##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
   o
 
 1-8514
 Smith International, Inc.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    95-3822631
(I.R.S. Employer Identification No.)
 411 North Sam Houston Parkway, Suite 600
Houston, Texas
(Address of principal executive offices)
    
    77060
(Zip Code)
 (281) 443-3370
 
 þ o
  þ o o
 o þ




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##### 



INDEX
 Page No.PART I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONSFor the Three Months ended March 31, 2007 and 2006
    
    
    2CONSOLIDATED CONDENSED BALANCE SHEETSAs of March 31, 2007 and December 31, 2006
    
    
    3CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWSFor the Three Months ended March 31, 2007 and 2006
    
    
    4NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
    
    
    5Item 2.
    
    Managements
Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    18PART II  OTHER INFORMATIONItems 1-5
    
    
    19Item 6
    
    
    
    
    20SIGNATURES
    
    
    21EXHIBIT INDEX
    
    
    22




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 SMITH INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 Three Months EndedMarch 31,2007
    
    
    2006Revenues
    
    $
    2,107,724
    
    
    $
    1,682,121Costs and expenses:Costs of revenues
    
    
    1,431,759
    
    
    
    1,155,518Selling expenses
    
    
    272,333
    
    
    
    221,194General and administrative expenses
    
    
    72,504
    
    
    
    68,291Total costs and expenses
    
    
    1,776,596
    
    
    
    1,445,003Operating income
    
    
    331,128
    
    
    
    237,118Interest expense
    
    
    18,534
    
    
    
    12,836Interest income
    
    
    (764
    )
    
    
    (597
    )Income before income taxes and minority interests
    
    
    313,358
    
    
    
    224,879Income tax provision
    
    
    93,099
    
    
    
    72,662Minority interests
    
    
    60,101
    
    
    
    45,001Net income
    
    $
    160,158
    
    
    $
    107,216Earnings per share:Basic
    
    $
    0.80
    
    
    $
    0.53Diluted
    
    $
    0.80
    
    
    $
    0.53Weighted average shares outstanding:Basic
    
    
    199,980
    
    
    
    200,995Diluted
    
    
    201,426
    
    
    
    202,527
  2




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##### 



SMITH INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
 March 31,
    
    
    December 31,2007
    
    
    2006AssetsCurrent Assets:Cash and cash equivalents
    
    $
    93,059
    
    
    $
    80,379Receivables, net
    
    
    1,662,938
    
    
    
    1,592,230Inventories, net
    
    
    1,530,843
    
    
    
    1,457,371Deferred tax assets, net
    
    
    40,066
    
    
    
    51,070Prepaid expenses and other
    
    
    101,213
    
    
    
    89,977Total current assets
    
    
    3,428,119
    
    
    
    3,271,027Property, Plant and Equipment, net
    
    
    925,954
    
    
    
    887,044Goodwill, net
    
    
    869,847
    
    
    
    867,647Other Intangible Assets, net
    
    
    142,611
    
    
    
    141,140Other Assets
    
    
    181,280
    
    
    
    168,617Total Assets
    
    $
    5,547,811
    
    
    $
    5,335,475Liabilities and Stockholders EquityCurrent Liabilities:Short-term borrowings and current portion of long-term debt
    
    $
    317,933
    
    
    $
    287,704Accounts payable
    
    
    624,362
    
    
    
    654,215Accrued payroll costs
    
    
    92,412
    
    
    
    154,756Income taxes payable
    
    
    122,833
    
    
    
    130,339Other
    
    
    149,667
    
    
    
    152,454Total current liabilities
    
    
    1,307,207
    
    
    
    1,379,468Long-Term Debt
    
    
    826,617
    
    
    
    800,928Deferred Tax Liabilities
    
    
    152,512
    
    
    
    143,124Other Long-Term Liabilities
    
    
    139,002
    
    
    
    102,904Minority Interests
    
    
    981,308
    
    
    
    922,114Commitments and Contingencies (Note 12)Stockholders Equity:Preferred stock, $1 par value; 5,000 shares authorized; no
shares issued or outstanding in 2007 or 2006
    
    
    
    
    
    
    Common stock, $1 par value; 250,000 shares authorized;
215,987 shares issued in 2007(214,947 shares issued in 2006)
    
    
    215,987
    
    
    
    214,947Additional paid-in capital
    
    
    468,861
    
    
    
    442,155Retained earnings
    
    
    1,792,440
    
    
    
    1,653,480Accumulated other comprehensive income
    
    
    28,063
    
    
    
    23,227Less  Treasury securities, at cost; 15,464 common shares
in 2007 (15,031 common shares in 2006)
    
    
    (364,186
    )
    
    
    (346,872
    )Total stockholders equity
    
    
    2,141,165
    
    
    
    1,986,937Total Liabilities and Stockholders Equity
    
    $
    5,547,811
    
    
    $
    5,335,475
  3




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##### 



SMITH INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    160,158
    
    
    $
    107,216Adjustments to reconcile net income to net cash provided
by operating activities, excluding the net effects of
acquisitions:Minority interests
    
    
    60,101
    
    
    
    45,001Depreciation and amortization
    
    
    44,380
    
    
    
    33,263Deferred income tax provision (benefit)
    
    
    22,262
    
    
    
    (811
    )Increase in LIFO inventory reserves
    
    
    18,738
    
    
    
    14,076Share-based compensation expense
    
    
    8,256
    
    
    
    6,698Provision for losses on receivables
    
    
    407
    
    
    
    2,123Foreign currency translation losses
    
    
    242
    
    
    
    1,274Gain on disposal of property, plant and equipment
    
    
    (7,341
    )
    
    
    (4,556
    )Equity earnings, net of dividends received
    
    
    (5,485
    )
    
    
    (3,588
    )Changes in operating assets and liabilities:Receivables
    
    
    (76,722
    )
    
    
    (137,990
    )Inventories
    
    
    (90,652
    )
    
    
    (115,354
    )Accounts payable
    
    
    (30,489
    )
    
    
    57,895Other current assets and liabilities
    
    
    (52,774
    )
    
    
    (15,265
    )Other non-current assets and liabilities
    
    
    (9,876
    )
    
    
    12,641Net cash provided by operating activities
    
    
    41,205
    
    
    
    2,623Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (1,865
    )
    
    
    (47,992
    )Purchases of property, plant and equipment
    
    
    (76,833
    )
    
    
    (56,778
    )Proceeds from disposal of property, plant and equipment
    
    
    14,673
    
    
    
    7,625Net cash used in investing activities
    
    
    (64,025
    )
    
    
    (97,145
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    43,171
    
    
    
    75,881Principal payments of long-term debt
    
    
    (16,389
    )
    
    
    (167
    )Net change in short-term borrowings
    
    
    29,136
    
    
    
    66,698Purchases of common stock under Repurchase Program
    
    
    (13,920
    )
    
    
    (38,994
    )Net proceeds related to long-term incentive awards
    
    
    9,020
    
    
    
    6,272Payment of common stock dividends
    
    
    (15,977
    )
    
    
    (12,043
    )Net cash provided by financing activities
    
    
    35,041
    
    
    
    97,647Effect of exchange rate changes on cash
    
    
    459
    
    
    
    105Increase in cash and cash equivalents
    
    
    12,680
    
    
    
    3,230Cash and cash equivalents at beginning of period
    
    
    80,379
    
    
    
    62,543Cash and cash equivalents at end of period
    
    $
    93,059
    
    
    $
    65,773Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    18,766
    
    
    $
    18,939Cash paid for income taxes
    
    
    42,966
    
    
    
    36,067
  4




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##### 



SMITH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 1. Basis of Presentation of Interim Financial Statements
    2. Recent Accounting Pronouncements
    3. Earnings Per Share
  Three Months Ended March 31,2007
    
    
    2006Basic EPS:Net income
    
    $
    160,158
    
    
    $
    107,216Weighted average number of common shares outstanding
    
    
    199,980
    
    
    
    200,995Basic EPS
    
    $
    0.80
    
    
    $
    0.53Diluted EPS:Net income
    
    $
    160,158
    
    
    $
    107,216Weighted average number of common shares outstanding
    
    
    199,980
    
    
    
    200,995Dilutive effect of stock options and restricted stock units
    
    
    1,446
    
    
    
    1,532201,426
    
    
    
    202,527Diluted EPS
    
    $
    0.80
    
    
    $
    0.53
 5




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##### 



4. Inventories
  March 31,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    137,435
    
    
    $
    117,812Work-in-process
    
    
    150,894
    
    
    
    147,543Finished goods
    
    
    1,354,794
    
    
    
    1,285,5581,643,123
    
    
    
    1,550,913Reserves to state certain U.S.
inventories (FIFO cost of $632,272
and $559,943 in 2007 and
2006, respectively) on a LIFO
basis
    
    
    (112,280
    )
    
    
    (93,542
    )$
    1,530,843
    
    
    $
    1,457,371
  5. Property, Plant and Equipment
  March 31,
    
    
    December 31,2007
    
    
    2006Land
    
    $
    58,770
    
    
    $
    55,138Buildings
    
    
    191,985
    
    
    
    181,419Machinery and equipment
    
    
    747,865
    
    
    
    717,761Rental tools
    
    
    620,625
    
    
    
    597,4681,619,245
    
    
    
    1,551,786Less  Accumulated depreciation
    
    
    (693,291
    )
    
    
    (664,742
    )$
    925,954
    
    
    $
    887,044
 6. Goodwill and Other Intangible Assets
 Goodwill
  Oilfield
    
    
    Distribution
    
    
    ConsolidatedBalance as of December 31, 2006
    
    $
    826,996
    
    
    $
    40,651
    
    
    $
    867,647Goodwill acquired
    
    
    
    
    
    
    1,721
    
    
    
    1,721Purchase price and other adjustments
    
    
    (384
    )
    
    
    863
    
    
    
    479Balance as of March 31, 2007
    
    $
    826,612
    
    
    $
    43,235
    
    
    $
    869,847
 6




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##### 



Other Intangible Assets
  March 31, 2007
    
    December 31, 2006
    
    WeightedAverageGross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    AmortizationCarrying
    
    Accumulated
    
    
    
    
    
    Carrying
    
    Accumulated
    
    
    
    
    
    PeriodAmount
    
    Amortization
    
    Net
    
    Amount
    
    Amortization
    
    Net
    
    (years)Patents
    
    $
    111,414
    
    
    $
    24,692
    
    
    $
    86,722
    
    
    $
    101,269
    
    
    $
    19,547
    
    
    $
    81,722
    
    
    
    12.9License
agreements
    
    
    31,688
    
    
    
    11,548
    
    
    
    20,140
    
    
    
    31,231
    
    
    
    10,661
    
    
    
    20,570
    
    
    
    10.4Non-compete
agreements and
trademarks
    
    
    33,421
    
    
    
    16,937
    
    
    
    16,484
    
    
    
    33,421
    
    
    
    15,662
    
    
    
    17,759
    
    
    
    9.3Customer lists
and contracts
    
    
    29,403
    
    
    
    10,138
    
    
    
    19,265
    
    
    
    29,403
    
    
    
    8,314
    
    
    
    21,089
    
    
    
    9.4$
    205,926
    
    
    $
    63,315
    
    
    $
    142,611
    
    
    $
    195,324
    
    
    $
    54,184
    
    
    $
    141,140
    
    
    
    11.6
  7. Income Taxes
     Earliest OpenJurisdiction
    
    Tax PeriodCanada
    
    
    2000Italy
    
    
    2000Norway
    
    
    1997Russia
    
    
    2004United Kingdom
    
    
    1999United States
    
    
    1999
 7




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##### 



8. Comprehensive Income
  Three Months Ended March 31,2007
    
    
    2006Net income
    
    $
    160,158
    
    
    $
    107,216Currency translation adjustments
    
    
    4,573
    
    
    
    589Changes in unrealized fair value of derivatives, net
    
    
    263
    
    
    
    Pension liability adjustments
    
    
    
    
    
    
    (543
    )Comprehensive income
    
    $
    164,994
    
    
    $
    107,262
  March 31,
    
    
    December 31,2007
    
    
    2006Currency translation adjustments
    
    $
    30,128
    
    
    $
    25,555Unrealized fair value of derivatives
    
    
    512
    
    
    
    249Pension liability adjustments
    
    
    (2,577
    )
    
    
    (2,577
    )Accumulated other comprehensive income
    
    $
    28,063
    
    
    $
    23,227
 9. Employee Benefit Plans
  10. Long-Term Incentive Compensation
  Restricted Stock
  Time-based Awards
    
    
    Performance-based AwardsTotalNo. of
    
    
    Fair
    
    
    No. of
    
    
    Fair
    
    
    RestrictedUnits
    
    
    Value(a)
    
    
    Units
    
    
    Value(a)
    
    
    Stock UnitsOutstanding at December 31, 2006
    
    
    524,552
    
    
    $
    40.84
    
    
    
    1,565,649
    
    
    $
    39.64
    
    
    
    2,090,201Granted
    
    
    20,700
    
    
    
    42.32
    
    
    
    
    
    
    
    
    
    
    
    20,700Forfeited
    
    
    (2,419
    )
    
    
    37.01
    
    
    
    (6,937
    )
    
    
    38.44
    
    
    
    (9,356
    )Vested
    
    
    (350
    )
    
    
    27.03
    
    
    
    (301,724
    )
    
    
    38.74
    
    
    
    (302,074
    )Outstanding at March 31, 2007
    
    
    542,483
    
    
    $
    40.92
    
    
    
    1,256,988
    
    
    $
    39.86
    
    
    
    1,799,471
 
 (a)
    
    Reflects the weighted average grant-date fair value.  8




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##### 



Stock Options
  WeightedWeighted
    
    
    Average
    
    
    AggregateShares
    
    
    Average
    
    
    Remaining
    
    
    IntrinsicUnder
    
    
    Exercise
    
    
    Contractual
    
    
    ValueOption
    
    
    Price
    
    
    Life
    
    
    (in thousands)Outstanding at December 31, 2006
    
    
    3,351,381
    
    
    $
    18.78Granted
    
    
    
    
    
    
    Forfeited
    
    
    (7,370
    )
    
    
    22.42Exercised
    
    
    (738,150
    )
    
    
    16.80Outstanding at March 31, 2007
    
    
    2,605,861
    
    
    $
    19.33
    
    
    
    6.2
    
    
    $
    74,841Exercisable at March 31, 2007
    
    
    1,848,539
    
    
    $
    17.92
    
    
    
    5.8
    
    
    $
    55,690
 Share-based Compensation Expense
  11. Industry Segments
  Three Months Ended March 31,2007
    
    
    2006Revenues:Oilfield
    
    $
    1,561,684
    
    
    $
    1,211,608Distribution
    
    
    546,040
    
    
    
    470,513$
    2,107,724
    
    
    $
    1,682,121Revenues by Area:United States
    
    $
    961,504
    
    
    $
    743,311Canada
    
    
    237,139
    
    
    
    268,887North America
    
    
    1,198,643
    
    
    
    1,012,198Latin America
    
    
    148,338
    
    
    
    124,497Europe/Africa
    
    
    478,678
    
    
    
    344,371Middle East/Asia
    
    
    282,065
    
    
    
    201,055Non-North America
    
    
    909,081
    
    
    
    669,923$
    2,107,724
    
    
    $
    1,682,121Operating Income:Oilfield
    
    $
    311,013
    
    
    $
    219,795Distribution
    
    
    29,235
    
    
    
    26,026General corporate
    
    
    (9,120
    )
    
    
    (8,703
    )$
    331,128
    
    
    $
    237,118
 9




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##### 



12. Commitments and Contingencies
 Standby Letters of Credit
  Litigation
 Rose Dove Egle v. John M. Egle, et al.
 Rose Dove Egle v. John M. Egle, et
al.
 Other
  Environmental
   10




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
  Company Products and Operations
    Business Outlook
   11




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##### 



Forward-Looking Statements
  12




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##### 



Results of Operations
 Segment Discussion
  Three Months Ended March 31,2007
    
    
    2006Amount
    
    
    %
    
    
    Amount
    
    
    %Financial Data:(dollars in thousands)Revenues:M-I SWACO
    
    $
    1,035,084
    
    
    
    49
    
    
    $
    802,550
    
    
    
    48Smith Technologies (1)
    
    
    244,091
    
    
    
    12
    
    
    
    200,412
    
    
    
    12Smith Services (1)
    
    
    282,509
    
    
    
    13
    
    
    
    208,646
    
    
    
    12Oilfield
    
    
    1,561,684
    
    
    
    74
    
    
    
    1,211,608
    
    
    
    72Distribution
    
    
    546,040
    
    
    
    26
    
    
    
    470,513
    
    
    
    28Total
    
    $
    2,107,724
    
    
    
    100
    
    
    $
    1,682,121
    
    
    
    100Geographic Revenues:United States:Oilfield
    
    $
    574,925
    
    
    
    27
    
    
    $
    444,222
    
    
    
    26Distribution
    
    
    386,579
    
    
    
    19
    
    
    
    299,089
    
    
    
    18Total United States
    
    
    961,504
    
    
    
    46
    
    
    
    743,311
    
    
    
    44Canada:Oilfield
    
    
    106,655
    
    
    
    5
    
    
    
    116,333
    
    
    
    7Distribution
    
    
    130,484
    
    
    
    6
    
    
    
    152,554
    
    
    
    9Total Canada
    
    
    237,139
    
    
    
    11
    
    
    
    268,887
    
    
    
    16Non-North America:Oilfield
    
    
    880,104
    
    
    
    42
    
    
    
    651,053
    
    
    
    39Distribution
    
    
    28,977
    
    
    
    1
    
    
    
    18,870
    
    
    
    1Total Non-North America
    
    
    909,081
    
    
    
    43
    
    
    
    669,923
    
    
    
    40Total Revenue
    
    $
    2,107,724
    
    
    
    100
    
    
    $
    1,682,121
    
    
    
    100Operating Income:Oilfield
    
    $
    311,013
    
    
    
    20
    
    
    $
    219,795
    
    
    
    18Distribution
    
    
    29,235
    
    
    
    5
    
    
    
    26,026
    
    
    
    6General Corporate
    
    
    (9,120
    )
    
    
    *
    
    
    
    (8,703
    )
    
    
    *Total
    
    $
    331,128
    
    
    
    16
    
    
    $
    237,118
    
    
    
    14Market Data:Average
Worldwide Rig Count:(2)United States
    
    
    1,899
    
    
    
    45
    
    
    
    1,808
    
    
    
    45Canada
    
    
    483
    
    
    
    11
    
    
    
    576
    
    
    
    14Non-North America
    
    
    1,890
    
    
    
    44
    
    
    
    1,644
    
    
    
    41Total
    
    
    4,272
    
    
    
    100
    
    
    
    4,028
    
    
    
    100Onshore
    
    
    3,733
    
    
    
    87
    
    
    
    3,494
    
    
    
    87Offshore
    
    
    539
    
    
    
    13
    
    
    
    534
    
    
    
    13Total
    
    
    4,272
    
    
    
    100
    
    
    
    4,028
    
    
    
    100Average Commodity Prices:Crude Oil ($/Bbl)(3)
    
    $
    58.23
    
    
    
    
    
    
    $
    63.48Natural Gas ($/mcf)(4)
    
    $
    7.18
    
    
    
    
    
    
    $
    7.84
 
 (1)
    In 2007, the Company formed the
Smith Borehole Enlargement (SBE) group, combining various product and service offerings from
Smith Technologies and Smith Services. Due to the formation of SBE, prior period revenues were
reclassified to conform to the current
presentation.(2)
    Source: M-I SWACO.(3)
    Average daily West Texas Intermediate (WTI) spot closing prices, as quoted by NYMEX.(4)
    Average daily Henry Hub, Louisiana spot closing prices, as quoted by NYMEX.*
    not meaningful 13




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##### 



Oilfield Segment
 Revenues
  ®
  Operating Income
  14




---



##### 



Distribution Segment
 Revenues
  Operating Income
  Consolidated Results
  Three Months Ended March 31,2007
    
    
    2006Amount
    
    
    %
    
    
    Amount
    
    
    %Revenues
    
    $
    2,107,724
    
    
    
    100
    
    
    $
    1,682,121
    
    
    
    100Gross profit
    
    
    675,965
    
    
    
    32
    
    
    
    526,603
    
    
    
    31Operating expenses
    
    
    344,837
    
    
    
    16
    
    
    
    289,485
    
    
    
    17Operating income
    
    
    331,128
    
    
    
    16
    
    
    
    237,118
    
    
    
    14Interest expense
    
    
    18,534
    
    
    
    1
    
    
    
    12,836
    
    
    
    1Interest income
    
    
    (764
    )
    
    
    
    
    
    
    (597
    )
    
    
    Income before income taxes and minority interests
    
    
    313,358
    
    
    
    15
    
    
    
    224,879
    
    
    
    13Income tax provision
    
    
    93,099
    
    
    
    4
    
    
    
    72,662
    
    
    
    4Minority interests
    
    
    60,101
    
    
    
    3
    
    
    
    45,001
    
    
    
    3Net income
    
    $
    160,158
    
    
    
    8
    
    
    $
    107,216
    
    
    
    6
  15




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##### 



Liquidity and Capital Resources
 General
     16




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##### 



Commitments and Contingencies
 Standby Letters of Credit
  Litigation
 Rose Dove Egle v. John M. Egle, et al.
 Rose Dove Egle v. John M. Egle, et
al.
 Other
  17




---



##### 



Environmental
   Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
    
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
 Changes in internal control over financial reporting.
 18




---



##### 



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Total Number of
    
    
    Number of SharesShares Purchased as
    
    
    that May Yet BeTotal Number
    
    
    Average Price Paid
    
    
    Part of Publicly
    
    
    Purchased UnderPeriod
    
    of Shares Purchased
    
    
    per Share
    
    
    Announced Program
    
    
    the ProgramJanuary 1  January 31
    
    
    234,800
    
    
    $
    37.03
    
    
    
    234,800
    
    
    
    17,029,413February 1  February 28
    
    
    33,100
    
    
    
    40.28
    
    
    
    33,100
    
    
    
    16,996,313March 1  March 31
    
    
    82,100
    
    
    
    47.41
    
    
    
    82,100
    
    
    
    16,914,2131st Quarter 2007
    
    
    350,000
    
    
    $
    39.77
    
    
    
    350,000
    
    
    
    16,914,213
 Item 3. Defaults upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
  19




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##### 



Item 6. Exhibits
  Exhibit Number
    
    Description3.1
    
    Restated Certificate of Incorporation of the Company, dated July 26, 2005. Filed as Exhibit
3.4 to the Companys report on Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference.3.2
    
    Restated Bylaws of the Company. Filed as Exhibit 3.3 to the Companys report on Form 10-K
for the year ended December 31, 2004 and incorporated herein by reference.10.1
    
    Form of Director Indemnification Agreement. Filed as Exhibit 10.28 to the Companys report on
Form 10-K for the year ended December 31, 2006 and incorporated herein by reference.31.1*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14 or 15d-14 of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14 or 15d-14 of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1**
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 20




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##### 



SIGNATURES
  SMITH INTERNATIONAL, INC.
RegistrantDate: May 10, 2007
    By:
    /s/ Doug RockDoug RockChairman of the Board, Chief Executive Officer,
President and Chief Operating Officer
(principal executive officer) Date: May 10, 2007
    By:
    /s/ Margaret K. DormanMargaret K. DormanSenior Vice President,
Chief Financial Officer and Treasurer
(principal financial and accounting officer) 21




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##### 



EXHIBIT INDEX
  Exhibit Number
    
    Description3.1
    
    Restated Certificate of Incorporation of the Company, dated July 26, 2005. Filed as Exhibit
3.4 to the Companys report on Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference.3.2
    
    Restated Bylaws of the Company. Filed as Exhibit 3.3 to the Companys report on Form 10-K
for the year ended December 31, 2004 and incorporated herein by reference.10.1
    
    Form of Director Indemnification Agreement. Filed as Exhibit 10.28 to the Companys report on
Form 10-K for the year ended December 31, 2006 and incorporated herein by reference.31.1*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14 or 15d-14 of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14 or 15d-14 of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1**
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 22