0001628280-19-009063.txt : 20190726 0001628280-19-009063.hdr.sgml : 20190726 20190726073030 ACCESSION NUMBER: 0001628280-19-009063 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 103 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190726 DATE AS OF CHANGE: 20190726 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Helmerich & Payne, Inc. CENTRAL INDEX KEY: 0000046765 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 730679879 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04221 FILM NUMBER: 19975919 BUSINESS ADDRESS: STREET 1: 1437 S. BOULDER AVE., SUITE 1400 CITY: TULSA STATE: OK ZIP: 74119 BUSINESS PHONE: 9187425531 MAIL ADDRESS: STREET 1: 1437 S. BOULDER AVE., SUITE 1400 CITY: TULSA STATE: OK ZIP: 74119 FORMER COMPANY: FORMER CONFORMED NAME: HELMERICH & PAYNE INC DATE OF NAME CHANGE: 19920703 10-Q 1 hp-20190630x10q.htm 10-Q Document
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xbrli:shares hp:component hp:month hp:tranche

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended:  June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                          to
Commission File Number: 1-4221
HELMERICH & PAYNE, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
73-0679879
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer I.D. Number)
1437 South Boulder Avenue, Suite 1400, Tulsa, Oklahoma, 74119
(Address of principal executive office) (Zip Code)
(918) 742-5531
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock ($0.10 par value)
HP
New York Stock Exchange
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  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer 
Smaller reporting company 
 
 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 
CLASS
 
OUTSTANDING AT July 18, 2019
Common Stock, $0.10 par value
 
109,433,698
 



HELMERICH & PAYNE, INC.
INDEX TO FORM 10-Q
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
HELMERICH & PAYNE, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
 
June 30,
 
September 30,
(in thousands except share data and per share amounts)
2019
 
2018
Assets
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
334,775

 
$
284,355

Short-term investments
45,748

 
41,461

Accounts receivable, net of allowance of $4,837 and $6,217, respectively
508,183

 
565,202

Inventories of materials and supplies, net
150,126

 
158,134

Prepaid expenses and other
77,406

 
66,398

Total current assets
1,116,238

 
1,115,550

Investments
48,291

 
98,696

Property, plant and equipment, net
4,583,673

 
4,857,382

Other Noncurrent Assets:
 
 
 
Goodwill
67,902

 
64,777

Intangible assets, net
69,093

 
73,207

Other assets
12,182

 
5,255

Total other noncurrent assets
149,177

 
143,239

 
 
 
 
Total assets
$
5,897,379

 
$
6,214,867

 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
134,077

 
$
132,664

Accrued liabilities
256,449

 
244,504

Total current liabilities
390,526

 
377,168

Noncurrent Liabilities:
 
 
 
Long-term debt, net
491,651

 
493,968

Deferred income taxes
827,027

 
853,136

Other
78,490

 
93,606

Noncurrent liabilities - discontinued operations
14,631

 
14,254

Total noncurrent liabilities
1,411,799

 
1,454,964

Commitments and Contingencies (Note 14)

 

Shareholders' Equity:
 
 
 
Common stock, $.10 par value, 160,000,000 shares authorized, 112,080,262 and 112,008,961 shares issued as of June 30, 2019 and September 30, 2018, respectively, and 109,433,198 and 108,993,718 shares outstanding as of June 30, 2019 and September 30, 2018, respectively
11,208

 
11,201

Preferred stock, no par value, 1,000,000 shares authorized, no shares issued

 

Additional paid-in capital
501,585

 
500,393

Retained earnings
3,750,785

 
4,027,779

Accumulated other comprehensive income (loss)
(16,085
)
 
16,550

Treasury stock, at cost, 2,647,064 shares and 3,015,243 shares as of June 30, 2019 and September 30, 2018, respectively
(152,439
)
 
(173,188
)
Total shareholders’ equity
4,095,054

 
4,382,735

Total liabilities and shareholders' equity
$
5,897,379

 
$
6,214,867

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
(in thousands, except per share amounts)
2019
 
2018
 
2019
 
2018
 
 
 
As adjusted (Note 2)
 
 
 
As adjusted (Note 2)
Operating revenues
 
 
 
 
 
 
 
Contract drilling
$
684,788

 
$
637,548

 
$
2,139,798

 
$
1,763,939

Other
3,186

 
11,324

 
9,642

 
26,504

 
687,974

 
648,872

 
2,149,440

 
1,790,443

Operating costs and expenses
 
 
 
 
 
 
 
Contract drilling operating expenses, excluding depreciation and amortization
443,114

 
443,087

 
1,372,426

 
1,199,422

Operating expenses applicable to other revenues
1,414

 
1,424

 
4,308

 
3,728

Depreciation and amortization
143,297

 
144,579

 
427,917

 
433,521

Asset impairment charge
224,327

 

 
224,327

 

Research and development
7,066

 
5,479

 
21,347

 
13,149

Selling, general and administrative
46,590

 
52,310

 
144,604

 
147,005

Gain on sale of assets
(9,960
)
 
(4,313
)
 
(27,050
)
 
(15,133
)
 
855,848

 
642,566

 
2,167,879

 
1,781,692

Operating income (loss) from continuing operations
(167,874
)
 
6,306

 
(18,439
)
 
8,751

Other income (expense)
 
 
 
 
 
 
 
Interest and dividend income
2,349

 
2,109

 
6,861

 
5,680

Interest expense
(6,257
)
 
(5,993
)
 
(17,145
)
 
(17,794
)
Loss on investment securities
(13,271
)
 

 
(50,228
)
 

Other
(1,599
)
 
(61
)
 
(1,051
)
 
170

 
(18,778
)
 
(3,945
)
 
(61,563
)
 
(11,944
)
Income (loss) from continuing operations before income taxes
(186,652
)
 
2,361

 
(80,002
)
 
(3,193
)
Income tax provision (benefit)
(32,031
)
 
10,535

 
(5,602
)
 
(494,028
)
Income (loss) from continuing operations
(154,621
)
 
(8,174
)
 
(74,400
)
 
490,835

Income from discontinued operations before income taxes
7,244

 
8,383

 
22,798

 
9,127

Income tax provision
7,306

 
8,217

 
23,231

 
19,743

Income (loss) from discontinued operations
(62
)
 
166

 
(433
)
 
(10,616
)
Net income (loss)
$
(154,683
)
 
$
(8,008
)
 
$
(74,833
)
 
$
480,219

Basic earnings (loss) per common share:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
(1.42
)
 
$
(0.08
)
 
$
(0.71
)
 
$
4.47

Loss from discontinued operations

 

 

 
(0.10
)
Net income (loss)
$
(1.42
)
 
$
(0.08
)
 
$
(0.71
)
 
$
4.37

Diluted earnings (loss) per common share:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
(1.42
)
 
$
(0.08
)
 
$
(0.71
)
 
$
4.45

Loss from discontinued operations

 

 

 
(0.10
)
Net income (loss)
$
(1.42
)
 
$
(0.08
)
 
$
(0.71
)
 
$
4.35

Weighted average shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
109,425

 
108,905

 
109,324

 
108,818

Diluted
109,425

 
108,905

 
109,324

 
109,338

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
(in thousands)
2019
 
2018
 
2019
 
2018
Net income (loss)
$
(154,683
)
 
$
(8,008
)
 
$
(74,833
)
 
$
480,219

Other comprehensive income, net of income taxes:
 
 
 
 
 
 
 
Unrealized appreciation on securities, net of income taxes of ($5.6) million and ($2.0) million for the three and nine months ended June 30, 2018, respectively

 
13,826

 

 
5,657

Minimum pension liability adjustments, net of income taxes of ($0.1) million and ($0.2) million for the three and nine months ended June 30, 2019, respectively, and ($0.1) million and ($0.4) million for the three and nine months ended June 30, 2018, respectively
226

 
337

 
675

 
985

Other comprehensive income
226

 
14,163

 
675

 
6,642

Comprehensive income (loss)
$
(154,457
)
 
$
6,155

 
$
(74,158
)
 
$
486,861

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Shareholders’ Equity
Three Months Ended June 30, 2019 and 2018
(Unaudited)
(in thousands, except per share amounts)
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury Stock
 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Total
Balance, March 31, 2019
112,080

 
$
11,208

 
$
493,421

 
$
3,979,708

 
$
(12,072
)
 
2,668

 
$
(153,645
)
 
$
4,318,620

Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss

 

 

 
(154,683
)
 

 

 

 
(154,683
)
Other comprehensive income

 

 

 

 
226

 

 

 
226

Dividends declared ($0.71 per share)

 

 

 
(78,479
)
 

 

 

 
(78,479
)
Exercise of employee stock options, net of shares withheld for employee taxes

 

 
(225
)
 

 

 
(15
)
 
870

 
645

Vesting of restricted stock awards, net of shares withheld for employee taxes

 

 
(489
)
 

 

 
(6
)
 
336

 
(153
)
Stock-based compensation

 

 
8,878

 

 

 

 

 
8,878

Reclassification of stranded tax effect for adoption of ASU No. 2018-02 (Note 2)

 

 

 
4,239

 
(4,239
)
 

 

 

Balance, June 30, 2019
112,080

 
$
11,208

 
$
501,585

 
$
3,750,785

 
$
(16,085
)
 
2,647

 
$
(152,439
)
 
$
4,095,054


(in thousands, except per share amounts)
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury Stock
 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Total
Balance, March 31, 2018
112,009

 
$
11,201

 
$
487,135

 
$
4,189,497

 
$
(5,221
)
 
3,132

 
$
(179,459
)
 
$
4,503,153

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss

 

 

 
(8,008
)
 

 

 

 
(8,008
)
Other comprehensive income

 

 

 

 
14,163

 

 

 
14,163

Dividends declared ($0.71 per share)

 

 

 
(78,071
)
 

 

 

 
(78,071
)
Exercise of employee stock options, net of shares withheld for employee taxes

 

 
(84
)
 

 

 
(62
)
 
3,498

 
3,414

Vesting of restricted stock awards, net of shares withheld for employee taxes

 

 
(373
)
 

 

 
(5
)
 
287

 
(86
)
Stock-based compensation

 

 
7,926

 

 

 

 

 
7,926

Balance, June 30, 2018
112,009

 
$
11,201

 
$
494,604

 
$
4,103,418

 
$
8,942

 
3,065

 
$
(175,674
)
 
$
4,442,491


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

6


HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Shareholders’ Equity
Nine Months Ended June 30, 2019 and 2018
(Unaudited)

(in thousands, except per share amounts)
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury Stock
 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Total
Balance, September 30, 2018
112,009

 
$
11,201

 
$
500,393

 
$
4,027,779

 
$
16,550

 
3,015

 
$
(173,188
)
 
$
4,382,735

Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss

 

 

 
(74,833
)
 

 

 

 
(74,833
)
Other comprehensive income

 

 

 

 
675

 

 

 
675

Dividends declared ($2.13 per share)

 

 

 
(235,433
)
 

 

 

 
(235,433
)
Exercise of employee stock options, net of shares withheld for employee taxes

 

 
(7,088
)
 

 

 
(147
)
 
8,259

 
1,171

Vesting of restricted stock awards, net of shares withheld for employee taxes
71

 
7

 
(17,187
)
 

 

 
(221
)
 
12,490

 
(4,690
)
Stock-based compensation

 

 
25,467

 

 

 

 

 
25,467

Cumulative effect adjustment for adoption of ASU No. 2014-09 (Note 9)

 

 

 
(38
)
 

 

 

 
(38
)
Cumulative effect adjustment for adoption of ASU No. 2016-01 (Note 2)

 

 

 
29,071

 
(29,071
)
 

 

 

Reclassification of stranded tax effect for adoption of ASU No. 2018-02 (Note 2)

 

 

 
4,239

 
(4,239
)
 

 

 

Balance, June 30, 2019
112,080

 
$
11,208

 
$
501,585

 
$
3,750,785

 
$
(16,085
)
 
2,647

 
$
(152,439
)
 
$
4,095,054


(in thousands, except per share amounts)
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury Stock
 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Total
Balance, September 30, 2017
111,957

 
$
11,196

 
$
487,248

 
$
3,855,686

 
$
2,300

 
3,353

 
$
(191,839
)
 
$
4,164,591

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
480,219

 

 

 

 
480,219

Other comprehensive income

 

 

 

 
6,642

 

 

 
6,642

Dividends declared ($2.11 per share)

 

 

 
(231,932
)
 

 

 

 
(231,932
)
Exercise of employee stock options, net of shares withheld for employee taxes
1

 

 
(5,147
)
 

 

 
(152
)
 
8,503

 
3,356

Vesting of restricted stock awards, net of shares withheld for employee taxes
51

 
5

 
(11,841
)
 

 

 
(136
)
 
7,662

 
(4,174
)
Stock-based compensation

 

 
23,472

 

 

 

 

 
23,472

Cumulative effect adjustment for adoption of ASU No. 2016-09

 

 
872

 
(555
)
 

 

 

 
317

Balance, June 30, 2018
112,009

 
$
11,201

 
$
494,604

 
$
4,103,418

 
$
8,942

 
3,065

 
$
(175,674
)
 
$
4,442,491

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7


HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months Ended June 30,
(in thousands)
2019
 
2018
 
 
 
As adjusted (Note 2)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(74,833
)
 
$
480,219

Adjustment for loss from discontinued operations
433

 
10,616

Income (loss) from continuing operations
(74,400
)
 
490,835

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
427,917

 
433,521

Asset impairment charge
224,327

 

Amortization of debt discount and debt issuance costs
1,176

 
798

Provision for bad debt
544

 
598

Stock-based compensation
25,467

 
23,472

Loss on investment securities
50,228

 

Gain on sale of assets
(27,050
)
 
(15,133
)
Deferred income tax benefit
(25,503
)
 
(498,491
)
Other
5,356

 
3,735

Change in assets and liabilities increasing (decreasing) cash:
 
 
 
Accounts receivable
63,002

 
(87,508
)
Inventories of materials and supplies
1,473

 
(14,905
)
Prepaid expenses and other
(9,556
)
 
(9,623
)
Other noncurrent assets
(5,899
)
 
6,105

Accounts payable
276

 
6,513

Accrued liabilities
8,110

 
40,668

Deferred income tax liability
11

 
(2,511
)
Other noncurrent liabilities
(6,052
)
 
(6,496
)
Net cash provided by operating activities from continuing operations
659,427

 
371,578

Net cash used in operating activities from discontinued operations
(56
)
 
(150
)
Net cash provided by operating activities
659,371

 
371,428

Cash flows from investing activities:
 
 
 
Capital expenditures
(403,570
)
 
(322,658
)
Purchase of short-term investments
(71,852
)
 
(52,159
)
Payment for acquisition of business, net of cash acquired
(2,781
)
 
(47,886
)
Proceeds from sale of short-term investments
68,015

 
52,470

Proceeds from asset sales
36,227

 
28,049

Net cash used in investing activities
(373,961
)
 
(342,184
)
Cash flows from financing activities:
 
 
 
Dividends paid
(235,058
)
 
(230,368
)
Debt issuance costs paid
(3,912
)
 

Proceeds from stock option exercises
2,901

 
5,160

Payments for employee taxes on net settlement of equity awards
(6,420
)
 
(5,978
)
Payment of contingent consideration from acquisition of business

 
(10,625
)
Net cash used in financing activities
(242,489
)
 
(241,811
)
Net increase (decrease) in cash and cash equivalents and restricted cash
42,921

 
(212,567
)
Cash and cash equivalents and restricted cash, beginning of period
326,185

 
560,509

Cash and cash equivalents and restricted cash, end of period
$
369,106

 
$
347,942

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period:
 
 
 
Interest paid
$
12,794

 
$
11,888

Income tax paid, net
$
11,213

 
$
4,633

Changes in accounts payable and accrued liabilities related to purchases of property, plant and equipment
$
16,279

 
$
1,070

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8


HELMERICH & PAYNE, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 NATURE OF OPERATIONS
Helmerich & Payne, Inc. (“H&P,” which, together with its subsidiaries, is identified as the “Company,” “we,” “us,” or “our,” except where stated or the context requires otherwise) through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies.
Effective October 1, 2018, we implemented organizational changes, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. Certain operations previously reported in “Other” within our segment disclosures are now managed and presented within the new H&P Technologies reportable segment. As a result, beginning with the reporting of first quarter 2019, our operations are organized into the following reportable business segments: U.S. Land, Offshore, International Land and H&P Technologies. Certain other corporate activities and our real estate operations are included in Other. All segment disclosures have been recast for these segment changes. Refer to Note 15—Business Segments and Geographic Information for further details on H&P Technologies, our new reportable segment.
Our U.S. Land operations are primarily located in Colorado, Louisiana, Ohio, Oklahoma, New Mexico, North Dakota, Pennsylvania, Texas, Utah, West Virginia and Wyoming. Additionally, Offshore operations are conducted in the Gulf of Mexico and our International Land operations have rigs primarily located in four international locations: Argentina, Bahrain, Colombia and United Arab Emirates (“U.A.E.”). 
We also own, develop and operate limited commercial real estate properties. Our real estate investments, which are located exclusively within Tulsa, Oklahoma, include a shopping center, multi-tenant industrial warehouse properties, and undeveloped real estate.
Fiscal Year 2019 Acquisition
On November 1, 2018, we completed an acquisition of an unaffiliated company, Angus Jamieson Consulting (“AJC”), which is now a wholly-owned subsidiary of the Company, for a total consideration of approximately $3.4 million. AJC is a software-based training and consultancy company based in Inverness, Scotland and is widely recognized as an industry leader in wellbore positioning. The operations of AJC are included in the H&P Technologies reportable business segment. The acquisition of AJC has been accounted for as a business combination in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recorded at their acquisition date fair values. The allocation of the purchase price includes goodwill of $3.1 million.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES
Interim Financial Information
The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the Consolidated Financial Statements and notes thereto in our 2018 Annual Report on Form 10-K and other current filings with the SEC.  In the opinion of management, all adjustments, consisting of those of a normal recurring nature, necessary to present fairly the results of the periods presented have been included. The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year. Certain prior period financial information has been recast to reflect the current year’s presentation as it relates to the new reportable segment, H&P Technologies, effective October 1, 2018. Refer to Note 15–Business Segments and Geographic Information. Additionally, the prior comparative periods presented in the Unaudited Condensed Consolidated Financial Statements have been adjusted in accordance with the adoption of accounting standard updates included in the Recently Issued Accounting Updates table below.
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of Helmerich & Payne, Inc. and its domestic and foreign subsidiaries. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the fiscal year are included in the unaudited condensed consolidated statements of operations and comprehensive income (loss) from the date the Company gains control until the date when the Company ceases to control the subsidiary. All significant intercompany accounts and transactions have been eliminated upon consolidation.

9


Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents include cash on hand, demand deposits with banks and any highly liquid investment with an original maturity of three months or less. Approximately $318.9 million of cash and cash equivalents reside in accounts in the United States and the remaining $15.9 million are in other countries. Our cash, cash equivalents and short-term investments are subject to global economic as well as credit risk, and international accounts are subject to risks specific to the countries where they are located. Some of our U.S. bank accounts also carry balances greater than the federally insured limit.
We had restricted cash of $34.3 million and $41.5 million at June 30, 2019 and 2018, respectively, and $41.8 million and $39.1 million at September 30, 2018 and 2017, respectively. Of the total at June 30, 2019 and September 30, 2018, $3.0 million and $11.3 million, respectively, is related to the acquisition of drilling technology companies,  $2.0 million as of each of June 30, 2019 and September 30, 2018 is from the initial capitalization of the captive insurance company, and $29.3 million and $28.5 million, respectively, represents an additional amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance company.  The restricted amounts are primarily invested in short-term money market securities. See Recently Issued Accounting Updates below for changes to the presentation of restricted cash effective October 1, 2018 as a result of adopting Accounting Standards Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.
The restricted cash and cash equivalents are reflected within the following line items on the Unaudited Condensed Consolidated Balance Sheets:
 
June 30,
 
September 30,
(in thousands)
2019
 
2018
 
2018
 
2017
Cash
$
334,775

 
$
306,426

 
$
284,355

 
$
521,375

Restricted Cash
 
 
 
 
 
 
 
Prepaid expenses and other
30,543

 
34,614

 
39,830

 
32,439

Other assets
3,788

 
6,902

 
2,000

 
6,695

Total cash, cash equivalents, and restricted cash
$
369,106

 
$
347,942

 
$
326,185

 
$
560,509


Drilling Revenues
Contract drilling revenues are comprised of daywork drilling contracts for which the related revenues and expenses are recognized as services are performed and collection is reasonably assured and it is determined to be probable that a significant reversal will not occur. For certain contracts, we receive payments contractually designated for the mobilization of rigs and other drilling equipment. Mobilization payments received, and direct costs incurred for the mobilization, are deferred and recognized on a straight-line basis over the term of the related drilling contract. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred. Refer to Note 9—Revenue from Contracts with Customers for additional information regarding our contract drilling services revenue.

10


Recently Issued Accounting Updates
Changes to U.S. GAAP are established by the FASB in the form of Accounting Standards Updates ("ASU's") to the FASB Accounting Standards Codification ("ASC"). We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable, clarifications of ASUs listed below, immaterial, or already adopted by the Company.
The following table provides a brief description of recent accounting pronouncements and our analysis of the effects on our financial statements:
Standard
Description
Date of
Adoption
Effect on the Financial Statements or Other Significant Matters
Recently Adopted Accounting Pronouncements
ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting
Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. Regardless of whether the change to the terms or conditions of the award requires modification accounting, the existing disclosure requirements and other aspects of U.S. GAAP associated with modification, such as earnings per share, continue to apply.
October 1, 2018
We adopted this ASU during the first quarter of fiscal year 2019, as required. There was no impact to our unaudited condensed consolidated financial statements and disclosures.
ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
The ASU changes how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the net periodic benefit cost in the income statement. Employers should present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Employers should present the other components of the net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. The amendments are applied retrospectively for the presentation of the service cost component and other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement.
October 1, 2018
We adopted this ASU during the first quarter of fiscal year 2019, as required, on a retrospective basis. The retrospective impact was not material to our unaudited condensed consolidated financial statements and disclosures.
ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash
The ASU requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending cash amounts for the periods shown on the statement of cash flows.
October 1, 2018
We adopted this ASU during the first quarter of fiscal year 2019, as required, on a retrospective basis. The retrospective impact on the unaudited condensed consolidated statement of cash flows for the nine months ended June 30, 2018 was an increase of $2.4 million in net cash provided by operating activities.
ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
Under prior U.S. GAAP, the tax effects of intra-entity asset transfers (intercompany sales) were deferred until the transferred asset was sold to a third party or otherwise recovered through use. This was an exception to the principle in ASC 740, Income Taxes, that generally requires comprehensive recognition of current and deferred income taxes. The new guidance eliminates the exception for all intra-entity sales of assets other than inventory. As a result, a reporting entity recognizes the tax expense from the sale of the asset in the seller's tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer's jurisdiction is also recognized at the time of the transfer. The new guidance does not apply to intra-entity transfers of inventory. The income tax consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party.
October 1, 2018
We adopted this ASU during the first quarter of fiscal year 2019, as required. There was no material impact to our unaudited condensed consolidated financial statements and disclosures.


11


ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
The ASU was intended to reduce diversity in practice in presentation and classification of certain cash receipts and cash payments by providing guidance on eight specific cash flow issues.
October 1, 2018
We adopted this ASU during the first quarter of fiscal year 2019, as required, on a retrospective basis. The retrospective impact on the unaudited condensed consolidated statement of cash flows for the nine months ended June 30, 2018 is a reclassification of $10.6 million from net cash provided by operating activities to net cash used in financing activities.
ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
The standard requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. At adoption, a cumulative-effect adjustment to beginning retained earnings is recorded to reflect the fair value of such investments at the date of adoption in retained earnings rather than accumulated other comprehensive income. 
October 1, 2018
We adopted this ASU during the first quarter of fiscal year 2019, as required. As a result, changes in the fair value of our equity investments have been recognized in net income since the date of adoption, and our future results of operations will continue to be subject to stock market fluctuations for these investments. The cumulative catch up impact that was recorded to the beginning balance of retained earnings at October 1, 2018 was a reclassification of $44.0 million ($29.1 million after-tax) of cumulative gains from the beginning balance of accumulated other comprehensive income.
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606)
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The update outlined a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and superseded other revenue recognition guidance, including industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled for those goods or services. The update also required disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Furthermore, as part of Topic 606, the FASB introduced ASC 340-40, Other Assets and Deferred Costs, which provides guidance on the capitalization of contract related costs that are not within the scope of other authoritative literature. Companies could use either a full retrospective or a modified retrospective approach to adopt the updates.
October 1, 2018
We adopted this topic, using the modified retrospective transitional approach, during the first quarter of fiscal year 2019, as required. We recognized the cumulative effect by initially applying the revenue standard as an adjustment to the opening balance of retained earnings during the period (October 1, 2018). Refer to Note 9—Revenue from Contracts with Customers for the impact of the adoption.
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework –  Changes to the Disclosure Requirements for Fair Value Measurement
This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project, where entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This update is effective for annual and interim periods beginning after December 15, 2019.
 
June 30, 2019
We early adopted this ASU during the third quarter of fiscal year 2019. The adoption did not have a material impact to our unaudited condensed consolidated financial statements and disclosures. Refer to Note 12—Fair Value Measurement of Financial Instruments.
ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income
This ASU relates to the impacts of the tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). The guidance permits the reclassification of certain income tax effects of the Tax Reform Act from Accumulated Other Comprehensive Income (Loss) to Retained Earnings. The guidance also requires certain new disclosures. This update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal periods and early adoption is permitted. Entities may adopt the guidance using one of two transition methods, retrospective to each period (or periods) in which the income tax effects of the Tax Reform Act related to the items remaining in Other Comprehensive Income are recognized or at the beginning of the period of adoption.
June 30, 2019
We early adopted this ASU during the third quarter of fiscal year 2019. We reclassified $4.2 million from accumulated other comprehensive income (loss) to retained earnings for stranded income tax effects resulting from the Tax Reform Act. The adoption did not have a material impact to our unaudited condensed consolidated financial statements and disclosures.



12


Standards that are not yet adopted as of June 30, 2019
ASU No. 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract
This ASU aims to reduce complexity in the accounting for costs of implementing a cloud computing service arrangement. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This update is effective for annual and interim periods beginning after December 15, 2019.
October 1, 2020
We are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures.

ASU No. 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans—General (Topic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans
This ASU amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit, pension and other postretirement plans. This update is effective for annual and interim periods ending after December 15, 2020.
October 1, 2021
We are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures.
ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) and related ASU’s issued subsequent
This ASU introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income(loss), and (4) beneficial interests in securitized financial assets. This update is effective for annual and interim periods beginning after December 15, 2019.    
October 1, 2020
We are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures.
ASU No. 2016-02, Leases (Topic 842) and related ASU’s issued subsequent
ASU No. 2016-02 will require organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months. Lessor accounting remains substantially similar to current U.S. GAAP. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2016-02 mandates a modified retrospective transition method of adoption with an option to use certain practical expedients.  
October 1, 2019
We are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures.


13


Cash Flows
The following is a summary of the retrospective impact of our adoption of ASU No. 2016-15 and ASU No. 2016-18:
 
Nine Months Ended June 30, 2018
(in thousands)
Historical
Accounting
Method
 
Effect of
Adoption of
ASU No. 2016-15
 
Effect of
Adoption of
ASU No. 2016-18
 
As
Adjusted
Unaudited Condensed Consolidated Statements of Cash Flows
 
 
 
 
 
 
 
Change in prepaid expenses and other
$
(11,798
)
 
$

 
$
2,175