SC 13D 1 h85939sc13d.txt SMITH INTERNATIONAL INC FOR CE FRANKLIN LTD 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- SCHEDULE 13D (RULE 13D-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(a) (AMENDMENT NO. ___) CE FRANKLIN LTD. (Name of Issuer) COMMON STOCK, NO PAR VALUE PER SHARE (Title of Class of Securities) 125151100 (CUSIP Number) NEAL S. SUTTON 16740 HARDY STREET HOUSTON, TEXAS 77032 (281) 233-5060 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) MAY 28, 1999 (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [ ]. (Continued on following pages) (Page 1 of 6) 2 CUSIP NO. 125151100 Page 2 of 6 Pages ------------------- ----------------- 1. Name of Reporting Person I.R.S. Identification No. of Above Person Smith International, Inc. 95-3822631 2. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] 3. SEC Use Only 4. Source of Funds OO, WC 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [X] 6. Citizenship or Place of Organization Delaware Number of 7. Sole Voting Power 8,576,182 Shares Beneficially 8. Shared Voting Power 0 Owned by Each Reporting 9. Sole Dispositive Power 8,576,182 Person 10. Shared Dispositive Power 0 11. Aggregate Amount Beneficially Owned by Each Reporting Person 8,576,182 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] 13. Percent of Class Represented by Amount in Row (11) 50% 14. Type of Reporting Person CO, HC 3 CUSIP NO. 125151100 Page 3 of 6 Pages ------------------- ----------------- ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D (this "Statement") relates to the common shares, no par value per share (the "CE Franklin Common Stock"), of CE FRANKLIN LTD., an Alberta corporation (the "Company"). The principal executive offices of the Company are at Suite 1900, 300 - 5th Avenue S.W., Calgary, Alberta, Canada T2P 3C4. ITEM 2. IDENTITY AND BACKGROUND. This Statement is being filed by Smith International, Inc., a Delaware corporation ("Smith"). Smith's principal business is supplying premium products and services to the oil and gas exploration and production industry, the petrochemical industry and other industrial markets. Smith's principal business and its principal office is located at 16740 Hardy Street, Houston, Texas 77032. (d) Except as set forth in the next paragraph, during the past five years, neither Smith nor, to the best of its knowledge, any of the persons identified on Schedule A attached hereto has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). On December 19, 1999, the Honorable Stanley Sporkin, United States District Judge for the District of Columbia, rendered a Bench Decision finding Smith guilty of violating a U.S. Department of Justice consent decree and Final Judgment entered on April 12, 1994, by completing the formation of a joint venture with Schlumberger Ltd. on July 14, 1999, to which the District Court found the consent decree was applicable. Judge Sporkin fined Smith $750,000. Subsequently, the District Court entered an order modifying the consent decree to permit the joint venture between Smith and Schlumberger. (e) During the past five years, neither Smith nor, to the best of its knowledge, any of the persons identified on Schedule A attached hereto was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. See Schedule A attached hereto for information with respect to the executive officers and directors of Smith. ITEM 3. SOURCE AND AMOUNT OF FUNDS. On May 28, 1999, Smith entered into a Purchase and Sale Agreement with Wilson Industries, Inc., a Texas corporation and wholly-owned subsidiary of Smith ("Wilson"), CONEMSCO, Inc., a Delaware corporation ("Conemsco"), and CE Distribution Services, Inc., a Delaware corporation ("CE"), whereby Conemsco and CE sold to Smith their supply and distribution businesses, including all of the assets of CE and 8,568,653 shares of CE Franklin Common Stock owned by Conemsco. The purchase price from Smith to Conemsco for the shares of CE Franklin Common Stock was paid by delivery of 548,527 shares of Smith common stock. On November 23, 1999, Smith acquired 949 additional shares of CE Franklin Common Stock at an aggregate price of $3,558.75 ($3.75 per share), and on March 9, 2000, Smith acquired 6,580 additional shares of CE Franklin Common Stock at an aggregate price of $19,674.20 ($2.99 per share). These two additional acquisitions were the result of Smith exercising its preemptive rights under the Pre-emptive Rights Agreement dated November 3, 1995 (the "Preemptive Rights Agreement"), between Smith (as 4 CUSIP NO. 125151100 Page 4 of 6 Pages ------------------- ----------------- successor-in-interest to Continental Emsco Company) and the Company (as successor to Franklin Supply Company Ltd.). Smith utilized working capital to acquire these additional shares. ITEM 4. PURPOSE OF TRANSACTION. Smith acquired the initial 8,568,653 shares of CE Franklin Common Stock in connection with its acquisition of the supply and distribution businesses of Conemsco and CE (the "CE Acquisition"). Smith acquired the additional 7,529 shares of CE Franklin Common Stock as a result of Smith exercising its preemptive rights under the Preemptive Rights Agreement (as indicated in Item 3 above). Conemsco assigned the Preemptive Rights Agreement to Smith in connection with the CE Acquisition. Under the Preemptive Rights Agreement, Smith has an irrevocable option to acquire all or any part of its proportionate number of shares with respect to issuances of equity securities by the Company in connection with public offerings, private placements, amalgamations, securities exchange takeover bids, asset acquisitions, options, rights or warrants and upon exercise of employee stock options; provided, however, that Smith does not have any right to acquire any securities of the Company upon the exercise of stock options or warrants outstanding on November 3, 1995 or stock options granted within six months after November 3, 1995 (with certain conditions) or upon any issuance pursuant to the Jiro Agreement referred to in Section 2.4(b) of the Purchase Agreement between the predecessors-in-interest to Smith and Conemsco under the Preemptive Rights Agreement. Smith's preemptive rights option expires on the earlier of (i) Smith's percentage ownership becoming less than 45% and (ii) November 3, 2001. Smith currently intends to maintain its ownership interest in the Company at or above 50% of the issued and outstanding shares of CE Franklin Common Stock through acquisitions of shares on the open market and/or through exercises of its option under the Preemptive Rights Agreement. As a result of the CE Acquisition, Doug Rock, Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer and director of Smith, and John J. Kennedy, President and Chief Executive Officer of Wilson, were elected, and currently serve as, directors of the Company. Except as set forth in this Statement, Smith does not have any plans or proposals that relate to or would result in any of the actions enumerated in (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) Smith is the beneficial owner of 8,576,182 shares of CE Franklin Common Stock (the "CE Franklin Shares"), representing approximately 50% of the issued and outstanding shares of CE Franklin Common Stock. (b) Smith has the sole power to vote or to direct the vote as well as the sole power to dispose or direct the disposition of all 8,576,182 shares. (c) Smith has not effected any transaction in the CE Franklin Common Stock in the past 60 days. (d) No party other than Smith has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the CE Franklin Shares. See Item 3 above with respect to how and when the CE Franklin Shares were acquired. 5 CUSIP NO. 125151100 Page 5 of 6 Pages ------------------- ----------------- ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Except as described in this Statement, Smith is not a party to any contracts, arrangements, understandings or relationships with any other person with respect to shares of CE Franklin Common Stock, including, but not limited to, transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, put or calls, guarantees of profits, divisions of profits or loss, or the giving or withholding of proxies. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 7.1 Purchase and Sale Agreement, dated May 28, 1999, by and among Smith International, Inc., Wilson Industries, Inc., CONEMSCO, Inc. and CE Distribution Services, Inc. Exhibit 7.2 Pre-emptive Rights Agreement, dated November 3, 1995, between Smith International, Inc. (as successor-in-interest to Continental EMSCO Company) and CE Franklin Ltd. (as successor to Franklin Supply Company Ltd.). 6 CUSIP NO. 125151100 Page 6 of 6 Pages ------------------- ----------------- SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 10, 2001 SMITH INTERNATIONAL, INC. By: /s/ NEAL S. SUTTON ----------------------------------- Neal S. Sutton Senior Vice President - Administration, General Counsel and Secretary 7 SCHEDULE A EXECUTIVE OFFICERS AND DIRECTORS OF SMITH INTERNATIONAL, INC. The names of the directors and the names and titles of the executive officers of Smith International, Inc. ("Smith") and their addresses and principal occupations are set forth below. The business address of Smith is 16740 Hardy Street, Houston, Texas 77032.
Residence or Business Name and Title Address Principal Occupation Citizenship -------------- --------------------- -------------------- ----------- Doug Rock - Chairman of the 16740 Hardy Street Chairman of the Board, Chief USA Board, Chief Executive Houston, Texas 77032 Executive Officer, President and Officer, President and Chief Chief Operating Officer of Smith Operating Officer Loren K. Carroll - Executive 16740 Hardy Street Executive Vice President USA Vice President and Director Houston, Texas 77032 of Smith; President and Chief Executive Officer of M-I L.L.C., a company located at 1201 Louisiana, Suite 857, Houston, Texas 77002, in which Smith holds a 60% interest, which provides drilling and completion fluid systems and services, solids-control equipment and waste management services Neal S. Sutton - Senior Vice 16740 Hardy Street Senior Vice President - USA President - Administration, Houston, Texas 77032 Administration, General Counsel General Counsel and Secretary and Secretary of Smith Margaret K. Dorman - Senior 16740 Hardy Street Senior Vice President, Chief USA Vice President, Chief Houston, Texas 77032 Financial Officer and Treasurer of Financial Officer and Smith Treasurer Benjamin F. Bailar - Director 410 East Walnut Road Dean and H. Joe Nelson, III USA Lake Forest, Illinois Professor of Administration 60045 Emeritus of Jesse H. Jones Graduate School of Administration of Rice University
8
Residence or Business Name and Title Address Principal Occupation Citizenship -------------- --------------------- -------------------- ----------- G. Clyde Buck - Director 600 Travis, Suite 3100 Senior Vice President and USA Houston, Texas 77002 Managing Director Corporate Finance of Sanders Morris Harris, an investment banking and securities firm located at 600 Travis, Suite 3100, Houston, Texas 77002 James R. Gibbs - Director 10000 Memorial Dr., Chairman of the Board, USA Suite 600 President and Chief Executive Houston, Texas 77024 Officer of Frontier Oil Corporation, an independent energy company engaged in crude oil refining and the wholesale marketing of refined petroleum products located at 10000 Memorial Drive, Suite 600, Houston, Texas 77024 Jerry W. Neely - Director P.O. Box 1119 Retired private investor USA San Juan Capistrano, California 92693 Wallace S. Wilson - Director 910 Travis, Suite 1980 Retired private investor USA Houston, Texas 77002
9 EXHIBIT INDEX Exhibit 7.1 Purchase and Sale Agreement, dated May 28, 1999, by and among Smith International, Inc., Wilson Industries, Inc., CONEMSCO, Inc. and CE Distribution Services, Inc. Exhibit 7.2 Pre-emptive Rights Agreement, dated November 3, 1995, between Smith International, Inc. (as successor-in-interest to Continental EMSCO Company) and CE Franklin Ltd. (as successor to Franklin Supply Company Ltd.).