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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
  For quarterly period ended: March 31, 2005
 
    
  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.

(Exact name of registrant as specified in its charter)
     
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 APRIL 30, 2005
Common Stock,  $0.10 par value   51,185,792

Total Number of Pages — 23

 
 

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

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 Certification of CEO Pursuant to Section 302
 Certification of CFO Pursuant to Section 302
 Certification of CEO and CFO Pursuant to Section 906

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Table of Contents

PART I. FINANCIAL INFORMATION

HELMERICH & PAYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share amounts)

ITEM 1. FINANCIAL STATEMENTS

                 
    Unaudited        
    March 31,     September 30,  
    2005     2004  
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 208,453     $ 65,296  
Accounts receivable, less reserve of $1,429 at March 31, 2005 and $1,265 at September 30, 2004
     133,184       133,262  
Inventories
     20,759       20,826  
Deferred income tax
     4,751       4,346  
Prepaid expenses and other
     25,785       22,156  
 
            
Total current assets
     392,932       245,886  
 
            
 
                
Investments
     157,076       161,532  
Property, plant and equipment, net
     959,487       998,674  
Other assets
     662       752  
 
            
 
                
Total assets
   $ 1,510,157     $ 1,406,844  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 24,500     $ 28,012  
Accrued liabilities
     31,221       31,891  
 
            
Total current liabilities
     55,721       59,903  
 
            
 
                
Noncurrent liabilities:
                
Long-term notes payable
     200,000       200,000  
Deferred income taxes
     221,148       194,573  
Other
     43,588       38,258  
 
            
Total noncurrent liabilities
     464,736       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
     97,016       85,466  
Retained earnings
     881,984       828,763  
Unearned compensation
     (149 )     —  
Accumulated other comprehensive income
     39,109       36,252  
Treasury stock, at cost
     (33,613 )     (41,724 )
 
            
Total shareholders’ equity
     989,700       914,110  
 
            
 
                
Total liabilities and shareholders’ equity
   $ 1,510,157     $ 1,406,844  
 
            

The accompanying notes are an integral part of these statements.

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Table of Contents

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
                                 
    Three Months Ended     Six Months Ended  
    March 31,     March 31,  
    2005     2004     2005     2004  
         
Operating revenues:
                                
Drilling — U.S. Land
   $ 122,394     $ 82,477     $ 231,582     $ 157,410  
Drilling — U.S. Offshore
     18,649       18,675       39,005       39,377  
Drilling — International
     41,799       39,311       84,270       75,272  
Real Estate
     2,608       2,561       5,272       5,238  
         
 
     185,450       143,024       360,129       277,297  
         
 
                                
Operating costs and expenses:
                                
Operating costs
     114,321       104,950       225,573       198,731  
Depreciation
     23,950       23,402       47,212       45,670  
General and administrative
     9,593       9,789       18,839       18,891  
         
 
     147,864       138,141       291,624       263,292  
         
 
                                
Operating income
     37,586       4,883       68,505       14,005  
 
                                
Other income (expense):
                                
Interest and dividend income
     1,193       516       2,154       1,161  
Interest expense
     (3,246 )     (3,112 )      (6,555 )     (6,334 )
Gain (loss) on sale of investment securities
     (36 )     7,072       26,313       11,976  
Income from asset sales
     971       755       11,787       1,636  
Other
     348       109       346       118  
         
 
     (770 )     5,340       34,045       8,557  
         
 
                                
Income before income taxes and equity in income (loss) of affiliate
     36,816       10,223       102,550       22,562  
 
                                
Income tax provision
     15,153       4,484       42,283       9,615  
 
                                
Equity in income (loss) of affiliate net of income taxes
     687       309       1,393       (311 )
         
 
                                
NET INCOME
   $ 22,350     $ 6,048     $ 61,660     $ 12,636  
         
 
Earnings per common share:
                                
Basic
   $ 0.44     $ 0.12     $ 1.22     $ 0.25  
Diluted
   $ 0.43     $ 0.12     $ 1.20     $ 0.25  
 
                                
Weighted average shares outstanding:
                                
Basic
     50,955       50,263       50,747       50,209  
Diluted
     51,891       50,903       51,571       50,784  
 
                                
Dividends declared per common share
   $ 0.0825     $ 0.0800     $ 0.1650     $ 0.1600  

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
                 
    Six Months Ended  
    March 31,  
    2005     2004  
OPERATING ACTIVITIES:
                
Net income
   $ 61,660     $ 12,636  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation
     47,212       45,670  
Equity in (income) loss of affiliate before income taxes
     (2,247 )     502  
Amortization of deferred compensation
     11       10  
Gain on sale of investment securities
     (26,313 )     (10,030 )
Non-monetary investment gain
     —       (1,946 )
Gain on sale of assets
     (11,787 )     (1,636 )
Other-net
     (348 )     34  
Deferred income tax expense
     21,947       18,652  
Change in assets and liabilities-
                
Accounts receivables
     (16,761 )     (10,894 )
Inventories
     67       821  
Prepaid expenses and other
     (1,539 )     (1,039 )
Income tax receivable
     —       (11,541 )
Accounts payable
     (3,571 )     (6,800 )
Accrued liabilities
     (670 )     (668 )
Deferred income taxes
     5,805       973  
Other noncurrent liabilities
     4,623       2,429  
 
            
 
                
Net cash provided by operating activities
     78,089       37,173  
 
            
 
                
INVESTING ACTIVITIES:
                
Capital expenditures
     (22,693 )     (52,657 )
Purchase of investments
     (5,000 )     —  
Proceeds from sale of investment securities
     62,843       14,033  
Proceeds from asset sales
     26,455       2,907  
 
            
Net cash provided by (used in) investing activities
     61,605       (35,717 )
 
            
 
                
FINANCING ACTIVITIES:
                
Payment of short-term notes
     —       (5,000 )
Dividends paid
     (8,380 )     (8,050 )
Proceeds from exercise of stock options
     11,843       3,963  
 
            
Net cash provided by (used in) financing activities
     3,463       (9,087 )
 
            
 
                
Net increase (decrease) in cash and cash equivalents
     143,157       (7,631 )
Cash and cash equivalents, beginning of period
     65,296       38,189  
 
            
Cash and cash equivalents, end of period
   $ 208,453     $ 30,558  
 
            

The accompanying notes are an integral part of these statements.

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Table of Contents

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands — except per share data)
                                                                         
                                                            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
                                     61,660                               61,660  
Other comprehensive income, Unrealized gains on available- for-sale securities, net
                                                             2,857       2,857  
 
                                                                      
Comprehensive income
                                                                     64,517  
 
                                                                      
 
                                                                        
Capital adjustment of equity investee
                     2,682                                               2,682  
Cash dividends $(0.165 per share)
                                     (8,439 )                             (8,439 )
Exercise of stock options
                     3,799                       (713 )     8,044               11,843  
Stock issued under
                                                                        
Restricted Stock Award Plan
                     93       (160 )             (5 )     67               —  
Tax benefit of stock-based awards
                     4,976                                               4,976  
Amortization of deferred compensation
                             11                                       11  
     
 
                                                                        
Balance, March 31, 2005
     53,529     $ 5,353     $ 97,016     $ (149 )   $ 881,984       2,366     $ (33,613 )   $ 39,109     $ 989,700  
     

The accompanying notes are an integral part of these statements.

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Table of Contents

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 six months ended March 31, 2005, and March 31, 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 Company’s 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     Six Months Ended  
    March 31,     March 31,  
    2005     2004     2005     2004  
    (in thousands except per share amounts)  
Net income, as reported
   $ 22,350     $ 6,048     $ 61,660     $ 12,636  
Add: Stock-based employee compensation expense included in the Consolidated Statements of Income, net of related tax effects
     5       —       7       6  
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects
     (833 )     (1,013 )     (1,826 )     (2,122 )
 
                        
Pro forma net income
   $ 21,522     $ 5,035     $ 59,841     $ 10,520  
 
                        
 
                                
Earnings per share:
                                
Basic-as reported
   $ 0.44     $ 0.12     $ 1.22     $ 0.25  
 
                        
Basic-pro forma
   $ 0.42     $ 0.10     $ 1.18     $ 0.21  
 
                        
 
                                
Diluted-as reported
   $ 0.43     $ 0.12     $ 1.20     $ 0.25  
 
                        
Diluted-pro forma
   $ 0.41     $ 0.10     $ 1.16     $ 0.21  
 
                        

3.   Cash Dividends
 
    The $.0825 cash dividend declared December 1, 2004, was paid March 1, 2005. On March 2, 2005, a cash dividend of $.0825 per share was declared for shareholders of record on May 13, 2005, payable June 1, 2005.
 
4.   Inventories
 
    Inventories consist primarily of replacement parts and supplies held for use in the Company’s drilling operations.

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Table of Contents

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     Six Months Ended  
    March 31,     March 31,  
    2005     2004     2005     2004  
After-tax gain (loss)
   $ (18 )   $ 4,337     $ 16,042     $ 6,201  
Earnings per diluted share
   $ —     $ 0.09     $ 0.31     $ 0.12  
 
                                
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 $6.3 million at March 31, 2005 and $5.6 million at September 30, 2004. The recorded amounts for investments accounted for under the equity method are $44.9 million and $57.8 million at March 31, 2005 and September 30, 2004, respectively.

                                 
            Gross     Gross     Est.  
            Unrealized     Unrealized     Fair  
    Cost     Gains     Losses     Value  
            (in thousands)          
Equity Securities 03/31/05
   $ 30,976     $ 74,959     $ 74     $ 105,861  
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     Six Months Ended