<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
July 26, 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)
<PAGE> 2
ITEM 5: OTHER EVENTS
A copy of the press release announcing the Company's results for the
second quarter of 1999 is filed as Exhibit 99.1 and is hereby incorporated
herein by reference.
<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.
/s/ NEAL S. SUTTON
-----------------------
By: Neal S. Sutton
Senior Vice President - Administration,
General Counsel and Secretary
Date: July 26, 1999
<PAGE> 4
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
99.1 Press Release dateded July 22, 1999
<PAGE> 1
Exhibit 99.1
PRESS RELEASE
- --------------------------------------------------------------------------------
SMITH INTERNATIONAL, INC.
P.O. BOX 60068
HOUSTON, TX 77205-0068
WEBSITE ADDRESS: smith.com
FOR RELEASE
THURSDAY, JULY 22, 1999
CONTACT: MARGARET K. DORMAN
CHIEF FINANCIAL OFFICER
(281) 443-3370
SMITH INTERNATIONAL, INC. REPORTS
SECOND QUARTER RESULTS
HOUSTON, Texas (July 22, 1999)... Smith International, Inc. (NYSE, PSX:
SII) today announced results for the second quarter which included a net loss of
$3.0 million, or six cents per share. After including after-tax merger and
restructuring charges of $37.2 million associated with the Wilson Industries
transaction, the Company reported a net loss of $7.5 million, or 16 cents per
share, in the prior year quarter. The net loss for the second quarter of 1999
primarily results from delays in completing the drilling fluids joint venture
with Schlumberger Limited which impacted reported interest costs for the period.
Revenues for the second quarter of 1999 were $389.7 million, reflecting a
30 percent decline from the prior year quarter. Over half of the revenue
decrease was reported in the U.S. where the average number of rigs drilling for
oil and gas was approximately 40 percent lower year-to-year. The decline in
worldwide activity levels has resulted in reduced demand for the Company's
products and services in all geographic regions with the exception of Canada.
Canadian revenues were impacted by the purchase of a majority ownership interest
in C.E. Franklin, Ltd. acquired as part of the ConEmsco transaction which closed
May 28, 1999. After excluding revenues from acquisitions, revenues were 34
percent below second quarter 1998 levels.
<PAGE> 2
For the six months ended June 30, 1999, the Company reported net income of
$3.6 million, or seven cents per share on a diluted basis, on revenues of $786.7
million. Earnings for the comparable period of the prior year were $26.1
million, or $0.54 per share on a diluted basis, on revenues of $1,136.7 million.
M-I Fluids' revenues for the second quarter of 1999 were $161.7 million, a
28 percent decline from the prior year quarter. The majority of the revenue
decline from the second quarter of the prior year related to reduced customer
spending outside of North America, primarily Latin America and Europe/Africa
which were impacted by the lower level of drilling activity.
M-I SWACO reported revenues of $22.2 million, a 39 percent decrease over
the second quarter of 1998. The largest portion of the revenue decline was
reported in the U.S. and Latin America and related to a combination of lower
activity levels and the completion of several projects during the quarter.
Smith Bits' revenues were $54.3 million for the second quarter, a 32
percent decrease over the comparable period of the prior year. The revenue
decrease was primarily associated with lower three-cone petroleum bit sales in
North America attributable to the 40 percent decline in drilling activity.
Smith Drilling & Completions' revenues declined to $54.4 million, a
decrease of 38 percent over the second quarter of 1998. The major revenue
declines were reported in the U.S. and Europe/Africa which experienced
significant reductions in activity levels from the prior year quarter. Decreased
tubular sales, which declined 78 percent over the prior year quarter, and lower
demand for remedial products and services contributed to the revenue decline.
<PAGE> 3
Wilson Supply revenues decreased 24 percent from the second quarter of 1998
to $97.1 million. The revenue decline was reported in the U.S. and related to
the impact of lower activity levels which were partially offset by incremental
revenues from the ConEmsco transaction. Reduced product sales to the upstream
sector contributed to the majority of the decrease with lower tubular sales
accounting for over 60 percent of the reported decline. Excluding the impact of
acquired operations, revenues were 42 percent below second quarter 1998 levels.
Commenting on the results, Chairman and CEO, Doug Rock stated, "We believe
we saw this downturn's low point in the second quarter and our results clearly
reflect the decline in activity levels. Although we expect a modest recovery for
the last half of the year, our outlook is encouraging due to several factors
including closing the Schlumberger joint venture and recently being awarded
several new fluids contracts in the North Sea."
Loren Carroll, Executive Vice President also noted that, "Continued focus
on improving our balance sheet has generated working capital reductions which
have been used to reduce our outstanding borrowings. Completing the Schlumberger
transaction subsequent to quarter-end has also benefited our balance sheet by
lowering our debt to total capitalization to the 30 percent range and providing
us with a platform to pursue opportunities for growth."
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 Bits,
Smith Drilling & Completions and Wilson Supply.
Unaudited financial highlights follow:
<PAGE> 4
SMITH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -------------------------
1999 1998 1999 1998
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues.................................. $ 389,695 $ 557,749 $ 786,717 $ 1,136,682
Costs and expenses:
Cost of revenues....................... 291,010 384,873 576,693 781,960
Selling expenses....................... 70,791 86,480 140,698 173,030
General and administrative expenses.... 21,479 20,397 39,801 42,601
Merger and restructuring costs......... - 55,000 - 55,000
---------- --------- ---------- -----------
Total costs and expenses............. 383,280 546,750 757,192 1,052,591
---------- --------- ---------- -----------
Earnings before interest and taxes........ 6,415 10,999 29,525 84,091
Interest expense, net..................... 11,297 9,813 23,372 18,926
---------- --------- ---------- -----------
Income (loss) before income taxes and
minority interests..................... (4,882) 1,186 6,153 65,165
Income tax provision (benefit)............ (1,455) 2,322 3,495 21,636
---------- --------- ---------- -----------
Income (loss) before minority interests... (3,427) (1,136) 2,658 43,529
Minority interests........................ (406) 6,356 (927) 17,444
---------- --------- ---------- -----------
Net income (loss)......................... $ (3,021) $ (7,492) $ 3,585 $ 26,085
========= ========= ========== ===========
Earnings (loss) per share:
Basic.................................. $ (0.06) $ (0.16) $ 0.07 $ 0.55
========= ========= ========== ===========
Diluted................................ $ (0.06) $ (0.16) $ 0.07 $ 0.54
========= ========= ========== ===========
Weighted average shares outstanding:
Basic.................................. 48,421 47,793 48,291 47,683
Diluted................................ 48,421 47,793 48,852 48,155
OTHER DATA:
Depreciation and Amortization............. $ 18,494 $ 17,018 $ 37,257 $ 34,020
========= ========= ========== ===========
Capital Spending (a)...................... $ 13,276 $ 32,168 $ 26,591 $ 67,382
========= ========= ========== ===========
</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 $18.6 million and $59.5 million for the first six
months of 1999 and 1998, respectively.
<PAGE> 5
SMITH INTERNATIONAL, INC.
REVENUE ANALYSIS
($'S IN THOUSANDS)
(UNAUDITED)
REVISED
- -------
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
M-I FLUIDS $ 161,682 $ 225,241
M-I SWACO 22,210 36,496
SMITH BITS 54,298 80,292
SMITH DRILLING & COMPLETIONS 54,412 88,100
WILSON SUPPLY 97,093 127,620
---------- ----------
TOTAL $ 389,695 $ 557,749
========== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
M-I FLUIDS $ 339,552 $ 455,469
M-I SWACO 50,241 73,189
SMITH BITS 114,719 171,179
SMITH DRILLING & COMPLETIONS 111,569 172,622
WILSON SUPPLY 170,636 264,223
---------- ----------
TOTAL $ 786,717 $1,136,682
========== ==========
</TABLE>
