8-K

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

April 22, 2008
Date of Report
(Date of earliest event reported)

SMITH INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 1-8514
(Commission
File Number) 95-3822631
(I.R.S. Employer
Identification No.)

16740 East Hardy Road
Houston, Texas
(Address of principal executive offices)

77032
(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:

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     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 news release dated April 22, 2008, announcing the Registrant’s financial results for the quarter ended March 31, 2008 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 News Release dated April 22, 2008 with respect to the Registrant’s financial results for the quarter ended March 31, 2008.

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.
Date: April 22, 2008	/s/ Richard E. Chandler, Jr.
	By: Richard E. Chandler, Jr.
	Senior Vice President, General Counsel and Secretary

EXHIBIT INDEX

Exhibit No.	Description
99.1	News Release by the Registrant dated April 22, 2008.

EX-99.1

Exhibit 99.1

NEWS RELEASE

Tuesday, April 22, 2008

Contact: Margaret K. Dorman
Chief Financial Officer
(281) 443-3370

SMITH INTERNATIONAL, INC. REPORTS
FIRST QUARTER EARNINGS OF 87 CENTS PER SHARE

     HOUSTON, Texas (April 22, 2008)... Smith International, Inc. (NYSE: SII) today announced first quarter net income of $175.0 million, or 87 cents per share, on revenues of $2.37 billion. The Company’s results for the comparable prior year quarter, net of a four-cent non-recurring tax benefit, were $152.7 million, or 76 cents per share, on revenues of $2.11 billion. Improved Oilfield segment earnings, which increased 17 percent over the prior year quarter, accounted for the year-on-year growth in base profitability levels.

     Revenues were 12 percent above the prior year quarter and three percent higher than the December 2007 period. The year-on-year revenue growth stemmed from a 15 percent improvement in Oilfield segment business volumes. Oilfield segment sales outside North America grew 24 percent over the prior year quarter supported by higher spending in the Former Soviet Union (“FSU”), the North Sea and Latin American markets. On a sequential quarter basis, the revenue growth was largely concentrated in the Western Hemisphere region influenced by the seasonal drilling pick-up in Canada, higher deepwater business volumes in the Gulf of Mexico and increased customer spending in the U.S. downstream distribution sector.

     Commenting on the results, Chairman and CEO, Doug Rock stated, “Both segments of our business performed well in the first quarter, enabling Smith to report record revenues and earnings. Whereas, we believe international growth will outpace North America for the near-term, the rapid emergence of unconventional gas plays could influence the pace of North American drilling going forward. Unconventional gas drilling has favorable implications for the industry and drives demand for Smith’s products and services specifically designed for directional drilling programs.”

     Margaret Dorman, Chief Financial Officer, added, “Smith’s first quarter results show improved Oilfield segment margins and solid free cash flow generation — evidencing a good start to the 2008 fiscal year. We achieved five percent sequential earnings growth despite a reasonably-flat global rig count and a lower relative-margin product mix. Smith’s Oilfield segment operating margins improved to 20.1 percent in the first quarter of 2008 — 20 basis points above the prior year period and 60 basis points higher than the December 2007 quarter.”

     M-I SWACO’s first quarter revenues totaled $1.23 billion, 19 percent higher on a year-on-year basis and three percent above the December 2007 quarter. Compared to the prior year period, the revenue growth was generated outside North America influenced by an increased number of land-based drilling projects in Latin America and the FSU region. Additionally, higher demand for environmental equipment and base fluid products for Eastern Hemisphere offshore drilling programs also contributed to the period-to-period growth. From a sequential perspective, the revenue improvement was largely driven by higher base fluid volumes in the offshore market, including the deepwater Gulf of Mexico, the Persian Gulf and the Caspian Sea.

     Smith Technologies reported revenues of $274.7 million, 13 percent higher than the prior year period and three percent above the fourth quarter of 2007. The year-on-year revenue growth was primarily influenced by the U.S. operations, reflecting higher drill bit volumes and increased demand in the Gulf of Mexico for our third-generation Rhino^®Reamer borehole enlargement tool. Higher non-North American revenue levels also contributed to the reported growth, supported by increased drill bit market penetration in Latin America and significant Rhino^®Reamer demand in the FSU and North Sea regions. On a sequential quarter basis, the revenue growth was largely concentrated in North America driven by higher Canadian drilling activity and an increased number of new borehole enlargement projects in the U.S. offshore market.

     Services’ revenues totaled $299.8 million in the first quarter of 2008, six percent above the year-ago level and modestly below the December 2007 period. Lower drill pipe sales volumes, which fell 27 percent from the prior year quarter and 38 percent sequentially, influenced the period-to-period comparisons. The decline in the level of year-on-year drill pipe shipments was more than offset by increased demand for higher relative-margin business lines, including premium tubular products, hydra-jar^â tools and high-performance completion equipment. Compared to the December 2007 quarter, non-drill pipe revenues grew five percent - favorably impacted by new contract awards in Latin America and increased market penetration in West Africa.

     Wilson reported record revenues of $568.1 million, four percent above the prior year period and eight percent higher on a sequential quarter basis. Both comparisons largely reflect the performance of the downstream and industrial operations, which posted revenue growth 10 percent above the prior year period and 20 percent higher than the December quarter. The improvement reflects increased turnaround activity in the refining and petrochemical sector and higher capital project spending in the mining and LNG customer segment.

     Smith International, Inc. is a leading supplier of premium products and services to the oil and gas exploration and production industry 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 10:00 a.m. Central to review the quarterly results. Participants may join the conference call by dialing (800) 233-1182 and requesting the Smith International call hosted by Doug Rock. A replay of the conference call will also be available through Tuesday, April 29, 2008, by dialing (888) 843-8996 and entering conference call identification number 21161942.

     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 Section 21E of the Securities Exchange Act of 1934, as amended. Whenever possible, the Company has identified these “forward-looking” statements by words such as “believe,” “encouraged,” “expect,” “expected,” “should” and similar phrases. The forward-looking statements are based upon management’s expectations and beliefs and, although these statements are based upon reasonable assumptions, actual results might differ materially from expected results due to a variety of factors including, but not limited to, overall demand for and pricing of the Company’s products, changes in the level of oil and natural gas exploration and development, and variations in global business and economic conditions. 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 additional risks and uncertainties that could impact the Company’s results, review the Smith International, Inc. Annual Report on Form 10-K for the year ended December 31, 2007 and other filings of the Company 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 III in this release for the corresponding reconciliations to GAAP financial measures for the period ended March 31, 2007. 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.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

	Three Months Ended
	March 31,						December 31,
	2008			2007			2007
Revenues	$	2,370,998		$	2,107,724		$	2,297,174
Costs and expenses:
Costs of revenues		1,589,514			1,431,759			1,542,934
Selling expenses		320,399			272,333			317,780
General and administrative expenses		82,278			72,504			80,577
Total costs and expenses		1,992,191			1,776,596			1,941,291
Operating income		378,807			331,128			355,883
Interest expense		16,301			18,534			16,748
Interest income		(896	)		(764	)		(1,257	)
Income before income taxes and minority interests		363,402			313,358			340,392
Income tax provision		117,291			93,099			107,902
Minority interests		71,120			60,101			65,483
Net income	$	174,991		$	160,158		$	167,007
Earnings per share:
Basic	$	0.87		$	0.80		$	0.83
Diluted	$	0.87		$	0.80		$	0.83
Weighted average shares outstanding:
Basic		200,808			199,980			200,424
Diluted		201,942			201,426			202,010

SMITH INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

	March 31,		December 31,
	2008		2007
Current Assets:
Cash and cash equivalents	$	148,374	$	158,267
Receivables, net		1,917,057		1,750,561
Inventories, net		1,767,709		1,658,172
Other current assets		159,858		160,735
Total current assets		3,992,998		3,727,735
Property, Plant and Equipment, net		1,139,053		1,105,880
Goodwill and Other Assets		1,240,136		1,228,265
Total Assets	$	6,372,187	$	6,061,880
Current Liabilities:
Short-term borrowings	$	120,740	$	139,481
Accounts payable		775,344		655,413
Other current liabilities		399,549		378,406
Total current liabilities		1,295,633		1,173,300
Long-Term Debt		794,995		845,624
Other Long-Term Liabilities		323,875		317,286
Minority Interests		1,200,355		1,130,773
Stockholders’ Equity		2,757,329		2,594,897
Total Liabilities and Stockholders’ Equity	$	6,372,187	$	6,061,880

SMITH INTERNATIONAL, INC.
SUPPLEMENTARY DATA — SCHEDULE I
(In thousands)
(Unaudited)

	Three Months Ended
	March 31,						December 31,
	2008			2007			2007
REVENUE DATA
Consolidated:
United States	$	1,012,679		$	961,504		$	1,001,320
Canada		234,425			237,139			200,258
North America		1,247,104			1,198,643			1,201,578
Latin America		226,977			148,338			208,282
Europe/Africa		596,492			478,678			580,720
Middle East/Asia		300,425			282,065			306,594
Non-North America		1,123,894			909,081			1,095,596
Total	$	2,370,998		$	2,107,724		$	2,297,174
Oilfield (a):
North America	$	709,283		$	681,580		$	701,345
Latin America		220,281			143,397			205,429
Europe/Africa		580,189			462,668			563,878
Middle East/Asia		293,174			274,039			299,631
Non-North America		1,093,644			880,104			1,068,938
Total	$	1,802,927		$	1,561,684		$	1,770,283
BUSINESS UNIT/SEGMENT DATA
Revenues:
M-I SWACO	$	1,228,429		$	1,035,084		$	1,190,258
Smith Technologies		274,725			244,091			267,089
Smith Services		299,773			282,509			312,936
Oilfield		1,802,927			1,561,684			1,770,283
Distribution		568,071			546,040			526,891
Total	$	2,370,998		$	2,107,724		$	2,297,174
Operating Income:
Oilfield	$	361,495		$	311,013		$	345,209
Distribution		29,209			29,235			20,830
General corporate		(11,897	)		(9,120	)		(10,156	)
Total	$	378,807		$	331,128		$	355,883

NOTE (a): Excludes revenues from the Wilson Distribution operations.

SMITH INTERNATIONAL, INC.
SUPPLEMENTARY DATA — SCHEDULE II
(In thousands)
(Unaudited)

	Three Months Ended
	March 31,				December 31,
	2008		2007		2007
OTHER DATA
Operating Income(b):
Smith ownership interest	$	292,470	$	257,502	$	277,078
Minority partner ownership interest		86,337		73,626		78,805
Total	$	378,807	$	331,128	$	355,883
Depreciation and Amortization(b):
Smith ownership interest	$	40,477	$	33,635	$	39,701
Minority partner ownership interest		12,124		10,745		12,134
Total	$	52,601	$	44,380	$	51,835
Gross Capital Spending(b):
Smith ownership interest	$	57,731	$	61,092	$	85,839
Minority partner ownership interest		16,299		15,741		21,452
Total	$	74,030	$	76,833	$	107,291
Net Capital Spending(b) (c):
Smith ownership interest	$	44,655	$	48,303	$	76,435
Minority partner ownership interest		15,001		13,857		19,699
Total	$	59,656	$	62,160	$	96,134

NOTE (b): 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 separated between the Company’s portion and the minority partners’ portion in order to aid in analyzing the Company’s financial results.

NOTE (c): Net capital spending reflects the impact of proceeds from lost-in-hole and fixed asset equipment sales.

SMITH INTERNATIONAL, INC.
SUPPLEMENTARY DATA — SCHEDULE III
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

	Three Months Ended
	March 31,					December 31,
	2008		2007			2007
Consolidated Net Income:
GAAP consolidated net income	$	174,991	$	160,158		$	167,007
R&D tax credit and other tax adjustments		—		(7,467	)		—
Non-GAAP consolidated net income	$	174,991	$	152,691		$	167,007
Diluted Earnings per Share:
GAAP diluted earnings per share	$	0.87	$	0.80		$	0.83
R&D tax credit and other tax adjustments		—		(0.04	)		—
Non-GAAP diluted earnings per share	$	0.87	$	0.76		$	0.83