Fort Worth Firm Spent $5.5 Million to Fend Off Smith : Gearhart Profit Rises 121% in Year

Gearhart Industries of Fort Worth spent $5.5 million fighting for its independence from Smith International of Newport Beach, according to a report released Monday by Gearhart.

Despite the legal and consulting fees to fend off Smith, Gearhart posted a 121% increase in net income and 76% increase in revenue for the year ended Jan. 31. Gearhart’s technicians and high-technology equipment provide information about geology and resources to oil and gas drillers worldwide.

On March 11, Smith and Gearhart announced an $80-million settlement of Smith’s nearly yearlong fight for control of the Texas high-technology oil-services company. Smith, which manufactures drilling bits and equipment, will receive about half of what it paid to acquire 5.3 million shares of Gearhart stock.

Smith, which has been laying off both corporate and hourly workers to save money, is moving to smaller quarters in Newport Beach on April 1. The beleaguered company previously projected a loss on annual revenue of $747 million but has not yet released its year-end figures nor offered any estimates of how the takeover fight will affect those earnings.

Gearhart’s earnings included the operations of Geosource Inc., a Houston seismic services company that it acquired last July from Aetna Life & Casualty in a $318-million cash and stock transaction. Gearhart bought Geosource in an attempt to increase its size beyond Smith’s buying power.

As part of the deal, Gearhart issued 10 million new shares of stock to Aetna, increasing the total number of Gearhart shares from 16.1 million to 26.2 million.

For the fourth quarter ended Jan. 31, Gearhart’s earnings dropped 32% but revenue increased 91%. Net income was $4.6 million, compared to the $6.8 million it reported in the fourth quarter of 1984. Fourth-quarter revenue increased to $185.9 million from the $97.1 million posted in the fourth quarter of 1984.

For the year, Gearhart reported a 121% increase in net income and a 76% increase in net revenue. Net income grew from $6.4 million in fiscal 1984 to $14.3 million in fiscal 1985. Revenue increased from $316.8 million in fiscal 1984 to $560.4 million in fiscal 1985.

The annual earnings reflected $11.4 million in expenses related to the acquisition of Geosource and Geosource operations. About $5.6 million of Gearhart’s 1985 net income was attributed to certain tax benefits related to the company’s domestic international sales corporations.