Helmerich & Payne, Inc. 10-K

Item 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Management’s Report on Internal Control over Financial Reporting 51 Reports of Independent Registered Public Accounting Firm 52 Consolidated Financial Statements: Consolidated Balance Sheets at September 30, 2020 and 2019 56 Consolidated Statements of Operations for the Years Ended September 30, 2020, 2019 and 2018 57 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended September 30, 2020, 2019 and 2018 58 Consolidated Statements of Shareholders’ Equity for the Years Ended September 30, 2020, 2019 and 2018 59 Consolidated Statements of Cash Flows for the Years Ended September 30, 2020, 2019 and 2018 60 Notes to Consolidated Financial Statements 61 50 Table of Contents Management’s Report on Internal Control over Financial Reporting Management of Helmerich & Payne, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a‑15(f) or 15d‑15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting was designed under the supervision of the Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, and includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and the Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2020 . In making this assessment, management used the criteria established in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the criteria in Internal Control-Integrated Framework (2013) , management has concluded that the Company maintained effective internal control over financial reporting as of September 30, 2020 . Ernst & Young LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of September 30, 2020 , as stated in their report which appears herein. Helmerich & Payne, Inc. by /s/ John W. Lindsay /s/ Mark W. Smith John W. Lindsay Director, President and Chief Executive Officer Mark W. Smith Senior Vice President and Chief Financial Officer November 20, 2020 November 20, 2020 51 Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Helmerich & Payne, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Helmerich & Payne, Inc. (the Company) as of September 30, 2020 and 2019 , the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 2020 , and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2020 and 2019 , and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2020 , in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2020 , based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 20, 2020 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Self-Insurance Accruals Description of the Matter The Company's self-insurance liability for workers’ compensation and other casualty claims was $73.8 million at September 30, 2020. As described in Note 2 to the consolidated financial statements, this liability is based on a third-party actuarial analysis, which includes an estimate for incurred but not reported claims. The actuarial analysis considers a variety of factors, including third-party adjusters’ estimates, historic experience, and statistical methods commonly used within the insurance industry. Auditing the Company's reserve for self-insured risks for worker’s compensation and other casualty claims is complex and required us to use our actuarial specialists due to the significant measurement uncertainty associated with the estimate, management’s application of significant judgment, and the use of various actuarial methods. 52 Table of Contents How We Addressed the Matter in Our Audit We evaluated the design and tested the operating effectiveness of the Company’s controls over the workers’ compensation and other casualty claims accrual process. For example, we tested controls over management’s determination of the appropriateness of the significant assumptions used in the calculation and the completeness and accuracy of the data underlying the reserve. To evaluate the self-insurance liability for worker’s compensation and other casualty claims, we performed audit procedures that included, among others, testing the completeness and accuracy of the underlying claims data provided to management’s actuary and obtaining legal confirmation letters to evaluate the reserves recorded on significant litigated matters. Additionally, we involved our actuarial specialists to assist in our evaluation of the methodologies applied by management’s actuary in establishing the actuarially determined reserve. We compared the Company’s assumptions to ranges of assumptions independently developed by our actuarial specialists. Impairment of Long-Lived Assets Description of the Matter As more fully described in Note 5 to the consolidated financial statements, the Company recognized a $441.4 million impairment charge in 2020 due to projected low utilization of the domestic non-super spec and all international asset groups. Auditing the Company's impairment analysis involved a high degree of subjectivity as the determination of undiscounted cash flows was based on assumptions about future market and economic conditions. Significant assumptions used in the Company’s undiscounted cash flow estimate included drilling rig utilization and net proceeds received upon future sale/disposition. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's process to estimate the undiscounted cash flows of the asset groups that were tested for recoverability. For example, we tested controls over management's assessment of the appropriateness of the significant assumptions underlying the undiscounted cash flows. Our testing of the Company’s undiscounted cash flows included, among other procedures, evaluating the significant assumptions used and testing the completeness and accuracy of the underlying data. For example, we compared the projected drilling rig utilization assumption to current and forecasted industry and market information and any ongoing bid and contracting activity and compared the estimated net proceeds received upon future sale/disposition to industry ranges, market quotes and the Company’s historical experience. We also compared the Company’s historical experience and market activity to peer averages. Furthermore, we searched for and evaluated information that corroborates or contradicts the Company’s assumptions, performed retrospective reviews of projected cash flows to historical actuals, and performed a sensitivity analysis to evaluate the change in the projected cash flows that would result from changes in the underlying assumptions. Valuation of Goodwill and Finite-lived Intangibles Description of the Matter As more fully described in Note 7 to the consolidated financial statements, during 2020 the Company performed goodwill and finite-lived intangible impairment analyses, resulting in a $38.3 million goodwill impairment charge. Auditing the Company’s impairment analyses was complex and highly judgmental due to the significant estimation required to determine the estimated future cash flows. In particular, the fair value estimate was sensitive to significant assumptions, such as changes in the utilization, discount rate, and terminal value, which are affected by expectations about future market and economic conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and finite-lived intangibles impairment review process, including controls over management’s review of the significant assumptions described above. For example, we evaluated controls over the Company’s forecasting process used to develop the estimated future cash flows. We also tested controls over management’s review of the data used in their valuation models and the significant assumptions such as the estimation of utilization, discount rate and terminal value. To test the estimated cash flows of the applicable reporting unit and finite-lived intangibles, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analyses. We compared the projected cash flows to available industry and market forecast information. We involved our valuation specialists to assist in testing the discount rate. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit and finite-lived intangibles that would result from changes in the assumptions. For finite-lived intangibles, we also assessed whether the assumptions used were consistent with those used in the goodwill impairment review process. 53 Table of Contents /s/Ernst & Young LLP We have served as the Company’s auditor since 1994. Tulsa, Oklahoma November 20, 2020 54 Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Helmerich & Payne, Inc. Opinion on Internal Control over Financial Reporting We have audited Helmerich & Payne, Inc.’s internal control over financial reporting as of September 30, 2020 , based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Helmerich & Payne, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020 , based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2020 and 2019 , the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2020 , and the related notes and our report dated November 20, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tulsa, Oklahoma November 20, 2020 55 Table of Contents HELMERICH & PAYNE, INC. Consolidated Balance Sheets September 30, (in thousands except share data and per share amounts) 2020 2019 Assets Current Assets: Cash and cash equivalents $ 487,884 $ 347,943 Short-term investments 89,335 52,960 Accounts receivable, net of allowance of $1,820 and $9,927, respectively 192,623 495,602 Inventories of materials and supplies, net 104,180 149,653 Prepaid expenses and other 89,305 68,928 Total current assets 963,327 1,115,086 Investments 31,585 31,991 Property, plant and equipment, net 3,646,341 4,502,084 Other Noncurrent Assets: Goodwill 45,653 82,786 Intangible assets, net 81,027 86,716 Operating lease right-of-use asset 44,583 — Other assets 17,105 20,852 Total other noncurrent assets 188,368 190,354 Total assets $ 4,829,621 $ 5,839,515 Liabilities and Shareholders’ Equity Current Liabilities: Accounts payable $ 36,468 $ 45,383 Dividends payable 27,226 77,763 Accrued liabilities 155,442 287,092 Total current liabilities 219,136 410,238 Noncurrent Liabilities: Long-term debt, net 480,727 479,356 Deferred income taxes 650,675 806,611 Other 147,180 115,746 Noncurrent liabilities - discontinued operations 13,389 15,341 Total noncurrent liabilities 1,291,971 1,417,054 Commitments and Contingencies (Note 17) Shareholders' Equity: Common stock, $.10 par value, 160,000,000 shares authorized, 112,151,563 and 112,080,262 shares issued as of September 30, 2020 and 2019, respectively, and 107,488,242 and 108,437,904 shares outstanding as of September 30, 2020 and 2019, respectively 11,215 11,208 Preferred stock, no par value, 1,000,000 shares authorized, no shares issued — — Additional paid-in capital 521,628 510,305 Retained earnings 3,010,012 3,714,307 Accumulated other comprehensive loss ( 26,188 ) ( 28,635 ) Treasury stock, at cost, 4,663,321 shares and 3,642,358 shares as of September 30, 2020 and 2019, respectively ( 198,153 ) ( 194,962 ) Total shareholders’ equity 3,318,514 4,012,223 Total liabilities and shareholders' equity $ 4,829,621 $ 5,839,515 The accompanying notes are an integral part of these consolidated financial statements. 56 Table of Contents HELMERICH & PAYNE, INC. Consolidated Statements of Operations Year Ended September 30, (in thousands, except per share amounts) 2020 2019 2018 Operating revenues Drilling services $ 1,761,714 $ 2,785,557 $ 2,474,458 Other 12,213 12,933 12,810 1,773,927 2,798,490 2,487,268 Operating costs and expenses Drilling services operating expenses, excluding depreciation and amortization 1,184,788 1,803,204 1,647,557 Other operating expenses 5,777 5,382 5,053 Depreciation and amortization 481,885 562,803 583,802 Research and development 21,645 27,467 18,167 Selling, general and administrative 167,513 194,416 199,257 Asset impairment charge 563,234 224,327 23,128 Restructuring charges 16,047 — — Gain on sale of assets ( 46,775 ) ( 39,691 ) ( 22,660 ) 2,394,114 2,777,908 2,454,304 Operating income (loss) from continuing operations ( 620,187 ) 20,582 32,964 Other income (expense) Interest and dividend income 7,304 9,468 8,017 Interest expense ( 24,474 ) ( 25,188 ) ( 24,265 ) Gain (loss) on investment securities ( 8,720 ) ( 54,488 ) 1 Gain on sale of subsidiary 14,963 — — Other ( 5,384 ) ( 1,596 ) ( 876 ) ( 16,311 ) ( 71,804 ) ( 17,123 ) Income (loss) from continuing operations before income taxes ( 636,498 ) ( 51,222 ) 15,841 Income tax benefit ( 140,106 ) ( 18,712 ) ( 477,169 ) Income (loss) from continuing operations ( 496,392 ) ( 32,510 ) 493,010 Income from discontinued operations before income taxes 30,580 32,848 23,389 Income tax provision 28,685 33,994 33,727 Income (loss) from discontinued operations 1,895 ( 1,146 ) ( 10,338 ) Net income (loss) $ ( 494,497 ) $ ( 33,656 ) $ 482,672 Basic earnings (loss) per common share: Income (loss) from continuing operations $ ( 4.62 ) $ ( 0.33 ) $ 4.49 Income (loss) from discontinued operations $ 0.02 ( 0.01 ) ( 0.10 ) Net income (loss) $ ( 4.60 ) $ ( 0.34 ) $ 4.39 Diluted earnings (loss) per common share: Income (loss) from continuing operations $ ( 4.62 ) $ ( 0.33 ) $ 4.47 Income (loss) from discontinued operations $ 0.02 ( 0.01 ) ( 0.10 ) Net income (loss) $ ( 4.60 ) $ ( 0.34 ) $ 4.37 Weighted average shares outstanding: Basic 108,009 109,216 108,851 Diluted 108,009 109,216 109,387 The accompanying notes are an integral part of these consolidated financial statements. 57 Table of Contents HELMERICH & PAYNE, INC. Consolidated Statements of Comprehensive Income (Loss) Year ended September 30, (in thousands) 2020 2019 2018 Net income (loss) $ ( 494,497 ) $ ( 33,656 ) $ 482,672 Other comprehensive income (loss), net of income taxes: Unrealized appreciation on securities, net of income taxes of $3.3 million at September 30, 2018 — — 9,001 Minimum pension liability adjustments, net of income taxes of $0.8 million at September 30, 2020, $(3.5) million at September 30, 2019 and $1.9 million at September 30, 2018 2,447 ( 11,875 ) 5,249 Other comprehensive income (loss) 2,447 ( 11,875 ) 14,250 Comprehensive income (loss) $ ( 492,050 ) $ ( 45,531 ) $ 496,922 The accompanying notes are an integral part of these consolidated financial statements. 58 Table of Contents HELMERICH & PAYNE, INC. Consolidated Statements of Shareholders’ Equity Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock (in thousands, except per share amounts) Shares Amount Shares Amount Total Balance at September 30, 2017 111,957 $ 11,196 $ 487,248 $ 3,855,686 $ 2,300 3,353 $ ( 191,839 ) $ 4,164,591 Comprehensive income: Net income — — — 482,672 — — — 482,672 Other comprehensive income — — — — 14,250 — — 14,250 Dividends declared ($2.82 per share) — — — ( 310,024 ) — — — ( 310,024 ) Exercise of employee stock options, net of shares withheld for employee taxes 1 — ( 7,557 ) — — ( 202 ) 10,992 3,435 Vesting of restricted stock awards, net of shares withheld for employee taxes 51 5 ( 11,857 ) — — ( 136 ) 7,659 ( 4,193 ) Stock-based compensation — — 31,687 — — — — 31,687 Adoption of ASU 2016-09 — — 872 ( 555 ) — — — 317 Balance at September 30, 2018 112,009 11,201 500,393 4,027,779 16,550 3,015 ( 173,188 ) 4,382,735 Comprehensive loss: Net loss — — — ( 33,656 ) — — — ( 33,656 ) Other comprehensive loss — — — — ( 11,875 ) — — ( 11,875 ) Dividends declared ($2.84 per share) — — — ( 313,088 ) — — — ( 313,088 ) Exercise of employee stock options, net of shares withheld for employee taxes — — ( 7,153 ) — — ( 151 ) 8,474 1,321 Vesting of restricted stock awards, net of shares withheld for employee taxes 71 7 ( 17,227 ) — — ( 222 ) 12,531 ( 4,689 ) Stock-based compensation — — 34,292 — — — — 34,292 Share repurchases — — — — — 1,000 ( 42,779 ) ( 42,779 ) Cumulative effect adjustment for adoption of ASU No. 2014-09 — — — ( 38 ) — — — ( 38 ) Cumulative effect adjustment for adoption of ASU No. 2016-01 (Note 10) — — — 29,071 ( 29,071 ) — — — Reclassification of stranded tax effect for adoption of ASU No. 2018-02 — — — 4,239 ( 4,239 ) — — — Balance at September 30, 2019 112,080 11,208 510,305 3,714,307 ( 28,635 ) 3,642 ( 194,962 ) 4,012,223 Comprehensive income (loss): Net loss — — — ( 494,497 ) — — — ( 494,497 ) Other comprehensive income — — — — 2,447 — — 2,447 Dividends declared ($1.92 per share) — — — ( 209,798 ) — — — ( 209,798 ) Exercise of employee stock options, net of shares withheld for employee taxes — — ( 3,151 ) — — ( 110 ) 7,195 4,044 Vesting of restricted stock awards, net of shares withheld for employee taxes 71 7 ( 21,855 ) — — ( 329 ) 18,119 ( 3,729 ) Stock-based compensation — — 36,329 — — — — 36,329 Share repurchases — — — — — 1,460 ( 28,505 ) ( 28,505 ) Balance at September 30, 2020 112,151 $ 11,215 $ 521,628 $ 3,010,012 $ ( 26,188 ) 4,663 $ ( 198,153 ) $ 3,318,514 The accompanying notes are an integral part of these consolidated financial statements. 59 Table of Contents HELMERICH & PAYNE, INC. Consolidated Statements of Cash Flows Year Ended September 30, (in thousands) 2020 2019 2018 Cash flows from operating activities: Net income (loss) $ ( 494,497 ) $ ( 33,656 ) $ 482,672 Adjustment for (income) loss from discontinued operations ( 1,895 ) 1,146 10,338 Income (loss) from continuing operations ( 496,392 ) ( 32,510 ) 493,010 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 481,885 562,803 583,802 Asset impairment charges 563,234 224,327 23,128 Amortization of debt discount and debt issuance costs 1,817 1,732 1,067 Provision for bad debt 2,203 2,321 2,193 Stock-based compensation 36,329 34,292 31,687 Loss (gain) on investment securities 8,720 54,488 ( 1 ) Gain on sale of assets ( 46,775 ) ( 39,691 ) ( 22,660 ) Gain on sale of subsidiary ( 14,963 ) — — Deferred income tax benefit ( 157,555 ) ( 44,554 ) ( 486,758 ) Other ( 200 ) ( 3,295 ) 7,623 Change in assets and liabilities: Accounts receivable 300,807 70,323 ( 85,202 ) Inventories of materials and supplies 7,197 1,821 ( 22,427 ) Prepaid expenses and other ( 5,506 ) ( 176 ) ( 3,827 ) Other noncurrent assets 2,820 ( 10,430 ) 5,568 Accounts payable ( 9,414 ) ( 9,147 ) ( 4,461 ) Accrued liabilities ( 138,414 ) 40,887 43,798 Deferred income tax liability 908 371 2,268 Other noncurrent liabilities 2,227 2,251 ( 10,787 ) Net cash provided by operating activities from continuing operations 538,928 855,813 558,021 Net cash used in operating activities from discontinued operations ( 47 ) ( 62 ) ( 169 ) Net cash provided by operating activities 538,881 855,751 557,852 Cash flows from investing activities: Capital expenditures ( 140,795 ) ( 458,402 ) ( 466,584 ) Purchase of short-term investments ( 134,641 ) ( 97,652 ) ( 71,049 ) Payment for acquisition of business, net of cash acquired — ( 16,163 ) ( 47,886 ) Proceeds from sale of short-term investments 94,646 86,765 68,776 Proceeds from sale of subsidiary 15,056 — — Proceeds from sale of marketable securities — 11,999 — Proceeds from asset sales 78,399 50,817 44,381 Other ( 550 ) — — Net cash used in investing activities ( 87,885 ) ( 422,636 ) ( 472,362 ) Cash flows from financing activities: Dividends paid ( 260,335 ) ( 313,421 ) ( 308,430 ) Debt issuance costs — ( 3,912 ) — Proceeds from stock option exercises 4,100 3,053 6,355 Payments for employee taxes on net settlement of equity awards ( 3,784 ) ( 6,418 ) ( 7,114 ) Payment of contingent consideration from acquisition of business ( 8,250 ) — ( 10,625 ) Payments for early extinguishment of long-term debt — ( 12,852 ) — Share repurchases ( 28,505 ) ( 42,779 ) — Other ( 446 ) — — Net cash used in financing activities ( 297,220 ) ( 376,329 ) ( 319,814 ) Net increase (decrease) in cash and cash equivalents and restricted cash 153,776 56,786 ( 234,324 ) Cash and cash equivalents and restricted cash, beginning of period 382,971 326,185 560,509 Cash and cash equivalents and restricted cash, end of period $ 536,747 $ 382,971 $ 326,185 Supplemental disclosure of cash flow information: Cash paid during the period: Interest paid $ 22,928 $ 26,739 $ 20,502 Income tax paid (refund), net 46,700 16,218 ( 38,400 ) Payments for operating leases 18,646 — — Changes in accounts payable and accrued liabilities related to purchases of property, plant and equipment 3,123 17,771 ( 2,245 ) The accompanying notes are an integral part of these consolidated financial statements. 60 Table of Contents HELMERICH & PAYNE, INC. Notes to Consolidated Financial Statements NOTE 1 NATURE OF OPERATIONS Helmerich & Payne, Inc. (“H&P,” which, together with its subsidiaries, is identified as the “Company,” “we,” “us,” or “our,” except where stated or the context requires otherwise) through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies. During the third quarter of fiscal year 2020 , we restructured our operations (see Note 19—Restructuring Charges ) to accommodate scale during an industry downturn and to re-organize our operations to align to new marketing and management strategies. This is consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. Operations previously reported within the former U.S. Land and H&P Technologies operating and reportable segments 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 drilling services operations were 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." Refer to Note 18—Business Segments and Geographic Information for further details on our reportable segments. Our North America Solutions operations are primarily located in Colorado, Ohio, Oklahoma, New Mexico, North Dakota, Pennsylvania, Texas, West Virginia and Wyoming. Additionally, Offshore Gulf of Mexico operations are conducted in Louisiana and in U.S. federal waters in the Gulf of Mexico and our International Solutions operations have rigs primarily located in four international locations: Argentina, Bahrain, Colombia and United Arab Emirates. We also own, develop and operate limited commercial real estate properties. Our real estate investments, which are located exclusively within Tulsa, Oklahoma, include a shopping center and undeveloped real estate. Dispositions In December 2019, we closed on the sale of a wholly-owned subsidiary of Helmerich & Payne International Drilling Co. ("HPIDC"), TerraVici Drilling Solutions, Inc. ("TerraVici"). 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 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. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES Basis of Presentation The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We classified our former Venezuelan operation as a discontinued operation in the third quarter of fiscal year 2010, as more fully described in Note 4—Discontinued Operations . Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates only to our continuing operations. Principles of Consolidation The consolidated financial statements include the accounts of Helmerich & Payne, Inc. and its domestic and foreign subsidiaries. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the fiscal year are included in the consolidated statement of operations and comprehensive income (loss) from the date the Company gains control until the date when the Company ceases to control the subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. 61 Table of Contents COVID-19 and OPEC+ Production Impacts The outbreak of a novel strain of coronavirus (“COVID-19”) and its development into a pandemic have resulted in significant global economic disruption, including North America and many of the other geographic areas where we operate, or where our customers are located, or suppliers or vendors operate. Actions taken to prevent the spread of COVID-19 by governmental authorities around the world, including imposing mandatory closures of all non-essential business facilities, seeking voluntary closures of such facilities and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions, have significantly reduced global economic activity, thereby resulting in lower demand for crude oil. In particular, the travel restrictions in certain countries where we operate, including the closure of their borders to travel into the country, have resulted in an inability to effectively staff or rotate personnel at, and thereby operate, certain of our rigs and could lead to an inability to fulfill our contractual obligations under contracts with customers. Governmental authorities have also implemented multi-step policies with the goal of re-opening various sectors of the economy. However, certain jurisdictions began re-opening only to return to restrictions in the face of increases in new COVID-19 cases, while other jurisdictions are continuing to re-open or have nearly completed the re-opening process despite increases in COVID-19 cases. The COVID-19 outbreak may significantly worsen during the upcoming months, which may cause governmental authorities to reconsider restrictions on business and social activities. In the event governmental authorities increase restrictions, the re-opening of the economy may be further curtailed. We have experienced, and expect to continue to experience, some resulting in disruptions to our business operations, as these restrictions have significantly impacted, and may continue to impact, many sectors of the economy. In addition, the perceived risk of infection and health risk associated with COVID-19, and the illness of many individuals across the globe, has and will continue to alter behaviors of consumers, and policies of companies around the world, resulting in many of the same effects intended by such governmental authorities to stop the spread of COVID-19, such as self-imposed or voluntary social distancing and quarantining and remote work policies. We are complying with local governmental jurisdiction policies and procedures where our operations reside. In some cases, policies and procedures are more stringent in our foreign operations than 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. In addition, a customer in one foreign jurisdiction has claimed force majeure resulting in zero chargeable revenues during the suspension period. 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 prices. Consequently, we have seen a significant decrease in customer 2020 capital budgets and a corresponding dramatic decline in the demand for land rigs. In April 2020, OPEC+ finalized an agreement to cut oil production by 9.7 million barrels per day during May and June 2020. On June 6, 2020, OPEC+ agreed to extend such production cuts until the end of July 2020. On July 15, 2020, OPEC+ agreed to ease the production cuts from 9.7 million barrels per day to 7.7 million barrels per day from August to December 2020. Despite the production cuts, prices in the oil and gas market have remained depressed, as the oversupply and lack of demand in the market persist. Oil and natural gas prices are expected to continue to be volatile as a result of the near-term production instability and the ongoing COVID-19 outbreak and as changes in oil and natural gas inventories, industry demand and global and national economic performance are reported. These events have had, and could continue to have, an adverse impact on numerous aspects of our business, financial condition and results of operations. The ultimate extent of the impact of COVID-19 and prolonged excess oil supply on our business, financial condition and results of operations will depend largely on future developments, including the duration and spread of the COVID-19 outbreak within the United States and the parts of the world in which we operate and the related impact on the oil and gas industry, the impact of governmental actions designed to prevent the spread of COVID-19 and the development and availability of effective treatments and vaccines, all of which are highly uncertain and cannot be predicted with certainty at this time. From a financial perspective, we believe the Company is operationally and financially well positioned to continue operating even through a more protracted disruption caused by COVID-19, oil oversupply and low oil prices. At September 30, 2020 , the Company had cash and cash equivalents and short-term investments of $ 577.2 million . The 2018 Credit Facility (as defined within Note 8—Debt ) has $ 750.0 million in aggregate availability with a maximum of $ 75.0 million available for use as letters of credit. As of September 30, 2020 , there were no borrowings or letters of credit outstanding, leaving $ 750.0 million available to borrow under the 2018 Credit Facility. We currently do not anticipate the need to draw on the 2018 Credit Facility. Furthermore, the Company 2025 Notes (as defined within Note 8—Debt ) do not mature until March 19, 2025. Foreign Currencies Our functional currency, together with all our foreign subsidiaries, is the U.S. dollar. Monetary assets and liabilities denominated in currencies other than the U.S. dollar are translated at exchange rates in effect at the end of the period, and the resulting gains and losses are recorded on our statement of operations. Aggregate foreign currency losses of $ 8.8 million , $ 8.2 million and $ 4.0 million in fiscal years 2020 , 2019 and 2018 , respectively, are included in drilling services operating expenses. 62 Table of Contents Use of Estimates The preparation of our financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents include cash on hand, demand deposits with banks and all highly liquid investments with original maturities of three months or less. Our cash, cash equivalents and short-term investments are subject to potential credit risk, and certain of our cash accounts carry balances greater than the federally insured limits. We had restricted cash and cash equivalents of $ 48.9 million and $ 35.0 million at September 30, 2020 and 2019 , respectively. Of the total at September 30, 2020 and 2019 , $ 3.6 million and $ 3.0 million , respectively, is related to the acquisition of drilling technology companies described in Note 3—Business Combinations , $ 2.0 million as of both fiscal year ends is from the initial capitalization of the captive insurance company, and $ 43.1 million and $ 30.0 million , respectively, represents an additional amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance company. The restricted amounts are primarily invested in short-term money market securities. The restricted cash and cash equivalents are reflected in the Consolidated Balance Sheets as follows: September 30, (in thousands) 2020 2019 2018 Cash $ 487,884 $ 347,943 $ 284,355 Restricted Cash Prepaid expenses and other 45,577 31,291 39,830 Other assets 3,286 3,737 2,000 Total cash, cash equivalents, and restricted cash $ 536,747 $ 382,971 $ 326,185 Accounts Receivable Accounts receivable represents valid claims against our customers for our services rendered, net of allowances for doubtful accounts. We perform credit evaluations of customers and do not typically require collateral in support for trade receivables. We provide an allowance for doubtful accounts, when necessary, to cover estimated credit losses. Outstanding customer receivables are reviewed regularly for possible nonpayment indicators, and allowances for doubtful accounts are recorded based upon management’s estimate of collectability at each balance sheet date. Refer to Note 16—Supplemental Balance Sheet Information . Inventories of Materials and Supplies Inventories are primarily replacement parts and supplies held for consumption in our drilling operations. Inventories are valued at the lower of cost or net realizable value. Cost is determined on a weighted average basis and includes the cost of materials, shipping, duties and labor. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The reserves for excess and obsolete inventory were $ 36.5 million and $ 11.5 million for fiscal years 2020 and 2019 , respectively. Investments We maintain investments in equity securities of certain publicly traded companies. We recognize our marketable equity securities that have readily determinable fair values at fair value, with changes in such values reflected in net income. Property, Plant, and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Substantially all property, plant and equipment are depreciated using the straight-line method based on the estimated useful lives of the assets after deducting their salvage values. The amount of depreciation expense we record is dependent upon certain assumptions, including an asset’s estimated useful life, rate of consumption, and corresponding salvage value. We periodically review these assumptions and may change one or more of these assumptions. Changes in our assumptions may require us to recognize, on a prospective basis, increased or decreased depreciation expense. We capitalize interest on major projects during construction. Interest is capitalized based on the average interest rate on related debt. We had no capitalized interest during fiscal years 2020 and 2019 and $ 0.4 million of capitalized interest during fiscal year 2018 . 63 Table of Contents We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Changes that could prompt such an assessment include a significant decline in revenue or cash margin per day, extended periods of low rig asset group utilization, changes in market demand for a specific asset, obsolescence, completion of specific contracts, restructuring of our drilling fleet, and/or overall general market conditions. If the review of the long-lived assets indicates that the carrying value of these assets/asset groups is more than the estimated undiscounted future cash flows projected to be realized from the use of the asset and its eventual disposal an impairment charge is made, as required, to adjust the carrying value down to the estimated fair value of the asset. The estimated fair value is determined based upon either an income approach using estimated discounted future cash flows, a market approach considering factors such as recent market sales of rigs of other companies and our own sales of rigs, appraisals and other factors, a cost approach utilizing reproduction costs new as adjusted for the asset age and condition, and/or a combination of multiple approaches. Cash flows are estimated by management considering factors such as prospective market demand, margins, recent changes in rig technology and its effect on each rig’s marketability, any investment required to make a rig operational, suitability of rig size and make up to existing platforms, and competitive dynamics including industry utilization. Long-lived assets that are held for sale are recorded at the lower of carrying value or the fair value less costs to sell. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in a business combination, at the date of acquisition. Goodwill is not amortized but is tested for potential impairment at the reporting unit level at a minimum on an annual basis in the fourth fiscal quarter of each fiscal year or when it is more likely than not that the carrying value may exceed fair value. If an impairment is determined to exist, an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value is recognized, limited to the total amount of goodwill allocated to that reporting unit. The reporting unit level is defined as an operating segment or one level below an operating segment. Finite-lived intangible assets are amortized using the straight-line method over the period in which these assets contribute to our cash flows, generally estimated to be 5 to 20 years , and are evaluated for impairment in accordance with our policies for valuation of long-lived assets. Drilling Revenues Drilling services revenues are comprised of daywork drilling contracts for which the related revenues and expenses are recognized as services are performed and collection is reasonably assured. For certain contracts, we receive payments contractually designated for the mobilization of rigs and other drilling equipment. Mobilization payments received, and direct costs incurred for the mobilization, are deferred and recognized on a straight-line basis as the drilling service is provided. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred. Reimbursements received for out-of-pocket expenses are recorded as both revenues and direct costs. Reimbursements for fiscal years 2020 , 2019 and 2018 were $ 212.0 million , $ 322.8 million and $ 274.7 million , respectively. For contracts that are terminated by customers prior to the expirations of their fixed terms, contractual provisions customarily require early termination amounts to be paid to us. Revenues from early terminated contracts are recognized when all contractual requirements have been met. Early termination revenue for fiscal years 2020 , 2019 and 2018 was approximately $ 73.4 million , $ 11.3 million and $ 17.1 million , respectively. Rent Revenues We enter into leases with tenants in our rental properties consisting primarily of retail and multi-tenant warehouse space. The lease terms of tenants occupying space in the retail centers and warehouse buildings generally range from three to ten years . Minimum rents are recognized on a straight-line basis over the term of the related leases. Overage and percentage rents are based on tenants’ sales volume. Recoveries from tenants for property taxes and operating expenses are recognized in other operating revenues in the Consolidated Statements of Operations. During the fiscal year ended September 30, 2020, we closed on the sale of a portion of our real estate investment portfolio, including six industrial sites. See Note 5—Property, Plant and Equipment for additional details. Our rent revenues are as follows: Year Ended September 30, (in thousands) 2020 2019 2018 Minimum rents $ 9,245 $ 10,168 $ 9,950 Overage and percentage rents 656 932 1,040 64 Table of Contents At September 30, 2020 , minimum future rental income to be received on noncancelable operating leases was as follows (in thousands): Fiscal Year Amount 2021 $ 5,512 2022 4,553 2023 3,564 2024 2,975 2025 2,350 Thereafter 5,358 Total $ 24,312 Leasehold improvement allowances are capitalized and amortized over the lease term. At September 30, 2020 and 2019 , the cost and accumulated depreciation for real estate properties were as follows: September 30, (in thousands) 2020 2019 Real estate properties $ 43,389 $ 72,507 Accumulated depreciation ( 27,588 ) ( 43,570 ) $ 15,801 $ 28,937 Income Taxes Current income tax expense is the amount of income taxes expected to be payable for the current fiscal year. Deferred income taxes are computed using the liability method and are provided on all temporary differences between the financial basis and the tax basis of our assets and liabilities. We take tax positions in our tax returns from time to time that may not ultimately be allowed by the relevant taxing authority. When we take such positions, we evaluate the likelihood of sustaining those positions and determine the amount of tax benefit arising from such positions, if any, that should be recognized in our financial statements. We recognize uncertain tax positions we believe have a greater than 50 percent likelihood of being sustained. Tax benefits not recognized by us are recorded as a liability for unrecognized tax benefits, which represents our potential future obligation to various taxing authorities if the tax positions are not sustained. See Note 9—Income Taxes . Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. We recognize accrued interest related to unrecognized tax benefits in interest expense and penalties in other expense in the Consolidated Statements of Operations. Earnings per Common Share Basic earnings per share is computed utilizing the two-class method and is calculated based on the weighted-average number of common shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted-average number of common and common equivalent shares outstanding during the periods utilizing the two-class method for stock options, nonvested restricted stock and performance share units. We have granted and expect to continue to grant to employees restricted stock grants that contain non-forfeitable rights to dividends. Such grants are considered participating securities under Accounting Standards Codification ("ASC") 260, Earnings Per Share . As such, we have included these grants in the calculation of our basic earnings per share. Stock-Based Compensation Stock-based compensation expense is determined using a fair-value-based measurement method for all awards granted. Beginning in fiscal year 2019, we replaced stock options with performance share units as a component of our executives’ long-term equity incentive compensation. We have also eliminated stock options as an element of our non-employee director compensation program. The Board of Directors (the "Board") has determined to award stock-based compensation to non-employee directors solely in the form of restricted stock. The fair value of each option granted prior to fiscal year 2019 was estimated on the date of grant based on the Black-Scholes options-pricing model utilizing assumptions for a risk-free interest rate, volatility, dividend yield and expected remaining term of the awards. The assumptions used in calculating the fair value of stock-based payment awards represented management’s best estimates, but these estimates involve inherent uncertainties and the application of management's judgment. 65 Table of Contents The grant date fair value of performance share units is determined through the use of the Monte Carlo simulation method. The Monte Carlo simulation method requires the use of highly subjective assumptions. Our key assumptions in the method include the price and the expected volatility of our stock and our self-determined peer group of companies’ (the "Peer Group") stock, risk free rate of return, dividend yields and cross-correlations between the Company and our Peer Group. Stock-based compensation is recognized on a straight-line basis over the requisite service periods of the stock awards, which is generally the vesting period. Compensation expense is recorded as a component of drilling services operating expenses, research and development expenses and selling, general and administrative expenses in the Consolidated Statements of Operations. See Note 12—Stock-based Compensation for additional discussion on stock-based compensation. Treasury Stock Treasury stock purchases are accounted for under the cost method whereby the cost of the acquired stock is recorded as treasury stock. Gains and losses on the subsequent reissuance of shares are credited or charged to additional paid-in capital using the average-cost method. Treasury stock may be issued under the Helmerich & Payne, Inc. 2020 Omnibus Incentive Plan. Comprehensive Income or Loss Other comprehensive income or loss refers to revenues, expenses, gains, and losses that are included in comprehensive income or loss but excluded from net income or loss. We report the components of other comprehensive income or loss, net of tax, by their nature and disclose the tax effect allocated to each component in the Consolidated Statements of Comprehensive Income (Loss). Leases We lease various offices, warehouses, equipment and vehicles. Rental contracts are typically made for fixed periods of one to 15 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. Up until the end of fiscal year 2019, leases of property, plant and equipment were classified as either capital or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to the income statement on a straight-line basis over the period of the lease (“levelized lease cost”). Beginning October 1, 2019, leases are recognized as a right-of-use asset and a corresponding liability within accrued liabilities and other non-current liabilities at the date at which the leased asset is available for use by the Company. Each lease payment is allocated between the liability and finance cost. The finance cost is recognized over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis for finance type leases and as the difference between the levelized lease cost and the finance cost for operating leases. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • Fixed payments (including in-substance fixed payments), less any lease incentives receivable • Variable lease payments that are based on an index or a rate • Amounts expected to be payable by the lessee under residual value guarantees • The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and • Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, which is the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Right-of-use assets are measured at cost and are comprised of the following: • The amount of the initial measurement of lease liability • Any lease payments made at or before the commencement date less any lease incentives received • Any initial direct costs, and • Asset retirement obligations related to that lease, as applicable. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets are comprised of IT-equipment and office furniture. 66 Table of Contents In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs and is within the control of the lessee. Refer to Note 6—Leases for additional information regarding our leases. Recently Issued Accounting Updates Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates ("ASUs") to the FASB ASC. We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable, clarifications of ASUs listed below, immaterial, or already adopted by the Company. The following table provides a brief description of recent accounting pronouncements and our analysis of the effects on our financial statements: Standard Description Date of Adoption Effect on the Financial Statements or Other Significant Matters Recently Adopted Accounting Pronouncements ASU No. 2016-02, Leases (Topic 842) and related ASUs issued subsequent ASU No. 2016-02 requires organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months. Lessor accounting remains substantially similar to current U.S. GAAP. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2016-02 mandates a modified retrospective transition method of adoption with an option to use certain practical expedients. October 1, 2019 We adopted this ASU during the first quarter of fiscal year 2020, as required. Refer to Note 6—Leases for additional information. ASU No. 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract This ASU aims to reduce complexity in the accounting for costs of implementing a cloud computing service arrangement. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This update is effective for annual and interim periods beginning after December 15, 2019. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. October 1, 2019 We early adopted this ASU during the first quarter of fiscal year 2020 on a prospective basis. The prospective impact is not material to our consolidated financial statements and disclosures. Standards that are not yet adopted as of September 30, 2020 ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) and related ASUs issued subsequent This ASU introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income(loss), and (4) beneficial interests in securitized financial assets. This update is effective for annual and interim periods beginning after December 15, 2019. October 1, 2020 The guidance will be applied using the modified retrospective method with a cumulative effect adjustment to our beginning retained earnings balance. This update will apply primarily to receivables arising from revenue transactions. We have analyzed our historical credit losses and considered current economic conditions in developing our expected credit loss rate. We are currently finalizing our processes, internal controls and disclosures that are required upon adoption. We do not believe the implementation of this guidance will have a material impact on our consolidated financial statements and disclosures. 67 Table of Contents Standard Description Date of Adoption Effect on the Financial Statements or Other Significant Matters ASU No. 2019-12, Financial Instruments – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes This ASU simplifies the accounting for income taxes by removing certain exceptions related to Topic 740. The ASU also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This update is effective for annual and interim periods beginning after December 15, 2020. Early adoption of the amendment is permitted, including adoption in any interim period for public entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. Upon adoption, the amendments addressed in this ASU will be applied either prospectively, retrospectively or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. October 1, 2021 We are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures. ASU No. 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans—General (Topic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans This ASU amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit, pension and other postretirement plans. This update is effective for annual and interim periods ending after December 15, 2020. Upon adoption, the guidance will be applied on a retrospective basis to all periods presented. October 1, 2021 We are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures. Concentration of Credit Risk Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of temporary cash investments, short-term investments and trade receivables. The industry concentration has the potential to impact our overall exposure to market and credit risks, either positively or negatively, in that our customers could be affected by similar changes in economic, industry or other conditions. However, we believe that the credit risk posed by this industry concentration is offset by the creditworthiness of our customer base. We had revenues from individual customers, within our North America Solutions segment, that constituted 10 percent or more of our total revenues as follows: (in thousands) 2018 EOG Resources, Inc. $ 258,194 In fiscal years 2020 and 2019, no individual customers constituted 10 percent or more of our total revenues. We place temporary cash investments in the United States with established financial institutions and invest in a diversified portfolio of highly rated, short-term money market instruments. Our trade receivables, primarily with established companies in the oil and gas industry, may impact credit risk as customers may be similarly affected by prolonged changes in economic and industry conditions. International sales also present various risks including governmental activities that may limit or disrupt markets and restrict the movement of funds. Most of our international sales, however, are to large international or government-owned national oil companies. Volatility of Market Our operations can be materially affected by oil and gas prices. Oil and natural gas prices have been historically volatile and difficult to predict with any degree of certainty. While current energy prices are important contributors to positive cash flow for customers, expectations about future prices and price volatility are generally more important for determining a customer’s future spending levels. This volatility, along with the difficulty in predicting future prices, can lead many exploration and production companies to base their capital spending on more conservative estimates of commodity prices. As a result, demand for drilling services is not always purely a function of the movement of commodity prices. In addition, customers may finance their exploration activities through cash flow from operations, the incurrence of debt or the issuance of equity. Any deterioration in the credit and capital markets may cause difficulty for customers to obtain funding for their capital needs. A reduction of cash flow resulting from declines in commodity prices or a reduction of available financing may result in a reduction in customer spending and the demand for our services. This reduction in spending could have a material adverse effect on our operations. 68 Table of Contents Self-Insurance We have accrued a liability for estimated workers’ compensation and other casualty claims incurred based upon cash reserves plus an estimate of loss development and incurred but not reported claims. The estimate is based upon historical trends. Insurance recoveries related to such liability are recorded when considered probable. We self-insure a significant portion of expected losses relating to workers’ compensation, general liability and automobile liability. Generally, deductibles range from $ 1 million to $ 10 million per occurrence depending on the coverage and whether a claim occurs outside or inside of the United States. Insurance is purchased over deductibles to reduce our exposure to catastrophic events. Estimates are recorded for incurred outstanding liabilities for workers’ compensation, general liability claims and claims that are incurred but not reported. Estimates are based on adjusters’ estimates, historical experience and statistical methods commonly used within the insurance industry that we believe are reliable. We have also engaged a third-party actuary to perform a review of our domestic casualty losses as well as losses in our captive insurance companies. Nonetheless, insurance estimates include certain assumptions and management judgments regarding the frequency and severity of claims, claim development and settlement practices. Unanticipated changes in these factors may produce materially different amounts of expense that would be reported under these programs. On October 1, 2019, we elected to utilize the 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 recorded within each of the operating segments 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. 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 an external actuarial analysis. 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 fiscal year ended September 30, 2020 were approximately $ 16.4 million and were recorded within drilling services operating expenses in our Consolidated Statement of Operations. Intercompany premium revenues and expenses during the fiscal year ended September 30, 2020 amounted to $ 36.9 million , 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 self-insures 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. The stop-loss program does not have a material impact on a consolidated basis. International Solutions Drilling Risks International Solutions drilling operations may significantly contribute to our revenues and net operating income. There can be no assurance that we will be able to successfully conduct such operations, and a failure to do so may have an adverse effect on our financial position, results of operations, and cash flows. Also, the success of our International Solutions operations will be subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general and regional economic conditions, fluctuations in currency exchange rates, modified exchange controls, changes in international regulatory requirements and international employment issues, risk of expropriation of real and personal property and the burden of complying with foreign laws. Additionally, in the event that extended labor strikes occur or a country experiences significant political, economic or social instability, we could experience shortages in labor and/or material and supplies necessary to operate some of our drilling rigs, thereby potentially causing an adverse material effect on our business, financial condition and results of operations. Many of the countries in which we operate have implemented measures in response to the COVID-19 pandemic. These measures, including imposing mandatory closures of all non-essential business facilities, seeking voluntary closures of such facilities and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions, have significantly reduced global economic activity, thereby, resulting in lower demand for crude oil. In particular, the travel restrictions in certain countries where we operate, including the closure of their borders to travel into the country, have resulted in an inability to effectively staff or rotate personnel at, and thereby operate, certain of our rigs and could lead to an inability to fulfill our contractual obligations under contracts with customers. 69 Table of Contents We have also experienced certain risks related to our Argentine operations. In Argentina, while our dayrate is denominated in U.S. dollars, we are paid in Argentine pesos. The Argentine branch of one of our second-tier subsidiaries remits U.S. dollars to its U.S. parent by converting the Argentine pesos into U.S. dollars through the Argentine Foreign Exchange Market and repatriating the U.S. dollars. Argentina also has a history of implementing currency controls which restrict the conversion and repatriation of U.S. dollars, including controls that were implemented in September 2019. In September 2020, Argentina implemented additional currency controls in an effort to preserve Argentina's U.S. dollar reserves. As a result of these currency controls, our ability to remit funds from our Argentine subsidiary to its U.S. parent has been limited. In the past, the Argentine government has also instituted price controls on crude oil, diesel and gasoline prices and instituted an exchange rate freeze in connection with those prices. These price controls and an exchange rate freeze could be instituted again in the future. In addition, in March 2020, the Argentine government introduced labor regulations that prohibit employee dismissals or suspensions without just cause, for lack of (or reduction in) work or due to force majeure, subject to certain exceptions that may result in the payment of compensation to suspended employees and/or increased severance costs to the company. These prohibitions have resulted in significant challenges for our Argentine operations during fiscal year 2020 and it remains uncertain for how long they will be in effect. Further, there are additional concerns regarding Argentina's debt burden, notwithstanding Argentina's recent restructuring deal with international bondholders in August 2020, as Argentina attempts to manage its substantial sovereign debt issues. These concerns could further negatively impact Argentina's economy and adversely affect our Argentine operations. Argentina’s economy is considered highly inflationary, which is defined as cumulative inflation rates exceeding 100 percent in the most recent three-year period based on inflation data published by the respective governments. Nonetheless, all of our foreign subsidiaries use the U.S. dollar as the functional currency and local currency monetary assets and liabilities are remeasured into U.S. dollars with gains and losses resulting from foreign currency transactions included in current results of operations. Because of the impact of local laws, our future operations in certain areas may be conducted through entities in which local citizens own interests and through entities (including joint ventures) in which we hold only a minority interest or pursuant to arrangements under which we conduct operations under contract to local entities. While we believe that neither operating through such entities nor pursuant to such arrangements would have a material adverse effect on our operations or revenues, there can be no assurance that we will in all cases be able to structure or restructure our operations to conform to local law (or the administration thereof) on terms acceptable to us. Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the fiscal year ended September 30, 2020 , approximately 8.3 percent of our operating revenues were generated from international locations in our drilling services business compared to 7.6 percent during the fiscal year ended September 30, 2019 . During the fiscal year ended September 30, 2020 , approximately 61.6 percent of operating revenues from international locations were from operations in South America compared to 91.6 percent during the fiscal year ended September 30, 2019 . Substantially all of the South American operating revenues were from Argentina and Colombia. The future occurrence of one or more international events arising from the types of risks described above could have a material adverse impact on our business, financial condition and results of operations. NOTE 3 BUSINESS COMBINATIONS Fiscal Year 2019 Acquisitions On August 21, 2019, we completed an acquisition of an unaffiliated company, DrillScan Energy SAS and its subsidiaries ("DrillScan ® "), which is now a wholly-owned subsidiary of the Company, for total consideration of approximately $ 32.7 million , which includes $ 17.7 million of contingent consideration. The fair value of total assets acquired, and liabilities assumed, as of the acquisition date, were $ 36.3 million and $ 3.6 million , respectively, including goodwill of $ 14.9 million . Of the total assets acquired, $ 19.1 million was allocated to identifiable intangible assets. DrillScan ® is a leading provider of proprietary drilling engineering software, well engineering services and training for the oil and gas industry. The operations of DrillScan ® are included in the North America Solutions reportable segment. The acquisition of DrillScan ® was accounted for as a business combination in accordance with FASB ASC 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recorded at their acquisition date fair values. In accordance with GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination. During the second quarter of fiscal year 2020, as a result of new information identified related to the acquisition of DrillScan ® , the acquisition date fair value of the contingent consideration and goodwill increased by approximately $ 1.2 million . This acquisition's measurement period closed during the quarter ended June 30, 2020 and, as a result, the purchase price accounting was finalized. On November 1, 2018, we completed an acquisition of an unaffiliated company, Angus Jamieson Consulting (“AJC”), which is now a wholly-owned subsidiary of the Company, for total consideration of approximately $ 3.4 million . AJC is a software-based training and consultancy company based in Inverness, Scotland and is widely recognized as an industry leader in wellbore positioning. The operations of AJC are included in the North America Solutions reportable segment. The acquisition of AJC has been accounted for as a business combination in accordance with FASB ASC 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recorded at their acquisition date fair values. The allocation of the purchase price included goodwill of $ 3.1 million . 70 Table of Contents NOTE 4 DISCONTINUED OPERATIONS Current and noncurrent liabilities from discontinued operations consist of municipal and income taxes payable and social obligations due within the country of Venezuela. Expenses incurred for in-country obligations are reported as discontinued operations within our Consolidated Statements of Operations. The activity for the fiscal year ended September 30, 2020 was primarily due to the remeasurement of uncertain tax liabilities as a result of the devaluation of the Venezuela Bolivar. Early in 2018, the Venezuelan government announced that it changed the existing dual-rate foreign currency exchange system by eliminating its heavily subsidized foreign exchange rate, which was 10 Bolivars per United States dollar, and relaunched an exchange system known as DICOM. The Venezuela government also established a new currency called the “Sovereign Bolivar,” which was determined by the elimination of five zeros from the old currency. The DICOM floating rate was approximately 436,677 , 21,028 , and 62 Bolivars per United States dollar at September 30, 2020 , 2019 and 2018, respectively. The DICOM floating rate might not reflect the barter market exchange rates. NOTE 5 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of September 30, 2020 and 2019 consisted of the following: (in thousands) Estimated Useful Lives September 30, 2020 September 30, 2019 Drilling services equipment 4 - 15 years $ 7,313,234 7,881,323 Tubulars 4 years 615,281 618,310 Real estate properties 10 - 45 years 43,389 72,507 Other 2 - 23 years 464,704 471,803 Construction in progress (1) 49,592 117,761 8,486,200 9,161,704 Accumulated depreciation ( 4,839,859 ) ( 4,659,620 ) Property, plant and equipment, net $ 3,646,341 $ 4,502,084 (1) Included in construction in progress are costs for projects in progress to upgrade or refurbish certain rigs in our existing fleet. Additionally, we include other capital maintenance purchase-orders that are open/in process. As these various projects are completed, the costs are then classified to their appropriate useful life category. Impairments - Fiscal Year 2020 Consistent with our policy, we evaluate our drilling rigs and related equipment for impairment whenever events or changes in circumstances indicate the carrying value of these assets may exceed the estimated undiscounted future net cash flows. Our evaluation, among other things, includes a review of external market factors and an assessment on the future marketability of specific rigs’ asset group. 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. 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 FlexRig ® 3 asset group and our FlexRig ® 5 asset group creating a new "Domestic super-spec FlexRig ® " asset group, while combining the legacy Domestic conventional asset group, FlexRig ® 4 asset group and FlexRig ® 3 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. As a result of these indicators, we performed impairment testing at March 31, 2020 on each of our Domestic non super-spec and International conventional, FlexRig ® 3, and FlexRig ® 4 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 Consolidated Statement of Operations for the fiscal year ended September 30, 2020. 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 segments, respectively. No further impairments were recognized in fiscal year 2020. Impairment was measured as the amount by which the net book value of each asset group exceeds its fair value. The most significant assumptions used in our undiscounted cash flow model include timing on awards of future drilling contracts, drilling rig utilization, estimated remaining useful life, and net proceeds received upon future sale/disposition. These assumptions are classified as Level 3 inputs by ASC Topic 820 Fair Value Measurement and Disclosures as they are based upon unobservable inputs and primarily rely on management assumptions and forecasts. 71 Table of Contents In determining the fair value of each asset group, we utilized a combination of income and market approaches. 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. 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 Consolidated Statement of Operations for the fiscal year ended September 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. Impairment - Fiscal Year 2019 During the third quarter of fiscal year 2019, the Company's management performed a detailed assessment, considering a number of approaches, to maximize the utilization and enhance the margins of the domestic and international FlexRig ® 4 asset groups. In June 2019, this assessment concluded that marketing a smaller fleet of these two asset groups would provide the best economic outcome. As such, the decision was made to downsize the number of domestic and international FlexRig ® 4 drilling rigs, to be marketed to our customers, from 71 rigs to 20 domestic rigs and from 10 rigs to 8 international rigs and utilize the major interchangeable components of the decommissioned drilling rigs within these asset groups as capital spares for all of our remaining rig fleet. This reduced the aggregate net book values of the FlexRig ® 4 asset groups as of June 30, 2019 from $ 317.8 million to $ 107.5 million for domestic rigs and from $ 55.7 million to $ 47.8 million for international rigs. Following the downsizing process, we performed a detailed study to optimize the quantities of capital spares and drilling support equipment required to support the future operations of our rig fleet going forward. These decisions and analysis resulted in a write down of excess capital spares and drilling support equipment, which had an aggregate net book value of $ 235.3 million , to their estimated proceeds to ultimately be received on sale or disposal based on our historical experience with sales and disposals of similar assets, resulting in an impairment of $ 224.3 million , which was recorded in our Consolidated Statement of Operations for the fiscal year ended September 30, 2019. Of the $ 224.3 million total impairment charge recorded, $ 216.9 million and $ 7.4 million was recorded in our North America Solutions and International Solutions segments, respectively. The significant assumptions in the valuation are classified as Level 2 inputs by ASC Topic 820, Fair Value Measurement and Disclosures. Due to the downsizing of our domestic and international FlexRig ® 4 asset groups, at June 30, 2019, we performed impairment testing on these two asset groups. We concluded that the net book values of the asset groups are recoverable through estimated undiscounted cash flows with a surplus. The most significant assumptions used in our undiscounted cash flow model include timing on awards of future drilling contracts, operating dayrates, operating costs, rig reactivation costs, drilling rig utilization, estimated remaining useful life, and net proceeds received upon future sale/disposition. The assumptions are consistent with the Company's internal forecasts for future years. Although we believe the assumptions used in our analysis are reasonable and appropriate and the probability-weighted average of expected future undiscounted net cash flows exceed the net book value for each of the domestic and international FlexRig ® 4 asset groups as of June 30, 2019, different assumptions and estimates could materially impact the analysis and our resulting conclusion. Impairments - Fiscal Year 2018 During the fourth quarter of fiscal year 2018, after ceasing operations in Ecuador, we entered into a sales negotiation with respect to the six conventional rigs, within a separate international conventional rigs’ asset group, with net book values of $ 20.8 million , present in the country, pursuant to which the rigs, together with associated equipment and machinery, were sold to a third party to be recycled. Certain components of these rigs, with an $ 8.5 million net book value, that were not subject to the sale agreement were transferred to the United States to be utilized on other FlexRig ® drilling rigs with high activity and demand. The sales transaction was completed in November 2018. We recorded a non-cash impairment charge within our International Solutions segment of $ 9.2 million , which is included in Asset Impairment Charge on the Consolidated Statement of Operations for the fiscal year ended September 30, 2018. As a result, the remaining rig within the same asset group, not to be disposed of, was written down resulting in an additional impairment charge of $ 1.4 million . The assets were recorded at fair value based on the sales agreement and as such are classified as Level 2 within the fair value hierarchy. Furthermore, during the fourth quarter of fiscal year 2018, within our North America Solutions segment, management committed to a plan to auction several previously decommissioned rigs during fiscal year 2019. As a result, we wrote them down to their estimated fair values. We recorded a non-cash impairment charge of $ 5.7 million , which is included in Asset Impairment Charge on the Consolidated Statements of Operations for the fiscal year ended September 30, 2018. The assets were recorded at fair value based on the auction price and as such are classified as Level 2 of the fair value hierarchy. 72 Table of Contents Decommissioning While the crude oil market imbalance is a global phenomenon, it has more acutely impacted the U.S. market as a result of storage limitations during the last two quarters of fiscal year 2020. The abruptness of and the overall size of the decrease in demand for refined products, such as gasoline and diesel, has created an abundance of supply for such products which has caused the inventory levels of crude oil and its related refined products to become greatly elevated, reaching the high end of storage capabilities. This has greatly reduced the need, or in some cases, entirely eliminated the ability of refineries to use crude oil as a feedstock. As such, exploration and production ("E&P") companies, our customers, may have limited opportunities to offload their production and even then, the selling price could be at very low, uneconomical prices. Consequently, some E&P companies have chosen to shut-in and stop production, not complete additional wells drilled and/or not drill any more wells until the market imbalance corrects and it is economical to resume production and drilling wells. During the fiscal year ended September 30, 2020, we decommissioned two rigs and 35 rigs from our legacy Domestic Conventional asset group and FlexRig ® 3 asset group, respectively. The decommissioned rigs were impaired as of March 31, 2020. Depreciation Depreciation in the Consolidated Statements of Operations of $ 474.7 million , $ 556.9 million and $ 578.4 million includes abandonments of $ 4.0 million , $ 11.4 million and $ 27.7 million for fiscal years 2020 , 2019 and 2018 , respectively. Gain on Sale of Assets We had a gain on sale of assets of $ 46.8 million , $ 39.7 million and $ 22.7 million in fiscal years 2020 , 2019 and 2018 , respectively. These gains were related to customer reimbursement for the replacement value of drill pipe damaged or lost in drilling operations. Additionally, during the fiscal year ended September 30, 2020, we closed on the sale of a portion of our real estate investment portfolio, including six industrial sites, for total consideration, net of selling related expenses, of $ 40.7 million and an aggregate net book value of $ 13.5 million , resulting in a gain of $ 27.2 million , which is included within Gain on Sale of Assets on our Consolidated Statement of Operations. NOTE 6 LEASES ASC 842 Adoption On October 1, 2019, we adopted ASC 842, retrospectively through a cumulative-effect adjustment without restating comparative periods for the 2019 and 2018 fiscal years as permitted under the specific transitional provisions in ASC 842. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on October 1, 2019. Upon the adoption of ASC 842, we recognized lease liabilities in relation to leases that had previously been classified as operating leases under the principles of ASC 840. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of October 1, 2019, as most of our contracts do not provide an implicit rate. The weighted average lessee’s incremental borrowing rate applied to the operating lease liabilities on October 1, 2019 was approximately 2.9 % . The change in accounting policy affected the following items in the balance sheet on October 1, 2019: (in thousands) September 30, 2019 Adjustments October 1, 2019 Other Noncurrent Assets: Operating lease right-of-use asset $ — $ 56,071 $ 56,071 Current Liabilities: Accrued Liabilities — 16,277 16,277 Noncurrent Liabilities: Other — 39,794 39,794 73 Table of Contents As of September 30, 2020 , segment assets and liabilities have all increased from September 30, 2019 as a result of the change in accounting policy. All reportable segments were affected by the change in policy. In applying ASC 842 for the first time, we have used the following practical expedients permitted by the topic: • The use of a single discount rate to a portfolio of leases with reasonably similar characteristics, • Not to reassess whether a contract is, or contains a lease at the date of initial application; instead, for contracts entered into before the transition date, we relied on our assessment in which we applied ASC 840 prior to the adoption date, • The option to not reassess initial direct cost for existing leases, and • The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. We have made the accounting policy election to not recognize a right-of-use asset and corresponding liability for leases with a term of 12 months or less and leases of low-value. Additionally, ASC 842 provides lessors with a practical expedient, by class of underlying asset, to not separate lease and non-lease components and account for the combined component under ASC 606 when the non-lease component is the predominant element of the combined component. The lessor practical expedient is limited to circumstances in which the lease, if accounted for separately, would be classified as an operating lease under ASC 842. With respect to our drilling service contracts that commenced or were amended during the fiscal year ended September 30, 2020 , we concluded that our drilling contracts contain a lease component and that the non-lease component is the predominant element of the combined component of such contracts. As such, we elected to apply the practical expedient to not separate the lease and non-lease components and account for the combined component under ASC 606. Therefore, we do not expect any change in our revenue recognition patterns or disclosures as a result of our adoption of ASC 842. Lease Position (in thousands) October 1, 2019 September 30, 2020 Operating lease commitments, including probable extensions (1) $ 62,218 $ 48,695 Discounted using the lessee's incremental borrowing rate at the date of initial application $ 57,323 $ 46,706 (Less): short-term leases recognized on a straight-line basis as expense ( 1,252 ) ( 1,456 ) Lease liability recognized $ 56,071 $ 45,250 Of which: Current lease liabilities $ 16,277 $ 11,364 Non-current lease liabilities 39,794 33,886 (1) Our future minimal rental payments exclude optional extensions that have not been exercised but are probable to be exercised in the future, those probable extensions are included in the operating lease liability balance. The recognized right-of-use assets relate to the following types of assets: (in thousands) October 1, 2019 September 30, 2020 Properties $ 52,188 $ 42,448 Equipment 3,652 1,394 Other 231 741 Total right-of-use assets $ 56,071 $ 44,583 The right-of-use assets were measured at the amount equal to the lease liability, adjusted for the amount of any prepaid or accrued lease payments recognized on the balance sheet at September 30, 2019. Lease Costs The following table presents certain information related to the lease costs for our operating leases: (in thousands) Year Ended September 30, 2020 Operating lease cost $ 16,953 Short-term lease cost 1,693 Total lease cost $ 18,646 74 Table of Contents Lease Terms and Discount Rates The table below presents certain information related to the weighted average remaining lease terms and weighted average discount rates for our operating leases as of September 30, 2020 . September 30, 2020 Weighted average remaining lease term 4.9 Weighted average discount rate 2.7 % Lease Obligations Future minimum rental payments required under operating leases having initial or remaining non-cancelable lease terms in excess of one year at September 30, 2020 (in thousands) are as follows: Fiscal Year Amount 2021 $ 11,680 2022 8,133 2023 7,466 2024 7,018 2025 3,231 Thereafter 638 Total (1) $ 38,166 (1) Our future minimal rental payments exclude optional extensions that have not been exercised but are probable to be exercised in the future, those probable extensions are included in the operating lease liability balance. Total rent expense was $ 18.6 million , $ 15.5 million and $ 13.7 million for the fiscal years ended September 30, 2020 , 2019 and 2018 , respectively. The future minimum lease payments for our Tulsa corporate office and our Tulsa industrial facility represent a material portion of the amounts shown in the table above. The lease agreement for our Tulsa corporate office commenced on May 30, 2003 and has subsequently been amended, most recently on March 12, 2018. The agreement will expire on January 31, 2025; however, we have two five -year renewal options, which were not recognized as part of our right-of-use assets and lease liabilities. The lease agreement for our Tulsa industrial facility, where we perform maintenance and assembly of FlexRig ® components commenced on December 21, 2018 and will expire on June 30, 2025; however, we have two two -year renewal options which were recognized as part of our right-of-use assets and lease liabilities. NOTE 7 GOODWILL AND INTANGIBLE ASSETS Goodwill Goodwill represents the excess of the purchase price over the fair values of the assets acquired and liabilities assumed in a business combination, at the date of acquisition. Goodwill is not amortized but is tested for potential impairment at the reporting unit level, at a minimum on an annual basis, or when indications of potential impairment exist. All of our goodwill is within our North America Solutions reportable segment. The following is a summary of changes in goodwill (in thousands): September 30, 2017 $ 51,705 Additions 17,791 Impairment ( 4,719 ) September 30, 2018 64,777 Additions 18,009 September 30, 2019 82,786 Additions 1,200 Impairment ( 38,333 ) September 30, 2020 $ 45,653 During the second quarter of fiscal year 2020, as a result of new information identified related to the acquisition of DrillScan ® , the acquisition date fair value of the contingent consideration and goodwill increased by approximately $ 1.2 million . 75 Table of Contents Intangible Assets Finite-lived intangible assets are amortized using the straight-line method over the period in which these assets contribute to our cash flows and are evaluated for impairment in accordance with our policies for valuation of long-lived assets. All of our intangible assets are within our North America Solutions reportable segment. Intangible assets consisted of the following: September 30, 2020 September 30, 2019 (in thousands) Weighted Average Estimated Useful Lives Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Finite-lived intangible asset: Developed technology 15 years $ 89,096 $ 16,222 $ 72,874 $ 89,096 $ 10,256 $ 78,840 Intellectual property 13 years 1,500 103 1,397 — — — Trade name 20 years 5,865 842 5,023 5,865 522 5,343 Customer relationships 5 years 4,000 2,267 1,733 4,000 1,467 2,533 $ 100,461 $ 19,434 $ 81,027 $ 98,961 $ 12,245 $ 86,716 Amortization expense in the Consolidated Statements of Operations was $ 7.2 million , $ 5.8 million and $ 5.4 million for fiscal years 2020 , 2019 and 2018 , respectively, and is estimated to be $ 7.2 million for each of the next two succeeding fiscal years, approximately $ 6.5 million for fiscal year 2023 and approximately $ 6.4 million for fiscal years 2024 and 2025. Impairment - Fiscal Year 2020 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. This resulted in a goodwill only non-cash impairment charge of $ 38.3 million recorded in the Consolidated Statement of Operations during the fiscal year ended September 30, 2020 . The recoverable amount of the H&P Technologies reporting unit was determined based on a fair value calculation which uses cash flow projections based on the Company's financial projections presented to the Board covering a five-year period, and a discount rate of 14 percent. Cash flows beyond that five-year period were extrapolated using the fifth-year data with no implied growth factor. 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 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 of awarded future contracts, commercial pricing terms, utilization, discount rate, and the terminal value. These assumptions are classified as Level 3 inputs by ASC Topic 820 Fair Value Measurement and Disclosures as they are based upon unobservable inputs and primarily rely on management assumptions and forecasts. Although we believe the assumptions used in our analysis and the probability-weighted average of expected future cash flows are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and our resulting conclusion. Impairment - Fiscal Year 2018 During the fourth quarter of fiscal year 2018, and as part of our annual goodwill impairment test, we performed a detailed assessment of the TerraVici reporting unit, where $ 4.7 million of goodwill was allocated. We determined that the estimated fair value of this reporting unit was less than its carrying amount and we recorded goodwill impairment losses of $ 4.7 million . In addition, we recorded an intangible assets impairment loss of $ 0.9 million . These impairment losses are included in Asset Impairment Charge on the Consolidated Statements of Operations for the fiscal year ended September 30, 2018. Our goodwill impairment analysis performed on our remaining technology reporting units in the fourth quarter of fiscal year 2018 did not result in an impairment charge. 76 Table of Contents NOTE 8 DEBT We had the following unsecured long-term debt outstanding with maturities shown in the following table: September 30, 2020 September 30, 2019 (in thousands) Face Amount Unamortized Discount and Debt Issuance Cost Book Value Face Amount Unamortized Discount and Debt Issuance Cost Book Value Unsecured senior notes: Due March 19, 2025 $ 487,148 $ ( 6,421 ) $ 480,727 $ 487,148 $ ( 7,792 ) $ 479,356 487,148 ( 6,421 ) 480,727 487,148 ( 7,792 ) 479,356 Less long-term debt due within one year — — — — — — Long-term debt $ 487,148 $ ( 6,421 ) $ 480,727 $ 487,148 $ ( 7,792 ) $ 479,356 Senior Notes HPIDC 2025 Notes On March 19, 2015, our subsidiary, HPIDC issued $ 500.0 million of 4.65 percent unsecured senior notes due 2025 of HPIDC (the "HPIDC 2025 Notes"), which were redeemed in full on September 27, 2019 as described under "––Exchange Offer, Consent Solicitation and Redemption." Interest on the HPIDC 2025 Notes was payable semi-annually on March 15 and September 15. The debt discount was being amortized to interest expense using the effective interest method. The debt issuance costs were being amortized straight-line over the stated life of the obligation, which approximated the effective interest method. Exchange Offer, Consent Solicitation and Redemption On December 20, 2018, we settled an offer to exchange (the “Exchange Offer”) any and all outstanding HPIDC 2025 Notes for (i) up to $ 500.0 million aggregate principal amount of new 4.65 percent unsecured senior notes due 2025 of the Company (the “Company 2025 Notes”), with registration rights, and (ii) cash, pursuant to which we issued approximately $ 487.1 million in aggregate principal amount of Company 2025 Notes. Interest on the Company 2025 Notes is payable semi-annually on March 15 and September 15 of each year, commencing March 15, 2019. The debt issuance costs are being amortized straight-line over the stated life of the obligation, which approximates the effective interest method. Following the consummation of the Exchange Offer, HPIDC had outstanding approximately $ 12.9 million in aggregate principal amount of HPIDC 2025 Notes. On December 20, 2018, HPIDC, the Company and Wells Fargo Bank, National Association, as trustee, entered into a supplemental indenture to the indenture governing the HPIDC 2025 Notes to adopt certain proposed amendments pursuant to a consent solicitation conducted concurrently with the Exchange Offer. On September 27, 2019, we redeemed the remaining approximately $ 12.9 million in aggregate principal amount of HPIDC 2025 Notes for approximately $ 14.6 million , including accrued interest and a prepayment premium. Simultaneously with the redemption of the HPIDC 2025 Notes, HPIDC was released as a guarantor under the Company 2025 Notes and the 2018 Credit Facility. As a result of such release, H&P is the only obligor under the Company 2025 Notes and the 2018 Credit Facility. Credit Facilities On November 13, 2018, we entered into a credit agreement by and among the Company, as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, which was amended on November 13, 2019, providing for an unsecured revolving credit facility (the “2018 Credit Facility”) that is set to mature on November 13, 2024. The 2018 Credit Facility has $ 750.0 million in aggregate availability with a maximum of $ 75.0 million available for use as letters of credit. The 2018 Credit Facility also permits aggregate commitments under the facility to be increased by $ 300.0 million , subject to the satisfaction of certain conditions and the procurement of additional commitments from new or existing lenders. The borrowings under the 2018 Credit Facility accrue interest at a spread over either the London Interbank Offered Rate ("LIBOR") or the Base Rate. We also pay a commitment fee on the unused balance of the facility. Borrowing spreads as well as commitment fees are determined based on the debt rating for senior unsecured debt of the Company, as determined by Moody’s and Standard & Poor’s. The spread over LIBOR ranges from 0.875 percent to 1.500 percent per annum and commitment fees range from 0.075 percent to 0.200 percent per annum. Based on the unsecured debt rating of the Company on September 30, 2020 , the spread over LIBOR would have been 1.125 percent had borrowings been outstanding under the 2018 Credit Facility and commitment fees are 0.125 percent . There is a financial covenant in the 2018 Credit Facility that requires us to maintain a total debt to total capitalization ratio of less than or equal to 50 percent . 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 September 30, 2020 , there were no borrowings or letters of credit outstanding, leaving $ 750.0 million available to borrow under the 2018 Credit Facility. 77 Table of Contents As of September 30, 2020 , we had two separate outstanding letters of credit with banks, in the amounts of $ 24.8 million and $ 2.1 million . As of September 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 , $ 4.3 million of financial guarantees were outstanding as of September 30, 2020 . Subsequent to September 30, 2020, $ 2.6 million in financial guarantees have expired. 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 September 30, 2020 , we were in compliance with all debt covenants. At September 30, 2020 , aggregate maturities of long-term debt are as follows (in thousands): Year ending September 30, 2021 $ — 2022 — 2023 — 2024 — 2025 487,148 Thereafter — $ 487,148 NOTE 9 INCOME TAXES Income Tax Benefit and Rate The components of the benefit for income taxes are as follows: Year Ended September 30, (in thousands) 2020 2019 2018 Current: Federal $ 15,431 $ 21,745 $ 757 Foreign 1,495 732 6,492 State 523 3,365 2,340 17,449 25,842 9,589 Deferred: Federal ( 127,096 ) ( 35,809 ) ( 508,256 ) Foreign ( 12,390 ) 2,804 7,415 State ( 18,069 ) ( 11,549 ) 14,083 ( 157,555 ) ( 44,554 ) ( 486,758 ) Total benefit $ ( 140,106 ) $ ( 18,712 ) $ ( 477,169 ) The amounts of domestic and foreign income (loss) before income taxes are as follows: Year Ended September 30, (in thousands) 2020 2019 2018 Domestic $ ( 458,364 ) $ ( 45,118 ) $ 27,436 Foreign ( 178,134 ) ( 6,104 ) ( 11,595 ) $ ( 636,498 ) $ ( 51,222 ) $ 15,841 78 Table of Contents Effective income tax rates as compared to the U.S. Federal income tax rate are as follows: Year Ended September 30, 2020 2019 2018 U.S. Federal income tax rate 21.0 % 21.0 % 24.5 % Effect of foreign taxes ( 0.2 ) ( 0.6 ) 87.8 State income taxes, net of federal tax benefit 2.8 17.2 68.8 Remeasurement of deferred tax related to Tax Cuts and Jobs Act — — ( 3,169.4 ) Other impact of foreign operations ( 0.5 ) 0.9 ( 43.4 ) Non-deductible meals and entertainment ( 0.2 ) ( 2.5 ) 8.2 Equity compensation ( 0.3 ) 2.7 ( 5.3 ) Excess officer's compensation ( 0.2 ) ( 1.9 ) 1.7 Contingent consideration adjustment — 4.5 10.7 Other ( 0.4 ) ( 4.8 ) 4.1 Effective income tax rate 22.0 % 36.5 % ( 3,012.3 )% Effective tax rates differ from the U.S. federal statutory rate of 21.0 percent due to state and foreign income taxes and the tax effect of non-deductible expenditures. Deferred Taxes Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. Recoverability of any tax assets are evaluated, and necessary valuation allowances are provided. The carrying value of the net deferred tax assets is based on management’s judgments using certain estimates and assumptions that we will be able to generate sufficient future taxable income in certain tax jurisdictions to realize the benefits of such assets. If these estimates and related assumptions change in the future, additional valuation allowances may be recorded against the deferred tax assets resulting in additional income tax expense in the future. The components of our net deferred tax liabilities are as follows: September 30, (in thousands) 2020 2019 Deferred tax liabilities: Property, plant and equipment $ 685,389 $ 867,909 Marketable securities 1,957 — Other 26,138 15,681 Total deferred tax liabilities 713,484 883,590 Deferred tax assets: Marketable securities — 771 Pension reserves 7,369 7,324 Self-insurance reserves 10,360 14,294 Net operating loss, foreign tax credit, and other federal tax credit carryforwards 33,747 41,126 Financial accruals 32,481 54,511 Other 15,632 2,531 Total deferred tax assets 99,589 120,557 Valuation allowance ( 36,780 ) ( 43,578 ) Net deferred tax assets 62,809 76,979 Net deferred tax liabilities $ 650,675 $ 806,611 The change in our net deferred tax assets and liabilities is impacted by foreign currency remeasurement. As of September 30, 2020 , we had federal, state and foreign tax net operating loss carryforwards of $ 7.3 million , $ 25.7 million and $ 39.9 million , respectively, and foreign tax credit carryforwards of approximately $ 23.9 million (of which $ 19.1 million is reflected as a deferred tax asset in our Consolidated Financial Statements prior to consideration of our valuation allowance) which will expire in fiscal years 2021 through 2040. The valuation allowance is primarily attributable to foreign net operating loss carryforwards of $ 11.3 million , foreign tax credit carryforwards of $ 19.1 million , equity compensation of $ 4.9 million , and foreign minimum tax credit carryforwards of $ 1.4 million which more likely than not will not be utilized. 79 Table of Contents Unrecognized Tax Benefits We recognize accrued interest related to unrecognized tax benefits in interest expense, and penalties in other expense in the Consolidated Statements of Operations. As of September 30, 2020 , and 2019 , we had accrued interest and penalties of $ 2.8 million and $ 2.1 million , respectively. A reconciliation of the change in our gross unrecognized tax benefits for the fiscal years ended September 30, 2020 and 2019 is as follows: (in thousands) 2020 2019 Unrecognized tax benefits at October 1, $ 15,759 $ 14,905 Gross decreases - current period effect of tax positions ( 2,338 ) ( 28 ) Gross increases - current period effect of tax positions 20 1,067 Expiration of statute of limitations for assessments ( 1 ) ( 185 ) Unrecognized tax benefits at September 30, $ 13,440 $ 15,759 As of September 30, 2020 , and 2019 , our liability for unrecognized tax benefits includes $ 13.0 million and $ 15.3 million , respectively, of unrecognized tax benefits related to discontinued operations that, if recognized, would not affect the effective tax rate. The remaining unrecognized tax benefits would affect the effective tax rate if recognized. The liabilities for unrecognized tax benefits and related interest and penalties are included in other noncurrent liabilities in our Consolidated Balance Sheets. For the next 12 months, we cannot predict with certainty whether we will achieve ultimate resolution of any uncertain tax position associated with our U.S. and international operations that could result in increases or decreases of our unrecognized tax benefits. However, we do not expect the increases or decreases to have a material effect on our results of operations or financial position. Tax Returns We file a consolidated U.S. federal income tax return, as well as income tax returns in various states and foreign jurisdictions. The tax years that remain open to examination by U.S. federal and state jurisdictions include fiscal years 2016 through 2019, with exception of certain state jurisdictions currently under audit. The tax years remaining open to examination by foreign jurisdictions include 2003 through 2019. NOTE 10 SHAREHOLDERS’ EQUITY The Company has an evergreen authorization from the Board for the repurchase of up to four million common shares in any calendar year. The repurchases may be made using our cash and cash equivalents or other available sources. During the fiscal year ended September 30, 2020 , we purchased 1.5 million common shares at an aggregate cost of $ 28.5 million , which are held as treasury shares. We purchased 1.0 million common shares at an aggregate cost of $ 42.8 million , which are held as treasury shares, during the fiscal year ended September 30, 2019 . We had no purchases of common shares during the fiscal year ended September 30, 2018 . As of September 30, 2020 , we declared $ 209.8 million in cash dividends. A cash dividend of $ 0.25 per share was declared on September 9, 2020 for shareholders of record on November 13, 2020, payable on December 1, 2020. As a result, we recorded a Dividend Payable of $ 27.2 million on our Consolidated Balance Sheets as of September 30, 2020 . Accumulated Other Comprehensive Income (Loss) Components of accumulated other comprehensive income (loss) were as follows: September 30, (in thousands) 2020 2019 2018 Pre-tax amounts: Unrealized appreciation on securities (1) $ — $ — $ 44,023 Unrealized actuarial loss ( 33,923 ) ( 37,084 ) ( 21,693 ) $ ( 33,923 ) $ ( 37,084 ) $ 22,330 After-tax amounts: Unrealized appreciation on securities (1) $ — $ — $ 29,071 Unrealized actuarial loss ( 26,188 ) ( 28,635 ) ( 12,521 ) $ ( 26,188 ) $ ( 28,635 ) $ 16,550 (1) We adopted ASU No. 2016-01 on October 1, 2018. The standard requires that changes in the fair value of our equity investments must be recognized in net income. The following is a summary of the changes in accumulated other comprehensive loss, net of tax, by component for the fiscal year ended September 30, 2020 : 80 Table of Contents (in thousands) Defined Benefit Pension Plan Balance at September 30, 2019 $ ( 28,635 ) Activity during the period Amounts reclassified from accumulated other comprehensive loss 2,447 Net current-period other comprehensive loss 2,447 Balance at September 30, 2020 $ ( 26,188 ) NOTE 11 REVENUE FROM CONTRACTS WITH CUSTOMERS Drilling Services Revenue The majority of our drilling services are performed on a “daywork” contract basis, under which we charge a rate per day, with the price determined by the location, depth and complexity of the well to be drilled, operating conditions, the duration of the contract, and the competitive forces of the market. These drilling services, including our technology solutions, represent a series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer. Because our customers benefit equally throughout the service period and our efforts in providing drilling services are incurred relatively evenly over the period of performance, revenue is recognized over time using a time-based input measure as we provide services to the customer. Contracts generally contain renewal or extension provisions exercisable at the option of the customer at prices mutually agreeable to us and the customer. For contracts that are terminated by customers prior to the expirations of their fixed terms, contractual provisions customarily require early termination amounts to be paid to us. Revenues from early terminated contracts are recognized when all contractual requirements have been met. During the fiscal years ended September 30, 2020 , 2019 and 2018 , early termination revenue associated with term contracts was approximately $ 73.4 million , $ 11.3 million and $ 17.1 million , respectively. During the fiscal years ended September 30, 2020 , 2019 and 2018 , notification fee revenue related to well-to-well contracts was approximately $ 2.9 million , $ 1.2 million and $ 0.2 million , respectively. We also act as a principal for certain reimbursable services and auxiliary equipment provided by us to our clients, for which we incur costs and earn revenues. Many of these costs are variable, or dependent upon the activity that is performed each day under the related contract. Accordingly, reimbursements that we receive for out-of-pocket expenses are recorded as revenues and the out-of-pocket expenses for which they relate are recorded as operating costs during the period to which they relate within the series of distinct time increments. All of our revenues are recognized net of sales taxes, when applicable. With most drilling contracts, we also receive payments contractually designated for the mobilization and demobilization of drilling rigs and other equipment to and from the client’s drill site. Revenues associated with the mobilization and demobilization of our drilling rigs to and from the client’s drill site do not relate to a distinct good or service. These revenues are deferred and recognized ratably over the related contract term that drilling services are provided. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the contract term. The amount of demobilization revenue that we ultimately collect is dependent upon the specific contractual terms, most of which include provisions for reduced or no payment for demobilization when, among other things, the contract is renewed or extended with the same client, or when the rig is subsequently contracted with another client prior to the termination of the current contract. Since revenues associated with demobilization activity are typically variable, at each period end, they are estimated at the most likely amount, and constrained when the likelihood of a significant reversal is probable. Any change in the expected amount of demobilization revenue is accounted for with the net cumulative impact of the change in estimate recognized in the period during which the revenue estimate is revised. Contract Costs Mobilization costs include certain direct costs incurred for mobilization of contracted rigs. These costs relate directly to a contract, enhance resources that will be used in satisfying the future performance obligations and are expected to be recovered. These costs are capitalized when incurred and recorded as current or noncurrent contract fulfillment cost assets (depending on the length of the initial contract term), and are amortized on a systematic basis consistent with the pattern of the transfer of the goods or services to which the asset relates which typically includes the initial term of the related drilling contract or a period longer than the initial contract term if management anticipates a customer will renew or extend a contract, which we expect to benefit from the cost of mobilizing the rig. Abnormal mobilization costs are fulfillment costs that are incurred from excessive resources, wasted or spoiled materials, and unproductive labor costs that are not otherwise anticipated in the contract price and are expensed as incurred. As of September 30, 2020 , and 2019 , we had capitalized fulfillment costs of $ 6.2 million and $ 13.9 million , respectively. If capital modification costs are incurred for rig modifications or if upgrades are required for a contract, these costs are considered to be capital improvements. These costs are capitalized as property, plant and equipment and depreciated over the estimated useful life of the improvement. 81 Table of Contents Remaining Performance Obligations The total aggregate transaction price allocated to the unsatisfied performance obligations, commonly referred to as backlog, as of September 30, 2020 was approximately $ 670.1 million , of which $ 446.7 million is expected to be recognized during fiscal year 2021 , and approximately $ 223.4 million in fiscal year 2022 and thereafter. These amounts do not include anticipated contract renewals. Additionally, contracts that currently contain month-to-month terms are represented in our backlog as one month of unsatisfied performance obligations. Our contracts are subject to cancellation or modification at the election of the customer; however, due to the level of capital deployed by our customers on underlying projects, we have not been materially adversely affected by contract cancellations or modifications in the past. However, the impact of the COVID-19 pandemic is inherently uncertain, and, as a result, the Company is unable to reasonably estimate the duration and ultimate impacts of the pandemic, including the effect it may have on our contractual obligations with our customers. Contract Assets and Liabilities Amounts owed from our customers under our revenue contracts are typically billed on a monthly basis as the service is being provided and are due within 30 days of billing. Such amounts are classified as accounts receivable on our Consolidated Balance Sheets. Under certain of our contracts, we recognize revenues in excess of billings, referred to as contract assets, within prepaid expenses and other current assets within our Consolidated Balance Sheets. Under certain of our contracts, we may be entitled to receive payments in advance of satisfying our performance obligations under the contract. We recognize a liability for these payments in excess of revenue recognized, referred to as deferred revenue or contract liabilities, within accrued liabilities and other noncurrent liabilities in our Consolidated Balance Sheets. Contract balances are presented at the net amount at a contract level. The following table summarizes the balances of our contract assets and liabilities at the dates indicated: (in thousands) September 30, 2020 September 30, 2019 Contract assets $ 2,367 $ 2,151 (in thousands) September 30, 2020 Contract liabilities balance at October 1, 2018 $ 38,472 Payment received/accrued and deferred 30,863 Revenue recognized during the period ( 45,981 ) Contract liabilities balance at September 30, 2019 23,354 Payment received/accrued and deferred 19,312 Revenue recognized during the period ( 34,030 ) Contract liabilities balance at September 30, 2020 $ 8,636 NOTE 12 STOCK-BASED COMPENSATION On March 3, 2020, the Helmerich & Payne, Inc. 2020 Omnibus Incentive Plan (the “2020 Plan”) was approved by our stockholders. The 2020 Plan replaces our stockholder-approved Helmerich & Payne, Inc. 2016 Omnibus Incentive Plan (the "2016 Plan"). The 2020 Plan is a stock and cash-based incentive plan that, among other things, authorizes the Board or Human Resources Committee of the Board to grant executive officers, employees and non-employee directors stock options, stock appreciation rights, restricted shares and restricted share units (including performance share units), share bonuses, other share-based awards and cash awards. Restricted stock may be granted for no consideration other than prior and future services. The purchase price per share for stock options may not be less than market price of the underlying stock on the date of grant. Stock options expire ten years after the grant date. Awards outstanding under the Helmerich & Payne, Inc. 2005 Long-Term Incentive Plan, the Helmerich & Payne, Inc. 2010 Long-Term Incentive Plan and the 2016 Plan remain subject to the terms and conditions of those plans. Beginning with fiscal year 2019, we replaced stock options with performance share units as a component of our executives' long-term equity incentive compensation. As a result, there were no stock options granted during the fiscal years ended September 30, 2020 and 2019. We have also eliminated stock options as an element of our non-employee director compensation program. The Board has determined to award stock-based compensation to non-employee directors solely in the form of restricted stock. During the fiscal year ended September 30, 2020 , 727,009 shares of restricted stock awards and 258,857 performance share units were granted under the 2016 Plan and 54,118 shares of restricted stock awards were granted under the 2020 Plan. 82 Table of Contents A summary of compensation cost for stock-based payment arrangements recognized in drilling services operating expense, research and development expense and selling, general and administrative expense in fiscal years 2020 , 2019 and 2018 is as follows: September 30, (in thousands) 2020 2019 2018 Stock-based compensation expense Stock options $ 1,753 $ 3,721 $ 7,913 Restricted stock 30,605 26,149 23,774 Performance share units 7,454 4,422 — Stock-based compensation benefit included in restructuring charges ( 3,483 ) — — $ 36,329 $ 34,292 $ 31,687 Of the total stock-based compensation expense, $ 9.1 million was recorded in drilling services operating expense, $ 0.8 million was recorded in research and development expense, $ 29.9 million in selling, general and administrative expense and $( 3.5 ) million was recorded in restructuring charges during the year ended September 30, 2020 on our Consolidated Statements of Operations. Stock Options Vesting requirements for stock options are determined by the Human Resources Committee of the Board. Options currently outstanding began vesting one year after the grant date with 25 percent of the options vesting for four consecutive years. We use the Black-Scholes formula to estimate the fair value of stock options granted to employees. The fair value of the options is amortized to compensation expense on a straight-line basis over the requisite service periods of the stock awards, which are generally the vesting periods. 2018 Risk-free interest rate (1) 2.2 % Expected stock volatility (2) 36.1 % Dividend yield (3) 4.7 % Expected term (in years) (4) 6.0 (1) The risk-free interest rate is based on U.S. Treasury securities for the expected term of the option. (2) Expected volatilities are based on the daily closing price of our stock based upon historical experience over a period which approximates the expected term of the option. (3) The dividend yield is based on our current dividend yield. (4) The expected term of the options granted represents the period of time that they are expected to be outstanding. We estimate term of option granted based on historical experience with grants and exercise. Based on these calculations, the weighted-average fair value per option granted to acquire a share of common stock was $ 13.17 per share for fiscal year 2018 . The following summary reflects the stock option activity for our common stock and related information for fiscal years 2020 , 2019 and 2018 : 2020 2019 2018 (shares in thousands) Shares Weighted-Average Exercise Price Shares Weighted-Average Exercise Price Shares Weighted-Average Exercise Price Outstanding at October 1, 3,238 $ 60.86 3,499 $ 58.62 3,278 $ 56.41 Granted — — — — 694 59.03 Exercised ( 201 ) 38.02 ( 217 ) 24.46 ( 375 ) 36.88 Forfeited/Expired ( 174 ) 61.76 ( 44 ) 62.14 ( 98 ) 70.77 Outstanding on September 30, 2,863 $ 62.41 3,238 $ 60.86 3,499 $ 58.62 Exercisable on September 30, 2,516 $ 62.38 2,482 $ 60.38 2,193 $ 56.31 83 Table of Contents The following table summarizes information about stock options at September 30, 2020 (shares in thousands): Outstanding Stock Options Exercisable Stock Options Range of Exercise Prices Shares Weighted-Average Remaining Life Weighted-Average Exercise Price Shares Weighted-Average Exercise Price $40.00 to $55.00 472 1.82 $ 51.86 462 $ 51.83 $55.00 to $70.00 1,918 5.07 60.56 1,641 60.82 $70.00 to $85.00 473 4.92 80.47 412 80.43 2,863 2,515 At September 30, 2020 , the weighted-average remaining life of exercisable stock options was 4.16 years and the aggregate intrinsic value was zero with a weighted-average exercise price of $ 62.38 per share. The number of options vested or expected to vest at September 30, 2020 was 347,093 with an aggregate intrinsic value of zero and a weighted-average exercise price of $ 62.63 per share. As of September 30, 2020 , the unrecognized compensation cost related to the stock options was $ 1.2 million . That cost is expected to be recognized over a weighted-average period of 1.22 years. The total intrinsic value of options exercised during fiscal years 2020 , 2019 and 2018 was $ 0.3 million , $ 7.9 million and $ 9.9 million , respectively. The grant date fair value of shares vested during fiscal years 2020 , 2019 and 2018 was $ 6.0 million , $ 8.0 million and $ 8.8 million , respectively. Restricted Stock Restricted stock awards consist of our common stock and are time-vested over four years . Non-forfeitable dividends are paid on non-vested shares of restricted stock. We recognize compensation expense on a straight-line basis over the vesting period. The fair value of restricted stock awards is determined based on the closing price of our shares on the grant date. As of September 30, 2020 , there was $ 31.4 million of total unrecognized compensation cost related to unvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 2.4 years. A summary of the status of our restricted stock awards as of September 30, 2020 , and of changes in restricted stock outstanding during the fiscal years ended September 30, 2020 , 2019 and 2018 , is as follows: 2020 2019 2018 (shares in thousands) Shares Weighted-Average Grant Date Fair Value per Share Shares Weighted-Average Grant Date Fair Value per Share Shares Weighted-Average Grant Date Fair Value per Share Non-vested restricted stock outstanding at October 1, 1,085 $ 61.28 1,001 $ 63.74 659 $ 70.76 Granted (1) 781 39.99 475 58.45 626 59.53 Vested (2) ( 501 ) 59.46 ( 371 ) 64.32 ( 258 ) 70.60 Forfeited ( 85 ) 48.98 ( 20 ) 60.85 ( 26 ) 66.73 Non-vested restricted stock outstanding at September 30, 1,280 $ 49.81 1,085 $ 61.28 1,001 $ 63.74 (1) The number of restricted stock awards granted includes phantom shares that confer the benefits of owning company stock without the actual ownership or transfer of any shares. There were 20,616 phantom shares granted during fiscal year 2020 . (2) The number of restricted stock awards vested includes shares that we withheld on behalf of our employees to satisfy the statutory tax withholding requirements. 84 Table of Contents Performance Share Units We have made awards to certain employees that are subject to market-based performance conditions ("performance share units"). Subject to the terms and conditions set forth in the applicable performance share unit award agreements and the 2016 Plan, grants of performance share units are subject to a vesting period of three years (the “Vesting Period”) that is dependent on the achievement of certain performance goals. Such performance share unit awards consist of two separate components. Performance share units that comprise the first component are subject to a three -year performance cycle. Performance share units that comprise the second component are further divided into three separate tranches, each of which is subject to a separate one -year performance cycle within the full three -year performance cycle. The vesting of the performance share units is generally dependent on (i) the achievement of the Company’s total shareholder return (“TSR”) performance goals relative to the TSR achievement of a peer group of companies (the “Peer Group”) over the applicable performance cycle, and (ii) the continued employment of the recipient of the performance share unit award throughout the Vesting Period. At the end of the Vesting Period, recipients receive dividend equivalents, if any, with respect to the number of vested performance share units. The vesting of units ranges from zero to 200 percent of the units granted depending on the Company’s TSR relative to the TSR of the Peer Group on the vesting date. The grant date fair value of performance share units was determined through use of the Monte Carlo simulation method. The Monte Carlo simulation method requires the use of highly subjective assumptions. Our key assumptions in the method include the price and the expected volatility of our stock and our self-determined Peer Group companies' stock, risk free rate of return and cross-correlations between the Company and our Peer Group companies. The valuation model assumes dividends are immediately reinvested. As of September 30, 2020 , there was $ 6.6 million of unrecognized compensation cost related to unvested performance share units. That cost is expected to be recognized over a weighted-average period of 1.9 years . A summary of the status of our performance share units as of September 30, 2020 and changes in non-vested performance share units outstanding during the fiscal year ended September 30, 2020 is presented below: 2020 2019 (in thousands, except per share amounts) Shares Weighted-Average Grant Date Fair Value per Share Shares Weighted-Average Grant Date Fair Value per Share Non-vested performance share units outstanding at September 30, 2019 145 $ 62.66 — $ — Granted 259 43.40 145 62.66 Forfeited ( 67 ) 46.35 — — Non-vested performance share units outstanding at September 30, 2020 337 $ 51.09 145 $ 62.66 The weighted-average fair value calculations for performance share units granted within the fiscal period are based on the following weighted-average assumptions set forth in the table below. 2020 2019 Risk-free interest rate (1) 1.6 % 2.7 % Expected stock volatility (2) 34.8 % 35.9 % Expected term (in years) 3.2 3.0 (1) The risk-free interest rate is based on U.S. Treasury securities for the expected term of the performance share units. (2) Expected volatilities are based on the daily closing price of our stock based upon historical experience over a period which approximates the expected term of the performance share units. NOTE 13 EARNINGS (LOSSES) PER COMMON SHARE ASC 260, Earnings per Share, requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating earnings per share. We have granted and expect to continue to grant to employees restricted stock grants that contain non-forfeitable rights to dividends. Such grants are considered participating securities under ASC 260. As such, we are required to include these grants in the calculation of our basic earnings per share and calculate basic earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Basic earnings per share is computed utilizing the two-class method and is calculated based on the weighted-average number of common shares outstanding during the periods presented. 85 Table of Contents Diluted earnings per share is computed using the weighted-average number of common and common equivalent shares outstanding during the periods utilizing the two-class method for stock options, nonvested restricted stock and performance share units. Under the two-class method of calculating earnings per share, dividends paid and a portion of undistributed net income, but not losses, are allocated to unvested restricted stock grants that receive dividends, which are considered participating securities. The following table sets forth the computation of basic and diluted earnings per share: September 30, (in thousands, except per share amounts) 2020 2019 2018 Numerator: Income (loss) from continuing operations $ ( 496,392 ) $ ( 32,510 ) $ 493,010 Income (loss) from discontinued operations 1,895 ( 1,146 ) ( 10,338 ) Net income (loss) ( 494,497 ) ( 33,656 ) 482,672 Adjustment for basic earnings per share Earnings allocated to unvested shareholders ( 2,647 ) ( 3,102 ) ( 4,346 ) Numerator for basic earnings (loss) per share: From continuing operations ( 499,039 ) ( 35,612 ) 488,664 From discontinued operations 1,895 ( 1,146 ) ( 10,338 ) ( 497,144 ) ( 36,758 ) 478,326 Adjustment for diluted earnings (loss) per share: Effect of reallocating undistributed earnings of unvested shareholders — — 7 Numerator for diluted earnings (loss) per share: From continuing operations ( 499,039 ) ( 35,612 ) 488,671 From discontinued operations 1,895 ( 1,146 ) ( 10,338 ) $ ( 497,144 ) $ ( 36,758 ) $ 478,340 Denominator: Denominator for basic earnings (loss) per share - weighted-average shares 108,009 109,216 108,851 Effect of dilutive shares from stock options, restricted stock and performance share units — — 536 Denominator for diluted earnings (loss) per share - adjusted weighted-average shares 108,009 109,216 109,387 Basic earnings (loss) per common share: Income (loss) from continuing operations $ ( 4.62 ) $ ( 0.33 ) $ 4.49 Income (loss) from discontinued operations 0.02 ( 0.01 ) ( 0.10 ) Net income (loss) $ ( 4.60 ) $ ( 0.34 ) $ 4.39 Diluted earnings (loss) per common share: Income (loss) from continuing operations $ ( 4.62 ) $ ( 0.33 ) $ 4.47 Income (loss) from discontinued operations 0.02 ( 0.01 ) ( 0.10 ) Net income (loss) $ ( 4.60 ) $ ( 0.34 ) $ 4.37 We had a net loss for fiscal years 2020 and 2019. Accordingly, our diluted earnings per share calculation for those years were equivalent to our basic earnings per share calculation since diluted earnings per share excluded any assumed exercise of equity awards. These were excluded because they were deemed to be anti-dilutive, meaning their inclusion would have reduced the reported net loss per share in the applicable period. The following potentially dilutive average shares attributable to outstanding equity awards were excluded from the calculation of diluted earnings (losses) per share because their inclusion would have been anti-dilutive: (in thousands, except per share amounts) 2020 2019 2018 Potentially dilutive shares excluded as anti-dilutive 4,004 3,031 1,559 Weighted-average price per share $ 60.72 $ 63.33 $ 68.28 86 Table of Contents NOTE 14 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS We have certain assets and liabilities that are required to be measured and disclosed at fair value. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use the fair value hierarchy established in ASC 820-10 to measure fair value to prioritize the inputs: • Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. • Level 2 — Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. • Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The assets held in a Non-Qualified Supplemental Savings Plan are carried at fair value and totaled $ 19.8 million and $ 15.7 million at September 30, 2020 and 2019 , respectively. The assets are comprised of mutual funds that are measured using Level 1 inputs. Short-term investments include securities classified as trading securities. Both realized and unrealized gains and losses on trading securities are included in other income (expense) in the Consolidated Statements of Operations. The securities are recorded at fair value. Our non-financial assets, such as intangible assets, goodwill and property, plant and equipment, are recorded at fair value when acquired in a business combination or when an impairment charge is recognized. If measured at fair value in the Consolidated Balance Sheets, these would generally be classified within Level 2 or 3 of the fair value hierarchy. The majority of cash equivalents are invested in highly-liquid money-market mutual funds invested primarily in direct or indirect obligations of the U.S. Government and in federally insured deposit accounts. The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments. The carrying value of other current assets, accrued liabilities and other liabilities approximated fair value at September 30, 2020 and 2019 . The following table summarizes our assets and liabilities measured at fair value presented in our Consolidated Balance Sheet: September 30, 2020 (in thousands) Fair Value Level 1 Level 2 Level 3 Recurring fair value measurements: Short-term investments: Certificates of deposit $ 1,370 $ — $ 1,370 $ — Corporate and municipal debt securities $ 78,156 $ — $ 78,156 $ — U.S. government and federal agency securities $ 7,817 $ 7,817 $ — $ — Other 1,992 1,992 — — Total short-term investments 89,335 9,809 79,526 — Cash and cash equivalents 487,884 487,884 — — Investments 11,766 7,274 3,992 500 Other current assets 45,577 45,577 — — Other assets 3,286 3,286 — — Total assets measured at fair value $ 637,848 $ 553,830 $ 83,518 $ 500 Liabilities: Contingent earnout liability $ 9,123 $ — $ — $ 9,123 At September 30, 2020 , our financial instruments measured at fair value utilizing Level 1 inputs include cash equivalents, U.S. Agency issued debt securities, equity securities with active markets, and money market funds that are classified as restricted assets. The current portion of restricted amounts are included in prepaid expenses and other, and the noncurrent portion is included in other assets. For these items, quoted current market prices are readily available. At September 30, 2020 , assets measured at fair value using Level 2 inputs include certificates of deposit, municipal bonds and corporate bonds measured using broker quotations that utilize observable market inputs. 87 Table of Contents Our financial instruments measured using Level 3 unobservable inputs primarily consist of potential earnout payments primarily associated with our business acquisitions in fiscal year 2019. The following table presents a reconciliation of changes in the fair value of our financial liabilities classified as Level 3 fair value measurements in the fair value hierarchy for fiscal years 2020 and 2019 : (in thousands) 2020 2019 Net liabilities at beginning of period $ 18,373 $ 11,160 Additions 1,500 18,373 Total gains or losses: Included in earnings ( 2,500 ) ( 11,160 ) Settlements (1) ( 8,250 ) — Net liabilities at end of period $ 9,123 $ 18,373 (1) Settlements represent earnout payments that have been earned or paid during the period. The following table provides quantitative information (in thousands) about our Level 3 unobservable inputs related to our financial liabilities at September 30, 2020 : Fair Value Valuation Technique Unobservable Input Unobservable Input Range Weighted Average (1) $ 1,000 Monte Carlo simulation Discount rate 1.6 % Revenue Volatility 46.2 % Risk free rate 1.2 % $ 8,123 Probability Analysis Discount rate 1.0 % Payment amounts $5,250 - $7,000 $ 6,400 Probabilities 40% - 60% 53 % (1) The weighted average of the payment amounts and the probabilities (Level 3 unobservable inputs), associated with the contingent consideration valued using probability analysis, were weighted by the relative undiscounted fair value of payment amounts and of probability payment amounts, respectively. The above significant unobservable inputs are subject to change based on changes in economic and market conditions. The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement of the contingent consideration using Monte Carlo simulation are (i) discount rate, (ii) revenue volatility and (iii) risk-free rate. Significant increases or decreases in the discount rate and risk-free rate in isolation would result in a significantly lower or higher fair value measurement. Significant changes in revenue volatility in isolation would result in a significantly lower or higher fair value measurement. The significant unobservable inputs used in the fair value measurement of the contingent consideration using probability analysis are (i) discount rate, (ii) payment amounts and (iii) probabilities. Significant increases or decreases in the discount rate in isolation would result in a significantly lower or higher fair value measurement. Significant increases or decreases in the payment amounts or probabilities in isolation would result in a significantly higher or lower fair value measurement. It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values. The following information presents the supplemental fair value information about long-term fixed-rate debt at September 30, 2020 and 2019 : September 30, (in millions) 2020 2019 Carrying value of long-term fixed-rate debt $ 480.7 $ 479.4 Fair value of long-term fixed-rate debt $ 534.5 $ 526.4 The fair value for the $ 534.5 million fixed-rate debt was based on broker quotes at September 30, 2020 . The notes are classified within Level 2 of the fair value hierarchy as they are not actively traded in markets. The estimated fair value of our investments, reflected on our Consolidated Balance Sheets as Investments, is primarily based on Level 1 inputs. As a result of the change in the fair value of our investments, we recorded a loss of $ 8.7 million for the fiscal year ended September 30, 2020 . In September 2019, we sold our remaining 1.6 million shares in Valaris, previously known as Ensco Rowan plc, for total proceeds of approximately $ 12.0 million . 88 Table of Contents NOTE 15 EMPLOYEE BENEFIT PLANS We maintain a domestic noncontributory defined benefit pension plan covering certain U.S. employees who meet certain age and service requirements. In July 2003, we revised the Helmerich & Payne, Inc. Employee Retirement Plan (“Pension Plan”) to close the Pension Plan to new participants effective October 1, 2003, and reduce benefit accruals for current participants through September 30, 2006, at which time benefit accruals were discontinued and the Pension Plan was frozen. The following table provides a reconciliation of the changes in the pension benefit obligations and fair value of Pension Plan assets over the two-year period ended September 30, 2020 and a statement of the funded status as of September 30, 2020 and 2019 : (in thousands) 2020 2019 Accumulated Benefit Obligation $ 116,146 $ 119,845 Changes in projected benefit obligations Projected benefit obligation at beginning of year $ 119,845 $ 106,205 Interest cost 3,598 4,389 Actuarial (gain) loss 4,310 16,914 Benefits paid ( 11,607 ) ( 7,663 ) Projected benefit obligation at end of year $ 116,146 $ 119,845 Change in plan assets Fair value of plan assets at beginning of year $ 91,142 $ 94,897 Actual return on plan assets 6,535 3,865 Employer contribution 33 43 Benefits paid ( 11,607 ) ( 7,663 ) Fair value of plan assets at end of year $ 86,103 $ 91,142 Funded status of the plan at end of year $ ( 30,043 ) $ ( 28,703 ) The amounts recognized in the Consolidated Balance Sheets at September 30, 2020 and 2019 are as follows (in thousands): Accrued liabilities $ ( 18 ) $ ( 50 ) Noncurrent liabilities-other ( 30,025 ) ( 28,653 ) Net amount recognized $ ( 30,043 ) $ ( 28,703 ) The amounts recognized in Accumulated Other Comprehensive Income (Loss) at September 30, 2020 and 2019 , and not yet reflected in net periodic benefit cost, are as follows (in thousands): Net actuarial loss $ ( 33,923 ) $ ( 37,084 ) The amount recognized in Accumulated Other Comprehensive Income (Loss) and not yet reflected in periodic benefit cost expected to be amortized in next year’s periodic benefit cost is a net actuarial loss of $ 2.4 million . The weighted average assumptions used for the pension calculations were as follows: September 30, 2020 2019 2018 Discount rate for net periodic benefit costs 3.16 % 4.27 % 3.79 % Discount rate for year-end obligations 2.66 % 3.16 % 4.27 % Expected return on plan assets 4.65 % 5.60 % 6.06 % The mortality table issued by the Society of Actuaries in October 2019 was used for the September 30, 2020 pension calculation. We did not make any contributions to the Pension Plan in fiscal year 2020 . In fiscal year 2021 , we do not expect minimum contributions required by law to be needed. However, we may make contributions in fiscal year 2021 if needed to fund unexpected distributions in lieu of liquidating pension assets. 89 Table of Contents Components of the net periodic pension expense were as follows: Year Ended September 30, (in thousands) 2020 2019 2018 Interest cost $ 3,598 $ 4,389 $ 4,077 Expected return on plan assets ( 4,784 ) ( 5,523 ) ( 5,555 ) Recognized net actuarial loss 2,718 1,229 1,926 Settlement 3,001 1,953 913 Net pension expense $ 4,533 $ 2,048 $ 1,361 We record settlement expense when benefit payments exceed the total annual interest costs. The following table reflects the expected benefits to be paid from the Pension Plan in each of the next five fiscal years, and in the aggregate for the five years thereafter (in thousands). Year Ended September 30, 2021 2022 2023 2024 2025 2026 – 2030 Total $ 5,931 $ 6,910 $ 6,980 $ 7,023 $ 7,141 $ 33,599 $ 67,584 Included in the Pension Plan is an unfunded supplemental executive retirement plan. Investment Strategy and Asset Allocation Our investment policy and strategies are established with a long-term view in mind. The investment strategy is intended to help pay the cost of the Pension Plan while providing adequate security to meet the benefits promised under the Pension Plan. We maintain a diversified asset mix to minimize the risk of a material loss to the portfolio value that might occur from devaluation of any single investment. In determining the appropriate asset mix, our financial strength and ability to fund potential shortfalls are considered. Pension Plan assets are invested in portfolios of diversified public-market equity securities and fixed income securities. The Pension Plan does not directly hold securities of the Company. The expected long-term rate of return on Pension Plan assets is based on historical and projected rates of return for current and planned asset classes in the Pension Plan’s investment portfolio after analyzing historical experience and future expectations of the return and volatility of various asset classes. The target allocation for 2021 and the asset allocation for the Pension Plan at the end of fiscal years 2020 and 2019 , by asset category, follows: Target Allocation September 30, Asset Category 2021 2020 2019 U.S. equities 45 % 42 % 47 % International equities 20 22 16 Fixed income 35 36 37 Total 100 % 100 % 100 % Plan Assets The fair value of Pension Plan assets at September 30, 2020 and 2019 , summarized by level within the fair value hierarchy described in Note 14—Fair Value Measurement of Financial Instruments , are as follows: September 30, 2020 (in thousands) Total Level 1 Level 2 Level 3 Short-term investments $ 1,541 $ 1,541 $ — $ — Mutual funds: Domestic stock funds 35,660 35,660 — — Bond funds 17,328 17,328 — — Balanced funds 17,447 17,447 — — International stock funds 14,044 14,044 — — Total mutual funds 84,479 84,479 — — Oil and gas properties 83 — — 83 Total $ 86,103 $ 86,020 $ — $ 83 90 Table of Contents September 30, 2019 (in thousands) Total Level 1 Level 2 Level 3 Short-term investments $ 3,072 $ 3,072 $ — $ — Mutual funds: Domestic stock funds 17,555 17,555 — — Bond funds 18,034 18,034 — — Balanced funds 17,878 17,878 — — International stock funds 14,181 14,181 — — Total mutual funds 67,648 67,648 — — Domestic common stock 20,261 17,748 2,513 — Oil and gas properties 161 — — 161 Total $ 91,142 $ 88,468 $ 2,513 $ 161 As of September 30, 2020, and 2019, the Pension Plan’s financial assets utilizing Level 1 inputs are valued based on quoted prices in active markets for identical securities. As of September 30, 2019, the Pension Plan’s Level 2 financial assets include domestic common stock. As of September 30, 2020, and 2019, the Pension Plan’s assets utilizing Level 3 inputs consist of oil and gas properties. The fair value of oil and gas properties is determined by Wells Fargo Bank, N.A., based upon actual revenue received for the previous twelve-month period and experience with similar assets. The following table sets forth a summary of changes in the fair value of the Pension Plan’s Level 3 assets for the fiscal years ended September 30, 2020 and 2019 : Oil and Gas Properties Year Ended September 30, (in thousands) 2020 2019 Balance, beginning of year $ 161 $ 116 Unrealized gains (losses) relating to property still held at the reporting date ( 78 ) 45 Balance, end of year $ 83 $ 161 Defined Contribution Plan Substantially all employees on the U.S. payroll may elect to participate in our 401(k)/Thrift Plan by contributing a portion of their earnings. We contribute an amount equal to 100 percent of the first five percent of the participant’s compensation subject to certain limitations. The annual expense incurred for this defined contribution plan was $ 23.8 million , $ 30.5 million and $ 26.6 million in fiscal years 2020 , 2019 and 2018 , respectively. NOTE 16 SUPPLEMENTAL BALANCE SHEET INFORMATION The following reflects the activity in our reserve for bad debt for fiscal years 2020 , 2019 and 2018 : (in thousands) 2020 2019 2018 Reserve for bad debt: Balance at October 1, $ 9,927 $ 6,217 $ 5,721 Provision for bad debt 2,203 2,321 2,193 (Write-off) recovery of bad debt ( 10,310 ) 1,389 ( 1,697 ) Balance at September 30, $ 1,820 $ 9,927 $ 6,217 91 Table of Contents Accounts receivable, prepaid expenses and other current assets, accrued liabilities and long-term liabilities at September 30, 2020 and 2019 consist of the following: September 30, (in thousands) 2020 2019 Accounts receivable, net of reserve: Trade receivables $ 150,249 $ 461,774 Income tax receivable 42,374 33,828 Total accounts receivable, net of reserve $ 192,623 $ 495,602 Prepaid expenses and other current assets: Restricted cash $ 45,577 $ 31,291 Deferred mobilization 4,528 10,571 Prepaid insurance 8,655 5,556 Prepaid value added tax 7,484 5,209 Prepaid maintenance and rent 7,273 9,113 Accrued demobilization 2,367 2,151 Other 13,421 5,037 Total prepaid expenses and other current assets $ 89,305 $ 68,928 Accrued liabilities: Accrued operating costs $ 10,942 $ 34,992 Payroll and employee benefits 27,068 79,465 Taxes payable, other than income tax 39,762 50,566 Self-insurance liabilities 36,518 37,117 Deferred income 9,266 25,426 Deferred mobilization revenue 5,705 14,737 Accrued income taxes — 19,277 Escrow 138 1,388 Litigation and claims 393 9,990 Contingent earnout liability 4,926 5,535 Operating lease liability 11,364 — Other 9,360 8,599 Total accrued liabilities $ 155,442 $ 287,092 Noncurrent liabilities — Other: Pension and other non-qualified retirement plans $ 54,043 $ 51,768 Self-insurance liabilities 37,369 37,118 Contingent earnout liability 4,197 12,838 Deferred revenue 2,955 9,471 Uncertain tax positions including interest and penalties 2,895 2,544 Operating lease liability 33,886 — Payroll tax deferral (1) 10,205 — Other 1,630 2,007 Total noncurrent liabilities — other $ 147,180 $ 115,746 (1) Deferral related to the provisions within the Coronavirus Aid, Relief, and Economic Security Act, passed on March 27, 2020, which allows for the deferral of the employer share of Social Security tax. NOTE 17 COMMITMENTS AND CONTINGENCIES Purchase Commitments Equipment, parts and supplies are ordered in advance to promote efficient construction and capital improvement progress. At September 30, 2020 , we had purchase commitments for equipment, parts and supplies of approximately $ 2.7 million . Lease Obligations Refer to Note 6—Leases for additional information on our lease obligations. 92 Table of Contents Guarantee Arrangements We are contingently liable to sureties in respect of bonds issued by the sureties in connection with certain commitments entered into by us in the normal course of business. We have agreed to indemnify the sureties for any payments made by them in respect of such bonds. Contingencies During the ordinary course of our business, contingencies arise resulting from an existing condition, situation or set of circumstances involving an uncertainty as to the realization of a possible gain or loss contingency. We account for gain contingencies in accordance with the provisions of ASC 450, Contingencies, and, therefore, we do not record gain contingencies or recognize income until realized. The property and equipment of our Venezuelan subsidiary was seized by the Venezuelan government on June 30, 2010. Our wholly-owned subsidiaries, HPIDC, and Helmerich & Payne de Venezuela, C.A. filed a lawsuit in the United States District Court for the District of Columbia on September 23, 2011 against the Bolivarian Republic of Venezuela, Petroleos de Venezuela, S.A. and PDVSA Petroleo, S.A., seeking damages for the taking of their Venezuelan drilling business in violation of international law and for breach of contract. While there exists the possibility of realizing a recovery, we are currently unable to determine the timing or amounts we may receive, if any, or the likelihood of recovery. In January 2018, an employee of HPIDC suffered personal injury and subsequently brought a lawsuit against the operator and H&P. Pursuant to the terms of the drilling contract between HPIDC and the operator, HPIDC indemnified the operator in the lawsuit, subject to certain limitations. H&P has settled this matter on behalf of itself and the operator with $ 21.0 million of the settlement amount to be paid by the Company. The settlement was paid out during the fiscal year ended September 30, 2019. While we believe we had meritorious defenses to the matter, we determined that settlement was a reasonable alternative to the uncertainty and expense associated with a jury trial. In October 2017, an employee of HPIDC suffered personal injury and subsequently brought a lawsuit against the operator. Pursuant to the terms of the drilling contract between HPIDC and the operator, HPIDC indemnified the operator in the lawsuit, subject to certain limitations. A settlement agreement was reached with the operator. As of September 30, 2019, we accrued $ 9.5 million for this lawsuit, which was subsequently paid out during the fiscal year ended September 30, 2020. The Company and its subsidiaries are parties to various other pending legal actions arising in the ordinary course of our business. We maintain insurance against certain business risks subject to certain deductibles. Although no assurance can be given, we believe, based on our experiences to date and taking into account established reserves and insurance, that the ultimate resolution of such items will not have a material adverse impact on our financial condition, cash flows, or results of operations. When we determine a loss is probable of occurring and is reasonably estimable, we accrue an undiscounted liability for such contingencies based on our best estimate using information available at that time. If the estimated loss is a range of potential outcomes and there is no better estimate within the range, we accrue the amount at the low end of the range. We disclose contingencies where an adverse outcome may be material, or in the judgment of management, we conclude the matter should otherwise be disclosed. NOTE 18 BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION Description of the Business We are a performance-driven drilling solutions and technologies company based in Tulsa, Oklahoma with operations in all major U.S. onshore basins as well as South America and the Middle East. Our drilling operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies. We believe we are the recognized industry leader in drilling as well as technological innovation. During the third quarter of fiscal year 2020, as part of our restructuring efforts (see Note 19—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 former U.S. Land and H&P Technologies operating and reportable segments 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 drilling services operations are organized into the following reportable operating business segments: North America Solutions, Offshore Gulf of Mexico and International Solutions. All prior period 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. Each reportable operating segment is a strategic business unit that is managed separately, and consolidated revenues and expenses reflect the elimination of all material intercompany transactions. Other includes additional non-reportable operating segments. External revenues included in "Other" primarily consist of rental income. 93 Table of Contents Segment Performance We evaluate segment performance based on income or loss from continuing operations (segment operating income (loss)) before income taxes which includes: • Revenues from external and internal customers • Direct operating costs • Depreciation and amortization • Allocated general and administrative cost s • Asset impairment charges • Restructuring charges but excludes gain on sale of assets and corporate selling, general and administrative costs, corporate depreciation, and corporate restructuring charges. General and administrative costs are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, on other methods which we believe to be a reasonable reflection of the utilization of services provided. Summarized financial information of our reportable segments for the fiscal years ended September 30, 2020 , 2019 and 2018 is shown in the following tables: September 30, 2020 (in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Eliminations Total External sales $ 1,474,380 $ 143,149 $ 144,185 $ 12,213 $ — $ 1,773,927 Intersegment — — — 36,901 ( 36,901 ) — Total sales 1,474,380 143,149 144,185 49,114 ( 36,901 ) 1,773,927 Segment operating income (loss) ( 393,902 ) 7,478 ( 162,368 ) 4,403 — ( 544,389 ) Depreciation and amortization 438,039 11,681 17,531 1,241 — 468,492 September 30, 2019 (in thousands) North America Solutions (1) Offshore Gulf of Mexico International Solutions Other Eliminations Total External sales $ 2,426,191 $ 147,635 $ 211,731 $ 12,933 $ — $ 2,798,490 Intersegment — — — — — — Total sales 2,426,191 147,635 211,731 12,933 — 2,798,490 Segment operating income 80,898 19,594 5,366 3,375 — 109,233 Depreciation and amortization 504,466 10,010 35,466 1,523 — 551,465 (1) Operations previously reported within the H&P Technologies reportable segment are now managed and presented within the North America Solutions reportable segment. September 30, 2018 (in thousands) North America Solutions (1) Offshore Gulf of Mexico International Solutions Other Eliminations Total External sales $ 2,093,601 $ 142,500 $ 238,356 $ 12,811 $ — $ 2,487,268 Intersegment — — — — — — Total sales 2,093,601 142,500 238,356 12,811 — 2,487,268 Segment operating income (loss) 108,697 26,124 ( 683 ) 5,883 — 140,021 Depreciation and amortization 511,958 10,392 46,826 1,486 — 570,662 (1) Operations previously reported within the H&P Technologies reportable segment are now managed and presented within the North America Solutions reportable segment. 94 Table of Contents The following table reconciles segment operating income (loss) per the tables above to income (loss) from continuing operations before income taxes as reported on the Consolidated Statements of Operations: Year Ended September 30, (in thousands) 2020 2019 2018 Segment operating income (loss) $ ( 544,389 ) $ 109,233 $ 140,021 Gain on sale of assets 46,775 39,691 22,660 Corporate selling, general and administrative costs, corporate depreciation and corporate restructuring charges ( 122,573 ) ( 128,342 ) ( 129,717 ) Operating income (loss) from continuing operations ( 620,187 ) 20,582 32,964 Other income (expense) Interest and dividend income 7,304 9,468 8,017 Interest expense ( 24,474 ) ( 25,188 ) ( 24,265 ) Gain (loss) on investment securities ( 8,720 ) ( 54,488 ) 1 Gain on sale of subsidiary 14,963 — — Other ( 5,384 ) ( 1,596 ) ( 876 ) Total unallocated amounts ( 16,311 ) ( 71,804 ) ( 17,123 ) Income (loss) from continuing operations before income taxes $ ( 636,498 ) $ ( 51,222 ) $ 15,841 The following table reconciles segment total assets to total assets as reported on the Consolidated Balance Sheets: Year Ended September 30, (in thousands) 2020 2019 Total assets (1) North America Solutions (2) $ 3,812,718 $ 5,284,141 Offshore Gulf of Mexico 93,501 102,442 International Solutions 181,181 217,094 Other 22,144 32,532 4,109,544 5,636,209 Investments and corporate operations 720,077 203,306 Total assets from continuing operations 4,829,621 5,839,515 Discontinued operations — — $ 4,829,621 $ 5,839,515 (1) Assets by segment exclude investments in subsidiaries and intersegment activity. (2) Operations previously reported within the H&P Technologies reportable segment are now managed and presented within the North America Solutions reportable segment. The following table presents revenues from external customers by country based on the location of service provided: Year Ended September 30, (in thousands) 2020 2019 2018 Operating revenues United States $ 1,626,407 $ 2,585,008 $ 2,247,400 Argentina 84,402 165,718 190,038 Bahrain 28,653 11,528 9,525 United Arab Emirates 24,716 4,728 — Colombia 6,414 29,757 38,793 Other Foreign 3,335 1,751 1,512 Total $ 1,773,927 $ 2,798,490 $ 2,487,268 95 Table of Contents The following table presents property, plant and equipment by country based on the location of service provided: Year Ended September 30, (in thousands) 2020 2019 Property, plant and equipment, net United States $ 3,562,525 $ 4,269,405 Argentina 49,419 132,321 Colombia 21,740 61,757 Other Foreign 12,657 38,601 Total $ 3,646,341 $ 4,502,084 NOTE 19 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. 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. Costs incurred, as of September 30, 2020 , in connection with the restructuring are comprised of one-time severance benefits to employees who were voluntarily or involuntarily terminated, benefits related to forfeitures and costs related to modification of stock-based compensation awards. The following table summarizes the Company's restructuring charges incurred during the fiscal year ended September 30, 2020 : (in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Corporate G&A Total Employee termination benefits $ 10,041 $ 1,432 $ 2,991 $ 321 $ 4,745 $ 19,530 Stock-based compensation benefit ( 3,036 ) ( 178 ) ( 11 ) ( 61 ) ( 197 ) ( 3,483 ) Total restructuring charges $ 7,005 $ 1,254 $ 2,980 $ 260 $ 4,548 $ 16,047 The following table summarizes the Company's accrual for restructuring charges for the fiscal year ended September 30, 2020 : (in thousands) Employee Termination Benefits Accrued restructuring charges at September 30, 2019 $ — Charges 19,530 Cash payments ( 18,979 ) Accrued restructuring charges at September 30, 2020 $ 551 These expenses are recorded within restructuring charges on our Consolidated Statements of Operations for the fiscal year ended September 30, 2020 and the related liability is recorded within accounts payable on our Consolidated Balance Sheets at September 30, 2020 . 96 Table of Contents NOTE 20 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Fiscal Year 2020 Quarters Ended (in thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Total (1) Operating revenues $ 614,657 $ 633,639 $ 317,364 $ 208,267 $ 1,773,927 Operating income (loss) 31,368 ( 518,541 ) ( 57,584 ) ( 75,430 ) ( 620,187 ) Income (loss) from continuing operations 30,729 ( 420,468 ) ( 46,007 ) ( 60,646 ) ( 496,392 ) Net income (loss) 30,605 ( 420,540 ) ( 45,599 ) ( 58,963 ) ( 494,497 ) Basic earnings per common share: Income (loss) from continuing operations 0.27 ( 3.88 ) ( 0.43 ) ( 0.57 ) ( 4.62 ) Net income (loss) 0.27 ( 3.88 ) ( 0.43 ) ( 0.55 ) ( 4.60 ) Diluted earnings per common share: Income (loss) from continuing operations 0.27 ( 3.88 ) ( 0.43 ) ( 0.57 ) ( 4.62 ) Net income (loss) 0.27 ( 3.88 ) ( 0.43 ) ( 0.55 ) ( 4.60 ) (1) The sum of earnings per share for the four quarters may not equal the total earnings per share for the fiscal year due to changes in the average number of common shares outstanding. Fiscal Year 2020 Quarters Ended (in thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Included within net income (loss): Gain from the sale of assets, after tax 3,314 7,985 3,254 21,674 Asset impairment charges, after tax — ( 436,225 ) — — Restructuring charges, after tax — — ( 12,001 ) ( 428 ) Effect on diluted earnings per common share: Gain from the sale of assets, after tax 0.03 0.07 0.03 0.2 Asset impairment charges, after tax — ( 4.02 ) — — Restructuring charges, after tax — — ( 0.11 ) — Fiscal Year 2019 Quarters Ended (in thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Total (1) Operating revenues $ 740,598 $ 720,868 $ 687,974 $ 649,050 $ 2,798,490 Operating income (loss) 54,289 95,146 ( 167,874 ) 39,021 20,582 Income (loss) from continuing operations 8,364 71,857 ( 154,621 ) 41,890 ( 32,510 ) Net income (loss) 18,959 60,891 ( 154,683 ) 41,177 ( 33,656 ) Basic earnings per common share: Income (loss) from continuing operations 0.07 0.65 ( 1.42 ) 0.38 ( 0.33 ) Net income (loss) 0.17 0.55 ( 1.42 ) 0.37 ( 0.34 ) Diluted earnings per common share: Income (loss) from continuing operations 0.07 0.65 ( 1.42 ) 0.38 ( 0.33 ) Net income (loss) 0.17 0.55 ( 1.42 ) 0.37 ( 0.34 ) (1) The sum of earnings per share for the four quarters may not equal the total earnings per share for the year due to changes in the average number of common shares outstanding. Fiscal Year 2019 Quarters Ended (in thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Included within net income (loss): Gain from the sale of assets, after tax 4,268 8,886 7,718 9,752 Asset impairment charges, after tax — — ( 173,227 ) — Effect on diluted earnings per common share: Gain from the sale of assets, after tax 0.04 0.08 0.07 0.09 Asset impairment charges, after tax — — ( 1.58 ) — 97 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.