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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 21, 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
first quarter of 1999 is filed as Exhibit 99.1 and is hereby incorporated herein
by reference.
ITEM 7: Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release, dated 4/21/99
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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
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By: Neal S. Sutton
Senior Vice President - Administration,
General Counsel and Secretary
Date: April 21, 1999
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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99.1 Press Release, dated 4/21/99
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Exhibit 99.1
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SMITH INTERNATIONAL, INC.
P.O. BOX 60068
HOUSTON, TX 77205-0068
WEBSITE ADDRESS: smith.com
For Release
Wednesday, April 21, 1999
Contact: John J. Kennedy
Chief Financial Officer
(281) 443-3370
SMITH INTERNATIONAL, INC. REPORTS
FIRST QUARTER RESULTS
HOUSTON, Texas (April 21, 1999)... Smith International, Inc. (NYSE, PSX:
SII) today announced first quarter earnings of $6.6 million, or $0.14 per share
on a diluted basis, compared with net income of $33.6 million, or $0.70 per
share on a diluted basis, in the first quarter of 1998. The Company reported
revenues of $397.0 million for the first quarter of 1999, a decrease of 31
percent compared to the first quarter of 1998. The revenue decrease resulted
from lower worldwide drilling activity, which declined 35 percent over the same
period.
Although the number of rigs drilling for oil and gas worldwide declined
significantly, the major areas of activity and revenue decrease were reported in
North America and Latin America where drilling activity reduced by 41 percent
and 34 percent, respectively. The revenue decline in the U.S. was lower than the
rig activity decrease as fluid sales to deepwater operators in the U.S. Gulf of
Mexico grew nearly 70 percent year-over-year. Reduced drilling activity in
Venezuela, approximately half of the activity levels reported in the first
quarter of 1998, contributed to the revenue decline in Latin America.
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During the period, the Company recognized a pre-tax gain of $10.5 million
on the sale of an industrial bentonite mine located on the island of Milos,
Greece. Additionally, the Company recorded pre-tax charges approximating $7.9
million for start-up costs required to be expensed upon the adoption of a new
accounting pronouncement and for amounts recognized related to the settlement of
a customer receivable during the period. On an after-tax basis, the combined
transactions were neutral to the reported net income.
Revenues for the M-I Fluids unit decreased 23 percent from the comparable
quarter of the prior year to $177.9 million. The majority of the decline was
reported in the U.S. and Latin America and related to lower volumes associated
with the activity declines in those markets. Increased sales of synthetic and
completion fluids in deepwater markets resulted in an overall revenue decrease
which was lower than the decline in rig activity.
M-I SWACO reported revenues of $28.0 million, a 24 percent decrease from
the first quarter of 1998. Lower fluid processing equipment sales and lower
rentals in the U.S. and Latin America were partially offset by incremental
revenues from the Safeguard acquisition.
Smith Bits' revenues were $60.4 million for the first quarter of 1999, a 34
percent decline from the comparable quarter of the prior year. Over half of the
revenue decrease was reported in North America as lower activity impacted sales
of petroleum three-cone bits.
Smith Drilling and Completions reported revenues of $57.2 million, a
decrease of 32 percent from the first quarter of 1998. Nearly one-third of the
revenue decline was associated with lower sales of tubular goods.
Geographically, North America and Latin America accounted for the majority of
the unit's revenue decline.
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Wilson Supply revenues decreased 46 percent from the first quarter of 1998
to $73.5 million. The distribution operations, being primarily in the U.S., were
impacted by the major decline in the U.S. activity. Lower product sales to the
upstream sector contributed to the majority of the decline with tubular goods
accounting for over 40 percent of the decrease from the first quarter of 1998.
Commenting on the results, Chairman and CEO Doug Rock stated, "Although
drilling activity continues to set new lows we've seen revenues stabilize during
the quarter. Oil markets appear to be recovering but it will take time for
operators to strengthen their balance sheets and begin to make E&P investments."
Loren Carroll, Executive Vice President added, "Our focus on cash flow
resulted in a reduction in our debt in the quarter of approximately $40 million.
Since June 30, 1998, we have retired over $100 million in debt, strengthening
our balance sheet. Lower net capital spending, approximately 70 percent lower
than the first quarter of last year, and lower working capital requirements were
the major contributors to the strong cash flow."
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)
Three Months Ended
March 31,
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1999 1998
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(Restated)
Revenues.................................. $ 397,022 $ 578,933
Costs and expenses:
Cost of revenues....................... 285,683 397,087
Selling expenses....................... 69,907 86,550
General and administrative expenses.... 20,943 22,204
Other non-recurring expenses........... 7,899 -
Gain on sale........................... (10,520) -
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Total cost and expenses.............. 373,912 505,841
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Earnings before interest and taxes........ 23,110 73,092
Interest expense, net..................... 12,075 9,113
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Income before income taxes and
minority interests..................... 11,035 63,979
Income tax provision...................... 4,950 19,314
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Income before minority interests.......... 6,085 44,665
Minority interests........................ (521) 11,088
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Net income................................ $ 6,606 $ 33,577
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Earnings per share:
Basic.................................. $ 0.14 $ 0.71
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Diluted................................ $ 0.14 $ 0.70
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Weighted average shares outstanding:......
Basic.................................. 48,159 47,572
Diluted................................ 48,607 48,053
OTHER DATA:
Depreciation and Amortization............. $ 18,763 $ 17,002
Capital Spending (a)...................... $ 13,315 $ 35,214
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 $9.3 million and $31.3 million in the first quarter
of 1999 and 1998, respectively.
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SMITH INTERNATIONAL, INC.
REVENUE ANALYSIS
($'s in Thousands)
Three Months
Ended March 31,
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1999 1998
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(Restated)
M-I Fluids $177,870 $230,228
M-I SWACO 28,031 36,693
Smith Bits 60,421 90,887
Smith Drilling & Completions 57,157 84,522
Wilson Supply 73,543 136,603
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TOTAL $397,022 $578,933
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