UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ
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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, 2005
OR
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|
o
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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)
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|
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Delaware
(State or other jurisdiction of
incorporation or organization)
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73-0679879
(I.R.S. Employer I.D. Number)
|
1437 South Boulder Avenue, Tulsa, Oklahoma,74119
(Address of principal executive office)(Zip Code)
(918) 742-5531
(Registrants telephone number, including area code)
N/A
(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
þ
No
o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).
Yes
þ
No
o
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CLASS
Common Stock, $0.10 par value
|
|
OUTSTANDING AT July 31, 2005
51,458,534
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Total Number of Pages 23
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
-2-
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share amounts)
ITEM 1. FINANCIAL STATEMENTS
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Unaudited
|
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June 30,
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September 30,
|
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2005
|
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2004
|
ASSETS
|
|
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|
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|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
236,285
|
|
|
$
|
65,296
|
|
Accounts receivable, less reserve of
$1,436 at June 30, 2005 and $1,265
at September 30, 2004
|
|
|
150,861
|
|
|
|
133,262
|
|
Inventories
|
|
|
20,108
|
|
|
|
20,826
|
|
Deferred income tax
|
|
|
5,344
|
|
|
|
4,346
|
|
Prepaid expenses and other
|
|
|
22,685
|
|
|
|
22,156
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
435,283
|
|
|
|
245,886
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
Investments
|
|
|
165,500
|
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|
|
161,532
|
|
Property, plant and equipment, net
|
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|
967,153
|
|
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|
998,674
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Other assets
|
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|
2,652
|
|
|
|
752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,570,588
|
|
|
$
|
1,406,844
|
|
|
|
|
|
|
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities:
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|
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|
|
Notes payable
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|
$
|
379
|
|
|
$
|
|
|
Accounts payable
|
|
|
29,249
|
|
|
|
28,012
|
|
Accrued liabilities
|
|
|
35,956
|
|
|
|
31,891
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
65,584
|
|
|
|
59,903
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|
|
|
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|
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|
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Long-term notes payable
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200,000
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|
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|
200,000
|
|
Deferred income taxes
|
|
|
233,319
|
|
|
|
194,573
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|
Other
|
|
|
45,405
|
|
|
|
38,258
|
|
|
|
|
|
|
|
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|
Total noncurrent liabilities
|
|
|
478,724
|
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432,831
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SHAREHOLDERS EQUITY
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Common stock, par value $.10 per
share: authorized common 80,000; issued 53,529
|
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5,353
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|
5,353
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Preferred stock, no shares issued
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|
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|
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|
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Additional paid-in capital
|
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|
100,033
|
|
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|
85,466
|
|
Retained earnings
|
|
|
907,563
|
|
|
|
828,763
|
|
Unearned compensation
|
|
|
(141
|
)
|
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Accumulated other comprehensive income
|
|
|
43,724
|
|
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|
36,252
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|
Treasury stock, at cost
|
|
|
(30,252
|
)
|
|
|
(41,724
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,026,280
|
|
|
|
914,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total liabilities and shareholders equity
|
|
$
|
1,570,588
|
|
|
$
|
1,406,844
|
|
|
|
|
|
|
|
|
|
|
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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2005
|
|
2004
|
|
2005
|
|
2004
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Operating revenues:
|
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|
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|
|
|
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|
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|
|
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|
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|
Drilling U.S. Land
|
|
$
|
138,720
|
|
|
$
|
88,550
|
|
|
$
|
370,302
|
|
|
$
|
245,960
|
|
Drilling U.S. Offshore
|
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|
19,905
|
|
|
|
21,260
|
|
|
|
58,910
|
|
|
|
60,637
|
|
Drilling International
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|
46,030
|
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|
35,487
|
|
|
|
130,300
|
|
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|
110,759
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|
Real Estate
|
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|
2,732
|
|
|
|
2,394
|
|
|
|
8,004
|
|
|
|
7,632
|
|
|
|
|
|
|
|
|
|
207,387
|
|
|
|
147,691
|
|
|
|
567,516
|
|
|
|
424,988
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Operating costs
|
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|
121,470
|
|
|
|
105,562
|
|
|
|
347,043
|
|
|
|
304,293
|
|
Depreciation
|
|
|
23,419
|
|
|
|
23,934
|
|
|
|
70,631
|
|
|
|
69,604
|
|
General and administrative
|
|
|
11,680
|
|
|
|
9,516
|
|
|
|
30,519
|
|
|
|
28,407
|
|
|
|
|
|
|
|
|
|
156,569
|
|
|
|
139,012
|
|
|
|
448,193
|
|
|
|
402,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
50,818
|
|
|
|
8,679
|
|
|
|
119,323
|
|
|
|
22,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
|
1,671
|
|
|
|
328
|
|
|
|
3,825
|
|
|
|
1,489
|
|
Interest expense
|
|
|
(3,127
|
)
|
|
|
(3,114
|
)
|
|
|
(9,682
|
)
|
|
|
(9,448
|
)
|
Gain on sale of investment
securities
|
|
|
|
|
|
|
|
|
|
|
26,313
|
|
|
|
11,976
|
|
Income from asset sales
|
|
|
603
|
|
|
|
102
|
|
|
|
12,390
|
|
|
|
1,738
|
|
Other
|
|
|
29
|
|
|
|
13
|
|
|
|
375
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
(824
|
)
|
|
|
(2,671
|
)
|
|
|
33,221
|
|
|
|
5,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and equity
in income of affiliate
|
|
|
49,994
|
|
|
|
6,008
|
|
|
|
152,544
|
|
|
|
28,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
20,627
|
|
|
|
2,522
|
|
|
|
62,910
|
|
|
|
12,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of affiliate
net of income taxes
|
|
|
458
|
|
|
|
861
|
|
|
|
1,851
|
|
|
|
550
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
29,825
|
|
|
$
|
4,347
|
|
|
$
|
91,485
|
|
|
$
|
16,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.58
|
|
|
$
|
0.09
|
|
|
$
|
1.80
|
|
|
$
|
0.34
|
|
Diluted
|
|
$
|
0.57
|
|
|
$
|
0.09
|
|
|
$
|
1.77
|
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
51,233
|
|
|
|
50,404
|
|
|
|
50,909
|
|
|
|
50,273
|
|
Diluted
|
|
|
52,236
|
|
|
|
50,880
|
|
|
|
51,793
|
|
|
|
50,816
|
|
|
Dividends declared per common share
|
|
$
|
0.0825
|
|
|
$
|
0.0825
|
|
|
$
|
0.2475
|
|
|
$
|
0.2425
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
June 30,
|
|
|
2005
|
|
2004
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
91,485
|
|
|
$
|
16,983
|
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
70,631
|
|
|
|
69,604
|
|
Equity in income of affiliate before
income taxes
|
|
|
(2,985
|
)
|
|
|
(887
|
)
|
Amortization of deferred compensation
|
|
|
19
|
|
|
|
10
|
|
Gain on sale of investment securities
|
|
|
(26,313
|
)
|
|
|
(10,030
|
)
|
Non-monetary investment gain
|
|
|
|
|
|
|
(1,946
|
)
|
Gain on sale of assets
|
|
|
(12,390
|
)
|
|
|
(1,738
|
)
|
Other-net
|
|
|
(350
|
)
|
|
|
34
|
|
Deferred income tax expense
|
|
|
30,417
|
|
|
|
31,004
|
|
Change in assets and liabilities-
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
(34,438
|
)
|
|
|
(11,170
|
)
|
Inventories
|
|
|
718
|
|
|
|
1,771
|
|
Prepaid expenses and other
|
|
|
(2,429
|
)
|
|
|
(1,213
|
)
|
Income tax receivable
|
|
|
|
|
|
|
(22,772
|
)
|
Accounts payable
|
|
|
1,159
|
|
|
|
(4,689
|
)
|
Accrued liabilities
|
|
|
4,065
|
|
|
|
(2,028
|
)
|
Deferred income taxes
|
|
|
7,887
|
|
|
|
1,929
|
|
Other noncurrent liabilities
|
|
|
6,199
|
|
|
|
9,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
133,675
|
|
|
|
74,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(54,082
|
)
|
|
|
(70,536
|
)
|
Purchase of investments
|
|
|
(5,000
|
)
|
|
|
|
|
Proceeds from sale of investments
|
|
|
64,843
|
|
|
|
14,033
|
|
Proceeds from asset sales
|
|
|
27,364
|
|
|
|
3,280
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
33,125
|
|
|
|
(53,223
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Increase (decrease) in short-term notes
|
|
|
379
|
|
|
|
(27,000
|
)
|
Dividends paid
|
|
|
(12,607
|
)
|
|
|
(12,083
|
)
|
Proceeds from exercise of stock options
|
|
|
16,417
|
|
|
|
4,324
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
4,189
|
|
|
|
(34,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
170,989
|
|
|
|
(13,742
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
65,296
|
|
|
|
38,189
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
236,285
|
|
|
$
|
24,447
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
-5-
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS EQUITY
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Common Stock
|
|
Paid-In
|
|
Retained
|
|
Unearned
|
|
Comprehensive
|
|
Treasury Stock
|
|
Shareholders
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
Compensation
|
|
Income
|
|
Shares
|
|
Amount
|
|
Equity
|
|
Balance, September 30, 2004
|
|
|
53,529
|
|
|
$
|
5,353
|
|
|
$
|
85,466
|
|
|
$
|
828,763
|
|
|
$
|
|
|
|
$
|
36,252
|
|
|
|
3,084
|
|
|
$
|
(41,724
|
)
|
|
$
|
914,110
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,485
|
|
Other comprehensive income,
Unrealized gains on available-
for-sale securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,472
|
|
|
|
|
|
|
|
|
|
|
|
7,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital adjustment of equity investee
|
|
|
|
|
|
|
|
|
|
|
2,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,682
|
|
Cash dividends ($0.2475 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,685
|
)
|
Exercise of stock options
|
|
|
|
|
|
|
|
|
|
|
5,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(949
|
)
|
|
|
11,405
|
|
|
|
16,417
|
|
Stock issued under
Restricted Stock Award Plan
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
(160
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
67
|
|
|
|
|
|
Tax benefit of stock-based awards
|
|
|
|
|
|
|
|
|
|
|
6,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,780
|
|
Amortization of deferred compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2005
|
|
|
53,529
|
|
|
$
|
5,353
|
|
|
$
|
100,033
|
|
|
$
|
907,563
|
|
|
$
|
(141
|
)
|
|
$
|
43,724
|
|
|
|
2,130
|
|
|
$
|
(30,252
|
)
|
|
$
|
1,026,280
|
|
|
|
|
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
|
|
|
|
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 and nine months ended June 30, 2005, and June 30,
2004, 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 2004 Annual Report
on Form 10-K and 10-K/A.
|
|
|
|
Certain reclassifications have been made to the prior period amounts to conform to the
current period presentation.
|
|
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 Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
(in thousands, except per share amounts)
|
Net income, as reported
|
|
$
|
29,825
|
|
|
$
|
4,347
|
|
|
$
|
91,485
|
|
|
$
|
16,983
|
|
Add: Stock-based employee compensation
expense included in the Consolidated
Statements of Income, net of related
tax effects
|
|
|
5
|
|
|
|
|
|
|
|
12
|
|
|
|
6
|
|
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects
|
|
|
(903
|
)
|
|
|
(1,009
|
)
|
|
|
(2,729
|
)
|
|
|
(3,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income
|
|
$
|
28,927
|
|
|
$
|
3,338
|
|
|
$
|
88,768
|
|
|
$
|
13,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic-as reported
|
|
$
|
0.58
|
|
|
$
|
0.09
|
|
|
$
|
1.80
|
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic-pro forma
|
|
$
|
0.56
|
|
|
$
|
0.07
|
|
|
$
|
1.74
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted-as reported
|
|
$
|
0.57
|
|
|
$
|
0.09
|
|
|
$
|
1.77
|
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted-pro forma
|
|
$
|
0.55
|
|
|
$
|
0.07
|
|
|
$
|
1.71
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $.0825 cash dividend declared March 2, 2005, was paid June 1, 2005. On June 1, 2005,
a cash dividend of $.0825 per share was declared for shareholders of record on August 15,
2005, payable September 1, 2005.
|
|
|
Inventories consist primarily of replacement parts and supplies held for use in the
Companys drilling operations.
|
-7-
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
5.
|
|
Sale of Investment Securities
|
|
|
|
Net income includes after-tax gains and losses from the sale of available-for-sale
securities and non-monetary investment gains as follows (in thousands, except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
After-tax gain (loss)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,042
|
|
|
$
|
6,201
|
|
Earnings per diluted share
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.31
|
|
|
$
|
0.13
|
|
|
Non-monetary investment gain
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,193
|
|
Earnings per diluted share
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.02
|
|
6.
|
|
Summary of Available-for-Sale Securities
|
|
|
|
The following is a summary of available-for-sale securities, which excludes those
accounted for under the equity method of accounting and assets held in a Non-qualified
Supplemental Savings Plan. The assets held in the Non-qualified Supplemental Savings
Plan are valued at fair market which totaled $6.6 million at June 30, 2005 and $5.6
million at September 30, 2004. The recorded amounts for investments accounted for under
the equity method are $45.6 million and $57.8 million at June 30, 2005 and September 30,
2004, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Gross
|
|
Est.
|
|
|
|
|
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Equity Securities 06/30/05
|
|
$
|
30,976
|
|
|
$
|
82,330
|
|
|
$
|
|
|
|
$
|
113,306
|
|
Equity Securities 09/30/04
|
|
$
|
27,811
|
|
|
$
|
70,448
|
|
|
$
|
170
|
|
|
$
|
98,089
|
|
|
|
Comprehensive income, net of related tax, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
Net Income
|
|
$
|
29,825
|
|
|
$
|
4,347
|
|
|
$
|
91,485
|
|
|
$
|
16,983
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on
securities
|
|
|
4,615
|
|
|
|
(1,198
|
)
|
|
|
7,472
|
|
|
|
8,805
|
|
Amortization of unrealized loss
on derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
4,615
|
|
|
|
(1,198
|
)
|
|
|
7,472
|
|
|
|
8,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
34,440
|
|
|
$
|
3,149
|
|
|
$
|
98,957
|
|
|
$
|
25,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income, net of related taxes, are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
September 30,
|
|
|
2005
|
|
2004
|
Unrealized gain on securities, net
|
|
$
|
51,044
|
|
|
$
|
43,572
|
|
Minimum pension liability
|
|
|
(7,320
|
)
|
|
|
(7,320
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
$
|
43,724
|
|
|
$
|
36,252
|
|
|
|
|
|
|
|
|
|
|
-8-
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
8.
|
|
Notes Payable and Long-term Debt
|
|
|
|
At June 30, 2005, 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.
|
|
|
|
At June 30, 2005, the Company had a committed unsecured line of credit totaling $50
million. A short-term loan totaling $0.4 million and letters of credit totaling $13.8
million were outstanding against the line at June 30, 2005, leaving $35.8 million
available to borrow. 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 amortization, and maintain a minimum level of tangible
net worth. The interest rate varies based on LIBOR plus .875 to 1.125 percent or prime
minus 1.75 percent to prime minus 1.50 percent depending on the ratios described above.
The line of credit matured in July, 2005 and the Company renewed the facility with the
same terms as the existing line of credit. The renewed facility matures in July, 2006.
|
|
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 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Basic weighted-average shares
|
|
|
51,233
|
|
|
|
50,404
|
|
|
|
50,909
|
|
|
|
50,273
|
|
Effect of dilutive shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and
restricted stock
|
|
|
1,003
|
|
|
|
476
|
|
|
|
884
|
|
|
|
543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares
|
|
|
52,236
|
|
|
|
50,880
|
|
|
|
51,793
|
|
|
|
50,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
|
Income Taxes
|
|
|
|
The Companys effective tax rate was 41.2 percent in the first nine months of fiscal
2005, compared to 42.5 percent in the first nine months of fiscal 2004. The effective tax
rate for the three months ended June 30, 2005 and 2004 was 41.3 percent and 42.0 percent,
respectively. The effective rate differs from the U.S. federal statutory rate of 35.0
percent primarily due to state and foreign taxes.
|
|
11.
|
|
Commitments
|
|
|
|
The Company, on a regular basis, makes commitments for the purchase of contract drilling
equipment. At June 30, 2005, the Company had commitments outstanding of approximately
$64.7 million for the purchase of drilling equipment.
|
-9-
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
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, and International. The contract drilling operations consist mainly 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 key areas of operation 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 income or loss
from operations before income taxes which includes:
|
|
|
|
revenues from external and internal customers
|
|
|
|
|
direct operating costs
|
|
|
|
|
depreciation
|
|
|
|
|
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 is 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 nine months
ended June 30, 2005, and 2004, is shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
Inter-
|
|
Total
|
|
Operating
|
(in thousands)
|
|
Sales
|
|
Segment
|
|
Sales
|
|
Income
|
|
June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Land
|
|
$
|
370,302
|
|
|
$
|
|
|
|
$
|
370,302
|
|
|
$
|
108,629
|
|
U.S. Offshore
|
|
|
58,910
|
|
|
|
|
|
|
|
58,910
|
|
|
|
12,988
|
|
International
|
|
|
130,300
|
|
|
|
|
|
|
|
130,300
|
|
|
|
15,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
559,512
|
|
|
|
|
|
|
|
559,512
|
|
|
|
136,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
8,004
|
|
|
|
592
|
|
|
|
8,596
|
|
|
|
3,202
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,177
|
)
|
Eliminations
|
|
|
|
|
|
|
(592
|
)
|
|
|
(592
|
)
|
|
|
1,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
567,516
|
|
|
$
|
|
|
|
$
|
567,516
|
|
|
$
|
119,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
Inter-
|
|
Total
|
|
Operating
|
(in thousands)
|
|
Sales
|
|
Segment
|
|
Sales
|
|
Income
|
|
June 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Land
|
|
$
|
245,960
|
|
|
$
|
|
|
|
$
|
245,960
|
|
|
$
|
21,689
|
|
U.S. Offshore
|
|
|
60,637
|
|
|
|
|
|
|
|
60,637
|
|
|
|
11,912
|
|
International
|
|
|
110,759
|
|
|
|
|
|
|
|
110,759
|
|
|
|
6,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
417,356
|
|
|
|
|
|
|
|
417,356
|
|
|
|
40,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
7,632
|
|
|
|
706
|
|
|
|
8,338
|
|
|
|
3,164
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,022
|
)
|
Eliminations
|
|
|
|
|
|
|
(706
|
)
|
|
|
(706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
424,988
|
|
|
$
|
|
|
|
$
|
424,988
|
|
|
$
|
22,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-10-
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, 2005, and 2004, is shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
Inter-
|
|
Total
|
|
Operating
|
(in thousands)
|
|
Sales
|
|
Segment
|
|
Sales
|
|
Income
|
|
June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Land
|
|
$
|
138,720
|
|
|
$
|
|
|
|
$
|
138,720
|
|
|
$
|
47,244
|
|
U.S. Offshore
|
|
|
19,905
|
|
|
|
|
|
|
|
19,905
|
|
|
|
4,648
|
|
International
|
|
|
46,030
|
|
|
|
|
|
|
|
46,030
|
|
|
|
5,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,655
|
|
|
|
|
|
|
|
204,655
|
|
|
|
57,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
2,732
|
|
|
|
199
|
|
|
|
2,931
|
|
|
|
1,266
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,327
|
)
|
Eliminations
|
|
|
|
|
|
|
(199
|
)
|
|
|
(199
|
)
|
|
|
703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
207,387
|
|
|
$
|
|
|
|
$
|
207,387
|
|
|
$
|
50,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
|
|
Inter-
|
|
Total
|
|
Operating
|
(in thousands)
|
|
Sales
|
|
Segment
|
|
Sales
|
|
Income
|
|
June 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Drilling:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Land
|
|
$
|
88,550
|
|
|
$
|
|
|
|
$
|
88,550
|
|
|
$
|
9,487
|
|
U.S. Offshore
|
|
|
21,260
|
|
|
|
|
|
|
|
21,260
|
|
|
|
3,820
|
|
International
|
|
|
35,487
|
|
|
|
|
|
|
|
35,487
|
|
|
|
1,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145,297
|
|
|
|
|
|
|
|
145,297
|
|
|
|
15,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
2,394
|
|
|
|
189
|
|
|
|
2,583
|
|
|
|
862
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,236
|
)
|
Eliminations
|
|
|
|
|
|
|
(189
|
)
|
|
|
(189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
147,691
|
|
|
$
|
|
|
|
$
|
147,691
|
|
|
$
|
8,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-11-
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,
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Segment operating income
|
|
$
|
50,818
|
|
|
$
|
8,679
|
|
|
$
|
119,323
|
|
|
$
|
22,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income
|
|
|
1,671
|
|
|
|
328
|
|
|
|
3,825
|
|
|
|
1,489
|
|
Interest expense
|
|
|
(3,127
|
)
|
|
|
(3,114
|
)
|
|
|
(9,682
|
)
|
|
|
(9,448
|
)
|
Gain on sale of investment
securities
|
|
|
|
|
|
|
|
|
|
|
26,313
|
|
|
|
11,976
|
|
Income from asset sales
|
|
|
603
|
|
|
|
102
|
|
|
|
12,390
|
|
|
|
1,738
|
|
Other
|
|
|
29
|
|
|
|
13
|
|
|
|
375
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(824
|
)
|
|
|
(2,671
|
)
|
|
|
33,221
|
|
|
|
5,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
and equity in income of
affiliate
|
|
$
|
49,994
|
|
|
$
|
6,008
|
|
|
$
|
152,544
|
|
|
$
|
28,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
September 30,
|
|
|
2005
|
|
2004
|
|
|
(in thousands)
|
Total Assets
|
|
|
|
|
|
|
|
|
U.S. Land
|
|
$
|
774,803
|
|
|
$
|
742,642
|
|
U.S. Offshore
|
|
|
93,292
|
|
|
|
102,557
|
|
International
|
|
|
243,110
|
|
|
|
261,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,111,205
|
|
|
|
1,107,092
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
32,269
|
|
|
|
33,044
|
|
Other
|
|
|
427,114
|
|
|
|
266,708
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,570,588
|
|
|
$
|
1,406,844
|
|
|
|
|
|
|
|
|
|
|
The following table presents revenues from external customers by country based
on the location of service provided.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
161,357
|
|
|
$
|
112,204
|
|
|
$
|
437,216
|
|
|
$
|
314,229
|
|
Venezuela
|
|
|
16,263
|
|
|
|
14,149
|
|
|
|
49,484
|
|
|
|
40,535
|
|
Ecuador
|
|
|
16,348
|
|
|
|
9,621
|
|
|
|
44,315
|
|
|
|
32,006
|
|
Other Foreign
|
|
|
13,419
|
|
|
|
11,717
|
|
|
|
36,501
|
|
|
|
38,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
207,387
|
|
|
$
|
147,691
|
|
|
$
|
567,516
|
|
|
$
|
424,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-12-
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
13.
|
|
Pensions and Other Post-retirement Benefits
|
|
|
|
The following provides information at June 30, 2005 and 2004 as to the Companys
sponsored domestic defined benefit pension plan.
|
|
|
|
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Service Cost
|
|
$
|
1,137
|
|
|
$
|
1,006
|
|
|
$
|
3,410
|
|
|
$
|
3,018
|
|
Interest Cost
|
|
|
1,154
|
|
|
|
1,101
|
|
|
|
3,462
|
|
|
|
3,303
|
|
Expected return on plan assets
|
|
|
(1,094
|
)
|
|
|
(1,058
|
)
|
|
|
(3,283
|
)
|
|
|
(3,175
|
)
|
Amortization-prior service cost
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
15
|
|
Recognized net actuarial loss
|
|
|
239
|
|
|
|
190
|
|
|
|
717
|
|
|
|
568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension expense
|
|
$
|
1,436
|
|
|
$
|
1,244
|
|
|
$
|
4,306
|
|
|
$
|
3,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Assets
|
|
|
|
The weighted-average asset allocations for the pension plan by asset category follow:
|
|
|
|
|
|
|
|
|
|
At June 30,
|
|
2005
|
|
2004
|
Asset Category
Equity Securities
|
|
|
73.1
|
%
|
|
|
71.5
|
%
|
Debt Securities
|
|
|
24.8
|
%
|
|
|
26.8
|
%
|
Real Estate and Other
|
|
|
2.1
|
%
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
Employer Contributions
|
|
|
|
The Company made a discretionary $1 million contribution to the pension plan during
the third quarter of fiscal 2005. The Company plans to make an additional
contribution to the pension plan in the fourth quarter of fiscal 2005.
|
|
14.
|
|
Recently Issued Accounting Standards
|
|
|
|
In December, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123
(revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees and amends FASB Statement No. 95, Statement of
Cash Flows. The statement requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the financial statements based on
their fair value. The statement is effective at the beginning of the first interim or
annual period beginning after June 15, 2005 with the SEC allowing for implementation at the
beginning of the first fiscal year beginning after June 15, 2005. The Company plans to
adopt the new standard the first quarter of fiscal 2006, beginning October 1, 2005, under
the modified-prospective-transition method. The Company will recognize compensation cost
for share-based payments to employees based on their grant-date fair value from the
beginning of the fiscal period in which the recognition provisions are first applied.
Measurement and attribution of compensation cost for awards that were granted but not
vested prior to the date the Company adopts the new standard will be based on the same
estimate of the grant-date fair value and the same attribution method used previously under
Statement 123 for pro forma disclosure. For those awards that are granted, modified or
settled after the Company adopts the Statement, compensation cost will be measured and
recognized in the financial statements in accordance with the provisions of Statement
123(R). The Company expects to incur additional compensation expense of approximately $1
million related to options currently outstanding in the first quarter of fiscal 2006 as a result of adopting Statement 123(R).
|
-13-
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
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 2004 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 include 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
Three Months Ended June 30, 2005 vs. Three Months Ended June 30, 2004
The Company reported net income of $29.8 million ($0.57 per diluted share) from operating
revenues of $207.4 million for the third quarter ended June 30, 2005, compared with net income
of $4.3 million ($0.09 per diluted share) from revenues of $147.7 million for the third
quarter of fiscal year 2004.
The following tables summarize operations by business segment for the three months ended June
30, 2005 and 2004. Operating statistics in the tables exclude the effects of offshore
platform and international 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.
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
2005
|
|
2004
|
U.S. LAND OPERATIONS
|
|
(in thousands, except days and per day amounts)
|
Revenues
|
|
$
|
138,720
|
|
|
$
|
88,550
|
|
Direct operating expenses
|
|
|
74,639
|
|
|
|
62,784
|
|
General and administrative expense
|
|
|
2,346
|
|
|
|
1,831
|
|
Depreciation
|
|
|
14,491
|
|
|
|
14,448
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
47,244
|
|
|
$
|
9,487
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
7,797
|
|
|
|
7,071
|
|
Average rig revenue per day
|
|
$
|
16,658
|
|
|
$
|
11,537
|
|
Average rig expense per day
|
|
$
|
8,439
|
|
|
$
|
7,893
|
|
Average rig margin per day
|
|
$
|
8,219
|
|
|
$
|
3,644
|
|
Rig utilization
|
|
|
94
|
%
|
|
|
89
|
%
|
-14-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
U.S. LAND operating income increased to $47.2 million for the third quarter of fiscal 2005
compared to $9.5 million in the same period of fiscal 2004. Revenues were $138.7 million and
$88.6 million in the third quarter of fiscal 2005 and 2004, respectively. Included in land
revenues for the three months ended June 30, 2005 and 2004 are reimbursements for
out-of-pocket expenses of $8.8 million and $7.0 million, respectively. The $37.7 million
increase in operating income was primarily the result of increased activity days and higher
dayrates.
Average land rig margin per day was $8,219 and $3,644 for the third quarter of fiscal 2005 and
2004, respectively. The significant increase in margins was due to higher dayrates. Land rig
utilization was 94 percent and 89 percent for the third quarter of fiscal 2005 and 2004,
respectively. Land rig activity days for the third quarter of fiscal 2005 were 7,797 compared
with 7,071 for the same period of fiscal 2004, with an average of 85.7 and 77.7 rigs working
during the third quarter of fiscal 2005 and 2004, respectively.
During the third quarter of fiscal 2005, one rig was transferred from our International rig
fleet to our U.S. Land rig fleet and is currently under contract. The Company has received a
letter of intent for a two-year term contract in Argentina and a rig from our U.S. Land rig
fleet is scheduled to be transferred to the International rig fleet in the first quarter of
fiscal 2006.
In the third quarter of fiscal 2005, the Company announced three contracts to operate seven
new FlexRig4s and one new FlexRig3. Subsequent to June 30, 2005, the Company announced two
additional agreements had been reached to operate four new FlexRig4s. With the addition of
these new contracts and the agreement to operate 10 new FlexRig4s that was announced in the
second quarter, the total rig construction commitment for the FlexRigs is 22. The first rig
is scheduled for completion in November, 2005, with the remaining rigs expected to be
delivered to the field at the rate of two per month. The total capital cost of the
construction is estimated at $236 million with approximately $50 million spent in fiscal 2005
and $186 million in fiscal 2006. All of the signed contracts contain a minimum term of three
years and the construction will be financed primarily by internally generated cash flow.
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
2005
|
|
2004
|
U.S. OFFSHORE OPERATIONS
|
|
(in thousands, except days and per day amounts)
|
Revenues
|
|
$
|
19,905
|
|
|
$
|
21,260
|
|
Direct operating expenses
|
|
|
11,504
|
|
|
|
13,615
|
|
General and administrative expense
|
|
|
1,071
|
|
|
|
792
|
|
Depreciation
|
|
|
2,682
|
|
|
|
3,033
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
4,648
|
|
|
$
|
3,820
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
455
|
|
|
|
572
|
|
Average rig revenue per day
|
|
$
|
32,614
|
|
|
$
|
27,955
|
|
Average rig expense per day
|
|
$
|
16,426
|
|
|
$
|
16,347
|
|
Average rig margin per day
|
|
$
|
16,188
|
|
|
$
|
11,608
|
|
Rig utilization
|
|
|
45
|
%
|
|
|
52
|
%
|
U.S. OFFSHORE revenues include reimbursements for out-of-pocket expenses of $2.4 million and
$1.2 million for the three months ended June 30, 2005 and 2004, respectively.
Operating income increased to $4.6 million for the third quarter of fiscal 2005 compared to
$3.8 million in the same period of fiscal 2004. The increase is the result of a reduction in
depreciation expense due to an asset impairment charge recorded in the fourth quarter of
fiscal 2004. Additionally, operating income was improved in the third quarter of fiscal 2005
compared to the third quarter of fiscal
2004, due to a rig working the entire third quarter of fiscal 2005 and only working the latter
part of the third quarter of fiscal 2004.
-15-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
Five of the Companys eleven platform rigs are currently contracted. A sixth rig commenced
operations in July and a seventh rig has been contracted to start operations late in the
fourth quarter of fiscal 2005. Four rigs are presently idle without contracts. However, the
Company expects to contract one of these idle rigs to start late in the fourth quarter of
fiscal 2005.
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
|
2005
|
|
2004
|
INTERNATIONAL OPERATIONS
|
|
(in thousands, except days and per day amounts)
|
Revenues
|
|
$
|
46,030
|
|
|
$
|
35,487
|
|
Direct operating expenses
|
|
|
35,192
|
|
|
|
28,210
|
|
General and administrative expense
|
|
|
619
|
|
|
|
428
|
|
Depreciation
|
|
|
4,935
|
|
|
|
5,103
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
5,284
|
|
|
$
|
1,746
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
1,916
|
|
|
|
1,567
|
|
Average rig revenue per day
|
|
$
|
19,536
|
|
|
$
|
18,827
|
|
Average rig expense per day
|
|
$
|
14,633
|
|
|
$
|
14,577
|
|
Average rig margin per day
|
|
$
|
4,903
|
|
|
$
|
4,250
|
|
Rig utilization
|
|
|
80
|
%
|
|
|
53
|
%
|
INTERNATIONAL DRILLING operating income for the third quarter of fiscal 2005 was $5.3 million,
compared to $1.7 million in the same period of fiscal 2004. Included in operating income is
an exchange gain in Venezuela of $0.9 million in the third quarter of fiscal 2005. Venezuela
incurred no significant exchange fluctuation during the third quarter of fiscal 2004. Rig
utilization for international operations averaged 80 percent for this years third quarter,
compared with 53 percent for the third quarter of fiscal 2004. An average of 20.8 rigs worked
during the current quarter, compared to 17.0 rigs in the third quarter of fiscal 2004.
International revenues were $46.0 million in the third quarter of fiscal 2005, compared with
$35.5 million in the third quarter of fiscal 2004. The increase in revenue is attributable to
increased activity days and increased dayrates. Included in International Drilling revenues
for the three months ended June 30, 2005 and 2004 are reimbursements for out-of-pocket
expenses of $4.1 million and $2.5 million, respectively.
Currently in Venezuela, the Company has nine deep rigs operating for PDVSA. The Company is
bidding on other contracts that offer possibilities for one 3,000 HP deep land rig and two
2,000 HP deep land rigs.
Ecuadors rig utilization was 100 percent and 64 percent for the third quarter of fiscal 2005
and 2004, respectively. In those same comparative quarters, an average of 8.0 rigs and 5.1
rigs worked.
Two deep rigs worked at 100 percent activity in Colombia during the third quarter of fiscal
2005, compared to no activity in the third quarter of fiscal 2004.
During the third quarter of fiscal 2005, Argentina had one rig operating. Argentina has a
second rig that is under contract while moving from Bolivia to Argentina. Argentina had one
rig working during the third quarter of fiscal 2004. A third rig has a letter of intent for a
two-year term contract starting in December 2005. This rig will be relocating from the U.S.
Land Operations.
Bolivia had one rig contracted during the third quarter of fiscal 2005 compared to one rig
working during the third quarter of fiscal 2004. The rig under contract is expected to begin
work during the first quarter of fiscal 2006. The remaining two rigs in Bolivia are moving to
Chile and Argentina to begin work in the first and second quarters of fiscal 2006,
respectively.
-16-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
Chad had no activity in the third quarter of fiscal 2005, as those operations ceased at the
end of fiscal 2004. The rig was moved to the U.S. Land fleet in the first quarter of fiscal
2005. In the third quarter of fiscal 2004, Chad had one rig working.
The contract in Hungary was completed early in the second quarter of fiscal 2005, and was
transferred to the U.S. Land fleet in the third quarter of fiscal 2005. In the third quarter
of fiscal 2004, there was one rig working in Hungary.
OTHER
General and administrative expenses increased to $11.7 million in the third quarter of fiscal
2005 from $9.5 million in the third quarter of fiscal 2004. The $2.2 million increase is
primarily due to the Company recording estimated bonuses projected to be earned during fiscal
2005. The Company determined that performance criteria will be met in fiscal 2005 that will
activate pre-determined bonus levels. The bonuses will be paid in December 2005. The Company
anticipates an expense of approximately $0.8 million for general and administrative related
bonuses in the fourth quarter of fiscal 2005.
Interest and dividend income increased to $1.7 million in the third quarter of fiscal 2005
compared to $0.3 million in the third quarter of fiscal 2004. The increase is due to higher
earnings from increased cash and cash equivalent balances.
Interest expense was $3.1 million in both the third quarter of fiscal 2005 and 2004. Interest
expense is primarily attributable to the $200 million long-term debt for both comparable
quarters. Capitalized interest was $0.1 million in both the third quarter of fiscal 2005 and
the third quarter of fiscal 2004.
Nine Months Ended June 30, 2005 vs. Nine Months Ended June 30, 2004
The Company reported net income of $91.5 million ($1.77 per diluted share) from operating
revenues of $567.5 million for the nine months ended June 30, 2005, compared with net income of
$17.0 million ($0.33 per diluted share) from operating revenues of $425.0 million for the first
nine months of fiscal year 2004. Net income for the first nine months of fiscal 2005 includes
$16.0 million ($0.31 per diluted share) of after-tax gains from the sale of available-for-sale
securities. Net income for the first nine months of fiscal 2004 includes $6.2 million ($0.13
per diluted share) of after-tax gains from the sale of available-for-sale securities and a
non-monetary investment gain of $1.2 million ($0.02 per diluted share).
The following tables summarize operations by business segment for the nine months ended June
30, 2005 and 2004. Operating statistics in the tables exclude the effects of offshore
platform and international 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.
-17-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30,
|
|
|
2005
|
|
2004
|
U.S. LAND OPERATIONS
|
|
(in thousands, except days and per day amounts)
|
Revenues
|
|
$
|
370,302
|
|
|
$
|
245,960
|
|
Direct operating expenses
|
|
|
211,312
|
|
|
|
177,217
|
|
General and administrative expense
|
|
|
6,051
|
|
|
|
5,623
|
|
Depreciation
|
|
|
44,310
|
|
|
|
41,431
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
108,629
|
|
|
$
|
21,689
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
22,974
|
|
|
|
20,109
|
|
Average rig revenue per day
|
|
$
|
15,028
|
|
|
$
|
11,342
|
|
Average rig expense per day
|
|
$
|
8,108
|
|
|
$
|
7,924
|
|
Average rig margin per day
|
|
$
|
6,920
|
|
|
$
|
3,418
|
|
Rig utilization
|
|
|
93
|
%
|
|
|
85
|
%
|
U.S. LAND operating income increased to $108.6 million for the first nine months of fiscal
2005 from $21.7 million in the first nine months of fiscal 2004.
Revenues were $370.3 million in the first nine months of fiscal 2005, compared with $246.0
million in the same period of fiscal 2004. Included in land revenues for the nine months
ended June 30, 2005 and June 30, 2004 are reimbursements for out-of-pocket expenses of $25.0
million and $17.9 million, respectively. Operating income increased to $108.6 million from
$21.7 million when comparing the nine months ended June 30, 2005 to the same period in 2004.
These increases in revenue and operating income were primarily the result of increased
activity days and higher dayrates, partially offset by increased depreciation.
The 102 percent increase in margins per day was due to higher dayrates in fiscal 2005. Land
rig utilization was 93 percent and 85 percent for the nine months of fiscal 2005 and 2004,
respectively. Land rig activity days for the first nine months of fiscal 2005 were 22,974
compared with 20,109 for the same period of fiscal 2004, with an average of 84.2 and 73.4 rigs
working during the first nine months of fiscal 2005 and 2004, respectively. The increase in
rig activity days and average rigs working is attributable to increased activity for the same
rigs working in fiscal 2005 and 2004 and four of the six rigs transferred from the
international rig fleet are working. The 7 percent increase in depreciation is the result of
the six additional rigs transferred from the international rig fleet during fiscal 2005 and a
full year of depreciation on FlexRig3s in fiscal 2005.
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30,
|
|
|
2005
|
|
2004
|
U.S. OFFSHORE OPERATIONS
|
|
(in thousands, except days and per day amounts)
|
Revenues
|
|
$
|
58,910
|
|
|
$
|
60,637
|
|
Direct operating expenses
|
|
|
35,343
|
|
|
|
37,334
|
|
General and administrative expense
|
|
|
2,722
|
|
|
|
2,288
|
|
Depreciation
|
|
|
7,857
|
|
|
|
9,103
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
12,988
|
|
|
$
|
11,912
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
1,468
|
|
|
|
1,487
|
|
Average rig revenue per day
|
|
$
|
28,981
|
|
|
$
|
29,593
|
|
Average rig expense per day
|
|
$
|
15,133
|
|
|
$
|
16,158
|
|
Average rig margin per day
|
|
$
|
13,848
|
|
|
$
|
13,435
|
|
Rig utilization
|
|
|
49
|
%
|
|
|
45
|
%
|
-18-
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
U.S. OFFSHORE operating revenues and income remained steady. Included in offshore revenues for
the nine months ended June 30, 2005 and June 30, 2004 are reimbursements for out-of-pocket
expenses of $5.3 million and $4.3 million, respectively. Operating income increased to $13.0
million in the first nine months of fiscal 2005 from $11.9 million in the first nine months of
fiscal 2004. The increase is primarily the result of a lower depreciation expense due to an
asset impairment charge recorded in the fourth quarter of fiscal 2004. Activity days were
1,468 and 1,487 for the first nine months of fiscal 2005 and 2004, respectively. Rig
utilization for the same periods was 49 percent and 45 percent, respectively.
Five of the Companys eleven platform rigs are currently contracted. A sixth rig has
commenced operations in July and a seventh rig has been contracted to start operations late in
the fourth quarter of fiscal 2005. Four rigs are presently idle without contracts. However,
the Company expects to contract one of these idle rigs to start late in the fourth quarter of
fiscal 2005.
|
|
|
|
|
|
|
|
|
|
|
Nine months ended June 30,
|
|
|
2005
|
|
2004
|
INTERNATIONAL OPERATIONS
|
|
(in thousands, except days and per day amounts)
|
Revenues
|
|
$
|
130,300
|
|
|
$
|
110,759
|
|
Direct operating expenses
|
|
|
98,967
|
|
|
|
86,938
|
|
General and administrative expense
|
|
|
1,769
|
|
|
|
1,617
|
|
Depreciation
|
|
|
14,501
|
|
|
|
15,263
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
15,063
|
|
|
$
|
6,941
|
|
|
|
|
|
|
|
|
|
|
Activity days
|
|
|
5,467
|
|
|
|
4,574
|
|
Average rig revenue per day
|
|
$
|
19,393
|
|
|
$
|
19,888
|
|
Average rig expense per day
|
|
$
|
13,900
|
|
|
$
|
14,846
|
|
Average rig margin per day
|
|
$
|
5,493
|
|
|
$
|
5,042
|
|
Rig utilization
|
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74
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%
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52
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%
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INTERNATIONAL DRILLING operating income in the first nine months of fiscal 2005 was $15.1
million, compared to $6.9 million in the same period of fiscal 2004. The increase in
operating income is primarily the result of increased rig activity. Rig utilization for
international operations averaged 74 percent for the first nine months of fiscal 2005,
compared with 52 percent for the first nine months of fiscal 2004. An average of 20.0 rigs
worked during the first nine months of fiscal 2005, compared to 16.7 rigs in the first nine
months of fiscal 2004. International revenues were $130.3 million and $110.8 million in the
first nine months of fiscal 2005 and 2004, respectively. The increase in revenues is a result
of increased activity days and increased dayrates. Included in International Drilling
revenues for the nine months ended June 30, 2005 and 2004, are reimbursements for
out-of-pocket expenses of $11.0 million and $9.3 million, respectively. The overall
increase in margin per day was primarily the result of an increase in activity days in
Venezuela, Colombia and Ecuador in fiscal 2005 and a decrease in expense due to the
closure of the Chad operation at the end of fiscal 2004.
Effective March 3, 2005, the Central Bank of Venezuela authorized the devaluation of the
bolivar from 1920 to 2150. Included in direct operating expenses for the nine months ended
June 30, 2005 is a $0.6 million exchange loss related to the Venezuelan currency devaluation,
compared to a $1.5 million currency devaluation loss for the same period in 2004.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
OTHER
General and administrative expenses increased to $30.5 million in the first nine months of
fiscal 2005 compared to $28.4 million in the same period of fiscal 2004. The $2.1 million
increase in primarily due to the Company recording estimated bonuses projected to be earned
during fiscal year 2005. The Company determined that performance criteria will be met in
fiscal 2005 that will activate pre-determined bonus levels. The bonuses will be paid in
December 2005.
Interest and dividend income increased to $3.8 million in the first nine months of fiscal
2005, compared to $1.5 million in the same period of fiscal 2004. The increase is
attributable to higher earnings from increased cash and cash equivalent balances.
The first nine months of fiscal 2005 includes gains from the sale of securities of $26.3
million, $16.0 million after-tax ($0.31 per diluted share), primarily from the sale of
1,000,000 shares of Atwood Oceanics, Inc. The first nine months of fiscal 2004 includes gains
from the sale of available-for-sale securities of $10.0 million, $6.2 million after-tax ($0.13
per diluted share) and a non-monetary investment gain of $1.9 million, $1.2 million after-tax
($0.02 per diluted share).
The value of the Companys remaining portfolio was approximately $236.4 million at June 30,
2005. The after-tax value was approximately $157.6 million.
Income from asset sales increased to $12.4 million in the first nine months of fiscal 2005,
compared to $1.7 million in the same period of fiscal 2004. The increase of $10.7 million is
primarily due to the sale of two deep domestic land rigs in the first quarter of fiscal 2005.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalent balances increased to $236.3 million at June 30, 2005 from $65.3
million at September 30, 2004. The increase in cash and cash equivalents is the result of
proceeds from the sale of investments of $64.8 million, proceeds from asset sales of $27.4
million and net cash provided by operating activities of $133.7 million. In the first nine
months of fiscal 2004, net cash provided by operating activities was $74.2 million.
Capital expenditures were $54.1 million and $70.5 million for the first nine months of fiscal
2005 and 2004, respectively. Capital expenditures decreased from 2004 due to the completion
of the Companys FlexRig3 construction project. The Company began construction of FlexRig4s in
the third quarter of fiscal 2005 with the first of 22 FlexRigs to be completed in November,
2005. During the first nine months of fiscal 2004, five new FlexRig3s were completed.
The Company anticipates capital expenditures to be approximately $115 million for fiscal 2005.
Included in the $115 million is approximately $50 million of the total estimated $236 million
construction costs related to the 22 new FlexRigs. The remaining estimated FlexRig
construction costs of $186 million will be incurred in fiscal 2006. Capital expenditures will
be financed primarily by internally generated cash flow.
Current cash, investments in short-term money market securities, and cash generated from
operating activities are expected to meet the Companys estimated capital expenditures and
other expected cash requirements for fiscal 2005. The Companys indebtedness totaled $200.4
million at June 30, 2005, as described in Note 8 to the Consolidated Condensed Financial
Statements.
There were no other significant changes in the Companys financial position since September
30, 2004.
-20-
PART I. FINANCIAL INFORMATION
June 30, 2005
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a description of the Companys market risks, see
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Item 7 (a). Quantitative and Qualitative Disclosures About Market Risk in the
Companys 2004 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on December 13, 2004,
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Note 8 to the Consolidated Condensed Financial Statements contained in Part I Item
1 hereof with regard to interest rate risk,
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Page 17 of Results of Operations contained in Item 2 hereof with regard to foreign
currency exchange rate risk with operations ceasing in Hungary, and
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Page 19 of Results of Operations contained in Item 2 hereof with regard to foreign
currency exchange rate risk due to the currency devaluation in Venezuela.
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ITEM 4. CONTROLS AND PROCEDURES
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a)
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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:
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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
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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 decisions regarding the required disclosure.
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b)
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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.
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c)
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Section 404 of the Sarbanes-Oxley Act of 2002 will require the Company to include an
internal control report of management with the annual report on Form 10-K for the
fiscal year ending September 30, 2005. The internal control report must contain (1) a
statement of managements responsibility for establishing and maintaining
effective internal control over financial reporting for the Company, (2) a statement
identifying the framework used by management to conduct the required evaluation of
the effectiveness of the Companys internal control over financial reporting, (3)
managements assessment of the effectiveness of the Companys internal control over
financial reporting as of the end of the most recent fiscal year, including a statement
as to whether or not the Companys internal control over financial reporting is
effective, and (4) a statement that the Companys independent auditors have issued an
attestation report on managements assessment of the Companys internal control over
financial reporting and the effectiveness of the Companys internal control.
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-21-
PART I. FINANCIAL INFORMATION
June 30, 2005
ITEM 4. CONTROLS AND PROCEDURES (continued)
The Company is currently undergoing a comprehensive effort in preparation for compliance with
Section 404 of the Sarbanes-Oxley Act of 2002. This effort includes the documentation, testing
and review of the Companys internal controls under the direction of senior management. During
the course of these activities, the Company has identified certain internal control issues which
senior management believes need to be improved. As a result, the Company is evaluating and
implementing improvements to internal controls over financial reporting and will continue to do
so. These improvements include further formalization of policies and procedures, improved
segregation of duties, and improved information technology system controls. To date, the Company
has not identified any material internal control weaknesses.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
(a) Exhibits
31.1
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Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
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Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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32
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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.
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-22-
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)
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Date: August 5, 2005
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By:
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/s/ HANS C. HELMERICH
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Hans C. Helmerich, President
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Date: August 5, 2005
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By:
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/s/ DOUGLAS E. FEARS
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Douglas E. Fears, Chief Financial Officer
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(Principal Financial Officer)
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Exhibit Index
31.1
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Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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31.2
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Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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32
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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.
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-23-