<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
----------- ----------
Commission File Number 1-8514
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
M-I RETIREMENT PLAN
P.O. BOX 42842
HOUSTON, TX 77242-2842
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Smith International, Inc.
16740 Hardy Street
Houston, Texas 77032
<PAGE> 2
The following financial statements and exhibits are filed as a part of this
annual report:
<TABLE>
<CAPTION>
Sequentially
Numbered
Page
--------------
<S> <C>
(a) Index to Financial Statements and Supplementary
Information:
Report of Independent Public Accountants....................................... 4
Statements of Net Assets Available for Plan
Benefits at December 31, 1997 and 1996......................................... 5
Statements of Changes in Net Assets Available
for Plan Benefits for the year ended December 31,
1997........................................................................... 7
Notes to financial statements.................................................. 8
Supplementary Information:
Schedule 1 - Assets held for Investment Purposes............................... 13
Schedule 2 - Reportable Transactions........................................... 14
</TABLE>
2
<PAGE> 3
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 26, 1998
M-I RETIREMENT PLAN
By: M-I L.L.C.
By: /s/ Geri D. Wilde
-----------------------
Geri D. Wilde,
Assistant Treasurer
3
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Employee Benefits Committee of
M-I L.L.C.
M-I Retirement Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the M-I Retirement Plan (the Plan) as of December 31, 1997 and 1996,
and the related statement of changes in net assets available for plan benefits
for the year ended December 31, 1997. These financial statements and the
schedules referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Plan's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for Plan benefits of the Plan as
of December 31, 1997 and 1996, and the changes in its net assets available for
Plan benefits for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of December 31, 1997 (Schedule I), and schedule of
reportable transactions - series transactions for the year ended December 31,
1997 (Schedule II), are presented for purposes of additional analysis and are
not a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The fund information in the statements of net assets available for plan
benefits and the statement of changes in net assets available for plan benefits
is presented for purposes of additional analysis rather than to present the net
assets available for Plan benefits and changes in net assets available for Plan
benefits of each fund. The supplemental schedules and fund information have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
June 12, 1998
4
<PAGE> 5
M-I L.L.C.
M-I RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Participant-Directed
---------------------------------------------------------------------------------
Vanguard Smith Long-
Retirement International, Term VMMR
Savings Inc., Vanguard Vanguard Corporate Prime
Trust Stock Wellington Windsor Bond Portfolio
Fund Fund Fund Fund Fund Fund
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments-
Registered investment companies $ -- $ -- $37,254,803 $12,392,408 $ 1,311,898 $ 2,072,422
Vanguard Retirement Savings Trust 10,372,200 -- -- -- -- --
Smith International, Inc., common stock -- 9,603,241 -- -- -- --
Loans to participants -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investments 10,372,200 9,603,241 37,254,803 12,392,408 1,311,898 2,072,422
Receivables-
Participant contributions 124,072 45,869 300,053 111,483 11,067 21,084
Company contributions 74,379 125,490 1,478,273 190,708 12,272 17,118
Loan repayments 43,843 11,424 56,590 35,792 4,308 7,285
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $10,614,494 $ 9,786,024 $39,089,719 $12,730,391 $ 1,339,545 $ 2,117,909
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Participant-Directed
----------------------------------------
Vanguard
Index International
500 Vanguard Growth
Portfolio PRIMECAP Portfolio Loan
Fund Fund Fund Fund Total
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments-
Registered investment companies $ 3,454,438 $ 6,477,037 $ 1,032,719 $ -- $63,995,725
Vanguard Retirement Savings Trust -- -- -- -- 10,372,200
Smith International, Inc., common stock -- -- -- -- 9,603,241
Loans to participants -- -- -- 4,404,522 4,404,522
----------- ----------- ----------- ----------- -----------
Total investments 3,454,438 6,477,037 1,032,719 4,404,522 88,375,688
Receivables-
Participant contributions 34,491 57,019 13,680 -- 718,818
Company contributions 95,197 162,438 36,811 -- 2,192,686
Loan repayments 6,605 15,192 2,888 -- 183,927
----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 3,590,731 $ 6,711,686 $ 1,086,098 $ 4,404,522 $91,471,119
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
M-I L.L.C.
M-I RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Participant-Directed
---------------------------------------------------------------------------------
Vanguard Smith Long-
Investment International, Term VMMR
Contract Inc., Vanguard Vanguard Corporate Prime
Trust Stock Wellington Windsor Bond Portfolio
Fund Fund Fund Fund Fund Fund
----------- -------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments-
Registered investment companies $ -- $ -- $29,559,107 $ 8,751,899 $ 929,778 $ 2,261,630
Vanguard Investment Contract Trust 11,358,406 -- -- -- -- --
Smith International, Inc., common stock -- 4,107,039 -- -- -- --
Loans to participants -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total investments 11,358,406 4,107,039 29,559,107 8,751,899 929,778 2,261,630
Receivables-
Participant contributions 91,366 15,704 135,200 63,397 7,905 13,217
Company contributions 61,670 79,105 1,209,133 129,992 7,927 8,549
Loan repayments 32,754 4,648 30,899 21,524 3,580 3,893
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $11,544,196 $ 4,206,496 $30,934,339 $ 8,966,812 $ 949,190 $ 2,287,289
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Participant-Directed
----------------------------------------
Vanguard
Index International
500 Vanguard Growth
Portfolio PRIMECAP Portfolio Loan
Fund Fund Fund Fund Total
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments-
Registered investment companies $ 1,804,269 $ 3,343,178 $ 1,307,888 $ -- $47,957,749
Vanguard Investment Contract Trust -- -- -- -- 11,358,406
Smith International, Inc., common stock -- -- -- -- 4,107,039
Loans to participants -- -- -- 3,594,835 3,594,835
----------- ----------- ----------- ----------- -----------
Total investments 1,804,269 3,343,178 1,307,888 3,594,835 67,018,029
Receivables-
Participant contributions 12,550 25,978 9,279 -- 374,596
Company contributions 57,181 90,489 35,809 -- 1,679,855
Loan repayments 3,031 7,951 2,385 -- 110,665
----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 1,877,031 $ 3,467,596 $ 1,355,361 $ 3,594,835 $69,183,145
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE> 7
M-I L.L.C.
M-I RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Participant-Directed
-----------------------------------------------------------------------------------
Vanguard Smith Long-
Retirement International, Term VMMR
Savings Inc., Vanguard Vanguard Corporate Prime
Trust Stock Wellington Windsor Bond Portfolio
Fund Fund Fund Fund Fund Fund
----------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT DECEMBER 31, 1996 $11,544,196 $ 4,206,496 $30,934,339 $ 8,966,812 $ 949,190 $ 2,287,289
----------- ----------- ----------- ----------- ----------- -----------
PLAN ADDITIONS:
Interest and dividends 655,138 -- 3,171,502 1,978,151 80,864 133,142
Net realized gain on sale of investments -- 1,212,885 583,080 307,390 3,604 --
Net unrealized appreciation (depreciation)
of investments -- (102,378) 3,274,339 (149,975) 57,576 --
----------- ----------- ----------- ----------- ----------- -----------
655,138 1,110,507 7,028,921 2,135,566 142,044 133,142
----------- ----------- ----------- ----------- ----------- -----------
Contributions-
Company 167,986 261,522 3,571,506 419,928 24,967 34,646
Participants 1,135,105 335,447 3,230,320 963,019 93,950 170,920
----------- ----------- ----------- ----------- ----------- -----------
1,303,091 596,969 6,801,826 1,382,947 118,917 205,566
----------- ----------- ----------- ----------- ----------- -----------
Total additions 1,958,229 1,707,476 13,830,747 3,518,513 260,961 338,708
----------- ----------- ----------- ----------- ----------- -----------
PLAN DEDUCTIONS:
Benefits paid to participants 519,377 129,002 1,716,111 319,728 46,633 57,628
Administrative expenses -- -- -- -- -- 19,736
INTERFUND TRANSFERS, net (2,368,554) 4,001,054 (3,959,256) 564,794 176,027 (430,724)
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT DECEMBER 31, 1997 $10,614,494 $ 9,786,024 $39,089,719 $12,730,391 $ 1,339,545 $ 2,117,909
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Participant-Directed
----------------------------------------
Vanguard
Index International
500 Vanguard Growth
Portfolio PRIMECAP Portfolio Loan
Fund Fund Fund Fund Total
----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT DECEMBER 31, 1996 $ 1,877,031 $ 3,467,596 $ 1,355,361 $ 3,594,835 $69,183,145
----------- ----------- ----------- ----------- -----------
PLAN ADDITIONS:
Interest and dividends 69,351 228,205 45,031 302,739 6,664,123
Net realized gain on sale of investments 107,634 299,746 34,708 -- 2,549,047
Net unrealized appreciation (depreciation)
of investments 568,525 889,577 (29,403) -- 4,508,261
----------- ----------- ----------- ----------- -----------
745,510 1,417,528 50,336 302,739 13,721,431
----------- ----------- ----------- ----------- -----------
Contributions-
Company 197,843 322,010 87,849 -- 5,088,257
Participants 240,320 418,985 123,207 -- 6,711,273
----------- ----------- ----------- ----------- -----------
438,163 740,995 211,056 -- 11,799,530
----------- ----------- ----------- ----------- -----------
Total additions 1,183,673 2,158,523 261,392 302,739 25,520,961
----------- ----------- ----------- ----------- -----------
PLAN DEDUCTIONS:
Benefits paid to participants 679 281,318 32,177 110,598 3,213,251
Administrative expenses -- -- -- -- 19,736
INTERFUND TRANSFERS, net 530,706 1,366,885 (498,478) 617,546 --
----------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT DECEMBER 31, 1997 $ 3,590,731 $ 6,711,686 $ 1,086,098 $ 4,404,522 $91,471,119
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
7
<PAGE> 8
M-I L.L.C.
M-I RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT
PLAN PROVISIONS:
The following description of the M-I Retirement Plan (the Plan), formerly known
as the M-I Drilling Fluids L.L.C. Profit Sharing and Savings Plan, provides only
general information. Participants should refer to the Plan document for a more
complete explanation of the Plan's provisions as the Plan document is
controlling at all times.
General
The Plan is a defined contribution plan of M-I L.L.C. (the Company). Smith
International, Inc., has a 64 percent majority ownership and Halliburton Company
has a 36 percent minority ownership in the Company. The Plan is operated for the
sole benefit of the employees of the Company and their beneficiaries and is
subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA). The Plan became effective on March 1, 1987, and is available to all
employees who meet certain eligibility requirements.
Administration
The Company is the plan administrator of the Plan as defined under the Employee
Retirement Income Security Act of 1974. Vanguard Fiduciary Trust Company is the
trustee of all investments held by the Plan. Expenses incident to the
administration of the Plan and trust may be paid by the Company or by the Plan.
Eligibility
An employee may participate in the Plan on the first day of the first month
following the date of hire.
Compensation
Compensation, as defined in the Plan, includes the cash compensation that is
paid by the Company to the participants during the Plan year for services
performed and is currently includible in the employee's gross income under the
Internal Revenue Code (the Code), including regular or base salary, wages,
commissions, overtime, bonuses, nondeferred incentive awards and foreign service
allowance, as such compensation items are reported on the employee's Form W-2
for the calendar year. Compensation shall exclude benefits paid or credited
under the Plan or any other deferred compensation plan maintained by the
Company. The maximum amount of compensation considered by the Plan during 1997,
as limited by the Code, was $160,000.
Contributions
Participants may elect to contribute voluntarily, in 1/2 percent increments,
from 1/2 percent to 12 percent of their compensation (except, for participants
whose annual compensation, as defined by the Plan, exceeds $54,000, the elective
contribution is from 1/2 percent to 10 percent), subject to a maximum amount of
$9,500 during 1997 under Section 402(g) of the Code.
8
<PAGE> 9
At the discretion of the Committee, the Company may provide contributions to the
Plan for each participant equal to 3 percent of the participant's compensation
during the Plan year (the Basic Contribution). The Company may also provide a
100 percent matching contribution of the first 1-1/2 percent of a participant's
voluntary contribution (the Matching Contribution).
In addition, with respect to each Plan year, the Company may contribute to the
Plan (from the Company's net income or any accumulated earnings and profits)
profit-sharing contributions (the Profit-Sharing Contribution) in such amounts,
if any, as determined by the Committee and approved and ratified by the
Company's board of directors.
Basic, Matching and Profit-Sharing Contributions made by the Company were $5.1
million for the year ended December 31, 1997.
Vesting
Participants are immediately vested in their voluntary contributions and the net
earnings thereon. Participants will vest annually in the Company's contributions
in 20 percent increments commencing with their first year of service.
Participants, or their beneficiaries, as appropriate, may also become fully
vested in the Company's contributions in the event of the participant's death,
termination of employment by reason of total or permanent disability or
retirement from the Company upon reaching the normal retirement age of 65.
Investment Options
At December 31, 1997 and 1996, the Plan's investments are held in a trust fund
administered by Vanguard Fiduciary Trust Company.
Participants have the option of investing their contributions and the Company's
matching contributions in any of the following Vanguard Funds and/or the common
stock of Smith International, Inc. (the majority owner of the Company):
Vanguard Retirement Savings Trust Fund--Investments are made primarily in a pool
of investment contracts issued by insurance companies and banks selected by the
Trustee. This investment was formerly known as the Investment Contract Trust
Fund. See Note 4 for further information regarding valuation of
these investments.
Smith International, Inc., Stock Fund--Investments are in the common stock of
Smith International, Inc., purchased on the open market.
Vanguard Wellington Fund--Investments are made in a combination of common stocks
and fixed income securities with the objective of conservation of principal and
reasonable current income.
Vanguard Windsor Fund--Investments are made in a portfolio of common stocks with
the primary objective of long-term growth of capital and income and a secondary
objective of providing current income.
Long-Term Corporate Bond Fund--Investments are made in a portfolio of bonds with
the objective of obtaining a high level of income while preserving capital.
VMMR Prime Portfolio Fund--Investments are made in high-quality money market
instruments which mature in one year or less, including negotiable certificates
of deposit, banker's acceptances issued by major U.S. banks, commercial paper
and short-term corporate obligations with the objective of preservation of
capital and liquidity.
9
<PAGE> 10
Vanguard Index 500 Portfolio Fund--Investments are made in a portfolio of
publicly traded stocks with the objective of providing the price and yield
performance represented by the Standard and Poor's 500 Composite Stock Price
Index.
Vanguard PRIMECAP Fund--Investments are made principally in a portfolio of
common stocks with the objective of long-term growth of capital.
International Growth Portfolio Fund--Investments are made in common stocks of
companies based outside of the United States with the objective of long-term
capital growth.
Contributions may be invested in one fund or divided among two or more funds.
Participants may transfer some or all of the balances out of any fund into one
or any combination of the other funds at any time.
Payment of Benefits
A participant may elect to receive benefit payments by any one of the several
methods provided by the Plan upon termination of service or retirement.
The Plan also provides for hardship distributions to participants with immediate
and significant financial needs, subject to authorization by the Committee. Such
distributions are limited to the vested amount then credited to such
participant's account.
Termination of the Plan
The Company presently intends to continue the Plan indefinitely. However, the
Company reserves the right to discontinue the Plan at any time and for any
reason by resolution of the Committee. In the event of termination, partial
termination or discontinuance of contributions under the Plan, participants will
be credited with a fully vested interest in their respective Company
contributions.
Loans
Participants who have participated in the Plan for a minimum of one year may
borrow from their accounts no more than once annually, subject to terms
specified by the Committee. Participants may not take out loans that, in the
aggregate, exceed $50,000 or 50 percent of the member's vested interest in his
or her account. These loans bear annual rates of interest commensurate with the
prevailing interest rate charged on similar commercial loans had the loan been
made under similar circumstances by a lending institution.
Forfeitures
In the event that a participant terminates employment with the Company, the
participant's vested balances are distributed. Forfeitures are applied first to
reinstate the participant's previously forfeited amounts when the participant is
reemployed by the Company within five years. Any remaining forfeitures are used
to reduce subsequent employer contributions or offset Plan expenses. Net assets
available for Plan benefits as of December 31, 1997 and 1996, includes forfeited
amounts of $68,542 and $80,216, respectively, which are held in the VMMR Prime
Portfolio Fund. Forfeitures of $19,736 were used to pay certain administrative
expenses in 1997. Forfeitures of $92,000 were used to reduce employer
contributions in 1997.
10
<PAGE> 11
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Basis of Accounting
The accounts of the Plan are maintained on the cash basis of accounting. For
financial reporting purposes, however, the financial statements have been
prepared on the accrual basis of accounting using information provided by the
Trustee.
Investment Valuation
The Plan's investments are held by the Trustee. The Trustee has provided
certified statements which are the basis for recording the transactions of the
Plan. Plan investments are stated at fair value, as determined by the Trustee
primarily by reference to published market data, except for the Vanguard
Retirement Savings Trust which is stated at contract value. Pursuant to
Department of Labor regulations, the realized gain or loss on the sale of Plan
assets, and unrealized appreciation or depreciation of the Plan assets, are
based on the value of those assets at the beginning of the Plan year or at the
time of purchase if acquired during the current year.
Participant Account Valuation
The Plan provides that each fund's income shall be allocated daily to the
individual participant in the proportion that the individual participant's
account balance in such fund bears to the total balance of that fund, after
reducing the participant's account by any distributions from the account on a
daily basis.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the administrator to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of changes in net
assets during the reporting period. Actual results could differ from those
estimates.
3. FEDERAL INCOME TAX STATUS:
The Plan obtained its latest determination letter on September 11, 1995, in
which the Internal Revenue Service stated that the Plan, as then designed, was
in compliance with the applicable requirements of the Code. The Plan has been
amended since receiving the determination letter. However, the Committee and the
Plan's tax counsel believe that the Plan is currently designed and being
operated in compliance with the applicable requirements of the Code. Therefore,
they believe that the Plan was qualified and the related trust was tax-exempt as
of the financial statement date.
4. INVESTMENT CONTRACTS:
Statement of Position 94-4, "Reporting of Investment Contracts Held by Health
and Welfare Benefit Plans and Defined Contribution Pension Plan" (SOP 94-4),
requires that fully benefit-responsive investment contracts be valued at
contract value which represents the principal balance of the contracts plus
accrued interest at the stated contract rate, less payments received and
contract charges by the insurance company.
11
<PAGE> 12
The Plan is invested in the Vanguard Retirement Savings Trust (the Trust) which
provides for the collective investment of the assets of tax-exempt pension and
profit-sharing plan trusts primarily in a pool of investment contracts issued by
insurance companies and banks. The average blended yield of the Trust's
investments as of December 31, 1997 and 1996, was 6.23 percent and 6.07 percent,
respectively. The total return of the Trust was 6.17 percent for the year ended
December 31, 1997. The fair value of the investments in the Trust as of December
31, 1997 and 1996, was $10,372,200 and $11,358,406, respectively, which
approximates contract value.
12
<PAGE> 13
SCHEDULE I
M-I L.L.C.
M-I RETIREMENT PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Current
Identity of Issue Description of Investment Cost Value
- --------------------------------------- --------------------------------------- ------------ ------------
<S> <C> <C> <C>
Vanguard Fiduciary Trust Company* Vanguard Retirement Savings Trust Fund $ 10,372,200 $ 10,372,200
Smith International, Inc.* Smith International, Inc., Stock Fund 9,254,412 9,603,241
Vanguard Group of Investment Companies* Vanguard Wellington Fund 29,802,340 37,254,803
Vanguard Group of Investment Companies* Vanguard Windsor Fund 11,805,148 12,392,408
Vanguard Group of Investment Companies* Long-Term Corporate Bond Fund 1,226,538 1,311,898
Vanguard Group of Investment Companies* VMMR Prime Portfolio Fund 2,072,422 2,072,422
Vanguard Group of Investment Companies* Vanguard Index 500 Portfolio Fund 2,680,976 3,454,438
Vanguard Group of Investment Companies* Vanguard PRIMECAP Fund 5,196,865 6,477,037
Vanguard Group of Investment Companies* International Growth Portfolio Fund 1,016,942 1,032,719
M-I Retirement Plan* Loans receivables from participants
(highest and lowest interest
rates are 5.83% and 10.05%) 4,404,522 4,404,522
------------ ------------
$ 77,832,365 $ 88,375,688
============ ============
</TABLE>
*Identified party in interest.
13
<PAGE> 14
SCHEDULE II
M-I L.L.C.
PROFIT SHARING AND SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS - SERIES TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Purchase Selling
Identity of Party Involved Description of Asset Price(a) Price(b)
- ---------------------------------------- ---------------------------------- ------------- -------------
<S> <C> <C> <C>
Vanguard Group of Investment Companies Vanguard Wellington Fund $ 12,127,400 $ --
-- 8,289,123
Vanguard Group of Investment Companies Vanguard Windsor Fund 7,952,838 --
-- 4,469,744
Vanguard Group of Investment Companies VMMR Prime Portfolio Fund 6,933,371 --
-- 7,122,579
Vanguard Group of Investment Companies Vanguard Index Trust 500
Portfolio Fund 3,019,627 --
-- 2,045,617
Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 4,797,992 --
-- 2,853,456
Vanguard Fiduciary Trust Company Vanguard Retirement Savings Trust 6,034,260 --
-- 7,020,466
Smith International, Inc. Smith International, Inc.,
Stock Fund 18,281,825 --
-- 13,896,130
</TABLE>
<TABLE>
<CAPTION>
Current Value
of Asset
Cost of on Transaction
Identity of Party Involved Description of Asset Asset Date Net Gain
- ---------------------------------------- ---------------------------------- ------------- ----------------- ----------
<S> <C> <C> <C> <C>
Vanguard Group of Investment Companies Vanguard Wellington Fund $ 12,127,400 $ 12,127,400 $ --
6,945,835 8,289,123 1,343,288
Vanguard Group of Investment Companies Vanguard Windsor Fund 7,952,838 7,952,838 --
4,045,599 4,469,744 424,145
Vanguard Group of Investment Companies VMMR Prime Portfolio Fund 6,933,371 6,933,371 --
7,122,579 7,122,579 --
Vanguard Group of Investment Companies Vanguard Index Trust 500
Portfolio Fund 3,019,627 3,019,627 --
1,874,492 2,045,617 171,125
Vanguard Group of Investment Companies Vanguard PRIMECAP Fund 4,797,992 4,797,992 --
2,403,888 2,853,456 449,568
Vanguard Fiduciary Trust Company Vanguard Retirement Savings Trust 6,034,260 6,034,260 --
7,020,466 7,020,466 --
Smith International, Inc. Smith International, Inc.,
Stock Fund 18,281,825 18,281,825 --
12,212,293 13,896,130 1,683,837
</TABLE>
(a) Purchase price includes transaction expenses.
(b) Selling price is net of transaction expenses.
NOTE: This schedule includes series transactions involving the same
investment activity which, in the aggregate, amounts to more
than 5 percent of net assets available for Plan benefits as
of January 1, 1997.
14
