exchange loss of approximately $1.4 million in the second quarter of fiscal 2004 as a result of the currency devaluation.
There were no other significant changes in the Companys financial position since September 30, 2003.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
For a description of the Companys market risks, see Item 7 (a). Quantitative and Qualitative Disclosures About Market Risk in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2003, Note 8 to the Consolidated Condensed Financial Statements contained in Part I Item I hereof with regard to interest rate risk, and discussion of Venezuela currency in Liquidity and Capital Resources contained in Item 2 hereof with regard to foreign currency exchange rate risk.
-15-
Item 4. CONTROLS AND PROCEDURES
a) | Evaluation of disclosure controls and procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, the Companys management, under the supervision and with the participation of the Companys Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on that evaluation, the Companys Chief Executive Officer and Chief Financial Officer believe that: |
| the Companys disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms; and |
| the Companys disclosure controls and procedures operate such that important information flows to appropriate collection and disclosure points in a timely manner and are effective to ensure that such information is accumulated and communicated to the Companys management, and made known to the Companys Chief Executive Officer and Chief Financial Officer, particularly during the period when this Quarterly Report on Form 10-Q was prepared, as appropriate to allow timely decision regarding the required disclosure. |
b) | Changes in internal control over financial reporting. There have been no changes in the Companys internal control over financial reporting during the Companys last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. |
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) | Exhibits |
31.1 | Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(b) | Reports on Form 8-K |
For the three months ended December 31, 2003, Registrant furnished one Form 8-K dated November 12, 2003, reporting information required by Item 12 of Form 8-K by attaching a press release announcing results of operations and certain supplemental information, including financial statements. Registrant also furnished one Form 8-K dated November 19, 2003, reporting information required by Item 12 of Form 8-K by attaching a copy of the Registrants press release announcing revised results of operations and certain supplemental information, including financial statements.
-16-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HELMERICH & PAYNE, INC.
(Registrant) |
||||
Date: February 13, 2004 | By: | /S/ HANS C. HELMERICH | ||
|
||||
Hans C. Helmerich, President | ||||
Date: February 13, 2004 | By: | /S/ DOUGLAS E. FEARS | ||
|
||||
Douglas E. Fears, Chief Financial Officer |
-17-
Exhibit Index
31.1
Certification of Chief Executive Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
EXHIBIT 31.1
CERTIFICATION
I, Hans Helmerich, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Helmerich & Payne, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b) | evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and |
c) | disclosed in this quarterly report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and |
5. The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions):
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
Date: February 13, 2004 | /s/ HANS HELMERICH | |
|
||
Hans Helmerich, Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, Douglas E. Fears, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Helmerich &
Payne, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:
5. The Registrants other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the Registrants auditors and the audit committee of the Registrants board of
directors (or persons performing the equivalent functions):
a)
designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b)
evaluated the effectiveness of the Registrants
disclosure controls and procedures and presented in this
quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the
period covered by this quarterly report based on such
evaluation; and
c)
disclosed in this quarterly report any change in
the Registrants internal control over financial reporting
that occurred during the Registrants most recent fiscal
quarter (the Registrants fourth fiscal quarter in the case of
an annual report) that has materially affected, or is
reasonably likely to materially affect, the Registrants
internal control over financial reporting; and
a)
all significant deficiencies and material
weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely
affect the Registrants ability to record, process, summarize
and report financial information; and
b)
any fraud, whether or not material, that involves
management or other employees who have a significant role in
the Registrants internal control over financial reporting.
Date: February 13, 2004
/s/ DOUGLAS E. FEARS
Douglas E. Fears, Chief Financial Officer
EXHIBIT 32
Certification of CEO and CFO Pursuant to
In connection with the Quarterly Report of Helmerich & Payne, Inc. (the
Company) on Form 10-Q for the period ending December 31, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the Report), Hans
Helmerich, as Chief Executive Officer of the Company, and Douglas E. Fears, as
Chief Financial Officer of the Company, each hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, to the best of his knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
/s/ HANS HELMERICH
/s/ DOUGLAS E. FEARS
Hans Helmerich
Chief Executive Officer
February 13, 2004
Douglas E. Fears
Chief Financial Officer
February 13, 2004