-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T0gHPoJn2nNZO4vbcF6HCTxHxIFTsFeybAZpFeVRskxO4QbM6qisiM5v5TsYzCmV Ks5mAgZ3DPt+YGdJX+gaEQ== 0000950129-04-002295.txt : 20040423 0000950129-04-002295.hdr.sgml : 20040423 20040423101553 ACCESSION NUMBER: 0000950129-04-002295 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040423 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITH INTERNATIONAL INC CENTRAL INDEX KEY: 0000721083 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 953822631 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08514 FILM NUMBER: 04749571 BUSINESS ADDRESS: STREET 1: 16740 HARDY ST STREET 2: P O BOX 60068 CITY: HOUSTON STATE: TX ZIP: 77032 BUSINESS PHONE: 2814433370 MAIL ADDRESS: STREET 1: 16740 HARDY ST STREET 2: P O BOX 60068 CITY: HOUSTON STATE: TX ZIP: 77205 8-K 1 h14685e8vk.txt SMITH INTERNATIONAL, INC. - APRIL 23, 2004 SMITH INTERNATIONAL, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 APRIL 23, 2004 DATE OF REPORT (Date of earliest event reported) SMITH INTERNATIONAL, INC. (Exact name of Registrant as specified in its charter) DELAWARE 1-8514 95-3822631 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 411 N. SAM HOUSTON PARKWAY, SUITE 600 HOUSTON, TEXAS (Address of principal executive offices) 77060 (Zip Code) (281) 443-3370 (Registrant's telephone number, including area code) ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibit 99.1 Press Release dated April 23, 2004 with respect to the Registrant's financial results for the quarter ended March 31, 2004. ITEM 12. DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION A copy of the press release dated April 23, 2004, announcing the Registrant's financial results for the quarter ended March 31, 2004 is furnished as Exhibit 99.1 to this report on form 8-K, and is incorporated herein by reference. The information in this report is being furnished, not filed, pursuant to Item 12 of Form 8-K. Accordingly, the information in Item 12 of this report and Exhibit 99.1 will not be incorporated by reference into any registration statement filed by the Registrant under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SMITH INTERNATIONAL, INC. /s/ NEAL S. SUTTON -------------------------------------- By: Neal S. Sutton Senior Vice President - Administration, General Counsel and Secretary Date: April 23, 2004 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION ----------- ----------- 99.1 Press Release by the Registrant dated April 23, 2004. EX-99.1 3 h14685exv99w1.txt PRESS RELEASE EXHIBIT 99.1 PRESS RELEASE ================================================================================ SMITH INTERNATIONAL, INC. P.O. BOX 60068 HOUSTON, TX 77205-0068 WEBSITE ADDRESS: smith.com FOR RELEASE Friday, April 23, 2004 Contact: Margaret K. Dorman Chief Financial Officer (281) 443-3370 SMITH INTERNATIONAL, INC. REPORTS EARNINGS OF $44.9 MILLION - MORE THAN DOUBLE COMPARABLE PRIOR YEAR PERIOD HOUSTON, Texas (April 23, 2004)... Smith International, Inc. (NYSE: SII) today announced record earnings of $44.9 million, or 44 cents per share, for the first quarter of 2004. The Company's net income improved nine percent on a sequential quarter basis, after adjusting the fourth quarter's results for a three-cent charge related to its Distribution operations, and was more than twice last year's first quarter earnings of $21.7 million, which excludes a one-cent charge related to the adoption of a new accounting standard during the period. The majority of the sequential earnings growth was generated in Canada, attributable to the seasonal increase in drilling activity; however, improving financial performance in the Company's Distribution segment also had a favorable impact. Revenues for the three months ended March 31, 2004 were $1.0 billion, three percent above the fourth quarter of 2003 and 26 percent higher than the prior year period. Over 80 percent of the sequential revenue growth was reported in the Western Hemisphere, as higher North American land-based drilling activity was partially offset by continued weakness in the offshore markets. Eastern Hemisphere revenues grew two percent over the fourth quarter despite relatively flat activity levels influenced, in part, by the inclusion of several, large export orders. The revenue growth over the first quarter of 2003 benefited from a 20 percent increase in North American land-based drilling activity and improved business volumes in the Europe/Africa region, including the Norwegian sector of the North Sea and the Former Soviet Union ("FSU"). M-I SWACO's first quarter revenues totaled $519.1 million, two percent above the fourth quarter of 2003 and 25 percent higher than the prior year period. On a sequential quarter basis, increased revenues associated with improved worldwide drilling activity were partially offset by reduced demand for higher-margin fluid products in the Western Hemisphere offshore markets due, in part, to the continued weakness in the U.S. Gulf. Compared to the prior year quarter, over 70 percent of the revenue growth was generated in areas outside of North America, reflecting new contract awards and increased exploration and production spending in Latin America, the North Sea and the FSU. To a lesser extent, increased North American land-based drilling activity also contributed to the year-over-year revenue variance. Smith Technologies reported revenues of $125.3 million, 14 percent higher on a sequential quarter basis and 36 percent above the March 2003 period. The significant revenue increase over the fourth quarter reflects a combination of improved activity levels, increased market penetration and, to a lesser extent, the inclusion of several, large international export orders. Non-export petroleum drill bit revenues increased 10 percent over the fourth quarter, more than twice the rate of improvement in the corresponding rig count, largely influenced by increased demand for new product introductions. The year-over-year revenue variance reflects the increase in global activity levels and, again, the delivery of several Eastern Hemisphere export orders. Excluding export business volumes, revenues grew approximately 27 percent driven by the continued strong performance of the North American operations. Smith Services' first quarter revenues totaled $111.1 million, a two percent improvement from the fourth quarter of 2003 and an increase of 17 percent over the prior year period. The sequential revenue improvement was reported in North America, reflecting increased demand for HEVI-WATE(TM) pipe and other drilling-related products and services. Lower customer spending in the North Sea, which impacted remedial product and service lines, served to mask the growth experienced throughout the North American market. Year-over-year, more than three-quarters of the revenue growth was reported in the Western Hemisphere benefiting from strong demand for remedial and drilling product and service lines. Excluding U.S. drill pipe orders, which declined by more than 50 percent from the prior year quarter, revenues grew 21 percent, significantly outpacing the change in corresponding activity levels. Distribution revenues were $262.3 million, a three percent increase from the December 2003 quarter and a 28 percent improvement over the prior year period. The sequential revenue growth was reported by CE Franklin Ltd., reflecting strong seasonal demand for maintenance, repair and operating supplies in Canada. Wilson's revenues declined approximately two percent from the fourth quarter, resulting from the completion of a large international engineering and construction ("E&C") project late last year. Compared to the prior year quarter, the Distribution energy sector operations grew in excess of the North American activity improvement and accounted for the majority of the revenue change. Industrial and downstream revenues increased 25 percent year-over-year benefiting from new contract awards in the refining and petrochemical markets and increased project spending by E&C customers. Commenting on the results, Chairman and CEO, Doug Rock stated, "Our operating people performed exceptionally in the first quarter, enabling Smith to report record revenues and earnings. Based on the first quarter results, we believe 2004 annual earnings of $1.80 to $1.90 per share should be a reasonable expectation for Smith - with most, if not all, of the increase over the current Thomson Financial consensus estimate expected to occur in the second half of the year." Loren Carroll, Executive Vice President, also noted that, "The first quarter's results provide us with a significant amount of momentum which should carryover into the rest of the year. Outside the seasonal impact of the Canadian break-up, we believe we'll continue to see a strengthening global business environment for our products and services. Although it's not a near-term event, we're encouraged by some of the spending plans of our larger customers scheduled to occur later this year." Smith International, Inc. is a leading worldwide supplier of premium products and services to the oil and gas exploration and production industry, the petrochemical industry and other industrial markets through its four principal business units - M-I SWACO, Smith Technologies, Smith Services and Wilson. The Company will host a conference call today beginning at 10:30 a.m. Central Time to review the quarterly results. Participants may join the conference call by dialing (706) 634-6555 and requesting the Smith International, Inc. call. A replay of the conference call will also be available through Friday, April 30, 2004 by dialing (706) 645-9291 and entering conference call identification number "6311336". Certain comments contained in this news release concerning the anticipated financial results of the Company constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the safe harbor created by that Act. Whenever possible, the Company has identified these "forward-looking" statements by words such as "expect", "expected", "believe", "encouraged" and similar phrases. The forward-looking statements are based upon managements' expectations and beliefs and, although these statements are based upon reasonable assumptions, there can be no assurances that the Company's financial results will be as estimated. The Company assumes no obligation to update publicly any forward- looking statements whether as a result of new information, future events or otherwise. For a discussion of factors, which could impact the Company's results, review the Smith International, Inc. Annual Report on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission. Non-GAAP Financial Measures. The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP performance measures and ratios utilized for internal analysis provide financial statement users meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Certain information discussed in this press release and in the scheduled conference call could be considered non-GAAP measures. See the Supplementary Data - Schedule II in this release for the corresponding reconciliations to GAAP financial measures for the three months ended December 31, 2003 and March 31, 2004. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results. Financial highlights follow: SMITH INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended March 31, ----------------------------------- 2004 2003 - -------------------------------------------------------------------------------------------- Revenues $ 1,017,788 $ 808,837 - -------------------------------------------------------------------------------------------- Costs and expenses: Costs of revenues 703,786 570,494 Selling expenses 160,559 137,128 General and administrative expenses 45,982 38,061 - -------------------------------------------------------------------------------------------- Total costs and expenses 910,327 745,683 - -------------------------------------------------------------------------------------------- Operating income 107,461 63,154 Interest expense 9,439 10,272 Interest income (365) (580) - -------------------------------------------------------------------------------------------- Income before income taxes, minority interests and cumulative effect of change in accounting principle 98,387 53,462 Income tax provision 31,845 16,840 Minority interests 21,692 14,907 - -------------------------------------------------------------------------------------------- Income before cumulative effect of change in accounting principle 44,850 21,715 Cumulative effect of change in accounting principle -- (1,154) - -------------------------------------------------------------------------------------------- Net income $ 44,850 $ 20,561 ============================================================================================ Earnings per share before cumulative effect of change in accounting principle: Basic $ 0.44 $ 0.22 ============================================================================================ Diluted $ 0.44 $ 0.22 ============================================================================================ Earnings per share after cumulative effect of change in accounting principle: Basic $ 0.44 $ 0.21 ============================================================================================ Diluted $ 0.44 $ 0.21 ============================================================================================ Weighted average shares outstanding: Basic 101,070 99,265 ============================================================================================ Diluted 102,504 100,267 ============================================================================================
SMITH INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
March 31, December 31, 2004 2003 - -------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 45,063 $ 51,286 Receivables, net 832,968 801,819 Inventories, net 777,027 739,627 Other current assets 86,315 87,064 - -------------------------------------------------------------------------------------------------- Total current assets 1,741,373 1,679,796 - -------------------------------------------------------------------------------------------------- Property, Plant and Equipment, net 539,986 534,871 Goodwill and Other Assets 883,443 882,380 - -------------------------------------------------------------------------------------------------- Total Assets $3,164,802 $3,097,047 ================================================================================================== Current Liabilities: Short-term borrowings $ 106,929 $ 89,747 Accounts payable 336,437 310,754 Other current liabilities 206,354 230,423 - -------------------------------------------------------------------------------------------------- Total current liabilities 649,720 630,924 - -------------------------------------------------------------------------------------------------- Long-Term Debt 435,449 488,548 Other Long-Term Liabilities 156,731 154,131 Minority Interests 607,826 587,668 Stockholders' Equity 1,315,076 1,235,776 - -------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $3,164,802 $3,097,047 ==================================================================================================
SMITH INTERNATIONAL, INC. SUPPLEMENTARY DATA - SCHEDULE I (In thousands) (Unaudited)
Three Months Ended March 31, --------------------------------------- 2004 2003 - -------------------------------------------------------------------------------------- SEGMENT DATA REVENUES: M-I SWACO $ 519,085 $ 416,289 Smith Technologies 125,341 92,239 Smith Services 111,064 95,032 - -------------------------------------------------------------------------------------- Oilfield Products and Services 755,490 603,560 Wilson 262,298 205,277 - -------------------------------------------------------------------------------------- Total $ 1,017,788 $ 808,837 ====================================================================================== OPERATING INCOME: Oilfield Products and Services $ 106,412 $ 68,933 Distribution 3,066 (4,099) General corporate (2,017) (1,680) - -------------------------------------------------------------------------------------- Total $ 107,461 $ 63,154 ====================================================================================== OTHER DATA OPERATING INCOME(a): Smith ownership interest $ 79,928 $ 44,072 Minority partner ownership interest 27,533 19,082 - -------------------------------------------------------------------------------------- Total $ 107,461 $ 63,154 ====================================================================================== DEPRECIATION AND AMORTIZATION(a): Smith ownership interest $ 20,533 $ 19,061 Minority partner ownership interest 5,961 5,323 - -------------------------------------------------------------------------------------- Total $ 26,494 $ 24,384 ====================================================================================== CAPITAL SPENDING(a)(b): Smith ownership interest $ 17,712 $ 15,754 Minority partner ownership interest 4,998 4,945 - -------------------------------------------------------------------------------------- Total $ 22,710 $ 20,699 ======================================================================================
NOTE (a): The Company derives a significant portion of its revenues and earnings from M-I SWACO and other joint venture operations. Consolidated operating income, depreciation and amortization and capital spending amounts have been broken out between the Company's portion and the minority partners' portion in order to aid in analyzing the Company's financial results. NOTE (b): Capital spending is reported gross and not reduced for the proceeds arising on lost-in-hole sales or sales of fixed asset equipment replaced. Total net capital spending was approximately $17.8 million and $16.3 million for the three months ended March 31, 2004 and 2003, respectively. SMITH INTERNATIONAL, INC. SUPPLEMENTARY DATA - SCHEDULE II RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited)
Three Months Ended ---------------------------------- March 31, December 31, 2004 2003 - ---------------------------------------------------------------------------------------------- CONSOLIDATED OPERATING INCOME: GAAP consolidated operating income $107,461 $ 97,368 Non-cash charges (c) -- 4,572 - ---------------------------------------------------------------------------------------------- Non-GAAP consolidated operating income $107,461 $ 101,940 ============================================================================================== DISTRIBUTION OPERATING INCOME: GAAP Distribution operating income $ 3,066 $ (3,549) Non-cash charges(c) -- 4,572 - ---------------------------------------------------------------------------------------------- Non-GAAP Distribution operating income $ 3,066 $ 1,023 ============================================================================================== DILUTED EARNINGS PER SHARE: GAAP diluted earnings per share $ 0.44 $ 0.38 Non-cash charges, net of tax(c) -- 0.03 - ---------------------------------------------------------------------------------------------- Non-GAAP diluted earnings per share $ 0.44 $ 0.41 ==============================================================================================
NOTE (c): This amount consists of a $3.8 million pre-tax inventory-related charge and a $0.8 million pre-tax provision for estimated losses associated with the bankruptcy of a large industrial customer. On an after-tax basis, these charges approximated $3.0 million, or three cents per share. -----END PRIVACY-ENHANCED MESSAGE-----