<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, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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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:
Sequentially
Numbered
Page
------------
(a) Index to Financial Statements and Supplementary
Information:
Report of Independent Public Accountants..................... 5
Statements of Net Assets Available for
Benefits at December 31, 1997 and 1996....................... 6
Statements of Changes in Net Assets Available
for Benefits for the year ended December 31,
1997......................................................... 7
Notes to financial statements................................ 8
Supplementary Information:
Schedule 1 - Assets held for Investment Purposes............. 17
Schedule 2 - Reportable Transactions......................... 18
Schedule 3 - Reportable Transactions Single Transaction...... 19
Schedule 4 - Non-Exempt Transactions......................... 20
(b) Exhibits:
23.1 - Consent of Independent Public Accountants.................. 21
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 28, 1999
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
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
TOGETHER WITH AUDITORS' REPORT
<PAGE> 5
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, 1998 and 1997, and the related statement of changes in net
assets available for benefits for the year ended December 31, 1998. These
financial statements and the supplemental schedules referred to below are the
responsibility of the Plan administrator. Our responsibility is to express an
opinion on these financial statements and supplemental 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, 1998 and 1997, and the changes in net assets available for
benefits for the year ended December 31, 1998, 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 schedules of assets
held for investment purposes as of December 31, 1998 (Schedule I), reportable
transactions - series transactions for the year ended December 31, 1998
(Schedule II), reportable transactions single transactions for the year
ended December 31, 1998 (Schedule III) and the non-exempt transactions for the
year ended December 31, 1998 (Schedule IV) 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 23, 1999
<PAGE> 6
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
CASH $ 110,928 $ 576,772
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY SHARES 115,161,114 78,124,715
SMITH INTERNATIONAL, INC. COMMON STOCK 13,174,240 25,185,147
LOANS RECEIVABLE FROM PARTICIPANTS 8,927,383 7,879,463
------------ ------------
137,373,665 111,766,097
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 140,866 258,426
EMPLOYER 756,985 3,182,215
RECEIVABLES - OTHER 138,331 217,572
------------ ------------
TOTAL ASSETS 138,409,847 115,424,310
------------ ------------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES -- 498,803
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $138,409,847 $114,925,507
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE> 7
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
NET ASSETS AVAILABLE FOR BENEFITS, AT BEGINNING OF YEAR $ 114,925,507
-------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS 6,921,953
NET REALIZED LOSS ON SALE OF INVESTMENTS (2,890,035)
NET UNREALIZED DEPRECIATION OF INVESTMENTS (5,116,685)
CONTRIBUTIONS:
EMPLOYEE 8,824,018
EMPLOYER 4,914,821
TRANSFER FROM OTHER PLANS (NOTE 2) 21,170,168
-------------
33,824,240
-------------
DEDUCTIONS:
WITHDRAWALS 10,339,900
-------------
NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 23,484,340
-------------
NET ASSETS AVAILABLE FOR BENEFITS, AT END OF YEAR $ 138,409,847
=============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
<PAGE> 8
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
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, as amended (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
ERISA. 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"). Effective April 7, 1997, the Company amended the Plan
whereby the Company will, in addition to the Company Retirement
Contributions, make mandatory matching
<PAGE> 9
contributions (the "Company Matching Contribution") up to 1 1/2
percent of the participants' compensation. In addition, discretionary
contributions (the "Company Discretionary Contribution") 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.
Company contributions to participants' accounts, including Company
Retirement Contributions and Company Matching Contributions were
approximately $4,900,000 for the year ended December 31, 1998. The
Company made no discretionary contributions in 1998.
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 retirement, matching and discretionary 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 issued by major
U.S. banks, commercial paper, and short-term corporate
obligations with the objective of preservation of capital and
liquidity.
<PAGE> 10
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. Investments in the Smith International,
Inc. Common Stock Fund are assigned units of participation.
The unit value is determined based upon the fair market value
of the underlying net assets, which consist of Smith
International common stock and temporary investments. The
total units of the Smith International, Inc. Common Stock
Fund assigned to participants as of December 31, 1998 and
1997, were 5,757,136 units and 4,575,761 units, respectively.
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.
<PAGE> 11
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.
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
1998 and 1997, 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 1998, $593,000 of unvested participant
<PAGE> 12
balances were forfeited and utilized to reduce the Company's
contributions. Forfeitures available at December 31, 1998 and 1997
totaled $111,484 and $14,607, respectively.
2. ACQUISITIONS
During 1998, Smith International, Inc. acquired Wilson Industries, Inc.
(Wilson). On October 1, 1998, the Wilson Industries, Inc. Savings Plan ("Wilson
Plan") merged its participant account balances of $20,143,143 with and into the
Plan, replacing in entirety the provisions of the Wilson Plan. Additionally,
subsequent to the merger, Wilson contributed matching contributions of $554,729
to the Plan, on behalf of eligible participants, as defined, of the Wilson Plan.
During October 1998, Smith International, Inc. merged participant account
balances of $788,849 included in predecessor plans of two acquired corporations
with and into the Plan, replacing in entirety the provisions of those
predecessor plans.
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
<PAGE> 13
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.
5. RISKS AND UNCERTAINTIES
The Plan provides for various investments in common stocks, money market
instruments, fixed income securities and long-term corporate bonds. Investment
securities, in general, are exposed to various risks, such as interest rate,
credit and overall market volatility risk. Due to the level of risk associated
with certain investment securities, it is reasonably possible that changes in
the values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the statements of net
assets available for benefits, as well as participant accounts.
6. 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, 1998 and 1997, the benefits payable to participants totaled $0
and $86,092, respectively. The following is a reconciliation of net assets
available for benefits per the financial statements to the Form 5500 as of
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Net assets available for benefits per the financial statements $ 138,409,847 $ 114,925,507
Less: Current amounts payable to participants at end of year -- (86,092)
------------- -------------
Net assets available for benefits per the Form 5500 $ 138,409,847 $ 114,839,415
============= =============
</TABLE>
The following is a reconciliation of withdrawals per the financial statements
to the Form 5500 for the year ended December 31, 1998:
<TABLE>
<CAPTION>
1998
------------
<S> <C>
Withdrawals per the financial statements $ 10,339,900
Less: Prior year amounts payable to participants at end of year (86,092)
Add: Current amounts payable to participants at end of year --
------------
Withdrawals per the Form 5500 $ 10,253,808
============
</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, 1998 and 1997, respectively, but not yet paid as of that date.
<PAGE> 14
7. 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, 1998 and 1997, (Exhibit I) and statement of changes in net
assets available for benefits, with fund information for the year ended
December 31, 1998 (Exhibit II) are reported on pages 7 through 9.
8. NON-EXEMPT TRANSACTIONS
For the year ended December 31, 1998, due to system delays, a contribution was
not remitted to the Plan trust by the Company within the time period
established by the Department of Labor. Subsequent to year-end, the Company
reimbursed the Plan for interest on the delayed contributions. As such, this
transaction represents a non-exempt transaction between the Company and the
Plan as identified in Schedule IV.
<PAGE> 15
Exhibit I
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
VMMR INTERNATIONAL SMITH
PRIME VANGUARD VANGUARD GROWTH INTERNATIONAL, INC.
PORTFOLIO PRIMECAP WELLINGTON PORTFOLIO STOCK
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
ASSETS
CASH $ -- $ -- $ -- $ -- $ 110,928
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES 28,655,784 22,896,280 24,447,925 4,591,502 --
SMITH INTERNATIONAL, INC
COMMON STOCK -- -- -- -- 13,174,240
LOANS RECEIVABLE
FROM PARTICIPANTS -- -- -- -- --
------------ ------------ ------------ ------------ ------------------
28,655,784 22,896,280 24,447,925 4,591,502 13,285,168
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 9,082 12,106 22,903 4,680 29,431
EMPLOYER 92,733 83,899 186,861 16,015 69,296
RECEIVABLES - OTHER 34,206 28,603 32,923 5,040 8,946
------------ ------------ ------------ ------------ ------------------
TOTAL ASSETS 28,791,805 23,020,888 24,690,612 4,617,237 13,392,841
------------ ------------ ------------ ------------ ------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 28,791,805 $ 23,020,888 $ 24,690,612 $ 4,617,237 $ 13,392,841
============ ============ ============ ============ ==================
<CAPTION>
LONG-TERM VANGUARD
VANGUARD CORPORATE INDEX 500
WINDSOR BOND PORTFOLIO LOAN
FUND FUND FUND FUND TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CASH $ -- $ -- $ -- $ -- $ 110,9287
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES 12,534,678 2,808,536 19,226,409 -- 115,161,114
SMITH INTERNATIONAL, INC
COMMON STOCK -- -- -- -- 13,174,240
LOANS RECEIVABLE
FROM PARTICIPANTS -- -- -- 8,927,383 8,927,383
------------ ------------ ------------ ------------ ------------
12,534,678 2,808,536 19,226,409 8,927,383 $137,373,665
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 16,889 5,126 40,649 -- 140,866
EMPLOYER 58,314 17,578 232,289 -- 756,985
RECEIVABLES - OTHER 13,501 2,382 12,730 -- 138,331
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 12,623,382 2,833,622 19,512,077 8,927,383 138,409,847
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 12,623,382 $ 2,833,622 $ 19,512,077 $ 8,927,383 $138,409,847
============ ============ ============ ============ ============
</TABLE>
<PAGE> 16
Exhibit I (cont.)
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.
PORTFOLIO PRIMECAP WELLINGTON PORTFOLIO STOCK
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------- ------------------
<S> <C> <C> <C> <C> <C>
ASSETS
CASH $ -- $ -- $ -- $ -- $ 576,772
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES 16,113,681 17,965,953 19,901,001 3,625,309 --
SMITH INTERNATIONAL, INC
COMMON STOCK -- -- -- -- 25,185,147
LOANS RECEIVABLE
FROM PARTICIPANTS -- -- -- -- --
------------ ------------ ------------ ------------ ------------
16,113,681 17,965,953 19,901,001 3,625,309 25,761,919
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 49,946 42,558 46,812 11,572 39,283
EMPLOYER 644,014 556,006 571,730 143,587 466,793
RECEIVABLES - OTHER 39,163 17,960 23,428 3,889 112,145
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 16,846,804 18,582,477 20,542,971 3,784,357 26,380,140
------------ ------------ ------------ ------------ ------------
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
============ ============ ============ ============ ============
<CAPTION>
LONG-TERM VANGUARD
VANGUARD CORPORATE INDEX 500
WINDSOR BOND PORTFOLIO LOAN
FUND FUND FUND FUND TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CASH $ -- $ -- $ -- $ -- $ 576,772
INVESTMENTS, AT FAIR VALUE:
REGISTERED INVESTMENT COMPANY
SHARES 12,860,610 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
------------ ------------ ------------ ------------ ------------
12,860,610 1,417,319 6,240,842 7,879,463 111,766,097
CONTRIBUTIONS RECEIVABLE:
EMPLOYEE 35,360 5,696 27,199 -- 258,426
EMPLOYER 440,405 71,015 288,665 -- 3,182,215
RECEIVABLES - OTHER 12,680 1,390 6,917 -- 217,572
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS 13,349,055 1,495,420 6,563,623 7,879,463 115,424,310
------------ ------------ ------------ ------------ ------------
LIABILITIES
PAYABLES - INVESTMENT PURCHASES -- -- -- -- 498,803
------------ ------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 13,349,055 $ 1,495,420 $ 6,563,623 $ 7,879,463 $114,925,507
============ ============ ============ ============ ============
</TABLE>
<PAGE> 17
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN Exhibit II
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH
FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
<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 $ 16,846,804 $ 18,582,477 $ 20,542,971 $ 3,784,357
------------ ------------ ------------ ------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS 1,105,135 875,732 2,643,198 90,729
NET REALIZED GAIN/(LOSS) ON SALE OF INVESTMENTS -- 211,286 199,686 60,035
NET UNREALIZED APPRECIATION/(DEPRECIATION)
OF INVESTMENTS -- 3,429,347 (331,117) 502,357
CONTRIBUTIONS:
EMPLOYEE 1,516,548 1,448,195 1,615,202 375,832
EMPLOYER 896,352 700,327 1,027,089 184,336
TRANSFER FROM OTHER PLANS (NOTE 2) 8,048,602 561,425 2,207,653 500,486
------------ ------------ ------------ ------------
11,566,637 7,226,312 7,361,711 1,713,775
------------ ------------ ------------ ------------
DEDUCTIONS:
WITHDRAWALS 3,101,923 1,369,371 2,244,033 223,901
INTER-FUND TRANSFERS 3,480,287 (1,418,530) (970,037) (656,994)
------------ ------------ ------------ ------------
NET INCREASE/(DECREASE) IN ASSETS
AVAILABLE FOR BENEFITS 11,945,001 4,438,411 4,147,641 832,880
------------ ------------ ------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS,
AT END OF YEAR $ 28,791,805 $ 23,020,888 $ 24,690,612 $ 4,617,237
============ ============ ============ ============
<CAPTION>
SMITH LONG-TERM VANGUARD
INTERNATIONAL, INC. VANGUARD CORPORATE INDEX 500
STOCK WINDSOR BOND PORTFOLIO
FUND FUND FUND FUND
------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS,
AT BEGINNING OF YEAR $ 25,881,337 $ 13,349,055 $ 1,495,420 $ 6,563,623
------------- ------------- ------------- -------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS 375 1,077,465 172,048 214,402
NET REALIZED GAIN/(LOSS) ON SALE OF INVESTMENTS (3,540,543) (78,893) (3,439) 261,833
NET UNREALIZED APPRECIATION/(DEPRECIATION)
OF INVESTMENTS (10,862,620) (974,200) (12,910) 3,132,458
CONTRIBUTIONS:
EMPLOYEE 1,356,323 1,123,697 208,739 1,179,482
EMPLOYER 742,877 538,223 123,477 702,140
TRANSFER FROM OTHER PLANS (NOTE 2) 223,633 574,836 771,521 7,459,093
------------- ------------- ------------- -------------
(12,079,955) 2,261,128 1,259,436 12,949,408
------------- ------------- ------------- -------------
DEDUCTIONS:
WITHDRAWALS 660,217 938,774 257,203 805,963
INTER-FUND TRANSFERS 251,676 (2,048,027) 335,969 805,009
------------- ------------- ------------- -------------
NET INCREASE/(DECREASE) IN ASSETS
AVAILABLE FOR BENEFITS (12,488,496) (725,673) 1,338,202 12,948,454
------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS,
AT END OF YEAR $ 13,392,841 $ 12,623,382 $ 2,833,622 $ 19,512,077
============= ============= ============= =============
<CAPTION>
LOAN
FUND TOTAL
------------- -------------
<S> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS,
AT BEGINNING OF YEAR $ 7,879,463 $ 114,925,507
------------- -------------
ADDITIONS:
INVESTMENT INCOME:
INTEREST AND DIVIDENDS 742,869 6,921,953
NET REALIZED GAIN/(LOSS) ON SALE OF INVESTMENTS -- (2,890,035)
NET UNREALIZED APPRECIATION/(DEPRECIATION)
OF INVESTMENTS -- (5,116,685)
CONTRIBUTIONS:
EMPLOYEE -- 8,824,018
EMPLOYER -- 4,914,821
TRANSFER FROM OTHER PLANS (NOTE 2) 822,919 21,170,168
------------- -------------
1,565,788 33,824,240
------------- -------------
DEDUCTIONS:
WITHDRAWALS 738,515 10,339,900
INTER-FUND TRANSFERS 220,647 --
------------- -------------
NET INCREASE/(DECREASE) IN ASSETS
AVAILABLE FOR BENEFITS 1,047,920 23,484,340
------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS,
AT END OF YEAR $ 8,927,383 $ 138,409,847
============= =============
</TABLE>
<PAGE> 18
SCHEDULE I
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number of Shares
Identity or
of Issue Description Principal Amount
- --------------------------------------------- ---------------------------------------------- ----------------------
<S> <C> <C>
*Vanguard Group of Investment Companies VMMR Prime Portfolio Fund 28,655,784
*Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 480,409
*Vanguard Group of Investment Companies Vanguard Wellington Fund 832,979
*Vanguard Group of Investment Companies International Growth Portfolio Fund 244,619
*Smith International, Inc. Smith International, Inc. Stock Fund 5,646,208
Smith International, Inc. Cash, interest-bearing 110,928
*Vanguard Group of Investment Companies Vanguard Windsor Fund 805,053
*Vanguard Group of Investment Companies Long-Term Corporate Bond Fund 302,318
*Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund 168,727
*Smith International, Inc Loans Receivable from Participants
401(k) Retirement Plan (Highest and lowest interest rates are 12.0% and 7.0%)
- -----------------
*Identified party in interest
<CAPTION>
Identity
of Issue Description Cost
- --------------------------------------------- ---------------------------------------------- ------------------
<S> <C> <C>
*Vanguard Group of Investment Companies VMMR Prime Portfolio Fund $ 28,655,784
*Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 14,994,032
*Vanguard Group of Investment Companies Vanguard Wellington Fund 21,444,093
*Vanguard Group of Investment Companies International Growth Portfolio Fund 3,729,111
*Smith International, Inc. Smith International, Inc. Stock Fund 19,910,386
Smith International, Inc. Cash, interest-bearing 110,928
*Vanguard Group of Investment Companies Vanguard Windsor Fund 13,027,626
*Vanguard Group of Investment Companies Long-Term Corporate Bond Fund 2,776,073
*Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund 14,804,483
*Smith International, Inc Loans Receivable from Participants 8,927,383
------------
401(k) Retirement Plan (Highest and lowest interest rates are 12.0% and 7.0%)
$128,379,899
============
- -----------------
*Identified party in interest
<CAPTION>
Identity Current
of Issue Description Value
- --------------------------------------------- ---------------------------------------------- -------------------
<S> <C> <C>
*Vanguard Group of Investment Companies VMMR Prime Portfolio Fund $ 28,655,784
*Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 22,896,280
*Vanguard Group of Investment Companies Vanguard Wellington Fund 24,447,925
*Vanguard Group of Investment Companies International Growth Portfolio Fund 4,591,502
*Smith International, Inc. Smith International, Inc. Stock Fund 13,174,240
Smith International, Inc. Cash, interest-bearing 110,928
*Vanguard Group of Investment Companies Vanguard Windsor Fund 12,534,678
*Vanguard Group of Investment Companies Long-Term Corporate Bond Fund 2,808,536
*Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund 19,226,409
*Smith International, Inc Loans Receivable from Participants 8,927,383
------------
401(k) Retirement Plan (Highest and lowest interest rates are 12.0% and 7.0%)
$137,373,665
============
- -----------------
*Identified party in interest
</TABLE>
<PAGE> 19
SCHEDULE II
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
SERIES TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
IDENTITY OF PURCHASE SELLING
PARTY INVOLVED DESCRIPTION OF ASSETS PRICE (a) PRICE (b) COST OF ASSET
- ------------------------------------- -------------------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C>
Vanguard Group of Investment Companies VMMR Prime Portfolio Fund $ 42,975,713 $ -- $ 42,975,713
Purchases (247) -- 30,433,610 30,433,610
Sales (244)
Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 10,643,246 -- 10,643,246
Purchases (180) -- 9,353,552 7,921,309
Sales (220)
Vanguard Group of Investment Companies Vanguard Wellington Fund 10,767,476 -- 10,767,476
Purchases (164) -- 6,089,121 5,090,414
Sales (217)
Smith International, Inc. (c) Common Stock 38,250,654 -- 38,250,654
Purchases (235) -- 35,747,470 39,342,897
Sales (237)
Vanguard Group of Investment Companies Vanguard Windsor Fund 8,950,161 -- 8,950,161
Purchases (144) -- 8,223,000 8,179,750
Sales (216)
Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund
Purchases (167) 14,002,754 -- 14,002,754
Sales (196) -- 4,411,478 3,770,106
(a) Purchase price includes transaction expenses.
(b) Selling price is net of transaction expenses.
(c) Smith International, Inc. Common Stock Fund is reported on a unitized
basis.
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.
<CAPTION>
CURRENT VALUE
IDENTITY OF OF ASSET ON NET
PARTY INVOLVED DESCRIPTION OF ASSETS TRANSACTION DATA GAIN (LOSS)
- ------------------------------------- -------------------------- ------------------- -----------
Vanguard Group of Investment Companies VMMR Prime Portfolio Fund $ 42,975,713 $ --
Purchases (247) 30,433,610 --
Sales (244)
Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 10,643,246 --
Purchases (180) 9,353,552 1,432,243
Sales (220)
Vanguard Group of Investment Companies Vanguard Wellington Fund 10,767,476 --
Purchases (164) 6,089,121 998,707
Sales (217)
Smith International, Inc. (c) Common Stock 38,250,654 0
Purchases (235) 35,747,470 (3,595,427)
Sales (237)
Vanguard Group of Investment Companies Vanguard Windsor Fund 8,950,161 --
Purchases (144) 8,223,000 43,250
Sales (216)
Vanguard Group of Investment Companies Vanguard Index 500 Portfolio Fund
Purchases (167) 14,002,754 --
Sales (196) 4,411,478 641,372
</TABLE>
(a) Purchase price includes transaction expenses.
(b) Selling price is net of transaction expenses.
(c) Smith International, Inc. Common Stock Fund is reported on a unitized
basis.
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.
<PAGE> 20
SCHEDULE III
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
SINGLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
IDENTITY OF NUMBER OF PURCHASE
PARTY INVOLVED DESCRIPTION OF ASSETS TRANSACTIONS PRICE (a) COST OF ASSET
- --------------------------------------- --------------------------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
Vanguard Group Investment Companies VMMR Prime Portfolio Fund 1 $7,794,905 $7,794,905
Vanguard Group Investment Companies Vanguard Index 500 Portfolio Fund 1 $7,273,157 $7,273,157
<CAPTION>
CURRENT VALUE
IDENTITY OF OF ASSET ON NET
PARTY INVOLVED DESCRIPTION OF ASSETS TRANSACTION DATE GAIN (LOSS)
- --------------------------------------- --------------------------------- ------------------ ------------------
<S> <C> <C> <C>
Vanguard Group Investment Companies VMMR Prime Portfolio Fund $7,794,905 $ --
Vanguard Group Investment Companies Vanguard Index 500 Portfolio Fund $7,273,157 --
</TABLE>
(a) Purchase price includes 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.
<PAGE> 21
SCHEDULE IV
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
SCHEDULE OF NON-EXEMPT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
RELATIONSHIP TO PLAN DESCRIPTION OF TRANSACTIONS INCLUDING INTEREST
IDENTITY OF EMPLOYER OR OTHER MATURITY DATE, RATE OF INTEREST, AMOUNT INCURRED
PARTY INVOLVED PARTY IN INTEREST COLLATERAL AND MATURITY VALUE LOANED ON LOAN
- -------------------------- -------------------------- ------------------------------------- ------------ ------------
<S> <C> <C> <C> <C>
Smith International, Inc. Employer Lending of monies from the Plan to the
Employer (contributions not remitted
to the Plan in a timely manner) as
follows:
Late payment of January 30, 1998 $357,745 $551
contributions, due within 15 working days
from the end of the month, received
February 24, 1998, interest at 14.06% per
annum.
</TABLE>
NOTE: The above interest amounts were subsequently remitted to the Plan by
the Employer.
<PAGE> 22
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
23.1 Consent of Independent Public Accountants
<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 23, 1999 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 29, 1999
