MODEC, INC. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
September 30, 2006ASSETS

Thousand of Japanese yen
September 30, 2006 September 30, 2005 December 31, 2005
CURRENT ASSETS:
Cash and time deposits
Accounts receivable - trade
Inventories
Short-term loans receivable
Other current assets
Less-Allowance for bad debts
Total current assets
PROPERTY AND EQUIPMENT:
VesselBuildings and equipment
Construction in progress

INTANGIBLE ASSETSOTHER ASSETS:
Investments securities
Long-term loans receivable
Long-term lease receivable
Other investments
Less-Allowance for bad debts

Total assets¥25,046,237
12,226,699
2,493,528
27,632,686
6,191,717(4,780)73,586,087¥20,800,488
15,587,836
2,268,574
231,075
4,752,600(58,812)43,581,762¥25,061,948
16,409,320
2,237,994
255,827
4,870,110(3,013)
48,832,185

3,245,530
617,254
80,222
3,943,005

2,867,876
460,257
2,113,092
5,441,225

2,882,197
477,527
3,735,215
7,094,939

5,865,859

5,369,184

5,246,688

9,187,166
12,688,626
3,259,420
1,752,142(6,400)26,880,955

7,858,317
20,477,352
5,416,405
1,292,401(6,400)35,038,075

8,463,479
28,289,633
5,043,801
1,734,330(6,400)43,524,842¥110,275,906¥89,430,245¥104,698,654

LIABILITIES AND SHAREHOLDERS' EQUITY

Thousand of Japanese yen
September 30, 2006 September 30, 2005 December 31, 2005
CURRENT LIABILITIES:
Accounts payable - trade
Short-term loans payable
Current portion of long-term loans payable
Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term loans payableSeverance and retirement benefits
For employees
For directors and corporate auditors
Deferred tax liabilities
Other long-term liabilities
Total long-term liabilities
NET ASSETSSHAREHOLDERS' EQUITY:
Common stock;
Authorized - 102,868,000 shares
Issued - 34,008,000 shares at September
30, 2005 and 37,408,000 shares at
December 31, 2005 and September 30,
2006
Capital surplus
Retained earnings
Less-Treasury stock at cost
Total shareholders' equity
DISCREPANCIES IN APPRAISAL andCONVERSIONS:Net unrealized holding gains on securities
Foreign currency translation adjustments
Total discrepancies in appraisals andConversions
MINORITY INTERESTS INCONSOLIDATED SUBSIDIARIES:
Total net assets
Total liabilities, net assets¥21,514,123
29,089,493
3,177,973
2,259,322
2,144,548
2,035,496
60,220,955¥4,966,877
27,364,562
2,830,073
1,805,548
367,239
16,287,153
53,621,451¥18,889,959
27,960,410
3,107,316
1,692,027
345,594
4,435,813
56,431,118

7,934,396

5,753,955

6,478,169

115,895
171,483
1,384,842
148,878
9,755,494

109,207
106,781
1,637,582378,997
7,986,522

113,839
120,9441,548,182
355,674
8,616,808

12,391,600

7,159,000

12,391,600

13,121,672
11,802,314(713)
37,314,874

7,675,150
9,753,621(385)
24,587,386

13,121,672
10,434,178(547)
35,946,903

771,046
907,873929,212401,888865,195
1,031,558

1,678,919

1,331,101

1,896,753

1,305,664
40,299,456¥110,275,906

1,903,786
27,822,272¥89,430,245

1,807,072
39,650,729¥104,698,654

MODEC, INC. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For 9 months ended September 30, 2006

SALES
COST OF SALES
Gross profit

Thousand of Japanese yen
January 1, 2006
January 1, 2005
January 1, 2005
thruthru
thru
September 30, 2006 September 30, 2005 December 31, 2005
¥77,281,213¥38,865,717¥71,614,166
70,951,485
32,547,033
63,053,293
6,329,728
6,318,684
8,560,873

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Operating profit

4,200,859
2,128,870

3,203,434
3,115,250

4,665,333
3,895,540

OTHER INCOME (EXPENSES):Interest income
Dividend income
Interest expense
Foreign exchange gain(loss), net
Equity in earnings of affiliates
Other, net
Total other income (expenses)

2,520,674
7,046(1,795,992)(930,924)
790,073
85,311
676,189

746,968
783(816,051)
379,293443,269
168,995
923,257

1,282,217
5,509(1,261,365)
580,714763,396
142,047
1,512,518

INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS

2,805,059

4,038,507

5,408,058

INCOME TAXES:
Current
Deferred

1,998,653(1,048,560)

627,101
448,633

1,010,252
841,903

INCOME BEFORE MINORITY INTERESTS

1,854,965

2,962,772

3,555,903

69,023

430,327

342,901¥1,785,942¥2,532,445¥3,213,002

MINORITY INTERESTSNET INCOME