Smith International Inc. Reports $39.8 Million Loss

Smith International Inc., an ailing Newport Beach oil services company, Thursday reported a second quarter loss of $39.8 million, mostly due to reserves established for continuing litigation.

The second quarter loss contrasted sharply with net income of $625,000 in the second quarter of 1984. Revenues for the quarter ended June 30, decreased slightly to $174.6 million from the $180 million posted a year earlier.

Second quarter earnings were impacted by a previously announced $22.8 million reserve set aside to cover possible damages relating to a 13-year-old legal battle with the Hughes Tool Co. Hughes is seeking about $3 billion in damages from Smith. In addition, Smith set aside $5 million to cover estimated legal expenses related to the suit.

For the first half of 1985, Smith lost $50.1 million, compared with net income of $3.9 million a year earlier. Revenues fell to $349.5 million from $352.2 million.

Company officials said the devaluation of the Mexican peso and increased price discounting throughout the oil field services industry also affected second quarter results.