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<head></head>
<body>
<!-- Begin Block Tagged Note 1 - us-gaap:SignificantAccountingPoliciesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<!-- xbrl,ns -->
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="center" style="font-size: 10pt"></div>
<div align="center" style="font-size: 10pt"></div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. Significant Accounting Policies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Basis of Presentation</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying unaudited consolidated condensed financial statements of Smith International, Inc.
and subsidiaries (“Smith” or the “Company”) were prepared in accordance with U.S. generally
accepted accounting principles and applicable rules and regulations of the Securities and Exchange
Commission (the “Commission”) pertaining to interim financial information. These interim financial
statements do not include all information or footnote disclosures required by generally accepted
accounting principles for complete financial statements and, therefore, should be read in
conjunction with the audited financial statements and accompanying notes included in the Company’s
2008 Annual Report on Form 10-K and other current filings with the Commission. All adjustments
that are, in the opinion of management, of a normal and recurring nature and are necessary for a
fair presentation of the interim financial statements have been included.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosed amounts of contingent assets and liabilities and the
reported amounts of revenues and expenses. If the underlying estimates and assumptions, upon which
the financial statements are based, change in future periods, actual amounts may differ from those
included in the accompanying consolidated condensed financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Management is also required to consider material events that occur after the date, but prior to the
issuance, of the financial statements and evaluate whether such events require modification to the
reported results or footnote disclosures. Our subsequent event review has been conducted through
August 7, 2009, immediately prior to the filing of the financial statements with the Commission.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Management believes the consolidated condensed financial statements present fairly the financial
position, results of operations and cash flows of the Company as of the dates indicated. The
results of operations for the interim period presented may not be indicative of results which may
be reported on a fiscal year basis.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Recently Adopted Accounting Pronouncements</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, new accounting pronouncements are issued by the Financial Accounting Standards
Board (“FASB”). The following standards were adopted by the Company on the specified effective
date.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2009, the Company adopted Statement of Financial Accounting Standards
(“SFAS”) No. 141(R), “Business Combinations” (“SFAS 141(R)”) which revises the accounting and
disclosure requirements for acquisition transactions. SFAS 141(R) differs from the previous
standard in that it requires the Company to expense professional fees and other transaction-related
costs as incurred instead of capitalizing these costs as purchase price consideration.
Additionally, the Company will be required to estimate contingent assets, liabilities and
transaction-related consideration as of the purchase date with future changes in the underlying
estimates recognized in the statement of operations. Finally, SFAS 141(R) requires the Company to
reflect any adjustments to deferred tax asset valuation allowances and income tax uncertainties
associated with acquisitions completed prior to January 1, 2009 as income tax expense rather than
an adjustment to goodwill.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2009, the Company implemented SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of ARB No. 51” (“SFAS 160”) which modifies the
accounting and disclosure requirements for subsidiaries which are not wholly-owned. In accordance
with the provisions of SFAS 160, the Company has reclassified the noncontrolling interest
previously reflected as a long-term liability and included the amount as a component of
stockholders’ equity in the accompanying consolidated condensed balance sheets. Additionally, the
Company has presented the net income attributable to the Company and the noncontrolling ownership
interests separately in the accompanying consolidated condensed statements of operations.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2009, the Company adopted SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an Amendment of FASB Statement No. 133” which
requires enhanced disclosure about derivative instruments. The standard requires the inclusion of
tabular information reflecting the impact of derivative financial instruments on the Company’s
consolidated financial position and results of operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2009, the Company adopted FASB Staff Position No. 107-1 and Accounting
Principles Board Opinion No. 28-1, “Interim Disclosure about Fair Value of Financial Instruments”
which requires additional fair value disclosure with respect to financial instruments in our
interim financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2009, the Company adopted the provisions of SFAS No. 165, “Subsequent
Events” which requires the disclosure of specifics related to the Company’s
subsequent review, including the date through which such review was completed.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Management believes the impact of other recently issued standards, which are not yet effective,
will not have a material impact on the Company’s consolidated financial position, results of
operations or cash flows upon adoption.
</div>
</div>
</body>
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<!-- Begin Block Tagged Note 2 - us-gaap:RestructuringAndRelatedActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. Employee Severance and Other Costs</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Due to the significant deterioration in North American drilling activity, the Company has
undertaken a number of cost reduction initiatives during the first six months of 2009. These
measures included personnel reductions and, to a lesser extent, the closing of certain
manufacturing and production facilities. The Company has reduced its global workforce by 11
percent from December 31, 2008, primarily associated with a 22 percent reduction in U.S. personnel
levels. In connection with these activities, the Company incurred costs of approximately $13.0
million and $45.3 million, respectively, for the three-month and six-month periods ended June 30,
2009.
</div>
</div>
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<body>
<!-- Begin Block Tagged Note 3 - sii:AcquisitionsAndDispositionsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. Acquisitions and Dispositions</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Acquisitions</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, the Company enters into transactions involving the purchase of a full or partial
ownership interest in complementary business operations. No material acquisitions were completed
during the first six months of 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On August 25, 2008, Smith completed the acquisition of W-H Energy Services, Inc. (“W-H”). The
transaction has been recorded using the purchase method of accounting and, accordingly, the
acquired operations have been included in the results of operations since the closing date. The
following unaudited pro forma supplemental information presents consolidated results of operations
as if the W-H acquisition had occurred on January 1, 2008. The unaudited pro forma data is based
on historical information and does not include estimated cost savings; therefore, it does not
purport to be indicative of the results of operations had the combination been in effect at the
date indicated or of future results for the combined entities
(in thousands, except per share amounts):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Six Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">June 30,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,944,289</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,841,095</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,355,768</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,513,061</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to Smith
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">24,386</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">208,258</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">121,321</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">402,954</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Earnings per share attributable to Smith:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.11</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.95</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.55</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.84</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.11</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.95</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.55</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.83</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Dispositions</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the first six months of 2009, the Company disposed of certain non-core operations acquired
in connection with the
W-H transaction. The Company received cash proceeds of $65.0 million and is entitled to future
consideration in the event financial metrics established under earn-out arrangements are met. The
accompanying consolidated condensed financial statements reflect no gain or loss associated with
the sale of these operations.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
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<!-- Begin Block Tagged Note 4 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Earnings Per Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Basic earnings per share (“EPS”) is computed using the weighted average number of common shares
outstanding during the period. Diluted EPS gives effect to the potential dilution of earnings that
could have occurred if additional shares were issued for stock option and restricted stock awards
under the treasury stock method. For each of the periods presented, an immaterial number of
outstanding stock-based awards were excluded from the computation of diluted EPS because they were
anti-dilutive. The following schedule reconciles the income and shares used in the basic and
diluted EPS computations
(in thousands, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Six Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">June 30,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to Smith
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">24,386</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">183,273</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">121,321</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">358,264</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average number of common shares outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">219,307</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200,938</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">219,254</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200,873</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Basic EPS</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.11</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.91</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.55</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.78</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income attributable to Smith
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">24,386</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">183,273</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">121,321</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">358,264</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average number of common shares outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">219,307</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200,938</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">219,254</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200,873</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive effect of stock options and restricted stock units
</div></td>
<td> </td>
<td> </td>
<td align="right">938</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,346</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">671</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,296</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">220,245</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">202,284</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">219,925</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">202,169</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px"><b>Diluted EPS</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.11</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.91</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.55</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1.77</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 5 - us-gaap:InventoryDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Inventories</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Inventories are stated at the lower of cost or market. Cost is determined using the average cost
method for the majority of the Company’s inventories; however, a portion of the Company’s
U.S.-based inventories are valued utilizing the last-in, first-out (“LIFO”) method. Inventory
costs, consisting of materials, labor and factory overhead, are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">December 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">180,743</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">190,790</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Work-in-process
</div></td>
<td> </td>
<td> </td>
<td align="right">174,220</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">202,019</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td> </td>
<td align="right">1,982,781</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,186,203</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">2,337,744</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,579,012</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Reserves to state certain U.S.
inventories (FIFO cost of $983,203
and $1,044,345 in 2009 and 2008,
respectively) on a LIFO basis
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(216,815</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(211,846</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,120,929</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,367,166</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For the six months ended June 30, 2009, the Company recorded additional LIFO reserves of $5.0
million, primarily related to modest cost inflation experienced in the oilfield manufacturing
operations which resulted in the revaluation of on-hand inventories to current unit cost standards.
To a lesser extent, the higher cost of steel and alloy products purchased in the Distribution
segment contributed to the increase in LIFO reserves.
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 6 - us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>6. Property, Plant and Equipment</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment consist of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">December 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Land and improvements
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">78,679</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">77,463</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings
</div></td>
<td> </td>
<td> </td>
<td align="right">334,371</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">322,569</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Machinery and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">1,107,760</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,048,821</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental tools
</div></td>
<td> </td>
<td> </td>
<td align="right">1,370,136</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,292,796</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">2,890,946</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,741,649</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less – Accumulated depreciation
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,024,645</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(897,613</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,866,301</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,844,036</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 7 - us-gaap:GoodwillAndIntangibleAssetsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. Goodwill and Other Intangible Assets</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Goodwill</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents goodwill on a segment basis as of the dates indicated as well as
changes in the account during the period shown. Consolidated beginning and ending goodwill
balances are presented net of accumulated amortization of $53.6 million.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Smith</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">M-I SWACO</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Oilfield</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Distribution</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Consolidated</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2008
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">714,663</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,250,675</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">51,087</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,016,425</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Purchase price and other adjustments
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,811</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,811</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Transfer between segments
</div></td>
<td> </td>
<td> </td>
<td align="right">10,320</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(10,320</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance as of June 30, 2009
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">724,983</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,244,166</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">51,087</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,020,236</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Other Intangible Assets</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The components of other intangible assets are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000">June 30, 2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000">December 31, 2008</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Gross <br />
Carrying</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Accumulated</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Gross <br />
Carrying</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Accumulated</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Net</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Net</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Patents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">427,066</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">67,631</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">359,435</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">426,772</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">52,175</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">374,597</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trademarks<sup style="font-size: 85%; vertical-align: text-top">(a)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">205,031</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,077</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200,954</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">205,031</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,764</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">201,267</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">License agreements
</div></td>
<td> </td>
<td> </td>
<td align="right">33,857</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,863</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,994</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,416</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,311</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,105</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-compete
agreements
</div></td>
<td> </td>
<td> </td>
<td align="right">37,928</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,845</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,083</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37,928</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,122</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,806</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer relationships
and contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">58,438</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,554</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,884</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,438</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,763</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">31,675</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">762,320</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">148,970</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">613,350</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">760,585</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">123,135</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">637,450</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><sup style="font-size: 85%; vertical-align: text-top"><i>(a)</i></sup></td>
<td> </td>
<td><i>Included within the gross carrying amount of trademarks is $195.7 million
of indefinite-lived assets.</i></td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Intangible amortization expense totaled $12.9 million and $5.9 million for the three-month
periods ended June 30, 2009 and 2008, respectively, and $25.8 million and $13.3 million for the
six-month periods ended June 30, 2009 and 2008, respectively. The weighted average life for other
intangible assets subject to amortization, which excludes certain indefinite-lived trademarks,
approximates 13 years. Intangible amortization expense is expected to approximate $51 million for
fiscal year 2009, $48 million for fiscal year 2010 and is anticipated to range between $34 million
and $41 million per year for the 2011 – 2013 fiscal years.
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 8 - us-gaap:DebtDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. Debt</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following summarizes the Company’s outstanding debt:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">December 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b><i>Current:</i></b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Short-term borrowings
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">87,653</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,096,443</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Current portion of long-term debt
</div></td>
<td> </td>
<td> </td>
<td align="right">317,232</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">269,853</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Short-term borrowings and current portion of long-term debt
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">404,885</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,366,296</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b><i>Long-Term:</i></b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Notes, net of unamortized discounts
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,493,450</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">494,638</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Revolving credit facilities
</div></td>
<td> </td>
<td> </td>
<td align="right">45,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">260,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Term loans
</div></td>
<td> </td>
<td> </td>
<td align="right">830,256</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">955,740</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">2,368,706</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,710,378</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Less – Current portion of long-term debt
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(317,232</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(269,853</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Long-term debt
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,051,474</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,440,525</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2009, the Company completed a public offering of $300.0 million
five-year and $700.0 million ten-year Senior Notes issued under an existing Indenture. Net
proceeds of $991.1 million were received in connection with the offering and were used to repay
outstanding indebtedness under a $1.0 billion bridge loan facility expiring August 2009. The
Senior Notes are unsecured obligations of the Company, carry a combined effective interest rate of
9.44 percent and require semi-annual interest payments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In March 2009, the Company also entered into a $525.0 million term loan facility with a syndicate
of financial institutions (the “Lenders”) which remained undrawn at June 30, 2009. Subsequent to
quarter-end, the Company requested termination of the term loan facility and entered into a new
$375.0 million unsecured revolving credit facility with the Lenders. The revolving credit
agreement allows for the election of interest at a base rate, or a Eurodollar rate of LIBOR plus
250 basis points, and requires the payment of a quarterly commitment fee of 32.5 basis points on
the unutilized portion of the facility. The credit agreement, which contains a debt-to-total
capitalization limitation and other customary covenants, expires on July 23, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Principal payments of long-term debt for the twelve-month periods ending subsequent to June 30,
2010 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">274,711</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">491,972</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">11,007</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">299,262</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Thereafter
</div></td>
<td> </td>
<td> </td>
<td align="right">974,522</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,051,474</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company was in compliance with its loan covenants under the various loan indentures, as
amended, at June 30, 2009.
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 9 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>9. Accumulated Other Comprehensive Income (Loss)</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Accumulated other comprehensive income (loss) in the accompanying consolidated condensed balance
sheets consist of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">December 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Currency translation adjustments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,023</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(24,235</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Changes in unrealized fair value of derivatives, net
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,813</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(42,489</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Pension liability adjustments
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,017</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,109</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income (loss)
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(6,807</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(73,833</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 10 - us-gaap:DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>10. Financial Instruments</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Foreign Exchange and Interest Rate Derivative Instruments</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The nature of the Company’s business activities involves the management of various financial and
market risks, including those related to changes in currency exchange rates and interest rates. In
an effort to mitigate these risks, the Company enters into derivative financial instruments which
are accounted for as fair value or cash flow hedges in accordance with
SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). The
Company does not enter into derivative instruments for speculative purposes.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For foreign exchange and interest rate derivative instruments that do not qualify as cash flow
hedges, realized and unrealized gains and losses are recognized
currently through earnings. Non-cash flow foreign exchange hedge
contracts with a notional amount of $103.9 million were outstanding at
June 30, 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For foreign exchange and interest rate derivative instruments that qualify as cash flow hedges,
realized and unrealized gains and losses are deferred to accumulated other comprehensive income
(loss) (“AOCI”) and recognized in the consolidated statement of operations when the hedged item
affects earnings. As of June 30, 2009, the Company had one
outstanding interest rate cash flow hedge
contract with a notional amount of $77.0 million and no
outstanding foreign exchange cash flow hedge
contracts.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company entered into three interest rate contracts and subsequent extensions during fiscal 2008
in anticipation of a planned public debt issuance. At December 31, 2008, unrealized mark-to-market
losses of $59.8 million associated with these cash flow hedge transactions were deferred as a
component of AOCI. Contract extensions expiring subsequent to December 31, 2008 did not qualify as
cash flow hedge transactions resulting in the recognition of a $56.9 million mark-to-market gain in
the first quarter of 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The 2009 public debt transaction did not include a longer-tenor debt issuance as contemplated in
the cash flow hedge transaction and a future transaction of this tenor is probable of not
occurring. Accordingly, $59.3 million of the mark-to-market loss previously deferred as a
component of AOCI was reclassified into earnings during the first
quarter of 2009 offsetting the $56.9 million mark-to-market gain
discussed above. Approximately
$2.2 million of losses deferred in AOCI related to cash flow foreign exchange and interest rate
derivative contracts, or $1.0 million net of taxes and noncontrolling interests, will be
reclassified into earnings during the remainder of fiscal 2009.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In
addition to the $2.4 million net mark-to-market interest rate
derivative loss included in the first quarter of 2009,
the Company has recognized $3.8 million and $10.9 million of derivative contract losses in the
consolidated condensed statements of operations for the three-month and six-month periods ended
June 30, 2009. The following table provides required information with respect to the
classification and loss amounts recognized in income as well as the derivative-related contract
losses deferred in AOCI during the 2009 periods shown:
</div>
<div align="center">
<table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="20%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td nowrap="nowrap" align="left">Derivatives Designated</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Gain (Loss)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Location of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Gain (Loss)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Location of Gain (Loss)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Gain (Loss)</td>
<td> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td nowrap="nowrap" align="left">as Cash Flow Hedging</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Recognized</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Gain (Loss) Reclassified</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Reclassified from</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Recognized in Income</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Recognized in Income</td>
<td> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">Instruments under SFAS 133 -</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">in AOCI</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">from AOCI to Income</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">AOCI to Income</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Ineffective)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">(Ineffective)</td>
<td> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Six</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Six</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Six</td>
<td> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest rate contracts
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(464</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(954</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Interest expense</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(725</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,367</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">
<div style="margin-left:15px; text-indent:-15px">Selling, general and <br />administrative expenses
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(76</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign exchange Contracts
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,061</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">
<div style="margin-left:15px; text-indent:-15px">Cost of oilfield revenues
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(908</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,316</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(464</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,015</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,633</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,683</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(76</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="20%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td nowrap="nowrap" align="left">Derivatives Not Designated</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"> </td>
<td> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td nowrap="nowrap" align="left">as Hedging Instruments</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Location of Gain (Loss)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Gain (Loss)</td>
<td> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">under SFAS 133 –</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Recognized in Income</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Recognized in Income</td>
<td> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Six</td>
<td> </td>
</tr>
<tr style="font-size: 7pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Months</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">
<div style="margin-left:15px; text-indent:-15px">Selling, general and <br />administrative expenses
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,216</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(7,161</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Fair Value Measurement</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of outstanding foreign exchange derivative instruments is determined using composite
pricing from published financial market sources whereas the fair value of the outstanding interest
rate derivative instruments is determined by obtaining quoted prices in active markets for
identical contracts. Both measurement methodologies are classified as Level Two tier under SFAS
157. The recorded fair value of derivative instruments at June 30, 2009 is as follows:
</div>
<div align="center">
<table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="45%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Asset Derivatives</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Liability Derivatives</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Classification</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Classification</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Derivatives Designated as Hedging Instruments
under SFAS 133 –
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Interest rate contracts
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="3" align="left">Other current liabilities</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(5,373</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center">Prepaid expenses and other</td>
<td> </td>
<td> </td>
<td align="right">12</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Derivatives Not Designated as Hedging
Instruments under SFAS 133 –
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts
</div></td>
<td> </td>
<td colspan="3" align="center">Prepaid expenses and other</td>
<td> </td>
<td> </td>
<td align="right">8,061</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="3" align="left">Other current liabilities</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,029</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,073</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(13,402</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of outstanding long-term debt instruments is determined using quoted prices for
identical debt instruments, which is classified as a Level Two tier measurement methodology under
SFAS 157. At June 30, 2009, the fair value of long-term debt instruments approximated $2.44
billion and the recorded value totaled $2.37 billion. The fair and recorded values of long-term
debt instruments totaled $1.63 billion and $1.71 billion, respectively, at December 31, 2008.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of the remaining financial instruments, including cash and cash equivalents,
receivables, payables and short-term borrowings, approximates the carrying value due to the nature
of these instruments.
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 11 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>11. Long-Term Incentive Compensation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of June 30, 2009, the Company had outstanding restricted stock units and stock options granted
under the Amended and Restated 1989 Long-Term Incentive Compensation Plan (the “LTIC Plan”). As of
June 30, 2009, approximately 1.9 million shares were authorized for future issuance pursuant to the
LTIC Plan.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Restricted Stock</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The restricted stock program consists of a combination of performance-based restricted stock units
(“performance-based units”) and time-based restricted stock units (“time-based units”). The number
of performance-based units issued under the program, which can range from zero to 130 percent of
the target units granted, is solely dependent upon financial metrics achieved by the Company in the
fiscal year subsequent to the award. Activity under the Company’s restricted stock program for the
six-month period ended June 30, 2009 is presented below (in thousands, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Time-Based Awards</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Performance-Based Awards</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Total</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">No. of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Fair</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">No. of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Fair</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Restricted</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Units</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Value<sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Units<sup style="font-size: 85%; vertical-align: text-top">(b)</sup></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Value<sup style="font-size: 85%; vertical-align: text-top">(a)</sup></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Stock Units</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at December 31,
2008
</div></td>
<td> </td>
<td> </td>
<td align="right">2,599</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">32.57</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,639</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">31.60</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,238</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">145</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21.64</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">145</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(155</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">35.70</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(60</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">31.64</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(215</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(58</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">59.29</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(58</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at June 30, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">2,531</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">31.14</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,579</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">31.58</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,110</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><i>(a)</i></td>
<td> </td>
<td><i>Reflects the weighted average grant-date fair value.</i></td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left"><i>(b)</i></td>
<td> </td>
<td><i>Performance-based units outstanding assume achievement of target-level financial metrics
related to the December 2008 grants.</i></td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Restrictions on approximately 1.1 million restricted stock units outstanding at June 30, 2009
are expected to lapse and issue during the 2009 fiscal year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt">S<i>tock Options</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Activity under the Company’s stock option program for the six-month period ended June 30, 2009 is
presented below
(in thousands, except per share data):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Shares</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Under</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Remaining</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Aggregate</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Option</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercise Price</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Contractual Life</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Intrinsic Value</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at December 31, 2008
</div></td>
<td> </td>
<td> </td>
<td align="right">1,150</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">19.58</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">23.26</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(35</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">14.88</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at June 30, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">1,106</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">19.69</td>
<td> </td>
<td> </td>
<td> </td>
<td align="center">3.93</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,498</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable at June 30, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">1,104</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">19.65</td>
<td> </td>
<td> </td>
<td> </td>
<td align="center">3.93</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,498</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Share-based Compensation Expense</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Share-based compensation expense, consisting of restricted stock unit and stock option awards, was
$10.8 million and $10.2 million for the three-month periods ended June 30, 2009 and 2008,
respectively, and $23.1 million and $20.9 million for each of the six-month periods ended June 30,
2009 and 2008, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">Assuming achievement of target-level financial metrics for performance-based awards granted in
December 2008, unrecognized share-based compensation expense totaled $99.3 million for awards
outstanding as of June 30, 2009. After adjusting for taxes and noncontrolling interests,
approximately $57.9 million of additional share-based compensation is expected to be recognized
over a weighted average period of 2.6 years.
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 12 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>12. Industry Segments and International Operations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is a global provider of products and services used during the drilling, completion and
production phases of oil and natural gas development activities. Our business is segregated into
three operating divisions, M-I SWACO,
Smith Oilfield and Distribution, which is the basis upon which we report our results.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The M-I SWACO segment consists of a majority-owned drilling fluid and environmental services joint
venture operation. The Smith Oilfield segment is comprised of our wholly-owned drilling and
completion services operations, which includes drill bits, directional drilling services and
downhole tools. The Distribution segment consists of the Wilson distribution operations and a
majority-owned interest in CE Franklin Ltd., a publicly-traded Canadian distribution company.
Finally, general corporate primarily reflects expenses related to corporate personnel,
administrative support functions and long-term incentive compensation programs.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents financial information for each reportable segment:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Six Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">June 30,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revenues:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">M-I SWACO
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,013,016</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,285,754</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,172,353</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,514,183</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Smith Oilfield
</div></td>
<td> </td>
<td> </td>
<td align="right">520,467</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">592,816</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,202,867</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,167,314</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Distribution
</div></td>
<td> </td>
<td> </td>
<td align="right">410,806</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">615,588</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">980,548</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,183,659</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,944,289</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,494,158</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,355,768</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,865,156</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Operating Income:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">M-I SWACO
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">121,325</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">212,294</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">268,833</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">420,092</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Smith Oilfield
</div></td>
<td> </td>
<td> </td>
<td align="right">47,622</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">162,864</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">153,387</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">325,870</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Distribution
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(9,799</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">36,518</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,722</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">66,402</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">General corporate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(25,844</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(21,909</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(52,960</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(43,790</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">133,304</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">389,767</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">374,982</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">768,574</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes charges associated with employee severance and other non-recurring
items on a reportable segment basis:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months <br />Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Six Months <br />
Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">June 30, 2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">June 30, 2009</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Employee Severance
and Other Charges:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">M-I SWACO
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,983</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,284</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Smith Oilfield
</div></td>
<td> </td>
<td> </td>
<td align="right">8,593</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,952</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Distribution
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1,265</td>
<td nowrap="nowrap"></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1,916</td>
<td nowrap="nowrap"></td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">General corporate
</div></td>
<td> </td>
<td> </td>
<td align="right">160</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,641</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">13,001</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">47,793</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents consolidated revenues by region:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Six Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">June 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">June 30,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">United States
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">772,535</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,145,960</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,862,075</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,158,639</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Canada
</div></td>
<td> </td>
<td> </td>
<td align="right">133,612</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">146,453</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">325,896</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">380,878</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">North America
</div></td>
<td> </td>
<td> </td>
<td align="right">906,147</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,292,413</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,187,971</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,539,517</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Latin America
</div></td>
<td> </td>
<td> </td>
<td align="right">227,499</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">244,543</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">503,606</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">471,520</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Europe/Africa
</div></td>
<td> </td>
<td> </td>
<td align="right">510,689</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">646,527</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,050,504</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,243,019</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Middle East/Asia
</div></td>
<td> </td>
<td> </td>
<td align="right">299,954</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">310,675</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">613,687</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">611,100</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-North America
</div></td>
<td> </td>
<td> </td>
<td align="right">1,038,142</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,201,745</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,167,797</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,325,639</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,944,289</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,494,158</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,355,768</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,865,156</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
</body>
</html>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<html>
<head></head>
<body>
<!-- Begin Block Tagged Note 13 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>13. Commitments and Contingencies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Standby Letters of Credit</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the normal course of business with customers, vendors and others, the Company is contingently
liable for performance under standby letters of credit and bid, performance and surety bonds.
Certain of these outstanding instruments guarantee payment to insurance companies with respect to
certain liability coverages of the Company’s insurance captive. Excluding the impact of these
instruments, for which $24.1 million of related liabilities are reflected in the accompanying
consolidated condensed balance sheet, the Company was contingently liable for $237.9 million of
standby letters of credit and bid, performance and surety bonds at June 30, 2009. Management does
not expect any material amounts to be drawn on these instruments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Insurance</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company maintains insurance coverage for various aspects of its business and operations. The
Company has elected to retain a portion of losses that occur through the use of deductibles and
retentions under its insurance programs. Amounts in excess of the self-insured retention levels
are fully insured to limits believed appropriate for the Company’s operations.
Self-insurance accruals are based on claims filed and an estimate for claims incurred but not
reported. While management believes that amounts accrued in the accompanying consolidated
condensed financial statements are adequate for expected liabilities arising from the Company’s
portion of losses, estimates of these liabilities may change as circumstances develop.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Litigation</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is a defendant in various legal proceedings arising in the ordinary course of business.
In the opinion of management, these matters will not have a material adverse effect on the
Company’s consolidated financial position, results of operations or cash flows.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Environmental</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company routinely establishes and reviews the adequacy of reserves for estimated future
environmental clean-up costs for properties currently or previously operated by the Company. In
the opinion of management, these matters will not have a material adverse effect on the Company’s
consolidated financial position, results of operations or cash flows.
</div>
</div>
</body>
</html>
false
--12-31
2009-06-30
10-Q
0000721083
220536730
Yes
Large Accelerated Filer
16522499931
Smith International, Inc.
No
Yes
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