UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For quarterly period ended: June 30, 2004
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to ______________
Commission File Number: 1-4221
HELMERICH & PAYNE, INC.
| Delaware (State or other jurisdiction of incorporation or organization) |
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
(Registrant’s 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 x No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
| CLASS | OUTSTANDING AT July 31, 2004 | |||
Common
Stock, $0.10 par value |
50,416,398 | |||
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
| Page No. |
||||||||
| PART I. | ||||||||
| Item 1. | ||||||||
| 3 | ||||||||
| 4 | ||||||||
| 5 | ||||||||
| 6 | ||||||||
| 7-13 | ||||||||
| Item 2. | 13-19 | |||||||
| Item 3. | 19 | |||||||
| Item 4. | 20 | |||||||
| PART II. | 20 | |||||||
| Item 6. | 20 | |||||||
| Signatures | 21 | |||||||
| Certification of CEO Pursuant to Section 302 | ||||||||
| Certification of CFO Pursuant to Section 302 | ||||||||
| Certification of CEO & CFO Pursuant to Section 906 | ||||||||
-2-
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
| Unaudited | ||||||||
| June 30, | September 30, | |||||||
| 2004 |
2003 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 24,447 | $ | 38,189 | ||||
Accounts receivable, less reserve of $1,329
at June 30, 2004 and $1,319 at
September 30, 2003 |
102,258 | 91,088 | ||||||
Inventories |
20,762 | 22,533 | ||||||
Income tax receivable |
35,080 | 32,619 | ||||||
Prepaid expenses and other |
14,778 | 13,102 | ||||||
Total current assets |
197,325 | 197,531 | ||||||
Investments |
172,785 | 158,770 | ||||||
Property, plant and equipment, net |
1,057,597 | 1,058,205 | ||||||
Other assets |
21,177 | 1,329 | ||||||
Total assets |
$ | 1,448,884 | $ | 1,415,835 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Notes payable |
$ | 3,000 | $ | 30,000 | ||||
Accounts payable |
24,941 | 29,630 | ||||||
Accrued liabilities |
26,843 | 28,988 | ||||||
Total current liabilities |
54,784 | 88,618 | ||||||
Noncurrent liabilities: |
||||||||
Long-term notes payable |
200,000 | 200,000 | ||||||
Deferred income taxes |
218,765 | 181,737 | ||||||
Other |
38,626 | 28,229 | ||||||
Total noncurrent liabilities |
457,391 | 409,966 | ||||||
SHAREHOLDERS’ EQUITY |
||||||||
Common stock, par value $.10 per share: |
||||||||
Authorized common 80,000; issued 53,529 |
5,353 | 5,353 | ||||||
Preferred stock, no shares issued |
— | — | ||||||
Additional paid-in capital |
85,339 | 83,302 | ||||||
Retained earnings |
844,717 | 840,776 | ||||||
Unearned compensation |
— | (10 | ) | |||||
Accumulated other comprehensive income |
43,515 | 33,668 | ||||||
| 978,924 | 963,089 | |||||||
Less treasury stock, at cost, 3,120 shares
and 3,389 shares at June 30, 2004 and
September 30, 2003, respectively |
42,215 | 45,838 | ||||||
Total shareholders’ equity |
936,709 | 917,251 | ||||||
Total liabilities and shareholders’ equity |
$ | 1,448,884 | $ | 1,415,835 | ||||
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)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
REVENUES |
||||||||||||||||
Operating revenues |
$ | 147,498 | $ | 136,553 | $ | 425,831 | $ | 374,516 | ||||||||
Income from investments |
376 | 472 | 12,123 | 2,142 | ||||||||||||
| 147,874 | 137,025 | 437,954 | 376,658 | |||||||||||||
COST AND EXPENSES |
||||||||||||||||
Direct operating costs |
105,302 | 88,720 | 303,489 | 257,129 | ||||||||||||
Depreciation |
23,934 | 21,517 | 69,604 | 59,696 | ||||||||||||
General and administrative |
9,516 | 9,368 | 28,407 | 31,884 | ||||||||||||
Interest |
3,114 | 3,247 | 9,448 | 9,049 | ||||||||||||
| 141,866 | 122,852 | 410,948 | 357,758 | |||||||||||||
Income before income taxes and equity
in income of affiliates |
6,008 | 14,173 | 27,006 | 18,900 | ||||||||||||
Provision for income taxes |
2,522 | 6,144 | 11,532 | 8,176 | ||||||||||||
Equity in income of affiliates
net of income taxes |
861 | 133 | 550 | 619 | ||||||||||||
NET INCOME |
$ | 4,347 | $ | 8,162 | $ | 16,024 | $ | 11,343 | ||||||||
Earnings per common share: |
||||||||||||||||
Basic |
$ | 0.09 | $ | 0.16 | $ | 0.32 | $ | 0.23 | ||||||||
Diluted |
$ | 0.09 | $ | 0.16 | $ | 0.32 | $ | 0.22 | ||||||||
Cash Dividends (Note 3) |
$ | 0.0825 | $ | 0.08 | $ | 0.2425 | $ | 0.24 | ||||||||
AVERAGE COMMON SHARES OUTSTANDING: |
||||||||||||||||
Basic |
50,404 | 50,045 | 50,273 | 50,016 | ||||||||||||
Diluted |
50,880 | 50,681 | 50,816 | 50,563 | ||||||||||||
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, |
||||||||
| 2004 |
2003 |
|||||||
OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 16,024 | $ | 11,343 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation |
69,604 | 59,696 | ||||||
Equity in income of affiliates before
income taxes |
(887 | ) | (996 | ) | ||||
Amortization of deferred compensation |
10 | 166 | ||||||
Gain on sale of securities |
(10,412 | ) | (306 | ) | ||||
Gain on sale of property, plant & equipment |
(1,736 | ) | (1,081 | ) | ||||
Deferred income tax benefit |
30,874 | 33,205 | ||||||
Other, net |
76 | 527 | ||||||
Change in assets and liabilities- |
||||||||
Accounts receivables |
(11,170 | ) | (14,855 | ) | ||||
Inventories |
1,771 | 984 | ||||||
Prepaid expenses and other |
(1,213 | ) | (3,270 | ) | ||||
Income tax receivable |
(21,480 | ) | (25,978 | ) | ||||
Accounts payable |
(4,689 | ) | (985 | ) | ||||
Accrued liabilities |
(2,028 | ) | 2,332 | |||||
Deferred income taxes |
118 | 1,011 | ||||||
Other noncurrent liabilities |
9,378 | 4,012 | ||||||
Net cash provided by operating activities |
74,240 | 65,805 | ||||||
INVESTING ACTIVITIES: |
||||||||
Capital expenditures |
(70,536 | ) | (201,381 | ) | ||||
Proceeds from sale of securities |
14,033 | 12,444 | ||||||
Proceeds from sales of property, plant and equipment |
3,280 | 3,877 | ||||||
Net cash used in investing activities |
(53,223 | ) | (185,060 | ) | ||||
FINANCING ACTIVITIES: |
||||||||
Proceeds from long-term debt |
— | 100,000 | ||||||
Decrease (increase) in short-term notes |
(27,000 | ) | 10,000 | |||||
Dividends paid |
(12,083 | ) | (12,012 | ) | ||||
Proceeds from exercise of stock options |
4,324 | 1,357 | ||||||
Net cash provided by (used in)
financing activities |
(34,759 | ) | 99,345 | |||||
Net decrease in cash and cash equivalents |
(13,742 | ) | (19,910 | ) | ||||
Cash and cash equivalents, beginning of period |
38,189 | 46,883 | ||||||
Cash and cash equivalents, end of period |
$ | 24,447 | $ | 26,973 | ||||
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 data)
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Common Stock |
Additional Paid-In |
Unearned | Retained | Treasury Stock |
Other Comprehensive |
Total Shareholders' |
||||||||||||||||||||||||||||||
| Shares |
Amount |
Capital |
Compensation |
Earnings |
Shares |
Amount |
Income |
Equity |
||||||||||||||||||||||||||||
Balance, September 30, 2003 |
53,529 | $ | 5,353 | $ | 83,302 | $ | (10 | ) | $ | 840,776 | 3,389 | $ | (45,838 | ) | $ | 33,668 | $ | 917,251 | ||||||||||||||||||
Comprehensive Income: |
||||||||||||||||||||||||||||||||||||
Net Income
|
||||||||||||||||||||||||||||||||||||
Other comprehensive income, |
16,024 | 16,024 | ||||||||||||||||||||||||||||||||||
Unrealized gains on available-
for-sale securities, net |
9,775 | 9,775 | ||||||||||||||||||||||||||||||||||
Amortization of unrealized loss
on derivative instruments, net |
72 | 72 | ||||||||||||||||||||||||||||||||||
Total other comprehensive income |
9,847 | |||||||||||||||||||||||||||||||||||
Comprehensive income |
25,871 | |||||||||||||||||||||||||||||||||||
Cash dividends ($0.2425 per share) |
(12,083 | ) | (12,083 | ) | ||||||||||||||||||||||||||||||||
Exercise of Stock Options |
701 | (269 | ) | 3,623 | 4,324 | |||||||||||||||||||||||||||||||
Tax benefit of stock-based awards |
1,336 | 1,336 | ||||||||||||||||||||||||||||||||||
Amortization of deferred compensation |
10 | 10 | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2004 |
53,529 | $ | 5,353 | $ | 85,339 | $ | — | $ | 844,717 | 3,120 | $ | (42,215 | ) | $ | 43,515 | $ | 936,709 | |||||||||||||||||||
-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, 2004, and June 30, 2003, 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 Company’s 2003 Annual Report on Form 10-K. | ||||
| 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, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (in thousands except per share amounts) | ||||||||||||||||
Net income, as reported |
$ | 4,347 | $ | 8,162 | $ | 16,024 | $ | 11,343 | ||||||||
Add: Stock-based employee compensation
expense included in the Consolidated
Statements of Income, net of related
tax effects |
— | 9 | 6 | 103 | ||||||||||||
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects |
(1,009 | ) | (1,090 | ) | (3,131 | ) | (3,296 | ) | ||||||||
Pro forma net income |
$ | 3,338 | $ | 7,081 | $ | 12,899 | $ | 8,150 | ||||||||
Earnings per share: |
||||||||||||||||
Basic-as reported |
$ | 0.09 | $ | 0.16 | $ | 0.32 | $ | 0.23 | ||||||||
Basic-pro forma |
$ | 0.07 | $ | 0.14 | $ | 0.26 | $ | 0.16 | ||||||||
Diluted-as reported |
$ | 0.09 | $ | 0.16 | $ | 0.32 | $ | 0.22 | ||||||||
Diluted-pro forma |
$ | 0.07 | $ | 0.14 | $ | 0.25 | $ | 0.16 | ||||||||
| 3. | Cash Dividends - | |||
| The $.08 cash dividend declared in March, 2004, was paid June 1, 2004. On June 2, 2004, a cash dividend of $.0825 per share was declared for shareholders of record on August 13, 2004, payable September 1, 2004. | ||||
| 4. | Inventories - | |||
| Inventories consist primarily of replacement parts and supplies held for use in the Company’s drilling operations. | ||||
| 5. | Sale of Investments - | |||
| Net income for the first nine months of fiscal 2004 includes after-tax gains from the sale of available-for-sale securities of $6,435,000 ($0.13 per diluted share). There were no security sales in the third quarter of fiscal 2004. Net income for the three and nine months ended June 30, 2003 include no material gain or loss from the sale of portfolio securities. | ||||
-7-
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)
| 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. The recorded amounts for investments accounted for under the equity method are $57.5 million and $56.7 million at June 30, 2004 and September 30, 2003, respectively. | ||||
| Gross | Gross | Est. | ||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost |
Gains |
Losses |
Value |
|||||||||||||
| (in thousands) | ||||||||||||||||
Equity Securities 6/30/04 |
$ | 29,644 | $ | 80,042 | $ | — | $ | 109,686 | ||||||||
Equity Securities 9/30/03 |
$ | 33,300 | $ | 64,276 | $ | — | $ | 97,576 | ||||||||
| 7. | Comprehensive Income - | |||
| Comprehensive income, net of related tax, is as follows (in thousands): | ||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
Net Income |
$ | 4,347 | $ | 8,162 | $ | 16,024 | $ | 11,343 | ||||||||
Other comprehensive income: |
||||||||||||||||
Net unrealized gain (loss) on
securities |
(1,198 | ) | 12,869 | 9,775 | 14,818 | |||||||||||
Amortization of unrealized loss on
derivative instruments |
— | 245 | 72 | 734 | ||||||||||||
Other comprehensive income (loss) |
(1,198 | ) | 13,114 | 9,847 | 15,552 | |||||||||||
Comprehensive income |
$ | 3,149 | $ | 21,276 | $ | 25,871 | $ | 26,895 | ||||||||
| The components of accumulated other comprehensive income, net of related taxes, are as follows (in thousands): |
| June 30, | September 30, | |||||||
| 2004 |
2003 |
|||||||
Unrealized gain on securities, net |
$ | 49,626 | $ | 39,851 | ||||
Unrealized loss on derivative instruments |
— | (72 | ) | |||||
Minimum pension liability |
(6,111 | ) | (6,111 | ) | ||||
Accumulated other comprehensive income |
$ | 43,515 | $ | 33,668 | ||||
| 8. | Notes payable and long-term debt – | |||
| At June 30, 2004, the Company had $200 million in long-term debt outstanding at fixed rates and maturities as summarized in the following table. | ||||
| Issue Amount |
Maturity Date |
Interest Rate |
||||||
$25,000,000 |
August 15, 2007 | 5.51 | % | |||||
$25,000,000 |
August 15, 2009 | 5.91 | % | |||||
$75,000,000 |
August 15, 2012 | 6.46 | % | |||||
$75,000,000 |
August 15, 2014 | 6.56 | % | |||||
| The terms of the debt obligations require the Company to maintain a minimum ratio of debt to total capitalization. The proceeds of the debt issuances were used to repay $50 million of outstanding debt, fund the Company’s rig construction program and for other general corporate purposes. |
-8-
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)
| At June 30, 2004, the Company had a committed unsecured line of credit totaling $50 million. Short-term loans totaling $3 million and letters of credit totaling $13 million were outstanding against the line, leaving $34 million available to borrow. The weighted-average interest rate on short-term loans at June 30, 2004 was 2.5 percent. Under terms of the line of credit, the Company must maintain certain financial ratios including debt to total capitalization and debt to earnings before interest, taxes, depreciation, and 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, as well as, the maturity selected by the Company. The line of credit matures in July, 2005. | ||||
| 9. | Earnings per share - | |||
| Basic earnings per share is based on the weighted-average number of common shares outstanding during the period. Diluted earnings per share include the dilutive effect of stock options and restricted stock. | ||||
| A reconciliation of the weighted-average common shares outstanding on a basic and diluted basis is as follows: | ||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
Basic weighted-average shares |
50,404 | 50,045 | 50,273 | 50,016 | ||||||||||||
Effect of dilutive shares: |
||||||||||||||||
Stock options |
476 | 633 | 543 | 545 | ||||||||||||
Restricted stock |
— | 3 | — | 2 | ||||||||||||
| 476 | 636 | 543 | 547 | |||||||||||||