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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
APRIL 30, 1998
(Date of Report)
SMITH INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-8514 95-3822631
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
16740 HARDY STREET
P.O. BOX 60068
HOUSTON, TEXAS 77205
(Address of principal executive offices) (Zip Code)
(281) 443-3370
(Registrant's telephone number,
including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 30, 1998, Smith International, Inc. (the
"Company") closed the acquisition of Wilson Industries, Inc.
("Wilson"), pursuant to a Merger Agreement dated January 19, 1998 by
and among the Company, Wilson and SII Acquisition Corp., a wholly owned
subsidiary of the Company ("SII"). The acquisition was completed
through the merger (the "Merger") of SII into Wilson, with Wilson
surviving as a wholly owned subsidiary of the Company. The shareholders
of Wilson approved the Merger at a special meeting on April 27, 1998.
Wilson, which operates through Wilson Supply and Houston Engineers, was
a privately-held company based in Houston, Texas. Wilson Supply is a
U.S.-based stocking distributor of materials for drilling production,
refining and petrochemical plants and pipeline operations. Houston
Engineers provides drilling and fishing tools and directional drilling
services worldwide to the exploration and production industry. The
Company issued 7.9 million shares of common stock in exchange for all
of the outstanding capital stock of Wilson. Wallace S. Wilson, Chairman
of Wilson, will be joining the Board of Directors of the Company. The
Merger will be accounted for as a pooling of interest.
A copy of the press release announcing the closing of
the acquisition is filed as Exhibit 99.1 and is hereby incorporated
herein by reference.
ITEM 5. OTHER EVENTS
On April 20, 1998, the Registrant announced its first
quarter earnings for the 1998 fiscal year. A copy of the press release
is attached hereto as Exhibit 99.2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
The financial statements of Wilson were filed as part of the
Company's Registration Statement on Form S-4 filed March 11, 1998
(Reg. No. 333-47729) and are incorporated herein by reference.
(b) Pro forma financial information.
In accordance with Item 7(b)(2) of Form 8-K, the Company will
file the required proforma financial information by amendment
to this Form 8-K as soon as practicable, but no later than
July 14, 1998.
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(c) Exhibits.
2.1 Merger Agreement dated January 19, 1998 by and among Wilson
Industries, Inc., Smith International, Inc. and SII
Acquisition Corp. filed as Exhibit 2.1 to the Company's
registration statement on Form S-4 dated March 11, 1998
(Reg. No. 333-47729) and incorporated herein by reference.
99.1 Press Release issued by Registrant dated April 30, 1998.
99.2 Press Release issued by Registrant dated April 20, 1998
announcing its first quarter earnings for the 1998 fiscal
year.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SMITH INTERNATIONAL, INC.
(Registrant)
Dated: May 14, 1998 By: /S/ Neal S. Sutton
---------------------------------------
Neal S. Sutton,
Senior Vice President - Administration,
General Counsel and Secretary
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EXHIBIT INDEX
Exhibit
Page No. Description
2.1 Merger Agreement dated January 19, 1998 by and among Wilson
Industries, Inc., Smith International, Inc. and SII
Acquisition Corp. filed as Exhibit 2.1 to the Company's
registration statement on Form S-4 dated March 11, 1998
and incorporated herein by reference.
99.1 Press Release issued by Registrant dated April 30, 1998.
99.2 Press Release issued by Registrant dated April 20, 1998
announcing its first quarter earnings for the 1998 fiscal
year.
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EXHIBIT 99.1
PRESS RELEASE
- -------------------------------------------------------------------------------
SMITH INTERNATIONAL, INC.
P.O. BOX 60068
HOUSTON, TX 77205-0068
WEBSITE ADDRESS: smith-intl.com
FOR RELEASE
THURSDAY, APRIL 30, 1998
CONTACT: JOHN J. KENNEDY
SMITH INTERNATIONAL, INC.
SR. VICE PRESIDENT & CHIEF FINANCIAL OFFICER
(281) 443-3370
SMITH INTERNATIONAL, INC. COMPLETES WILSON INDUSTRIES, INC. ACQUISITION
HOUSTON, Texas (April 30, 1998)...Smith International, Inc. (Smith)
announced that it has completed the acquisition of Wilson Industries, Inc.
(Wilson) for 7.9 million shares of Smith's common stock.
Wilson Industries is a privately held Houston based company engaged in
providing materials for drilling, production, refining and petrochemical plants
and pipeline operations and in supplying drilling and fishing tools and
directional drilling services to the worldwide drilling and production industry.
Wilson employs approximately 1,100 people. Revenues for the fiscal year ended
December 31, 1997 were $605 million.
Smith International, Inc. (NYSE, PSE: SII) is a leading supplier of
premium products and services to the oil and gas exploration and production
industry through its five principal business units - M-I Fluids, M-I Swaco,
Smith Tool, Smith Diamond Technology, and Smith Drilling & Completions.
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EXHIBIT 99.2
PRESS RELEASE
- -------------------------------------------------------------------------------
SMITH INTERNATIONAL, INC.
P.O. BOX 60068
HOUSTON, TX 77205-0068
WEBSITE ADDRESS: smith-intl.com
FOR RELEASE
MONDAY, APRIL 20, 1998
CONTACT: JOHN J. KENNEDY
CHIEF FINANCIAL OFFICER
(281) 443-3370
SMITH INTERNATIONAL, INC.
REPORTS FIRST QUARTER EARNINGS
HOUSTON, Texas (April 20, 1998)... Smith International, Inc. (NYSE, PSE:
SII) today announced first quarter earnings of $28.8 million, or 72 cents per
share on a diluted basis, compared with net income of $21.1 million, or 53 cents
per share on a diluted basis, in the first quarter of 1997. The Company reported
revenues of $423.4 million for the first quarter of 1998, an 18 percent increase
over the revenues for the first quarter of 1997. Revenues grew in all geographic
areas with particularly strong growth reported in the U.S., Canada and Latin
America. Each business unit reported higher revenues and earnings compared to
the prior year quarter due to a combination of increased activity levels, market
penetration and the impact of acquired operations. Excluding the impact of
revenues from acquisitions, revenues increased 12 percent over the first quarter
of 1997.
Revenues for the M-I Fluids unit increased 12 percent over the comparable
quarter of the prior year to $230.2 million. The majority of the revenue growth
was reported in Latin America, Canada and the U.S. The impact of acquired
operations, including Fleming Oilfield Services, and higher activity levels in
the U.S. contributed to the revenue increase. Excluding the impact of
acquisitions, Fluids' revenues grew by 7 percent over the first quarter of 1997.
1
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M-I SWACO reported revenues of $36.7 million, a 33 percent increase over
the first quarter of 1997. The majority of the revenue increase was reported in
the U.S. which benefited from an alliance contract and incremental revenues
associated with the acquisition of DSR Companies finalized in the fourth quarter
of 1997. Excluding the impact of acquisitions, SWACO's revenues grew by 16
percent over the first quarter of 1997.
Smith Tool's revenues were $67.2 million for the first quarter, an increase
of 15 percent over the comparable quarter of the prior year. Revenue growth
arose from increased sales of premium bits, higher Canadian activity and general
market penetration. Excluding mining bits, petroleum three-cone bit revenues
grew by 19 percent over the first quarter of 1997.
Smith Diamond Technology reported revenues of $23.7 million, a 33 percent
increase over the first quarter of the prior year. Increased activity in the
U.S. combined with increased sales in Europe/Africa and the Far East accounted
for the majority of the quarter-to-quarter revenue increase. On a combined
basis, revenues for petroleum three-cone bits (excluding mining bits) and
diamond bits grew 23 percent over the prior year quarter.
Smith Drilling and Completions' revenues increased 37 percent over the
first quarter of the prior year to $65.6 million. Over 70 percent of the revenue
increase was reported in the U.S. and Latin America. The revenue growth related
to the impact of acquisitions and strong demand for drilling and remedial
products and services. Excluding revenues from acquisitions, revenues increased
approximately 18 percent over the first quarter of 1997.
Commenting on the results, Chairman and CEO, Doug Rock stated, "Despite
lower oil prices, our people continue to deliver more value to our customers and
shareholders. Our high technology content business strategy is even more
important today because of our customers' need to reduce costs in a lower energy
price environment."
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Loren Carroll, Executive Vice President also noted that, "Key performance
measures in the first quarter of 1998 compared to the first quarter of 1997
continue to improve. The earnings increase of 36 percent was double the revenue
percentage increase of 18 percent. Operating margins improved to 15.3 percent of
revenues compared to 12.6 percent for the first quarter of 1997 and operating
cash flow also continues to improve. Operating cash flow consisting of earnings
before interest, taxes and minority interests plus depreciation and
amortization, after reduction for the effect of minority interests, totaled
$62.8 million, or $1.56 per share, for the first quarter of 1998 which is a 48
percent increase over the $42.6 million reported in the first quarter of 1997."
Smith International, Inc. is a leading worldwide supplier of premium
products and services to the oil and gas exploration and production industry
through its five principal business units - M-I Fluids, M-I SWACO, Smith Tool,
Smith Diamond Technology and Smith Drilling & Completions.
Financial highlights follow:
3
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SMITH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Revenues.......................................... $ 423,441 $ 357,484
Costs and expenses:
Costs of revenues............................... 269,320 236,219
Selling expenses................................ 69,879 56,287
General and administrative expenses............. 19,623 19,953
------- -------
Total costs and expenses...................... 358,822 312,459
------- -------
Earnings before interest and taxes............ 64,619 45,025
Interest expense, net............................. 7,803 5,234
------ ------
Income before income taxes and
minority interests.............................. 56,816 39,791
Income tax provision.............................. 16,967 9,967
------- ------
Income before minority interests.................. 39,849 29,824
Minority interests................................ 11,088 8,711
------- ------
Net income........................................ $ 28,761 $ 21,113
======= =======
Earnings per share:
Basic.......................................... $ 0.72 $ 0.53
======= =======
Diluted........................................ $ 0.72 $ 0.53
======= =======
Weighted average shares outstanding:
Basic.......................................... 39,672 39,539
Diluted........................................ 40,153 40,068
OTHER DATA:
Depreciation and Amortization..................... $ 13,394 $ 9,166
======== ========
Capital Spending (a).............................. $ 25,150 $ 14,708
======= =======
EBIT excluding minority interests (b)............. $ 51,867 $ 34,927
======= =======
EBITDA excluding minority interests (b)........... $ 62,798 $ 42,569
======== ========
</TABLE>
NOTE (a):
Capital spending is reported gross and not reduced for the proceeds arising on
lost-in-hole sales or sales of fixed asset equipment replaced. The net capital
spending was approximately $23.4 million and $13.2 million for the first quarter
of 1998 and 1997, respectively.
NOTE (b):
"Earnings before interest and taxes (EBIT) excluding minority interests" and
"Earnings before interest, taxes, depreciation and amortization (EBITDA)
excluding minority interests" represent the amount of EBIT and EBITDA earned by
the Company after reduction for the portion of the respective amounts allocable
to the minority interest ownership in M-I L.L.C.
4
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SMITH INTERNATIONAL, INC.
REVENUE ANALYSIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
M-I - Fluids...................................... $ 230,228 $ 206,101
M-I - SWACO....................................... 36,693 27,538
Smith Tool........................................ 67,213 58,242
Smith Diamond Technology.......................... 23,674 17,865
Smith Drilling & Completions...................... 65,633 47,738
-------- --------
Total......................................... $ 423,441 $ 357,484
======== ========
</TABLE>
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