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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
THURSDAY, JULY 20, 2000
CONTACT: MARGARET K. DORMAN
CHIEF FINANCIAL OFFICER
(281) 443-3370
SMITH INTERNATIONAL, INC. REPORTS
QUARTERLY EARNINGS OF 30 CENTS PER SHARE
HOUSTON, Texas (July 20, 2000)... Smith International, Inc. (NYSE:SII; PCX)
today announced second quarter earnings of $15.0 million, or 30 cents per share
on a diluted basis, on revenues of $657.2 million. In the prior year quarter,
when worldwide drilling activity reached record low levels, the Company reported
a net loss of $3.0 million, or six cents per share. Revenues for the three
months ended June 30, 2000 were 69 percent above the prior year period and five
percent higher on a sequential quarter basis. Organic growth and acquisitions
contributed equally to the revenue increase over the prior year period. The
improvement in base business revenues was primarily attributable to improved
North American activity levels; however, the impact of new contracts awarded in
the United States and the Europe/Africa region also contributed to the increase.
After excluding the effect of acquired and divested operations, revenues were 39
percent above amounts reported in the second quarter of 1999.
For the six months ended June 30, 2000, the Company reported net income of
$26.3 million, or 52 cents per share on a diluted basis, on revenues of $1.3
billion. In the comparable period of the prior year, earnings were $3.6 million,
or seven cents per share on a diluted basis, on revenues of $786.7 million.
Revenues grew across all business units and geographic areas with the majority
of the increase attributable to acquisitions and improved North American
activity
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levels. Excluding the impact of acquired and divested operations, revenues
increased by 32 percent over the amounts reported for the first half of 1999.
Revenues for the M-I operations were $294.4 million, a 60 percent increase
over the prior year quarter. Improved worldwide drilling activity, including
higher offshore activity levels in the United States and Europe/Africa,
contributed the majority of the revenue growth over the second quarter of 1999.
The quarter-to-quarter increase was also impacted by the formation of the
drilling fluids joint venture which resulted in increased revenues in the
Europe/Africa and Latin America regions. After excluding incremental revenues
associated with the drilling fluid operations contributed by Schlumberger
Limited, revenues increased 43 percent over the prior year period.
Smith Bits reported revenues of $76.0 million for the second quarter of
2000, a 40 percent increase over the amount reported in the prior year period.
Approximately three-quarters of the revenue increase was generated in North
America, as higher drilling activity levels impacted demand for petroleum
three-cone bits. On a combined basis, revenues for petroleum three-cone and
diamond bits grew 45 percent over the second quarter of 1999 during a period
when the average M-I worldwide rig count increased 39 percent.
Smith Services' revenues were $69.2 million, an increase of 27 percent over
the second quarter of 1999. The revenue increase is attributable to the
improvement in North American activity levels, particularly in the U.S. Gulf
Coast area. Revenue growth was experienced across all product groups with
stronger demand for directional drilling, inspection and fishing services
accounting for the majority of the increase over the prior year period.
Wilson's revenues increased to $217.6 million for the second quarter of
2000, more than double the amount reported in the prior year period. The
acquired ConEmsco and Texas Mill Supply operations accounted for the majority of
the increase over the second quarter of 1999. Higher U.S. activity levels also
contributed to the revenue improvement, resulting in increased line pipe and
other product sales, in the energy sector. Excluding the impact of acquired and
divested operations, revenues were 38 percent above second quarter 1999 levels.
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Commenting on the results, Chairman and CEO, Doug Rock stated, "Our second
quarter results are further evidence of an improving worldwide oil and gas
drilling environment. We expect to see improved profitability levels in the
second half of the year as we benefit from higher customer spending and the
impact of price increases recently announced by Smith business units."
Loren Carroll, Executive Vice President also noted that, "We're encouraged
that we are finally beginning to see increased spending in areas outside of
North America, including the North Sea, West Africa and Latin America. This is
particularly significant for our oilfield segment businesses, as areas outside
of North America account for over half of the revenue base. Non-North American
activity levels helped increase the operating margins in our oilfield segment to
nine percent of revenues during the quarter, resulting in incremental operating
margins of 24 percent on a sequential quarter basis."
Smith International, Inc. is a leading worldwide supplier of premium
products and services to the oil and gas exploration and production industry,
the petrochemical industry and other industrial markets through its four
principal business units - M-I, Smith Bits, Smith Services and Wilson.
Unaudited financial highlights follow:
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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,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues .................................................................. $ 657,229 $ 389,695 $1,282,661 $ 786,717
Costs and expenses:
Costs of revenues ....................................................... 482,894 291,010 946,843 576,693
Selling expenses ........................................................ 99,794 70,791 195,098 140,698
General and administrative expenses ..................................... 31,231 21,479 61,485 42,422
Non-recurring items ..................................................... -- -- -- (2,621)
---------- ---------- ---------- ----------
Total costs and expenses ........................................... 613,919 383,280 1,203,426 757,192
---------- ---------- ---------- ----------
Income before interest and taxes .......................................... 43,310 6,415 79,235 29,525
Interest expense, net ..................................................... 8,758 11,297 17,523 23,372
---------- ---------- ---------- ----------
Income (loss) before income taxes and
minority interests ...................................................... 34,552 (4,882) 61,712 6,153
Income tax provision (benefit) ............................................ 11,413 (1,455) 21,088 3,495
---------- ---------- ---------- ----------
Income (loss) before minority interests .................................. 23,139 (3,427) 40,624 2,658
Minority interests ........................................................ 8,165 (406) 14,327 (927)
---------- ---------- ---------- ----------
Net income (loss) ......................................................... $ 14,974 $ (3,021) $ 26,297 $ 3,585
========== ========== ========== ==========
Earnings (loss) per share:
Basic ................................................................... $ 0.30 $ (0.06) $ 0.53 $ 0.07
========== ========== ========== ==========
Diluted ................................................................. $ 0.30 $ (0.06) $ 0.52 $ 0.07
========== ========== ========== ==========
Weighted average shares outstanding:
Basic ................................................................... 49,725 48,421 49,448 48,291
Diluted ................................................................. 50,363 48,421 50,153 48,852
OTHER DATA:
Depreciation and amortization.............................................. $ 19,736 $ 18,494 $ 39,170 $ 37,257
========== ========== ========== ==========
Capital spending(a)........................................................ $ 23,186 $ 13,276 $ 38,825 $ 26,591
========== ========== ========== ==========
EBIT excluding minority interests (b) ..................................... $ 32,498 $ 6,613 $ 59,815 $ 27,102
========== ========== ========== ==========
EBITDA excluding minority interests (b) ................................... $ 48,438 $ 24,992 $ 91,460 $ 64,244
========== ========== ========== ==========
</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 $31.9 million and $18.6 million for the first six
months of 2000 and 1999, 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 partners. The six month 1999 amounts also exclude the
impact of non-recurring items.
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SMITH INTERNATIONAL, INC.
REVENUE ANALYSIS
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30,
--------------------------------------------------
2000 1999
-------------------- ----------------------
<S> <C> <C>
M-I $294,425 $183,892
SMITH BITS 75,991 54,298
SMITH SERVICES 69,197 54,412
WILSON 217,616 97,093
-------------------- ----------------------
TOTAL $657,229 $389,695
==================== ======================
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------------------------------
2000 1999
-------------------- ----------------------
<S> <C> <C>
M-I $562,202 $389,793
SMITH BITS 151,430 114,719
SMITH SERVICES 133,861 111,569
WILSON 435,168 170,636
-------------------- ----------------------
TOTAL $1,282,661 $786,717
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</TABLE>
