Smith International, Inc. Reports Third Quarter Operating Earnings of $1.01 Per Diluted Share
biz.yahoo.com
Tuesday October 28, 5:00 am ET
HOUSTON--(BUSINESS WIRE)--Smith International, Inc. (NYSE:SII) today announced record earnings of $209.8 million, or $1.00 per diluted share, for the third quarter of 2008. The results include a non-recurring charge of $4.7 million, reflecting uninsured property losses and clean-up costs associated with hurricanes experienced in the U.S. Gulf Coast area. Excluding non-recurring items, the Company reported net income of $211.9 million, or $1.01 per diluted share. Net of charges, after-tax earnings grew $28.6 million, or 16 percent, on a sequential quarter basis.
During the third quarter of 2008, the Company completed the W-H Energy Services (“W-H”) transaction which contributed to the sequential earnings growth. The operations have been reflected in the accompanying results for the period subsequent to the August 25, 2008 closing date. However, if the acquired operations had been included for the entire reporting period, the Company’s revenues would have approximated $3.07 billion for the September 2008 quarter.
Revenues for the three months ended September 30, 2008 were $2.85 billion, 14 percent above the second quarter of 2008 and 27 percent higher than the prior year period. Excluding the impact of the acquired operations, consolidated revenues grew eight percent on a sequential quarter basis and were 21 percent higher year-on-year. Net of acquisitions, the majority of the sequential quarter revenue growth was reported in North America, influenced by the seasonal drilling recovery in Canada and higher U.S. distribution sales volumes associated with increased infrastructure investment for unconventional oil and gas projects. Excluding the impact of acquired operations, business revenues in markets outside North America grew five percent, attributable to increased activity levels in key growth markets including the Former Soviet Union (FSU), West Africa and the Latin American region. The sequential revenue comparison was influenced by weather-related work disruptions in the Gulf of Mexico during the month of September which resulted in an estimated $40 million revenue decline and a five-cent reduction in after-tax earnings.
Commenting on the results, Chairman and CEO, Doug Rock stated, “The integration of our August 2008 merger with W-H Energy Services is progressing exceptionally well. The merger was accretive to Smith’s third quarter 2008 earnings and will again contribute to earnings growth in this year’s fourth quarter. We expect the fourth quarter of 2008 to be another record revenue and earnings quarter for Smith and, as a result, we are increasing our 2008 yearly earnings guidance to $3.83 to $3.88 per share.
“Looking toward 2009, we feel the negative investment sentiment towards the oil and oil service industry is characteristic of panic rather than reason. Oil prices at $60 per barrel are more than six times their 1998 low point and natural gas prices are nearly three and a half times their 1998 low point. There’s plenty of profit potential at today’s industry price structure, which is why capital will continue to flow into the oil and gas industry in proportionate and available quantities. Today’s high oil and gas production depletion rates will assure relatively tight supply and demand balance, even with flat to somewhat negative demand growth.”
Margaret Dorman, Executive Vice President and Chief Financial Officer, commented, “We're pleased with the overall operating results for the quarter - particularly the contribution from the W-H Energy operations. Consolidated operating margins were comparable with the June 2008 quarter, as weather-related work disruptions in the U.S. Gulf of Mexico impacted offshore business volumes and resulted in lower M-I SWACO margins. Smith continues to be well-positioned from a financial perspective - our balance sheet is strong and our leverage is at a very manageable level.” |
