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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
February 4, 1999
Date of Report
(Date of earliest event reported)
SMITH INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-8514 95-3822631
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
16740 Hardy Street
Houston, Texas
(Address of principal executive offices)
77032
(Zip Code)
(281) 443-3370
(Registrant's telephone number, including area code)
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ITEM 5: OTHER EVENTS
A copy of the press release announcing the Company's earnings for the
fourth quarter of 1998 and fiscal year 1998 is filed as Exhibit 99.1 and is
hereby incorporated herein by reference.
ITEM 7: FINANCIAL SCHEDULES AND EXHIBITS
c. Exhibits
99.1 Press Release dated February 2, 1999
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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.
/s/ NEAL S. SUTTON
--------------------------------------
By: Neal S. Sutton
Senior Vice President -
Administration,
General Counsel and Secretary
Date: February 4, 1999
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EXHIBIT INDEX
99.1 Press Release dated February 2, 1999
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Exhibit 99.1
PRESS RELEASE
- -------------------------------------------------------------------------------
SMITH INTERNATIONAL, INC.
P.O. BOX 60068
HOUSTON, TX 77205-0068
WEBSITE ADDRESS: smith.com
FOR RELEASE
TUESDAY, FEBRUARY 2, 1999
CONTACT: JOHN J. KENNEDY
CHIEF FINANCIAL OFFICER
(281) 443-3370
SMITH INTERNATIONAL, INC. REPORTS
FOURTH QUARTER RESULTS
HOUSTON, Texas (February 2, 1999)... Smith International, Inc. (NYSE,
PSX: SII) today announced fourth quarter net earnings, excluding a special
charge (as previously announced) for restructuring costs and asset write-downs,
of $12.5 million or $0.26 per share on a diluted basis. Net earnings for the
fourth quarter of 1997 were $36.0 million or $0.75 per share on a diluted
basis. Including the special charge of $42.4 million before taxes ($28.6
million or $0.59 per share after tax) the Company reported a net loss of $16.1
million or $0.33 per share on a diluted basis. The special charge includes
$27.5 million of restructuring costs related to personnel reductions and
facility closures, which are included in merger and restructuring costs, and
$14.9 million of costs associated with inventory write-downs, which have been
recorded in cost of revenues.
The Company reported revenues of $461.8 million for the fourth quarter of
1998, a decrease of 21 percent from the fourth quarter of 1997. The average
number of rigs drilling for oil and gas worldwide decreased by 30 percent over
the same period. The major declines in drilling activity were in the U.S. and
Canada where the average number of rigs drilling decreased by 31 percent and 55
percent, respectively, from the fourth quarter of 1997. The revenue decrease in
the U.S. was in line with the decline in drilling activity and revenues in
Canada decreased by 43 percent. Revenues also declined in Latin America and the
Far East partially offset by increases in Europe/Africa and the Middle East.
Operating income for the quarter excluding the special charge was $31.6 million
compared to $73.5 million in the fourth quarter of 1997.
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For the year ended December 31, 1998 the Company reported net income of
$99.8 million or $2.07 per share on a diluted basis (excluding special charges
recorded in the second and fourth quarters totaling $65.8 million after tax) on
revenues of $2.1 billion. Earnings for the prior fiscal year, restated for the
acquisition of Wilson Industries, Inc., were $121.3 million or $2.52 per share
on a diluted basis, on revenues of $2.2 billion. Including the after tax impact
of the special charges, net earnings for fiscal 1998 were $34.1 million or
$0.70 per share on a diluted basis.
M-I Fluids reported revenues of $203.2 million in the fourth quarter of
1998, a decrease of 14 percent from the fourth quarter of 1997. The revenue
decrease was lower than the decline in rig activity as lower oil prices had
less of an effect on deepwater Gulf of Mexico projects.
M-I Swaco reported revenues of $33.9 million, a 4 percent decrease from
the fourth quarter of 1997. Incremental revenues from the Safeguard and DSR
acquisitions were offset by rental revenue declines in Canada and Latin America
associated with reduced activity levels.
Smith Bits reported revenues of $65.3 million, a decrease of 25 percent
from the fourth quarter of 1997. Revenues from sales of three-cone bits
declined primarily in the U.S. and Canada. Activity declines resulted in lower
unit sales of diamond drill bits, which were partially offset by the sale of
larger-size bits.
Smith Drilling and Completions reported revenues of $68.1 million, a
decrease of 18 percent from the fourth quarter of 1997 with 27 percent of the
revenue decline associated with lower sales of tubular goods. Additionally,
decreases in North Sea activity levels adversely impacted remedial revenues and
contributed to the quarter-to-quarter decline.
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Wilson Supply reported revenues of $91.3 million, a decrease of 37
percent from the fourth quarter of 1997. Lower sales of tubular goods accounted
for almost 70 percent of the revenue decline. Sales of other products to the
upstream sector accounted for the balance of the revenue decrease, as revenues
from the downstream sector remained relatively constant with the fourth quarter
of 1997.
Commenting on the results, Chairman and CEO Doug Rock stated, "The fourth
quarter decline in drilling activity, particularly in North America, resulted
in further restructuring of our operations. However, we are using this downturn
as an opportunity to consolidate the key markets in which we operate. That is
why the Schlumberger / M-I and Continental Emsco / Wilson Joint Ventures are so
important to Smith's future."
Loren Carroll, Executive Vice President added, "Despite the difficult
operating environment, our cash flow continues to be strong. Excluding the
impact of the special charges recorded during the year, our fiscal 1998
operating cash flow, consisting of earnings before interest, taxes and minority
interests plus depreciation and amortization, after reduction for the effect of
minority interest, totaled $256.3 million or $5.30 per share. Additionally we
reported a substantial decline in working capital during the fourth quarter
which resulted in reduced borrowings of approximately $50 million."
Smith International, Inc. is a leading worldwide supplier of premium
products and services to the oil and gas exploration, production and
petrochemical industries through its five principal business units - M-I
Fluids, M-I SWACO, Smith Bits, Smith Drilling & Completions and Wilson Supply.
Unaudited financial highlights follow:
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SMITH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
------------------------- ---------------------------
1998 1997 1998 1997
-------- --------- ---------- -----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues......................................... $461,824 $ 587,876 $2,118,715 $ 2,167,952
Costs and expenses:
Cost of revenues.............................. 342,052 405,421 1,489,656 1,515,353
Selling expenses.............................. 81,784 84,991 339,097 314,533
General and administrative expenses........... 21,239 23,950 82,153 89,120
Merger and restructuring costs................ 27,500 - 82,500 -
-------- --------- ---------- -----------
Total cost and expenses.................... 472,575 514,362 1,993,406 1,919,006
-------- --------- ---------- -----------
Earnings (loss) before interest and taxes........ (10,751) 73,514 125,309 248,946
Interest expense, net............................ 13,057 8,266 43,371 28,991
-------- --------- ---------- -----------
Income (loss) before income taxes and
minority interests............................ (23,808) 65,248 81,938 219,955
Income tax provision (benefit)................... (7,872) 17,998 26,279 59,109
-------- --------- ---------- -----------
Income (loss) before minority interests.......... (15,936) 47,250 55,659 160,846
Minority interests............................... 133 11,246 21,590 39,517
-------- --------- ---------- -----------
Net income (loss)................................ $(16,069) $ 36,004 $ 34,069 $ 121,329
======== ========= ========== ===========
Earnings (loss) per share:
Basic......................................... $ (0.33) $ 0.76 $ 0.71 $ 2.55
===== ==== ==== ====
Diluted....................................... $ (0.33) $ 0.75 $ 0.70 $ 2.52
====== ==== ==== ====
Weighted average shares outstanding:.............
Basic......................................... 48,134 47,556 47,909 47,504
Diluted....................................... 48,134 48,149 48,341 48,083
OTHER DATA:
Depreciation and Amortization.................... $ 18,620 $ 17,232 $ 70,316 $ 58,553
Capital Spending (a)............................. $ 26,171 $ 34,794 $ 119,204 $ 113,146
</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 $102.8 million and $98.7 million in 1998 and 1997,
respectively.
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SMITH INTERNATIONAL, INC.
REVENUE ANALYSIS
($'S IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997
------------------------ --------------------------
(RESTATED)
<S> <C> <C>
M-I FLUIDS $203,236 $236,355
M-I SWACO 33,934 35,259
SMITH BITS 65,315 87,360
SMITH DRILLING & COMPLETIONS 68,072 83,337
WILSON SUPPLY 91,267 145,565
------------------------ --------------------------
TOTAL $461,824 $587,876
======================== ==========================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------------------------
1998 1997
------------------------ --------------------------
<S> <C> <C>
(RESTATED)
M-I FLUIDS $868,141 $872,290
M-I SWACO 146,308 128,758
SMITH BITS 308,263 328,112
SMITH DRILLING & COMPLETIONS 323,456 295,498
WILSON SUPPLY 472,547 543,294
------------------------ --------------------------
TOTAL $2,118,715 $2,167,952
======================== ==========================
</TABLE>
