<PAGE> 1
- --------------------------------------------------------------------------------
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, 1997
( ) 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, 1997 and 1996......................................... 5
Statements of Changes in Net Assets Available
for Benefits for the year ended December 31,
1997........................................................................... 6
Notes to financial statements.................................................. 7
Supplementary Information:
Schedule 1 - Assets held for Investment Purposes............................... 16
Schedule 2 - Reportable Transactions........................................... 17
(b) Exhibits:
23.1 - Consent of Independent Public Accountants...................................... 19
</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 26, 1998
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, 1997 and 1996, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1997. 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, 1997 and 1996, and the changes in net assets available for benefits
for the year ended December 31, 1997, 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 as of December 31, 1997 (Schedule I) and the schedule of
reportable transactions - series transactions for the year ended December 31,
1997 (Schedule II) 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 12, 1998
4
<PAGE> 5
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
--------------- ---------------
<S> <C> <C>
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY SHARES $ 78,124,715 $ 68,040,345
SMITH INTERNATIONAL, INC. COMMON STOCK 25,185,147 10,297,642
LOANS RECEIVABLE FROM PARTICIPANTS 7,879,463 5,891,422
--------------- ---------------
111,189,325 84,229,409
CASH 576,772 108,787
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 258,426 369,816
EMPLOYER 3,182,215 3,035,962
RECEIVABLES - OTHER 217,572 700,251
--------------- ---------------
TOTAL ASSETS 115,424,310 88,444,225
--------------- ---------------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES 498,803 560,706
--------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS $ 114,925,507 $ 87,883,519
=============== ===============
</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, 1997
<TABLE>
<S> <C>
NET ASSETS AVAILABLE FOR BENEFITS, AT BEGINNING OF YEAR $ 87,883,519
---------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS 6,410,649
NET REALIZED GAIN ON SALE OF INVESTMENTS 5,169,370
NET UNREALIZED APPRECIATION OF INVESTMENTS 6,100,988
CONTRIBUTIONS:
EMPLOYEE 8,187,092
EMPLOYER 6,504,990
TRANSFER FROM OTHER PLANS (NOTE 2) 921,710
---------------
33,294,799
---------------
DEDUCTIONS:
WITHDRAWALS 6,252,811
---------------
NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 27,041,988
---------------
NET ASSETS AVAILABLE FOR BENEFITS, AT END OF YEAR $ 114,925,507
===============
</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, 1997 AND 1996
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 Company is the plan administrator of the Plan as defined under the
Employee Retirement Income Security Act of 1974. Vanguard Fiduciary
Trust Company is the trustee of all investments held by the Plan.
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
upon the age of the participant (the "Company Retirement
Contributions"). The Company
7
<PAGE> 8
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 $6.5 million for the year ended
December 31, 1997.
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.
9
<PAGE> 10
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 combination of the other funds at any time. (See
Exhibit 1 and 2 for Statements of Net Assets Available for Benefits,
with fund information as of December 31, 1997 and December 31, 1996 and
Statement of Changes in Net Assets, with fund information for the year
ended December 31, 1997.)
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
1997 and 1996, 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.
10
<PAGE> 11
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 1997 $219,349 of unvested participant balances were forfeited
and utilized to reduce the Company's contributions.
2. ACQUISITIONS
From time to time, the Company acquires companies with defined contribution
plans which are merged into the Plan. During 1997, $921,710 was transferred from
the acquired companies plans to the Plan.
3. 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.
4. 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
"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.
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<PAGE> 12
5. 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, 1997 and 1996 the benefits payable to participants totaled $86,092
and $150,842, respectively. The following is a reconciliation of net assets
available for benefits per the financial statements to the Form 5500 as of
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Net assets available for benefits per the financial statements $ 114,925,507 $ 87,883,519
Less: Current amounts payable to participants at end of year (86,092) (150,842)
--------------- ---------------
Net assets available for benefits per the Form 5500 $ 114,839,415 $ 87,732,677
=============== ===============
</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, 1997:
<TABLE>
<CAPTION>
1997
---------------
<S> <C>
Benefits paid to participants per the financial statements $ 6,252,811
Less: Prior year amounts payable to participants at end of year (150,842)
Add: Current amounts payable to participants at end of year 86,092
---------------
Benefits paid to participants per the Form 5500 $ 6,188,061
===============
</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, 1997 and 1996, respectively, but not yet paid as of that date.
6. 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, 1997 and 1996, (Exhibit I) and statement of changes in net assets
available for benefits, with fund information for the year ended December 31,
1997 (Exhibit II) are reported on pages 13 through 15.
12
<PAGE> 13
Exhibit I
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
VMMR INTERNATIONAL SMITH
PRIME VANGUARD VANGUARD GROWTH INTERNATIONAL, INC. VANGUARD
PORTFOLIO PRIMECAP WELLINGTON PORTFOLIO STOCK WINDSOR
FUND FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES $ 16,113,681 $ 17,965,953 $ 19,901,001 $ 3,625,309 $ 12,860,610
SMITH INTERNATIONAL, INC
COMMON STOCK 25,185,147
LOANS RECEIVABLE
FROM PARTICIPANTS
------------ ------------ ------------ ------------ ------------ ------------
16,113,681 17,965,953 19,901,001 3,625,309 25,185,147 12,860,610
CASH 576,772
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 49,946 42,558 46,812 11,572 39,283 35,360
EMPLOYER 644,014 556,006 571,730 143,587 466,793 440,405
RECEIVABLES - OTHER 39,163 17,960 23,428 3,889 112,145 12,680
------------ ------------ ------------ ------------ ------------ ------------
TOTAL ASSETS $ 16,846,804 $ 18,582,477 $ 20,542,971 $ 3,784,357 $ 26,380,140 $ 13,349,055
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES 498,803
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 16,846,804 $ 18,582,477 $ 20,542,971 $ 3,784,357 $ 25,881,337 $ 13,349,055
============ ============ ============ ============ ============ ============
<CAPTION>
LONG-TERM VANGUARD
CORPORATE INDEX 500
BOND PORTFOLIO LOAN
FUND FUND FUND TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES $ 1,417,319 $ 6,240,842 $ 78,124,715
SMITH INTERNATIONAL, INC
COMMON STOCK $ 25,185,147
LOANS RECEIVABLE
FROM PARTICIPANTS 7,879,463 $ 7,879,463
------------ ------------ ------------ ------------
1,417,319 6,240,842 7,879,463 111,189,325
CASH $ 576,772
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 5,696 27,199 -- 258,426
EMPLOYER 71,015 288,665 -- 3,182,215
RECEIVABLES - OTHER 1,390 6,917 -- 217,572
------------ ------------ ------------ ------------
TOTAL ASSETS $ 1,495,420 $ 6,563,623 $ 7,879,463 $115,424,310
------------ ------------ ------------ ------------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES 498,803
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 1,495,420 $ 6,563,623 $ 7,879,463 $114,925,507
============ ============ ============ ============
</TABLE>
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EXHIBIT I
(CONTINUED)
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VMMR INTERNATIONAL SMITH
PRIME VANGUARD VANGUARD GROWTH INTERNATIONAL, VANGUARD
PORTFOLIO PRIMECAP WELLINGTON PORTFOLIO INC. STOCK WINDSOR
FUND FUND FUND FUND FUND FUND
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES $21,791,975 $11,651,687 $16,150,397 $ 3,765,186 $ -- $ 9,646,761
SMITH INTERNATIONAL, INC
COMMON STOCK -- -- -- -- 10,297,642 --
LOANS RECEIVABLE
FROM PARTICIPANTS -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
21,791,975 11,651,687 16,150,397 3,765,186 10,297,642 9,646,761
CASH -- -- -- -- 108,787 --
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 93,864 54,445 75,239 18,900 43,799 49,233
EMPLOYER 730,012 465,684 592,029 147,147 405,145 419,078
RECEIVABLES - OTHER 56,744 22,838 39,434 7,282 545,726 17,860
----------- ----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $22,672,595 $12,194,654 $16,857,099 $ 3,938,515 $11,401,099 $10,132,932
----------- ----------- ----------- ----------- ----------- -----------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES -- -- -- -- 560,706 --
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $22,672,595 $12,194,654 $16,857,099 $ 3,938,515 $10,840,393 $10,132,932
=========== =========== =========== =========== =========== ===========
<CAPTION>
LONG-TERM VANGUARD
CORPORATE INDEX 500
BOND PORTFOLIO LOAN
FUND FUND FUND TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY $ 906,999 $ 4,127,340 $ -- $68,040,345
SHARES
SMITH INTERNATIONAL, INC -- -- -- $10,297,642
COMMON STOCK
LOANS RECEIVABLE -- -- 5,891,422 $ 5,891,422
FROM PARTICIPANTS ----------- ----------- ----------- -----------
906,999 4,127,340 5,891,422 84,229,409
-- -- -- $ 108,787
CASH
CONTRIBUTIONS RECEIVABLE: 7,212 27,124 -- $ 369,816
EMPLOYEE 50,524 226,343 -- $ 3,035,962
EMPLOYER
1,889 8,478 -- $ 700,251
RECEIVABLES - OTHER ----------- ----------- ----------- -----------
$ 966,624 $ 4,389,285 $ 5,891,422 $88,444,225
TOTAL ASSETS ----------- ----------- ----------- -----------
LIABILITIES
-- -- -- $ 560,706
PAYABLES - INVESTMENT PURCHASES ----------- ----------- ----------- -----------
$ 966,624 $ 4,389,285 $ 5,891,422 $87,883,519
NET ASSETS AVAILABLE FOR BENEFITS =========== =========== =========== ===========
</TABLE>
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<PAGE> 15
EXHIBIT II
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
VMMR INTERNATIONAL
PRIME VANGUARD VANGUARD GROWTH
PORTFOLIO PRIMECAP WELLINGTON PORTFOLIO
FUND FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS,
AT BEGINNING OF YEAR $ 22,672,595 $ 12,194,654 $ 16,857,099 $ 3,938,515
------------ ------------ ------------ ------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS $ 1,014,095 $ 645,035 $ 1,712,585 $ 154,211
NET REALIZED GAIN/(LOSS) ON
SALE OF INVESTMENTS -- 687,829 445,006 83,254
NET UNREALIZED
APPRECIATION/(DEPRECIATION)
OF INVESTMENTS -- 3,153,614 1,653,318 (77,877)
CONTRIBUTIONS:
EMPLOYEE 1,737,158 1,126,601 1,660,394 344,104
EMPLOYER 1,423,799 1,043,115 1,212,581 298,326
TRANSFER FROM OTHER PLANS (NOTE 2) 50,374 123,157 184,167 46,920
------------ ------------ ------------ ------------
4,225,426 6,779,351 6,868,051 848,938
------------ ------------ ------------ ------------
DEDUCTIONS:
WITHDRAWALS 1,502,695 1,320,410 1,501,538 251,121
INTER-FUND TRANSFERS (8,548,522) 928,882 (1,680,641) (751,975)
------------ ------------ ------------ ------------
NET INCREASE/(DECREASE) IN ASSETS
AVAILABLE FOR BENEFITS (5,825,791) 6,387,823 3,685,872 (154,158)
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
AT END OF YEAR $ 16,846,804 $ 18,582,477 $ 20,542,971 $ 3,784,357
============ ============ ============ ============
<CAPTION>
SMITH LONG-TERM VANGUARD
INTERNATIONAL, VANGUARD CORPORATE INDEX 500
INC. STOCK WINDSOR BOND PORTFOLIO LOAN
FUND FUND FUND FUND FUND TOTAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS,
AT BEGINNING OF YEAR $ 10,840,393 $ 10,132,932 $ 966,624 $ 4,389,285 $ 5,891,422 $ 87,883,519
------------ ------------ ------------ ------------ ------------ ------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS $ 59 $ 2,048,046 $ 99,824 $ 133,081 $ 603,713 $ 6,410,649
NET REALIZED GAIN/(LOSS) ON
SALE OF INVESTMENTS 3,074,412 539,668 30,881 308,320 5,169,370
NET UNREALIZED
APPRECIATION/(DEPRECIATION)
OF INVESTMENTS 480,511 (195,986) 57,278 1,030,130 6,100,988
CONTRIBUTIONS:
EMPLOYEE 1,168,558 1,325,457 144,046 648,575 32,199 8,187,092
EMPLOYER 974,713 860,188 140,492 551,776 6,504,990
TRANSFER FROM OTHER PLANS (NOTE 2) 4,666 231,019 67,554 213,853 -- 921,710
------------ ------------ ------------ ------------ ------------ ------------
5,702,919 4,808,392 540,075 2,885,735 635,912 33,294,799
------------ ------------ ------------ ------------ ------------ ------------
DEDUCTIONS:
WITHDRAWALS 424,139 682,509 57,414 237,621 275,364 6,252,811
INTER-FUND TRANSFERS 9,762,164 (909,760) 46,135 (473,776) 1,627,493 --
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE/(DECREASE) IN ASSETS
AVAILABLE FOR BENEFITS 15,040,944 3,216,123 528,796 2,174,338 1,988,041 27,041,988
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
AT END OF YEAR $ 25,881,337 $ 13,349,055 $ 1,495,420 $ 6,563,623 $ 7,879,463 $114,925,507
============ ============ ============ ============ ============ ============
</TABLE>
15
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SCHEDULE I
SMITH INTERNATIONAL, INC. 401 (k) RETIREMENT PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<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 16,113,681 $16,113,681 $ 16,113,681
*Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 454,030 12,272,095 17,965,953
*Vanguard Group of Investment Companies Vanguard Wellington Fund 675,756 15,767,031 19,901,001
*Vanguard Group of Investment Companies International Growth Portfolio Fund 221,190 3,169,198 3,625,309
*Smith International, Inc. Smith International, Inc. Stock Fund 3,810,630 20,973,839 25,185,147
*Vanguard Group of Investment Companies Vanguard Windsor Fund 757,398 2,257,215 12,860,610
*Vanguard Group of Investment Companies Long-Term Corporate Bond Fund 153,058 1,356,357 1,417,319
*Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund 69,289 4,571,835 6,240,842
*Smith International, Inc Loans Receivable from Participants 7,879,463 7,879,463
----------- ------------
401 (k) Retirement Plan (Highest and lowest interest rates
are 12.0% and 7.0%)
$84,360,714 $111,189,325
=========== ============
</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, 1997
<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 (236) 11,148,248 $59,645,160 --
Sales (232) 9,101,090 -- $48,312,578
Vanguard Group of Investment Companies Vanguard Wellington Fund
Purchases (183) 269,367 7,742,320
Sales (217) 211,195 6,090,040
Vanguard Group of Investment Companies Vanguard Windsor Fund
Purchases (186) 724,677 13,365,017
Sales (210) 548,759 10,494,850
Vanguard Group of Investment Companies VMMR Prime Portfolio Fund
Purchases (249) 45,205,884 45,205,884
Sales (242) 50,883,718 50,884,178
Vanguard Group of Investment Companies Vanguard PRIMECAP Fund
Purchases (201) 262,436 9,796,127
Sales (211) 195,763 7,323,304
Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund
Purchases (170) 68,151 5,587,910
Sales (183) 58,548 4,812,858
<CAPTION>
CURRENT VALUE
IDENTITY OF OF ASSET ON NET
PARTY INVOLVED DESCRIPTION OF ASSETS COST OF ASSET TRANSACTION DATE GAIN
- ------------------------------------- --------------------- ------------- ---------------- ----
<S> <C> <C> <C> <C>
Smith International, Inc. Common Stock
Purchases (236) $ 59,645,160 $59,645,160 --
Sales (232) 44,316,640 $48,312,578 $3,995,938
Vanguard Group of Investment Companies Vanguard Wellington Fund
Purchases (183) 7,742,320 7,742,320 --
Sales (217) 4,902,387 6,090,040 1,187,653
Vanguard Group of Investment Companies Vanguard Windsor Fund
Purchases (186) 13,365,017 13,365,017 --
Sales (210) 9,720,856 10,494,850 773,994
Vanguard Group of Investment Companies VMMR Prime Portfolio Fund
Purchases (249) 45,205,884 45,205,884 --
Sales (242) 50,884,178 50,884,178 --
Vanguard Group of Investment Companies Vanguard PRIMECAP Fund
Purchases (201) 9,796,127 9,796,127 --
Sales (211) 5,972,363 7,323,304 1,350,941
Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund
Purchases (170) 5,587,910 5,587,910 --
Sales (183) 4,261,808 4,812,858 551,050
</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
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ -----------
<S> <C>
23.1 - Consent of Independent Public Accountants
</TABLE>
18
<PAGE> 1
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference of your report dated June 12, 1998 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 26, 1998
19
