<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 1-12815
CHICAGO BRIDGE & IRON COMPANY N.V.
Incorporated in The Netherlands IRS Identification Number: Not Applicable
Polarisavenue 31
2132 JH Hoofddorp
The Netherlands
31-23-568-5660
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
The number of shares outstanding of a single class of common stock as of
June 30, 1998 - 12,284,748
<PAGE> 2
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I.FINANCIAL INFORMATION
Page
---------
<S> <C>
Consolidated Financial Statements
Statements of Income
Three and Six Months Ended June 30, 1998 and 1997 3
Balance Sheets
June 30, 1998 and December 31, 1997 4
Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of
Results of Operations and Financial Condition 8 - 10
PART II.OTHER INFORMATION 11 - 12
SIGNATURE PAGE 13
</TABLE>
2
<PAGE> 3
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $ 181,808 $ 160,349 $ 371,689 $ 310,745
Cost of revenues 164,270 141,828 337,263 275,878
------------ ----------- ----------- ----------
Gross profit 17,538 18,521 34,426 34,867
Selling and administrative expenses 11,963 11,123 23,755 22,340
Management Plan charge -- -- -- 16,662
Other operating income, net (336) (112) (664) (303)
------------ ----------- ----------- ----------
Income (loss) from operations 5,911 7,510 11,335 (3,832)
Interest expense (956) (1,296) (1,949) (2,625)
Other income 529 466 759 864
------------ ----------- ----------- ----------
Income (loss) before taxes and
minority interest 5,484 6,680 10,145 (5,593)
Income tax (expense) benefit (1,536) (1,987) (2,841) 3,374
------------ ----------- ----------- ----------
Income (loss) before minority interest 3,948 4,693 7,304 (2,219)
Minority interest in (income) loss (21) 81 (27) 18
------------ ----------- ----------- ----------
Net income (loss) $ 3,927 $ 4,774 $ 7,277 $ (2,201)
============ =========== =========== ==========
Net income (loss) per common share (1)
Basic and Diluted $0.32 $0.38 $0.59 $(0.18)
Weighted average common shares outstanding (1)
Basic and Diluted 12,284,377 12,517,552 12,344,036 12,517,552
Dividends on common shares
Amount $737 $751 $1,473 $751
Per share $0.06 $0.06 $0.12 $0.06
</TABLE>
(1) Net income (loss) per common share and the weighted average common shares
outstanding for 1997 are presented as if the Offering and the
Reorganization had occurred at the beginning of the year.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
3
<PAGE> 4
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1998 1997
<S> <C> <C>
Current assets
Cash and cash equivalents $ 17,050 $ 10,240
Accounts receivable, net of allowance for doubtful
accounts of $1,385 in 1998 and $1,909 in 1997 151,216 157,785
Contracts in progress with earned revenues
exceeding related progress billings 48,413 63,172
Other current assets 19,501 17,157
-------- --------
Total current assets 236,180 248,354
-------- --------
Property and equipment 117,252 121,798
Goodwill 18,295 18,539
Other non-current assets 11,299 11,959
-------- --------
Total assets $383,026 $400,650
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $2,739 $1,158
Accounts payable 51,082 52,904
Accrued liabilities 45,729 46,518
Contracts in progress with progress billings
exceeding related earned revenues 67,750 72,810
Income taxes payable 1,292 5,160
-------- --------
Total current liabilities 168,592 178,550
-------- --------
Long-term debt 39,000 44,000
Minority interest in subsidiaries 4,886 5,273
Other non-current liabilities 66,577 69,001
-------- --------
Total liabilities 279,055 296,824
-------- --------
Shareholders' equity
Common stock; NLG .01 par value, 50,000,000 authorized shares
issued: 12,517,552 in 1998 and 1997;
outstanding: 12,284,748 in 1998 and 12,517,552 in 1997 74 74
Additional paid-in capital 93,691 93,691
Retained earnings 20,497 14,712
Treasury stock, at cost: 232,804 shares in 1998 (3,445) --
Cumulative translation adjustment (6,846) (4,651)
-------- --------
Total shareholders' equity 103,971 103,826
-------- --------
Total liabilities and shareholders' equity $383,026 $400,650
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
4
<PAGE> 5
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 7,277 $ (2,201)
Adjustments to reconcile net income to net cash provided by
operating activities
Management Plan charge -- 16,662
Depreciation and amortization 8,942 8,117
Increase/(decrease) in deferred income taxes 1,467 (6,474)
Gain on sale of fixed assets (664) (1,128)
Change in operating assets and liabilities (see below) 2,981 20,895
------- --------
Net cash provided by operating activities 20,003 35,871
------- --------
Cash flows from capital investment activities
Proceeds from sale of fixed assets and assets held for sale 1,498 9,718
Capital expenditures (6,335) (18,801)
------- --------
Net cash used in capital investment activities (4,837) (9,083)
------- --------
Cash flows from financing activities
Payment to former Parent Company -- (6,008)
Increase in notes payable 1,581 187
Net (repayment) of debt to former Parent Company -- (53,907)
Net (repayment)/borrowing under Revolving Credit Facility (5,000) 53,000
Purchase of common stock (3,698) --
Sale of common stock 234 --
Dividends paid (1,473) (751)
------- --------
Net cash used in financing activities (8,356) (7,479)
------- --------
Increase in cash and cash equivalents 6,810 19,309
Cash and cash equivalents, beginning of the year 10,240 11,864
------- --------
Cash and cash equivalents, end of the period $17,050 $ 31,173
======= ========
Change in operating assets and liabilities
(Increase)/decrease in receivables, net $ 6,569 $ (3,546)
Decrease in contracts in progress, net 9,699 15,600
(Increase)/decrease in other current assets (2,344) 2,145
Increase/(decrease) in accounts payable & accrued liabilities (2,611) 11,364
(Decrease) in income taxes payable (3,868) (1,287)
Other, net (4,464) (3,381)
------- --------
Total $ 2,981 $ 20,895
======= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
5
<PAGE> 6
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements for Chicago Bridge
& Iron Company N.V. and Subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. The accompanying unaudited
interim consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the 1997
Annual Report on Form 10-K of the Company.
In the opinion of the Company, all adjustments necessary to present fairly the
financial position of the Company and the results of its operations and cash
flows for the period then ended have been included. The results of operations
for such interim periods are not necessarily indicative of the results for the
full year.
2. SIGNIFICANT ACCOUNTING POLICIES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for fiscal years
beginning after June 15, 1999. SFAS 133 requires all derivative instruments be
recorded on the balance sheet at their fair value and that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company has not yet determined the
impact that the adoption of SFAS 133 will have on its earnings or statement of
financial position. However, the Company anticipates that, due to its limited
use of derivative instruments, the adoption of SFAS 133 will not have a
significant effect on its results of operations or its financial position.
3. LONG-TERM DEBT
The weighted average interest rate on $39,000 of borrowings under the Company's
revolving credit facility was 6.29% at June 30, 1998.
6
<PAGE> 7
4. COMPREHENSIVE INCOME
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income (loss) $ 3,927 $ 4,774 $ 7,277 $(2,201)
Other comprehensive income, net of tax:
Cumulative translation adjustment (1,845) (1,050) (2,195) (1,064)
------- ------- ------- -------
Comprehensive income (loss) $ 2,082 $ 3,724 $ 5,082 $(3,265)
======= ======= ======= =======
</TABLE>
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and accompanying notes.
RESULTS OF OPERATIONS
For the three months ended June 30, 1998, new business taken grew 12% to $203.6
million, compared with $182.5 million in the second quarter of 1997. More than
70% of the new business taken during the quarter was for contracts awarded
outside of North America. For the six months ended June 30, 1998, new business
taken of $414.7 million was 7% higher than the $388.1 million reported in the
first half of 1997. During the first half of 1998, new business taken
increased 42% in the Europe, Africa, Middle East (EAME) area, 67% in the
Central and South America (CSA) area and 3% in North America, but declined 41%
in the Asia Pacific (AP) area. Backlog at June 30, 1998, was $579.2 million--a
near-term record--compared with a $560.2 million backlog reported at June 30,
1997, and a $555.0 million backlog at year-end 1997.
New business taken in the quarter was achieved in spite of concerns over lower
oil prices and the Asian economic downturn. The six-month new business total
was the Company's highest in recent years. The Company has capitalized on
opportunities in active markets and has been successful in expanding the work
scope on several key projects. While there are fewer opportunities in Southeast
Asia at the moment, the Company is winning its share of what work is available,
including a significant petrochemical project in Singapore.
Revenues for the second quarter of 1998 rose 13% to $181.8 million, compared
with $160.3 million in the second quarter of 1997. The increase was due
primarily to a greater amount of work put in place in the EAME area. Revenues
for the first six months of 1998 increased 20% to $371.7 million compared with
$310.7 million for the first half of 1997.
Gross profit for the three months ended June 30, 1998, amounted to $17.5
million, or 9.6% of revenues, compared with $18.5 million, or 11.6% of
revenues, in the prior year quarter. In the aggregate, the Company's gross
profit margin during the quarter would have shown improvement year-on-year
except for the CSA area which had higher than expected costs and disappointing
execution results on a few contracts. The Company has taken steps to improve
project execution and adjust the overhead structure in CSA. Excluding CSA
results, gross profit margin in the second quarter, led by strong results in
EAME, was 12.1% of revenues compared with 11.6% in the prior year period.
Gross profit for the first half of 1998 was $34.4 million, or 9.3% of revenues,
compared with $34.9 million, or 11.2% of revenues, for the first six months of
1997.
Selling and administrative expenses for the 1998 second quarter were $12.0
million and decreased to 6.6% of revenues compared with 6.9% for the prior year
quarter. In the 1998 first half, selling and administrative expenses of $23.8
million compared with $22.3 million in the 1997 period.
8
<PAGE> 9
Income from operations for the second quarter of 1998 was $5.9 million compared
with $7.5 million for the second quarter of 1997. The CB&I Constructors North
American operation reported its third consecutive quarter of improved operating
income. Income from operations for the first six months of 1998 was $11.3
million, compared with an operating loss of $3.8 million in the first half of
1997 including the one-time, non-cash Management Plan charge. Excluding the
one-time, non-cash Management Plan charge, the Company reported income from
operations of $12.8 million in the first half of 1997.
The Company continues to focus on lowering its cost base and redeploying its
resources to correspond with current market conditions. It has initiated a
number of senior management and organizational changes in areas needing improved
performance, such as CSA and CB&I Constructors. The additional costs incurred
in problem areas have been more than offset by improvements in other regions.
Interest expense continued to decline to $1.0 million for the second quarter of
1998 compared with $1.3 million in the comparable period of 1997. The decrease
was due to lower debt levels and lower interest rates. Cash and cash
equivalents at the end of the quarter were $17.1 million. Long-term debt
decreased to $39 million from $57 million at March 31, 1998. Other income
consisted primarily of interest earned on cash balances at foreign
subsidiaries.
For the six months ended June 30, 1998, income tax expense increased to $2.8
million or an effective income tax rate of 28.0% compared to a net income tax
benefit of $3.4 million in the comparable period of the prior year. The 1997
income tax benefit was mainly attributable to the one-time, non-cash Management
Plan charge. Excluding the Management Plan charge, income tax expense would
have been $3.2 million or an effective income tax rate of 29.0% for the first
half of 1997.
Net income for the three months ended June 30, 1998 was $3.9 million or $0.32
per share for the three months ended June 30, 1998, compared with net income of
$4.8 million or $0.38 per share for the same period in 1997. Net income for
the first six months of 1998 was $7.3 million or $0.59 per share compared with
a net loss of $2.2 million or $0.18 per share for the first half of 1997. The
1997 results included the effect of a one-time, non-cash Management Plan charge
of $16.7 million ($10.1 million after tax) related to the contribution of
common shares to a management compensation program in connection with the
Company's initial public offering. Excluding the one-time, non-cash Management
Plan charge, the Company reported net income of $7.9 million or $0.63 per share
in the first half of 1997.
FINANCIAL CONDITION
For the three months ended June 30, 1998, the Company generated cash from
operations of $17.9 million. Capital expenditures during the second quarter of
1998 were $4.2 million, bringing the year to date total to $6.3 million,
compared with $18.8 million for the first half of 1997 (which included $8.8
million of modifications to the Company's Houston, Texas facility). Contract
capital (accounts receivable plus net contracts in progress less accounts
payable) was further reduced by $11.6 million during the quarter.
9
<PAGE> 10
As previously reported, 1998 revenues have been negatively impacted by the Tuban
project in Indonesia, where work remains suspended. At June 30, 1998, the
Company's backlog related to this project was approximately $50 million and the
Company and its affiliates had approximately $34 million of net receivables
outstanding. Similar to other major contractors involved in the project, the
Company has received approval to redeploy certain material purchased for this
project in order to reduce its costs. While the Company believes the Tuban
project is viable, it is expected that permanent financing for the project will
not be secured until the political and economic situation in Indonesia improves.
The Company believes work on the Tuban project ultimately will resume, but not
until 1999 at the earliest, and no assurances can be given that this will
happen.
Management anticipates that by utilizing cash generated from operations and
funds provided under the Revolving Credit Facility, the Company will be able to
meet its working capital and capital expenditure needs for at least the next 24
months.
This discussion and analysis contains certain forward-looking statements that
involve a number of risks and uncertainties. Actual events or results may
differ materially from the Company's expectations. In addition to matters
described herein, including the Tuban project, operating risks, risks associated
with fixed price contracts, risks associated with percentage of completion
accounting, fluctuating revenues and cash flow, dependence on the petroleum and
petrochemical industries and competitive conditions, as well as risk factors
listed from time to time in the Company's reports filed with the Securities and
Exchange Commission (including, but not limited to its Registration Statement on
Form S-1 [File No.333-18065], as amended), may affect the actual results
achieved by the Company.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in the legal proceedings as described
in Note 7 of the Notes to Consolidated Financial Statements submitted with the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of Chicago Bridge & Iron Company N.V.
was held on May 12, 1998. The following matters were voted upon and
adopted at the meeting:
(i) Reelection of Jerry H. Ballangee and L. Donald Simpson to serve as
supervisory directors for a three year term.
<TABLE>
<S> <C>
For 8,378,876
Against 3,350
Abstain 183,600
</TABLE>
(ii) The authorization to prepare the annual accounts and the report in
the English language and the adoption of the Dutch Statutory Annual
Accounts of the Company for the fiscal year ended December 31, 1997.
<TABLE>
<S> <C>
For 8,490,397
Against 3,250
Abstain 183,785
</TABLE>
(iii) The approval of distribution of profits for fiscal year ended
December 31, 1997 in the amount of US$0.24 per share of common stock
previously paid as common dividends.
<TABLE>
<S> <C>
For 8,436,043
Against 2,105
Abstain 182,685
</TABLE>
(iv) The approval to extend the Management Board's authority to
repurchase up to 10% of the outstanding share capital of the Company
until November 12, 1999.
<TABLE>
<S> <C>
For 7,015,381
Against 1,367,191
Abstain 183,750
</TABLE>
(v) The approval to extend the authority of the Supervisory Board to
issue and/or grant rights (including options to purchase) on common
stock of the Company until May 12, 2003.
<TABLE>
<S> <C>
For 4,811,972
Against 3,570,460
Abstain 184,250
</TABLE>
11
<PAGE> 12
(vi) The approval to extend the authority of the Supervisory Board to
limit or exclude the preemptive rights of the holders of the common
stock of the Company until May 12, 2003.
<TABLE>
<S> <C>
For 4,331,914
Against 4,044,587
Abstain 189,821
</TABLE>
(vii) The amendment of the Articles of Association of the Company to
eliminate provisions granting Praxair, Inc. the Company's former sole
shareholder, the right to appoint Supervisory Directors.
<TABLE>
<S> <C>
For 8,379,397
Against 5,350
Abstain 181,935
</TABLE>
(viii) The appointment of Arthur Andersen as the Company's independent
public auditors for the fiscal year ending December 31, 1998.
<TABLE>
<S> <C>
For 8,382,357
Against 1,515
Abstain 182,450
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file a current report on Form 8-K during the
three months ended June 30, 1998.
12
<PAGE> 13
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Chicago Bridge & Iron Company N.V.
/s/ Timothy J. Wiggins
--------------------------------------
By: Chicago Bridge & Iron Company B.V.
Its: Managing Director
Timothy J. Wiggins
Managing Director
(Principal Financial Officer)
Date: August 6, 1998
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1998, AND THE INCOME STATEMENT FOR THE SIX MONTHS ENDED
JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 17,050
<SECURITIES> 0
<RECEIVABLES> 152,601
<ALLOWANCES> 1,385
<INVENTORY> 2,775
<CURRENT-ASSETS> 236,180
<PP&E> 153,915
<DEPRECIATION> 36,663
<TOTAL-ASSETS> 383,026
<CURRENT-LIABILITIES> 168,592
<BONDS> 39,000
<COMMON> 74
0
0
<OTHER-SE> 103,897
<TOTAL-LIABILITY-AND-EQUITY> 383,026
<SALES> 0
<TOTAL-REVENUES> 371,689
<CGS> 0
<TOTAL-COSTS> 337,263
<OTHER-EXPENSES> (664)
<LOSS-PROVISION> (524)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,145
<INCOME-TAX> 2,841
<INCOME-CONTINUING> 7,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,277
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
</TABLE>
