Smith International Inc. (SII) reported fourth quarter 2009 earnings of 9 cents per share, versus the Zacks Consensus Estimate of 10 cents and the year-earlier performance of $1.00.
For the full year 2009, the company reported earnings of 81 cents, a penny below the Zacks Consensus Estimate of 82 cents and substantially below the year-ago earnings of $3.78.
The reported quarter was primarily influenced by increased drilling activity in the North American market, coupled with stable prices for the company’s products and services, besides a significant increase in revenue per rig in Latin America and Africa for both M-I SWACO and the Smith Oilfield segments.
Revenue during the quarter increased 6% sequentially but was down 35% year over year to $1.98 billion. Worldwide rig count increased 8% during the quarter. The sequential revenue increase was mainly due to higher revenue generated in the United States, driven by a higher level of onshore drilling and completion activity. This was offset in part by continued weakness in Gulf of Mexico offshore activity and related weather delays. Revenue in markets outside North America was up approximately 5% from the September quarter, despite flat sequential rig activity.
For the full year 2009, Smith’s revenue was $8.2 billion, as compared to the prior-year revenue of $10.8 billion.
With respect to business segments, M-I SWACO accounted for approximately 51% of the total yearly revenue. The segment’s fourth quarter and full year revenue totaled $1.06 billion and $4.22 billion, respectively. This represented a year-over-year decline of 19% for both the quarter and the year. However, sequential revenue in the quarter improved 6% from $994.6 million. The positive sequential comparison reflected an increase in offshore rig count, together with double-digit percentage revenue growth outside the United States.
The Oilfield segment reported revenues of $2.23 billion (27% of total yearly revenues) in 2009, down 22% year-over-year. The segment’s revenue in the quarter was $516.3 million, up 2% sequentially and down 46% year over year. The sequential increase in revenue was largely concentrated in the U.S. market, led by a 29% increase in the PathFinder business and double-digit gains in the fishing and remedial as well as the cased-hole wireline businesses.
Revenue in the Distribution segment totaled $1.8 billion (22% of total yearly revenue), down 35% year over year. Segmental revenue in the quarter was $410.1 million, up 8% sequentially and down 48% year over year. The sequential revenue increase can be attributable to the energy sector operations.
Operating income in the quarter was up 21% sequentially, while it declined 71% year over year to $122.8 million. For 2009, operating income declined 64% year over year to $599.1 million.
Smith International ended the year with a strong liquidity position, comprising a cash balance of $1.0 billion and undrawn credit facilities of $1.4 billion. Year-end cash on hand totaled $250 million, while total debt declined to $2.2 billion (net debt of $1.2 billion). The company plans to further reduce its total outstanding debt in the first quarter 2010. For 2010, the company plans to invest approximately $320 million in net capital expenditures.
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