<PAGE> 1
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
___________________
MARCH 6, 1998
(Date of Report)
SMITH INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 1-8514 95-3822631
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
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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)
<PAGE> 2
ITEM 5. OTHER EVENTS
On February 2, 1998, the Registrant announced its fourth quarter and
12-month earnings for the year ended December 31, 1997 and related matters.
Such matters are described in the press release attached hereto as Exhibit
99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) - (b) No financial statements are filed with this report.
(c) Exhibits.
99.1 Press Release issued by Registrant dated
February 2, 1998 announcing its fourth
quarter and 12-month earnings for the year
ended December 31, 1997 and related matters.
<PAGE> 3
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: March 6, 1998 By: /S/ NEAL S. SUTTON
---------------------------------------------
Neal S. Sutton,
Senior Vice President - Administration,
General Counsel and Secretary
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EXHIBIT INDEX
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<CAPTION>
Exhibit Sequential
Page No. Description Page No.
- ----------- ----------- ------------
<S> <C> <C>
99.1 Press Release issued by Registrant dated February 2, 1998 announcing 1
its fourth quarter and 12-month earnings for the year ended December
31, 1997 and related matters.
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<PAGE> 1
EXHIBIT 99.1
PRESS RELEASE
================================================================================
SMITH INTERNATIONAL, INC.
P.O. BOX 60068
HOUSTON, TX 77205-0068
WEBSITE ADDRESS: smith-intl.com
FOR RELEASE
MONDAY, FEBRUARY 2, 1998
CONTACT: JOHN J. KENNEDY
CHIEF FINANCIAL OFFICER
(281) 443-3370
SMITH INTERNATIONAL, INC. REPORTS
51 PERCENT INCREASE IN QUARTERLY EARNINGS
HOUSTON, Texas (February 2, 1998)... Smith International, Inc. (NYSE,
PSE: SII) today announced fourth quarter earnings of $30.0 million, or 75 cents
per share on a diluted basis, compared with net income of $19.9 million, or 50
cents per share on a diluted basis, in the fourth quarter of 1996. The Company
reported revenues of $425.9 million for the fourth quarter of 1997, a 26
percent increase over the revenues for the fourth quarter of 1996. Strong
revenue growth was reported in North America, Latin America and the Far East.
The quarter benefited from acquisitions made during the year including Fleming
Oilfield Services, Chem-Tech, Inc. and DSR Companies, which were acquired in
the fourth quarter. Excluding the impact of revenues from acquisitions,
revenues increased 21 percent over the fourth quarter of 1996.
Revenues for the M-I Fluids unit increased 21 percent over the
comparable quarter of the prior year to $236.4 million. Strong revenue growth
was reported in the U.S., Latin America and the Far East regions. Higher
activity levels, new contracts and incremental revenues associated with the
Fleming operations all contributed to the favorable revenue variance. Excluding
the impact of acquisitions, Fluids' revenues grew by 18 percent over the fourth
quarter of 1996.
1
<PAGE> 2
M-I SWACO, M-I's solids control and waste management unit, reported
revenues of $35.3 million, a 42 percent increase over the fourth quarter of
1996. SWACO continues to experience strong growth in the U.S. and Canada
benefiting from the impact of current year acquisitions and increased equipment
rental activity in the U.S. Gulf Coast area. Excluding the impact of
acquisitions, SWACO's revenues grew by 30 percent over the fourth quarter of
1996.
Smith Tool's revenues were $65.2 million for the fourth quarter, an
increase of 22 percent over the comparable quarter of the prior year. Smith
Tool reported balanced revenue growth across all geographic regions due to
increased activity levels, price increases and improved market penetration.
Sales of Magnum(TM) bits doubled from the fourth quarter of 1996.
Smith Diamond Technology reported revenues of $22.1 million, a 24
percent increase over the fourth quarter of the prior year. Increased market
penetration in Europe/Africa and the Far East accounted for over half of the
quarter-to-quarter revenue increase. Higher volumes and increased sales of
larger-size diamond bits during the quarter contributed to the revenue growth.
On a combined basis, revenues for petroleum three-cone bits (excluding mining
bits) and diamond bits grew in excess of 25 percent over the prior year
quarter.
Smith Drilling and Completions' revenues increased 45 percent over the
fourth quarter of the prior year to $66.9 million. Over half of the revenue
increase was reported in the U.S. which benefited from continued strength in
the U.S. Gulf Coast market and the impact of current year acquisitions.
Excluding revenues from acquisitions, revenues increased approximately 25
percent over the fourth quarter of 1996.
For the year ended December 31, 1997, the Company reported net income
of $102.4 million, or $2.55 per share on a diluted basis, on revenues of $1.6
billion compared to net income of $64.4 million, or $1.62 per share on a
diluted basis, on revenues of $1.2 billion in the prior fiscal year. Each
business unit reported higher revenues and earnings compared to the prior year
due to a combination of increased activity levels, the impact of new product
introductions, improved pricing and the benefit of acquired operations.
Revenues grew in all geographic areas over the prior year, with particularly
strong growth reported in the U.S., Europe/Africa and Latin America.
2
<PAGE> 3
Approximately 61 percent of the Company's revenues were generated
outside the U.S. in both 1997 and 1996.
Commenting on the results, Chairman and CEO, Doug Rock stated, "We're
pleased with last year's results, but that's behind us. With the recent oil
price drop, and the resultant equity market plunge for oil service stocks,
we're charging ahead to further reduce drilling, completion and downstream
costs for our customers. The Wilson Industries acquisition, which should be
completed by the end of this quarter, is one example of our pledge to improve
customer efficiencies. Based on past performance, weak markets mean strong
opportunities for Smith."
Loren Carroll, Executive Vice President also noted that, "Improved
gross margins and favorable operating expense leverage have resulted in Smith's
operating margins reaching 14.9 percent in the quarter. Smith also continues
to report improved financial ratios evidenced by our return on shareholders'
equity increasing to 26.5 percent in the fourth quarter of 1997 from 22.4
percent in the fourth quarter of 1996. Finally, 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 $209.8 million or $5.22 per share for the fiscal year, an
increase of approximately 63 percent over 1996."
Smith International, Inc. 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.
Financial highlights follow:
3
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SMITH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
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<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
--------------------- -------------------------
1997 1996 1997 1996
-------- -------- ---------- ----------
(Unaudited) (Audited)
<S> <C> <C> <C> <C>
Revenues..................................... $425,868 $336,909 $1,563,144 $1,156,658
Costs and expenses:
Costs of revenues ......................... 271,835 219,477 1,014,612 764,596
Selling expenses .......................... 69,309 57,038 251,278 194,875
General and administrative expenses ....... 21,173 17,995 79,763 64,667
-------- -------- ---------- ----------
Total costs and expenses ................ 362,317 294,510 1,345,653 1,024,138
-------- -------- ---------- ----------
Earnings before interest and taxes .......... 63,551 42,399 217,491 132,520
Interest expense, net ....................... 7,091 5,095 24,973 16,445
-------- -------- ---------- ----------
Income before income taxes and
minority interests ........................ 56,460 37,304 192,518 116,075
Income tax provision ........................ 15,169 9,375 50,650 26,798
-------- -------- ---------- ----------
Income before minority interests ............ 41,291 27,929 141,868 89,277
Minority interests .......................... 11,246 8,018 39,517 24,833
-------- -------- ---------- ----------
Net income .................................. $ 30,045 $ 19,911 $ 102,351 $ 64,444
======== ======== ========== ==========
Earnings per share:
Basic ..................................... $ 0.76 $ 0.51 $ 2.58 $ 1.64
======== ======== ========== ==========
Diluted ................................... $ 0.75 $ 0.50 $ 2.55 $ 1.62
======== ======== ========== ==========
Weighted average shares outstanding:
Basic ..................................... 39,656 39,411 39,604 39,352
Diluted ................................... 40,249 39,994 40,183 39,880
OTHER DATA:
Depreciation and Amortization ............... $ 12,829 $ 8,885 $ 46,704 $ 31,601
======== ======== ========== ==========
Capital Spending(a) ......................... $ 26,417 $ 23,166 $ 82,787 $ 72,958
======== ======== ========== ==========
EBIT excluding minority interest(b) ......... $ 50,437 $ 32,786 $ 171,471 $ 102,590
======== ======== ========== ==========
EBITDA excluding minority interest(b) ....... $ 60,920 $ 40,240 $ 209,753 $ 128,747
======== ======== ========== ==========
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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 replace. The net capital
spending was approximately $76.2 million and $61.2 million in 1997 and 1996,
respectively.
NOTE (b):
"Earnings before interest and taxes (EBIT) excluding minority interests" and
"Earnings before interest, taxes, depreciation and amortization (EBITDA)
excluding minority interests" represent the amount of EBIT and EBITDA earned by
the Company after reduction for the portion of the respective amounts allocable
to the minority interest ownership in M-I L.L.C.
4
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SMITH INTERNATIONAL, INC.
REVENUE ANALYSIS
($'s IN THOUSANDS)
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<CAPTION>
THREE MONTHS
ENDED DECEMBER 31,
------------------------------------
1997 1996
---------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
M-I FLUIDS $236,355 $194,562
M-I SWACO 35,259 24,759
SMITH TOOL 65,244 53,571
SMITH DIAMOND TECHNOLOGY 22,116 17,889
SMITH DRILLING & COMPLETION 66,894 46,128
--------------- --------------
TOTAL $425,868 $336,909
=============== ==============
YEAR ENDED
DECEMBER 31,
------------------------------------
1997 1996
---------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
M-I FLUIDS $872,290 $669,585
M-I SWACO 128,758 82,741
SMITH TOOL 248,500 196,691
SMITH DIAMOND TECHNOLOGY 79,612 58,919
SMITH DRILLING & COMPLETIONS 233,984 148,722
--------------- --------------
TOTAL $1,563,144 $1,156,658
=============== ==============
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