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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM_________ TO _____________
COMMISSION FILE NUMBER 1-8514
A. FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF DIFFERENT
FROM THAT OF THE ISSUER NAMED BELOW:
SMITH INTERNATIONAL, INC.
401(k) RETIREMENT PLAN
B. NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN AND THE
ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE:
SMITH INTERNATIONAL, INC.
411 N. SAM HOUSTON PARKWAY, SUITE 600
HOUSTON, TEXAS 77060
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The following financial statements and exhibits are filed as a part of this
annual report:
Sequentially
Numbered
Page
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Index to Financial Statements and Supplementary Information:
Report of Independent Public Accountants 3
Statements of Net Assets Available for Plan Benefits
at December 31, 2000 and 1999 4
Statement of Changes in Net Assets Available for
Plan Benefits for the Year Ended December 31, 2000 5
Notes to Financial Statements 6
Schedule of Assets (Held at End of Year) 10
Exhibit:
23.1 - Consent of Independent Public Accountants 13
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of
the Smith International, Inc. 401(k) Retirement Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Smith International, Inc. 401(k) Retirement Plan (the "Plan") as
of December 31, 2000 and 1999, and the related statement of changes in net
assets available for plan benefits for the year ended December 31, 2000. These
financial statements and the supplemental schedule referred to below are the
responsibility of the Administrative Committee. Our responsibility is to express
an opinion on these financial statements and supplemental schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the Administrative Committee, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 2000 and 1999, and the changes in net assets available for plan
benefits for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) as of December 31, 2000, is presented for purposes of additional
analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
June 20, 2001
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SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 2000 AND 1999
2000 1999
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ASSETS:
Investments, at fair value $190,806,049 $173,683,202
Receivables-
Company contribution 7,318,600 3,405,951
Participant contribution 338,162 311,034
Other -- 28,188
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $198,462,811 $177,428,375
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The accompanying notes are an integral part of these financial statements.
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SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2000
NET ASSETS AVAILABLE FOR PLAN BENEFITS AT DECEMBER 31, 1999 $ 177,428,375
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ADDITIONS:
Income (loss)-
Interest and dividend income 10,751,445
Net appreciation in fair value of Company common stock 11,291,620
Net depreciation in fair value of registered investment companies (5,476,981)
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Total income 16,566,084
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Contributions-
Company, net of forfeitures 12,519,304
Participant 10,275,737
Rollover 1,698,060
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Total contributions 24,493,101
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Transfer from other plan (Note 3) 1,319,006
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Total additions 42,378,191
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DEDUCTIONS:
Benefits paid to participants 21,206,222
Administrative expenses 137,533
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Total deductions 21,343,755
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NET ADDITIONS TO NET ASSETS AVAILABLE FOR PLAN BENEFITS 21,034,436
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NET ASSETS AVAILABLE FOR PLAN BENEFITS AT DECEMBER 31, 2000 $ 198,462,811
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The accompanying notes are an integral part of this financial statement.
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SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT
PLAN PROVISIONS:
The following description of the Smith International, Inc. 401(k) Retirement
Plan (the "Plan") provides only general information. Participants should refer
to the Plan document for a more complete explanation of the Plan's provisions as
the Plan document is controlling at all times.
General and Eligibility
The Plan is a defined contribution plan of Smith International, Inc. ("Smith" or
the "Company"). The Plan is operated for the sole benefit of the employees of
the Company and their beneficiaries and is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan
is available to all employees of the Company who meet certain eligibility
requirements under the Plan. Participation in the Plan may commence upon the
later of such eligible employees' commencement date or the date on which such
employees attain the age of 18.
Plan Administrator and Trustee
The Company is the plan administrator and sponsor of the Plan as defined under
ERISA. The Plan's operations are monitored by an administrative committee (the
"Administrative Committee") which is comprised of participants of the Plan.
Vanguard Fiduciary Trust Company ("Vanguard Trust" or the "Trustee") is the
trustee of all investments held by the Plan.
Contributions
The Plan allows participants to contribute up to 12 percent of their
compensation to the Plan on a pretax basis. Prior to July 1, 1983, participants'
contributions were taxed prior to being contributed to the Plan. The Company
contributes to the account of each participant in the Plan between 2 percent and
6 percent of each participant's compensation based upon the age of the
participant (the "Company Retirement Contributions"). The Company will, in
addition to the Company Retirement Contributions, make mandatory matching
contributions (the "Company Matching Contribution") up to 1.5 percent of the
participants' compensation. In addition, discretionary contributions (the
"Company Discretionary Contribution") in excess of the 1.5 percent may be made
at the discretion of the Company's board of directors to the accounts of
participants who are employed by the Company at the end of the Plan year.
For 2000, a Company Discretionary Contribution was made at a rate of 100 percent
of participant contributions less Company matching contributions, subject to
certain limitations.
Vesting
Participants are fully vested in their contributions and related earnings and
vest in Company contributions and related earnings at the rate of 20 percent for
each year of service. Upon death, judicial declaration of incompetence, or
normal or disability retirement, participants become fully vested in Company
contributions and related earnings.
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The Plan has certain provisions that provide for service credit for vesting and
eligibility purposes for all employees who directly transfer employment between
M-I L.L.C., a majority-owned subsidiary of the Company, and Smith.
Compensation
Compensation, as defined in the Plan, includes all cash compensation paid by the
Company to participants excluding payments made in connection with termination
of employment, any compensation deferred under the Company's management
incentive plan, and cost-of-living and any other extraordinary payments made to
expatriates.
Investment Options
Participants have the option of investing their contributions and the Company's
Retirement, Matching and Discretionary Contributions among one or all of the
seven registered investment companies offered by the Vanguard Group of
Investment Companies (the "Vanguard Group") and the Company's common stock.
Contributions may be invested in one fund or divided among two or more funds.
Participants may transfer some or all of the balances out of any fund into one
or any combination of the other funds at any time.
The Dreyfus-Certus Stable Value Fund, held at December 31, 1999, was not
available for current investment by participants. During 2000, monies invested
in the Dreyfus-Certus Stable Value Fund were transferred to the Vanguard Prime
Money Market Fund or into one or more of the available investment options at the
direction of the participants.
Administrative Expenses
The Plan is responsible for its administrative expenses. During 2000,
administrative expenses were paid from forfeitures of the Plan.
Priorities Upon Plan Termination
The Company intends for the Plan to be permanent; however, in the event of
permanent discontinuance of contributions or termination of the Plan, the total
balances of all participants shall become fully vested.
Loans
The Plan permits participants to borrow the lesser of $50,000 or 50 percent of
their vested account balances in the Plan. These loans bear interest at prime
plus 1 percent and are repaid through payroll withholdings over a period not to
exceed five years, except for qualifying loans to purchase a primary residence
which may be repaid over an extended repayment period.
Withdrawals and Forfeitures
A participant may elect to receive benefit payments through any one of the
several methods provided by the Plan upon termination or retirement.
Participants can withdraw their contributions made prior to July 1, 1983, in
cash without being suspended from making additional contributions to the Plan.
Upon termination of employment with the Company, any unvested Company
contributions and related earnings/losses are forfeited if participants do not
return to the Company within 60 months of their termination. During 2000,
forfeitures of $362,927 and $137,533 were used to reduce the Company's
contributions and pay Plan expenses, respectively. Forfeitures available at
December 31, 2000 and 1999, totaled $39,254 and $62,567, respectively.
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2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Basis of Accounting
The accounts of the Plan are maintained on the cash basis of accounting. For
financial reporting purposes, however, the financial statements have been
prepared on the accrual basis of accounting.
Investment Valuation
Plan investments are stated at fair value, as determined by the Trustee
primarily by reference to published market data, except for the
common/collective trust. The common/collective trust held at December 31, 1999,
was valued by the issuer based upon the market value of the underlying assets of
the common/collective trust.
Investment Income
Net depreciation in fair value of registered investment companies and net
appreciation in fair value of Company common stock in the statement of changes
in net assets available for plan benefits include realized gains or losses on
the sale of the investments and unrealized appreciation or depreciation in the
fair value of the investments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Administrative Committee to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
changes in net assets during the reporting period. Actual results could differ
from those estimates.
3. TRANSFER FROM OTHER PLAN:
In connection with the termination of the Wilson Industries, Inc. Pension Plan
(the "Wilson Plan"), assets remaining in the Wilson Plan following satisfaction
of all benefit liabilities of $1,319,006 were transferred to the Plan during
October 2000. Accordingly, the Plan has been amended such that the transferred
assets and earnings thereon are to be held in an account to be utilized over a
maximum seven-year period to reduce future Company contributions to the Plan.
During 2000, $1,010,234 was used to reduce the Company's contributions, and
$320,702 was available as of December 31, 2000, for future reductions. These
amounts are invested in the Vanguard Money Market Reserves Prime Portfolio Fund.
4. FEDERAL INCOME TAX STATUS:
The Plan obtained its latest determination letter on March 5, 1996, in which the
Internal Revenue Service stated that the Plan, as then designed, was in
compliance with the applicable requirements of the Internal Revenue Code of
1986, as amended (the "Code"). The Plan has been amended since receiving the
determination letter. However, the Administrative Committee believes that the
Plan is currently designed and being operated in compliance with the applicable
requirements of the Code. Therefore, the Administrative Committee believes that
the Plan was qualified and the related trust was tax-exempt as of the financial
statement date.
5. RISKS AND UNCERTAINTIES:
The Plan provides for various investments in registered investment companies and
common stock. Investment securities, in general, are exposed to various risks,
such as interest rate, credit and overall market volatility risk. Due to the
level of risk associated with certain investment securities, it is reasonably
possible that changes in the values of investment securities will occur in the
near term.
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6. PARTY-IN-INTEREST TRANSACTIONS:
The Plan invests in shares of common stock of the Company. As the Company is the
Plan's administrator and sponsor, these transactions qualify as
party-in-interest transactions. In addition, the Plan invests in shares of
registered investment companies managed by the Vanguard Group, an affiliate of
Vanguard Trust. As Vanguard Trust is the Trustee of the Plan, these transactions
qualify as party-in-interest transactions.
7. INVESTMENTS:
Individual investments which exceed 5 percent of net assets available for Plan
benefits as of December 31, are as follows:
2000 1999
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Smith International, Inc., common stock $29,370,505 $23,848,041
Vanguard Index 500 Portfolio Fund 24,075,645 26,603,908
Vanguard Money Market Reserves Prime Portfolio 34,158,670 34,167,857
Vanguard PRIMECAP Fund 45,600,756 33,949,311
Vanguard Wellington Fund 25,760,792 24,308,035
Vanguard Windsor Fund 12,810,181 12,170,004
8. SUBSEQUENT EVENTS:
Effective January 1, 2001, the Plan was amended to include a provision under
which the Company may, at its discretion, contribute to the accounts of
participants employed on the last day of February, an amount equal to the
Company discretionary contribution that would have been contributed for the
immediately preceding Plan year had the participant's allocation not been
limited under the Code.
In connection with the purchase of certain business assets by the Company from
Van Leeuwen Pipe and Tube Corporation ("VLPT") on January 31, 2001, the Plan was
amended to give past service credit to certain employees formerly employed by
VLPT who became employees of the Company as of February 1, 2001. This past
service will include the period of such individual's employment with VLPT
through January 31, 2001.
Effective May 1, 2001, the Plan was amended and restated to incorporate all
prior Plan amendments and to conform with current law changes.
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SCHEDULE
SMITH INTERNATIONAL, INC. 401(k) RETIREMENT PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2000
Identity of Issue Description of Investment Cost Current Value
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Smith International, Inc.* Smith International, Inc., common stock (a) $ 29,370,505
Vanguard Group of
Investment Companies* Vanguard Index 500 Portfolio Fund (a) 24,075,645
Vanguard Group of
Investment Companies* Vanguard International Growth Fund (a) 5,916,562
Vanguard Group of
Investment Companies* Vanguard Long-Term Corporate Fund (a) 3,680,883
Vanguard Group of Vanguard Money Market Reserves
Investment Companies* Prime Portfolio (a) 34,158,670
Vanguard Group of
Investment Companies* Vanguard PRIMECAP Fund (a) 45,600,756
Vanguard Group of
Investment Companies* Vanguard Wellington Fund (a) 25,760,792
Vanguard Group of
Investment Companies* Vanguard Windsor Fund (a) 12,810,181
The Plan* Participant loans (highest and lowest interest
rates are 11.5% and 7.0%, respectively) (a) 9,432,055
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Total investments $190,806,049
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*Indicates a party in interest to the Plan.
(a)Cost omitted for participant-directed investments.
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: June 27, 2001 SMITH INTERNATIONAL, INC.
401(k) RETIREMENT PLAN
By: Administrative Committee for
the Smith International, Inc.
Retirement Plan
By: /s/ Neal S. Sutton
Neal S. Sutton, Member
By: /s/ Vivian M. Cline
Vivian M. Cline, Member
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INDEX TO EXHIBIT
EXHIBIT
NUMBER DESCRIPTION
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23.1 Consent of Independent Public Accountants
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