The Rise and Fall of Smith International

1936--H. C. Smith buys small oil tool company and names it Smith Oil Tool. Name later changed to Smith International and corporate headquarters moved from Los Angeles County to Newport Beach.

1965--Jerry Neely joins Smith International as a manager.

1972--Fred Barnes joins Smith as controller.

Hughes Tool Co. of Houston files patent infringement suit against Smith, alleging Smith had used a Hughes-patented rubber seal in its oil well drill bits.

1975--Neely named president and chief operating officer.

Neely warns in a prophetic speech that, while oil drilling equipment companies are doing well now, they face tough challenges and only those with “fantastic” annual earnings will survive.

1977--Neely named chairman, president and chief executive.

1979--Hughes wins patent infringement suit; Smith appeals.

1981--Smith’s annual sales top $1 billion.

1982--Employment reaches historic peak of 14,000.

Smith adopts “golden parachute” severance pay plan that covers 31 top executives, the broadest such coverage in California corporate history.

Slump in oil industry causes string of layoffs to begin in August.

Whittaker Corp. of Los Angeles buys 8% of Smith’s stock and says it will boost holding to 23% as an investment. Smith vows to fight any takeover attempt.

Appeals court upholds Hughes’ patent infringement victory.

Smith reports first drop in annual profits in 12 years.

1983--Smith closes its 2-year-old San Bernardino drill bit manufacturing plant. Layoffs continue; total employment falls to 7,800 by end of February.

Smith reports first quarterly loss in 20 years.

Bass family of Fort Worth joins Whittaker Corp. to fight Smith plan to reincorporate in Delaware. Bass Bros. Group is second-largest shareholder with 6.4%, or 1.44 million shares.

Whittaker cancels plan to buy more Smith stock, cuts holding to 1.6 million shares, or 7.2%.

Smith completes purchase of 23% of Gearhart Industries of Fort Worth.

1984--Smith boosts Gearhart holdings to 33% and makes tender offer for 56.3% of company.

Gearhart obtains federal injunction blocking Smith’s tender offer; Smith appeals.

1985--Smith begins year by laying off 700 workers.

Smith sells its 33% stake in Gearhart for a loss of about $80 million.

Smith sets aside $22.8-million reserve to help pay anticipated damage award to Hughes.

Whittaker Corp. sells entire stake in Smith for $26.2-million loss in November.

Damage portion of patent infringement trial begins in federal court in Los Angeles on Dec. 30.

1986--Federal judge rules Feb. 14 that Smith must pay Hughes damages of about $207 million. A final ruling is expected this month. Smith lays off 357 workers that same day.

On Feb. 18, Smith says it may default on $260 million in loans.

Smith announces 700 more layoffs Feb. 26. Total employment now below 5,500.

Smith acknowledges on Feb. 27 that Neely has resigned from boards of directors of Security Pacific Corp. and Security Pacific National Bank, among Smith’s largest creditors.

Smith files on March 7 for reorganization and protection from creditors under Chapter 11 of U.S. Bankruptcy Code.