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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For quarterly period ended: December 31, 2003

OR

For the transition period from            to           

Commission File Number: 1-4221

HELMERICH & PAYNE, INC.

(918) 742-5531

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

Total Number of Pages — 17

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HELMERICH & PAYNE, INC.

INDEX

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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.

Item 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands — except per share data)

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HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1.

Basis of Presentation -

In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly the results of the periods presented. The results of operations for the three months ended December 31, 2003, and December 31, 2002, are not necessarily indicative of the results to be expected for the full year. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s 2003 Annual Report on Form 10K.

2.

Employee Stock-Based Awards –

Employee stock-based awards are accounted for under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Fixed plan common stock options generally do not result in compensation expense, because the exercise price of the options issued by the Company equals the market price of the underlying stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”.

3.

The $.08 cash dividend declared in September, 2003, was paid December 1, 2003. On December 3, 2003, a cash dividend of $.08 per share was declared for shareholders of record on February 13, 2004, payable March 1, 2004.

4.

Inventories consist primarily of replacement parts and supplies held for use in the Company’s drilling operations.

5.

Net income for the three months ended December 31, 2003 includes gains from the sale of available-for-sale securities of $2,098,000 ($0.04 per diluted share). Cash realized from the sale was $3,462,000. There were no security sales in the first quarter of fiscal 2003.

6.

The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting. The recorded amounts for investments accounted for under the equity method are $55.7 million and $56.7 million at December 31, 2003 and September 30, 2003, respectively.

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HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)

7.

Comprehensive Income -

Comprehensive income, net of related tax, is as follows (in thousands):

The components of accumulated other comprehensive income, net of related taxes, are as follows (in thousands):

8.

Notes payable and long-term debt –

At December 31, 2003, the Company had $200 million in long-term debt outstanding at fixed rates and maturities as summarized in the following table.

The terms of the debt obligations require the Company to maintain a minimum ratio of debt to total capitalization. The proceeds of the debt issuances were used to repay $50 million of outstanding debt, fund the Company’s rig construction program and for other general corporate purposes.

At December 31, 2003, the Company had a committed unsecured line of credit totaling $125 million. Short-term loans totaling $30 million and letters of credit totaling $13.7 million were outstanding against the line, leaving $81.3 million available to borrow. The weighted average interest rate on short-term loans at December 31, 2003 was 2.0 percent. Under terms of the line of credit, the Company must maintain certain financial ratios including debt to total capitalization and debt to earnings before interest, taxes, depreciation, and

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HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)

amortization, and maintain certain levels of liquidity and tangible net worth. A non-use fee of 0.15 percent per annum is calculated on the average daily unused amount, payable quarterly. The interest rate varies based on LIBOR plus .875 to 1.125 percent depending on ratios described above. The line of credit matures in July, 2004.

On October 27, 2003, the Company’s interest rate swap matured. The remaining amortization of $117,065 was included in interest expense.

9.

Earnings per share -

Basic earnings per share is based on the weighted-average number of common shares outstanding during the period. Diluted earnings per share include the dilutive effect of stock options and restricted stock.

A reconciliation of the weighted-average common shares outstanding on a basic and diluted basis is as follows:

Options to purchase 1,049,186 and 1,036,762 shares of common stock at a weighted average price of $27.84 and $27.86 were outstanding at December 31, 2003 and 2002, respectively, but were not included in the computation of diluted earnings per common share. Inclusion of these shares would be antidilutive.

10.

Income Taxes –

The Company’s effective tax rate was 42.0% in the first quarter of fiscal 2004, compared to 43.0% in the first quarter of fiscal 2003.

11.

Commitments -

The Company, on a regular basis, makes commitments for the purchase of contract drilling equipment. At December 31, 2003, the Company had commitments outstanding of approximately $30 million for the purchase of drilling equipment.

12.

Segment information –

The Company operates principally in the contract drilling industry. The Company’s contract drilling business includes the following operating segments: U.S. Land, U.S. Offshore Platform, and International. The contract drilling operations consist primarily of contracting Company-owned drilling equipment primarily to major oil and gas exploration companies. The Company’s primary international areas of operation include Venezuela, Colombia, Ecuador, Argentina and Bolivia. The Company also has a Real Estate Segment whose operations are conducted exclusively in the metropolitan area of Tulsa, Oklahoma. The primary

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HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)

areas of operations include a major shopping center and several multi-tenant warehouses. Each reportable segment is a strategic business unit which is managed separately. Other includes investments and corporate operations.

The Company evaluates performance of its segments based upon operating profit or loss from operations before income taxes which includes revenues from external and internal customers; direct operating costs; depreciation; and allocated general and administrative costs; but excludes corporate costs for other depreciation and other income and expense. General and administrative costs are allocated to the segments based primarily on specific identification, and to the extent that such identification was not practical, on other methods which the Company believes to be a reasonable reflection of the utilization of services provided.

Summarized financial information of the Company’s reportable segments for the quarters ended December 31, 2003, and 2002, is shown in the following tables:

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HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)

The following table reconciles segment operating profit per the table above to income before income taxes and equity in income (loss) of affiliates as reported on the Consolidated Condensed Statements of Income.