(RTTNews) - Smith International Inc. (SII: News ) on Thursday posted a steep decline in third-quarter profit, largely reflecting continued pricing pressure in the U.S. operations of the Distribution and Smith Oilfield segments, and said it anticipates more favorable industry environment during 2010 with increased activity.

The Houston, Texas-based company's third-quarter net income plunged to $43.7 million from $282.9 million a year ago. Net income attributable to Smith was $7.04 million or $0.03 per share, compared to $209.8 million or $1.00 per share in the prior-year quarter.

The company said its third-quarter results were primarily influenced by unfavorable economic fundamentals in the North American natural gas market that contributed to continued pricing pressure within the U.S. operations of the Distribution and Smith Oilfield segments. Line pipe, drilling-related tubular offerings, as well as fishing and remedial services were particularly affected during the quarter.

On a non-GAAP basis, net income attributable to Smith dived to $14.8 million or $0.07 per share from $211.9 million or $1.01 per share in the same quarter of last year.

On average, 22 analysts polled by Thomson Reuters expected the company to post earnings of $0.15 per share. Analysts' estimates typically exclude special items.

Quarterly revenues declined to $1.88 billion from the previous year's revenues of $2.85 billion, and fell shy of thirteen Wall Street analysts' consensus revenue estimate of $1.91 billion.
The company added that the modest seasonal recovery of drilling activity in Canada, sequential quarter revenue growth in Latin America and the solid performance of M-I SWACO were not sufficient to mitigate the revenue and margin deterioration experienced during the third quarter of 2009.

Commenting on the results, Chief Executive Officer, John Yearwood stated, "Our operating results for the third quarter reflected a challenging U.S. environment but displayed signs of stabilization towards the end of the quarter. M-I SWACO continued its remarkable success in deepwater contract awards, winning approximately 75 percent of the total fluids contract values awarded over the first three quarters of 2009."

Due to strong customer demand and excellent drilling results, Smith's PathFinder business continued to execute on its planned international expansion. Directional drilling, measurement-while-drilling and logging-while-drilling service revenue grew at a double digit percentage, exceeding the growth rate of the U.S. non-vertical rig count.

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