What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-07-29 compared with 2020-05-04 · 270 added, 266 removed, 275 unchanged (66% of the section changed)

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our business strategy;

the amount and nature of our future capital expenditures and how we expect to fund our capital expenditures, and the number of rigs we plan to construct or acquire;

estimates of our revenues, income, earnings per share, and market share;

our capital structure and our ability to return cash to stockholders through dividends or share repurchases;

the amount and nature of our future capital expenditures and how we expect to fund our capital expenditures;

the volatility of future oil and natural gas prices;

changes in future levels of drilling activity and capital expenditures by our customers, whether as a result of global capital markets and liquidity, changes in prices of oil and natural gas or otherwise, which may cause us to idle or stack additional rigs, or increase our capital expenditures and the construction or acquisition of rigs;

the effect, impact, potential duration or other implications of the recent outbreak of a novel strain of coronavirus ("COVID-19") and the recent oil price collapse, and any expectations we may have with respect thereto;

the effect, impact, potential duration or other implications of the recent and ongoing outbreak of a novel strain of coronavirus ("COVID-19") and the recent oil price collapse, and any expectations we may have with respect thereto;

changes in worldwide rig supply and demand, competition, or technology;

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potential long-lived asset impairments.

Important factors that could cause actual results to differ materially from our expectations or results discussed in the forward‑looking statements are disclosed in this Form 10-Q under Part II, Item 1A— “Risk Factors" and in our 2019 Annual Report on Form 10-K under Item 1A— “Risk Factors,” as well as in Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All subsequent written and oral forward‑looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by such cautionary statements.

Important factors that could cause actual results to differ materially from our expectations or results discussed in the forward‑looking statements are disclosed in this Form 10-Q under Part II, Item 1A— “Risk Factors" and in our 2019 Annual Report on Form 10-K under Item 1A— “Risk Factors,” and Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All subsequent written and oral forward‑looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by such cautionary statements.

Because of the underlying risks and uncertainties, we caution you against placing undue reliance on these forward-looking statements.

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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) 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.

As of March 31, 2020 , our drilling rig fleet included a total of 339 drilling rigs.

Our contract drilling services segments consist of the U.S.

Land segment with 299 rigs, the Offshore segment with eight offshore platform rigs and the International Land segment with 32 rigs as of March 31, 2020 .

At the close of the second quarter of fiscal year 2020 , we had 170 contracted rigs, of which 102 were under a fixed term contract and 68 were working well-to-well, compared to 218 contracted rigs at September 30, 2019 .

land drilling industry continues to evolve, and we have led the way by upgrading and converting more rigs to the super-spec classification than any competitor in the industry.

The investments in our super-spec FlexRig drilling fleet and our ability to deliver best-in-class field performance and customer satisfaction have resulted in H&P garnering the largest market share in the U.S.

land drilling industry.

(“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.

As of June 30, 2020 , our drilling rig fleet included a total of 302 drilling rigs.

Our contract drilling services segments consist of the North America Solutions segment with 262 rigs, the Offshore Gulf of Mexico segment with eight offshore platform rigs and the International Solutions segment with 32 rigs as of June 30, 2020 .

At the close of the third quarter of fiscal year 2020 , we had 81 contracted rigs, of which 58 were under a fixed-term contract and 23 were working well-to-well, compared to 218 contracted rigs at September 30, 2019 .

Our long-term strategy remains focused on innovation, technology, safety, operational excellence and reliability.

As we move forward, we believe that our advanced uniform rig fleet, financial strength, contract backlog and strong customer and employee base position us very well to respond to volatile market conditions and take advantage of future opportunities.

As we move forward, we believe that our advanced uniform rig fleet, technology offerings, financial strength, contract backlog and strong customer and employee base position us very well to respond to continued volatile market conditions and take advantage of future opportunities.

Market Outlook

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Both commodities have historically been, and we expect them to continue to be, cyclical and highly volatile.

With respect to U.S.

Land Drilling, the resurgence of oil and natural gas production coming from the United States brought about by unconventional shale drilling for oil has significantly impacted the supply of oil and natural gas and the type of rig utilized in the U.S.

With respect to North America Solutions, the resurgence of oil and natural gas production coming from the United States brought about by unconventional shale drilling for oil has significantly impacted the supply of oil and natural gas and the type of rig utilized in the U.S.

land drilling industry.

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In early March 2020, the increase in crude oil supply resulting from production escalations from the Organization of the Petroleum Exporting Countries and other oil producing nations ("OPEC+") combined with a decrease in crude oil demand stemming from the global response and uncertainties surrounding the COVID-19 pandemic resulted in a sharp decline in crude oil strip prices.

Since the beginning of the calendar year 2020, crude oil prices fell from approximately $60 per barrel to the low-to-mid-$20 per barrel range, lower in some cases, reaching record lows.

Consequently, we have seen a significant decrease in customer 2020 capital budgets representing a decline of approximately 40% from calendar year 2019 levels.

There has been a corresponding dramatic decline in the demand for land rigs, such that the overall rig count for calendar 2020 will average significantly less than in calendar 2019.

Since the beginning of the calendar year 2020, crude oil prices fell from approximately $60 per barrel to the low-to-mid-$20 per barrel range, lower in some cases.

Consequently, we have seen a significant decrease in customer 2020 capital budgets representing a decline of nearly 50% from calendar year 2019 levels.

There has been a corresponding dramatic decline in the demand for land rigs, such that the overall rig count for calendar year 2020 will average significantly less than in calendar year 2019.

During calendar year 2020, our North American Solutions rig count has declined from 195 contracted rigs at December 31, 2019 to 68 contracted rigs at June 30, 2020.

Of the 68 contracted rigs at June 30, 2020, 48 are active with 14 rigs warm stacked and six cold stacked.

When rigs are stacked, they remain under the terms of the contract but typically pay a reduced rate, where the term days are generally not reduced, but our operating expenses are typically reduced.

We believe that we will not experience further significant declines in our rig count and that any additional declines would be much less dramatic.

We do not expect our rig count to increase until customers initiate their 2021 capital budgets.

Utilization for our super-spec FlexRig fleet peaked in late calendar year 2018 with 216 of 221 super-spec rigs working (98 percent utilization);

however, the recent decline in the demand for land rigs resulted in customers idling a large portion of our super-spec FlexRig fleet.

At March 31, 2020, we had 89 idle super-spec rigs out of our FlexRig fleet of 234 super-spec rigs ( 62 percent utilization).

Based on current customer budgets and rig release notifications, we expect our rig count to further decline by a meaningful amount.

Collectively, our other business segments, Offshore Drilling, International Land Drilling and H&P Technologies, are exposed to the same macro environment adversely affecting our U.S.

Land Drilling segment and those unfavorable factors are creating similar challenges for these business segments as well.

At June 30, 2020, we had 168 idle super-spec rigs out of our FlexRig fleet of 234 super-spec rigs ( 28 percent utilization).

Collectively, our other business segments, Offshore Gulf of Mexico and International Solutions, are exposed to the same macro environment adversely affecting our North America Solutions segment and those unfavorable factors are creating similar challenges for these business segments as well.

H&P recognizes the uncertainties and concerns caused by the COVID-19 pandemic;

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The Company mobilized a global COVID-19 response team to manage the evolving situation

H&P moved to a global "remote work" model for office personnel (beginning March 13, 2020)

The Company moved to a global "remote work" model for office personnel (beginning March 13, 2020)

The Company suspended all non-essential travel

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The temperatures of operational personnel are taken prior to them being allowed to enter a rig site

Implemented enhanced sanitation and cleaning protocols

The Company has implemented enhanced sanitation and cleaning protocols

We are complying with local governmental jurisdiction policies and procedures where our operations reside;

in some instances, policies and procedures are more stringent in our foreign operations t han in our domestic operations and this has resulted in a complete suspension of all drilling operations in at least one foreign jurisdiction

As of April 30, 2020, we have had one out of approximately 6,200 H&P employees with a confirmed case of COVID-19.

Upon being notified that the employee had tested positive, the Company followed pre-established guidelines and placed the employee on leave.

Upon full recovery, the employee will be required to quarantine for 14 days prior to returning to work.

The Company also followed our contact tracing guidelines and quarantined employees who had been in contact with the employee in the last 14 days.

None of those employees have tested positive for COVID–19.

in some instances, policies and procedures are more stringent in our foreign operations t han in our North America operations and this has resulted in a complete suspension, for a certain period of time, of all drilling operations in at least one foreign jurisdiction

As of July 15, 2020, we have had 45 out of approximately 4,050 H&P employees with confirmed cases of COVID-19.

Upon being notified that an employee has tested positive, the Company follows pre-established guidelines and places the employee on leave.

Upon full recovery, the employee is required to quarantine for 14 days prior to returning to work.

The Company also follows its contact tracing guidelines and quarantined employees who have been in contact with the employee in the last 14 days.

In addition, the Company applied its enhanced sanitation procedures to the employee’s work location prior to allowing employees to re-enter the location.

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We have taken measures to reduce costs and capital expenditures to levels that better reflect a lower activity environment.

Such reductions represent approximately $145 million of reduced planned cost and capital expenditures, and we anticipate further cost reductions.

We also announced our intention to reduce future quarterly dividends to $0.25 per share down from $0.71 per share, commencing with any dividend that may be declared by our Board of Directors (the "Board") for the third quarter of fiscal year 2020.

Actions taken during the second quarter of fiscal year 2020 included a reduction to the annual dividend of approximately $200 million, a reduction in planned fiscal year 2020 capital spend of $95 million, and a roughly $50 million reduction in fixed operational overhead.

During the third quarter of fiscal year 2020, the Company took further steps to reduce its planned fiscal year 2020 capital spend by another $40 million and its selling, general and administrative cost structures by another $25 million on an annualized basis.

The culmination of these cost-saving initiatives resulted in a $15.5 million restructuring charge during the third quarter of fiscal year 2020.

We anticipate further cost reductions in our International Solutions operations as well and are working through local jurisdictional regulations to implement those measures.

We also reduced future quarterly dividends to $0.25 per share down from $0.71 per share, commencing with dividends declared by our Board of Directors (the "Board") on June 3, 2020 for the third quarter of fiscal year 2020.

This reduction will result in approximately $200 million being retained by the Company on an annual basis.

At March 31, 2020, the Company had cash and cash equivalents and short-term investments of $381.7 million , availability under the 2018 Credit Facility (as defined herein) of $750 million and approximately $1.1 billion in near-term liquidity.

At June 30, 2020, the Company had cash and cash equivalents and short-term investments of $492.0 million and availability under the 2018 Credit Facility (as defined herein) of $750.0 million resulting in approximately $1.2 billion in near-term liquidity.

We currently do not anticipate the need to draw on the 2018 Credit Facility.

As part of the Company's normal operations, we regularly monitor the creditworthiness of our customers and vendors, screening out those where we believe there is high risk of failure to honor their counter-party obligations either through payment or delivery of goods or services.

As part of the Company's normal operations, we regularly monitor the creditworthiness of our customers and vendors, screening out those that we believe have a high risk of failure to honor their counter-party obligations either through payment or delivery of goods or services.

We also perform routine reviews of our accounts receivable and other amounts owed to us to assess and quantify the ultimate collectability of those amounts.

At March 31, 2020, the Company had a net allowance against its accounts receivable of $3.1 million and incurred bad debt expense of $3.8 million and $1.8 million during the three and six months ended March 31, 2020, respectively.

During the three months ended December 31, 2019, we recorded a bad debt recovery of $2.0 million.

At June 30, 2020, the Company had a net allowance against its accounts receivable of $4.7 million and incurred bad debt expense of $2.4 million and $4.2 million during the three and nine months ended June 30, 2020, respectively.

For the three months ended December 31, 2019, we recorded a bad debt recovery of $2.0 million within our contract drilling services operating expense on our Unaudited Condensed Consolidated Statements of Operations.

Subsequent to March 31, 2020, we adjusted our credit risk monitoring for specific customers, in response to the recent economic events described above.

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Among other things, the 2018 Credit Facility Amendment (i) extended the maturity date of the 2018 Credit Facility by one year to November 13, 2024, (ii) deleted certain negative covenants and (iii) refreshed the number of permissible extensions of the maturity date that require only the consent of extending lenders.

Restructuring

Beginning in the third quarter of fiscal year 2020, we implemented cost controls and began evaluating further measures to respond to the combination of weakened commodity prices, uncertainties related to the COVID-19 pandemic, and the resulting market volatility.

We restructured our operations to accommodate scale during an industry downturn and to re-organize our operations to align to new marketing and management strategies.

We commenced a number of restructuring efforts as a result of this evaluation, which included, among other things a reduction in our capital allocation plans, changes to our organizational structure, and a reduction of staffing levels.

Business Segments

During the fourth quarter of fiscal year 2019, we migrated our FlexApp offerings into our H&P Technologies segment.

The activity of our FlexApps was previously included in our U.S.

Land segment.

All segment disclosures have been restated, as practicable, for these segment changes.

During the third quarter of fiscal year 2020, as part of our restructuring efforts (see Note 18—Restructuring Charges ) and consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources we implemented organizational changes.

We are moving from a product-based offering, such as a rig or separate technology package, to an integrated solution-based approach by combining proprietary rig technology, automation software, and digital expertise into our rig operations.

Operations previously reported within the H&P Technologies reportable segment are now managed and presented within the North America Solutions reportable segment.

As a result, beginning with the third quarter of fiscal year 2020, our contract drilling services operations are organized into the following reportable operating business segments:

North America Solutions, Offshore Gulf of Mexico and International Solutions.

All segment disclosures have been recast for these segment changes.

Our real estate operations, our incubator program for new research and development projects, and our wholly-owned captive insurance companies are included in "Other." Consolidated revenues and expenses reflect the elimination of intercompany transactions.

Self-Insurance

On October 1, 2019, we elected to utilize a wholly-owned insurance captive (“Captive”) to insure the deductibles for our workers’ compensation, general liability and automobile liability insurance programs.

Casualty claims occurring prior to October 1, 2019 will remain on the operating segment books and future adjustments to these claims will continue to be reflected within the operating segments.

Casualty claims occurring prior to October 1, 2019 will remain on the operating segments books and future adjustments to these claims will continue to be reflected within the operating segments.

Reserves for legacy claims occurring prior to October 1, 2019, will remain as liabilities in our operating segments until they have been resolved.

We also intend to continue utilizing the Captive to insure the deductibles for our assets under a property insurance program.

Changes in those reserves will be reflected in segment earnings as they occur.

We will continue to utilize the Captive to finance the risk of loss to equipment and rig property assets.

The Company and the Captive maintain excess property and casualty reinsurance programs with third-party insurers in an effort to limit the financial impact of significant events covered under these programs.

Our operating subsidiaries are paying premiums to the Captive, typically on a monthly basis, for the estimated losses based on the external actuarial analysis.

These premiums are held in a restricted account, resulting in a transfer of risk from our operating subsidiaries to the Captive for the deductible self-insurance retention.

The actuarial estimated underwriting expenses for the three and six months ended March 31, 2020 was approximately $6.0 million and $14.7 million , respectively, and was recorded within Contract drilling services operating expenses in our Unaudited Condensed Consolidated Statement of Operations.

Intercompany premium revenues and expenses during the three and six months ended March 31, 2020 amounted to $10.5 million and $18.2 million , respectively, which were eliminated upon consolidation.

These intercompany insurance premiums are reflected as segment operating expenses within the U.S.

Land, Offshore, and International Land reportable operating segments and are reflected as intersegment sales within "Other".

The Company previously self-insured employee health plan exposures in excess of employee deductibles.

Starting in the second quarter of fiscal year 2020, the Captive insurer issued a stop-loss program that will pay for health plan claims that exceed $50,000 .

These premiums are currently held in a restricted account, resulting in a transfer of risk from our operating subsidiaries to the Captive.

The actuarial estimated underwriting expenses for the three and nine months ended June 30, 2020 was approximately $1.1 million and $15.8 million , respectively, and was recorded within contract drilling services operating expenses in our Unaudited Condensed Consolidated Statement of Operations.

Intercompany premium revenues and expenses during the three and nine months ended June 30, 2020 amounted to $10.4 million and $28.9 million , respectively, which were eliminated upon consolidation.

These intercompany insurance premiums are reflected as segment operating expenses within the North America Solutions, Offshore Gulf of Mexico, and International Solutions reportable operating segments and are reflected as intersegment sales within "Other." The Company previously self-insured employee health plan exposures in excess of employee deductibles.

Starting in the second quarter of fiscal year 2020, the Captive insurer issued a stop-loss program that will reimburse the Company's health plan for claims that exceed $50,000 .

This program will also be reviewed at the end of each policy year by an outside actuary.

One hundred percent of the stop-loss premium is being set aside by the Captive as reserves.

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As a result of the sale, 100% of TerraVici's outstanding capital stock was transferred to the purchaser in exchange for approximately $15.1 million , resulting in a total gain on the sale of TerraVici of approximately $15.0 million .

Prior to the sale, TerraVici was a component of the H&P Technologies reportable segment.

Prior to the sale, TerraVici was a component of the H&P Technologies reportable segment, which transitioned to the North America Solutions operating segment.

This transaction does not represent a strategic shift in our operations and will not have a significant effect on our operations and financial results going forward.

During the three months ended March 31, 2020, several significant economic events took place that severely impacted the current demand on drilling services, including the significant drop in the crude oil prices caused by OPEC+'s price war coupled with the decrease in the demand due to the COVID-19 pandemic.

During the second quarter of fiscal year 2020, several significant economic events took place that severely impacted the current demand on drilling services, including the significant drop in crude oil prices caused by OPEC+'s price war coupled with the decrease in the demand due to the COVID-19 pandemic.

Property, Plant and Equipment and Inventory To maintain a competitive edge in a challenging market, the Company’s management introduced a new strategy focused on operating various types of highly capable upgraded rigs and phasing out the older, less capable fleet.

This resulted in grouping the super-spec rigs of our legacy Domestic FlexRig3 asset group with our FlexRig5 asset group creating a new "Domestic super-spec FlexRig" asset group, while combining the legacy Domestic conventional asset group, FlexRig4 asset group and FlexRig3 non-super-spec rigs into one asset group (Domestic non-super-spec asset group) .

This resulted in grouping the super-spec rigs of our legacy Domestic FlexRig3 asset group and our FlexRig5 asset group creating a new "Domestic super-spec FlexRig" asset group, while combining the legacy Domestic conventional asset group, FlexRig4 asset group and FlexRig3 non-super-spec rigs into one asset group (Domestic non-super-spec asset group).

Given the current and projected low utilization for our Domestic non-super-spec asset group and all International asset groups, we considered these economic factors to be indicators that these asset groups may be impaired.

At March 31, 2020, we performed impairment testing on our Domestic non-super-spec and International conventional, FlexRig3, and FlexRig4 asset groups which had an aggregate net book value of $605.8 million .

We concluded that the net book value of each asset group is not recoverable through estimated undiscounted cash flows and recorded a non-cash impairment charge of $441.4 million in the Unaudited Condensed Consolidated Statement of Operations during the three and six months ended March 31, 2020.

Of the $441.4 million total impairment charge recorded, $292.4 million and $149.0 million was recorded in the U.S.

Land and International Land segment, respectively.

As a result of these indicators, we performed impairment testing as of March 31, 2020 on each of our Domestic non-super-spec and International conventional, FlexRig3, and FlexRig4 asset groups which had an aggregate net book value of $605.8 million.

Of the $441.4 million total impairment charge recorded, $292.4 million and $149.0 million was recorded in the North America Solutions and International Solutions segment, respectively.

No further impairments were recognized in the third quarter of fiscal year 2020.

Impairment was measured as the amount by which the net book value of each asset group exceeds its fair value.

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The significant assumptions in the valuation are based on those of a market participant and are classified as Level 2 and Level 3 inputs by ASC Topic 820 Fair Value Measurement and Disclosures.

The Company also recorded an additional non-cash impairment charge related to in-progress drilling equipment and rotational inventory of $44.9 million and $38.6 million , respectively, which had aggregate book values of $68.4 million and $38.6 million , respectively, in the Unaudited Condensed Consolidated Statement of Operations during the three and six months ended March 31, 2020.

Of the $83.5 million total impairment charge recorded for in-progress drilling equipment and rotational inventory, $75.8 million and $7.7 million was recorded in the U.S.

Land and International Land segment, respectively.

Goodwill and Intangible Assets Consistent with our policy, we test goodwill annually for impairment in the fourth quarter of our fiscal year, or more frequently if there are indicators that goodwill might be impaired.

Due to the market conditions described in Note 5—Property, Plant and Equipment , we concluded that goodwill and intangible assets might be impaired and tested the H&P Technologies reporting unit, where the goodwill balance is allocated and the intangible assets are recorded, for recoverability.

This resulted in a goodwill only non-cash impairment charge of $38.3 million recorded in Asset Impairment Charge on the Unaudited Condensed Consolidated Statement of Operations during the three and six months ended March 31, 2020 .

The recoverable amount of the H&P Technologies segment as a reporting unit is determined based on a fair value calculation which uses cash flow projections based on the Company’s financial budgets approved by the board of directors covering a five-year period, and a discount rate of 14 percent.

As of March 31, 2020, the Company also recorded an additional non-cash impairment charge related to in-progress drilling equipment and rotational inventory of $44.9 million and $38.6 million , respectively, which had aggregate book values of $68.4 million and $38.6 million , respectively, in the Unaudited Condensed Consolidated Statement of Operations during the nine months ended June 30, 2020.

Of the $83.5 million total impairment charge recorded for in-progress drilling equipment and rotational inventory, $75.8 million and $7.7 million was recorded in the North America Solutions and International Solutions segments, respectively.

Goodwill Consistent with our policy, we test goodwill annually for impairment in the fourth quarter of our fiscal year, or more frequently if there are indicators that goodwill might be impaired.

Due to the market conditions described in Note 5—Property, Plant and Equipment , during the second quarter of fiscal year 2020, we concluded that goodwill and intangible assets might be impaired and tested the H&P Technologies reporting unit, where the goodwill balance is allocated and the intangible assets are recorded, for recoverability.

The recoverable amount of the H&P Technologies reporting unit is determined based on a fair value calculation which uses cash flow projections based on the Company’s financial projections presented to the board of directors covering a five-year period, and a discount rate of 14 percent .

Cash flows beyond that five-year period have been extrapolated using the fifth-year data with no implied growth factor.

The recoverable amount of the intangible assets tested for impairment within the H&P Technologies reporting unit is determined based on undiscounted cash flow projections using the Company’s financial budgets approved by the board of directors covering a five-year period, and extrapolated for the remaining weighted average useful lives of the intangible assets.

The reporting unit level is defined as an operating segment or one level below an operating segment.

The recoverable amount of the intangible assets tested for impairment within the H&P Technologies reporting unit is determined based on undiscounted cash flow projections using the Company’s financial projections presented to the board of directors covering a five-year period, and extrapolated for the remaining weighted average useful lives of the intangible assets.

The most significant assumptions used in our cash flow model include timing on awards of future contracts, commercial pricing terms, utilization, discount rate, and the terminal value.

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Contract Backlog

As of March 31, 2020 , and September 30, 2019 , our contract drilling backlog, being the expected future dayrate revenue from executed contracts, was $0.8 billion and $1.2 billion , respectively.

The decrease in backlog at March 31, 2020 from September 30, 2019 is primarily due to prevailing market conditions causing a decline in the number of drilling contracts executed and to some extent an increase in the number of early terminations of contracts.

Approximately 50.7 percent of the March 31, 2020 total backlog is reasonably expected to be fulfilled in fiscal year 2021 and thereafter.

We do not have material long-term contracts related to our H&P Technologies segment.

As of June 30, 2020 , and September 30, 2019 , our contract drilling backlog, being the expected future dayrate revenue from executed contracts, was $0.6 billion and $1.2 billion , respectively.

The decrease in backlog at June 30, 2020 from September 30, 2019 is primarily due to prevailing market conditions causing a decline in the number of drilling contracts executed and to some extent an increase in the number of early terminations of contracts.

Approximately 73.4 percent of the June 30, 2020 total backlog is reasonably expected to be fulfilled in fiscal year 2021 and thereafter.

Fixed-term contracts customarily provide for termination at the election of the customer, with an early termination payment to be paid to us if a contract is terminated prior to the expiration of the fixed term.

As a result of the depressed market conditions and negative outlook for the near term, certain of our customers, as well as those of our competitors, have opted to renegotiate or early terminate existing drilling contracts.

Such renegotiations include requests to lower the contract dayrate in exchange for additional terms, temporary stacking of the rig, and other possibilities.

We have received early termination notices for rigs that were under contract at March 31, 2020.

During the three months ended March 31, 2020 and 2019, early termination revenue associated with term contracts was approximately $8.2 million and $1.2 million, respectively, and $8.3 million for both the six months ended March 31, 2020 and 2019.

The following table sets forth the total backlog by reportable segment as of March 31, 2020 and September 30, 2019 , and the percentage of the March 31, 2020 backlog reasonably expected to be fulfilled in fiscal year 2021 and thereafter:

As a result of the depressed market conditions and negative outlook for the near term, beginning in the second quarter of fiscal year 2020, certain of our customers, as well as those of our competitors, have opted to renegotiate or early terminate existing drilling contracts.

Such renegotiations have included requests to lower the contract dayrate in exchange for additional terms, temporary stacking of the rig, and other proposals.

We have received early termination notices for rigs that were under contract at June 30, 2020.

During the three months ended June 30, 2020 and 2019, early termination revenue associated with term contracts was $49.5 million and $0.8 million, respectively, and $57.8 million and $9.1 million for the nine months ended June 30, 2020 and 2019, respectively.

In response to the current market conditions, several operators have opted to place their rigs in an idle-but-contracted state as an alternative to early termination.

This includes "warm stacking" and "cold stacking." Warm stacking occurs when a rig remains on-site while pausing drilling activity, while cold stacking occurs when a rig is demobilized and returned to the yard temporarily until next steps are determined.

When rigs are stacked, they remain under the terms of the contract but typically pay a reduced rate, where the term days are generally not reduced, but our operating expenses reduced.

In many instances for stacked rigs, for the total days stacked there are proportional days added to the original contract length at the original contracted rate.

As of June 30, 2020, there are 14 rigs that are warm stacked and six rigs that are cold stacked within North America Solutions.

There are two rigs within Offshore Gulf of Mexico that are cold stacked, and six rigs within International Solutions that are warm stacked.

The following table sets forth the total backlog by reportable segment as of June 30, 2020 and September 30, 2019 , and the percentage of the June 30, 2020 backlog reasonably expected to be fulfilled in fiscal year 2021 and thereafter:

(in billions)

March 31, 2020

June 30, 2020

September 30, 2019

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and Thereafter

International Land

North America Solutions

Offshore Gulf of Mexico

International Solutions

The early termination of a contract may result in a rig being idle for an extended period of time, which could adversely affect our financial condition, results of operations and cash flows.

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Additionally, see " Item 1A.

Risk Factors – The impact and effects of public health crises, pandemics and epidemics, such as the recent outbreak of COVID-19, could adversely affect our business, financial condition and results of operations " within this Form 10-Q.

Results of Operations for the Three Months Ended March 31, 2020 and 2019

Risk Factors – The impact and effects of public health crises, pandemics and epidemics, such as the recent and ongoing outbreak of COVID-19, have adversely affected and are expected to continue to adversely affect our business, financial condition and results of operations " within this Form 10-Q.

Results of Operations for the Three Months Ended June 30, 2020 and 2019

Consolidated Results of Operations

Net Income (Loss) We reported loss from continuing operations of $420.5 million ( $3.88 loss per diluted share) from operating revenues of $633.6 million for the three months ended March 31, 2020 compared to income from continuing operations of $71.9 million ( $0.65 per diluted share) from operating revenues of $720.9 million for the three months ended March 31, 2019 .

Included in the net loss for the three months ended March 31, 2020 is a loss of $0.1 million ( no impact per diluted share) from discontinued operations.

Including discontinued operations, we recorded net loss of $420.5 million ( $3.88 loss per diluted share) for the three months ended March 31, 2020 compared to net income of $60.9 million ( $0.55 per diluted share) for the three months ended March 31, 2019 .

Research and Development For the three months ended March 31, 2020 and 2019 , we incurred $6.2 million and $7.3 million , respectively, of research and development expenses.

Selling, General and Administrative Expense Selling, general and administrative expenses decreased to $42.0 million during the three months ended March 31, 2020 compared to $43.5 million in the three months ended March 31, 2019 .

Net Loss We reported a loss from continuing operations of $46.0 million ( $0.43 loss per diluted share) from operating revenues of $317.4 million for the three months ended June 30, 2020 compared to a loss from continuing operations of $154.6 million ( $1.42 loss per diluted share) from operating revenues of $688.0 million for the three months ended June 30, 2019 .

Included in the net loss for the three months ended June 30, 2020 is income of $0.4 million ( no impact per diluted share) from discontinued operations.

Including discontinued operations, we recorded a net loss of $45.6 million ( $0.43 loss per diluted share) for the three months ended June 30, 2020 compared to a net loss of $154.7 million ( $1.42 loss per diluted share) for the three months ended June 30, 2019 .

Research and Development For the three months ended June 30, 2020 and 2019 , we incurred $3.6 million and $7.1 million , respectively, of research and development expenses.

Selling, General and Administrative Expense Selling, general and administrative expenses decreased to $43.1 million during the three months ended June 30, 2020 compared to $46.6 million in the three months ended June 30, 2019 .

The $3.5 million decrease in fiscal year 2020 compared to the same period in fiscal year 2019 is primarily due to lower accrued variable compensation expense.

Asset Impairment Charge During the three months ended March 31, 2020 , we impaired several assets including inventory, property, plant and equipment, and goodwill which resulted in an impairment charge of $563.2 million ($437.5 million, net of tax, or $5.19 per diluted share), which is included in Asset Impairment Charge on the Consolidated Statement of Operations for the three months ended March 31, 2020 .

Income Taxes We had an income tax benefit of $113.4 million for the three months ended March 31, 2020 compared to an income tax provision of $25.1 million for the three months ended March 31, 2019 .

Asset Impairment Charge During the three months ended June 30, 2020 , no triggering event was identified that would lead to an asset impairment charge.

During the three months ended June 30, 2019 , mainly driven by the downsizing of our fleet of FlexRig4 drilling rigs, we wrote down excess capital spares and drilling support equipment, which had an aggregate net book value of $235.3 million, and as a result, an impairment charge of $224.3 million was recorded in our Unaudited Condensed Consolidated Statements of Operations.

Restructuring Charges Beginning in the third quarter of fiscal year 2020, we implemented cost controls and began evaluating further measures to respond to the combination of weakened commodity prices, uncertainties related to the COVID-19 pandemic, and the resulting market volatility.

For the three months ended June 30, 2020 , we incurred $15.5 million in restructuring charges.

Income Taxes We had an income tax benefit of $17.6 million for the three months ended June 30, 2020 (which includes discrete tax benefits of approximately $5.9 million primarily related to a decrease in our deferred state income tax rate and return to provision adjustments) compared to an income tax benefit of $32.0 million for the three months ended June 30, 2019 (which includes discrete tax benefits of approximately $6.8 million primarily related to a decrease in our deferred state income tax rate).

Our statutory federal income tax rate for fiscal year 2020 is 21.0 percent (before incremental state and foreign taxes).

Land Operations Segment

Three Months Ended March 31,

North America Solutions Operations Segment

Three Months Ended June 30,

(in thousands, except operating statistics)

4 unchanged sentences

Asset impairment charge

Segment operating income (loss)

Restructuring charges

Segment operating loss

Operating Statistics (1):

3 unchanged sentences

Rig utilization

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $77.1 million and $76.2 million during the three months ended March 31, 2020 and 2019 , respectively.

Average expense per day excludes intercompany expense activity related to FlexApps of $2.4 million for the three months ended March 31, 2020 .

Operating Income (Loss) The U.S.

Land segment had an operating loss of $309.1 million for the three months ended March 31, 2020 compared to operating income of $102.0 million in the same period of fiscal year 2019 .

The decrease was primarily driven by the recording of an asset impairment loss during the three months ended March 31, 2020.

Revenues were $530.7 million and $617.5 million in the three months ended March 31, 2020 and 2019 , respectively.

Included in U.S.

land revenues for the three months ended March 31, 2020 is early termination revenue of $8.2 million compared to $1.2 million during the same period of fiscal year 2019 .

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $27.8 million and $72.4 million during the three months ended June 30, 2020 and 2019 , respectively.

Prior period information has been restated to reflect the transition of the H&P Technologies reportable segment to the North America Solutions reportable segment.

Operating Loss The North America Solutions segment had an operating loss of $25.2 million for the three months ended June 30, 2020 compared to an operating loss of $147.0 million in the same period of fiscal year 2019 .

The decrease was primarily driven by the asset impairment charge that was recorded during the three months ended June 30, 2019 and was partially offset by lower activity and restructuring charges during the three months ended June 30, 2020 .

Revenues were $254.4 million and $600.8 million in the three months ended June 30, 2020 and 2019 , respectively.

Included in revenues for the three months ended June 30, 2020 is early termination revenue of $48.8 million compared to $0.7 million during the same period of fiscal year 2019 .

Fixed‑term contracts customarily provide for termination at the election of the customer, with an early termination payment to be paid to us if a contract is terminated prior to the expiration of the fixed term (except in limited circumstances including sustained unacceptable performance by us).

Revenue Excluding early termination revenue per day of $475 and $57 for the three months ended March 31, 2020 and 2019 , respectively, average rig revenue per day increased by $376 to $25,781 due to higher demobilization revenue associated with rig releases offset by lower dayrate pricing.

Compared to the three months ended March 31, 2019 , our revenue days declined by 18.8 percent .

This decline was driven by a focus on free cash flow generation and budget discipline by many of our publicly traded E&P customers which commenced during fiscal year 2019 .

Additionally, recent declines in hydrocarbon prices caused many of our customers to lower rig activity during the last half of the second quarter of fiscal year 2020 .

This trend accelerated in the second half of March 2020 as oil prices collapsed.

Direct Operating Expenses Average expense per day increased $1,328 to $15,497 during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 .

The increase is primarily due to higher self-insurance expense and one-time expenses associated with idling rigs in the second half of March 2020.

Depreciation Depreciation includes charges for abandoned equipment of $0.9 million and $4.2 million for the three months ended March 31, 2020 and 2019 , respectively.

In the three months ended March 31, 2020 , depreciation expense included $0.5 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2020 as compared to $1.1 million of accelerated depreciation for the three months ended March 31, 2019 .

Asset Impairment Charge During the three months ended March 31, 2020 , we impaired our Domestic Conventional, FlexRig3, and FlexRig4 asset groups, in addition to in-progress drilling equipment and rotational inventory.

This resulted in an aggregate impairment charge of $368.2 million ($284.1 million, net of tax, or $3.39 per diluted share), which is included in Asset Impairment Charge on the Consolidated Statement of Operations for the three months ended March 31, 2020 .

Utilization U.S.

land rig utilization decreased to 63 percent for the three months ended March 31, 2020 compared to 67 percent during the three months ended March 31, 2019 .

At March 31, 2020 , 150 out of 299 existing rigs in the U.S.

Land segment were contracted.

Revenue Excluding early termination revenue per day of $6,024 and $33 for the three months ended June 30, 2020 and 2019 , respectively, average rig revenue per day decreased by $4,643 to $21,951 due to a portion of our contracted rigs operating in an idle-but-contracted state during the third quarter of fiscal year 2020 with lower average daily revenue and average daily expense.

Compared to the three months ended June 30, 2019 , our revenue days declined by 59 percent .

This decline was driven by the collapse of oil prices that occurred in March 2020, which drove our customers to quickly lower rig activity beginning in the second half of March 2020 and continuing throughout the third quarter of fiscal year 2020.

Direct Operating Expenses Average expense per day decreased $111 to $15,412 during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 .

The decrease is due to the previously-mentioned effect of idle-but-contracted rigs partially offset by one-time expenses associated with idling rigs and higher self-insurance expenses.

Depreciation Depreciation includes charges for abandoned equipment of $0.1 million and $1.2 million for the three months ended June 30, 2020 and 2019 , respectively.

In the three months ended June 30, 2020 , depreciation expense included $0.4 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2020 as compared to $1.0 million of accelerated depreciation for the three months ended June 30, 2019 .

Asset Impairment Charge During the three months ended June 30, 2020 , no triggering event was identified that would lead to an asset impairment charge.

During the three months ended June 30, 2019 , we recorded an asset impairment charge of $216.9 million , mainly driven by the downsizing of our fleet of FlexRig4 drilling rigs.

Restructuring Charges For the three months ended June 30, 2020 , we incurred $7.2 million in restructuring charges.

Utilization Rig utilization decreased to 32 percent for the three months ended June 30, 2020 compared to 62 percent during the three months ended June 30, 2019 .

At June 30, 2020 , 68 out of 262 existing rigs in the North America Solutions segment were contracted.

Of the 68 contracted rigs, 54 were under fixed-term contracts and 14 were working in the spot market.

Offshore Operations Segment

Three Months Ended March 31,

Of the 54 rigs under fixed-term contracts, 19 were idle-but-contracted.

Of the 14 rigs working in the spot market, one was idle-but-contracted.

Offshore Gulf of Mexico Operations Segment

Three Months Ended June 30,

(in thousands, except operating statistics)

2 unchanged sentences

Selling, general and administrative expense

Segment operating income (loss)

Restructuring charges

Segment operating income

Operating Statistics (1) :

3 unchanged sentences

Rig utilization

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $6.8 million and $5.5 million for the three months ended March 31, 2020 and 2019 , respectively.

The operating statistics only include rigs that we own and exclude offshore platform management and contract labor service revenues of $7.1 million and $12.1 million , offshore platform management and contract labor service expenses of $3.9 million and $7.5 million , and currency revaluation expense of $5.9 thousand and currency revaluation income of $2.7 thousand for the three months ended March 31, 2020 and 2019 , respectively.

Operating Income (Loss) During the three months ended March 31, 2020 , the Offshore segment had an operating loss of $3.3 million compared to operating income of $4.5 million for the three months ended March 31, 2019 .

This decrease is primarily attributable to $3.7 million of bad debt expense incurred during the three months ended March 31, 2020 and lower contribution from two rigs that demobilized back to shore during the first quarter of fiscal year 2020 .

One of the two rigs began mobilizing to a new platform during March 2020 and recently commenced drilling operations.

Revenue Average rig revenue per day increased in the three months ended March 31, 2020 compared to the three months ended March 31, 2019 due to rate increases during the first quarter of fiscal year 2020 and one of our customers shifting its activity from a customer-owned rig managed by H&P to a rig owned by H&P.

Direct Operating Expenses Average rig expense increased to $48,117 per day during the three months ended March 31, 2020 from $25,941 per day.

Included in average rig expense per day is $8,084 of bad debt expense.

Excluding the bad debt expense, average rig expense increased by $14,092 due to the factors mentioned above.

Utilization As of March 31, 2020 and 2019 , five of our eight available platform rigs were under contract.

International Land Operations Segment

Three Months Ended March 31,

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $8.2 million and $7.3 million for the three months ended June 30, 2020 and 2019 , respectively.

The operating statistics only include rigs that we own and exclude offshore platform management and contract labor service revenues of $6.7 million and $8.8 million , offshore platform management and contract labor service expenses of $5.0 million and $6.7 million , and currency revaluation expense of $2.7 thousand and $1.6 thousand for the three months ended June 30, 2020 and 2019 , respectively.

Operating Income During the three months ended June 30, 2020 , the Offshore Gulf of Mexico segment had operating income of $3.0 million compared to operating income of $5.1 million for the three months ended June 30, 2019 .

This decrease is primarily attributable to $1.3 million of restructuring charges incurred during the three months ended June 30, 2020 .

Revenue Average rig revenue per day increased 25 percent in the three months ended June 30, 2020 compared to the three months ended June 30, 2019 due to one of our customers shifting its activity from a customer-owned rig managed by H&P to a rig owned by H&P.

Direct Operating Expenses Average rig expense increased to $34,702 per day during the three months ended June 30, 2020 from $27,222 per day, primarily due to one of our customers shifting its activity from a customer-owned rig managed by H&P to a rig owned by H&P.

Restructuring Charges For the three months ended June 30, 2020 , we incurred $1.3 million in restructuring charges.

Utilization As of June 30, 2020 , five of our eight available platform rigs were under contract, compared to six of our eight available platform rigs as of June 30, 2019 .

International Solutions Operations Segment

Three Months Ended June 30,

(in thousands, except operating statistics)

3 unchanged sentences

Asset impairment charge

Segment operating income (loss)

Restructuring charges

Segment operating loss

Operating Statistics (1) :

3 unchanged sentences

Rig utilization

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $2.2 million and $2.3 million for the three months ended March 31, 2020 and 2019 , respectively.

Also excluded are the effects of currency revaluation expense of $3.4 million and $0.7 million for the three months ended March 31, 2020 and 2019 , respectively.

Operating Income (Loss) The International Land segment had an operating loss of $152.5 million for the three months ended March 31, 2020 compared to operating income of $8.0 million for the three months ended March 31, 2019 .

The decrease was primarily driven by the recording of an asset impairment loss during the three months ended March 31, 2020.

Revenue We experienced a one percent decrease in revenue days when comparing the three months ended March 31, 2020 to the three months ended March 31, 2019 .

The average number of active rigs was 17.0 during the three months ended March 31, 2020 compared to 17.3 during the same period in fiscal year 2019 .

Direct Operating Expenses Average rig expense increased to $20,922 per day during the three months ended March 31, 2020 as compared to $19,269 per day during the three months ended March 31, 2019 .

The increase was primarily attributable to additional start-up costs.

Asset Impairment Charge During the three months ended March 31, 2020 , we impaired our International Conventional, FlexRig3, and FlexRig4 asset groups, in addition to rotational inventory.

This resulted in an aggregate impairment charge of $156.7 million ($123.8 million, net of tax, or $1.44 per diluted share), which is included in Asset Impairment Charge on the Consolidated Statement of Operations for the three months ended March 31, 2020 .

Utilization Our utilization decreased during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 .

At March 31, 2020 , 15 out of 32 existing rigs in the International Land segment were contracted.

Of the 15 contracted rigs, five were under fixed-term contracts and ten were working in the spot market.

H&P Technologies Operations Segment

Three Months Ended March 31,

(in thousands)

Operating revenues

Direct operating expenses

Research and development

Selling, general and administrative expense

Depreciation and amortization

Asset impairment charge

Segment operating loss

Operating Loss H&P Technologies had an operating loss of $33.6 million in the three months ended March 31, 2020 compared to an operating loss of $3.8 million in the three months ended March 31, 2019 .

The change was primarily driven by the recording of a goodwill impairment loss during the three months ended March 31, 2020.

Excluding the impairment loss, the change was primarily driven by revenue growth, partially offset by additional direct operating expenses.

Asset Impairment Charge During the three months ended March 31, 2020 , we recorded a goodwill impairment loss of $38.3 million ( $29.6 million , net of tax, or $0.35 per diluted share).

This non-cash impairment charge is included in Asset Impairment Charge on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 .

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $3.1 million and $1.5 million for the three months ended June 30, 2020 and 2019 , respectively.

Also excluded are the effects of currency revaluation expense of $3.2 million and income of $30.8 thousand for the three months ended June 30, 2020 and 2019 , respectively.

Operating Loss The International Solutions segment had an operating loss of $9.5 million for the three months ended June 30, 2020 compared to an operating loss of $5.0 million for the three months ended June 30, 2019 .

The change was primarily driven by lower activity and restructuring charges during the three months ended June 30, 2020 , partially offset by the recording of an asset impairment charge during the three months ended June 30, 2019 .

Revenue We experienced a 35 percent decrease in revenue days when comparing the three months ended June 30, 2020 to the three months ended June 30, 2019 as customers reacted to lower commodity prices.

The average number of active rigs was 10.9 during the three months ended June 30, 2020 compared to 16.6 during the same period in fiscal year 2019 .

Average rig revenue per day declined due to both the mix of rigs operating as well as actions by customers to put several rigs on a lower standby rate.

Direct Operating Expenses Average rig expense per day decreased to $21,589 per day during the three months ended June 30, 2020 as compared to $21,650 per day during the three months ended June 30, 2019 .

The decrease was driven by lower activity during the three months ended June 30, 2020 and was partially offset by an increase of currency revaluation expense.

Asset Impairment Charge During the three months ended June 30, 2020 , no triggering event was identified that would lead to an asset impairment charge.

During the three months ended June 30, 2019 , mainly driven by the downsizing of our fleet of FlexRig4 drilling rigs, we wrote down excess capital spares and drilling support equipment and as a result, an asset impairment charge of $7.4 million was recorded in our Unaudited Condensed Consolidated Statements of Operations.

Restructuring Charges For the three months ended June 30, 2020 , we incurred $2.3 million in restructuring charges.

Utilization Our utilization decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 .

At June 30, 2020 , eight out of 32 existing rigs in the International Solutions segment were contracted.

Of the eight contracted rigs, three were under fixed-term contracts and five were working in the spot market.

Other Operations

Results of our other operations, excluding corporate selling, general and administrative costs and corporate depreciation, are as follows:

Three Months Ended March 31,

Results of our other operations, excluding corporate restructuring charges, corporate selling, general and administrative costs and corporate depreciation, are as follows:

Three Months Ended June 30,

(in thousands)

3 unchanged sentences

Selling, general and administrative expense

Operating income

Restructuring charges

Operating income (loss)

Operating Income On October 1, 2019, we elected to utilize the Captive to insure the deductibles for our workers’ compensation, general liability and automobile liability claims programs.

Direct operating costs include accruals for estimated losses of approximately $6.0 million allocated to the Captive during the three months ended March 31, 2020.

Intercompany premium revenues recorded by the Captive during the three months ended March 31, 2020 amounted to $10.5 million , which were eliminated upon consolidation.

Results of Operations for the Six Months Ended March 31, 2020 and 2019

Direct operating costs include accruals for estimated losses of approximately $1.1 million allocated to the Captive during the three months ended June 30, 2020.

Intercompany premium revenues recorded by the Captive during the three months ended June 30, 2020 amounted to $10.4 million , which were eliminated upon consolidation.

Results of Operations for the Nine Months Ended June 30, 2020 and 2019

Consolidated Results of Operations

Net Income (Loss) We reported loss from continuing operations of $389.7 million ( $3.61 per diluted share) from operating revenues of $1.2 billion for the six months ended March 31, 2020 compared to income from continuing operations of $80.2 million ( $0.72 per diluted share) from operating revenues of $1.5 billion for the six months ended March 31, 2019 .

Included in the net loss for the six months ended March 31, 2020 is a loss of $0.2 million ( no impact per diluted share) from discontinued operations.

Including discontinued operations, we recorded a net loss of $389.9 million ( $3.61 per diluted share) for the six months ended March 31, 2020 compared to net income of $79.9 million ( $0.72 per diluted share) for the six months ended March 31, 2019 .

Research and Development For the six months ended March 31, 2020 and 2019 , we incurred $13.1 million and $14.3 million , respectively, of research and development expenses.

Selling, General and Administrative Expense Selling, general and administrative expenses decreased to $91.8 million during the six months ended March 31, 2020 compared to $98.0 million in the six months ended March 31, 2019 .

Net Loss We reported a loss from continuing operations of $435.7 million ( $4.05 loss per diluted share) from operating revenues of $1.6 billion for the nine months ended June 30, 2020 compared to a loss from continuing operations of $74.4 million ( $0.71 loss per diluted share) from operating revenues of $2.1 billion for the nine months ended June 30, 2019 .

Included in the net loss for the nine months ended June 30, 2020 is income of $0.2 million ( no impact per diluted share) from discontinued operations.

Including discontinued operations, we recorded a net loss of $435.5 million ( $4.05 loss per diluted share) for the nine months ended June 30, 2020 compared to a net loss of $74.8 million ( $0.71 loss per diluted share) for the nine months ended June 30, 2019 .

Research and Development For the nine months ended June 30, 2020 and 2019 , we incurred $16.7 million and $21.3 million , respectively, of research and development expenses.

Selling, General and Administrative Expense Selling, general and administrative expenses decreased to $134.9 million during the nine months ended June 30, 2020 compared to $144.6 million in the nine months ended June 30, 2019 .

The $9.7 million decrease in fiscal year 2020 compared to the same period in fiscal year 2019 is primarily due to lower accrued variable compensation expense.

Asset Impairment Charge During the six months ended March 31, 2020 , we impaired several assets including inventory, property, plant and equipment, and goodwill which resulted in an impairment charge of $563.2 million ($437.5 million, net of tax, or $5.19 per diluted share), which is included in Asset Impairment Charge on the Consolidated Statement of Operations for the six months ended March 31, 2020 .

Income Taxes We had an income tax benefit of $99.3 million for the six months ended March 31, 2020 (which included a discrete tax benefit of $2.4 million primarily related to equity compensation) compared to an income tax provision of $26.4 million (which included a discrete tax benefit of $1.7 million related to the reversal of an uncertain tax liability, as the statute of limitation expired) for the six months ended March 31, 2019 .

Asset Impairment Charge During the nine months ended June 30, 2020 , we impaired several assets including inventory, property, plant and equipment, and goodwill which resulted in an impairment charge of $563.2 million ($438.6 million, net of tax, or $5.21 per diluted share), which is included in Asset Impairment Charge on the Consolidated Statement of Operations for the nine months ended June 30, 2020 .

Comparatively, during the nine months ended June 30, 2019 , mainly driven by the downsizing of our fleet of FlexRig4 drilling rigs, we wrote down excess capital spares and drilling support equipment, which had an aggregate net book value of $235.3 million, and as a result, an asset impairment charge of $224.3 million was recorded in our Unaudited Condensed Consolidated Statements of Operations.

For the three months ended June 30, 2020 , we incurred $15.5 million in restructuring charges.

Income Taxes We had an income tax benefit of $116.9 million for the nine months ended June 30, 2020 (which included a discrete tax benefit of approximately $3.5 million primarily related to a decrease in our deferred state income tax rate, return to provision adjustments, equity compensation and the reversal of an uncertain tax liability, as the statute of limitation expired) compared to an income tax benefit of $5.6 million (which included a discrete tax benefit of approximately $8.2 million related to a decrease in our deferred state income tax rate, return to provision adjustments, and the reversal of an uncertain tax liability, as the statute of limitations expired) for the nine months ended June 30, 2019 .

Our statutory federal income tax rate for fiscal year 2020 is 21.0 percent (before incremental state and foreign taxes).

Land Operations Segment

Six Months Ended March 31,

North America Solutions Operations Segment

Nine Months Ended June 30,

(in thousands, except operating statistics)

4 unchanged sentences

Asset impairment charge

Restructuring charges

Segment operating income (loss)

4 unchanged sentences

Rig utilization

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $136.7 million and $146.3 million during the six months ended March 31, 2020 and 2019 , respectively.

Average expense per day excludes intercompany expense activity related to FlexApps of $5.1 million for the six months ended March 31, 2020 .

Operating Income (Loss) The U.S.

Land segment had an operating loss of $252.4 million for the six months ended March 31, 2020 compared to operating income of $177.9 million in the same period of fiscal year 2019 .

The decrease was primarily driven by the recording of an asset impairment loss during the six months ended March 31, 2020.

Revenues were $1.0 billion and $1.2 billion in the six months ended March 31, 2020 and 2019 , respectively.

Included in U.S.

land revenues for the six months ended March 31, 2020 is early termination revenue of $8.3 million compared to $3.6 million during the same period of fiscal year 2019 .

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $164.5 million and $218.6 million during the nine months ended June 30, 2020 and 2019 , respectively.

Prior period information has been restated to reflect the transition of the H&P Technologies reportable segment to the North America Solutions reportable segment.

Operating Income (Loss) The North America Solutions segment had an operating loss of $315.7 million for the nine months ended June 30, 2020 compared to operating income of $20.5 million in the same period of fiscal year 2019 .

The decrease was primarily driven by the recording of a larger asset impairment loss and lower activity during the nine months ended June 30, 2020.

Revenues were $1.3 billion and $1.9 billion in the nine months ended June 30, 2020 and 2019 , respectively.

Included in North America Solutions revenues for the nine months ended June 30, 2020 is early termination revenue of $57.1 million compared to $4.3 million during the same period of fiscal year 2019 .

Included in U.S.

land operating expenses for the six months ended March 31, 2019 are costs of $18.0 million associated with a settled lawsuit.

Revenue Excluding early termination per day revenue of $237 and $83 for the six months ended March 31, 2020 and 2019 , respectively, average rig revenue per day increased by $420 to $25,588 as dayrate pricing and customer utilization of our FlexServices offerings improved year-over-year.

Compared to the six months ended March 31, 2019 , our revenue days declined by 19.1 percent .

This decline was driven by a focus on free cash flow generation and budget discipline by many of our publicly traded E&P customers which commenced during fiscal year 2019 .

Direct Operating Expenses Average expense per day increased $449 to $15,239 during the six months ended March 31, 2020 compared to the six months ended March 31, 2019 .

The increase is primarily due to higher self-insurance expense.

Depreciation Depreciation includes charges for abandoned equipment of $1.7 million and $5.0 million for the six months ended March 31, 2020 and 2019 , respectively.

In the six months ended March 31, 2020 , depreciation expense included $1.0 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2020 as compared to $3.6 million of accelerated depreciation for the six months ended March 31, 2019 .

Asset Impairment Charge During the six months ended March 31, 2020 , we impaired our Domestic Conventional, FlexRig3, and FlexRig4 asset groups, in addition to in-progress drilling equipment and rotational inventory.

Utilization U.S.

land rig utilization decreased to 64 percent for the six months ended March 31, 2020 compared to 68 percent during the six months ended March 31, 2019 .

At March 31, 2020 , 150 out of 299 existing rigs in the U.S.

Land segment were contracted.

Included in North America Solutions operating expenses for the nine months ended June 30, 2019 are costs of $18.0 million associated with a settled lawsuit.

Revenue Excluding early termination per day revenue of $1,326 and $67 for the nine months ended June 30, 2020 and 2019 , respectively, average rig revenue per day decreased by $458 to $25,627 due to a portion of our contracted rigs operating in an idle-but-contracted state during the third quarter of fiscal year 2020 with lower average daily revenue and average daily expense.

Compared to the nine months ended June 30, 2019 , our revenue days declined by 32 percent .

This decline was initially driven by a focus on free cash flow generation and budget discipline by many of our publicly-traded E&P customers which commenced during fiscal year 2019.

Additionally, the collapse of oil prices that occurred in March 2020 drove our customers to quickly lower rig activity beginning in the second half of March 2020 and continuing throughout the third quarter of fiscal year 2020.

Direct Operating Expenses Average expense per day increased $309 to $15,507 during the nine months ended June 30, 2020 compared to the nine months ended June 30, 2019 .

The increase is due to one-time expenses associated with idling rigs and higher self-insurance expense, partially offset by the previously-mentioned effect of idle-but-contracted rigs.

Depreciation Depreciation includes charges for abandoned equipment of $1.7 million and $6.1 million for the nine months ended June 30, 2020 and 2019 , respectively.

In the nine months ended June 30, 2020 , depreciation expense included $1.4 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2020 as compared to $4.6 million of accelerated depreciation for the nine months ended June 30, 2019 .

Asset Impairment Charge During the nine months ended June 30, 2020 , we impaired our Domestic Conventional, FlexRig3, and FlexRig4 asset groups, in addition to in-progress drilling equipment and rotational inventory.

This resulted in an aggregate impairment charge of $368.2 million ($285.2 million, net of tax, or $3.40 per diluted share) for the nine months ended June 30, 2020 .

Comparatively, during the nine months ended June 30, 2019 , we recorded an asset impairment charge of $216.9 million mainly driven by the downsizing of our fleet of FlexRig4 drilling rigs.

During the nine months ended June 30, 2020 , we also recorded a goodwill impairment loss of $38.3 million ($29.7 million, net of tax, or $0.36 per diluted share).

These non-cash impairment charges are included in Asset Impairment Charge on the Condensed Consolidated Statements of Operations for the nine months ended June 30, 2020 .

Restructuring Charges For the three months ended June 30, 2020 , we incurred $7.2 million in restructuring charges.

Utilization North America Solutions rig utilization decreased to 54 percent for the nine months ended June 30, 2020 compared to 66 percent during the nine months ended June 30, 2019 .

At June 30, 2020 , 68 out of 262 existing rigs in the North America Solutions segment were contracted.

Of the 68 contracted rigs, 54 were under fixed-term contracts and 14 were working in the spot market.

Offshore Operations Segment

Six Months Ended March 31,

Of the 54 rigs under fixed-term contracts, 19 were idle-but-contracted.

Of the 14 rigs working in the spot market, one was idle-but-contracted.

Offshore Gulf of Mexico Operations Segment

Nine Months Ended June 30,

(in thousands, except operating statistics)

2 unchanged sentences

Selling, general and administrative expense

Restructuring charges

Segment operating income

4 unchanged sentences

Rig utilization

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $16.7 million and $11.3 million for the six months ended March 31, 2020 and 2019 , respectively.

The operating statistics only include rigs that we own and exclude offshore platform management and contract labor service revenues of $13.3 million and $24.6 million , offshore platform management and contract labor service expenses of $7.2 million and $14.6 million , and currency revaluation expense of $16.7 thousand and $8.3 thousand for the six months ended March 31, 2020 and 2019 , respectively.

Operating Income During the six months ended March 31, 2020 , the Offshore segment had operating income of $3.0 million compared to operating income of $11.7 million for the six months ended March 31, 2019 .

This decrease is primarily attributable to $3.7 million of bad debt expense incurred during the six months ended March 31, 2019 and lower contribution from two rigs that demobilized back to shore during the first quarter of fiscal year 2020 .

One of the two rigs began mobilizing to a new platform during March 2020 and recently commenced drilling operations.

Revenue Average rig revenue per day increased in the six months ended March 31, 2020 compared to the six months ended March 31, 2019 due to rate increases during the first quarter of fiscal year 2020 and one of our customers shifting its activity from a customer-owned rig managed by H&P to a rig owned by H&P.

Direct Operating Expenses Average rig expense increased to $38,545 per day during the six months ended March 31, 2020 from $25,791 per day due to the factors mentioned above.

Utilization As of March 31, 2020 and 2019 , five of our eight available platform rigs were under contract.

International Land Operations Segment

Six Months Ended March 31,

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $24.9 million and $18.5 million for the nine months ended June 30, 2020 and 2019 , respectively.

The operating statistics only include rigs that we own and exclude offshore platform management and contract labor service revenues of $20.0 million and $33.3 million , offshore platform management and contract labor service expenses of $12.1 million and $21.3 million , and currency revaluation expense of $19.3 thousand and $9.9 thousand for the nine months ended June 30, 2020 and 2019 , respectively.

Operating Income During the nine months ended June 30, 2020 , the Offshore Gulf of Mexico segment had operating income of $6.0 million compared to operating income of $16.8 million for the nine months ended June 30, 2019 .

This decrease is primarily attributable to lower contribution from two rigs that demobilized back to shore during the first quarter of fiscal year 2020.

One of the two rigs began mobilizing to a new platform during March 2020 and commenced drilling operations during the third quarter of fiscal year 2020.

Additionally, we incurred $3.7 million of bad debt expense during the nine months ended June 30, 2020 .

Revenue Average rig revenue per day increased 27 percent in the nine months ended June 30, compared to the nine months ended June 30, 2019 due to one of our customers shifting its activity from a customer-owned rig managed by H&P to a rig owned by H&P.

Direct Operating Expenses Average rig expense increased to $37,348 per day during the nine months ended June 30, 2020 from $26,276 per day due to the factors mentioned above.

Restructuring Charges For the three months ended June 30, 2020 , we incurred $1.3 million in restructuring charges.

Utilization As of June 30, 2020 , five of our eight available platform rigs were under contract, compared to six of our eight available platform rigs as of June 30, 2019 .

International Solutions Operations Segment

Nine Months Ended June 30,

(in thousands, except operating statistics)

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Asset impairment charge

Restructuring charges

Segment operating income (loss)

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Rig utilization

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $3.8 million and $6.0 million for the six months ended March 31, 2020 and 2019 , respectively.

Also excluded are the effects of currency revaluation expense of $2.7 million and $4.6 million for the six months ended March 31, 2020 and 2019 , respectively.

Operating Income (Loss) The International Land segment had an operating loss of $149.4 million for the six months ended March 31, 2020 compared to operating income of $14.6 million for the six months ended March 31, 2019 .

The decrease was primarily driven by the recording of an asset impairment loss during the six months ended March 31, 2020.

Revenue We experienced a 4.6 percent decrease in revenue days when comparing the six months ended March 31, 2020 to the six months ended March 31, 2019 .

The average number of active rigs was 17.3 during the six months ended March 31, 2020 compared to 18.2 during the same period in fiscal year 2019 .

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $6.9 million and $7.5 million for the nine months ended June 30, 2020 and 2019 , respectively.

Also excluded are the effects of currency revaluation expense of $5.9 million and $4.6 million for the nine months ended June 30, 2020 and 2019 , respectively.

Operating Income (Loss) The International Solutions segment had an operating loss of $158.9 million for the nine months ended June 30, 2020 compared to operating income of $9.6 million for the nine months ended June 30, 2019 .

The decrease was primarily driven by the recording of an asset impairment loss during the nine months ended June 30, 2020 , as well as lower activity and restructuring charges during the nine months ended June 30, 2020 .

Revenue We experienced a 14 percent decrease in revenue days when comparing the nine months ended June 30, 2020 to the same period in fiscal year 2019 .

The average number of active rigs was 15.2 during the nine months ended June 30, 2020 compared to 17.7 during the same period in fiscal year 2019 .

Average rig revenue per day decreased by 16 percent primarily due to the devaluation of the Argentine peso, which decreased our average daily revenue as a result of being translated from local currency to the U.S.

Direct Operating Expenses Average rig expense decreased to $20,710 per day during the six months ended March 31, 2020 as compared to $21,083 per day during the six months ended March 31, 2019 .

The decrease was primarily attributable to a different mix of rigs working in different regions.

Asset Impairment Charge During the six months ended March 31, 2019 , we impaired our International Conventional, FlexRig3, and FlexRig4 asset groups, in addition to rotational inventory.

Utilization Our utilization decreased during the six months ended March 31, 2020 compared to the six months ended March 31, 2019 .

At March 31, 2020 , 15 out of 32 existing rigs in the International Land segment were contracted.

Of the 15 contracted rigs, five were under fixed term contracts and ten were working in the spot market.

H&P Technologies Operations Segment

Six Months Ended March 31,

(in thousands)

Operating revenues

Direct operating expenses

Research and development

Selling, general and administrative expense

Depreciation and amortization

Asset impairment charge

Segment operating loss

Operating Loss H&P Technologies had an operating loss of $38.1 million in the six months ended March 31, 2020 compared to an operating loss of $10.4 million in the six months ended March 31, 2019 .

The change was primarily driven by the recording of a goodwill impairment loss.

Excluding the impairment loss, the change was primarily driven by revenue growth, partially offset by additional direct operating expenses.

Asset Impairment Charge During the six months ended March 31, 2020 , we recorded a goodwill impairment loss of $38.3 million ( $29.6 million , net of tax, or $0.35 per diluted share).

This non-cash impairment charge is included in Asset Impairment Charge on the Condensed Consolidated Statements of Operations for the six months ended March 31, 2020 .

dollar, as well as actions by customers to put several rigs on a lower standby rate.

Direct Operating Expenses Average rig expense decreased to $20,919 per day during the nine months ended June 30, 2020 as compared to $21,261 per day during the nine months ended June 30, 2019 .

The decrease was driven by lower activity during the nine months ended June 30, 2020 .

Asset Impairment Charge During the nine months ended June 30, 2020 , we impaired our International Conventional, FlexRig3, and FlexRig4 asset groups, in addition to rotational inventory.

This resulted in an aggregate impairment charge of $156.7 million ($123.8 million, net of tax, or $1.45 per diluted share), which is included in Asset Impairment Charge on the Unaudited Condensed Consolidated Statements of Operations for the nine months ended June 30, 2020 .

Comparatively, during the nine months ended June 30, 2019 , mainly driven by the downsizing of our fleet of FlexRig4 drilling rigs, we wrote down capital spares and drilling support equipment and, as a result, we recorded an asset impairment charge of $7.4 million , in our Unaudited Condensed Consolidated Statements of Operations.

Restructuring Charges For the three months ended June 30, 2020 , we incurred $2.3 million in restructuring charges.

Utilization Our utilization decreased during the nine months ended June 30, 2020 compared to the same period in fiscal year 2019 .

At June 30, 2020 , eight out of 32 existing rigs in the International Solutions segment were contracted.

Of the eight contracted rigs, three were under fixed-term contracts and five were working in the spot market.

Other Operations

Results of our other operations, excluding corporate selling, general and administrative costs and corporate depreciation, are as follows:

Six Months Ended March 31,

Results of our other operations, excluding corporate restructuring charges, corporate selling, general and administrative costs and corporate depreciation, are as follows:

Nine Months Ended June 30,

(in thousands)

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Selling, general and administrative expense

Operating income (loss)

Operating Income (Loss) On October 1, 2019, we elected to utilize the Captive to insure the deductibles for our workers’ compensation, general liability and automobile liability claims programs.

Direct operating costs include accruals for estimated losses of approximately $14.7 million allocated to the Captive during the six months ended March 31, 2020.

Intercompany premium revenues recorded by the Captive during the six months ended March 31, 2020 amounted to $18.2 million , which were eliminated upon consolidation.

Restructuring charges

Operating income

Operating Income On October 1, 2019, we elected to utilize the Captive to insure the deductibles for our workers’ compensation, general liability and automobile liability claims programs.

Direct operating costs include accruals for estimated losses of approximately $15.8 million allocated to the Captive during the nine months ended June 30, 2020.

Intercompany premium revenues recorded by the Captive during the nine months ended June 30, 2020 amounted to $28.9 million , which were eliminated upon consolidation.

Liquidity and Capital Resources

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Historically, we have financed operations primarily through internally generated cash flows.

During periods when internally generated cash flows are not sufficient to meet liquidity needs, we may borrow from available credit sources, access capital markets or sell our marketable securities.

During periods when internally generated cash flows are not sufficient to meet liquidity needs, we may utilize cash on hand, borrow from available credit sources, access capital markets or sell our marketable securities.

Likewise, if we are generating excess cash flows, we may invest in highly rated short‑term money market and debt securities.

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Treasury securities, U.S.

Agency issued debt securities, corporate bonds, certificates of deposit and money market funds.

Agency issued debt securities, corporate bonds and commercial paper, certificates of deposit and money market funds.

Our marketable securities are recorded at fair value.

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Our ability to access the debt and equity capital markets depends on a number of factors, including our credit rating, market and industry conditions and market perceptions of our industry, general economic conditions, our revenue backlog and our capital expenditure commitments.

The effects of the COVID-19 outbreak and the recent oil price collapse could have significant adverse consequences for general economic, financial and business conditions, as well as for our business and financial position and the business and financial position of our customers, suppliers and vendors and may, among other things, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all and affect our future need or ability to borrow under the 2018 Credit Facility.

The effects of the COVID-19 outbreak and the recent oil price collapse have had significant adverse consequences for general economic, financial and business conditions, as well as for our business and financial position and the business and financial position of our customers, suppliers and vendors and may, among other things, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all and affect our future need or ability to borrow under the 2018 Credit Facility.

In addition to our potential sources of funding, the effects of such global events may impact our liquidity or need to alter our allocation or sources of capital, implement additional cost reduction measures and further change our financial strategy.

Although the COVID-19 outbreak and the recent oil price collapse could have a broad range of effects on our sources and uses of liquidity, the ultimate effect thereon, if any, will depend on future developments, which cannot be predicted at this time.

Our cash flows fluctuate depending on a number of factors, including, among others, the number of our drilling rigs under contract, the dayrates we receive under those contracts, the efficiency with which we operate our drilling units, the timing of collections on outstanding accounts receivable, the timing of payments to our vendors for operating costs, and capital expenditures, all of which may be impacted by the COVID-19 outbreak or the recent oil price collapse.

Our cash flows fluctuate depending on a number of factors, including, among others, the number of our drilling rigs under contract, the dayrates we receive under those contracts, the efficiency with which we operate our drilling units, the timing of collections on outstanding accounts receivable, the timing of payments to our vendors for operating costs, and capital expenditures, all of which was impacted by the COVID-19 outbreak and the recent oil price collapse.

As our revenues increase, net working capital is typically a use of capital, while conversely, as our revenues decrease, net working capital is typically a source of capital.

To date, general inflationary trends have not had a material effect on our operating margins.

As of March 31, 2020 , we had $336.1 million of cash on hand and $45.7 million of short-term investments.

Our cash flows for the six months ended March 31, 2020 and 2019 are presented below:

Six Months Ended March 31,

As of June 30, 2020 , we had $426.2 million of cash on hand and $65.8 million of short-term investments.

Our cash flows for the nine months ended June 30, 2020 and 2019 are presented below:

Nine Months Ended June 30,

(in thousands)

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Financing activities

Decrease in cash and cash equivalents

Net increase in cash and cash equivalents and restricted cash

Operating Activities

Net working capital excluding cash and short-term investments were $361.0 million as of March 31, 2020 compared to $303.9 million as of September 30, 2019 .

Included in accounts receivable as of March 31, 2020 is $32.1 million of early termination fees.

Cash flows provided by operating activities were approximately $232.6 million for the six months ended March 31, 2020 compared to approximately $409.0 million for the six months ended March 31, 2019 .

The decrease was primarily driven by less activity coupled with an unfavorable variance in the use of working capital.

Net working capital excluding cash and short-term investments was $256.3 million as of June 30, 2020 compared to $303.9 million as of September 30, 2019 .

Included in accounts receivable as of June 30, 2020 were $42.3 million of early termination fees and $51.0 million of income tax receivables.

Cash flows provided by operating activities were approximately $446.3 million for the nine months ended June 30, 2020 compared to approximately $659.4 million for the nine months ended June 30, 2019 .

The decrease was primarily driven by less activity and an unfavorable variance in the use of working capital.

Investing Activities

Capital Expenditures Our investing activities are primarily related to capital expenditures for our fleet.

Our capital expenditures during the six months ended March 31, 2020 were $94.3 million compared to $330.0 million during the six months ended March 31, 2019 .

Our capital expenditures during the nine months ended June 30, 2020 were $121.0 million compared to $403.6 million during the nine months ended June 30, 2019 .

The year-over-year decrease in capital expenditures is driven by a decrease in super-spec upgrades and lower maintenance capital expenditure levels as a result of lower activity.

Sale of Assets Our proceeds from asset sales totaled $24.8 million during the six months ended March 31, 2020 and $24.6 million during the six months ended March 31, 2019 .

Sale of Assets Our proceeds from asset sales totaled $31.2 million during the nine months ended June 30, 2020 and $36.2 million during the nine months ended June 30, 2019 .

These sales were primarily related to reimbursement for drill pipe damaged or lost in drilling operations.

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Stock Portfolio Held We manage marketable securities consisting of common shares of Schlumberger, Ltd.

that, at the end of the second quarter of fiscal year 2020 , had a fair value of $6.3 million .

that, at the end of the third quarter of fiscal year 2020 , had a fair value of $8.6 million .

The value of the portfolio is subject to fluctuation in the market and may vary considerably over time.

Our marketable securities are recorded at fair value on our balance sheet.

Our marketable securities held as of March 31, 2020 are presented below:

Our marketable securities held as of June 30, 2020 are presented below:

(in thousands, except share amounts)

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Financing Activities

Repurchase of Shares The increase of $23.9 million in net cash used by financing activities during the six months ended March 31, 2020 from the same period in fiscal year 2019 was primarily due to a $28.5 million cash outflow for the repurchase of shares.

Dividends We paid dividends of $1.42 per share during the six months ended March 31, 2020 and 2019 .

Total dividends paid were $155.9 million and $156.6 million during the six months ended March 31, 2020 and 2019 , respectively.

An additional cash dividend of $0.71 per share was declared on March 4, 2020 for shareholders of record on May 11, 2020, payable on June 1, 2020.

As a result, we recorded a dividend payable of $77.3 million within Accounts Payable on our Unaudited Condensed Consolidated Balance Sheets as of March 31, 2020 .

Repurchase of Shares The increase of $23.5 million in net cash used by financing activities during the nine months ended June 30, 2020 from the same period in fiscal year 2019 was primarily due to a $28.5 million cash outflow for the repurchase of shares during the second quarter of fiscal year 2020.

Dividends We paid dividends of $2.13 per share during both the nine months ended June 30, 2020 and 2019 .

Total dividends paid were $233.1 million and $235.1 million during the nine months ended June 30, 2020 and 2019 , respectively.

On March 31, 2020, we reaffirmed our commitment to paying the previously announced $0.71 per share quarterly dividend on June 1, 2020, to stockholders of record at the close of business on May 11, 2020, and, as part of our capital allocation update, announced our intention to reduce future quarterly cash dividends to $0.25 per share.

A cash dividend of $0.25 per share was declared on June 3, 2020 for shareholders of record on August 17, 2020, payable on August 31, 2020.

The declaration and amount of future dividends is at the discretion of the Board and subject to our financial condition, results of operations, cash flows, and other factors the Board deems relevant.

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The 2018 Credit Facility contains additional terms, conditions, restrictions and covenants that we believe are usual and customary in unsecured debt arrangements for companies of similar size and credit quality, including a limitation that priority debt (as defined in the credit agreement) may not exceed 17.5 percent of the net worth of the Company.

As of March 31, 2020 , there were no borrowings or letters of credit outstanding, leaving $750.0 million available to borrow under the 2018 Credit Facility.

As of March 31, 2020 , we had two outstanding letters of credit with banks, in the amounts of $24.8 million and $2.1 million , respectively.

As of March 31, 2020 , we also had a $20.0 million unsecured standalone line of credit facility, for the purpose of obtaining the issuance of international letters of credit, bank guarantees, and performance bonds.

Of the $20.0 million , $14.3 million of financial guarantees were outstanding as of March 31, 2020 .

As of June 30, 2020 , there were no borrowings or letters of credit outstanding, leaving $750.0 million available to borrow under the 2018 Credit Facility.

As of June 30, 2020 , we had two outstanding letters of credit with banks, in the amounts of $24.8 million and $2.1 million , respectively.

As of June 30, 2020 , we also had a $20.0 million unsecured standalone line of credit facility, for the purpose of obtaining the issuance of international letters of credit, bank guarantees, and performance bonds.

Of the $20.0 million , $14.3 million of financial guarantees were outstanding as of June 30, 2020 .

The applicable agreements for all unsecured debt contain additional terms, conditions and restrictions that we believe are usual and customary in unsecured debt arrangements for companies that are similar in size and credit quality.

At March 31, 2020 , we were in compliance with all debt covenants , and we anticipate that we will continue to be in compliance during the next quarter of fiscal year 2020 .

At June 30, 2020 , we were in compliance with all debt covenants , and we anticipate that we will continue to be in compliance during the next quarter of fiscal year 2020 .

Exchange Offer, Consent Solicitation and Redemption

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If needed, we may decide to obtain additional funding from our $750.0 million 2018 Credit Facility.

Our indebtedness under our unsecured senior notes totaled $479.8 million at March 31, 2020 and matures on March 19, 2025.

The long-term debt to total capitalization ratio was 12.3 percent and 10.2 percent at March 31, 2020 and 2019 , respectively.

Our indebtedness under our unsecured senior notes totaled $480.3 million at June 30, 2020 and matures on March 19, 2025.

The long-term debt to total capitalization ratio was 12.5 percent and 10.9 percent at June 30, 2020 and 2019 , respectively.

For additional information regarding debt agreements, refer to Note 8—Debt to the Unaudited Condensed Consolidated Financial Statements.

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Material Commitments

Material commitments as reported in our 2019 Annual Report on Form 10-K have not changed significantly at March 31, 2020 , other than those disclosed in Note 16—Commitments and Contingencies to the Unaudited Condensed Consolidated Financial Statements.

Material commitments as reported in our 2019 Annual Report on Form 10-K have not changed significantly at June 30, 2020 , other than those disclosed in Note 16—Commitments and Contingencies to the Unaudited Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis