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: December 31, 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 | 73-0679879 | |||
| (State or other jurisdiction of | (I.R.S. Employer I.D. Number) | |||
| incorporation or organization) |
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 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
CLASS
|
OUTSTANDING AT JANUARY 31, 2005 | |
Common Stock, $0.10 par value
|
50,751,546 | |
| Total Number of Pages — 20 |
HELMERICH & PAYNE, INC.
INDEX
| Page No. | ||||||||
| 3 | ||||||||
| 4 | ||||||||
| 5 | ||||||||
| 6 | ||||||||
| 7-12 | ||||||||
| 13-17 | ||||||||
| 17-18 | ||||||||
| 17 | ||||||||
| 18 | ||||||||
| 18 | ||||||||
| 19 | ||||||||
| Certification of CEO Pursuant to Section 302 | ||||||||
| Certification of CFO Pursuant to Section 302 | ||||||||
| Certification of CEO & CFO Pursuant to Section 906 | ||||||||
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
| Unaudited | ||||||||
| December 31, | September 30, | |||||||
| 2004 | 2004 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 177,524 | $ | 65,296 | ||||
Accounts receivable, less reserve of
$1,415 at December 31, 2004 and $1,265
at September 30, 2004 |
124,055 | 133,262 | ||||||
Inventories |
19,911 | 20,826 | ||||||
Deferred income tax |
4,346 | 4,346 | ||||||
Prepaid expenses and other |
26,403 | 22,156 | ||||||
Total current assets |
352,239 | 245,886 | ||||||
Investments |
149,667 | 161,532 | ||||||
Property, plant and equipment, net |
970,443 | 998,674 | ||||||
Other assets |
743 | 752 | ||||||
Total assets |
$ | 1,473,092 | $ | 1,406,844 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 21,689 | $ | 28,012 | ||||
Accrued liabilities |
36,653 | 31,891 | ||||||
Total current liabilities |
58,342 | 59,903 | ||||||
Noncurrent liabilities: |
||||||||
Long-term notes payable |
200,000 | 200,000 | ||||||
Deferred income taxes |
212,945 | 194,573 | ||||||
Other |
41,636 | 38,258 | ||||||
Total noncurrent liabilities |
454,581 | 432,831 | ||||||
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 |
92,240 | 85,466 | ||||||
Retained earnings |
863,887 | 828,763 | ||||||
Unearned compensation |
(157 | ) | — | |||||
Accumulated other comprehensive income |
37,282 | 36,252 | ||||||
Treasury stock, at cost |
(38,436 | ) | (41,724 | ) | ||||
Total shareholders’ equity |
960,169 | 914,110 | ||||||
Total liabilities and shareholders’ equity |
$ | 1,473,092 | $ | 1,406,844 | ||||
The accompanying notes are an integral part of these statements.
-3-
HELMERICH & PAYNE, INC.
| Three Months Ended | ||||||||
| December 31, | ||||||||
| 2004 | 2003 | |||||||
Operating revenues: |
||||||||
Drilling – U.S. Land |
$ | 109,188 | $ | 74,933 | ||||
Drilling – U.S. Offshore |
20,356 | 20,702 | ||||||
Drilling – International |
42,471 | 35,961 | ||||||
Real Estate |
2,664 | 2,677 | ||||||
| 174,679 | 134,273 | |||||||
Operating costs and expenses: |
||||||||
Operating costs |
111,252 | 93,781 | ||||||
Depreciation |
23,262 | 22,268 | ||||||
General and administrative |
9,246 | 9,102 | ||||||
| 143,760 | 125,151 | |||||||
Operating income |
30,919 | 9,122 | ||||||
Other income (expense): |
||||||||
Interest and dividend income |
961 | 645 | ||||||
Interest expense |
(3,309 | ) | (3,222 | ) | ||||
Gain on sale of investment securities |
26,349 | 4,904 | ||||||
Income from asset sales |
10,816 | 881 | ||||||
Other |
(2 | ) | 9 | |||||
| 34,815 | 3,217 | |||||||
Income before income taxes and equity
in income (loss) of affiliate |
65,734 | 12,339 | ||||||
Income tax provision |
27,130 | 5,131 | ||||||
Equity in income (loss) of affiliate
net of income taxes |
706 | (620 | ) | |||||
NET INCOME |
$ | 39,310 | $ | 6,588 | ||||
Earnings per common share: |
||||||||
Basic |
$ | 0.78 | $ | 0.13 | ||||
Diluted |
$ | 0.77 | $ | 0.13 | ||||
Weighted average shares outstanding: |
||||||||
Basic |
50,543 | 50,154 | ||||||
Diluted |
51,256 | 50,667 | ||||||
Dividends declared per common share |
$ | 0.0825 | $ | 0.0800 | ||||
The accompanying notes are an integral part of these statements.
-4-
HELMERICH & PAYNE, INC.
| Three Months Ended | ||||||||
| December 31, | ||||||||
| 2004 | 2003 | |||||||
OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 39,310 | $ | 6,588 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation |
23,262 | 22,268 | ||||||
Equity in (income) loss of affiliate before
income taxes |
(1,139 | ) | 1,000 | |||||
Amortization of deferred compensation |
3 | 10 | ||||||
Gain on sale of securities |
(26,349 | ) | (3,209 | ) | ||||
Non-monetary
investment (gain) loss |
— | (1,564 | ) | |||||
Gain on sale of assets |
(10,816 | ) | (881 | ) | ||||
Other-net |
(4 | ) | 244 | |||||
Deferred income tax expense |
17,349 | 10,242 | ||||||
Change in assets and liabilities: |
||||||||
Accounts receivable |
(7,238 | ) | 1,490 | |||||
Inventories |
915 | 463 | ||||||
Prepaid expenses and other |
(4,238 | ) | (12,435 | ) | ||||
Accounts payable |
(6,323 | ) | 731 | |||||
Accrued liabilities |
4,742 | (761 | ) | |||||
Deferred income taxes |
1,434 | 182 | ||||||
Other noncurrent liabilities |
2,768 | 1,368 | ||||||
Net cash provided by operating activities |
33,676 | 25,736 | ||||||
INVESTING ACTIVITIES: |
||||||||
Capital expenditures |
(9,370 | ) | (29,746 | ) | ||||
Proceeds from sale of investments |
62,397 | 3,462 | ||||||
Proceeds from sales of property, plant and equipment |
25,156 | 1,295 | ||||||
Net cash provided by (used in)
investing activities |
78,183 | (24,989 | ) | |||||
FINANCING ACTIVITIES: |
||||||||
Dividends paid |
(4,166 | ) | (4,015 | ) | ||||
Proceeds from exercise of stock options |
4,535 | 576 | ||||||
Net cash provided by (used in) financing activities |
369 | (3,439 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
112,228 | (2,692 | ) | |||||
Cash and cash equivalents, beginning of period |
65,296 | 38,189 | ||||||
Cash and cash equivalents, end of period |
$ | 177,524 | $ | 35,497 | ||||
The accompanying notes are an integral part of these statements.
-5-
HELMERICH & PAYNE, INC.
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Unearned | Retained | Treasury Stock | Comprehensive | Shareholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Compensation | Earnings | Shares | Amount | Income | Equity | ||||||||||||||||||||||||||||
Balance, September 30, 2004 |
53,529 | $ | 5,353 | $ | 85,466 | $ | — | $ | 828,763 | 3,084 | $ | (41,724 | ) | $ | 36,252 | $ | 914,110 | |||||||||||||||||||
Comprehensive Income: |
||||||||||||||||||||||||||||||||||||
Net Income |
39,310 | 39,310 | ||||||||||||||||||||||||||||||||||
Other comprehensive income,
Unrealized gains on available-
for-sale securities, net |
1,030 | 1,030 | ||||||||||||||||||||||||||||||||||
Total other comprehensive income |
1,030 | |||||||||||||||||||||||||||||||||||
Comprehensive income |
40,340 | |||||||||||||||||||||||||||||||||||
Capital adjustment of equity investee |
4,326 | 4,326 | ||||||||||||||||||||||||||||||||||
Cash dividends ($0.0825 per share) |
(4,186 | ) | (4,186 | ) | ||||||||||||||||||||||||||||||||
Exercise of stock options |
1,314 | (238 | ) | 3,221 | 4,535 | |||||||||||||||||||||||||||||||
Stock issued under
Restricted Stock Award Plan |
93 | (160 | ) | (5 | ) | 67 | — | |||||||||||||||||||||||||||||
Tax benefit of stock-based awards |
1,041 | 1,041 | ||||||||||||||||||||||||||||||||||
Amortization of deferred compensation |
3 | 3 | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2004 |
53,529 | $ | 5,353 | $ | 92,240 | $ | (157 | ) | $ | 863,887 | 2,841 | $ | (38,436 | ) | $ | 37,282 | $ | 960,169 | ||||||||||||||||||
The accompanying notes are an integral part of these statements.
-6-
HELMERICH & PAYNE, INC.
| 1. | Basis of Presentation | |||
| In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly the results of the periods presented. The results of operations for the three months ended December 31, 2004, and December 31, 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 2004 Annual Report on Form 10K. | ||||
| 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 SFAS No. 123, “Accounting for Stock-Based Compensation”. | ||||
| Three Months Ended | ||||||||
| December 31, | ||||||||
| 2004 | 2003 | |||||||
| (in thousands except per share amounts) | ||||||||
Net income, as reported |
$ | 39,310 | $ | 6,588 | ||||
Add: Stock-based employee compensation expense
included in the Consolidated Statements
of Income, net of related tax effects |
2 | 6 | ||||||
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects |
(993 | ) | (1,109 | ) | ||||
Pro forma net income |
$ | 38,319 | $ | 5,485 | ||||
Earnings per share: |
||||||||
Basic-as reported |
$ | 0.78 | $ | 0.13 | ||||
Basic-pro forma |
$ | 0.76 | $ | 0.11 | ||||
Diluted-as reported |
$ | 0.77 | $ | 0.13 | ||||
Diluted-pro forma |
$ | 0.75 | $ | 0.11 | ||||
| 3. | Cash Dividends | |||
| The $.0825 cash dividend declared in September, 2004, was paid December 1, 2004. On December 1, 2004, a cash dividend of $.0825 per share was declared for shareholders of record on February 11, 2005, payable March 1, 2005. | ||||
| 4. | Inventories | |||
| Inventories consist primarily of replacement parts and supplies held for use in the Company’s drilling operations. | ||||
| 5. | Sale of Investment Securities | |||
| Net income includes after-tax gains from the sales of securities of $16.0 million ($0.31 per diluted share) and $1.9 million ($0.04 per diluted share) for the three months ended December 31, 2004 and 2003, respectively. The activity | ||||
-7-
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)
| in the first quarter of 2005 was comprised primarily of the sale of shares in our equity investee, Atwood Oceanics (“Atwood”), in conjunction with an equity offering by Atwood. As a result of Atwood’s capital transaction, our equity investment and paid-in-capital increased by $4.3 million. Also, included in net income for the first quarter of fiscal 2004 is a non-monetary investment gain of $1.2 million ($0.02 per diluted share). | ||||
| 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 $6.2 million at December 31, 2004 and $5.6 million at September 30, 2004. The recorded amounts for investments accounted for under the equity method are $43.9 million and $57.8 million at December 31, 2004 and September 30, 2004, respectively. | ||||
| Gross | Gross | Est. | ||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| (in thousands) | ||||||||||||||||
Equity Securities 12/31/04
|
$ | 27,629 | $ | 71,939 | $ | — | $ | 99,568 | ||||||||
Equity Securities 09/30/04
|
$ | 27,811 | $ | 70,448 | $ | 170 | $ | 98,089 | ||||||||
| 7. | Comprehensive Income | |||
| Comprehensive income, net of related tax, is as follows (in thousands): | ||||
| Three Months Ended | ||||||||
| December 31, | ||||||||
| 2004 | 2003 | |||||||
Net Income |
$ | 39,310 | $ | 6,588 | ||||
Other comprehensive income: |
||||||||
Net unrealized gain on securities |
1,030 | 5,312 | ||||||
Amortization of unrealized loss on derivative
instruments |
— | 72 | ||||||
Other comprehensive income |
1,030 | 5,384 | ||||||
Comprehensive income |
$ | 40,340 | $ | 11,972 | ||||
| The components of accumulated other comprehensive income, net of related taxes, are as follows (in thousands): |
| December 31, | September 30, | |||||||
| 2004 | 2004 | |||||||
Unrealized gain on securities, net |
$ | 44,602 | $ | 43,572 | ||||
Minimum pension liability |
(7,320 | ) | (7,320 | ) | ||||
Accumulated other comprehensive income |
$ | 37,282 | $ | 36,252 | ||||
| 8. | Notes Payable and Long-term Debt | |||
| At December 31, 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% |
-8-
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)
| The terms of the debt obligations require the Company to maintain a minimum ratio of debt to total capitalization. | ||||
| At December 31, 2004, the Company had a committed unsecured line of credit totaling $50 million. Letters of credit totaling $14.9 million were outstanding against the line, leaving $35.1 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 certain 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 ratios described above. 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 | ||||||||
| December 31, | ||||||||
| 2004 | 2003 | |||||||
| (in thousands) | ||||||||
Basic weighted-average shares |
||||||||