<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________ to __________
Commission File Number 1-8514
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Smith International, Inc.
16740 Hardy Street
Houston, Texas 77032
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<PAGE> 2
The following financial statements and exhibits are filed as a part of this
annual report:
<TABLE>
<CAPTION>
Sequentially
Numbered
Page
------------
<S> <C>
(a) Index to Financial Statements and Supplementary
Information:
Report of Independent Public Accountants................ 4
Statements of Net Assets Available for
Benefits at December 31, 1996 and 1995.................. 5
Statement of Changes in Net Assets Available
for Benefits for the year ended December 31, 1996....... 6
Notes to financial statements........................... 7
Supplementary Information:
Schedule 1 - Assets held for Investment Purposes........ 16
Schedule 2 - Reportable Transactions - Series........... 17
Schedule 3 - Reportable Transactions - Single........... 18
(b) Exhibits:
23.1 - Consent of Independent Public Accountants............... 20
</TABLE>
2
<PAGE> 3
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 27, 1997
SMITH INTERNATIONAL, INC.
401(k) RETIREMENT PLAN
By: Administrative Committee for
the Smith International, Inc.
Retirement Plan
By: /s/ Neal S. Sutton
-------------------------------
Neal S. Sutton, Member
By: /s/ Vivian M. Cline
-------------------------------
Vivian M. Cline, Member
3
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
Smith International, Inc. 401(k) Retirement Plan:
We have audited the accompanying statements of net assets available for
benefits of the Smith International, Inc. 401(k) Retirement Plan ("the Plan")
as of December 31, 1996 and 1995, and the related statement of changes in net
assets available for benefits for the year ended December 31, 1996. These
financial statements and the schedules referred to below are the responsibility
of the Plan administrator. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the Plan administrator, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1996 and 1995, and the changes in net assets available for
benefits for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes (Schedule I), schedule of reportable transactions -
series transactions (Schedule II) and schedule of reportable transactions -
single transactions (Schedule III) are presented for purposes of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
June 24, 1997
4
<PAGE> 5
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
----------- -----------
<S> <C> <C>
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY SHARES $68,040,345 $55,384,278
SMITH INTERNATIONAL, INC. COMMON STOCK 10,297,642 3,844,464
LOANS RECEIVABLE FROM PARTICIPANTS 5,891,422 4,867,726
----------- -----------
84,229,409 64,096,468
CASH 108,787 1,881
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 369,816 166,513
EMPLOYER 3,035,962 1,992,282
RECEIVABLES - OTHER 700,251 404,048
----------- -----------
TOTAL ASSETS 88,444,225 66,661,192
----------- -----------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES 560,706 321,724
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $87,883,519 $66,339,468
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
<PAGE> 6
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
NET ASSETS AVAILABLE FOR BENEFITS, AT BEGINNING OF YEAR $66,339,468
-----------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS 4,277,999
NET REALIZED GAIN ON SALE OF INVESTMENTS 2,892,714
NET UNREALIZED APPRECIATION OF INVESTMENTS 7,153,174
CONTRIBUTIONS:
EMPLOYEE 5,980,016
EMPLOYER 4,851,799
-----------
25,155,702
-----------
DEDUCTIONS:
WITHDRAWALS 3,611,651
-----------
NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 21,544,051
-----------
NET ASSETS AVAILABLE FOR BENEFITS, AT END OF YEAR $87,883,519
===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
6
<PAGE> 7
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT PLAN PROVISIONS
The following description of the Smith International, Inc. 401(k) Retirement
Plan (the Plan) provides only general information. Participants should refer to
the Plan document for a more complete explanation of the Plan's provisions as
the Plan document is controlling at all times.
GENERAL
The Plan is a defined contribution plan of Smith International, Inc. (the
Company). The Plan is operated for the sole benefit of the employees of the
Company and their beneficiaries and is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA). The Plan is available
to all employees who meet certain eligibility requirements.
a. PLAN ADMINISTRATOR AND TRUSTEE
The fiduciary responsibilities of the Plan are performed by the Smith
International, Inc. Compensation and Benefits Committee of the Board
of Directors. Vanguard Fiduciary Trust Company is the trustee of all
investments held by the Plan. The responsibilities of the Trustee are
to invest Plan assets in accordance with guidelines set forth by the
Committee and to make disbursements from Plan assets as directed by
the Committee.
b. ELIGIBILITY
Persons employed by the Company within the United States, citizens of
the United States employed abroad who are not covered by a collective
bargaining agreement, and employees covered by a collective bargaining
agreement which provides for participation in the Plan are eligible to
participate. Participation may commence upon the later of such
eligible employees' commencement date or the date on which such
employees attain the age of eighteen.
c. CONTRIBUTIONS
The Plan allows participants to contribute up to 12 percent of their
compensation to the Plan on a pretax basis. Prior to July 1, 1983,
participants contributions were taxed prior to being contributed to
the Plan. The Company contributes to the account of each participant
in the Plan between 2 and 6 percent of each participants' compensation
based
7
<PAGE> 8
upon the age of the participant (the Company Retirement
contributions). The Company may, in its discretion, also contribute
for a Plan Year a matching contribution with respect to each
participant who is employed by the Company on the last day of such
Plan Year (the Company Matching Contribution). The Company's Board of
Directors shall determine whether a Company Matching Contribution
shall be made for a Plan Year, the matching percentage, and the
percentage of a participant's compensation upon which the match shall
be based. Company contributions to participants accounts, including
Company Matching Contributions and Company Retirement Contributions,
were $4.9 million and $3.9 million for the years ended December 31,
1996 and 1995, respectively.
Effective April 7, 1997, the Company amended the Plan whereby the
Company will, in addition to the Company Retirement Contributions,
make mandatory matching contributions up to 1 1/2 percent of the
participants' compensation. In addition, matching contributions in
excess of the 1 1/2 percent may be made at the discretion of the
Company's Board of Directors to the account of participants who are
employed by the Company at the end of the Plan Year.
d. VESTING
Participants are fully vested in their contributions and related
earnings/losses and vest in Company contributions and related
earnings/losses at the rate of 20 percent for each year of service.
Upon death, judicial declaration of incompetence, or normal or
disability retirement, participants become fully vested in Company
contributions and related earnings/losses and all vested balances are
distributed.
e. COMPENSATION
Compensation, as defined in the Plan, includes all cash compensation
paid by the Company to participants excluding payments made in
connection with termination of employment, any compensation deferred
under the Company's management incentive plan, and cost-of-living and
any other extraordinary payments made to expatriates.
f. INVESTMENT PROGRAMS
Participants have the option of investing their contributions and the
Company's matching contributions in any of the following funds of the
Vanguard Group of Investment Companies (Vanguard Funds) and/or the
Company's common stock:
VMMR PRIME PORTFOLIO FUND
Investments are made in high-quality money market instruments
which mature in one year or less, including negotiable
certificates of deposit, banker's acceptances
8
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issued by major U.S. banks, commercial paper, and short-term
corporate obligations with the objective of preservation of
capital and liquidity.
VANGUARD PRIMECAP FUND
Investments are made principally in a portfolio of common
stocks with the objective of long-term growth of capital.
VANGUARD WELLINGTON FUND
Investments are made in a combination of common stocks and
fixed income securities with the objective of conservation of
principal and reasonable current income.
INTERNATIONAL GROWTH PORTFOLIO FUND
Investments are made in common stocks of companies based
outside of the United States with the objective of long-term
capital growth.
SMITH INTERNATIONAL, INC. STOCK FUND
Investments are in the common stock of the Company purchased
on the open market.
VANGUARD WINDSOR FUND
Investments are made in a portfolio of common stocks with the
primary objective of long-term growth of capital and income
and a secondary objective of providing current income.
LONG-TERM CORPORATE BOND FUND
Investments are made in a portfolio of bonds with the
objective of obtaining a high level of income while
preserving capital.
VANGUARD INDEX 500 PORTFOLIO FUND
Investments are made in a portfolio of publicly-traded stocks
with the objective of providing the price and yield
performance represented by the Standard and Poor's 500
Composite Stock Price Index.
Contributions may be invested in one fund or divided among two or more
funds. Participants may transfer some or all of the balances out of
any fund into one or any
9
<PAGE> 10
combination of the other funds at any time. (See Note 5 for
Statements of Net Assets Available for Benefits, with fund
information as of December 31, 1996 and December 31, 1995 and
Statement of Changes in Net Assets, with fund information for the
year ended December 31, 1996.)
g. ASSET VALUATION
The assets of the Plan are recorded at cost in the participants'
accounts and converted to market value for financial statement
presentation. Pursuant to Department of Labor regulations, the
realized gain or loss on the sale of the Plan assets, and unrealized
appreciation or depreciation of the Plan assets are based on the value
of those assets at the beginning of the Plan year or at the time of
purchase, if acquired during the current year.
h. ADMINISTRATIVE EXPENSES
The Plan is responsible for its administrative expenses. However, in
1996 and 1995, the Company elected to pay all administrative expenses.
In the future, the Company may elect to discontinue paying such
expenses.
i. PRIORITIES UPON PLAN TERMINATION
The Company intends for the Plan to be permanent; however, in the
event of permanent discontinuance of contributions or termination of
the Plan, the total balances of all participants shall become fully
vested.
j. LOANS
The Plan permits participants to borrow the lesser of $50,000 or 50
percent of their vested account balances in the Plan. These loans bear
interest at prime plus one percent and are repaid through payroll
withholdings over a period not to exceed five years, except for
qualifying loans to purchase a primary residence which may be repaid
over an extended repayment period.
k. WITHDRAWALS AND FORFEITURES
A participant may elect to receive benefit payments through any one of
the several methods provided by the Plan upon termination or
retirement. Participants can withdraw their pre-July 1, 1983
contributions (see Note 1.c.) in cash without being suspended from
making additional contributions to the Plan.
Upon termination of employment with the Company, any unvested Company
contributions and related earnings/losses are forfeited if
participants do not return to the Company within 60 months of their
termination. During 1996 and 1995, $66,398 and $49,799,
10
<PAGE> 11
respectively, of unvested participant balances were forfeited and
utilized to reduce the Company's contributions in the respective
years.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING
The accounts of the Plan are maintained on the cash basis of accounting. For
financial reporting purposes, however, the financial statements have been
prepared on the accrual basis of accounting using information provided by the
trustee.
INVESTMENT VALUATION
The Plan's investments are held by the trustee. Plan investments are stated at
fair value, as determined by the trustee primarily by reference to published
market data.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Plan administrator to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of changes in net
assets during the reporting period. Actual results could differ from those
estimates.
3. FEDERAL INCOME TAX STATUS
The Plan obtained its latest determination letter on March 5, 1996, in which
the Internal Revenue Service stated that the Plan, as then designed, was in
compliance with the applicable requirements of the Internal Revenue Code. The
Plan has been amended since receiving the determination letter. However, the
Company and the Plan's tax counsel believe that the Plan is currently designed
and being operated in compliance with the applicable requirements of the Code.
Therefore, they believe that the Plan was qualified and the related trust was
tax-exempt as of the financial statement date.
4. RECONCILIATION OF FORM 5500:
Benefits payable to participants are included in net assets available for
benefits and are not reflected as a liability in the financial statements. As
of December 31, 1996 and 1995, the benefits payable to participants totaled
$150,842 and $159,748, respectively. The following is a reconciliation of net
assets available for benefits per the financial statements to the Form 5500 as
of December 31, 1996 and 1995:
11
<PAGE> 12
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net assets available for benefits per the financial statements $ 87,883,519 $ 66,339,468
Less: Current amounts payable to participants at end of year (150,842) (159,748)
------------ ------------
Net assets available for benefits per the Form 5500 $ 87,732,677 $ 66,179,720
============ ============
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for the year ended December 31, 1996:
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
Benefits paid to participants per the financial statements $ 3,611,651
Less: Prior year amounts payable to participants at end of year (159,748)
Add: Current amounts payable to participants at end of year 150,842
-----------
Benefits paid to participants per the Form 5500 $ 3,602,745
===========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31, 1996 and 1995, respectively, but not yet paid as of that date.
5. STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION AND
CHANGES IN NET ASSETS, WITH FUND INFORMATION
The statements of net assets available for benefits, with fund information as
of December 31, 1996 and 1995, and statement of changes in net assets available
for benefits, with fund information for the year ended December 31, 1996 are
reported on pages 13 through 15.
12
<PAGE> 13
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
VMMR International
Prime Vanguard Vanguard Growth
Portfolio PRIMECAP Wellington Portfolio
Fund Fund Fund Fund
----------- ----------- ----------- ----------
ASSETS
<S> <C> <C> <C> <C>
INVESTMENTS, at fair value:
Registered investment company
shares $21,791,975 $11,651,687 $16,150,397 $3,765,186
Smith International, Inc.
common stock -- -- -- --
Loans Receivable
from Participants -- -- -- --
----------- ----------- ----------- ----------
21,791,975 11,651,687 16,150,397 3,765,186
CASH -- -- -- --
CONTRIBUTIONS RECEIVABLE:
Employee 93,864 54,445 75,239 18,900
Employer 730,012 465,684 592,029 147,147
RECEIVABLES - OTHER 56,744 22,838 39,434 7,282
----------- ----------- ----------- ----------
TOTAL ASSETS $22,672,595 $12,194,654 $16,857,099 $3,938,515
----------- ----------- ----------- ----------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES -- -- -- --
----------- ----------- ----------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $22,672,595 $12,194,654 $16,857,099 $3,938,515
=========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Smith Long-Term Vanguard
International,Inc. Vanguard Corporate Index 500
Stock Windsor Bond Portfolio Loan
Fund Fund Fund Fund Fund Total
----------- ----------- ---------- ---------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
INVESTMENTS, at fair value:
Registered investment company
shares $ -- $ 9,646,761 $ 906,999 $4,127,340 $ -- $68,040,345
Smith International, Inc.
common stock 10,297,642 -- -- -- -- 10,297,642
Loans Receivable
from Participants -- -- -- -- 5,891,422 5,891,422
----------- ----------- ---------- ---------- ----------- -----------
10,297,642 9,646,761 906,999 4,127,340 5,891,422 84,229,409
CASH 108,787 -- -- -- -- 108,787
CONTRIBUTIONS RECEIVABLE:
Employee 43,799 49,233 7,212 27,124 -- 369,816
Employer 405,145 419,078 50,524 226,343 -- 3,035,962
RECEIVABLES - OTHER 545,726 17,860 1,889 8,478 -- 700,251
----------- ----------- ---------- ---------- ----------- -----------
TOTAL ASSETS $11,401,099 $10,132,932 $ 966,624 $4,389,285 $ 5,891,422 $88,444,225
----------- ----------- ---------- ---------- ----------- -----------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES 560,706 -- -- -- -- 560,706
----------- ----------- ---------- ---------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $10,840,393 $10,132,932 $ 966,624 $4,389,285 $ 5,891,422 $87,883,519
=========== =========== ========== ========== =========== ===========
</TABLE>
13
<PAGE> 14
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
VMMR INTERNATIONAL
PRIME VANGUARD VANGUARD GROWTH
PORTFOLIO PRIMECAP WELLINGTON PORTFOLIO
FUND FUND FUND FUND
----------- ----------- ----------- ----------
ASSETS
<S> <C> <C> <C> <C>
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES $20,669,229 $ 9,146,682 $13,620,693 $2,810,220
SMITH INTERNATIONAL, INC.
COMMON STOCK -- -- -- --
LOANS RECEIVABLE
FROM PARTICIPANTS -- -- -- --
----------- ----------- ----------- ----------
20,669,229 9,146,682 13,620,693 2,810,220
CASH -- -- -- --
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 47,294 26,608 33,121 8,952
EMPLOYER 541,512 316,099 402,748 111,371
RECEIVABLES - OTHER 26,633 10,594 18,775 3,515
----------- ----------- ----------- ----------
TOTAL ASSETS $21,284,668 $ 9,499,983 $14,075,337 $2,934,058
----------- ----------- ----------- ----------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES -- -- -- --
----------- ----------- ----------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $21,284,668 $ 9,499,983 $14,075,337 $2,934,058
----------- ----------- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
SMITH LONG-TERM VANGUARD
INTERNATIONAL,INC. VANGUARD CORPORATE INDEX 500
STOCK WINDSOR BOND PORTFOLIO LOAN
FUND FUND FUND FUND FUND TOTAL
---------- ---------- ---------- ---------- ----------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES $ -- $6,162,239 $ 746,852 $2,228,363 $ -- $55,384,278
SMITH INTERNATIONAL, INC
COMMON STOCK 3,844,464 -- -- -- -- 3,844,464
LOANS RECEIVABLE
FROM PARTICIPANTS -- -- -- -- 4,867,726 4,867,726
---------- ---------- ---------- ---------- ----------- -----------
3,844,464 6,162,239 746,852 2,228,363 4,867,726 64,096,468
CASH 1,881 -- -- -- -- 1,881
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 14,879 21,811 3,093 10,755 -- 166,513
EMPLOYER 180,062 275,508 36,251 128,731 -- 1,992,282
RECEIVABLES - OTHER 332,897 7,818 1,002 2,814 -- 404,048
---------- ---------- ---------- ---------- ----------- -----------
TOTAL ASSETS $4,374,183 $6,467,376 $ 787,198 $2,370,663 $ 4,867,726 $66,661,192
---------- ---------- ---------- ---------- ----------- -----------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES 321,724 -- -- -- -- 321,724
---------- ---------- ---------- ---------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $4,052,459 $6,467,376 $ 787,198 $2,370,663 $ 4,867,726 $66,339,468
---------- ---------- ---------- ---------- ----------- -----------
</TABLE>
14
<PAGE> 15
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
VMMR INTERNATIONAL SMITH
PRIME VANGUARD VANGUARD GROWTH INTERNATIONAL,
PORTFOLIO PRIMECAP WELLINGTON PORTFOLIO INC. STOCK
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS,
AT BEGINNING OF YEAR $ 21,284,668 $ 9,499,983 $ 14,075,337 $ 2,934,058 $ 4,052,459
------------ ------------ ------------ ------------ ------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS 1,031,482 347,718 1,250,737 159,576 -
NET REALIZED GAIN/(LOSS) ON SALE OF INVESTMENTS - 82,813 112,955 27,059 2,530,947
NET UNREALIZED APPRECIATION/(DEPRECIATION)
OF INVESTMENTS - 1,278,396 865,959 265,109 3,444,747
CONTRIBUTIONS:
EMPLOYEE 1,314,749 950,901 1,105,720 275,846 742,630
EMPLOYER 1,218,867 741,865 968,298 239,346 618,351
------------ ------------ ------------ ------------ ------------
3,565,098 3,401,693 4,303,669 966,936 7,336,675
------------ ------------ ------------ ------------ ------------
DEDUCTIONS:
WITHDRAWALS 1,457,803 564,758 486,495 120,401 285,832
INTER-FUND TRANSFERS (719,368) (142,264) (1,035,412) 157,922 (262,909)
------------ ------------ ------------ ------------ ------------
NET INCREASE IN ASSETS
AVAILABLE FOR BENEFITS 1,387,927 2,694,671 2,781,762 1,004,457 6,787,934
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
AT END OF YEAR $ 22,672,595 $ 12,194,654 $ 16,857,099 $ 3,938,515 $ 10,840,393
============ ============ ============ ============ ============
<CAPTION>
LONG-TERM VANGUARD
VANGUARD CORPORATE INDEX 500
WINDSOR BOND PORTFOLIO LOAN
FUND FUND FUND FUND TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS,
AT BEGINNING OF YEAR $ 6,467,376 $ 787,198 $ 2,370,663 $ 4,867,726 $ 66,339,468
------------ ------------ ------------ ------------ ------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS 885,481 67,188 83,014 452,803 4,277,999
NET REALIZED GAIN/(LOSS) ON SALE OF INVESTMENTS 119,811 (28,845) 47,974 - 2,892,714
NET UNREALIZED APPRECIATION/(DEPRECIATION)
OF INVESTMENTS 809,596 (30,896) 520,263 - 7,153,174
CONTRIBUTIONS:
EMPLOYEE 775,336 140,609 674,225 - 5,980,016
EMPLOYER 636,876 87,592 340,604 - 4,851,799
------------ ------------ ------------ ------------ ------------
3,227,100 235,648 1,666,080 452,803 25,155,702
------------ ------------ ------------ ------------ ------------
DEDUCTIONS:
WITHDRAWALS 391,947 10,192 119,014 175,209 3,611,651
INTER-FUND TRANSFERS 830,403 (46,030) 471,556 746,102 -
------------ ------------ ------------ ------------ ------------
NET INCREASE IN ASSETS
AVAILABLE FOR BENEFITS 3,665,556 179,426 2,018,622 1,023,696 21,544,051
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
AT END OF YEAR $ 10,132,932 $ 966,624 $ 4,389,285 $ 5,891,422 $ 87,883,519
============ ============ ============ ============ ============
</TABLE>
15
<PAGE> 16
SCHEDULE I
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SHARES
IDENTITY OR CURRENT
OF ISSUE DESCRIPTION PRINCIPAL AMOUNT COST VALUE
- --------------------------------------- ------------------------------------ ---------------- ----------- -----------
<S> <C> <C> <C> <C>
*Vanguard Group of Investment Companies VMMR Prime Portfolio Fund 21,791,975 $21,791,975 $21,791,975
*Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 387,357 8,448,331 11,651,687
*Vanguard Group of Investment Companies Vanguard Wellington Fund 617,606 12,927,098 16,150,397
*Vanguard Group of Investment Companies International Growth Portfolio Fund 228,748 3,037,368 3,765,186
*Smith International, Inc. Smith International, Inc. Stock Fund 2,510,824 5,744,695 10,297,642
*Vanguard Group of Investment Companies Vanguard Windsor Fund 581,480 8,613,054 9,646,761
*Vanguard Group of Investment Companies Long-Term Corporate Bond Fund 103,185 902,711 906,999
*Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund 59,678 3,245,733 4,127,340
*Smith International, Inc Loans Receivable from Participants
401 (k) Retirement Plan (Highest and lowest interest rates
are 12.0% and 7.0%) 5,891,422 5,891,422
----------- -----------
$70,602,387 $84,229,409
=========== ===========
</TABLE>
- --------------------------------
*Identified party in interest
16
<PAGE> 17
SCHEDULE II
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
SERIES TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR
IDENTITY OF PRINCIPAL PURCHASE SELLING
PARTY INVOLVED DESCRIPTION OF ASSETS AMOUNT PRICE (a) PRICE (b)
- -------------------------------------- ---------------------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Smith International, Inc. Common Stock
Purchases (223) 1,124,090 $32,117,755 -
Sales (197) 10,341,695 - $31,640,271
Vanguard Group of Investment Companies Registered investment
company shares:
Vanguard Wellington Fund
Purchases (167) 237,991 6,080,825 -
Sales (180) 177,924 - 4,530,033
Vanguard Group of Investment Companies Vanguard Windsor Fund
Purchases (156) 601,599 9,604,186 -
Sales (167) 444,223 - 7,049,071
Vanguard Group of Investment Companies VMMR Prime Portfolio Fund
Purchases (235) 28,501,114 28,501,114 -
Sales (234) 27,378,368 - 27,378,368
Vanguard Group of Investment Companies Vanguard PRIMECAP Fund
Purchases (162) 234,715 6,506,217 -
Sales (182) 196,056 - 5,362,421
Vanguard Group of Investment Companies Vanguard Index 500 Portfolio
Fund
Purchases (138) 73,940 4,626,209 -
Sales (128) 52,949 - 3,295,469
</TABLE>
<TABLE>
<CAPTION>
CURRENT VALUE
IDENTITY OF OF ASSET ON NET
PARTY INVOLVED COST OF ASSET TRANSACTION DATE GAIN
- -------------------------------------- ------------- ---------------- ----------
<S> <C> <C> <C>
Smith International, Inc.
$32,117,755 $32,117,755 -
28,705,740 31,640,271 $2,934,531
Vanguard Group of Investment Companies
6,080,825 6,080,825 -
4,059,405 4,530,033 470,628
Vanguard Group of Investment Companies
9,604,186 9,604,186 -
6,902,872 7,049,071 146,199
Vanguard Group of Investment Companies
28,501,114 28,501,114 -
27,378,308 27,378,368 -
Vanguard Group of Investment Companies
6,506,217 6,506,217 -
4,909,090 5,362,421 453,331
Vanguard Group of Investment Companies
4,626,209 4,626,209 -
3,176,355 3,295,469 119,114
</TABLE>
(a) Purchase price includes transaction expenses.
(b) Selling price is net of transaction expenses.
NOTE: This schedule is a listing of investment transactions which exceed 5
percent of the Plan assets as of the beginning of the Plan year.
17
<PAGE> 18
SCHEDULE III
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
SINGLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES OR CURRENT VALUE
IDENTITY OF PRINCIPAL PURCHASE SELLING OF ASSET ON NET
PARTY INVOLVED DESCRIPTION OF ASSETS AMOUNT PRICE PRICE (a) COST OF ASSET TRANSACTION DATE GAIN
- ------------------------- --------------------- --------- ---------- ---------- ------------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
Smith International, Inc. Common Stock Sale 817,931 $3,416,908 $2,887,670 $3,416,908 $529,238
</TABLE>
(a) Selling price is net of transaction expenses.
NOTE: This schedule is a listing of investment transactions which exceed 5
percent of the Plan assets as of the beginning of the Plan year.
18
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.1 Consent of Independent Public Accountants
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated June 24, 1997 included in this Form 11-K, into
the previously filed registration statement of Smith International, Inc. on
Form S-8 (File No. 2-76939).
ARTHUR ANDERSEN LLP
Houston, Texas
June 27, 1997
