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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1997
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
Principal Executive Office: Koningslaan 34
1075 AD Amsterdam
The Netherlands
31-20-5789588
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Stock; NLG .01 par value New York Stock Exchange
Amsterdam Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
none
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ]
Aggregate market value of common stock held by non-affiliates, based on a New
York Stock Exchange closing price of $14.125 as of March 5, 1998 was
$162,213,181.
The number of shares outstanding of a single class of common stock as of March
5, 1998 was 12,267,852.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Shareholders Part I and Part II
Portions of the 1998 Proxy Statement Part III
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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
PART I.
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II.
Item 5. Market for Registrant's Common Equity and Related 11
Stockholder Matters
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on 11
Accounting and Financial Disclosure
PART III.
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners and 14
Management
Item 13. Certain Relationships and Related Transactions 14
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports 15
on Form 8-K
SIGNATURES 16
</TABLE>
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PART I
ITEM 1. BUSINESS
Chicago Bridge & Iron Company N.V. and its Subsidiaries ("CB&I" or "the
Company") is a global engineering and construction company specializing in the
design and engineering, fabrication, field erection and repair of bulk liquid
terminals, steel tanks, pressure vessels, low temperature and cryogenic storage
facilities and other steel plate structures and their associated systems. CB&I
has been continuously engaged in the engineering and construction industry
since its founding in 1889.
Prior to January 12, 1996, the business of the Company was operated by Chicago
Bridge & Iron Company, a wholly owned subsidiary of Chi Bridge Holdings, Inc.
("Holdings"), which in turn was a wholly owned subsidiary of CBI Industries,
Inc. ("Industries"). On January 12, 1996, pursuant to the merger agreement
dated December 22, 1995, Industries became a subsidiary of Praxair, Inc.
In March 1997, Holdings effected a reorganization ("the Reorganization")
whereby Holdings transferred the business of Chicago Bridge & Iron Company to
Chicago Bridge & Iron Company N.V., a corporation organized under the laws of
The Netherlands.
Effective March 26, 1997, an initial public offering (the "Offering") of a
majority of the shares of the Company's Common Stock, par value NLG 0.01 (the
"Common Stock"), was made. The Company did not receive any proceeds from the
Offering, but paid a portion of the offering costs. The Common Stock is traded
on the New York and Amsterdam stock exchanges.
PRODUCT LINE INFORMATION
<TABLE>
<CAPTION>
REVENUES BY PRODUCT LINE
(In millions)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Flat Bottom Tanks $209 $248 $253
Specialty and Other
Structures 154 117 73
Low Temperature/Cryogenic
Tanks and Systems 109 60 28
Repairs and Modifications 58 70 68
Pressure Vessels 53 82 85
Elevated Tanks 48 42 60
Turnarounds 42 45 55
---- ---- ----
Total $673 $664 $622
==== ==== ====
</TABLE>
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Flat Bottom Tanks
These above-ground storage tanks are sold primarily to customers operating in
the petroleum, petrochemical and chemical industries around the world. This
industrial customer group includes nearly all of the major oil and chemical
companies on every continent. Depending on the industry and application, flat
bottom tanks can be used for storage of crude oil and its derivative products
such as gasoline, raw water, potable water, chemicals, petrochemicals and a
large variety of feedstocks for the manufacturing industry.
Specialty and Other Structures
Examples of these special plate structures include research and test facilities
for testing prototype spacecraft, rocket engines and vacuum testing of
satellites before launch; hydroelectric structures such as penstocks, spiral
cases and draft tubes; and processing facilities or components used in the
iron, aluminum and mining industries. These structures are typically made from
bent and formed metal plate materials (carbon steel, stainless steel, special
alloy steel and aluminum) and are shipped as fabricated pieces or components to
their final location for field assembly and welding. The Company has performed
design, constructability analysis, complex fabrication, welding and specialized
field erection in order to supply these special structures for industrial,
utility and governmental customers throughout the world.
Low Temperature/Cryogenic Tanks and Systems
These facilities are used primarily for the storage and handling of liquefied
gases. The Company specializes in providing refrigerated turnkey terminals and
tanks. Refrigerated tanks are built from special steels and alloys that have
properties to withstand cold temperatures. The systems usually include special
refrigeration systems to maintain the gases in liquefied form. Applications
extend from low temperature (+30F to -100F ) to cryogenic (-100F to -423F).
Customers in the petroleum, chemical, petrochemical, specialty gas, natural
gas, power generation and agricultural industries use these tanks and systems
to store and handle liquefied gases such as LNG, methane, ethane, ethylene,
LPG, propane, propylene, butane, butadiene, anhydrous ammonia, oxygen,
nitrogen, argon and hydrogen.
Repairs and Modifications
Repair, maintenance and modification services are performed primarily on flat
bottom tanks and pressure vessels. The Company has focused on providing these
services primarily in the United States. Customers in the petroleum, chemical,
petrochemical and water industries generally require these types of services.
Pressure Vessels
Pressure vessels are built primarily from high strength carbon steel plates
which have been bent or formed in a fabrication shop and are welded together at
a job site. Pressure vessels come in a variety of cylindrical, spherical,
hemispherical and conical shapes and sizes, some weighing in excess of 700
tons, with thicknesses in excess of six inches. This product line encompasses a
number of technological issues such as design, analysis, welding capabilities,
metallurgy, complex fabrication and specialty field erection methods. Existing
customers represent a cross section of the petroleum, petrochemical, chemical
and pulp and paper industries, where process applications of high pressure
and/or temperature are required. Pressure vessels are used in refineries as
storage containers as well as process vessels, which are used to transform
crude oil into its various components. They are also used in the production of
synthetic oil from methane gas. The Company has designed, built and tested
pressure vessels throughout the world.
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Elevated Tanks
Elevated water storage tanks are constructed primarily of bent and formed
carbon steel plates that are welded together on site. They range in size from
25,000 gallons to 3,000,000 gallons in capacity. These structures provide
potable water reserves and also supply pressure to the water distribution
system.
Turnarounds
A turnaround is a logically planned shutdown of a refinery or other process
units for repair and maintenance of equipment and associated systems. The work
is usually scheduled on a multi-shift, seven day per week basis. Personnel,
materials and equipment must come together at precisely the right time to
accomplish this manpower intensive operation. This product line often requires
short cycle times and unique construction procedures. The Company currently
offers this service to its customers in the petroleum, petrochemical and
chemical industries throughout the world.
BUSINESS STRATEGY
The Company is committed to increasing shareholder value by seeking to build
upon its established success and by growing its business in the global
marketplace through a combination of strategic initiatives including the
following:
Focus on Core Business
In order to actively pursue growth opportunities in its core business, the
Company seeks to leverage its expertise in design, engineering, metallurgy and
welding, and its ability to execute projects virtually anywhere in the world.
Continue Cost Reductions and Productivity Improvements
CB&I's management believes the Company's restructuring efforts initiated in
1995 represent the foundation for a long-term strategy of reducing the costs of
its products and services, with the goal of establishing and maintaining a
position as a low cost provider in its markets.
Target Global Growth Markets
The Company intends to pursue business opportunities in selected key emerging
markets such as China, India, Mexico and the former Soviet republics, and to
continue to pursue opportunities in growth markets such as Africa, the Middle
East and South America. CB&I intends to leverage its significant international
experience and technological strengths to expand into these new geographic
areas. The Company believes that its ability to rapidly mobilize project
management and skilled craft personnel, combined with its global material
supply and equipment logistics capabilities, provide a key competitive
advantage.
Improve Financial Controls and Management
The Company believes it will continue to improve the management of project
profitability through the ongoing implementation of new systems which enhance
cost estimating, bidding, capital utilization and project execution.
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Pursue Partnering and Strategic Alliances
The Company intends to expand its use of partnering and strategic alliances
with customers and vendors. These relationships can serve as a vehicle for
improvements in quality, productivity and profitability for both parties.
CB&I's existing partnering relationships include several with major
international oil companies.
OTHER OPERATIONAL INFORMATION
In 1997, the Company began using an innovative tank building process called
CoilBuilding(TM), in which the tank shell is formed from continuous steel coils
rather than individual plates. CoilBuilding is particularly suited for
smaller-diameter, stainless steel tanks used in certain petrochemical,
chemical, pharmaceutical and food applications where corrosion resistance and
cleanliness are vital. The Company has exclusive rights to the CoilBuilding
process in North America and is aggressively marketing this new technology.
The principal raw materials used by the Company are metal plate and structural
steel. These materials are available from numerous suppliers worldwide. CB&I
does not anticipate having difficulty obtaining adequate amounts of raw
materials in the foreseeable future.
CB&I holds patents and licenses for certain items incorporated into its
products. However, none is so essential that its loss would materially affect
the businesses of the Company.
For information regarding working capital practices, refer to "Liquidity and
Capital Resources" on pages 29 and 30 of the Company's 1997 Annual Report to
Shareholders and is incorporated herein by reference.
The Company is not dependent upon any single customer on an ongoing basis and
the loss of any single customer would not have a material adverse effect on the
business; however, from time to time a particular contract or customer may
account for a significant portion of the Company's backlog.
CB&I had a backlog of work to be completed on contracts of $555 million at
December 31, 1997 and $486 million at December 31, 1996. Approximately 70% of
the backlog as of December 31, 1997 is expected to be completed in 1998. New
business taken represents the value of new project commitments received by the
Company during a given period. Such commitments are included in backlog until
work is performed and revenue recognized or until cancellation. Backlog may
also fluctuate with currency movements.
Management believes the Company can compete effectively for new construction
projects around the world and that it is a leading competitor in its markets.
Competition is based primarily on performance and the ability to provide the
design, engineering, fabrication, project management and construction
capabilities required to complete projects in a timely and cost effective
manner. Contracts are usually awarded on a competitive bid basis. Price,
quality, reputation and timeliness of completion are the principal competitive
factors within the industry, with price being one of the most important
factors. In addition, the Company believes that it is viewed as a local
contractor in a number of the regions it services by virtue of its long-term
presence and participation in those markets. This perception may translate
into a competitive advantage through knowledge of local vendors and suppliers,
as well as of local labor markets
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and supervisory personnel. Several large companies offer metal plate products
which compete with some of those offered by the Company. Some companies
compete with some of the Company's product lines, while also offering other
product lines. Local and regional companies offer competition in one or more
geographical areas but not in other areas where the Company operates. Because
reliable market share data are not available, it is difficult to estimate the
Company's exact position in the industry, although the Company believes it
ranks among the leaders in the field.
The Company incurred expenses during the year for the purpose of complying with
environmental regulations, but their impact on the consolidated financial
statements was not material.
The Company incurred expenses of approximately $1,670,000 in 1997, $730,000 in
1996 and $2,474,000 in 1995 for its research and development activities.
The Company employed 6,094 people as of December 31, 1997.
Financial information by geographic area of operation can be found on page 49
of the Company's 1997 Annual Report to Shareholders and is incorporated herein
by reference.
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ITEM 2. PROPERTIES
The Company owns or leases the properties used to conduct its business. The
capacities of these facilities depend upon the composition of products being
fabricated and constructed. As the product composition is constantly changing,
the extent of utilization of these facilities cannot be accurately stated.
CB&I believes these facilities are adequate to meet its current requirements.
The following list summarizes its principal properties:
<TABLE>
<CAPTION>
Location Type of Facility Interest
- -------- ---------------- --------
<S> <C> <C>
Houston, Texas Engineering, fabrication facility, warehouse, Owned
operations and administrative office
Plainfield, Illinois Engineering, operations and administrative Owned
office
Kankakee, Illinois (1) Fabrication facility, warehouse and office Owned
Fort Saskatchewan, Warehouse, operations and Owned
Canada administrative office
Dubai, United Arab Engineering, warehouse, operations and Leased
Emirates administrative office
Puerto Ordaz, Venezuela Fabrication facility and warehouse Leased
Kwinana, Australia Fabrication facility, warehouse and office Leased
Ao Udom, Thailand Fabrication facility Leased
Batangas, Philippines Fabrication facility and warehouse Leased
Cilegon, Indonesia Fabrication facility and warehouse Leased
Al Aujam, Saudi Arabia Fabrication facility and warehouse Leased
Secunda, South Africa Fabrication facility and warehouse Leased
</TABLE>
(1) The Company discontinued fabrication operations in Kankakee, and the
Company's office functions were relocated to Plainfield in 1997. The Company
plans to sell the Kankakee facility in the near future and lease warehouse
space.
The Company also owns or leases a number of sales, administrative and field
construction offices, warehouses and equipment maintenance centers
strategically located throughout the world.
ITEM 3. LEGAL PROCEEDINGS
Environmental Matters
A subsidiary (the "subsidiary") of the Company was a minority shareholder from
1934 to 1954 in a company which owned or operated at various times several wood
treating facilities at sites in the United States, some of which are currently
under investigation, monitoring or remediation under various environmental
laws. With respect to some of these sites, the subsidiary has been named a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") and similar state laws.
Without admitting any liability, the subsidiary has entered into a consent
decree with the federal government regarding one of these sites and has had an
administrative order issued against it with respect to another. There can be no
assurance that the subsidiary will not be required to
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clean up one or more of these sites pursuant to agency directives or court
orders. The subsidiary has been involved in litigation concerning environmental
liabilities, which are currently undeterminable, in connection with certain of
those sites. The subsidiary denies any liability for each site and believes
that the successors to the wood treating business are responsible for the costs
of remediation of the sites. Without admitting any liability, the subsidiary
has reached settlements for environmental clean-up at most of the sites. In
July 1996, a judgment in favor of the subsidiary was entered in the suit
Aluminum Company of America v. Beazer East, Inc. v. Chicago Bridge & Iron
Company, instituted in January 1991, before the U. S. District Court for the
Western District of Pennsylvania. On September 2, 1997, the United States Court
of Appeals for the Third Circuit affirmed the judgment in favor of the
subsidiary. There were no further appeals. The Company believes that an
estimate of the possible loss or range of possible loss relating to such
matters cannot be made. Although the Company believes such settlements and any
remaining potential liability will not be material, there can be no assurance
that such settlements and any remaining potential liability will not have a
materially adverse effect on its business, financial condition or results of
operations.
The Company's facilities have operated for many years and substances which
currently are or might be considered hazardous were used and disposed of at
some locations, which will or may require the Company to make expenditures for
remediation. In addition, the Company has agreed to indemnify parties to whom
it has sold facilities for certain environmental liabilities arising from acts
occurring before the dates those facilities were transferred. The Company is
aware of no manifestation by a potential claimant of awareness by such claimant
of a possible claim or assessment and does not consider it to be probable that
a claim will be asserted which claim is reasonably possible to have an
unfavorable outcome, in each case, which would be material to the Company with
respect to the matters addressed in this paragraph. The Company believes that
any potential liability for these matters will not have a materially adverse
effect on its business, financial condition or results of operations.
Along with multiple other parties, a subsidiary of the Company is currently a
PRP under CERCLA and analogous state laws at several sites as a generator of
wastes disposed of at such sites. While CERCLA imposes joint and several
liability on responsible parties, liability for each site is likely to be
apportioned among the parties. The Company believes that an estimate of the
possible loss or range of possible loss relating to such matters cannot be
made. While it is impossible at this time to determine with certainty the
outcome of such matters and although no assurance can be given with respect
thereto, based on information currently available to the Company and based on
the Company's belief as to the reasonable likelihood of the outcomes of such
matters, the Company does not believe that its potential liability in
connection with these sites, either individually or in the aggregate, will have
a material adverse effect on its business, financial condition or results of
operations.
The Company does not anticipate incurring material capital expenditures for
environmental controls or for investigation or remediation of environmental
conditions during the current or succeeding fiscal year. Nevertheless, the
Company can give no assurance that it, or entities for which it may be
responsible, will not incur liability in connection with the investigation and
remediation of facilities it currently (or formerly) owns or operates or other
locations in a manner that could materially and adversely affect the Company.
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Other Contingencies
In 1991, CB&I Constructors, Inc. (formerly CBI Na-Con, Inc.), a subsidiary of
the Company, installed a catalyst cooler bundle at Fina Oil & Chemical
Company's ("Fina") Port Arthur, Texas refinery. In July 1991, Fina determined
that the catalyst cooler bundle was defective and had it replaced. Fina is
seeking approximately $20 million in damages for loss of use of Fina's catalyst
cracking unit and the cost of replacement of the catalyst cooler bundle. On
June 28, 1993, Fina filed a complaint against CB&I Constructors, Inc. before
the District Court of Harris County, Texas in Fina Oil & Chemical Company v.
CB&I Constructors, Inc., et al. The Company denies that it is liable. The
Company believes that an estimate of the possible loss or range of possible
loss cannot be made. While the Company believes that the claims are without
merit and/or the Company has valid defenses to such claims and that it is
reasonably likely to prevail in defending against such claims, there can be no
assurance that if the Company is finally determined to be liable for all or a
portion of any damages payable, that such liability will not have a materially
adverse effect on the Company's business, financial condition or results of
operations.
The Company is a defendant in a number of other lawsuits arising in the normal
course of its business. The Company believes that an estimate of the possible
loss or range of possible loss relating to such matters cannot be made. While
it is impossible at this time to determine with certainty the ultimate outcome
of these lawsuits and although no assurance can be given with respect thereto,
based on information currently available to the Company and based on the
Company's belief as to the reasonable likelihood of the outcomes of such
matters, the Company's management believes that adequate provision has been
made for probable losses with respect thereto as best as can be determined at
this time and that the ultimate outcome, after provisions therefore, will not
have a material adverse effect, either individually or in the aggregate, on the
Company's business, financial condition or results of operations. The adequacy
of reserves applicable to the potential costs of being engaged in litigation
and potential liabilities resulting from litigation are reviewed as
developments in the litigation warrant.
The Company is jointly and severally liable for certain liabilities of
partnerships and joint ventures. The Company has also given certain
performance guarantees arising in the ordinary course of business for its
subsidiaries and unconsolidated affiliates.
The Company has elected to retain portions of anticipated losses through the
use of deductibles and self-insured retentions for its exposures related to
third party liability and workers' compensation. Liabilities in excess of
these amounts are the responsibilities of an insurance carrier. To the extent
the Company self insures for these exposures, reserves have been provided for
based on management's best estimates with input from the Company's legal and
insurance advisors. Changes in assumptions, as well as changes in actual
experience, could cause these estimates to change in the near term. The
Company's management believes that the reasonably possible losses, if any, for
these matters, to the extent not otherwise disclosed and net of recorded
reserves, will not be material to its financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 1997.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information required by this item can be found on page 50 of the Company's 1997
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item can be found on pages 24 and 25 of the
Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by this item can be found on pages 26 through 30 of the
Company's 1997 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to the Company until after June 15, 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements and Report of Independent Public Accountants
can be found on pages 31 through 50 of the Company's 1997 Annual Report to
Shareholders and are incorporated herein by reference.
Quarterly financial data can be found on page 50 of the Company's 1997 Annual
Report to Shareholders and is incorporated herein by reference.
Additional financial information and schedules can be found in Part IV of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
CB&I has neither changed its independent accountants nor had any disagreements
on accounting and financial disclosure with its independent accountants during
the prior two years.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to supervisory directors can be found on pages 2 and 3
of the Company's 1998 Proxy Statement and is incorporated herein by reference.
The following table sets forth certain information regarding the executive
officers of Chicago Bridge & Iron Company ("CBIC") and Chicago Bridge & Iron
Company B.V. ("CB&I B.V."). As permitted under the law of The Netherlands, the
Company does not have executive officers. CB&I B.V. serves as the Company's
management board.
<TABLE>
<CAPTION>
Served in
Name Age Position Position Since
- ---- --- -------- --------------
<S> <C> <C> <C>
Gerald M. Glenn 55 Chairman of the Supervisory Board of the 1997
Company;
Chairman, President and Chief Executive Officer 1996
and Director of CBIC;
Chairman, President and Chief Executive Officer 1997
and Managing Director of CB&I B.V.
Thomas L. Aldinger 46 Vice President - North American Group 1997
Executive of CBIC
C. David Bassett 62 Vice President - Engineering, Fabrication and 1996
Logistics of CBIC
Stephen P. Crain 44 Vice President - Global Sales and Marketing of 1997
CBIC
Stephen M. Duffy 48 Vice President - Human Resources, 1996
Administration and Services of CBIC
Robert B. Jordan 48 Vice President - Operations of CBIC; 1998
Managing Director of CB&I B.V. 1998
John R. Meier 52 Vice President and Controller of CBIC 1997
Timothy J. Wiggins 41 Vice President - Chief Financial Officer and 1996
Director of CBIC;
Vice President, Treasurer and Chief Financial 1997
Officer and Managing Director of CB&I B.V.
Robert H. Wolfe 48 Secretary of the Company; 1997
Vice President, General Counsel and Secretary of 1996
CBIC
Secretary of CB&I B.V. 1997
</TABLE>
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There are no family relationships between any executive officers and
supervisory directors. Executive officers of CBIC are elected annually. The
Managing Directors of CB&I B.V. serve until successors are elected.
Business Experience
Gerald M. Glenn has served as Chairman of the Supervisory Board of the Company
since April 1997. He has been the Chairman, President and Chief Executive
Officer and Director of CBIC since May 1996, and has been the Chairman,
President and Chief Executive Officer and Managing Director of CB&I B.V. since
March 1997. Mr. Glenn has been elected to serve as Chairman of the Supervisory
Board of the Company; his term will expire in 2000. From April 1994 to
present, Mr. Glenn has been a principal in The Glenn Group LLC. From November
1986 to April 1994, Mr. Glenn served as Group President for Fluor Daniel, Inc.
Thomas L. Aldinger has been the Vice President - North American Group Executive
since December 1997. Prior to that time, Mr. Aldinger was employed by CBIC or
its affiliates in an executive or management capacity for more than five years.
Mr. Aldinger has been continuously employed by the Company since 1974.
C. David Bassett has been the Vice President - Engineering, Fabrication and
Logistics of CBIC since November 1996. From February 1994 to November 1996,
Mr. Bassett was an independent consultant. From 1987 to February 1994, Mr.
Bassett was the Chief Operating Officer for CRS Sirrine in Greenville, South
Carolina.
Stephen P. Crain has been the Vice President - Global Sales and Marketing of
CBIC since July 1997. Prior to that time, Mr. Crain was employed by CBIC or
its affiliates in an executive or management capacity for more than five years.
Mr. Crain has been continuously employed by the Company since 1978.
Stephen M. Duffy has been the Vice President - Human Resources, Administration
and Services of CBIC since June 1996. Mr. Duffy was the Vice President - Human
Resources and Administration of CBI Industries, Inc. from November 1991 through
May 1996.
Robert B. Jordan has been the Vice President - Operations of CBIC and Managing
Director of CB&I B.V. since February 1998. From May 1996 to February 1998, Mr.
Jordan was the Senior Vice President - Sales and Operations for the Process
Division of BE&K Incorporated located in Birmingham, Alabama. From February
1994 to May 1996, Mr. Jordan was the Senior Vice President - Sales and
Operations for the Process and Industrial Division of Raytheon/Rust Engineering
& Construction located in Birmingham, Alabama. Mr. Jordan also served the
Fluor Daniel organization from 1973 to February 1994, most recently as Vice
President-General Manager of the Chemical and Process Division.
John R. Meier has been the Vice President and Controller of CBIC since June
1997. Prior to that time, Mr. Meier was employed by CBIC and CBI Industries,
Inc. in an executive or management capacity for more than five years. Mr.
Meier has been employed by the Company since 1968.
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Timothy J. Wiggins has been the Vice President - Chief Financial Officer and
Director of CBIC since September 1996, and the Vice President, Treasurer and
Chief Financial Officer and Managing Director of CB&I B.V. since March 1997.
From August 1993 to September 1996, Mr. Wiggins was the Executive Vice
President - Finance and Administration, Chief Financial Officer and Secretary
and a director of Fruehauf Trailer Corporation ("Fruehauf"), a publicly-held
manufacturer of truck trailers. Fruehauf filed a petition under the Federal
bankruptcy laws in October 1996. From May 1993 to August 1993, Mr. Wiggins was
employed by Glass & Associates, Inc., a turnaround and management consulting
firm. From 1988 to March 1993, Mr. Wiggins served Autodie Corporation, a
publicly-held manufacturer of large-scale stamping dies and molds primarily for
the automotive industry, in various executive positions. Mr. Wiggins was
promoted to Chief Executive Officer of Autodie Corporation shortly after
Autodie Corporation filed a petition under the Federal bankruptcy laws.
Robert H. Wolfe has been the Vice President, General Counsel and Secretary of
CBIC since November 1996, and the Secretary of the Company since its inception.
From June 1996 to November 1996, Mr. Wolfe served as a private consultant to
Rust Engineering & Construction Inc. ("Rust"). He served as Vice President,
General Counsel and Secretary to Rust from November 1993 to June 1996, and as
Associate General Counsel for that company from July 1988 to November 1993.
Information with respect to compliance with Section 16(a) of the Securities
Exchange Act of 1934 can be found on page 6 of the 1998 Proxy Statement and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation can be found on pages 7
through 17 of the 1998 Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Common Stock Ownership By Certain Persons and
Management can be found on pages 5 and 6 of the 1998 Proxy Statement and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
14
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements
The following consolidated financial statements and Report of Independent
Public Accountants previously incorporated by reference under Item 8 of Part II
of this report are herein incorporated by reference.
Consolidated Balance Sheets - As of December 31, 1997 and 1996
Consolidated Statements of Income - For the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders' Equity - For the
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - For the years ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules
Supplemental Schedule V - Valuation and Qualifying Accounts and Reserves for
each of the years ended December 31, 1997, 1996 and 1995 can be found on page
18 of this report.
Schedules, other than the one above, have been omitted because the schedules
are either not applicable or the required information is shown in the financial
statements or notes thereto previously incorporated by reference under Item 8
of Part II of this report.
Quarterly financial data for the years ended December 31, 1997 and 1996 is
shown in the Notes to Consolidated Financial Statements previously incorporated
by reference under Item 8 of Part II of this report.
CB&I's interest in 50 percent or less owned affiliates, when considered in the
aggregate, does not constitute a significant subsidiary; therefore, summarized
financial information has been omitted.
Exhibits
The Exhibit Index on page 19 and Exhibits being filed are submitted as a
separate section of this report.
Reports on Form 8-K
A Current Report on Form 8-K was filed during the quarter ended December 31,
1997 under Item 5 of Form 8-K, Other Events. The date of that report was
October 10, 1997.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 31, 1998 /s/ Timothy J. Wiggins
---------------------------------------
By: Chicago Bridge & Iron Company B.V.
Its: Managing Director
Timothy J. Wiggins
Managing Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 31, 1998.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
/s/ Gerald M. Glenn
- ------------------------------------------------ Chairman of the Supervisory Board
Gerald M. Glenn of Registrant, and President, Chief
Executive Officer of CBIC
(Principal Executive Officer)
/s/ Timothy J. Wiggins
- ------------------------------------------------ Vice President and Chief Financial
Timothy J. Wiggins Officer of CBIC
(Principal Financial Officer)
/s/ John R. Meier
- ------------------------------------------------ Vice President and Controller of
John R. Meier CBIC
(Principal Accounting Officer)
/s/ Jerry H. Ballengee Supervisory Director
- ------------------------------------------------
Jerry H. Ballengee
/s/ J. Dennis Bonney
- ------------------------------------------------ Supervisory Director
J. Dennis Bonney
/s/ J. Charles Jennett
- ------------------------------------------------ Supervisory Director
J. Charles Jennett
/s/ Vincent L. Kontny
- ------------------------------------------------ Supervisory Director
Vincent L. Kontny
/s/ Gary L. Neale
- ------------------------------------------------ Supervisory Director
Gary L. Neale
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
/s/ L. Donald Simpson Supervisory Director
- --------------------------------------------------
L. Donald Simpson
/s/ Marsha C. Williams Supervisory Director
- --------------------------------------------------
Marsha C. Williams
Registrant's Agent for Service in the United States
/s/ Robert H. Wolfe
- --------------------------------------------------
Robert H. Wolfe
</TABLE>
17
<PAGE> 18
SCHEDULE V. SUPPLEMENTAL INFORMATION ON VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
CHICAGO BRIDGE & IRON COMPANY N.V.
Valuation and Qualifying Accounts and Reserves
For Each of the Three Years Ended December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
BALANCE CHARGED TO BALANCE
AT COSTS AND AT
DESCRIPTIONS JANUARY 1 EXPENSES DEDUCTIONS(1) DECEMBER 31
------------ --------- -------- ------------- -----------
<S> <C> <C> <C> <C>
Allowance for
doubtful accounts
1997 $3,047 $1,207 $(2,345) $1,909
1996 4,343(2) 2,313 (3,609) 3,047
1995 2,862 5,656 (2,175) 6,343
</TABLE>
(1) Deductions generally represents utilization of previously established
reserves or adjustments to reverse unnecessary reserves due to subsequent
collections.
(2) The balance as of January 1, 1996 reflects a $2,000 purchase accounting
adjustment to reduce the reserve.
18
<PAGE> 19
EXHIBIT INDEX
(2)
3 Amended Articles of Association of the Company (English translation)
(2)
4.1 Specimen Stock Certificate
(2)
10.1 Form of Indemnification Agreement between the Company and its
Supervisory and Managing directors
(1)
10.2 The Company's Annual Incentive Compensation Plan
(3)
10.3 The Company's Long-Term Incentive Plan
(1)
10.4 The Company's Deferred Compensation Plan
(4)
10.5 The Company's Management Plan
(1)
10.6 The Company's Excess Benefit Plan
(2)
10.7 Form of the Company's Supplemental Executive Death Benefits Plan
(2)
10.8 Employment Agreements Including Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering between the Company
and Certain Executive Officers
(2)
10.9 Form of Termination Agreements between the Company and Certain
Executive Officers
(2)
10.10 Separation Agreement
(2)
10.11 Form of Amended and Restated Tax Disaffiliation Agreement
(2)
10.12 Employee Benefits Separation Agreement
(2)
10.13 Conforming Agreement
(1)
10.14 Employment Agreement Letters between the Company and Robert B. Jordan
(2)
10.15 Revolving Credit Facility
(a) Amendment No. 1 dated October 31, 1997 (1)
(b) Amendment No. 2 dated March 5, 1998 (1)
(1)
13 Portion of the 1997 Annual Report to Shareholders
(1)
21 List of Significant Subsidiaries
19
<PAGE> 20
(1)
23 Consent and Report of the Independent Public Accountants
(1)
27 Financial Data Schedule
______________________
(1) Filed herewith
(2) Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No. 333-18065)
(3) Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 333-24445)
(4) Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 333-24443)
20
<PAGE> 1
Exhibit 10.2
ANNUAL INCENTIVE COMPENSATION PLAN
The Annual Incentive Compensation Plan (bonus plan), was amended June 2, 1997.
The plan shall be an annual short-term incentive plan. Participants shall
consist of the executive officers of the Company and its principal operating
subsidiaries, and other designated management employees. The bonus plan shall
be based on the annual operating plan of the Company, developed after
discussion and analysis of the business plans within the major divisions of the
Company. Payment of bonuses shall be based on the attainment of specific
financial and individual goals, and shall be paid following the end of the
fiscal year as of a date to be designated by the officers of the Company. Such
goals shall be set from year to year, at the beginning of each year, upon
management recommendation and approval by the Board.
The president and CEO, with the approval of the Board, at his discretion may
adjust the financial results for the calculation of achievement of the goals
for extraordinary, non-recurring events beyond the control of the Company which
otherwise distort financial performance. For this purpose, these may include
but are not limited to, special tax and accounting charges or the acquisition
or disposition of businesses.
A target bonus amount, expressed either in dollars or as a percent of pay,
shall be established for each participating employee at the beginning of each
fiscal year based on position, responsibilities and grade level, as determined
in the discretion of the officers of the company.
Achievement of the Company's financial goals shall earn 100% of the portion of
the target bonus allocated to such goals. Performance above stated goals will
result in additional bonus opportunities for participants. The discretionary
bonus shall be determined by the management's evaluation of each individual's
performance (the Compensation Committee of the Board, in the case of the CEO).
<PAGE> 1
Exhibit 10.4
CHICAGO BRIDGE & IRON COMPANY
DEFERRED COMPENSATION PLAN
<PAGE> 2
CHICAGO BRIDGE & IRON COMPANY
DEFERRED COMPENSATION PLAN
ARTICLE I
ESTABLISHMENT, OBJECTIVES AND DURATION
1.1 Establishment of Plan. Chicago Bridge & Iron Company, a Delaware
corporation wholly-owned by Chicago Bridge & Iron Company N.V., a Netherlands
corporation, hereby establishes an elective deferred compensation plan, to be
known as the "Chicago Bridge & Iron Company Deferred Compensation Plan" (the
"Plan") as set forth in this document.
1.2 Effective Date. The Plan shall become effective as of January 1, 1998.
The Plan applies only to individuals who are employees or directors of the
Company or Subsidiaries on or after that effective date. The Plan shall remain
in effect until terminated as provided in Article VIII.
1.3 Objectives. The Plan is an unfunded deferred compensation arrangement
for a select group of management or highly compensated employees and directors
of the Company. The Plan is intended to provide participating employees and
directors with the opportunity to defer compensation that is otherwise payable
to them as Salary, as Bonus under the Incentive Compensation Program, and as
Directors' Fees.
ARTICLE II
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "Account" means any of the separate bookkeeping accounts maintained
for each Participant representing the Participant's total credits under Article
IV of the Plan. The Plan Administrator may maintain such subaccounts within
any Account as the Plan Administrator deems necessary or desirable.
2.2 "Award" has the meaning prescribed for that term in the Long-Term
Incentive Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Bonus" means an Employee's annual incentive bonus payable under the
Company's Incentive Compensation Program (including without distinction target
payments based on meeting the Company's annual goals and discretionary
payments).
2.5 "Change Date, as of which a Participant may change the deemed
investment of his or her Account or of future contributions to his or her
Account, means any date as of which such change may become effective under
procedures for such changes established by the Plan Administrator.
<PAGE> 3
2.6 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.7 "Company" means Chicago Bridge & Iron Company, a Delaware corporation.
2.8 "Director" means a member of the Board or a member of the Board of
Directors of any Subsidiary (whether or not an Employee of the Company).
2.9 "Directors' Fees" means the compensation payable in cash to a Director
for his or her services as a Director.
2.10 "Employee" means any employee of the Company or its Subsidiaries.
2.11 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.12 "Incentive Compensation Program means the Chicago Bridge & Iron
Company Incentive Compensation Program as in effect from time to time.
2.13 "Long-Term Incentive Plan" means the Chicago Bridge & Iron Company
Long Term Incentive Plan as in effect from time to time.
2.14 "Measurement Fund" means a publicly traded or offered mutual fund or
funds from the following list of funds managed by T. Rowe Price Associates,
Inc. or one of its affiliates, which a Participant may select under Section 4.3
to determine the subsequent income (or loss) on his or her deferrals:
Blue Chip Fund
Balanced Fund
Equity Income Fund
Equity Index
New Horizons
Prime Reserve
Spectrum Income
Spectrum Growth
International Stock
2.15 "Participant" means an Employee or Director who is eligible to
participate in the Plan accordance with Section 3.1 and elects to defer
compensation under this Plan pursuant to Section 4.1.
2.16 "Plan Administrator" means the Company.
2.17 "Plan Year" means the fiscal year of the Company, which until changed
is the calendar year.
2.18 "Salary" means an employee's base salary, determined without regard
to Bonuses, Awards or any other incentive compensation, and without regard to
elective deferrals under the Savings Plan, any cafeteria plan under Section 125
of the Code, or this Plan.
2
<PAGE> 4
2.19 "Savings Plan" means the Chicago Bridge & Iron Savings Plan, as
amended from time to time.
2.20 "Subsidiary" means any corporation (other than the Company) in which
Chicago Bridge & Iron Company N.V. (the "Parent") owns, directly or indirectly
through the Company or Subsidiaries, at least fifty percent (50% of the total
combined voting power of all classes of stock, or any other entity (including
but not limited to partnerships and joint ventures) in which the Parent owns,
directly or indirectly through the Company or Subsidiaries, at least fifty
percent (50%) of the capital or profits interest.
2.21 "Trust" means the trust, of the type commonly known as a "rabbi"
trust, established in connection with this Plan pursuant to Section 8.2.
2.22 "Trustee" means the Trustee of the Trust.
2.23 "Valuation Date" means the last day of each Plan Year and such other
dates as the Plan Administrator makes a determination of the value of
Participants' Accounts.
ARTICLE III
PARTICIPATION
3.1 Eligibility. An Employee of the Company or any Subsidiary shall be
eligible to participate in this Plan if he or she is (i) a management or highly
compensated employee within the meaning of Sections 201(2), 301(a)(3), and
401(a)(2) of ERISA, (ii) a participant in the Long-Term Incentive Plan or
eligible to receive a Bonus under the Incentive Compensation Program, and (iii)
affirmatively selected by the Company to participate in this Plan and notified
by the Company of his or her eligibility pursuant to Section 3.2. A Director
of the Company or any Subsidiary shall be eligible to participate in this Plan.
3.2 Participation. The Company shall advise each eligible Employee
selected for Participation, and each Director, of his or her eligibility and
afford him or her the opportunity to defer compensation in accordance with
Section 4.1. An eligible Employee or a Director shall become a Participant
upon first electing to defer compensation under Section 4.1.
3.3 Duration of Participation. A Participant shall continue to be a
Participant until the Participant's termination of service as an Employee or
Director with the Company and all Subsidiaries, and thereafter shall be an
inactive Participant for so long as he or she is entitled to a benefit from the
Plan. A Participant who remains an Employee of the Company or a Subsidiary but
who for any reason does not meet the requirements of Section 3.1 for a Plan
Year shall be an inactive Participant for such Plan Year, but shall be eligible
to again become an active Participant in any later Plan Year for which he or
she meets those requirements.
ARTICLE IV
3
<PAGE> 5
DEFERRED COMPENSATION
4.1 Deferral of Compensation. For each Plan Year, each Participant may
elect, on a form provided by the Plan Administrator substantially in the form
of Exhibit A, to defer part of his or her Salary, part or all of his or her
Bonus, and part or all of his or her Directors' Fees, as follows:
(a) Salary Deferral. A Participant may elect to defer any whole
percentage up to and including 50% of his or her Salary.
(b) Bonus Deferral. A Participant may elect to defer (i) any
whole percentage up to and including 100% of his or her Bonus, (ii)
a stated dollar amount of his or her Bonus, or (iii) all of his or
her Bonus (if any) in excess of a stated dollar amount.
Notwithstanding such election, in no event will the Bonus deferral
exceed the actual Bonus to which he or she turns out to be entitled
under the Incentive Compensation Program.
(c) Directors' Fees Deferral. A Participant may elect to defer
any whole percentage up to and including 100% of his or her
Directors' Fees.
Amounts deferred under Section 4.1 will be credited to an Account for the
Participant at such time or times as the Salary, Bonus or Directors' Fees would
otherwise have been paid to the Participant in cash.
4.2 Time of Election. This election shall be made during the ninety-day
period preceding the first day of the Plan Year. If an individual becomes a
Participant in mid-year, he or she may make this election, but only respecting
Salary, Bonus and Directors' Fees for services to be performed after he or she
makes the election, within 30 days of the date he or she becomes a Participant.
For this purpose, the Bonus for any year (paid after the close of that year)
shall be deemed to be for services performed ratably over the course of the
year; and notwithstanding a mid-year Participant's election under Section 4.1,
the portion of any Bonus which may be deferred under this Plan shall not exceed
the ratable portion of Bonus earned after the Participant makes his or her
election. A Participant may not elect to increase, decrease, or cease his or
her Salary, Bonus or Directors' Fees deferral at any time during the Plan Year
under this Plan. However, the Participant may make a new and different
election (or revoke his or her election) for the following Plan Year during the
election period for that following Plan Year. If a Participant does not change
his or her current year's election within the election period for the following
year, his or her current year's election will continue in effect for the
following year. Every deferral election under this Plan shall be effective
only with respect to Salary, Bonus and Directors' Fees not yet earned as of the
date of the election.
4.3 Suspension of Deferral for Hardship. In the event of an unforeseeable
emergency that entitles the Participant to a distribution from his Account
under Section 6.3, or in the event that the Participant applies for and
receives a distribution by reason of hardship from the Savings Plan (determined
under the provision of that plan and applicable regulations under Section
401(k) of the Code), deferral shall be canceled with respect to any Salary,
Bonus and Directors' Fees that would not yet have been paid to the Participant
in cash if the Participant had not made a deferral election. The
4
<PAGE> 6
Participant may make a new deferral election for the following year, subject to
any restrictions on deferral in this Plan or the Savings Plan.
4.4 Income (or Loss) on Credits. For purposes of determining income (or
loss) on a Participant's Account, the Account shall be deemed invested in such
Measurement Funds as the Participant may designate from time to time under
procedures established by the Plan Administrator. The designation of
Measurement Funds from time to time shall apply to all deferrals (of Salary,
Bonus and Directors' Fees) and to the Participant's entire Account, until
changed. Designation of Measurement Funds shall be in whole percentages of a
Participant's deferrals, or of the balance of his or her Account, which
percentages shall add up to 100%. If the Participant does not otherwise
designate a Measurement Fund under procedures established by the Plan
Administrator, his or her Account shall be deemed invested in the Prime Reserve
Measurement Fund.
As of any Change Date, a Participant may change the designation or
allocation of Measurement Funds to determine income (or loss) on future credits
of deferred compensation, or may change the existing allocation of his or her
Account among Measurement Funds, under procedures established by the Plan
Administrator to implement such changes.
For purposes of determining income (or loss), a Participant's deferred
compensation shall be deemed to have been invested in Measurement Funds as soon
as reasonably practicable after the date as of which they are credited under
Section 4.1, and in all events by the fifteenth (15th) business day of the
month after the month in which they are credited under Section 4.1. For
purposes of determining income (or loss), a Participant's Account shall be
deemed to have been reinvested in the newly-designated Measurement Funds as
soon as reasonably practicable under the procedures established by the Plan
Administrator to implement such changes.
4.5 Statements. The Plan Administrator shall give each Participant a
statement of the value of his or her Account, and the Measurement Funds then in
effect for that Account, as of and as soon as reasonably practicable after the
Valuation Date which falls on the last day of the Plan Year. The Plan
Administrator may, but shall not be required to, provide similar statements as
of any intervening quarterly Valuation Date. The value of a Participant's
Account, and the applicable Measurement Funds, as of the applicable Valuation
Date, shown on any such statement shall be conclusive and binding on both the
Company and the Participant absent bad faith or manifest error unless the
Participant brings error to the attention of the Plan Administrator by filing a
claim for clarification of his or her future rights to benefits pursuant to
Section 7.3 within ninety (90) days after receiving that statement.
ARTICLE V
VESTING
5.1 Vesting. A Participant shall be fully vested in his or her Account at
all times.
5
<PAGE> 7
ARTICLE VI
PAYMENT OF BENEFITS
6.1 Distribution Options. Simultaneously with his or her election under
Section 4.1, a Participant shall elect, on a form provided by the Plan
Administrator substantially in the form of Exhibit B, and delivered to the Plan
Administrator, one of the following distribution dates and one of the following
distribution methods for payment of his or her Account:
(a) Distribution Dates:
(i) Termination. The Participant's termination of employment;
(ii) Designated Date. The first day of a designated calendar
month in a designated calendar year;
(iii) Designated Post-Employment Deferral. The first day of the
calendar month that follows the Participant's termination of
employment by a designated number (not more than 120) of
months.
Notwithstanding an election of (ii) or (iii) above, the
distribution date shall be the date of termination of employment if
employment terminates due to death or disability. In the case of a
Director, termination of employment shall mean the first date that
he or she is neither an Employee or Director of the Company or any
Subsidiary.
(b) Distribution Methods:
(i) Lump Sum. A distribution in a single lump sum.
(ii) Installments. A distribution in annual, quarterly or monthly
installments over a period, not exceeding 10 years, elected
by the Participant; with the amount of each installment being
the balance of the Participant's Account subject to this
distribution option as of the Valuation Date preceding
payment divided by the number of installments (including the
current installment) remaining to be paid.
In either case the lump sum payment or the first installment
payment shall be made as soon as practicable (and in all events
within thirty (30) days) after the Participant's distribution date
and any remaining installment payments shall be made in January of
each successive year until payments are completed.
If upon a Participant's termination of employment no election of
distribution date or distribution method is in effect, distribution
shall be made as soon as practicable after his or her termination
of employment in a single lump sum.
6
<PAGE> 8
6.2 Changes in Distribution Options. A Participant may change his or her
previously elected distribution option on a form provided by the Plan
Administrator substantially in the form of Exhibit B, and delivered to the Plan
Administrator. But no change in a Participant's distribution option after his
or her initial election of a distribution option will become effective (for
distribution upon or after) a subsequent termination of employment) until a
date which is (i) at least six months after the date the change of election is
filed with the Plan Administrator, and (ii) is in the Plan Year after the Plan
year in which the change of election is filed with the Plan Administrator. The
distribution date and distribution method upon or after a Participant's
termination of employment shall therefore be determined by his or her most
recent distribution option election that meets the foregoing requirements,
except as provided in Sections 6.1, 6.3 and 6.4.
6.3 Unforeseeable Emergency. The Plan Administrator, upon request of a
Participant and substantiation acceptable to the Plan Administrator in its sole
discretion, may direct premature distribution of part or all of a Participant's
Account either during employment or after his or her employment terminates,
upon an unforeseeable emergency affecting the Participant. For this purpose,
an unforeseeable emergency is a severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant
or of a dependent (as defined in Section 152(a) of the Code) of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant, as determined by the Plan
Administrator taking into account the facts of each case. An unforeseeable
emergency does not include the need to send a Participant's child to college or
the desire to purchase a home. The amount distributable shall not exceed the
amount necessary to relieve the hardship caused by the unforeseeable emergency
after taking into consideration the extent to which such hardship is or may be
relieved through reimbursement or compensation by insurance or otherwise, by
liquidation of the Participant's assets (to the extent such liquidation would
not itself cause severe financial hardship), or by cessation of compensation
deferral under this Plan or elective deferrals under the Savings Plan.
6.4 Small Installments and Account Balances. If for any reason, at any
time after a Participant's employment terminates and before the date (if any)
installment payments actually begin, the balance of his or her Account (or
portion of an Account payable to a single Beneficiary) is less than $10,000,
then notwithstanding anything in this Plan or any Participant's election to the
contrary, the Participant's Account (or such portion) shall be distributed in a
single lump sum as soon as practicable. If for any reason, at any time after a
Participant's employment terminates and on or after the date installment
payments actually begin, the amount of any installment payable to a Participant
or Beneficiary is less than a minimum amount of $500 (for a monthly
installment), $1,500 (for a quarterly installment) or $6,000 (for an annual
installment), then notwithstanding anything in this Plan or any Participant's
election to the contrary, each installment shall be in the applicable foregoing
minimum amount and installments shall continue only until the Account is
exhausted. If for any reason the distributee of benefits under this Plan is an
estate, the Plan Administrator in its sole discretion may pay to the estate the
entire balance of the Account that is distributable to the estate in a single
lump sum.
6.5 Form of Payment. All benefits under this Plan shall be paid by
negotiable check or other cash equivalent from the Trust or other general funds
of the Company.
6.6 Beneficiary. Any amounts payable under this Plan after the death of
the Participant shall be paid to the Participant's Beneficiary at the time and
in the method determined by the Participant
7
<PAGE> 9
pursuant to Section 6.1, subject to Sections 6.2 and 6.3. A Participant may
designate the Beneficiary or Beneficiaries (who may be named contingently or
successively) to receive such amounts. Each designation of Beneficiary shall
be on a form provided by the Plan Administrator substantially in the form of
Exhibit C, signed by the Participant and filed with the Plan Administrator
during the Participant's lifetime. A Participant may revoke such designation
(without the consent of any Beneficiary) and make a new designation of
Beneficiary by filing a new form in like manner. A properly completed and
executed change in a designation of Beneficiary shall take effect immediately
upon being filed with the Plan Administrator during the Participant's lifetime.
If upon a Participant's death no valid designation of Beneficiary is on file
with the Plan Administrator, or if a Beneficiary dies before payments are
completed and there are no living contingent or successive Beneficiaries, then
any remaining payments under this Plan shall be made (1) to the Participant's
surviving spouse, if any, or (2) if there is no surviving spouse, then in equal
shares to his or her children (with the then-living descendants of any deceased
child taking that child's share per stirpes), or (3) if there are neither a
surviving spouse nor surviving children or their descendants, then to estate of
the last to die of the Participant and all designated Beneficiaries.
6.7 Rights of Beneficiary. The Beneficiary of a Participant who has died
shall have the same right as the Participant to designate Measurement Funds
under Section 4.3, and receive a statement under Section 4.4, for the Account
(or portion of an Account) as to which he or she is a Beneficiary.
6.8 Facility of Payment. In the event any distribution is payable under
this Plan to a minor or other individual who is legally, physically or mentally
incompetent to receive such payment, the Plan Administrator in its sole
discretion shall pay such benefits to one or more of the following persons:
(a) Directly to such minor or other person.
(b) To the legal guardian or conservator of such minor or other person;
(c) To the spouse, parent, brother, sister, child or other relative of
such minor or other person for the use of such minor or other person.
The Plan Administrator shall not be required to see to the application of any
distribution so made to any of such persons, but the receipt therefor shall be
a full discharge of the liability of the Plan, the Plan Administrator, the
Company, and the Trustee to such minor or other person.
ARTICLE VII
ADMINISTRATION
7.1 Company as Plan Administrator. The Plan will be administered by the
Company.
7.2 Power of the Plan Administrator. The Plan Administrator shall have
the power and authority in its sole and absolute discretion:
8
<PAGE> 10
(a) To construe and interpret the Plan, determine the application
of the Plan to situations where such application is unclear or
disputable, and make equitable adjustments for any mistakes or
errors made in the administration of the Plan.
(b) To determine all questions arising in the administration of
the Plan, including the power to determine the rights of
Participants and their beneficiaries and the amount of their
respective benefits;
(c) To adopt such rules, regulations and forms as it may deem
necessary for the proper and efficient administration of the Plan
consistent with its purposes;
(d) To enforce the Plan in accordance with its terms and the
rules, regulations and forms adopted by the Plan Administrator;
(e) To take such action and establish such procedures as it deems
necessary or appropriate to coordinate deferrals and benefits under
this Plan with the Incentive Program, the Long-Term Incentive Plan,
the Chicago Bridge & Iron Company Excess Benefit Plan, or the Trust;
(f) To take such action and establish such procedures as it deems
necessary or appropriate to implement Participant designations of
Measurement Funds and coordinate the investment of Trust assets with
such designations to reduce or eliminate the Company's exposure to
market fluctuations.
(g) To instruct the Trustee regarding payments from the Plan and
to provide, amend, and supplement from time to time a schedule of
payments to be made from the Trust for purposes of the Plan;
(h) To employ such counsel, auditors, actuaries, or other
specialists (who may be counsel, auditors, actuaries or other
specialists for the Company) and to engage such clerical or other
services to the extent such services are not provided by the
Company;
(i) To delegate such of its powers and authorities to such person
or persons, with his, her, its or their consent, as the Plan
Administrator may appoint;
(j) To do all other things the Plan Administrator deems necessary
or desirable for the advantageous administration of the Plan and to
make the Plan fully effective in accordance with its terms and
intent.
7.3 Claims for Benefits. No claim shall be necessary for payments
routinely due to begin under the terms of the Plan. Any claim for benefits not
received or received in an improper amount or time, or any claim for
clarification of a Participant's or Beneficiary's future rights to benefits,
shall be made in writing to the Plan Administrator. The Plan Administrator
shall decide each claim and give the person making the claim (a "Claimant")
written notice of the disposition of the claim within 90 days after the claim
is filed. If the Plan Administrator denies a claim, the notice of denial shall
be in writing, shall contain the specific reason or reasons for the denial of
the claim, shall contain a specific reference to the pertinent Plan provisions
upon which the denial is based, shall contain a description of any
9
<PAGE> 11
additional material or information necessary for the claimant to perfect the
claim along with an explanation why such material or information is necessary,
and shall contain an explanation of the Plan's claims review procedures.
Within 60 days after receipt by the Claimant of a written notice of denial
of a claim, the Claimant may file a written request with the Company for a full
and fair review of the denial of the claim for benefits by a panel of three
officers of the Company who are also members of the Board of Managing Directors
of Chicago Bridge & Iron Company B.V., a Netherlands corporation; provided that
no such member may serve on an Appeals Panel particularly respecting his or her
own claim for benefits. In connection with a claimant's appeal of the denial
of the benefit, the Claimant may review pertinent documents and may submit
issues and comments in writing. The Appeals Panel shall deliver to the
Claimant a written decision on the claim promptly, but not later than sixty
days after the Claimant's request for review. Such decision shall be written
in a manner calculated to be understood by the Claimant, shall include specific
reasons for the decision, and shall contain specific references to the
pertinent Plan provisions upon which the decision is based. The decision of
the Appeals Panel shall be final, conclusive and binding on all persons.
ARTICLE VIII
MISCELLANEOUS
8.1 Funding Policy. The Accounts under this Plan are merely unfunded
bookkeeping accounts of the Company and all payments under this Plan shall be
deemed made by the Company from general assets available to all unsecured
creditors of the Company in the event of its insolvency. All Participants have
merely the status of general unsecured creditors of the Company and the Plan is
merely a promise by the Company to make benefit payments in the future. It is
the intent of the Company that the arrangements under this Plan be unfunded for
tax purposes and for purposes of Title I of ERISA.
8.2 Trust. The Company shall create for purposes of this Plan a Trust of
the type commonly referred to as a "rabbi" trust. The terms of the Trust shall
be substantially similar (but need not be identical) to the terms of the model
trust published by the Internal Revenue Service in Rev. Proc. 92-64. The
Company shall transfer assets to the Trustee to hold and to make distributions
under this Plan on behalf of the Company. The assets so held in trust shall
remain the general assets of the Company, which is the grantor under the Trust.
The rights of Participants and their Beneficiaries under this Plan and the
Trust shall be exclusively unsecured contractual rights. No Participant or
Beneficiary shall have any right, title or interest whatsoever in the Trust.
8.3 No Employment Rights. Nothing in this Plan shall confer any greater
employment rights on a Participant than he or she otherwise may have.
8.4 Withholding. The Company may withhold from amounts payable under this
Plan any amounts as it reasonably deems required under any federal, state or
local revenue law applying to such payments.
8.5 No Assignment. The Participant's rights to benefit payments under
this Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge encumbrance,
10
<PAGE> 12
attachment or garnishment by creditors of the Participant or the Participant's
beneficiary other than by a "qualified domestic relations order" (within the
meaning of Section 206(d)(3)(B)(i) of ERISA).
8.6 Expenses. Expenses of administering the Plan shall be borne by the
Company.
8.7 Amendment and Termination. The Company may amend or terminate this
Plan at any time and in its sole discretion, by (and only by) written
instrument executed on behalf of the Company by an officer of the Company who
is also a member of the Board of managing Directors of Chicago Bridge & Iron
Company, B.V. a Netherlands corporation. Any such amendment or termination
shall be binding on the Company and all Participants and their Beneficiaries,
even though it may be retroactive and applicable to Participants whose
employment by the Company or Subsidiaries has terminated. However, no
amendment or termination of the Plan shall adversely affect the right of a
Participant to payment of a benefit that he or she would be entitled to (then
or thereafter) under the terms of the Plan if his or her employment terminated
immediately before the adoption of such amendment or termination of the Plan,
unless such amendment or termination of the Plan in the reasonable judgment of
the Plan Administrator is required to comply with applicable law or to preserve
the tax treatment of benefits under this Plan for the Company or for the
Participant, or is consented to by the affected Participant.
Notwithstanding anything in this Plan to the contrary, upon termination of
the Plan the Company may in its sole discretion pay all Account balances to the
Participants (or Beneficiaries) entitled thereto in a single lump sum.
8.8 Successors. All obligations of the Company under this Plan shall be
binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company.
8.9 Company Action. Except for matters on which this Plan specifically
requires action by the Board or by a Company officer otherwise specified, any
action or decision the Company is required or permitted to take under this Plan
will be properly done if done in writing over the signature of the Company's
Vice President - Human Resources and Administration (or if the Company has no
officer with that title, then of the Company officer having substantially
equivalent portion and responsibilities to a Vice President - Human Resources
and Administration).
8.10 Notice. Any notice that this Plan requires or permits the Company to
receive will be properly given if sent by first class mail, postage paid and
properly addressed, to the principal business address of the Company to the
attention of the Company's Vice President - Human Resources and Administration
(or if the Company has no officer with that title, then to the attention of the
Company officer having substantially equivalent position and responsibilities
to a Vice President - Human Resources and Administration). Any notice, or any
check in payment of benefits, that this Plan requires or permits a Participant
to receive will be properly given and received if sent to a Participant who is
an Employee by regular interoffice distribution channels; or sent to any
Participant or Beneficiary by first class mail, postage paid and properly
addressed, to the last known residence address of the Participant or
Beneficiary appearing on the records of the Company.
11
<PAGE> 13
8.11 Governing Law. This Plan is subject to Federal law under ERISA as
applicable to plans described in Section 3(a) of ERISA but exempt from certain
provisions of ERISA under Sections 201(2), 301(a)(3), and 401(a)(2) of ERISA,
and is subject to the laws of the State of Illinois to the extent such laws are
not pre-empted by ERISA.
12
<PAGE> 14
IN WITNESS WHEREOF the Company has caused this Chicago Bridge & Iron
Company Deferred Compensation Plan to be executed by an authorized officer this
18th day of December, 1997.
CHICAGO BRIDGE & IRON COMPANY
By: /s/ Gerald M. Glenn
---------------------------
Title: Chairman, President & C.E.O.
----------------------------
13
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - ESTABLISHMENT, OBJECTIVES AND DURATION............... 1
1.1 Establishment of Plan ............................... 1
1.2 Effective Date....................................... 1
1.3 Objectives........................................... 1
ARTICLE II - DEFINITIONS......................................... 1
2.1 Account ............................................. 1
2.2 Award................................................ 1
2.3 Board ............................................... 1
2.4 Bonus ............................................... 1
2.5 Change Date.......................................... 1
2.6 Code................................................. 2
2.7 Company.............................................. 2
2.8 Director ............................................ 2
2.9 Directors' Fees...................................... 2
2.10 Employee ........................................... 2
2.11 ERISA .............................................. 2
2.12 Incentive Compensation Program...................... 2
2.13 Long-Term Incentive Plan ........................... 2
2.14 Measurement Fund.................................... 2
2.15 Participant......................................... 2
2.16 Plan Administrator.................................. 2
2.17 Plan Year........................................... 2
2.18 Salary.............................................. 2
2.19 Savings Plan ....................................... 3
2.20 Subsidiary ......................................... 3
2.21 Trust .............................................. 3
2.22 Trustee ............................................ 3
2.23 Valuation Date...................................... 3
ARTICLE III - PARTICIPATION...................................... 3
3.1 Eligibility ........................................ 3
3.2 Participation........................................ 3
3.3 Duration of Participation............................ 3
ARTICLE IV - DEFERRED COMPENSATION............................... 3
4.1 Deferral of Compensation............................. 4
4.2 Time of Election..................................... 4
4.3 Suspension of Deferral for Hardship.................. 4
4.4 Income (or Loss) on Credits.......................... 5
4.5 Statements........................................... 5
</TABLE>
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE V - VESTING............................................. 5
5.1 Vesting............................................. 5
ARTICLE VI - PAYMENT OF BENEFITS................................ 6
6.1 Distribution Options................................ 6
6.2 Changes in Distribution Options..................... 7
6.3 Unforeseeable Emergency............................. 7
6.4 Small Installments and Account Balances............. 7
6.5 Form of Payment .................................... 7
6.6 Beneficiary......................................... 7
6.7 Rights of Beneficiary .............................. 8
6.8 Facility of Payment ................................ 8
ARTICLE VII - ADMINISTRATION ................................... 8
7.1 Company as Plan Administrator....................... 8
7.2 Power of the Plan Administrator..................... 8
7.3 Claims for Benefits................................. 9
ARTICLE VIII - MISCELLANEOUS ................................... 10
8.1 Funding Policy ..................................... 10
8.2 Trust............................................... 10
8.3 No Employment Rights ............................... 10
8.4 Withholding......................................... 10
8.5 No Assignment ...................................... 10
8.6 Expenses ........................................... 11
8.7 Amendment and Termination .......................... 11
8.8 Successors.......................................... 11
8.9 Company Action...................................... 11
8.10 Notice............................................. 11
8.11 Governing Law...................................... 12
</TABLE>
<PAGE> 1
Exhibit 10.6
CHICAGO BRIDGE & IRON COMPANY
EXCESS BENEFIT PLAN
<PAGE> 2
CHICAGO BRIDGE & IRON COMPANY
EXCESS BENEFIT PLAN
ARTICLE I
ESTABLISHMENT, OBJECTIVES AND DURATION
1.1 Establishment of Plan. Chicago Bridge & Iron Company, a Delaware
corporation wholly-owned by Chicago Bridge & Iron Company N.V., a Netherlands
corporation, hereby establishes an elective deferred compensation plan to be
known as the "Chicago Bridge & Iron Company Excess Benefit Plan" (the "Plan")
as set forth in this amended Plan document.
1.2 Effective Date. The Plan shall become effective as of January 1,
1997. The Plan applies only to individuals who are employees of the Company on
or after that effective date. The Plan shall remain in effect until terminated
as provided in Article VIII.
1.3 Objectives. The Plan is an unfunded deferred compensation arrangement
for a select group of management or highly compensated employees of the
Company. The Plan is intended to provide participating employees with the
benefits equivalent to the contributions the Company would have made on their
behalf to the Chicago Bridge & Iron Savings Plan ("Savings Plan") but for the
limitations of the Code.
ARTICLE II
DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "Account" means any of the separate bookkeeping accounts maintained
for each Participant representing the Participant's total credits under Article
IV of the Plan, and which consists of the following subaccounts:
(i) "Matching Contribution Subaccount" means the record of the
Participant's Matching Contribution Credits under Section 4.1
and earnings (or loss) thereon.
(ii) "Company Contribution Subaccount" means the record of the
Participant's Company Contribution Credits under Section 4.2
and earnings (or loss) thereon.
The Plan Administrator may maintain such other subaccounts within any Account
as the Plan Administrator deems necessary or desirable.
2.2 "Board" means the Board of Directors of the Company.
<PAGE> 3
2.3 "Change Date," as of which a Participant may change the deemed
investment of his or her Account or of future contributions to his or her
Account, means any date as of which such change may become effective under
procedures for such changes established by the Plan Administrator.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.5 "Company" means Chicago Bridge & Iron Company, a Delaware corporation.
2.6 "Company Contribution Credits" means credits to a Participant's
Account determined and made according to Section 4.2.
2.7 "Compensation" means "compensation" as defined in the Savings Plan for
purposes of making Elective Deferrals, modified by including deferrals under
the Chicago Bridge & Iron Company Deferred Compensation Plan as well as
Elective Deferrals under the Savings Plan; and determined without regard to the
Section 401(a)(17) Limit.
2.8 "Elective Deferrals" means "elective deferrals" as defined in the
Savings Plan for purposes of applying the limitations of Sections 401(k)(3) and
402(g) of the Code.
2.9 "Employee" means any employee of the Company or its Subsidiaries.
Directors who are not employed by the Company or a Subsidiary shall not be
considered Employees under this Plan.
2.10 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.11 "Highly Compensated Employee" means an Employee who is treated as a
highly compensated employee, as defined in Section 414(q) of the Code, for
purposes of the Savings Plan.
2.12 "Matching Credits" means credits to a Participant's Account
determined and made according to Section 4.1.
2.13 "Measurement Fund" means a publicly traded or offered mutual fund or
funds from the following list of funds managed by T. Rowe Price Associates,
Inc., or one of its affiliates, which a Participant may select under Section
4.3 to determine the subsequent imputed interest on his or her deferrals:
Blue Chip Fund
Balanced Fund
Equity Income Fund
Equity Index
New Horizons
Prime Reserve
Spectrum Income
Spectrum Growth
International Stock
2
<PAGE> 4
2.14 "Participant" means an employee of the Company who is eligible to
participate in this Plan in accordance with Section 3.1.
2.15 "Plan Administrator" means the Company.
2.16 "Plan Year" means the plan year of the Savings Plan, which unless and
until changed is identical to the fiscal year of the Company and to the
calendar year.
2.17 "Qualified Compensation" means "compensation," as defined in the
Savings Plan for purposes of making Elective Deferrals, not in excess of the
Section 401(a)(17) Limit.
2.18 "Savings Plan" means the Chicago Bridge & Iron Savings Plan, as
amended from time to time.
2.19 "Section 401(a)(17) Limit" means the limit on includible compensation
under qualified plans imposed by Section 401(a)(17) of the Code, as adjusted
for the applicable Plan Year.
2.20 "Subsidiary" means any corporation (other than the Company) in which
Chicago Bridge & Iron Company N.V. (the "Parent") owns, directly or indirectly
through the Company or Subsidiaries, at least fifty percent (50% of the total
combined voting power of all classes of stock, or any other entity (including
but not limited to partnerships and joint ventures) in which the Parent owns,
directly or indirectly through the Company or Subsidiaries, at least fifty
percent (50%) of the capital or profits interest.
2.21 "Trust" means the trust, of the type commonly known as a "rabbi"
trust, established in connection with this Plan pursuant to Section 8.2.
2.22 "Trustee" means the Trustee of the Trust.
2.23 "Valuation Date" means the last day of each Plan Year and such other
dates as the Plan Administrator makes a determination of the value of
Participants' Accounts.
ARTICLE III
PARTICIPATION
3.1 Eligibility. An Employee of the Company or any Subsidiary shall
automatically participate in this Plan for any Plan Year if for such Plan Year
he or she (i) is a management or highly compensated employee within the meaning
of Sections 201(2), 301(a)(3), and 401(a)(2) of ERISA, (ii) is eligible to
participate in the Savings Plan, (iii) is an Employee on the last day of the
Plan Year or incurred a termination of employment during the Plan Year due to
retirement, disability, death or a reduction in force (as such terms are
defined in the Savings Plan for purposes of entitlement to allocations
thereunder); and (iv) has "compensation" as defined in the Savings Plan in
excess of the Section 401(a)(17) Limit.
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<PAGE> 5
3.2 Entry. Each Participant shall complete and return the appropriate
participation forms to the Plan Administrator.
3.3 Duration of Participation. A Participant shall continue to be a
Participant until the Participant's termination of employment with the Company
and all Subsidiaries, and thereafter shall be an inactive Participant for so
long as he or she is entitled to a benefit from the Plan. A Participant who
remains an employee of the Company or a Subsidiary but who for any reason does
not meet the requirements of Section 3.1 for a Plan Year shall be an inactive
Participant for such Plan Year, but shall again become an active Participant in
any later Plan Year in which he or she meets those requirements.
ARTICLE IV
COMPANY CREDITS
4.1 Matching Contribution Credits. For each Plan Year, a Participant who
has met the applicable requirements of Article III shall receive a Matching
Contribution Credit equal to (a) below minus (b) below, as follows:
(a) Three percent (3%) of the Participant's Compensation.
(b) Three percent (3%) of the Participant's Qualified Compensation.
Matching Contribution Credits for a Plan Year shall be credited to the
Participant's Matching Contribution Subaccount as of the date (or dates)
determined by the Company, but not later than the earlier of (i) the date or
dates that funds are contributed to the Savings Plan as matching contributions
thereunder based upon the same Compensation for the Plan year, or (ii) the due
date (after all applicable extensions) for filing the Company's federal income
tax return for the Plan Year.
4.2 Company Contribution Credits. For each Plan Year, a Participant who
has met the applicable requirements of Section 3.1 shall receive a Company
Contribution Credit equal to (a) below minus (b) below, as follows:
(a) An amount equal to (i) the percentage of Qualified Compensation at
which the sum of Company basic and discretionary contributions under
the Savings Plan for the Plan Year are allocated to the accounts of
Savings Plan participants who are not Highly Compensated Employees,
of (ii) the Participant's Compensation for the Plan Year; and
(b) The sum of Company basic and discretionary contributions, if any,
actually made for the Participant under the Savings Plan for the Plan
Year (after applying the Section 401(a)(17) Limit, and if applicable,
the limitations of Section 415 of the Code).
4
<PAGE> 6
Company Contribution Credits shall be credited to the Participant's Company
Contribution Subaccount as of the date (or dates) determined by the Company,
but not later than the due date (after all applicable extensions) for filing
the Company's federal income tax return for the Plan Year.
4.3 Income (or Loss) on Credits. For purposes of determining income (or
loss) on a Participant's Account, the Account shall be deemed invested in such
Measurement Funds as the Participant may designate from time to time under
procedures established by the Plan Administrator. The designation of
Measurement Funds from time to time shall apply to both his or her Matching
Contribution Subaccount and Company Contribution Subaccount until changed.
Designation of Measurement Funds shall be in whole percentages of the periodic
credits to the Participant's Account, or of the balance of his or her Account,
which percentages shall add up to 100%. If the Participant does not otherwise
designate a Measurement Fund under procedures established by the Plan
Administrator, his or her Account shall be deemed invested in the Prime Reserve
Measurement Fund.
As of any Change Date, a Participant may change the designation or
allocation of Measurement Funds to determine income (or loss) on future credits
to his or her Account, or may change the existing allocation of his or her
Account among Measurement Funds, under procedures established by the Plan
Administrator to implement such changes.
For purposes of determining income (or loss), a Participant's Matching and
Company Contribution Credits shall be deemed to have been invested in
Measurement Funds as soon as reasonably practicable after the date as of which
they are credited under Sections 4.1 or 4.2. For purposes of determining
income (or loss), a Participant's Account shall be deemed to have been
reinvested in the newly-designated Measurement Funds as soon as reasonably
practicable under the procedures established by the Plan Administrator to
implement such changes.
4.4 Statements. The Plan Administrator shall give each Participant a
statement of the value of his or her Account, and the Measurement Funds then in
effect for that Account, as of and as soon as reasonably practicable after the
Valuation Date which falls on the last day of the Plan Year. The Plan
Administrator may, but shall not be required to, provide similar statements as
of any intervening Valuation Date. The value of a Participant's Account, and
the applicable Measurement Funds, as of the applicable Measurement Date, shown
on any such statement shall be conclusive and binding on both the Company and
the Participant absent bad faith or manifest error unless the Participant
brings error to the attention of the Plan Administrator by filing a claim for
clarification of his or her future rights to benefits pursuant to Section 7.3
within ninety (90) days after receiving that statement.
4.5 Excess Elective Deferrals. Notwithstanding anything in this Plan to
the contrary, in no circumstances will any Elective Deferrals or other Company
contributions under the Savings Plan be deferred or contributed into this Plan
or the Trust. Any portion of a Participant's Elective Deferrals or other
Company contributions made on his or her behalf under the Savings Plan that for
any reason cannot remain in the Savings Plan (or its associated trust) shall be
paid out to the Participant in accordance with the Savings Plan.
ARTICLE V
5
<PAGE> 7
VESTING
5.1 Vesting. A Participant shall be vested in his or her Matching
Contribution Subaccount and Company Contribution Subaccount (if any) to the
same extent as the Participant is vested in his or her corresponding accounts
under the Savings Plan.
ARTICLE VI
PAYMENT OF BENEFITS
6.1 Distribution Options. Upon or after becoming a Participant in this
Plan, the Participant may elect, on a form provided by the Plan Administrator
substantially in the form of Exhibit A, and delivered to the Plan
Administrator, one of the following distribution dates and one of the following
distribution methods for payment of his or her Account:
(a) Distribution Dates:
(i) Termination. The Participant's termination of employment;
(ii) Designated Date. The first day of a designated calendar
month in a designated calendar year;
(iii) Designated Post-Employment Deferral. The first day of the
calendar month that follows the Participant's termination of
employment by a designated number (not more than 120) of
months.
Notwithstanding an election of (ii) or (iii) above, the
distribution date shall be the date of termination of employment if
employment terminates due to death or disability. In the case of a
Director, termination of employment shall mean the first date that
he or she is neither an Employee nor Director of the Company or any
Subsidiary.
(b) Distribution Methods:
(i) Lump Sum. A distribution in a single lump sum.
(ii) Installments. A distribution in annual, quarterly or monthly
installments over a period, not exceeding 10 years, elected
by the Participant; with the amount of each installment being
the balance of the Participant's Account subject to this
distribution option as of the Valuation Date preceding
payment divided by the number of installments (including the
current installment) remaining to be paid.
In either case the lump sum payment or the first installment
payment shall be made as soon as practicable (and in all
events within thirty (30) days) after the
6
<PAGE> 8
Participant's termination of employment and any remaining
installment payments shall be made on the annual, quarterly
or monthly (as the case may be) anniversary of that initial
distribution date until payments are completed. The
distribution option elected shall apply uniformly to the
entire balance of the Participant's Account, including both
the Matching Contribution Subaccount and the Discretionary
Contribution Subaccount (if any). If upon a Participant's
termination of employment no election of distribution date or
distribution method is in effect, distribution shall be made
as soon as practicable after his or her termination of
employment in a single lump sum.
6.2 Changes in Distribution Options. A Participant may change his or her
previously elected distribution option on a form provided by the Plan
Administrator substantially in the form of Exhibit A, and delivered to the Plan
Administrator. But no change in a Participant's distribution option after his
or her initial election of a distribution option will become effective (for
distribution upon a subsequent termination of employment) until a date which is
(i) at least six months after the date the change of election is filed with the
Plan Administrator, and (ii) is in the Plan Year after the Plan Year in which
the change of election is filed with the Plan Administrator. The date and
distribution method upon or after distribution on a Participant's termination
of employment shall therefore be determined by his or her most recent
distribution option election that meets the foregoing requirements, except as
provided in Sections 6.1 and 6.3.
6.3 Small Installments and Account Balances. If for any reason, at any
time after a Participant's employment terminates and before the date (if any)
installment payments actually begin, the balance of his or her Account (or
portion of an Account payable to a single Beneficiary) is less than $10,000,
then notwithstanding anything in this Plan or any Participant's election to the
contrary, the Participant's Account (or such portion) shall be distributed in a
single lump sum as soon as practicable. If for any reason, at any time after a
Participant's employment terminates and on or after the date installment
payments actually begin, the amount of any installment payable to a Participant
or Beneficiary is less than a minimum amount of $500 (for a monthly
installment), $1,500 (for a quarterly installment) or $6,000 (for an annual
installment), then notwithstanding anything in this Plan or any Participant's
election to the contrary, each installment shall be in the applicable foregoing
minimum amount and installments shall continue only until the Account is
exhausted. If for any reason the distributee of benefits under this Plan is
either an estate or, subsequent to the death of a Participant or Beneficiary, a
trust, the Plan Administrator in its sole discretion may pay to such estate or
trust the entire balance of the Account that is distributable to such estate or
trust in a single lump sum.
6.4 Form of Payment. All benefits under this Plan shall be paid by
negotiable check or other cash equivalent from the Trust or other general funds
of the Company.
6.5 Beneficiary. Any amounts payable under this Plan after the death of
the Participant shall be paid to the Participant's Beneficiary at the time and
in the method determined by the Participant pursuant to Section 6.1, subject to
Sections 6.2 and 6.3. A Participant may designate the Beneficiary or
Beneficiaries (who may be named contingently or successively) to receive such
amounts. Each designation of Beneficiary shall be on a form provided by the
Plan Administrator substantially in the form of Exhibit B, signed by the
Participant and filed with the Plan Administrator during the
7
<PAGE> 9
Participant's lifetime. A Participant may revoke such designation (without the
consent of any Beneficiary) and make a new designation of Beneficiary by filing
a new form in like manner. If upon a Participant's death no valid designation
of Beneficiary is on file with the Plan Administrator, or if a Beneficiary dies
before payments are completed and there are no living contingent or successive
Beneficiaries, then any remaining payments under this Plan shall be made (1) to
the Participant's surviving spouse, if any, or (2) if there is no surviving
spouse, then in equal shares to his or her children (with the then-living
descendants of any deceased child taking that child's share per stirpes), or
(3) if there are neither a surviving spouse nor surviving children or their
descendants, then to the estate of the last to die of the Participant and all
designated Beneficiaries.
6.6 Rights of Beneficiary. The Beneficiary of a Participant who has died
shall have the same right as a Participant to designate Measurement Funds under
Section 4.3, and receive a statement under Section 4.4, for the Account (or
portion of an Account) as to which he or she is a Beneficiary.
6.7 Facility of Payment. In the event any distribution is payable under
this Plan to a minor or other individual who is legally, physically or mentally
incompetent to receive such payment, the Plan Administrator in its sole
discretion shall pay such benefits to one or more of the following persons:
(a) Directly to such minor or other person.
(b) To the legal guardian or conservator of such minor or other person;
(c) To the spouse, parent, brother, sister, child or other relative of
such minor or other person for the use and benefit of such minor or other
person.
The Plan Administrator shall not be required to see to the application of any
distribution so made to any of such persons, but the receipt therefor shall be
a full discharge of the liability of the Plan, the Plan Administrator, the
Company, and the Trustee to such minor or other person.
ARTICLE VII
ADMINISTRATION
7.1 Company as Plan Administrator. The Plan will be administered by the
Company.
7.2 Power of the Plan Administrator. The Plan Administrator shall have
the power and authority in its sole and absolute discretion:
(a) To construe and interpret the Plan, determine the application
of the Plan to situations where such application is unclear or
disputable, and make equitable adjustments for any mistakes or
errors made in the administration of the Plan.
8
<PAGE> 10
(b) To determine all questions arising in the administration of
the Plan, including the power to determine the rights of
Participants and their beneficiaries and the amount of their
respective benefits;
(c) To adopt such rules, regulations and forms as it may deem
necessary for the proper and efficient administration of the Plan
consistent with its purposes;
(d) To enforce the Plan in accordance with its terms and the
rules, regulations and forms adopted by the Plan Administrator;
(e) To take such action and establish such procedures as it deems
necessary or appropriate to coordinate deferrals and benefits under
this Plan with the Savings Plan, the Chicago Bridge & Iron Company
Deferred Compensation Plan, or the Trust;
(f) To take such action and establish such procedures as it deems
necessary or appropriate to implement Participant designations of
Measurement Funds and coordinate the investment of Trust assets with
such designations to reduce or eliminate the Company's exposure to
market fluctuations.
(g) To instruct the Trustee regarding payments from the Plan and
to provide, amend, and supplement from time to time a schedule of
payments to be made from the Trust for purposes of the Plan;
(h) To employ such counsel, auditors, actuaries, or other
specialists (who may be counsel, auditors, actuaries or other
specialists for the Company) and to engage such clerical or other
services to the extent such services are not provided by the
Company;
(i) To delegate such of its powers and authorities to such person
or persons, with his, her, its or their consent, as the Plan
Administrator may appoint;
(j) To do all other things the Plan Administrator deems necessary
or desirable for the advantageous administration of the Plan and to
make the Plan fully effective in accordance with its terms and
intent.
7.3 Claims for Benefits. No claim shall be necessary for payments
routinely due to begin under the terms of the Plan. Any claim for benefits not
received or received in an improper amount or time, or any claim for
clarification of a Participant's or Beneficiary's future rights to benefits,
shall be made in writing to the Plan Administrator. The Plan Administrator
shall decide each claim and give the person making the claim (a "Claimant")
written notice of the disposition of the claim within 90 days after the claim
is filed. If the Plan Administrator denies a claim, the notice of denial shall
be in writing, shall contain the specific reason or reasons for the denial of
the claim, shall contain a specific reference to the pertinent Plan provisions
upon which the denial is based, shall contain a description of any additional
material or information necessary for the claimant to perfect the claim along
with an explanation why such material or information is necessary, and shall
contain an explanation of the Plan's claims review procedures.
9
<PAGE> 11
Within 60 days after receipt by the Claimant of a written notice of denial
of a claim, the Claimant may file a written request with the Company for a full
and fair review of the denial of the claim for benefits for benefits by a panel
of three officers of the Company who are also members of the Board of Managing
Directors of Chicago Bridge & Iron Company B.V., a Netherlands corporation;
provided that no such member may serve on an Appeals Panel particularly
respecting his or her own claim for benefits. In connection with a claimant's
appeal of the denial of the benefit, the Claimant may review pertinent
documents and may submit issues and comments in writing. The Appeals Panel
shall deliver to the Claimant a written decision on the claim promptly, but not
later than sixty days after the Claimant's request for review. Such decision
shall be written in a manner calculated to be understood by the Claimant, shall
include specific reasons for the decision, and shall contain specific
references to the pertinent Plan provisions upon which the decision is based.
The decision of the Appeals Panel shall be final, conclusive and binding on all
persons.
10
<PAGE> 12
ARTICLE VIII
MISCELLANEOUS
8.1 Funding Policy. The Accounts under this Plan are merely unfunded
bookkeeping accounts of the Company and all payments under this Plan shall be
deemed made by the Company from general assets available to all unsecured
creditors of the Company in the event of its insolvency. All Participants have
merely the status of general unsecured creditors of the Company and the Plan is
merely a promise by the Company to make benefit payments in the future. It is
the intent of the Company that the arrangements under this Plan be unfunded for
tax purposes and for purposes of Title I of ERISA.
8.2 Trust. The Company shall create for purposes of this Plan a Trust of
the type commonly referred to as a "rabbi" trust. The terms of the Trust shall
be substantially similar (but need not be identical) to the terms of the model
trust published by the Internal Revenue Service in Rev. Proc. 92-64. The
Company shall transfer assets to the Trustee to hold and to make distributions
under this Plan on behalf of the Company. The assets so held in trust shall
remain the general assets of the Company, which is the grantor under the Trust.
The rights of Participants and their Beneficiaries under this Plan and the
Trust shall be exclusively unsecured contractual rights. No Participant or
Beneficiary shall have any right, title or interest whatsoever in the Trust.
8.3 No Employment Rights. Nothing in this Plan shall confer any greater
employment rights on a Participant than he or she otherwise may have.
8.4 Withholding. The Company may withhold from amounts payable under this
Plan any amounts as it reasonably deems required under any federal, state or
local revenue law applying to such payments.
8.5 No Assignment. The Participant's rights to benefit payments under
this Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge encumbrance, attachment or garnishment by
creditors of the Participant or the Participant's Beneficiaries other than by a
"qualified domestic relations order" (within the meaning of Section
206(d)(3)(B)(i) of ERISA).
8.6 Expenses. Expenses of administering the Plan shall be borne by the
Company.
8.7 Amendment and Termination. The Company may amend or terminate this
Plan at any time and in its sole discretion, by (and only by) written
instrument executed on behalf of the Company by an officer of the Company who
is also a member of the Board of Managing Directors of Chicago Bridge & Iron
Company B.V., a Netherlands corporation. Any such amendment or termination
shall be binding on the Company and all Participants and their Beneficiaries,
even though it may be retroactive and applicable to Participants whose
employment by the Company or Subsidiaries has terminated. However, no
amendment or termination of the Plan shall adversely affect the right of a
Participant to payment of a benefit that he or she would be entitled to (then
or thereafter) under the terms of the Plan if his or her employment terminated
immediately before the adoption of such
11
<PAGE> 13
amendment or termination of the Plan, unless such amendment or termination of
the Plan in the reasonable judgment of the Plan Administrator is required to
comply with applicable law or to preserve the tax treatment of benefits under
this Plan for the Company or for the Participant, or is consented to by the
affected Participant.
Notwithstanding anything in this Plan to the contrary, upon termination of
the Plan the Company may in its sole discretion pay all Account balances to the
Participants (or Beneficiaries) entitled thereto in a single lump sum.
8.8 Successors. All obligations of the Company under this Plan shall be
binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company.
8.9 Company Action. Except for matters on which this Plan specifically
requires action by the Board or by a Company officer otherwise specified, any
action or decision the Company is required or permitted to take under this Plan
will be properly done if done in writing over the signature of the Company's
Vice President - Human Resources and Administration (or if the Company has no
officer with that title, then of the Company officer having substantially
equivalent position and responsibilities to a Vice President-Human Resources
and Administration).
8.10 Notice. Any notice that this Plan requires or permits the Company to
receive will be properly given if sent by first class mail, postage paid and
properly addressed, to the principal business address of the Company to the
attention of its Vice President - Human Resources and Administration (or if the
Company has no officer with that title, then to the attention of the Company
officer having substantially equivalent position and responsibilities to a Vice
President - Human Resources and Administration). Any notice, or any check in
payment of benefits, that this Plan requires or permits a Participant to
receive will be properly given and received if sent to a Participant who is an
Employee by regular interoffice distribution channels; or sent to any
Participant or Beneficiary by first class mail, postage paid and properly
addressed, to the last known residence address of the Participant or
Beneficiary appearing on the records of the Company.
8.11 Governing Law. This Plan is subject to Federal law under ERISA as
applicable to plans described in Section 3(a) of ERISA but exempt from certain
provisions of ERISA under Sections 201(2), 301(a)(3), and 401(a)(2) of ERISA,
and is subject to the laws of the State of Illinois to the extent such laws are
not pre-empted by ERISA.
12
<PAGE> 14
IN WITNESS WHEREOF the Company has caused amendment and restatement of
this Chicago Bridge & Iron Company Excess Benefit Plan to be executed by an
authorized officer this 18th day of December, 1997.
CHICAGO BRIDGE & IRON COMPANY
a Delaware corporation
By: /s/ Gerald M. Glenn
---------------------------
Title: Chairman, President & C.E.O.
----------------------------
13
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - ESTABLISHMENT, OBJECTIVES AND DURATION.............. 1
1.1 Establishment of Plan............................... 1
1.2 Effective Date...................................... 1
1.3 Objectives.......................................... 1
ARTICLE II - DEFINITIONS........................................ 1
2.1 Account............................................. 1
2.2 Board .............................................. 1
2.3 Change Date ........................................ 2
2.4 Code................................................ 2
2.5 Company ............................................ 2
2.6 Company Contribution Credits ....................... 2
2.7 Compensation ....................................... 2
2.8 Elective Deferrals ................................. 2
2.9 Employee ........................................... 2
2.10 ERISA ............................................. 2
2.11 Highly Compensated Employee ....................... 2
2.12 Matching Credits .................................. 2
2.13 Measurement Fund .................................. 2
2.14 Participant ....................................... 3
2.15 Plan Administrator ................................ 3
2.16 Plan Year.......................................... 3
2.17 Qualified Compensation ............................ 3
2.18 Savings Plan ...................................... 3
2.19 Section 401(a)(17) Limit .......................... 3
2.20 Subsidiary ........................................ 3
2.21 Trust ............................................. 3
2.22 Trustee ........................................... 3
2.23 Valuation Date .................................... 3
ARTICLE III - PARTICIPATION .................................... 3
3.1 Eligibility ........................................ 3
3.2 Entry .............................................. 4
3.3 Duration of Participation........................... 4
ARTICLE IV - COMPANY CREDITS ................................... 4
4.1 Matching Contribution Credits....................... 4
4.2 Company Contribution Credits ....................... 4
4.3 Income (or Loss) on Credits......................... 5
4.4 Statements ......................................... 5
4.5 Excess Elective Deferrals .......................... 5
ARTICLE V - VESTING ............................................ 5
</TABLE>
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.1 Vesting ........................................... 6
ARTICLE VI - PAYMENT OF BENEFITS .............................. 6
6.1 Distribution Options .............................. 6
6.2 Changes in Distribution Options ................... 7
6.3 Small Installments and Account Balances ........... 7
6.4 Form of Payment ................................... 7
6.5 Beneficiary........................................ 7
6.6 Rights of Beneficiary ............................. 8
6.7 Facility of Payment ............................... 8
ARTICLE VII - ADMINISTRATION .................................. 8
7.1 Company as Plan Administrator ..................... 8
7.2 Power of the Plan Administrator.................... 8
7.3 Claims for Benefits ............................... 9
ARTICLE VIII - MISCELLANEOUS .................................. 11
8.1 Funding Policy .................................... 11
8.2 Trust.............................................. 11
8.3 No Employment Rights .............................. 11
8.4 Withholding ....................................... 11
8.5 No Assignment ..................................... 11
8.6 Expenses........................................... 11
8.7 Amendment and Termination ......................... 11
8.8 Successors ........................................ 12
8.9 Company Action .................................... 12
8.10 Notice ........................................... 12
8.11 Governing Law .................................... 12
</TABLE>
<PAGE> 1
Exhibit 10.14
[CHICAGO BRIDGE & IRON COMPANY LETTERHEAD]
January 13, 1998
Mr. Robert Jordan
913 Belgrave Court
Birmingham, AL 35242
Dear Bob,
In response to your January 13 correspondence, please be advised of the
following modifications to your offer letter of January 5, 1998:
- Your base salary will be $280,000 per year.
- Relocation expenses which are not deductible by IRS regulations will
be "grossed up" for tax purposes.
- You will be eligible to receive up to six (6) months for temporary
housing cost.
- You will receive a Change of Control severance agreement, similar
to those described on Page 65 of the prospectus which will provide
for a lump sum payment of $1,000,000.
- You will participate in the Long Term Incentive Compensation Plan
(the "Incentive Plan") as described on Page 62 of the prospectus.
- While a supplemental Executive Death Benefit Plan is not currently
in effect. Should this plan be implemented for the Senior Officers
at CB&I, you will participate.
I look forward to your affirmative response by Friday, January 16, 1998.
Sincerely,
/s/ Gerald M. Glenn
Gerald M. Glenn
President, Chairman and Chief Executive Officer
GMG:sjh
Enc
cc: Stephen M. Duffy
<PAGE> 2
[CHICAGO BRIDGE & IRON COMPANY LETTERHEAD]
January 5, 1998
Mr. Robert Jordan
913 Belgrave Court
Birmingham, AL 35242
Dear Bob,
As we discussed, I am pleased to offer you the position of Vice President of
Operations of the Chicago Bridge & Iron Company located in Plainfield, Illinois.
Your base salary in this position will be $265,000 per year. In addition, you
will be eligible to participate in the Chicago Bridge & Iron Incentive
Compensation Program. Your bonus target will be 50% of base pay. For the 1998
plan year, you will be eligible to participate on a pro-rata basis determined
by your start date.
You will also participate in the Stock Option Program and will be granted
options for 50,000 shares of CB&I at an option price equal to the closing price
of our stock on your employment date. This initial grant represents three
years of option grants (annual target of 16,667 shares) and will vest three
years from the grant date, subject to the same corporate performance goal which
applies to others in the management team.
Relocation costs to be reimbursed shall include the following:
- - Brokers fee on the sale of your existing residence (not to exceed 6%)
- - Cost of the physical move
- - Normal closing fees including legal expenses
- - Loan origination fees
- - Temporary housing costs
You will receive use of a company-owned vehicle (American-made, full size
sedan, i.e., Buick or equivalent) or an automobile allowance of $500.00 per
month.
In the event of a Change of Control of the Chicago Bridge & Iron Company,
within the two (2) year period immediately following your employment date,
which results in your termination for reasons other than willful misconduct or
gross negligence, you will be eligible to receive a lump sum payment of
$1,000,000. This payment will be made to you within thirty (30) days of your
separation.
I have also included for your perusal a brochure which describes the employee
benefit programs in which you will be eligible to participate. As you will
note, these programs include group health insurance for you and your family and
a 401(k) savings plan, including company contributions.
<PAGE> 3
[ CBI LOGO ] CHICAGO BRIDGE & IRON COMPANY
- --------------------------------------------------------------------------------
As a senior executive, you will be immediately eligible for 4 weeks paid
vacation annually and the Company will provide a county club membership and
dues to facilitate your business entertainment needs. You will also participate
in the Executive Physical program.
Bob, we feel that you will find this position both challenging and rewarding
and we are confident that it will be mutually beneficial.
You should be aware that this offer is contingent upon successful completion of
a company physical and drug test. Please let me know when you would like to
schedule this, and I will have someone contact you to set it up. As we
discussed, I would like to have you start on February 2, or sooner. I look
forward to your affirmative response as soon as is possible. If you have any
questions regarding this offer, please do not hesitate to call me. This offer
will remain in effect until the close of business on Friday, January 16, 1998.
Sincerely,
/s/ Gerald M. Glenn
Gerald M. Glenn
President, Chairman and Chief Executive Officer
GMG:sjh
Enc
cc: Stephen M. Duffy
<PAGE> 1
Exhibit 10.15(a)
First Amendment dated as of
October 31, 1997 (this "Amendment") to the
Credit Agreement dated as of March 6, 1997,
(the "Credit Agreement"), among CHICAGO
BRIDGE & IRON COMPANY N.V., (the "Company"),
the BORROWING SUBSIDIARIES party thereto
(collectively with the Company, the "Borrowers"),
the lenders party thereto (the "Lenders"),
THE CHASE MANHATTAN BANK, as administrative agent
for the Lenders (in such capacity, the
"Administrative Agent").
Whereas the parties hereto desire to amend the Credit Agreement as set
forth herein;
Accordingly, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each capitalized term used herein which is defined in the
Credit Agreement shall have the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and
each other similar reference contained in the Credit Agreement shall from and
after the date hereof refer to the Credit Agreement as amended hereby.
SECTION 2. Amendment. (i) Section 6.10 is hereby amended to read as
follows:
The Company will not permit Consolidated Capital Expenditures to
exceed (a) $33,000,000 during the fiscal year ending December 31,
1997, or (b) $20,000,000 during any fiscal year thereafter;
provided, the amount of Consolidated Capital Expenditures
permitted in any fiscal year beginning after December 31, 1998,
shall be increased by the lesser of (i) any amount by which
permitted Consolidated Capital Expenditures during the immediately
preceding fiscal year exceeded actual Consolidated Capital
Expenditures during such preceding fiscal year and (ii)
$5,000,000.
(ii) The Company explicitly acknowledges that, except as set
forth in the preceding clause (i), Section 6.10 and each other provision
of the Credit Agreement remains in full force and effect.
<PAGE> 2
SECTION 3. Effectiveness. This Amendment shall become effective on
the date hereof. Delivery of an executed counterpart of a signature page
of this Amendment by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Amendment.
SECTION 4. Representations and Warranties. The Company represents
and warrants to each of the Lenders and the Administrative Agent that:
(a) Before and after giving effect to this Amendment, the
representations and warranties set forth in Article III of the
Credit Agreement are true and correct in all material respects with
the same effect as if made on the date hereof, except to the extent
such representations and warranties expressly relate to an earlier
date.
(b) Before and after giving effect to this Amendment, no
Default or Event of Default has occurred and is continuing.
SECTION 5. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day
and year first written above.
CHICAGO BRIDGE & IRON COMPANY
N.V., By: Chicago Bridge & Iron Company B.V.
Its Managing Director
by /s/T. J. Wiggins
___________________________________________
Name: T. J. Wiggins
Title: Managing Director
<PAGE> 3
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by /s/Timothy J. Storms
___________________________________
Name: Timothy J. Storms
Title: Managing Director
BANK OF MONTREAL,
by /s/Angelo A. Barone
___________________________________
Name: Angelo A. Barone
Title: Director
THE FIRST NATIONAL BANK OF
CHICAGO,
by /s/Deborah Stevens
_________________________________
Name: Deborah Stevens
Title: Authorized Agent
CREDIT SUISSE FIRST BOSTON,
by /s/Lynn Allegaert
___________________________________
Name: Lynn Allegaert
Title: Vice President
by /s/Robert B. Potter
___________________________________
Name: Robert B. Potter
Title: Vice President
UNION BANK OF SWITZERLAND, NEW
YORK BRANCH,
by /s/Hamilton W. Bullard
___________________________________
Name: Hamilton W. Bullard
Title: Assistant Treasurer
by /s/C.C. Glockler
___________________________________
Name: C. C. Glockler
Title: Director
<PAGE> 4
Exhibit 10.15(b)
Second Amendment dated as of
March 5, 1998 (this "Amendment") to the
Credit Agreement dated as of March 6, 1997 as
amended as of October 31, 1997 (the "Credit
Agreement"), among CHICAGO BRIDGE & IRON
COMPANY N.V. (the "Company"), the BORROWING
SUBSIDIARIES party thereto (collectively with
the Company, the "Borrowers"), the lenders
party thereto (the "Lenders") and THE CHASE
MANHATTAN BANK, as administrative agent for
the Lenders (in such capacity, the
"Administrative Agent").
Whereas the parties hereto desire to amend the Credit
Agreement as set forth herein;
Accordingly, in consideration of the mutual agreements
herein contained and other good and valuable consideration,
the sufficiency and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each capitalized term used
herein which is defined in the Credit Agreement shall have
the meaning assigned to such term in the Credit Agreement.
Each reference to "hereof", "hereunder", "herein" and
"hereby" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer
to the Credit Agreement as amended hereby.
SECTION 2. Amendment.
A. Section 6.01(h) is hereby amended to read as
follows:
"(h) other unsecured Indebtedness in an aggregate
principal amount at any time outstanding not in
excess of $20,000,000 minus the aggregate
outstanding amount of the Indebtedness referred to
in paragraph (g) above."
B. Section 6.03 is hereby amended to replace the
dollar amount $1,000,000 with $5,000,000.
C. Subclause (ii) of the second parenthetical in
Section 6.04(a) is hereby amended to read as
follows:
"(ii) other assets with a book value not in excess
of (x) 10% of the shareholders' equity of the
Company (determined in accordance with GAAP)
<PAGE> 5
during any fiscal year of the Company or (y)
$30,000,000 during the term of this Agreement"
D. Section 6.07(b) is hereby amended to read as
follows:
"(b) the Company may (i) declare and pay dividends
with respect to its capital stock payable in
additional shares of its common stock or (ii) so
long as no Default shall be continuing at the time
thereof or after giving effect thereto, declare
and pay dividends with respect to its capital
stock in cash, or make stock repurchases, in an
aggregate amount not to exceed during any fiscal
year of the Company $5,000,000 plus 10% of
Consolidated Net Income for the immediately
preceding fiscal year,"
The Company explicitly acknowledges that, except
as set forth in the preceding clauses A through D, Sections
6.01, 6.03, 6.04 and 6.07 and each other provision of the
Credit Agreement will remain in full force and effect.
SECTION 3. Effectiveness. This Amendment shall become
effective on the date hereof. Delivery of an executed
counterpart of a signature page of this Amendment by
facsimile transmission shall be as effective as delivery of
a manually executed counterpart of this Amendment.
SECTION 4. Representations and Warranties. The
Company represents and warrants to each of the Lenders and
the Administrative Agent that:
(a) Before and after giving effect to this
Amendment, the representations and warranties set forth
in Article III of the Credit Agreement are true and
correct in all material respects with the same effect
as if made on the date hereof, except to the extent
such representations and warranties expressly relate to
an earlier date.
(b) Before and after giving effect to this
Amendment, no Default or Event of Default has occurred
and is continuing.
SECTION 5. Applicable Law. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
SECTION 6. Counterparts. This Amendment may be
executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together
shall constitute but one contract.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized
officers as of the day and year first written above.
CHICAGO BRIDGE & IRON COMPANY
N.V., By: Chicago Bridge & Iron Company B.V.,
Its Managing Director
by /s/Gerald W. Glenn
__________________________
Name: Gerald W. Glenn
Title: Chief Executive Officer
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by /s/Lenard Weiner
__________________________
Name: Lenard Weiner
Title: Managing Director
BANK OF MONTREAL,
by /s/Leon H. Sinclair
___________________________
Name: Leon H. Sinclair
Title: Director
THE FIRST NATIONAL BANK OF
CHICAGO,
by /s/Deborah E. Stevens
___________________________
Name: Deborah E. Stevens
Title: Authorized Agent
CREDIT SUISSE FIRST BOSTON,
by
____________________________
Name:
Title:
<PAGE> 7
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH,
by /s/Hamilton W. Bullard
___________________________
Name: Hamilton W. Bullard
Title: Assistant Treasurer
by /s/Paula Mueller
____________________________
Name: Paula Mueller
Title: Vice President Structured
Finance
GULF INTERNATIONAL BANK
B.S.C.
by /s/Abdel-Fattah Tahoun
______________________________
Name: Abdel-Fattah Tahoun
Title: Senior Vice President
by /s/Haytham F. Khalil
_______________________________
Name: Haytham F. Khalil
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 13
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth Selected Consolidated Financial and Other Data
for the periods and as of the dates indicated. The selected consolidated income
statement and cash flow data for each of the years in the five year period ended
December 31, 1997 and the selected consolidated balance sheet data as of
December 31, 1997, 1996, 1995 and 1994 have been derived from the audited
consolidated financial statements of the Company. The selected consolidated
balance sheet data as of December 31, 1993 has been derived from the Company's
unaudited financial statements.
(In thousands, except share and employee data)
<TABLE>
<CAPTION>
POST-REORGANIZATION(1) PRE-REORGANIZATION(1)
---------------------- ------------------------------------------------------
POST-PRAXAIR ACQUISITION(2) PRE-PRAXAIR ACQUISITION(2)
--------------------------- ---------------------------------------
Years Ended December 31, 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
- --------------------------------------------------------------------------------------------------------------------------
Revenues $ 672,811 $ 663,721 $ 621,938 $ 762,803 $ 680,541
Cost of revenues 609,173 590,030 614,230 692,266 630,978
- --------------------------------------------------------------------------------------------------------------------------
Gross profit 63,638 73,691 7,708 70,537 49,563
Selling and administrative expenses 44,988 42,921 43,023 45,503 44,193
Management Plan charge (3) 16,662 - - - -
Special charges - - 5,230(4) 16,990 (5) 22,900 (6)
Other operating income, net (7) (4,807) (493) (10,030) (11,360) (118)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 6,795 31,263 (30,515) 19,404 (17,412)
Interest expense (3,892) (5,002) (799) (180) (298)
Other income 1,416 990 1,191 1,652 3,056
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes and minority interest 4,319 27,251 (30,123) 20,876 (14,654)
Income tax expense (benefit) (730) 7,789 (8,093) 3,074 (6,080)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest 5,049 19,462 (22,030) 17,802 (8,574)
Minority interest in income (loss) (354) 2,900 3,576 1,359 1,247
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 5,403 $ 16,562 $ (25,606) $ 16,443 $ (9,821)
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
- --------------------------------------------------------------------------------------------------------------------------
Net income (1) $ 0.43 N/A N/A N/A N/A
Dividends (1) 0.18 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
- --------------------------------------------------------------------------------------------------------------------------
Total assets $ 400,650 $ 351,496 $ 356,125 $ 359,912 $ 408,936
Long-term debt 44,000 53,907 - - -
Total shareholders' equity 103,826 90,746 186,507 183,101 217,231
Contract capital (8) 95,243 121,926 109,503 101,063 117,643
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOW DATA
- --------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities $ 40,407 $ 25,159 $ (36,806) $ 38,447 $ (357)
Cash flow from investing activities (21,907) (11,348) 1,554 14,051 (11,764)
Cash flow from financing activities (20,124) (14,797) 32,012 (49,742) 2,662
- --------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 16,911 $ 17,281 $ 16,077 $ 15,569 $ 16,178
EBITDA (9) 40,368 48,544 (9,208) 51,963 21,666
Capital expenditures 34,955 20,425 14,880 18,772 19,232
- --------------------------------------------------------------------------------------------------------------------------
OTHER DATA
- --------------------------------------------------------------------------------------------------------------------------
Number of employees:
Salaried 1,464 1,516 1,663 1,800 1,861
Hourly and craft 4,630 4,432 3,483 4,852 4,408
New business taken (10) $ 757,985 $ 687,227 $ 782,878 $ 648,082 $ 782,606
Backlog (10) 554,982 485,704 470,174 323,343 449,303
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 2
FOOTNOTES FOR PREVIOUS TABLE
(1) The Reorganization (Note 1) was completed in March 1997 and did not
materially affect the carrying amounts of the Company's assets and
liabilities. The Reorganization is reflected in the Company's financial
statements as of January 1, 1997. Also in March 1997, the Company
completed a common share offering (the "Offering" - Note 1). Thus, net
income per share and dividend data are not applicable for years prior to
1997.
(2) Prior to the first quarter of 1996, the Company was a subsidiary of
CBI Industries, Inc. ("Industries"). During the first quarter of 1996,
pursuant to a merger agreement dated December 22, 1995, Industries became
a subsidiary of Praxair. This merger transaction was reflected in the
consolidated financial statements of the Company as a purchase effective
January 1, 1996. The application of purchase accounting resulted in
changes to the historical basis of various assets. Accordingly, the
information provided for periods prior to January 1, 1996 is not
comparable to subsequent financial information.
(3) Upon consummation of the Offering (Note 1), the Company made a
contribution to the Management Plan in the form of 925,670 Common Shares
having a value of $16.7 million. Accordingly, the Company recorded expense
of $16.7 million (the "Management Plan charge") in 1997, which was $10.1
million after tax. (Note 9)
(4) In 1995, the Company recorded a special charge of $5.2 million comprised
of $0.8 million for work force reduction and $4.4 million for the
write-down of an idle facility and other related costs.
(5) In 1994, the Company recorded a special charge of $17.0 million to
recognize the expenses of a major litigation settlement.
(6) In 1993, a special charge of $22.9 million was recorded to recognize the
expense of two major legal claims totalling $15.0 million as well as a
$7.9 million write-down of non-performing assets.
(7) Other operating income, net generally represents gains on the sale of
property, plant and equipment. 1997 was favorably impacted by
non-recurring income of approximately $4.0 million from the recognition of
income related to a favorable appeals court decision and the resolution of
disputed liabilities. In addition, 1997 includes $1.6 million gain from
the sale of assets, primarily from the sale of the Cordova, Alabama,
manufacturing facility, partially offset by $0.8 million increase in
litigation reserves. The gain recorded in 1995 primarily relates to the
sale of certain underutilized facilities. The gain recorded in 1994
includes gains from affiliated entity transactions primarily from the sale
of the Company's minority interest in a terminal and the sale of the
Company's interest in a fabrication facility.
(8) Contract capital is defined as accounts receivable plus net contracts in
progress less accounts payable.
(9) EBITDA is defined as income (loss) from operations plus the Management
Plan charge, plus special charges, plus depreciation and amortization
expenses. While EBITDA should not be construed as a substitute for
operating income (loss) or a better measure of liquidity than cash flow
from operating activities, which are determined in accordance with United
States GAAP, it is included herein to provide additional information
regarding the ability of the Company to meet its capital expenditures,
working capital requirements and any future debt service. EBITDA is not
necessarily a measure of the Company's ability to fund its cash needs,
particularly because it does not include capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(10) New business taken represents the value of new project commitments
received by the Company during a given period. Such commitments are
included in backlog until work is performed and revenue recognized or
until cancellation. Backlog may also fluctuate with currency movements.
25
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and accompanying Notes.
RESULTS OF OPERATIONS
The following tables indicate new business taken and revenues by product line
for the years ended December 31, 1997, 1996 and 1995.
(Dollars in millions)
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW BUSINESS TAKEN BY PRODUCT LINE
- --------------------------------------------------------------------------------------------------------
Flat Bottom Tanks $ 319 $ 278 $ 196
Specialty and Other Structures 168 107 122
Low Temperature/Cryogenic Tanks and Systems 71 91 204
Repairs and Modifications 63 57 63
Pressure Vessels 58 67 86
Turnarounds 40 41 68
Elevated Tanks 39 46 44
- --------------------------------------------------------------------------------------------------------
TOTAL $ 758 $ 687 $ 783
========================================================================================================
REVENUES BY PRODUCT LINE
- --------------------------------------------------------------------------------------------------------
Flat Bottom Tanks $ 209 $ 248 $ 253
Specialty and Other Structures 154 117 73
Low Temperature/Cryogenic Tanks and Systems 109 60 28
Repairs and Modifications 58 70 68
Pressure Vessels 53 82 85
Turnarounds 42 45 55
Elevated Tanks 48 42 60
- --------------------------------------------------------------------------------------------------------
Total $ 673 $ 664 $ 622
========================================================================================================
</TABLE>
26
<PAGE> 4
1997 VERSUS 1996
NEW BUSINESS TAKEN/BACKLOG -- New business taken during 1997 increased by $70.8
million, or 10.3%, to $758.0 million compared with $687.2 million in 1996.
Included in the 1997 new business taken was an expansion of an order for a large
COREX(R) unit for Saldanha Steel in South Africa and an order for fifty tanks
for a Nickel-Cobalt refinery in Australia, both of which are projects for the
metals and mining industries. Awards in the petroleum and petrochemical sector
included numerous contracts, the most significant of which was for several large
floating roof tanks in Nigeria. Over 60% of the new business taken during 1997
was for contracts awarded outside of North America. The Asian financial crisis
is expected to reduce the level of new business available from Asia in the near
future. In addition, declining oil prices may have an impact on activity in, and
capital spending by, the petroleum and petrochemical sector. However, the
Company may benefit within this sector as lower feedstock prices lead to
increased demand for downstream processing capabilities. Backlog at December 31,
1997 increased by $69.3 million to $555.0 million compared with the backlog at
December 31, 1996 of $485.7 million. The unearned gross profit in December 31,
1997 backlog is consistent with the gross profit earned by the Company in the
prior two years, excluding the negative impact of CB&I Constructors in 1997.
REVENUES -- Revenues increased $9.1 million, or 1.3%, to $672.8 million in 1997
from $663.7 million in 1996. The two largest projects contributing to revenues
in 1997 were the petrochemical project in Tuban, Indonesia ("Tuban Project"),
and the COREX unit for Saldanha Steel in South Africa. Additionally, 1997
revenues in the low temperature/cryogenic product line increased by $49 million,
partly as a result of work put in place on three liquefied natural gas ("LNG")
projects in North Carolina, Tennessee and Argentina. Revenues in 1997 were
favorably impacted by a higher volume of work in all geographic areas, except
North America. The decline in North American revenues was more than offset by
the Company's ability to expand on its traditional scope of work in other areas.
GROSS PROFIT -- Gross profit decreased $10.1 million to $63.6 million in 1997
from $73.7 million in 1996. Gross profit as a percentage of revenues ("gross
margin") decreased to 9.5% in 1997 from 11.1% in 1996. In 1997, annual cost
savings of approximately $21 million were realized from restructuring
activities, relative to the Company's 1995 cost base. However, these benefits
were offset by an operating loss at CB&I Constructors, the major North American
unit. This loss resulted from start-up problems associated with the expansion of
the Houston fabricating facility and implementation of new integrated computer
systems being piloted in Houston. These factors resulted in additional costs and
delays in some materials reaching construction sites, thereby resulting in lower
gross profit and postponing the recognition of revenue. The gross profit decline
in CB&I Constructors was partly offset by higher gross profit in the Europe,
Africa, Middle East area. This improvement was the result of better contract
execution and a shift to more profitable product lines.
As of December 31, 1997, the Houston facility expansion was substantially
complete and the integrated system was in place. As a result of these changes,
1998 should bring enhanced profitability to North American contract execution.
INCOME FROM OPERATIONS -- Income from operations was $6.8 million in 1997, or
1.0% of revenues. Excluding the Management Plan charge (Note 9), income from
operations was $23.5 million, or 3.5% of revenues in 1997, versus $31.3 million,
or 4.7% in 1996. Selling and administrative expenses increased to $45.0 million
in 1997 from $42.9 million in 1996, due to higher administrative expenses
required as an independent public company. Also, as expected, higher benefit
costs in 1997 had a negative impact on income from operations. Income from
operations was favorably impacted by other operating income of $4.8 million,
which included non-recurring income of $4.0 million from the recognition of
income related to a favorable appeals court decision and the resolution of
disputed liabilities, a $1.6 million gain from the sale of assets, and an
offsetting charge of $0.8 million due to an increase in litigation reserves.
27
<PAGE> 5
Interest expense decreased $1.1 million to $3.9 million in 1997 from $5.0
million in 1996. The decrease primarily reflected lower interest rates, $0.6
million of capitalized interest, and the Company's reduction of its long-term
debt balance as of December 31, 1997. Other income consisted primarily of
interest earned on cash balances at foreign subsidiaries.
The Company recorded a $0.7 million income tax benefit in 1997 compared with
$7.8 million of income tax expense in 1996. The decrease in income tax expense
between periods is mostly attributable to lower taxable income as a result of
the Management Plan charge. Excluding the Management Plan charge, income tax
expense would have been $5.9 million in 1997, or an effective tax rate of 28.0%
in 1997 compared with 28.6% in 1996.
The Company recorded minority interest in loss of $0.4 million in 1997 compared
to minority interest in income of $2.9 million in 1996. The decrease in minority
interest in income was mainly due to lower profitability of the Company's less
than 100% owned consolidated entity operating in Asia.
Net income for 1997 was $15.5 million, or $1.24 per share, excluding the
Management Plan charge. Including the one-time, non-cash special charge, the
Company reported net income of $5.4 million or $0.43 per share in 1997. Giving
effect to the Offering and Reorganization (see Note 1) as if each had occurred
at the first day of the year, net income per share would have been $1.32 in
1996.
1996 VERSUS 1995
NEW BUSINESS TAKEN/BACKLOG -- New business taken during 1996 decreased by 12.2%
to $687.2 million compared with $782.9 million in 1995, which included
approximately $150 million for three LNG storage facility contracts. During
1996, new contract awards increased significantly in Asia, the Middle East and
South America, while awards decreased in the U.S. Backlog at December 31, 1996
increased by $15.5 million to $485.7 million compared with the backlog at
December 31, 1995 of $470.2 million.
REVENUES -- Revenues increased $41.8 million, or 6.7%, to $663.7 million in 1996
from $621.9 million in 1995. This increase reflected improvement in contract
activity, primarily in the United States and Central and South America. Revenues
for low temperature and specialty product lines increased, reflecting contracts
for several LNG storage facilities and other significant contracts for a
wastewater project and a government research facility. To improve profitability
of the Company during 1996, management focused on improving contract execution
and cost reductions. As a result, management was more selective in pursuing
contract opportunities, which was reflected in the level of new business taken
and in the moderate revenue growth in 1996.
GROSS PROFIT -- Gross profit increased $66.0 million to $73.7 million during
1996 from $7.7 million in 1995. Gross margin increased to 11.1% for 1996 from
1.2% in 1995. The improvement in gross profit and gross margin in 1996 reflected
the results of the restructuring initiatives which have achieved cost savings of
approximately $10 million, reduced unabsorbed overhead costs by $10.6 million,
improved contract estimation and associated construction performance and reduced
benefit costs, as discussed below. In addition, gross profit increased with
higher revenues. Gross profit for 1995 was negatively impacted by approximately
$19 million due to the effect of significant losses on a few contracts.
INCOME FROM OPERATIONS -- Income from operations was $31.3 million in 1996, or
4.7% of revenues, versus a loss of $30.5 million in 1995. The improvement in
income from operations was primarily attributable to the improvement in gross
profit and gross margin described above. Selling and administrative expenses
decreased slightly to $42.9 million from $43.0 million in 1995. Selling and
administrative expenses included higher
28
<PAGE> 6
expenses relating to the Company's upgrading of its information technology
systems and increased incentive compensation due to improved results, offset by
a reduction in benefit costs and other cost savings. Benefit cost reductions of
approximately $4 million and pension curtailment gains of approximately $1.9
million reduced 1996 cost of revenues sold and selling and administrative
expenses by $4.9 million and $1.0 million, respectively. The decrease in the
Company's benefit costs during 1996 as compared with 1995 was the result of the
transition from the Industries' benefit plans to new benefit plans established
by the Company. Income from operations in 1995 was also impacted by gains from
the sale of assets of $10.0 million and a special charge of $5.2 million.
Interest expense increased $4.2 million to $5.0 million during 1996 from $0.8
million in 1995. The increase was primarily a result of $55.0 million of
long-term debt assumed by the Company on January 1, 1996 as part of the Praxair
acquisition.
Income tax expense increased $15.9 million to $7.8 million during 1996 from an
income tax benefit of $8.1 million during 1995. This increase resulted from the
return to profitable operations in the U.S. and increased profitability in
non-U.S. jurisdictions.
Net income for 1996 was $16.6 million compared with a net loss of $25.6 million
in 1995.
LIQUIDITY AND CAPITAL RESOURCES
In 1997, the Company generated cash from operations of $40.4 million compared
with $25.2 million in 1996. A significant contributor to this increase in
positive operating cash flow was a $26.7 million reduction in contract capital
(accounts receivable plus net contracts in progress less accounts payable). In
1996, cash generated from operations was primarily the result of increased net
income and reduced working capital requirements. In 1995, cash requirements of
the operations were largely attributable to a net loss and increased working
capital requirements caused by a major litigation settlement and satisfaction of
income tax liabilities.
Although the Company expended $35.0 million for capital expenditures in 1997, it
realized $13.0 million in proceeds from the sale of excess manufacturing
facilities and field equipment. The capital expenditures included $19.2 million
for the expansion and improvement of facilities, $11.9 million for field
equipment, and $3.9 million for information systems. Capital expenditures in
1996 were $20.4 million. Such capital expenditures included $11.0 million for
field equipment, $4.0 million for information systems, $2.0 million for shop and
other equipment and the remainder for environmental and other capital
expenditures. During the period from 1993 through 1995, the Company had annual
capital spending of approximately one times annual depreciation expense to
maintain its competitive position. The Company anticipates that capital
expenditures in the near future will approximate the level of depreciation and
amortization, although there can be no assurance that such levels will not
increase or decrease.
The Company was a subsidiary of Industries when Industries was acquired by
Praxair during the first quarter of 1996. On December 19, 1996, Industries
merged into Praxair. As a subsidiary of both Industries and Praxair, the Company
participated in corporate cash management systems. Liquidity required for or
generated from the business was handled through this system. As part of the
Praxair acquisition, $55.0 million of acquisition related indebtedness was
assumed by the Company.
In early 1997, the Company entered into a revolving credit facility (the
"Revolving Credit Facility") with a syndicate of banks. The facility has a
maximum availability of $100 million for three years, to be reduced to $50
29
<PAGE> 7
million for two years thereafter (including up to $35 million of letters of
credit). In April 1997, the Company borrowed $75 million under this credit
facility to refinance its long-term debt to Praxair and to fund its own
corporate cash management system. During 1997, the Company made substantial
progress in reducing long-term debt, ending the year with $10.2 million in cash
and $44 million in long-term debt, down from the $75 million of long-term debt
at the time of the Offering. The reduction in long-term debt was due in large
measure to a $26.7 million reduction in 1997 in contract capital (accounts
receivable plus net contracts in progress less accounts payable). The progress
in debt and contract capital reduction was offset somewhat by the negative
impact of the Asian financial crisis on the Tuban Project.
The $2.5 billion Tuban Project, which is about 40% complete, has been delayed
pending the completion of permanent financing which has been impacted by the
Asian financial crisis. At December 31, 1997, the Company's backlog related to
this project was approximately $50 million and the Company and its affiliates
had approximately $31 million of net receivables outstanding. The Company has
reduced the project work force, and has adjusted the material supply schedule.
While the Company believes the delay will have an impact on 1998 revenues, it
also believes that ultimately the project will get permanent financing and that
the Company will resume its work.
The terms of the Revolving Credit Facility include various covenants, including
financial covenants that require the Company to maintain minimum levels of
tangible net worth, establish interest coverage and debt coverage ratios and
limit capital expenditures.
In addition to liquidity generated through the Revolving Credit Facility, the
Company intends to continue to improve its working capital position through
aggressive management of the individual components of working capital, including
programs to reduce excess cash, accounts receivable and unfilled contracts in
progress and to maximize available terms from trade suppliers. The Company is
also actively marketing its remaining assets held for sale.
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.
YEAR 2000 COMPLIANCE
The Company is executing a plan to ensure its equipment and systems will be
compliant with the requirements to function in the year 2000. The direct costs
of the ongoing J.D. Edwards implementation, which is a Year 2000 compliant
system, are being capitalized. The decision to implement this new information
system was made independent of the Company's Year 2000 compliance issues. If the
Company is unsuccessful in implementing this system at all locations by the Year
2000, the cost of the contingency plan would not be material to the Company. The
Company is also communicating with suppliers, financial institutions and others
to coordinate Year 2000 compliance. The Company does not anticipate any material
cost or disruption in its operations as a result of any failure to be in
compliance; however, no assurance can be given that these efforts will be
successful.
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 in
this report, operating risks, risks associated with fixed price contracts,
fluctuating revenues and cash flow and competitive conditions, as well as risk
factors listed from time to time in the Company's SEC filings and reports
(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.
30
<PAGE> 8
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Supervisory Board of Chicago Bridge & Iron Company
N.V.:
We have audited the accompanying consolidated balance sheets of CHICAGO BRIDGE &
IRON COMPANY N.V. (a Netherlands corporation) and SUBSIDIARIES, the business of
which was formerly operated by CHICAGO BRIDGE & IRON COMPANY (a Delaware
corporation) and SUBSIDIARIES, as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the three years ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audits 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 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 financial position of CHICAGO BRIDGE & IRON COMPANY
N.V. and SUBSIDIARIES as of December 31, 1997 and 1996, and the results of its
operations and cash flows for the three years ended December 31, 1997, in
conformity with accounting principles generally accepted in the United States.
Arthur Andersen
Amsterdam, The Netherlands
February 12, 1998
31
<PAGE> 9
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
Years Ended December 31, 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 10,240 $ 11,864
Accounts receivable 157,785 101,675
Contracts in progress with earned revenues exceeding related progress billings (Note 3) 63,172 79,782
Other current assets 17,157 12,738
- --------------------------------------------------------------------------------------------------------------
Total current assets 248,354 206,059
- --------------------------------------------------------------------------------------------------------------
Property and equipment (Note 6) 121,798 107,875
Goodwill (Note 2) 18,539 19,027
Other non-current assets 11,959 18,535
- --------------------------------------------------------------------------------------------------------------
Total assets $ 400,650 $ 351,496
- --------------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------------
Notes payable $ 1,158 $ 3,114
Accounts payable 52,904 24,804
Accrued liabilities (Note 6) 46,518 44,513
Contracts in progress with progress billings exceeding related earned revenues (Note 3) 72,810 34,727
Payable to former Parent Company - 6,008
Income taxes payable 5,160 4,440
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 178,550 117,606
- --------------------------------------------------------------------------------------------------------------
Long-term debt (Note 4) 44,000 53,907
Minority interest in subsidiaries 5,273 7,428
Other non-current liabilities (Note 6) 69,001 81,809
- --------------------------------------------------------------------------------------------------------------
Total liabilities 296,824 260,750
- --------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------
Common stock; NLG .01 par value, 50,000,000 authorized
shares; 12,517,552 issued and outstanding shares 74 -
Common stock, $1 par value, 1,000 authorized shares;
1,000 issued and outstanding - 1
Additional paid-in capital 93,691 79,958
Retained earnings 14,712 11,562
Cumulative translation adjustment (4,651) (775)
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity 103,826 90,746
- --------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 400,650 $ 351,496
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
32
<PAGE> 10
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
<TABLE>
<CAPTION>
PRE-PRAXAIR
POST-PRAXAIR ACQUISITION ACQUISITION
------------------------ -----------
Years Ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 672,811 $ 663,721 $ 621,938
Cost of revenues 609,173 590,030 614,230
- --------------------------------------------------------------------------------------------------------
Gross profit 63,638 73,691 7,708
Selling and administrative expenses 44,988 42,921 43,023
Management Plan charge (Note 9) 16,662 - -
Special charge - - 5,230
Other operating income, net (4,807) (493) (10,030)
- --------------------------------------------------------------------------------------------------------
Income (loss) from operations 6,795 31,263 (30,515)
Interest expense (3,892) (5,002) (799)
Other income 1,416 990 1,191
- --------------------------------------------------------------------------------------------------------
Income (loss) before taxes and minority interest 4,319 27,251 (30,123)
Income tax expense (benefit) (730) 7,789 (8,093)
- --------------------------------------------------------------------------------------------------------
Income (loss) before minority interest 5,049 19,462 (22,030)
Minority interest in income (loss) (354) 2,900 3,576
- --------------------------------------------------------------------------------------------------------
Net income (loss) $ 5,403 $ 16,562 $ (25,606)
- --------------------------------------------------------------------------------------------------------
Net income per Common Share $ 0.43 N/A(1) N/A(1)
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net income (loss) per Common Share is not presented for 1996 and 1995 as
the Reorganization and Offering had not taken place (Note 1). Giving effect
to the Reorganization and the Offering as if each had occurred at the first
day of the year, net income (loss) per Common Share would have been $1.32
in 1996 and $(2.05) in 1995.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
33
<PAGE> 11
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
ADVANCES CUMULATIVE TOTAL
ADDITIONAL TO FORMER TRANS- SHARE-
COMMON PAID-IN RETAINED PARENT LATION HOLDERS'
STOCK CAPITAL EARNINGS COMPANY ADJUSTMENT EQUITY
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994
(Pre-Praxair Acquisition) $ 1 $ 185,493 $ 185,278 $ (173,797) $ (13,874) $ 183,101
Net loss - - (25,606) - - (25,606)
Advances to former Parent Company - - - 31,011 - 31,011
Translation adjustment - - - - (1,999) (1,999)
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 1 185,493 159,672 (142,786) (15,873) 186,507
Praxair acquisition adjustments - 52,292 (159,672) - 15,873 (91,507)
- --------------------------------------------------------------------------------------------------------
Balance at January 1, 1996
(Post-Praxair Acquisition) 1 237,785 - (142,786) - 95,000
Net income - - 16,562 - - 16,562
Advances to former Parent Company - - - (15,041) - (15,041)
Return of capital dividend
to former Parent Company - (157,827) - 157,827 - -
Dividend payable
to former Parent Company - - (5,000) - - (5,000)
Translation adjustment - - - - (775) (775)
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 1 79,958 11,562 - (775) 90,746
Reorganization (Note 1) 73 (14) - - - 59
Net income - - 5,403 - - 5,403
Management Plan charge (Note 9) - 16,662 - - - 16,662
Dividends to common shareholders - - (2,253) - - (2,253)
Stock offering costs - (2,915) - - - (2,915)
Translation adjustment - - - - (3,876) (3,876)
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 74 $ 93,691 $ 14,712 $ - $ (4,651) $ 103,826
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
34
<PAGE> 12
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
PRE-PRAXAIR
POST-PRAXAIR ACQUISITION ACQUISITION
---------------------------- -----------
Years Ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 5,403 $ 16,562 $ (25,606)
Adjustments to reconcile net income to net cash
provided by operating activities:
Management Plan charge (Note 9) 16,662 - -
Special charge - - 1,850
Depreciation and amortization 16,911 17,281 16,077
(Decrease)/increase in deferred income taxes (9,292) 4,251 1,132
Gain on sale of fixed assets (1,623) (493) (10,030)
Change in operating assets and liabilities (see below) 12,346 (12,442) (20,229)
- ------------------------------------------------------------------------------------------------------------
Net Cash Provided by/(Used in) Operating Activities 40,407 25,159 (36,806)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------
Proceeds from sale of fixed assets and investments 13,048 9,077 16,434
Capital expenditures (34,955) (20,425) (14,880)
- ------------------------------------------------------------------------------------------------------------
Net Cash Provided by/(Used in) Investing Activities (21,907) (11,348) 1,554
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------
Payment to former Parent Company (6,008) (15,041) 31,011
Increase/(decrease) in notes payable (1,956) 1,337 1,001
Net borrowings under Revolving Credit Facility 44,000 - -
Dividends paid (2,253) - -
Net repayment of debt to former Parent Company (53,907) (1,093) -
- ------------------------------------------------------------------------------------------------------------
Net Cash Provided by/(Used in) Financing Activities (20,124) (14,797) 32,012
- ------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (1,624) (986) (3,240)
Cash and cash equivalents, beginning of the year 11,864 12,850 16,090
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of the year $ 10,240 $ 11,864 $ 12,850
- ------------------------------------------------------------------------------------------------------------
CHANGE IN OPERATING ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------------------
(Increase)/decrease in receivables, net $ (56,110) $ 9,213 $ (4,770)
(Increase)/decrease in contracts in progress, net 54,693 (24,950) (213)
(Increase)/decrease in other current assets (5,714) 8,689 1,731
Increase/(decrease) in accounts payable & accrued liabilities 27,180 (4,652) (6,310)
Increase/(decrease) in income tax payable 720 404 (10,320)
Increase other (8,423) (1,146) (347)
- ------------------------------------------------------------------------------------------------------------
Total $ 12,346 $ (12,442) $ (20,229)
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW DISCLOSURES
- ------------------------------------------------------------------------------------------------------------
Cash paid for interest $ 4,619 $ 3,902 $ 829
Cash paid for income taxes $ 5,310 $ 3,536 $ 2,936
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL NON-CASH DISCLOSURE
- ------------------------------------------------------------------------------------------------------------
Return of capital dividend to former Parent Company $ - $ 157,827 $ -
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
35
<PAGE> 13
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. ORGANIZATION AND NATURE OF OPERATIONS
Chicago Bridge & Iron Company N.V. and Subsidiaries, the business of which was
formerly operated by Chicago Bridge & Iron Company and Subsidiaries ("the
Company"), is a global engineering and construction company specializing in the
design and engineering, fabrication, field erection and repair of bulk liquid
terminals, steel tanks, pressure vessels, low temperature and cryogenic storage
facilities and other steel plate structures and their associated systems. Based
on its knowledge of and experience in its industry, the Company believes it is
a leading provider of field erected steel tanks and other steel plate
structures, associated systems and related services in North America and one of
the leading providers of these specialized products and services in the world.
The Company seeks to maintain its leading industry position by focusing on its
technological expertise in design, metallurgy and welding, along with its
ability to complete logistically and technically complex metal plate projects
virtually anywhere in the world. The Company has been continuously engaged in
the engineering and construction industry since its founding in 1889.
ORGANIZATION -- During the periods and as of the dates prior to January 1, 1996,
the Company was a wholly owned subsidiary of Chi Bridge Holdings, Inc.,
("Holdings") which in turn was a wholly owned subsidiary of CBI Industries, Inc.
("Industries"). On January 12, 1996, pursuant to the merger agreement dated
December 22, 1995, Industries became a subsidiary of Praxair, Inc. ("Praxair").
This merger transaction was reflected in the Company's consolidated financial
statements as a purchase effective January 1, 1996 ("Merger Date"). Accordingly,
the historical information provided for the periods prior to January 1, 1996
("Pre-Praxair Acquisition") will not be comparable to subsequent financial
information ("Post-Praxair Acquisition").
The fair value assigned to the Company as of the Merger Date was $150,000,
excluding any bank or assumed debt ("Merger Value"). This Merger Value
approximated the portion of the total Industries purchase price that relates to
the Company. The allocation of this Merger Value to the fair value of individual
assets and liabilities was based on the respective fair values. The allocation
of this fair value resulted in the following opening balance sheet:
36
<PAGE> 14
<TABLE>
<CAPTION>
HISTORICAL PURCHASE OPENING
BALANCE SHEET ACCOUNTING BALANCE SHEET
DECEMBER 31, 1995 ADJUSTMENTS JANUARY 1, 1996
(PRE-PRAXAIR INCREASE/ (POST-PRAXAIR
ACQUISITION) (DECREASE) ACQUISITION)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 12,850 $ - $ 12,850
Accounts receivable 106,634 4,095 (A) 110,729
Contracts in progress 70,918 - 70,918
Assets held for sale 5,157 4,374 (B) 9,531
Deferred income taxes 7,369 (5,507)(C) 1,862
Other current assets 14,617 (192)(A) 14,425
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 217,545 2,770 220,315
Property and equipment 100,496 4,307 (B) 104,803
Assets held for sale 2,235 7,527 (B) 9,762
Deferred income taxes 28,405 (28,405)(C) -
Goodwill - 19,515 (D) 19,515
Other non-current assets 7,444 3,238 (A) 10,682
- -------------------------------------------------------------------------------------------------------------------------
Total Assets $ 356,125 $ 8,952 $365,077
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
- -------------------------------------------------------------------------------------------------------------------------
Contracts in progress $ 47,660 $ 3,153 (A) $ 50,813
Other current liabilities 59,545 5,048 (E) 64,593
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 107,205 8,201 115,406
Long-term debt to Parent Company - 55,000 (F) 55,000
Other non-current liabilities 62,413 37,258 (E) 99,671
- -------------------------------------------------------------------------------------------------------------------------
Total Liabilities 169,618 100,459 270,077
- -------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER'S EQUITY
- -------------------------------------------------------------------------------------------------------------------------
Common stock 1 - 1
Additional paid-in capital 185,493 52,292 (A) 237,785
Retained earnings 159,672 (159,672)(G) -
Advances to Parent Company (142,786) - (142,786)
Cumulative translation adjustment (15,873) 15,873 (G) -
- -------------------------------------------------------------------------------------------------------------------------
Total shareholder's equity 186,507 (91,507) 95,000
- -------------------------------------------------------------------------------------------------------------------------
Total Liabilities & Shareholder's Equity $ 356,125 $ 8,952 $365,077
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
DESCRIPTION OF PURCHASE ACCOUNTING ADJUSTMENTS
(A) To record other estimated fair value and purchase accounting adjustments.
(B) To record estimated fair value of property, equipment and assets held for
sale and to reclassify certain assets from property to assets held for
sale.
(C) To write-off $36,231 of U.S. deferred tax assets which may not be
realizable on a stand-alone company basis and to reclassify $2,319 of
foreign deferred tax liabilities.
(D) To record goodwill which will be amortized over 40 years.
(E) Relates primarily to recognition of the unamortized portion of actuarial
gains and losses and other adjustments relating to the Company's defined
benefit and postretirement plans, and the recognition of severance for
personnel reductions.
(F) To record the assumption of Praxair acquisition related debt in the
Company's financial statements.
(G) To eliminate historical retained earnings and cumulative translation
adjustment.
37
<PAGE> 15
COMMON STOCK OFFERING -- In December 1996, the Company filed a registration
statement with the Securities and Exchange Commission for an initial public
offering (the "Offering") of a majority of the shares of the Company's Common
Stock, par value NLG 0.01 (the "Common Stock"). Effective March 1997, the
Company completed the Offering of 11,045,941 shares of Common Stock at $18.00
per share. The Company did not receive any proceeds from the Offering, but paid
a portion of the offering costs. The Common Stock is traded on the New York and
Amsterdam stock exchanges.
REORGANIZATION -- In March 1997, Holdings effected a reorganization (the
"Reorganization") whereby Holdings transferred the business of Chicago Bridge &
Iron Company ("CB&I") to Chicago Bridge & Iron Company N.V. ("CB&I N.V."), a
corporation organized under the laws of The Netherlands. This Reorganization did
not affect the carrying amounts of CB&I's assets and liabilities, nor result in
any distribution of its cash or other assets to Praxair. CB&I N.V.'s only
transaction for the year ended December 31, 1996 was a $59 original investment
in exchange for common stock. The Reorganization is reflected in the Company's
financial statements effective January 1, 1997. The consolidated balance sheet
as of December 31, 1996 and the consolidated statements of income and statements
of cash flows for the years ended December 31, 1996 and 1995 include the amounts
of CB&I prior to the Reorganization.
NATURE OF OPERATIONS -- The worldwide petroleum and petrochemical industry has
been the largest sector of the Company's revenues, accounting for approximately
60-70% of revenues in 1997 and 1996. Numerous factors influence capital
expenditure decisions in this industry which are beyond the control of the
Company. Therefore, no assurance can be given that the Company's business,
financial condition and results of operations will not be adversely affected
because of reduced activity or changing taxes, price controls and laws and
regulations related to the petroleum and petrochemical industry.
TUBAN PROJECT -- The Company has taken a contract to supply materials and
construct a portion of a $2.5 billion petrochemical project in Tuban, West Java,
Indonesia. The Tuban Project, which is about 40% complete, has been delayed
pending the completion of permanent financing which has been impacted by the
Asian financial crisis. At December 31, 1997, the Company's backlog related to
this project was approximately $50 million and the Company and its affiliates
had approximately $31 million of net receivables outstanding. The Company has
reduced the project work force, and has adjusted the material supply schedule.
While the Company believes the delay will have an impact on 1998 revenues, it
also believes that ultimately the project will get permanent financing and that
the Company will resume its work.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING AND CONSOLIDATION -- These financial statements are prepared
in accordance with generally accepted accounting principles in the United
States. The consolidated financial statements include all majority owned
subsidiaries. Significant intercompany balances and transactions are eliminated
in consolidation. Investments in non-majority owned affiliates are accounted for
by the equity method.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities.
Management is also required to make judgments regarding the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION -- Revenues are recognized using the percentage of
completion method. Contract revenues are accrued based generally on the
percentage that costs-to-date bear to total estimated costs. The cumulative
impact of revisions in total cost estimates during the progress of work is
reflected in the period in which these changes become known. Contract revenue
reflects the original contract price adjusted for agreed upon claim and change
order revenue, if any. Losses expected to be incurred on jobs in process, after
consideration of estimated minimum recoveries from claims and change orders, are
charged to income as soon as such losses are known.
38
<PAGE> 16
A significant portion of the Company's work is performed on a fixed price or
lump sum basis. The balance of projects are primarily performed on variations of
cost reimbursable and target, fixed or lump sum price approaches. Progress
billings in accounts receivable are currently due and exclude retentions until
such amounts are due in accordance with contract terms. Cost of revenues
includes direct contract costs such as material and construction labor, and
indirect costs which are attributable to contract activity.
FOREIGN CURRENCY TRANSLATION AND EXCHANGE -- The primary effects of foreign
currency translation adjustments are recognized in shareholders' equity as
cumulative translation adjustment. Foreign currency exchange gains/(losses) are
included in the determination of income, and were $1,387 in 1997, $(587) in
1996, and $(974) in 1995.
CASH EQUIVALENTS -- Cash equivalents are considered to be all highly liquid
securities with original maturities of three months or less.
PROPERTY AND EQUIPMENT -- Property and equipment are recorded at cost and
depreciated on a straight-line basis over their estimated useful lives:
buildings and improvements, 10 to 40 years; plant and field equipment, 3 to 20
years. Renewals and betterments which substantially extend the useful life of an
asset are capitalized and depreciated. Depreciation expense was $16,423 in
1997, $16,793 in 1996 and $16,077 in 1995.
In 1997, the Company revised its capitalization policy by adjusting the dollar
threshold for capitalizing small tools in order to better match costs and
revenues. This policy revision positively impacted 1997 income by $1,198.
GOODWILL -- As a result of the purchase accounting adjustments recorded as of
January 1, 1996, the Company recorded the excess of cost over the fair value of
tangible net assets of the Company as goodwill on the balance sheet and is
amortizing it on a straight-line basis over 40 years. Amortization expense was
$488 in 1997 and 1996. Accumulated amortization was $976 as of December 31,
1997, and $488 as of December 31, 1996. The carrying value of goodwill is
reviewed periodically based on the undiscounted cash flows of the entity over
the remaining amortization period. If this review indicates that goodwill is not
recoverable, the Company's carrying value of the goodwill is reduced by the
estimated shortfall of undiscounted cash flows.
The Company recorded a valuation allowance of $27,155 for deferred tax assets in
connection with the Praxair Acquisition accounting. If the related deferred tax
assets are realized, the reversal of the valuation allowance will first reduce
the remaining goodwill balance dollar-for-dollar until zero, and thereafter will
reduce income tax expense.
FINANCIAL INSTRUMENTS -- The Company uses various methods and assumptions to
estimate the fair value of each class of financial instrument. Due to their
nature, the carrying value of cash and temporary cash investments, accounts
receivable, accounts payable, notes payable and long-term debt approximates fair
value. The Company's other financial instruments are not significant. For the
three years ended December 31, 1997, the Company recorded interest expense on
notes payable, long-term debt, and certain other interest bearing obligations.
FORWARD CONTRACTS -- The Company periodically uses forward contracts to hedge
foreign currency transactions and does not engage in currency speculation. Gains
or losses on forward contracts are included in income. At December 31, 1997, the
Company had $1,052 of outstanding foreign currency exchange contracts to
purchase Canadian dollars and $2,097 of outstanding foreign currency exchange
contracts to sell British pounds. These outstanding contracts matured within 40
days after year-end. The fair value of the forward contracts approximated their
carrying value in the financial statements at December 31, 1997. The
counterparties to the Company's forward contracts are major financial
institutions, which the Company continually evaluates as to their
creditworthiness. The Company has never experienced, nor does it anticipate,
nonperformance by any of its counterparties.
RESEARCH AND DEVELOPMENT -- Expenditures for research and development
activities, which are charged to income as incurred, amounted to $1,670 in 1997,
$730 in 1996 and $2,474 in 1995.
RECLASSIFICATION OF PRIOR YEAR BALANCES -- Certain prior year balances have been
reclassified to conform with current year presentation.
39
<PAGE> 17
3. UNCOMPLETED CONTRACTS
Contract terms generally provide for progress billings based on completion of
certain phases of the work. The excess of revenues recognized for construction
contracts over progress billings on uncompleted contracts is reported as a
current asset and the excess of progress billings over revenues recognized on
uncompleted contracts is reported as a current liability as follows:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNCOMPLETED CONTRACTS
- --------------------------------------------------------------------------------------------------------
Revenues recognized on uncompleted contracts $ 658,760 $ 680,223
Billings on uncompleted contracts 668,398 635,168
- --------------------------------------------------------------------------------------------------------
$ (9,638) $ 45,055
- --------------------------------------------------------------------------------------------------------
Shown on balance sheet as
Contracts in progress with earned revenues exceeding related progress billings $ 63,172 $ 79,782
Contracts in progress with progress billings exceeding related earned revenues (72,810) (34,727)
- --------------------------------------------------------------------------------------------------------
$ (9,638) $ 45,055
- --------------------------------------------------------------------------------------------------------
</TABLE>
4. NOTES PAYABLE AND LONG-TERM DEBT
Prior to April 2, 1997, the Company's cash requirements were funded by Praxair
through the long-term debt account. Interest was payable to Praxair at 7% per
annum.
On April 2, 1997, the Company, The Chase Manhattan Bank and a syndicate of other
banks entered into a five year senior, unsecured competitive advance and
revolving credit facility (the "Revolving Credit Facility"). Maximum
availability under the Revolving Credit Facility is $100,000 for the first three
years and $50,000 thereafter. The Company initially borrowed $75,000 thereunder
to repay the long-term debt to Praxair balance as of April 2, 1997. The
committed amounts under the Revolving Credit Facility will be available for
general corporate purposes, including working capital, letters of credit and
other requirements of the Company. Revolving credit loans are available at
interest rates based upon the lenders' alternate base rate or a spread ranging
from 0.325% to 0.875% (based on the Company's debt coverage ratio) over LIBOR or
on a competitive bid basis. At December 31, 1997, the weighted average interest
rate was 6.62%. Letters of credit may be issued, subject to a $35,000 sublimit,
on either a committed or competitive bid basis and expire one year after
issuance, unless otherwise provided. The Revolving Credit Facility contains
certain restrictive covenants regarding tangible net worth, interest coverage
and leverage ratios, and capital expenditures, among other restrictions. The
Revolving Credit Facility will terminate on April 2, 2002.
Approximately $24,172 of letters of credit were outstanding at December 31,
1997, related to the Company's insurance program.
Notes payable consist primarily of short-term loans borrowed under credit
facilities made available on an informal basis by commercial banks. The
Company's weighted average interest rate for notes payable was 7.11% at December
31, 1997 and 5.34% at December 31, 1996.
Capitalized interest was $599 in 1997.
5. LEASES
Certain facilities and equipment are rented under operating leases that expire
at various dates through 2006. Rental expense on operating leases was $4,974 in
1997, $3,372 in 1996 and $3,589 in 1995. Future rental commitments during the
years ending in 1998 through 2002 and thereafter are $4,649, $2,776, $1,751,
$1,233, $529, and $1,754, respectively.
40
<PAGE> 18
6. SUPPLEMENTAL BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMPONENTS OF PROPERTY AND EQUIPMENT
- --------------------------------------------------------------------------------------------------------
Land and improvements $ 11,698 $ 11,954
Buildings and improvements 35,448 30,460
Plant and field equipment 106,555 81,159
- --------------------------------------------------------------------------------------------------------
Total property and equipment 153,701 123,573
- --------------------------------------------------------------------------------------------------------
Accumulated depreciation (31,903) (15,698)
- --------------------------------------------------------------------------------------------------------
Net property and equipment $ 121,798 $ 107,875
- --------------------------------------------------------------------------------------------------------
COMPONENTS OF ACCRUED LIABILITIES
- --------------------------------------------------------------------------------------------------------
Payroll, vacation, bonuses and profit-sharing $ 9,322 $ 11,533
Self-insurance/retention reserves 10,925 10,000
Postretirement benefit obligation 1,909 1,783
Pension obligation 1,539 1,439
Contract cost and other accruals 22,823 19,758
- --------------------------------------------------------------------------------------------------------
Accrued liabilities $ 46,518 $ 44,513
- --------------------------------------------------------------------------------------------------------
COMPONENTS OF OTHER NON-CURRENT LIABILITIES
- --------------------------------------------------------------------------------------------------------
Self-insurance/retention reserves $ 19,733 $ 27,608
Postretirement benefit obligation 25,951 28,148
Pension obligation 14,391 15,831
Other 8,926 10,222
- --------------------------------------------------------------------------------------------------------
Other non-current liabilities $ 69,001 $ 81,809
- --------------------------------------------------------------------------------------------------------
</TABLE>
7. COMMITMENTS AND CONTINGENT LIABILITIES
ENVIRONMENTAL MATTERS -- A subsidiary (the "subsidiary") of the Company was a
minority shareholder from 1934 to 1954 in a company which owned or operated at
various times several wood treating facilities at sites in the United States,
some of which are currently under investigation, monitoring or remediation under
various environmental laws. With respect to some of these sites, the subsidiary
has been named a potentially responsible party ("PRP") under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") and similar
state laws. Without admitting any liability, the subsidiary has entered into a
consent decree with the federal government regarding one of these sites and has
had an administrative order issued against it with respect to another. There can
be no assurance that the subsidiary will not be required to clean up one or more
of these sites pursuant to agency directives or court orders. The subsidiary has
been involved in litigation concerning environmental liabilities, which are
currently undeterminable, in connection with certain of those sites. The
subsidiary denies any liability for each site and believes that the successors
to the wood treating business are responsible for the costs of remediation of
the sites. Without admitting any liability, the subsidiary has reached
settlements for environmental clean-up at most of the sites. In July 1996, a
judgment in favor of the subsidiary was entered in the suit Aluminum Company of
America v. Beazer East, Inc. v. Chicago Bridge & Iron Company, instituted in
January 1991, before the U.S. District Court for the Western District of
Pennsylvania. On September 2, 1997, the United States Court of Appeals for the
Third Circuit affirmed the judgment in favor of the subsidiary. There were no
further appeals. The Company believes that an estimate of the possible loss or
range of possible loss relating to such matters cannot be made. Although the
Company believes such settlements and any remaining potential liability will not
be material, there can be no assurance that such settlements and any remaining
potential liability will not have a materially adverse effect on its business,
financial condition or results of operations.
41
<PAGE> 19
The Company's facilities have operated for many years and substances which
currently are or might be considered hazardous were used and disposed of at some
locations, which will or may require the Company to make expenditures for
remediation. In addition, the Company has agreed to indemnify parties to whom it
has sold facilities for certain environmental liabilities arising from acts
occurring before the dates those facilities were transferred. The Company is
aware of no manifestation by a potential claimant of awareness by such claimant
of a possible claim or assessment and does not consider it to be probable that a
claim will be asserted which claim is reasonably possible to have an unfavorable
outcome, in each case, which would be material to the Company with respect to
the matters addressed in this paragraph. The Company believes that any potential
liability for these matters will not have a materially adverse effect on its
business, financial condition or results of operations.
Along with multiple other parties, a subsidiary of the Company is currently a
PRP under CERCLA and analogous state laws at several sites as a generator of
wastes disposed of at such sites. While CERCLA imposes joint and several
liability on responsible parties, liability for each site is likely to be
apportioned among the parties. The Company believes that an estimate of the
possible loss or range of possible loss relating to such matters cannot be made.
While it is impossible at this time to determine with certainty the outcome of
such matters and although no assurance can be given with respect thereto, based
on information currently available to the Company and based on the Company's
belief as to the reasonable likelihood of the outcomes of such matters, the
Company does not believe that its potential liability in connection with these
sites, either individually or in the aggregate, will have a material adverse
effect on its business, financial condition or results of operations.
The Company does not anticipate incurring material capital expenditures for
environmental controls or for investigation or remediation of environmental
conditions during the current or succeeding fiscal year. Nevertheless, the
Company can give no assurance that it, or entities for which it may be
responsible, will not incur liability in connection with the investigation and
remediation of facilities it currently (or formerly) owns or operates or other
locations in a manner that could materially and adversely affect the Company.
OTHER CONTINGENCIES -- In 1991, CB&I Constructors, Inc. (formerly CBI Na-Con,
Inc.), a subsidiary of the Company, installed a catalyst cooler bundle at Fina
Oil & Chemical Company's ("Fina") Port Arthur, Texas refinery. In July 1991,
Fina determined that the catalyst cooler bundle was defective and had it
replaced. Fina is seeking approximately $20,000 in damages for loss of use of
Fina's catalyst cracking unit and the cost of replacement of the catalyst cooler
bundle. On June 28, 1993, Fina filed a complaint against CB&I Constructors, Inc.
before the District Court of Harris County, Texas in Fina Oil & Chemical Company
v. CB&I Constructors, Inc., et al. The Company denies that it is liable. The
Company believes that an estimate of the possible loss or range of possible loss
cannot be made. While the Company believes that the claims are without merit
and/or the Company has valid defenses to such claims and that it is reasonably
likely to prevail in defending against such claims, there can be no assurance
that if the Company is finally determined to be liable for all or a portion of
any damages payable, that such liability will not have a materially adverse
effect on the Company's business, financial condition or results of operations.
The Company is a defendant in a number of other lawsuits arising in the normal
course of its business. The Company believes that an estimate of the possible
loss or range of possible loss relating to such matters cannot be made. While it
is impossible at this time to determine with certainty the ultimate outcome of
these lawsuits and although no assurance can be given with respect thereto,
based on information currently available to the Company and based on the
Company's belief as to the reasonable likelihood of the outcomes of such
matters, the Company's management believes that adequate provision has been made
for probable losses with respect thereto as best as can be determined at this
time and that the ultimate outcome, after provisions therefore, will not have a
material adverse effect, either individually or in the aggregate, on the
Company's business, financial condition or results of operations. The adequacy
of reserves applicable to the potential costs of being engaged in litigation and
potential liabilities resulting from litigation are reviewed as developments in
the litigation warrant.
The Company is jointly and severally liable for certain liabilities of
partnerships and joint ventures. The Company has also given certain performance
guarantees arising in the ordinary course of business for its subsidiaries and
unconsolidated affiliates.
42
<PAGE> 20
The Company has elected to retain portions of anticipated losses through the use
of deductibles and self-insured retentions for its exposures related to third
party liability and workers' compensation. Liabilities in excess of these
amounts are the responsibilities of an insurance carrier. To the extent the
Company self insures for these exposures, reserves have been provided for based
on management's best estimates with input from the Company's legal and insurance
advisors. Changes in assumptions, as well as changes in actual experience, could
cause these estimates to change in the near term. The Company's management
believes that the reasonably possible losses, if any, for these matters, to the
extent not otherwise disclosed and net of recorded reserves, will not be
material to its financial position or results of operations.
8. POSTRETIREMENT BENEFITS
DEFINED CONTRIBUTION PLANS -- Effective January 1, 1997, the Company adopted a
new tax-qualified defined contribution plan ("New 401(k) Plan") for eligible
employees. The New 401(k) Plan substantially replaces the former Parent
Company-sponsored pension and 401(k) plans discussed below. The New 401(k) Plan
consists of a voluntary pre-tax salary deferral feature under Section 401(k) of
the Internal Revenue Code, a Company matching contribution, and an additional
Company profit-sharing contribution to be determined annually by the Company.
For 1997, the Company contributed $6,949 to the New 401(k) Plan.
The Company is the sponsor for several other defined contribution plans that
cover salaried and hourly employees for which the Company does not provide
matching contributions. The cost of these plans to the Company was insignificant
in 1997, 1996 and 1995.
DEFINED BENEFIT PLANS -- The Company participates in three defined benefit plans
sponsored by the Company's Canadian subsidiary and makes contributions to union
sponsored multi-employer pension plans. Prior to 1997, the Company participated
in a defined benefit plan sponsored by the former Parent Company (the "CBI
Industries Pension Plan").
The Company's three Canadian pension plans cover salaried, field and hourly
employees. The following tables reflect the components of net pension cost and
the funded status of these pension plans.
<TABLE>
<CAPTION>
PRE-PRAXAIR
POST-PRAXAIR ACQUISITION ACQUISITION
----------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET PENSION COST
- ------------------------------------------------------------------------------------------------------------------
Service cost $ - $ 301 $ 291
Interest cost 1,007 1,287 1,218
Actual return on assets (1,806) (1,840) (1,515)
Net amortization and deferral (126) - (239)
Curtailment gain - (1,899) -
- ------------------------------------------------------------------------------------------------------------------
Net defined benefit pension plans income $ (925) $ (2,151) $ (245)
- ------------------------------------------------------------------------------------------------------------------
FUNDED STATUS
- ------------------------------------------------------------------------------------------------
Accumulated benefit obligation
(including vested benefits of $11,374 in 1997 and $14,056 in 1996) $(11,374) $(14,172)
Additional benefits based on projected salary levels - (2,563)
- ------------------------------------------------------------------------------------------------
Projected benefit obligation (11,374) (16,735)
Market value of plan assets 23,532 28,091
- ------------------------------------------------------------------------------------------------
Plan assets over projected benefit obligation 12,158 11,356
Unrecognized gains (1,722) (1,075)
- ------------------------------------------------------------------------------------------------
Pension asset $ 10,436 $ 10,281
- ------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 21
The principal defined benefit plan assets consist of long-term investments,
including equity and fixed income securities and cash. The significant
assumptions used in determining the Company's pension expense and the related
pension obligations were:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 6-8.50% 7.50% 7.25%
Increase in compensation levels - 6.00% 4.50%
Long-term rate of return on plan assets 7.50% 7.50% 9.00%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Of these three Canadian plans, the salaried plan was terminated in 1994. Since
then, all members who elected to transfer their balance have been paid out,
while the remaining members (all retirees) continue to have benefits under the
plan. The field construction plan was wound-up in 1994. It is anticipated that
the surplus assets will be distributed in 1998. The hourly plan was wound-up in
1996. A surplus sharing agreement with the participants will be developed during
1998. In 1996, a curtailment gain of $1,899 was recorded related to the salaried
and hourly plans.
The Company made contributions of $3,991 in 1997, $3,431 in 1996, and $5,088 in
1995 to certain union sponsored multi-employer pension plans. Benefits under
these defined benefit plans are based on years of service and compensation
levels.
The CBI Industries Pension Plan was the principal non-contributory tax qualified
defined benefit plan of the Company and covered most U.S. salaried employees of
the Company. The Company's portion of the net pension cost for the CBI
Industries Pension Plan was $4,414 in 1996 and $2,937 in 1995. Benefit accruals
under the CBI Industries Pension Plan for Company employees were discontinued as
of December 31, 1996. The Company's obligation to fund its portion of the
accumulated benefit obligation for its participants in excess of plan assets was
fixed at $17,270 as of December 31, 1996, as agreed to by the Company and
Praxair. This obligation is payable ratably to Praxair over a twelve-year period
beginning December 1, 1997 with interest at 7.5%. In 1997, the Company incurred
$1,284 in pension expense and has a remaining pension liability to Praxair of
$15,930 as of December 31, 1997.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS -- The Company
participates in a health care and life insurance benefit program. This program
provides certain separate health care and life insurance benefits for retired
Company employees. Retiree health care benefits are provided under an
established formula which limits costs based on prior years of service of
retired employees. This plan may be changed or terminated by the Company at any
time.
Effective January 1, 1997, the Company discontinued its participation in the
program sponsored by the former Parent Company, and the future obligation for
the Company's active employees as of December 31, 1996 ("Actives") under this
program has been assumed by the Company. The following tables reflect the
components of net postretirement benefit cost and the funded status allocated to
the Company for active employees.
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET PERIODIC POSTRETIREMENT BENEFIT COST - ACTIVES
- --------------------------------------------------------------------------------------------------------
Service cost $ 253 $ 375
Interest cost 488 582
Actual return on assets - -
Net amortization and deferral (47) -
Curtailment gain (812) -
- --------------------------------------------------------------------------------------------------------
Postretirement health care and life insurance benefits (income)/cost $ (118) $ 957
- --------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 22
The significant assumptions used in determining the other postretirement benefit
expense were a discount rate of 7.5% in 1997 and 7.0% in 1996; and a salary
scale of 4.25% in 1997 and 1996. The curtailment gain of $812 recognized in 1997
was related to the closure of the Company's manufacturing facility in Kankakee,
Illinois.
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET PERIODIC POSTRETIREMENT LIABILITY- ACTIVES
- --------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation - Active employees $ (7,275) $ (7,781)
Unrecognized gain (842) (750)
- --------------------------------------------------------------------------------------------------------
Postretirement health care and life insurance benefits (liability) $ (8,117) $ (8,531)
- --------------------------------------------------------------------------------------------------------
</TABLE>
The Company's obligation with respect to retired employees of the Company as of
December 31, 1996 ("Retirees") under the program was fixed at $21,400 as of
December 31, 1996, as agreed to by the Company and Praxair. The Retirees
obligation is payable ratably to Praxair over a twelve-year period beginning
December 1, 1997 with interest at 7.5%. In 1997, the Company incurred $1,593 in
other postretirement expense for Retirees and has a remaining postretirement
benefit liability to Praxair of $19,743 as of December 31, 1997.
The Company reimbursed the former Parent Company $1,318 in 1996 and $2,258 in
1995 for its proportionate cost of this program for both Actives and Retirees.
9. MANAGEMENT PLAN
The Company established the Chicago Bridge & Iron Management Defined
Contribution Plan (the "Management Plan") in early 1997. The Management Plan is
not qualified under Section 401(a) of the Internal Revenue Code ("the Code")
and each participant's account is treated as a separate account under Section
404(a)(5) of the Code. Upon consummation of the Offering, the Company made a
contribution to the Management Plan in the form of 925,670 shares of Common
Stock having a value of $16,662. Accordingly, the Company recorded expense of
$16,662 (the "Management Plan charge") in 1997, which was $10,064 after tax.
The designation of the Management Plan's participants, the amount of Company
contributions to the Management Plan and the amount allocated to the individual
participants were determined by the Company's Management Board. The allocation
to the participant's individual accounts occurs concurrently with the Company's
contributions. Management Plan shares contributed concurrent with the Offering
will vest three years (and with respect to one participant, two years) after the
date of the Offering. Upon vesting, the balance held in the individual
participant's account can be distributed at the election of the participant.
Forfeitures of Management Plan shares under the provisions of the Management
Plan will be reallocated to the other Management Plan participants.
10. EMPLOYEE STOCK PLANS
STOCK OPTIONS - The Company has one stock option plan, the Chicago Bridge & Iron
Long-Term Incentive Plan (the "Incentive Plan"). The Company accounts for this
plan under APB Opinion No. 25, under which no compensation cost has been
recognized. Had compensation cost for stock options awarded under this plan been
determined consistent with FASB Statement No. 123, the Company's net income and
net income per common share would have been reduced to the following pro forma
amounts:
45
<PAGE> 23
<TABLE>
<CAPTION>
1997
- ------------------------------------------------------------------------
<S> <C>
NET INCOME
- ------------------------------------------------------------------------
As reported $ 5,403
Pro forma 4,740
- ------------------------------------------------------------------------
NET INCOME PER COMMON SHARE (BASIC AND DILUTED)
- ------------------------------------------------------------------------
As reported $ .43
Pro forma .38
- ------------------------------------------------------------------------
</TABLE>
Because no stock options were granted prior to January 1, 1997, the resulting
pro forma compensation cost may not be representative of that to be expected in
future years.
The Company may grant options for up to 1,251,755 shares under the Incentive
Plan. The Company has granted options on 520,248 shares through December 31,
1997. Under the Incentive Plan, the option exercise price equals the Common
Stock's market price on date of grant. The options are exercisable after April
2, 2000 at the earliest, subject to achievement of a cumulative net income per
common share for the three-year period from 1997 through 1999 of at least $6.25
per common share (excluding the $16,662 Management Plan charge), or if not
achieved, on any succeeding April 2 if such goal, compounded an additional 15%
per year, is achieved as of the end of the fiscal year then ended preceding such
April 2 date, and if never so achieved, then automatically after nine years from
their date of grant.
The following table summarizes the Incentive Plan for the year ended December
31, 1997:
<TABLE>
<CAPTION>
1997
- ---------------------------------------------------------------------
<S> <C>
Shares outstanding at beginning of year -
Shares granted 520,248
Shares forfeited (15,945)
- ---------------------------------------------------------------------
Shares outstanding at end of year 504,303
Exercisable at end of year -
- ---------------------------------------------------------------------
Weighted average fair value of options granted $8.77
- ---------------------------------------------------------------------
</TABLE>
As of December 31, 1997, 497,403 of the 504,303 options outstanding have
exercise prices equal to $18.00 and a weighted average remaining contractual
life of 9.26 years. None of these options are exercisable. The remaining 6,900
options have exercise prices of $21.38 or $22.88, with a weighted average price
of $22.35 and a weighted average remaining contractual life of 9.57 years. None
of these options are exercisable.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for the four option grants in 1997: risk-free interest rate of
6.87%; expected dividend yields of 1.33%; expected life of 10.0 years; expected
volatility of 31.65%.
EMPLOYEE STOCK PURCHASE PLAN -- The Company's Employee Stock Purchase Plan
provides that employees may purchase shares of Common Stock beginning January 1,
1998 at 85% of the Common Stock closing price per share on the New York Stock
Exchange on the first trading day following the end of the calendar quarter. The
plan provides that up to 250,000 of authorized and unissued shares of Common
Stock may be purchased.
46
<PAGE> 24
11. TRANSACTIONS WITH FORMER PARENT COMPANY
Prior to the Offering, the Company recognized certain related-party transactions
with Industries or Praxair ("the former Parent Company"). Related-party
transactions recorded in 1997, not disclosed elsewhere, were not material.
Related-party transactions recorded in 1996 and 1995, not disclosed elsewhere in
the financial statements, were as follows:
REVENUES FROM AFFILIATES -- The Company provided services to affiliates of the
former Parent Company for the construction and expansion of facilities and for
certain repair and maintenance work. The Company recorded revenues from
affiliates of $13,384 in 1996 and $40,374 in 1995. Gross profit, net of overhead
costs, was $2,287 in 1996 and $5,516 in 1995. The Company believes these
revenues and gross profits approximate those of similar services provided to
independent third parties.
DEBT TO FORMER PARENT COMPANY -- In conjunction with Praxair's acquisition of
Industries effective January 1, 1996, the Company assumed $55,000 of acquisition
related debt payable to Praxair. Subsequent to September 30, 1996, the Company's
long-term debt balance increased when the Company required cash and decreased
when a cash surplus was available to reduce the long-term debt balance. The
Company paid interest at 7% per annum on a quarterly basis. This interest
expense was $3,850 in 1996. In addition, approximately $22,000 of letters of
credit were outstanding on behalf of Praxair at December 31, 1996 relating to
the Company's insurance program.
In contemplation of the Offering, the Company entered into a long-term credit
agreement with a group of financial institutions in order to repay the Debt to
former Parent Company and to provide liquidity to support letters of credit and
working capital requirements. (Note 4)
PAYABLE TO FORMER PARENT COMPANY -- Payable to former Parent Company as of
December 31, 1996 included a $5,000 dividend to Praxair paid in the first
quarter of 1997 and interest accrued on the Debt to former Parent Company, net
of an income tax receivable from the former Parent Company.
CORPORATE SERVICES -- The former Parent Company provided certain support
services to the Company through June 30, 1996, including legal, finance, tax,
human resources, information services and risk management. Charges for these
services were allocated by the former Parent Company to the Company based on
various methods which reasonably approximate the actual costs incurred. The
allocations recorded by the Company for these corporate services in the
accompanying consolidated income statements were $4,732 in 1996 and $10,008 in
1995. Subsequent to June 30, 1996, the Company performed substantially all of
these support services internally. The amounts allocated by the former Parent
Company are not necessarily indicative of the actual costs which may have been
incurred had the Company operated as an entity unaffiliated with the former
Parent Company. However, the Company believes that the allocation is reasonable
and in accordance with the Securities and Exchange Commission's Staff Accounting
Bulletin No. 55.
12. INCOME TAXES
Prior to the Reorganization, the consolidated amount of current and deferred tax
expense was allocated among the members of the former Parent Company group using
the pro-rata method, which assumed the Company's taxes would be filed as part of
the former Parent Company's consolidated return. In conjunction with the
Offering, the Company became a stand-alone entity and, therefore, subsequent to
March 26, 1997, the consolidated amount of current and deferred tax expense will
be calculated using a separate return approach. The separate return approach did
not result in significant adjustments to the tax accounts.
47
<PAGE> 25
<TABLE>
<CAPTION>
PRE-PRAXAIR
POST-PRAXAIR ACQUISITION ACQUISITION
------------ ----------- -----------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THE SOURCES OF INCOME/(LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST ARE
- ---------------------------------------------------------------------------------------------------------------------
U.S. $ (23,778) $ 2,919 $ (25,387)
Non-U.S. 28,097 24,332 (4,736)
- ---------------------------------------------------------------------------------------------------------------------
Total $ 4,319 $ 27,251 $ (30,123)
- ---------------------------------------------------------------------------------------------------------------------
The U.S. loss before income taxes and minority interest in 1997 includes the
Management Plan charge.
THE PROVISION/(BENEFIT) FOR INCOME TAXES CONSISTED OF
- ---------------------------------------------------------------------------------------------------------------------
Current income taxes -
U.S. $ - $ (1,295) $ (6,678)
Non-U.S. 4,596 4,833 1,586
- ---------------------------------------------------------------------------------------------------------------------
4,596 3,538 (5,092)
- ---------------------------------------------------------------------------------------------------------------------
Deferred income taxes -
U.S. (4,575) 3,087 (1,469)
Non-U.S. (751) 1,164 (1,532)
- ---------------------------------------------------------------------------------------------------------------------
(5,326) 4,251 (3,001)
- ---------------------------------------------------------------------------------------------------------------------
Total provision/(benefit) $ (730) $ 7,789 $ (8,093)
- ---------------------------------------------------------------------------------------------------------------------
A RECONCILIATION OF INCOME TAXES AT THE STATUTORY RATE
AND THE PROVISION/(BENEFIT) FOR INCOME TAXES FOLLOW
- ---------------------------------------------------------------------------------------------------------------------
Tax provision at statutory rate $ 1,512 $ 9,538 $ (10,543)
State income taxes 394 50 82
Non-statutory tax rate differential (3,180) (2,519) 1,610
Other, net 544 720 758
- ---------------------------------------------------------------------------------------------------------------------
Provision/(benefit) for income taxes $ (730) $ 7,789 $ (8,093)
- ---------------------------------------------------------------------------------------------------------------------
Effective tax rate (16.9%) 28.6% (26.9%)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's statutory rate was The Netherlands' rate of 35% in 1997 and the
U.S. rate of 35% in 1996 and 1995.
The principal temporary differences included in deferred income taxes reported
on the December 31, 1997 and 1996 balance sheets are:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT DEFERRED TAXES
- ---------------------------------------------------------------------------------------------------------------------
Insurance $ 4,054 $ 4,070
Employee benefits 1,573 2,162
Contracts 8,099 1,378
Other (617) 865
- ---------------------------------------------------------------------------------------------------------------------
13,109 8,475
Valuation allowance (13,109) (8,475)
- ---------------------------------------------------------------------------------------------------------------------
NON-CURRENT DEFERRED TAXES
- ---------------------------------------------------------------------------------------------------------------------
Employee benefits $ 13,264 $ 8,722
Insurance 10,109 11,417
Non-U.S. activity 3,408 1,465
Other 3,854 877
- ---------------------------------------------------------------------------------------------------------------------
30,635 22,481
Valuation allowance (14,046) (18,680)
Depreciation (12,245) (8,749)
- ---------------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS/(LIABILITIES) $ 4,344 $ (4,948)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE> 26
The Company recorded a valuation allowance of $27,155 as of December 31, 1997
and 1996 for its U.S. deferred tax assets, as realization is dependent on
sustained U.S. taxable income. The Company did not record any Netherlands
deferred income taxes on indefinitely reinvested undistributed earnings of its
subsidiaries and affiliates at December 31, 1997. If any such undistributed
earnings were distributed, the Netherlands participation exemption should become
available under current law to significantly reduce or eliminate any resulting
Netherlands income tax liability.
13. OPERATIONS BY GEOGRAPHIC SEGMENT
The Company operates in four major geographic business segments: North America;
Central and South America; Europe, Africa, Middle East; and Asia Pacific. No
customer accounted for more than 10% of revenues. Export sales to unrelated
customers outside of the United States were less than 10% of revenues. Transfers
between geographic areas are not material. Corporate costs were allocated to the
segments based on their relative revenues, assets or work force.
Revenues, income/(loss) from operations and assets by geographic area are:
<TABLE>
<CAPTION>
PRE-PRAXAIR
POST-PRAXAIR ACQUISITION ACQUISITION
------------------------ -----------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
- -----------------------------------------------------------------------------------------------------------
North America $ 295,159 $ 328,836 $ 317,698
Central and South America 94,964 90,877 54,605
Europe, Africa, Middle East 134,187 109,522 110,775
Asia Pacific 148,501 134,486 138,860
- -----------------------------------------------------------------------------------------------------------
$ 672,811 $ 663,721 $ 621,938
- -----------------------------------------------------------------------------------------------------------
INCOME/(LOSS) FROM OPERATIONS
- -----------------------------------------------------------------------------------------------------------
North America $ 3,134(A) $ 9,469 $ (37,623)
Central and South America 2,634 6,530 8,511
Europe, Africa, Middle East 12,803 4,298 (5,527)
Asia Pacific 4,886 10,966 4,124
Management Plan charge (16,662) - -
- -----------------------------------------------------------------------------------------------------------
$ 6,795 $ 31,263 $ (30,515)
- -----------------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------------
North America $ 181,224 $ 165,651 $ 190,187
Central and South America 49,386 31,756 14,997
Europe, Africa, Middle East 99,332 90,389 73,322
Asia Pacific 70,708 63,700 77,619
- -----------------------------------------------------------------------------------------------------------
$ 400,650 $ 351,496 $ 356,125
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(A) 1997 was favorably impacted by non-recurring income of approximately $3.4
million from the recognition of income related to a favorable appeals court
decision.
49
<PAGE> 27
14. QUARTERLY OPERATING RESULTS AND COMMON STOCK DIVIDENDS AND
PRICES (UNAUDITED)
QUARTERLY OPERATING RESULTS -- The following table sets forth selected unaudited
consolidated income statement information for the Company on a quarterly basis
for the two years ended December 31, 1997:
<TABLE>
<CAPTION>
Three Months Ended 1997 March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 150,396 $ 160,349 $ 166,755 $ 195,311
Gross profit 16,346 18,521 8,551 20,220
Management Plan charge (16,662) - - -
Income (loss) from operations (11,342) 7,510 1,508 9,119
Net income (loss) (6,975) 4,774 1,112 6,492
Net income (loss) per Common Share $ (.56) $ .38 $ .09 $ .52
- --------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended 1996 March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------------------------------
Revenues $ 139,721 $ 160,789 $ 183,021 $ 180,190
Gross profit 15,733 17,690 19,585 20,683
Income from operations 5,647 6,955 8,539 10,122
Net income 2,370 3,187 5,373 5,632
Net income per Common Share $ .19 $ .25 $ .43 $ .45
- --------------------------------------------------------------------------------------------------------
</TABLE>
Net income per Common Share is presented for 1996 giving effect to the
Reorganization and the Offering as if each had occurred at the first day of the
year (Note 1).
COMMON STOCK DIVIDENDS AND PRICES -- In December 1996, the Company filed a
registration statement with the Securities and Exchange Commission for an
initial public offering of a majority of the shares of the Company's Common
Stock. Effective March 1997, the Company completed the Offering of 11,045,941
shares of Common Stock at $18 per share. The Common Stock is traded on the New
York and Amsterdam stock exchanges. As of March 20, 1998, the Company had
approximately 2,600 shareholders. The following table presents the quarterly
common shares outstanding, dividends on Common Stock and range of Common Stock
prices for the year ended December 31, 1997:
<TABLE>
<CAPTION>
Three Months Ended 1997 March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shares outstanding at quarter end 12,517,552 12,517,552 12,517,552 12,517,552
Common dividends per share - $ .06 $ .06 $ .06
Range of Common Stock prices
New York Stock Exchange
High $18 1/8 $ 23 1/8 $ 23 5/8 $ 23
Low 17 5/8 16 1/8 19 7/8 14 1/2
Close 17 3/4 22 1/8 20 3/4 16 1/4
Amsterdam Stock Exchange (In NLG)
High 34 42.2 48.9 43.2
Low 34 31 41 31
Close 34 42.2 41 31.5
- --------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 1
Exhibit 21
LIST OF SIGNIFICANT SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction in which
Subsidiary or Affiliate Incorporated or Organized
- ----------------------- -------------------------
<S> <C>
Chicago Bridge & Iron Company B.V. The Netherlands
Arabian CBI Ltd. Saudi Arabia
Arabian CBI Tank Manufacturing Co. Ltd. Saudi Arabia
CBI Construcciones S.A. Argentina
CBI Constructors Pty. Ltd. Australia
CBI Constructors Pty. Ltd. (PNG) New Guinea
CBI Constructors S.A. (Pty.) Ltd. South Africa
CBI Holdings U.K. Ltd. United Kingdom
CBI Constructors Limited United Kingdom
CBI (Malaysia) Sdn. Bhd. Malaysia
CBI (Philippines) Inc. Philippines
CBI Sino Thai, Ltd. Thailand
CBI Venezolana, S.A. Venezuela
Horton CBI, Limited Canada
Horton Services, Inc. Canada
P.T. CBI Indonesia (1) Indonesia
Chicago Bridge & Iron Company (Antilles) N.V. Netherland Antilles
CBI Eastern Anstalt Liechtenstein
Oasis Supply Company Anstalt Liechtenstein
CBI Overseas LLC Delaware
Chicago Bridge & Iron Company Delaware
CB&I Constructors, Inc. Texas
CBI Services, Inc. Delaware
Chicago Bridge & Iron Company Illinois
CBI Company Ltd. Delaware
Constructora CBI Ltd. Chile
CBI Caribe Limited Delaware
Chicago Bridge & Iron Company (Delaware) Delaware
Lealand Finance Company B.V. The Netherlands
</TABLE>
(1) Unconsolidated affiliate
In addition, Chicago Bridge & Iron Company N.V. has multiple other consolidated
subsidiaries providing similar contracting services outside the United States,
the number of which changes from time to time depending upon business
opportunities and work locations.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
WITH RESPECT TO FORM S-8
As independent public accountants with respect to Chicago Bridge & Iron Company
N.V. and Subsidiaries, we hereby consent to the incorporation of our report
addressed to the Shareholders and the Supervisory Board of Chicago Bridge &
Iron Company N.V. in respect of the December 31, 1997 and 1996 consolidated
balance sheets, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years ended December
31, 1997, incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 (Nos. 333-24443,
333-24445, 333-33199 and 333-39975).
It should be noted that we have not made an examination of any financial
statements of Chicago Bridge & Iron Company N.V. and Subsidiaries as of any
date or for any period subsequent to December 31, 1997, the date of the latest
financial statements covered by our report.
Very truly yours,
/s/ Arthur Andersen
Amsterdam, The Netherlands
March 30, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON THE SUPPLEMENTAL
SCHEDULE TO CONSOLIDATED FINANCIAL STATEMENTS
To the Shareholders and the Supervisory Board of Chicago Bridge & Iron Company
N.V.:
We have audited in accordance with generally accepted auditing standards in the
United States the consolidated financial statements of CHICAGO BRIDGE & IRON
COMPANY N.V. (a Netherlands corporation) and SUBSIDIARIES, the business of
which was formerly operated by CHICAGO BRIDGE & IRON COMPANY (a Delaware
corporation) and SUBSIDIARIES, included in the Company's 1997 Annual Report to
Shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 12, 1998. Our audit was conducted for the
purpose of forming an opinion on those statements taken as a whole.
Supplemental Schedule V. (the "Schedule") to the consolidated financial
statements included on page 18 of this Form 10-K is the responsibility of the
Company's management. The Schedule is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. The Schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen
Amsterdam, The Netherlands
February 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1997, AND THE INCOME STATEMENT FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> $10240
<SECURITIES> 0
<RECEIVABLES> 159694
<ALLOWANCES> 1909
<INVENTORY> 1816
<CURRENT-ASSETS> 248354
<PP&E> 153701
<DEPRECIATION> (31903)
<TOTAL-ASSETS> 400650
<CURRENT-LIABILITIES> 178550
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 103752
<TOTAL-LIABILITY-AND-EQUITY> 400650
<SALES> 0
<TOTAL-REVENUES> 672811
<CGS> 0
<TOTAL-COSTS> 609173
<OTHER-EXPENSES> (4807)
<LOSS-PROVISION> (1138)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4319
<INCOME-TAX> (730)
<INCOME-CONTINUING> 5403
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5403
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
