-----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, T/Nue+i6rFbQ8HFVY95AWxuxyyQAYSE5oxF7HzqbfGb3ihSZp56C/+bPjdp+OAXj d6id/b+YW+7fKzGG6Bc9og== 0000950129-04-007976.txt : 20041025 0000950129-04-007976.hdr.sgml : 20041025 20041025093151 ACCESSION NUMBER: 0000950129-04-007976 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041025 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041025 DATE AS OF CHANGE: 20041025 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: 041093023 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 h19333e8vk.txt SMITH INTERNATIONAL, INC. - OCTOBER 25, 2004 UNITED STATES 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 OCTOBER 25, 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) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION A copy of the press release dated October 25, 2004, announcing the Registrant's financial results for the quarter ended September 30, 2004 is furnished as Exhibit 99.1 to this report on form 8-K, and is incorporated herein by reference. The information contained in this report and the exhibit hereto shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filings made by Smith International, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibit 99.1 Press Release dated October 25, 2004 with respect to the Registrant's financial results for the quarter ended September 30, 2004. SIGNATURE 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: October 25, 2004 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION ----------- ----------- 99.1 Press Release by the Registrant dated October 25, 2004. EX-99.1 2 h19333exv99w1.txt PRESS RELEASE DATED OCTOBER 25, 2004 EXHIBIT 99.1 PRESS RELEASE ================================================================================ SMITH INTERNATIONAL, INC. P.O. BOX 60068 HOUSTON, TX 77205-0068 WEBSITE ADDRESS: smith.com FOR RELEASE Monday, October 25, 2004 Contact: Margaret K. Dorman Chief Financial Officer (281) 443-3370 SMITH INTERNATIONAL, INC. ANNOUNCES 48 PERCENT INCREASE IN QUARTERLY EARNINGS HOUSTON, Texas (October 25, 2004)... Smith International, Inc. (NYSE: SII) today announced record earnings of $51.9 million, or 51 cents per diluted share, for the third quarter of 2004. The Company's net income improved eight percent on a sequential quarter basis, after adjusting the second quarter's results for a 20-cent after-tax charge related to a patent infringement suit, and was 48 percent above the prior year's third quarter earnings of $35.0 million. The majority of the sequential earnings growth was generated in Canada, attributable to the seasonal increase in drilling activity, but improved financial performance in the Company's Distribution segment also had a favorable impact on the quarterly results. Revenues for the three months ended September 30, 2004 were $1.1 billion, five percent above the second quarter of 2004 and 21 percent higher than the prior year quarter. The sequential revenue growth was reported in the Western Hemisphere, as higher land-based drilling activity more than offset a $15 million revenue reduction from weather-related work disruptions in the Gulf of Mexico. Eastern Hemisphere revenues were comparable with the second quarter of 2004 as increased market penetration in the Far East market was offset by the impact of activity declines in Europe/Africa. Year-over-year, the revenue growth was primarily influenced by a 16 percent improvement in U.S. land-based drilling activity and, to a lesser extent, new contract awards in the Eastern Hemisphere markets. M-I SWACO's third quarter revenues totaled $565.4 million, three percent above the second quarter of 2004 and 18 percent higher than the prior year period. The sequential quarter revenue growth was influenced by the seasonal drilling rebound in Canada and increased spending in certain Latin American markets, including Mexico and Argentina. U.S. revenues showed a slight increase over the amounts reported in the second quarter of 2004, as higher land-based revenue volumes were largely offset by weather-related revenue reductions in the U.S. offshore market, which resulted in lower sales of high-margin synthetic fluid products. Compared to the prior year quarter, approximately two-thirds of the revenue growth was generated in areas outside of North America, reflecting new contract awards in certain international markets and increased exploration and production spending in the Former Soviet Union, the Middle East and the Far East markets. To a lesser extent, increased land-based North American drilling activity also contributed to the year-over-year revenue improvement. Smith Technologies reported revenues of $126.8 million, five percent higher on a sequential quarter basis and 21 percent above the September 2003 period. The improvement over the second quarter primarily reflects increased revenue volumes associated with the seasonal drilling recovery in Canada. Year-over-year, revenues increased at a rate significantly in excess of the nine percent improvement in worldwide drilling activity. The favorable comparison reflects increased customer demand for diamond bit products specifically designed for the North American rental market and, to a lesser extent, price increases implemented during the past 12 month period. Smith Services' revenues totaled $124.6 million, a seven percent improvement on a sequential quarter basis and 21 percent above the third quarter of 2003. The sequential revenue growth was driven by increased demand for tubular products in the U.S. market and the impact of incremental revenues from the CanFish acquisition completed in July 2004. After excluding the impact of tubular sales, base revenues were comparable with the second quarter as work disruptions in key drilling markets impacted revenue volumes. The revenue increase from the prior year quarter was reported in the Western Hemisphere markets and primarily reflected increased customer spending across drilling-related product and service lines. Wilson reported revenues of $302.4 million, nine percent higher on a sequential quarter basis and 27 percent above the prior year period. Higher sales to the upstream energy segment, influenced by the seasonal drilling recovery in Canada, accounted for the majority of the sequential revenue improvement. Industrial and downstream revenues, which grew 12 percent from the second quarter of 2004 driven by increased project business in the refining and engineering and construction markets, also contributed to the sequential revenue increase. Higher reported line pipe sales in the U.S. market combined with the implementation of new contract awards in the industrial and downstream segment accounted for the majority of the revenue improvement over the prior year quarter. Commenting on the results, Chairman and CEO, Doug Rock stated, "The third quarter of 2004 was another solid revenue and earnings performance for Smith. We anticipate a long line of continued, future year-over-year and sequential earnings improvements. Our confidence is supported by tight supply and demand fundamentals and our expectation that customer spending will accelerate further in 2005 and beyond." Loren Carroll, Executive Vice President, also noted that, "We're pleased with our third quarter results, especially in light of the disruptions we've experienced during this quarter that negatively impacted some of our most significant geographic areas. As work resumes in these markets, and we realize the impact of our recently announced price increases, we're optimistic that we'll see improved profitability levels." 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 9:00 a.m. Central 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 Monday, November 1, 2004 by dialing (706) 645-9291 and entering conference call identification number "1132335". Certain comments contained in this news release and today's scheduled conference call 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 "anticipate", "believe", "encouraged", "expect", "expected" 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-month periods ended September 30, 2004 and June 30, 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 ----------------------------------------------------------- September 30, ---------------------------------- June 30, 2004 2003 2004 ----------- --------- ----------- Revenues $ 1,119,184 $ 924,792 $ 1,064,450 ----------- --------- ----------- Costs and expenses: Costs of revenues 780,201 646,390 737,082 Selling expenses 172,348 150,411 167,983 General and administrative expenses 48,418 39,183 76,850 ----------- --------- ----------- Total costs and expenses 1,000,967 835,984 981,915 ----------- --------- ----------- Operating income 118,217 88,808 82,535 Interest expense 9,965 10,198 9,399 Interest income (327) (534) (289) ----------- --------- ----------- Income before income taxes and minority interests 108,579 79,144 73,425 Income tax provision 35,129 25,524 23,981 Minority interests 21,557 18,616 21,967 ----------- --------- ----------- Net income $ 51,893 $ 35,004 $ 27,477 =========== ========= =========== Earnings per share: Basic $ 0.51 $ 0.35 $ 0.27 =========== ========= =========== Diluted $ 0.51 $ 0.35 $ 0.27 =========== ========= =========== Weighted average shares outstanding: Basic 101,290 100,095 101,580 =========== ========= =========== Diluted 102,424 101,093 102,662 =========== ========= ===========
SMITH INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Nine Months Ended September 30, --------------------------------------- 2004 2003 ----------- ----------- Revenues $ 3,201,422 $ 2,611,286 ----------- ----------- Costs and expenses: Costs of revenues 2,221,069 1,832,631 Selling expenses 500,890 430,378 General and administrative expenses 171,250 116,898 ----------- ----------- Total costs and expenses 2,893,209 2,379,907 ----------- ----------- Operating income 308,213 231,379 Interest expense 28,803 31,372 Interest income (981) (1,636) ----------- ----------- Income before income taxes, minority interests and cumulative effect of change in accounting principle 280,391 201,643 Income tax provision 90,955 64,678 Minority interests 65,216 50,346 ----------- ----------- Income before cumulative effect of change in accounting principle 124,220 86,619 Cumulative effect of change in accounting principle -- (1,154) ----------- ----------- Net income $ 124,220 $ 85,465 =========== =========== Earnings per share before cumulative effect of change in accounting principle: Basic $ 1.23 $ 0.87 =========== =========== Diluted $ 1.21 $ 0.86 =========== =========== Earnings per share after cumulative effect of change in accounting principle: Basic $ 1.23 $ 0.86 =========== =========== Diluted $ 1.21 $ 0.85 =========== =========== Weighted average shares outstanding: Basic 101,313 99,702 =========== =========== Diluted 102,545 100,774 =========== ===========
SMITH INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
September 30, December 31, 2004 2003 ------------- ------------ Current Assets: Cash and cash equivalents $ 65,035 $ 51,286 Receivables, net 910,281 801,819 Inventories, net 834,563 739,627 Other current assets 110,986 87,064 ---------- ---------- Total current assets 1,920,865 1,679,796 ---------- ---------- Property, Plant and Equipment, net 548,845 534,871 Goodwill and Other Assets 901,659 882,380 ---------- ---------- Total Assets $3,371,369 $3,097,047 ========== ========== Current Liabilities: Short-term borrowings $ 193,605 $ 89,747 Accounts payable 354,114 310,754 Other current liabilities 263,068 230,423 ---------- ---------- Total current liabilities 810,787 630,924 ---------- ---------- Long-Term Debt 390,849 488,548 Other Long-Term Liabilities 165,435 154,131 Minority Interests 650,107 587,668 Stockholders' Equity 1,354,191 1,235,776 ---------- ---------- Total Liabilities and Stockholders' Equity $3,371,369 $3,097,047 ========== ==========
SMITH INTERNATIONAL, INC. SUPPLEMENTARY DATA - SCHEDULE I (In thousands) (Unaudited)
Three Months Ended ------------------------------------------- Nine Months Ended September 30, September 30, -------------------------- June 30, ---------------------------- 2004 2003 2004 2004 2003 ----------- --------- ----------- ----------- ----------- SEGMENT DATA REVENUES: M-I SWACO $ 565,366 $ 479,724 $ 550,257 $ 1,634,708 $ 1,356,399 Smith Technologies 126,805 104,505 121,184 373,330 293,250 Smith Services 124,617 103,144 116,384 352,065 300,405 ----------- --------- ----------- ----------- ----------- Oilfield Products and Services 816,788 687,373 787,825 2,360,103 1,950,054 Wilson 302,396 237,419 276,625 841,319 661,232 ----------- --------- ----------- ----------- ----------- Total $ 1,119,184 $ 924,792 $ 1,064,450 $ 3,201,422 $ 2,611,286 =========== ========= =========== =========== =========== OPERATING INCOME: Oilfield Products and Services $ 112,737 $ 90,318 $ 78,102 $ 297,251 $ 240,841 Distribution 7,388 229 6,466 16,920 (4,348) General corporate (1,908) (1,739) (2,033) (5,958) (5,114) ----------- --------- ----------- ----------- ----------- Total $ 118,217 $ 88,808 $ 82,535 $ 308,213 $ 231,379 =========== ========= =========== =========== =========== OTHER DATA OPERATING INCOME(a): Smith ownership interest $ 90,676 $ 63,891 $ 54,491 $ 225,095 $ 164,968 Minority partner ownership interest 27,541 24,917 28,044 83,118 66,411 ----------- --------- ----------- ----------- ----------- Total $ 118,217 $ 88,808 $ 82,535 $ 308,213 $ 231,379 =========== ========= =========== =========== =========== DEPRECIATION AND AMORTIZATION(a): Smith ownership interest $ 20,180 $ 19,898 $ 20,480 $ 61,193 $ 58,925 Minority partner ownership interest 6,074 5,529 6,058 18,093 16,443 ----------- --------- ----------- ----------- ----------- Total $ 26,254 $ 25,427 $ 26,538 $ 79,286 $ 75,368 =========== ========= =========== =========== =========== CAPITAL SPENDING(a)(b): Smith ownership interest $ 19,853 $ 18,389 $ 18,609 $ 56,174 $ 51,925 Minority partner ownership interest 6,980 5,797 7,416 19,394 18,132 ----------- --------- ----------- ----------- ----------- Total $ 26,833 $ 24,186 $ 26,025 $ 75,568 $ 70,057 =========== ========= =========== =========== ===========
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): Total capital spending is not reduced for the proceeds arising on lost-in-hole sales or sales of fixed asset equipment replaced. After considering proceeds arising on lost-in-hole sales and sales of fixed asset equipment replaced, capital spending was approximately $22.3 million and $60.5 million for the three and nine-month periods ended September 30, 2004; $20.3 million for the three-month period ended June 30, 2004; and $19.0 million and $52.8 million for the three and nine-month periods ended September 30, 2003. 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 ----------------------------------- September 30, June 30, 2004 2004 -------- -------- CONSOLIDATED OPERATING INCOME: GAAP consolidated operating income $118,217 $ 82,535 Litigation-related charges(a) -- 31,439 -------- -------- Non-GAAP consolidated operating income $118,217 $113,974 ======== ======== OILFIELD OPERATING INCOME: GAAP Oilfield operating income $112,737 $ 78,102 Litigation-related charges(a) -- 31,439 -------- -------- Non-GAAP Oilfield operating income $112,737 $109,541 ======== ======== CONSOLIDATED NET INCOME: GAAP consolidated net income $ 51,893 $ 27,477 Litigation-related charges(a) -- 20,435 -------- -------- Non-GAAP consolidated net income $ 51,893 $ 47,912 ======== ======== DILUTED EARNINGS PER SHARE: GAAP diluted earnings per share $ 0.51 $ 0.27 Litigation-related charges, net of tax(a) -- 0.20 -------- -------- Non-GAAP diluted earnings per share $ 0.51 $ 0.47 ======== ========
NOTE (a): This amount represents a provision for estimated losses associated with the previously disclosed outcome of a three-cone drill bit patent infringement case in which the jury found in favor of the plaintiff and awarded damages. On an after-tax basis, these charges approximated $20.4 million, or 20 cents per share. -----END PRIVACY-ENHANCED MESSAGE-----